How To Find Bottoms For The SP500, Dow, Nasdaq & Russell 2000

It was a great first week in the market for 2011. Volume picked up as traders slowly return from holidays focusing on the markets again. Looking forward volume should continue to expand because there will be more traders in front of their terminals excited to see what type of money they can make in 2011.

Let's jump into what happened last week. On Friday the market generated a short term trading signals to go long SP500, Dow, Nasdaq or Russell 2k. This trade seemed to fall on a perfect day because if we look back over last year's weird trading characteristics typically if you were to buy on a Friday and hold a position until Monday it would have netted you a profit. Well on Friday the market had a very nice intraday pullback to a level which there was strong support so we bought in with a small position.

Let's jump into the charts for a visual of what I am talking about�

SPY - Daily Chart & Moving Averages

This chart shows the big picture. Currently we are in a strong uptrend and looking to buy significant pullbacks to key levels of support, and that is exactly what we had last week.

The market pulled back to a level which has support: (more)

Bob Chapman on Radio Liberty 01-10-11

Bob Chapman wrote in the International Forecaster of the 8th Jan 2011 about the problems caused by the FED which is the root of most problems :"...Many professionals are looking for answers as to why the US economy and finances are in the state they are in. We have been pointing out for ten years that the Fed is the problem, but those who realize this are afraid to speak the truth. They won’t have their jobs long if they do speak out. Low or zero interest rates may have helped government and big business, but it has not helped small business and the unemployed. Are we to believe that the Fed had nothing to do with the real estate collapse? Of course they did – they planned and executed it. The zero interest rate policy still in place has created more grievous damage than any other aspect of economic causes...."

Housing Market Slips Into Depression Territory

As the economy revs back to life, with signs of hiring on the horizon, the housing market is being left behind like Macaulay Culkin in “Home Alone.”

AP Macaulay Culkin

In the past few years, we’ve all been careful to choose our words carefully, not calling it a recession until it fit the technical definition and avoiding any inappropriate use of the “D” word — Depression.

Things were bad but the broader economy never reached Depression territory. The housing market, on the other hand, just crossed that threshold.

Home values have fallen 26 percent since their peak in June 2006, worse than the 25.9-percent decline seen during the Depression years between 1928 and 1933, Zillow reported.

November marked the 53^rd consecutive month (4 ½ years) that home values have fallen. (more)

Highly Anticipated USDA Report Calls For More Big Gains In Agriculture Prices

If you were wise enough to invest in farmland, like Marc Faber, you've made a very good decision as prices look likely to continue to rise, according to the U.S. Department of Agriculture.

The result is that farmers will now be increasing farmland to grow crops like wheat, soy beans, and corn.

Already, wheat acreage is rising, with winter planting coming in higher than expected. The demand for soy beans has yet to be caught up with, and with projections for next years harvest down 15%. Corn supplies left unsold are at their lowest levels in 4 years.

The breakdown on prices, from the U.S. Department of Agriculture report, with current futures charts: read the report here

Facebook: Two toxic bubbles in one

Goldman Sachs' US$2 billion deal for Facebook, valuing the social networking site at $50 billion, combines the worst elements of the 1997-2000 and 2004-07 bubbles.

It sets a grossly excessive valuation on an Internet company with modest revenues and prospects. It also involves an investment bank structuring a complex deal to maximize its own fees, while driving a truck through two major elements of financial services regulation.

Add a third element, that it places a company controlling personal information on 500 million users in close business partnership with a Russian billionaire with a criminal record and you can see the deal is truly groundbreaking. It should also raise important red flags about current market conditions.

General market opinion is that the US stock market is not currently overvalued because it has not broken through its 2007 highs. I would argue that US fiscal and monetary policies are unsustainable, making the foundations of the economy far more fragile than in 2007. (more)

Fed prints another $600bn to keep US recovery on track

The latest round of quantitative easing (QE) comes on top of the $1.7 trillion already completed and is intended "to promote a stronger pace of recovery", the Fed said. It is changing tack, however, buying US government bonds instead of corporate debt and mortgage-backed securities. Existing QE will be rolled over, but also recycled into treasuries.

By the end of June, the Fed expects to have bought $850bn to $900bn of treasuries – roughly $110bn a month, $75bn of which will be additional QE. The Fed also kept inerest rates at 0pc to 0.25pc, where they have been since December 2008.

Yields on 10-year US government bonds dipped 0.06 percentage points to 2.53pc as the markets digested the news, which was largely as expected. Lower yields feed back into the economy by reducing borrowing rates for companies and households, thereby stimulating investment and spending.

The dollar fell against most currencies due to QE, raising fears of a retaliatotry strike by the Bank of Japan on Friday. (more)

Gold Must Exceed $2,000 to Be Considered in a Bubble, Deutsche Bank Says

Gold would have to exceed $2,000 an ounce to be considered in a bubble, and the metal will gain this year on investment in exchange-traded funds and central-bank buying, Deutsche Bank AG said.

Gold will “perform strongly” on investor demand and low real interest rates in the U.S., Michael Lewis, London-based head of commodities research at Deutsche Bank, said in a report today. A bubble may form because investors are buying gold as a hedge against both inflation and deflation, he said.

“Given these risks, we believe gold will continue to compete aggressively for investment capital,” Lewis said. “On our estimates, the gold price would need to move above $2,000 to represent a bubble.”

Bullion for immediate delivery climbed $6.43, or 0.5 percent, to $1,382.10 an ounce at 11:45 a.m. London time. Prices rose yesterday, ending a string of five declines, on concern that Europe’s sovereign-debt crisis may worsen. Gold for February delivery climbed 0.6 percent to $1,382.20 on the Comex in New York. (more)