Dirty Pool

The charts below (courtesy bigcharts.com) shows a comparison of the Dow Jones Industrials relative to the S&P 500 going back 30 years. (quarterly) and 3 years (daily)

Two interesting points which emerge are:

• Whilst the Dow looks relatively bullish given that it "appears" to be wanting to break to new highs, the reality is that - except for a brief period in2000- it has been performing in line with the Standard and Poor Index, which is currently significantly below it 2000 high
• The quarterly On Balance Volume chart "appeared" to show a major upside break in third quarter 2005 (around September)

When we look at the OBV on the daily charts - which cannot be manipulated by last minute buying over the quarter end - it becomes apparent that the buy signal manifested as a result of two days unusual activity which took the OBV from about 3 billion cumulative to 10 billion cumulative. Further, there are two other anomalous days which, if excluded, would leave the OBV at around zero for the three year period.

If we look at the $SPX chart on its own - specifically at the Point and Figure chart (courtesy Stockcharts.com) we see that the $SPX is still 200 points below it peak, and that it will encounter strong resistance at the blue horizontal line at around 1400.

Conclusion

The technical evidence suggests that the Dow Jones Industrial Index is being "manipulated". This could be by the professional traders or by the so-called Plunge Protection Team. It is impossible to call.

Expect a "false upside breakout" leading up to the elections in early November

Now let's look at those pesky Interest Rates that everyone and his brother is calling to continue falling

There can be no doubt that the weekly chart has shown a downside break through the rising trendline (courtesy decisionpoint.com)

But look at the 30 year yield divided by the 10 year yield on the P&F chart - which eliminates trading noise. This is telling us that either the 30 year yield is going to start RISING relative to the 10 year yield (inflation) or the 10 year yield is going to start FALLING relative to the 30 year yield.

Now, why would the 10 year yield start to fall relative to the 30 year yield? Personally, I cannot think of any financially or economically justifiable reason.

Here is a chart which shows the 30 year yield relative to the US Dollar. One would expect this chart to be in a bull trend because yields need to be managed to protect the dollar. Of course, it's possible for this relationship to be in a bull trend if the Dollar is falling relative to static yields, but is HIGHLY unlikely that the trend will reverse and the US Dollar will rise in the face of static yields or remain static in the face of falling yields.

Now, if this rising trend is to remain intact, surely it follows that yields need to rise relative to a static dollar or the dollar needs to fall faster than falling yields?

So: What's the probability that the Federal Reserve Board of the USA will deliberately engineer a collapsing dollar, by manipulating yields downwards - which will lead to inflation within the USA?

Alternatively, what's the probability that the US Federal Reserve will stand aside and do nothing in respect of yields whilst the watch the US Dollar collapsing?

Lets look at the US Dollar chart. Are foreigners worried?

Not really. The Dollar Index could conceivably fall to 81.44 and maybe even 80 on a breakdown from these levels. The Fed still has some wriggle room to play games with interest rates leading up to the elections without endangering the Dollar.

Conclusions

The falling yields are probably being contrived in anticipation of the elections

The men and women in power today cannot be trusted. They are trying to snow the public.

Overall Conclusion

The system is rotten and needs to be changed. Those in power are no longer representing the interests of Joe Sixpack