We are in uncertain times -- nothing is certain. And, I might add, in many instances things are not as they seem......






Always remember, price is what you pay but value is what you get!






Today's government interventions -

* The actions were introduced not to stimulate growth but in order to prevent a crisis in liquidity.
* The problems of solvency remain very much in place and will be unaffected by the dollar swap action.
* The last time funding costs of dollar swaps were reduced was back on June 29, 2011. Over the next week the S&P 500 rose by about 57 handles, from 1295 to 1353. Less than seven days later, all of the gains were erased and the S&P fell all the way back to 1100 by the first week of August.

In no way do I expect such an extreme downturn, but I want to point out the historical precedent.






If George Lindsay's technical observation proves correct, the S&P 500 should embark on a sharp move higher.

By means of background, technical analyst George Lindsay coined his 23-step "Three Peaks and a Domed House" technical pattern and gained celebrity because it pointed to a market peak in late 1968 -- and the largest stock market correction since World War II followed in the years after.

The sharp downturn in stock prices in July (matching Stages 9 to 10) that followed provided an almost perfect fit to Lindsay's observed technical configuration.

But now (after possibly moving from Stage 1 to Stage 19), a positive setup and phase (from Stages 20 to 23) might be in order.

If the pattern of Lindsay's "Three Peaks and a Domed House" continues, a sharp upside move in the stock indices appears possible.






Central banks around the world lowered dollar swap rates, and futures exploded to the upside.

The Fed, ECB, Bank of Japan, Bank of England, SNB Bank of Canada all lowered swap rates in an attempt to address worldwide liquidity concerns. In other words, throwing more dollars at the debt problem. In still other words, papering over (print, print, print) the debt.






No one ever said that investing in the market would be fun.

No one ever said that investing in the market would be easy.

There is an inevitability that we will be moving toward some sort of solution to the eurozone's debt crisis and that the U.S. stock market has discounted a downturn in the domestic economy.

For the time being, those looking at technical signs and/or price behavior might be whipsawed by the market's lack of predictability, absence of memory (from day to day) and enormous volatility.

Understandably, many are freaked out by the above three market conditions -- it has been manifested in continued massive outflows of domestic equity funds and further de-risking of the hedge fund community. But these sentiment conditions are not new. Retail investors have taken out over $400 billion from equity funds over the past four years -- the pace of outflows has recently accelerated -- and hedge funds have been de-risking for two years. Sentiment extremes such as this are more often seen at market bottoms than at market tops.

Volatility represents the reality of the marketplace and, to some degree, has become (understandable) a distraction to those investors that trade/invest based on price momentum.

But opportunistic trading requires the fortitude of buying in panics (and sometimes selling into euphoria), and intermediate- to longer-term investing produces returns when investors are greedy while others are fearful.

Good news, for the short term at least, out of Europe and China caught market players by surprise and it was off to the races as skeptical bulls scrambled to find new buys. The fact that we ramped up even more in the final 30 minutes of trading was a sign that market players are underinvested and felt they had no choice but to chase things that had already made huge moves.

Obviously, it was a sea of green today with huge point moves and very strong breadth. Volume was relatively light given the magnitude of the point move, but picked up at the close on what looked like buy programs. As soon as we hit the day's highs in the final hour of trading, the momentum-chasing algorithms were triggered.

The S&P 500 is up 7.52% so far this week but 87% of that gain occurred overnight. In other words, if you weren't loaded up long at the close, you missed the great bulk of the move. That caused much consternation for day traders and position traders who have been waiting for better charts to develop. They never had much of a chance to buy either.

The big issue now is whether this momentum continues. This market has had a strong tendency to run even higher after moves like this. It becomes overbought and just keeps going. We saw it happen in October, after we hit the lows of the year, and when we went straight up from the beginning of December 2010 through February 2011. We stayed overbought for weeks and had very few pullbacks along the way.

Our markets, if one can call them that, may have a pleasant ride up into the end of the year. If the stock market does make a final-month push up, that doesn't mean all is well structurally. The stock markets are broken in the United States. There is still no uptick rule; this must be changed immediately. There is absolutely no enforcement of naked shorting laws; some naked shorting is brazenly out in the open. Naked CDS' should not exist. There absolutely must be an insurable interest component to these insurance-like contracts. Right now, there is none. The unregulated existence of ultra-levered ETFs has made the stock markets a joke; they are really casinos.

The world financial system is being destroyed by the incredibly poor policies of the EU, financial terrorism - which utilizes the terrible market rules against the markets, and the use of fractional reserve banking.

Standard & Poor's wide-ranging downgrade of major banks was expected, and it should not move these stocks very much tomorrow. BAC at 5 or below looks very, very interesting to me. This move had been telegraphed by the ratings agency, which had previously said it planned to update its credit ratings on the largest 30 banks in the world by November's end.

The market was expecting a broad downgrade of the banking industry.

The fact that there was "only" a one notch downgrade may be viewed as a mild positive surprise in my view.






The S&P 500 is at approximately the same price that existed in December 1998, so a lot has already been discounted.

I read that Bill Gross was on CNBC late in the afternoon discussing his downbeat monthly commentary. Gross sees years of slow growth and little upside to risk assets. I agree completely on his assessment of slow growth, etc., but I would remind investors and Mr. Gross that the S&P 500 today is at approximately the same price that existed in December 1998.

In other words, in the market, a lot has already been discounted.






Run, don't walk, to read a letter sent yesterday from Leon Cooperman, head of hedge fund Omega Advisors, to President Obama.

The letter is an informed and intelligent plea to the president -- it might be the best 15 minutes of reading you have engaged in for some time.






There is a lot of doom and gloom on housing today. The September Case/Shiller Home Price Index dropped by 0.6% (month over month) compared to expectations of flat pricing. This result was the greatest drop in almost eight months, with 15 of 20 cities surveyed showing price declines. The year-over-year Case/Shiller Index is down by about 3.5% this year.

But I believe some of the negativity on housing is misplaced, as overall pricing and turnover is being affected by broad differences in regional locales. The national housing market is bifurcated. There is strength in regions that are not exposed to the shadow inventory of foreclosed and near-foreclosed properties -- like the corridor between Washington, D.C. and Boston.

In areas like Florida; Nevada; Orange County, Calif.; Phoenix; -- all of which are inundated with shadow inventory for sale -- pricing is still very weak.

Areas not plagued with shadow inventory are likely a harbinger of better times even as Florida et al. are still weighing on average industry pricing.

The good news is that, very slowly, foreclosure inventory is dropping. Better is that in some areas of the country it is now cheaper to buy than rent, mortgage rates remain attractive and new-home production is well below demographic and household formation trends.

The U.S. residential real estate market is in the process of bottoming and is making a cyclical low. While the housing recovery will be muted in the year ahead, and for possibly several years, a multiyear recovery (from very, very low levels!) can now be expected.






Peter Boockvar from Miller Tabak is saying that Yellen's words almost guarantee QE3:

Likely confirming QE3 on Dec 13th when the FOMC next meets, Fed Gov Yellen, part of the Bernanke, Dudley trio said while the "Fed continues to provide highly accommodative monetary conditions to foster a stronger economic recovery in a context of price stability," she said "the scope remains to provide additional accommodation through enhanced guidance on the path of the federal funds rate or through additional purchases of longer term financial assets." Fed members pick their words very carefully and she wouldn't be saying this unless they were prepared to act. Other voting members saying the same recently have been Dudley, Evans and Tarullo and Bernanke's beliefs are along the same lines. Thus, those that want even more Fed action already have 5 of the 11 voting members. This meeting will come days after the EU fiscal union will be enhanced at the Dec 9th EU summit with hopes of some that the ECB will follow with something more.

Sir Peter concludes that "notwithstanding all the worrisome European headlines, if there is one thing markets like, it's central bank juice."

I agree.






From Yellen:

* "Scope remains" for additional Fed easing.
* Fed can ease with rate guidance or asset purchases.






Run, don't walk, to read Pimco's Bill Gross's latest monthly commentary, "Family Feud."

Below are some of his conclusions:

* "Investors should recognize that Euroland's problems are global and secular in nature; it will be years before Euroland and developed nations in total can constructively escape from their straitjacket of debt."
* "Global growth will likely remain stunted, interest rates artificially low and investors continually disenchanted with returns that fail to match expectations."
* "Investors should consider risk assets in emerging economies, such as Brazil and Asia, and bonds in the strongest developed economies, where the steep yield curve may offer opportunities for capital gains and potentially higher total returns."

It was a mixed and choppy day of trading with the DJIA acting well while the Nasdaq struggled. Oil, commodities and retail led while financials and technology lagged. Market players kept one eye on Europe but nothing new developed there, so we had no clear drivers. The better-than-expected consumer confidence numbers this morning helped a little, but were soon forgotten.

After a big move like Monday's, the important thing is that we not give back too much too quickly. We want the short-termers and flippers to exit but dip-buying interest should prevent too much of a pullback. It is helpful if volume recedes a bit after a spike but it has been equally slow on both days, which is a little troubling to those who remember when volume mattered.

According to a report, the European commission is planning to propose bank debt guarantees.







Goldman Sachs calls for $25 billion in equities to be bought in pension rebalancings by month-end.






The eurozone's economic union and banking system, a house built on pillars of sand -- that is, too much sovereign debt, reckless leverage and incredibly unrealistic unmarked-to-market accounting by the banking industry -- are now in jeopardy.

Given the disparate economic, political and legal interests in the E.U., the regimes of some monarchs and prime ministers have been toppled, but the heavy policy lifting lies ahead.

The lesson learned in the American economic crisis and Great Decession of 2008-2009 and now in the eurozone crisis of 2011-???? is that debt cannot grow beyond the ability to service it. Obviously.

A period of subpar economic growth is the best outcome for the eurozone. At worst, the European economies' downturn will be far deeper, bank credit will be restrained, the euro could vanish, currency and trade wars might erupt, and the European banking system could collapse -- or a combination of these factors could occur.

The only practical solution in Europe appears to be going the route of the U.S. and our Fed three years ago and embarking on its own brand of massive European-style quantitative easing.






Risk markets are losing their patience. The eurozone situation is approaching a major climax. This is by far the most important story to follow in the coming days and weeks. U.S. economic data muddles along. If Europe took care of business quickly, global stock markets would rally sharply. The S&P 500 could possibly make a run at the bull market highs. Unfortunately, there is a major ongoing political crisis in the region.






It is the rapidity of the loss of confidence and the quickness with which European sovereign bond yields have risen that have served as 2011's sword of Damocles hanging over stocks. The world's markets have broken down under the weight of the eurozone crisis in a punishing and incessant display of selling over the past two weeks. As a result, our stock market is now discounting recession.






It is now up to Europe to forcefully address, arrest and reverse the negative credit trends that have taken hold of our markets with forceful policy (easing and the implementation of euro bonds).

As Zero Hedge's Tyler Durden writes, the outcome looks binary -- either policy is implemented and the world's risk markets experience a sharp rally or the absence of policy to stem the European debt contagion leads to a bear market.

History shows that our world's leaders rise to the occasion in the face of crisis. It happened (and worked to correct the impending doom in our credit markets) in the U.S. in early 2009, when all seemed in chaos.

I don't know whether La Stampa's report on Sunday that the IMF is preparing a 600 billion euro loan for Italy is credible, but I do expect that the market's recent deterioration itself will likely pressure Europe's leaders into more forceful policy. As a possible precursor to more proactive, powerful and more timely policy, the eurozone countries appeared to be moving toward an accelerated path of fiscal integration over the weekend (that would bypass the cumbersome process of treaty changes). Reuters reported that this path demonstrates the seriousness that politicians are taking the growing debt contagion. Hopefully, as The Wall Street Journal reports, "Some within Berlin say a new binding fiscal regime might just be enough to justify ECB action." Other measures, such as an EFSF partial guarantee of a portion of eurozone sovereign bonds, appear to be on the table as well.

Tomorrow's meeting of financial ministers might hold some additional clues as to the timing of policy responses as documents that formalize the EFSF leveraging will be completed and ready for signatures. And the Dec. 9 Leaders summit might have more information.

We were due for an oversold bounce, and we had a pretty good one following upbeat news about Europe and Black Friday. Breadth was better than 4-to-1 positive, but volume was extremely light, and we had few signs of real momentum. This market has been lacking leadership and pockets of speculative interest for quite some time and nothing new emerged today.

I don't know how many times a low-volume, oversold bounce has turned into a V-shaped move that just keeps on going. There's still lots of negativity, the bulls are poorly positioned and end-of-year seasonality should be kicking in, so conditions are good for an upside surprise.