Down to the Wire on Debt Ceiling Compromise

Over the weekend, House majority leader John Boehner genuflected to the Tea Party coalition of Republicans, put forth a bill that was sure to pass the House and die and the Senate, and that's exactly what happened.

By Monday morning, however, Senate majority leader Harry Reid had put together a compromise plan that has more chance of passing both bodies before the clock strikes midnight on the debt ceiling issue. Reid's plan calls for an initial $1 trillion in deficit reductions, all in the form of spending cuts, has a trigger for more cuts by Thanksgiving and puts the onus of delivering on mandatory cuts - should debate in congress not find suitable agreement - on a welve-member committee made up of six Republicans and six Democrats which would then make mandatory cuts to both Medicare and Defense spending among other programs.

While all this wrangling was going on the markets were closed over the weekend, but opened Monday morning in a very positive mood, with all major indices hitting their highs of the day within minutes after the opening bell.

The euphoric spirit was short-lived. At 10:00 am EDT, the ISM Index for July came in at 50.9, on expectations of a reading of 54.0. The sharp contraction - from 55.3 in June, reminded traders that whether or not the debt ceiling is raised, the US economy continues to stall out, sending all of the indices into free-fall. The Dow, which was up 139 points at the open, was lower by 100 points just 35 minutes later. Stocks continued to slide until the noon hour, bouncing off the bottom and finally rallying into the close, though all finished in negative territory.

For the Dow Jones Industrials, it was the seventh consecutive losing session, an event which has not occurred since 2002. And, as the market players took off their trading aprons and headed home, there still was no vote on the Reid plan, though indications were that both houses of congress would approve the measure and the president would sign it into law.

The debt ceiling, if the bill passes, will be raised to over $16.4 trillion, which should be enough to keep the Washington spendthrifts happy until after the 2012 elections. A vote is supposed to happen this afternoon or tonight, though no timetable has been announced.

What is annoying, or amusing, depending on your state of mind, is how the congress can waste so much time arguing, to only come up with a bill that satisfies nobody. The Tea Party faction held the public debt hostage, and likely will come out looking like winners in the end, though, typical of Washington, all will claim victory when actually nobody won a thing.

Meanwhile, we still await the vote, which is still somewhat in doubt.

Dow 12,132.49, -10.75 (0.09%)
NASDAQ 2,744.61, -11.77 (0.43%)
S&P 500 1,286.94, -5.34 (0.41%)
NYSE Composite 8,040.94, -38.50 (0.48%)

On the day, decliners beat advancers, 3416-3189. On the NASDAQ, 36 new highs were overshadowed by 99 new lows, while the NYSE registered 35 new highs and 93 new lows, making the combined total in favor of new lows, 192-71, continuing the sell signal. Volume was somewhat robust, as the kleptomaniacs behind the HFT (high frequency trading) computers shaved fractions from everyone on the way up, down and back up again.

NASDAQ Volume 2,176,811,750
NYSE Volume 4,948,650,500

Fortunately, crude oil, which was up sharply in the opening minutes of live trading, also reversed course and ended lower by 81 cents, at $94.89. Gold was also whipsawed, but ended down $9.50, at $1,621.70. Silver met a similar fate, losing 59 cents, to $39.31.

Whether or not the debt ceiling increase and debt reduction bill becomes law before the markets open tomorrow is in the hands of congress and president Obama, but the real test for markets will come later in the week, on Friday, when July non-farm payroll data is released. The market is expecting an increase of only 84,000 jobs, which would be bad enough to send stocks tumbling again. Many believe that number will not be met or even come close to, and that it's entirely possible that a number in the 20-30,000 range may be in store.

We'll get a preview on Wednesday, when ADP releases its private payroll report for the same period.

Money Daily will publish a special post, with more details, if and when the House and Senate approve the proposed legislation.

Traders Still Positive on Debt Limit Deal; Markets Spooked

It could have been so much worse.

US stocks took another tumble Friday, on revisions to 1st and 2nd quarter GDP and fears that the debt ceiling debate in Washington was running out of time.

An hour prior to the opening bell, the government reported its second revision to second quarter GDP, which came in at a measly 1.3%, but the greater shock was the revision to first quarter GDP, which was revised lower, from 1.9% growth to a frighteningly-low 0.4%. That sent shock waves through the futures market and US indices fell sharply at the open, hitting the lows of the day within the first 15 minutes of trading.

Just before 10:00 am EDT, Chicago PMI was reported to have fallen to 58.8 in July, lower than forecast, from 61.1 the prior month. That wasn't bad enough news, however, to shake off the nascent rally on rumors and hope that congress would decide on a debt ceiling increase by the end of the day or over the weekend.

As the session wore on, stocks moved sharply on any unfounded rumors, but eventually gave way late in the day, as lawmakers in the House of Representatives agreed, 236-186, to begin debate on House majority leader John Boehner's debt ceiling proposal, which had been in limbo since Tuesday because the measure did not have the backing of the Tea Party wing of the Republican party and - even if it did pass the House - was seen as almost certain to fail in the Senate. An actual vote on the measure is expected to come around 6:00 pm EDT Friday.

At the end of the day and end of the week, with no resolution on the debt issue and economic data overshadowing even the best corporate second quarter reports, the Dow finished lower for the sixth straight day, the S&P down for the last five, and the NASDAQ in negative territory for the fourth day out of the last five. On Thursday, the NASDAQ registered a gain of just over one-and-a-half points.

For the week, the Dow lost 538 points, a 4% decline. The S&P slipped 53 points, the NASDAQ shed 102 points and the NYSE composite fell by 328 points.

As bad as it was, stocks actually recovered half of their earlier losses on Friday. Still, it was the worst weekly performance for US indices in a year.

Dow 12,143.24, -96.87 (0.79%)
NASDAQ 2,756.38, -9.87 (0.36%)
S&P 500 1,292.28, -8.39 (0.65%)
NYSE Composite 8,079.44, -44.59 (0.55%)

Declining issues again dominated advancers, 4113-2476, and the gap between the expanding number of new lows and shrinking new highs worsened. On the NASDAQ, there were just 26 new highs, as compared to 114 new lows. The NYSE showed even worse, with just 16 new highs and 177 new lows. The combined totals of 42 new highs against 291 new lows is sending the strongest sell signal imaginable. Even if the congress does find a way to pass a debt ceiling increase by Tuesday, August 2, the damage for wasting time has been done the Moody's and S&P will likely downgrade US debt in short order, as they both have warned would occur if serious measures were not taken at this impasse.

Add to that the non-recovery "recovery" which has been represented by high unemployment and falling home prices and the recipe for further declines in equities is writ large.

Volume on the day was strong, another sign of a weakening stock market poised on the brink of turning losses into a major correction and a resumption of the bear market.

NASDAQ Volume 2,274,169,000
NYSE Volume 5,045,403,000

Among other interesting notes were the 10-year, which rose in price, but slumped in yield, down to 2.80%. The 30-year bond also hit a fresh low yield of 4.13%.

Oil took some losses, down $1.74, to $95.70. Gold made another intra-day high of $1637.50, before settling back to close at $1,628.30, up $14.90 for the day. Silver was up 31 cents, to $40.11 per ounce.

With the markets suffering their worst weekly losses in a year - coincidentally at the same time top economists are partying at their annual convention in Jackson Hole, Wyoming, the same place that Fed Chairman announced the launch of QE2 last summer - the onus is on the congress to come with a plan that appeases not only both parties but the ratings agencies as well.

While it is doubtful they would let the August 2 date pass without a debt ceiling increase, the chances of them passing a bill before then that actually cuts spending appropriately are still quite long.

Hope Fades in Late-Day Selling

There really was no good reason for stocks to start the day higher, but they did, probably in response to initial unemployment claims falling below 400,000 for the first time in three months.

The actual figure was 398,000, and was probably significantly fudged and will almost certainly be revised higher next week, but in a market this tense, anything that even hints of being good news is taken and such, so off went the speculators and day-traders, looking for quick, easy, short-term profits.

Some were undeniably successful, as a good number of stocks made significant gains and the NASDAQ rebounded nicely, up more than 30 points, after Wednesday's debacle.

Highs of the day were right around noon, and form there it was all downhill, with an especially sharp decline at the 2:00 hour. With the exception of the NASDAQ, which finished with a gain of just over one point, all of the major indices finished in the red for the fourth straight session.

Dow 12,240.11, -62.44 (0.51%)
NASDAQ 2,766.25, +1.46 (0.05%)
S&P 500 1,300.67, -4.22 (0.32%)
NYSE Composite 8,124.03, -29.18 (0.36%)

Once again, declining issues led advancers, 3744-2735. NASDAQ new highs numbered a mere 18, with 83 new lows. On the NYSE, new highs were outnumbered by new lows, 25-107. This puts the combined total at 43 new highs and 190 new lows, screaming for continued selling. Volume was healthy for a change, though most of it was on the downside.

NASDAQ Volume 2,105,143,250
NYSE Volume 4,957,269,500

Commodities hugged the flat line for the most part. Crude oil was up just 4 cents, to $97.44. Gold slipped $1.70, to $1,613.40. Silver still is being suppressed by the likes of JP Morgan and HSBC, falling another 77 cents, to $39.79.

Kitco's Live 24-hour spot silver chart clearly shows that once silver is traded in the Hong Kong market, prices are relatively stable, but wild swings - mostly to the negative - occur with regularity during the NY GLOBEX and NYMEX daily sessions. The big banks have their shorts in place and have been waging a losing battle for the past three years. Despite their mendacious efforts at keeping the price of silver down, they have already failed miserably and it is only a matter of time before the entire global silver market comes unglued and price soars past $50, $60, even $70 per ounce.

Silver has been a top performer the past five years or so, and should continue to do well as the fiat currency regime comes crashing down. Price is quite high at the present, but eventually, holders will be rewarded.

It appears that there will be no debt ceiling solution before the weekend, leaving the fools in Washington with nothing else to do but pass a stand-alone debt ceiling raise, which is what should have been happening all along. The Republicans in the House have perverted and conjoined the debt ceiling with the budget and long-term finances, and they will look like the fools of the foolish when all is said and done come Tuesday.

D-Day Minus Six: Beware Falling Stocks; Dow, NASDAQ in Second-Worst Decline of 2011

It is now just six days from August 2nd, the day the government of the United States of America either passes a bill increasing the debt ceiling or begins defaulting on said debt, which is fast approaching $15 trillion.

Through accounting gimmicks and "borrowing" from the pension funds of federal employees, the government has thus far avoiding making either the commitment to borrow more or claim deadbeat status and suffer a beating at the hands of the ratings agencies in the form of credit downgrades and subsequent higher interest payments.

Make no bones about it, it is time for the American people to come to grips with the reality that the officials in Washington are not doing the jobs they are paid to do, nor have they represented the best interests of the American people for quite a long time (at least the past 11 years).

If the debt ceiling is not raised, calamity will surely ensue, which is why both sides - Republicans and Democrats, except for a few ardent Tea Partiers - have repeatedly expressed sentiment that the debt ceiling must be raised by August 2nd, no matter the outcome of budget negotiations. In truth, both sides are coming to the realization that their parties are far apart and that no budget issues or long-term spending should have become tied to the debt ceiling issue. They are separate matters which should be dealt with separately.

Nonetheless, the politicians continue their annoying Kabuki theatre while the American public seethes over their inability to compromise, act like reasonable adults and do what they were elected to do.

Wall Street has taken notice as well, logging losses in each of the first three days of this week, with no end to the selling yet in sight. To say that our "leaders" have taken a walk to the end of the plank would be putting it mildly. This issue should never have gotten to this point and those wishing to play fast and loose with the US economy should be given a hearly heave-ho and be dutifully shoved off the plank and into the drink.

What both parties have done - though especially the Republicans, who picked this fight - is shrink from their responsibilities, putting politics ahead of their oaths. It is a shameful chapter in American governance which should never be allowed to be repeated, though the general consensus is that more of the same will be forthcoming as the 2012 election season heats up.

The leaders of both parties should be henceforth removed from office for putting the stability and good faith and credit of America at extreme risk. After that, the herd of politicians being led by money from various lobbyists should be summarily removed from office. The entire congress could run better with many fewer members, preferably none of those presently constituting that formerly-august body.

The American public want change, need change and have been promised change, but all it has gotten is a sordid soap opera of bad politics and even worse outcomes. We have reached the brink and it is very nearly time to throw off the yoke of oppression by the governors and take matters in hand in a more efficient and direct manner. Nothing gets done in Washington any more; maybe it's time to shut it down.

The wealthy barons of Wall Street, those who funded the campaigns and lined the pockets of these moronic, imbecilic politicians, should also be brought to task, something Attorney General Eric Holder seems reluctant to pursue. After all, Wall Street keeps him in nice suits and fancy offices. He should be impeached.

Today's losses on the major indices were the second-largest of 2011 (except for the S&P, for which it was the third-largest), surpassing the 68 points the NASDAQ lost on January 28, but less than the 77 point decline on February 22, though more than the 66 point loss on June 1.

The Dow dropped 166, 179 and 279 points, and the S&P fell 23, 28 and 30 points on the same dates, respectively.

Dow 12,302.55, -198.75 (1.59%)
NASDAQ 2,764.79, -75.17 (2.65%)
S&P 500 1,304.89, -27.05 (2.03%)
NYSE Composite 8,153.21, -178.46 (2.14%)

Declining issues slaughtered advancers, 5875-804. New highs on the NASDAQ numbered only 15, while new lows expanded to 89. On the NYSE, there were 28 new highs and 105 new lows. The combined totals of 43 new highs and 194 new lows puts this indicator clearly in the "sell signal" category. Volume was dynamic and huge. Make no doubt about it: this was a rout.

NASDAQ Volume 2,310,879,750
NYSE Volume 5,074,647,000

Commodities were rather tame throughout the equity carnage. WTI oil fell $2.19, to $97.40, from an artificial and fully inflated high point. Gold dipped $1.70, to $1,615.10, while silver fell a modest 13 cents, to $40.57. The losses in the precious metals are temporary, likely the result of margin calls. Eventually, if stocks continue to take on water, money will gush into gold and silver.

The delay in raising the debt ceiling was not the only issue making for a horrible day on Wall Street. Durable goods orders fell 2.1% in June, further evidence that the economy is slowing.

Tomorrow's initial unemployment claims reading from the BLS could be the proverbial straw that breaks this market's back. Should the number come in above 420,000, stocks could pick right up where they left off today, severely to the downside.

No Debt Ceiling Deal Sends Stocks Lower Again

While the plutocrats in Washington dither away valuable time trying to figure out the most politically-expedient way out of their self-imposed debt ceiling crisis, the rest of the world goes on, mostly oblivious to the debacle in the capitol.

Stocks, however, as money substitutes, aren't taking the "no news" as good news. In fact, markets are absolutely terrified, not that the current congress and president will find a solution by the artificial August 2 deadline, but that their efforts will be so futile and pointless that the ratings agencies will lower the US debt/credit rating from its now pristine AAA sovereign status.

While the majority of people neither understand nor care about this delicious little surprise coming down the road like a 60-ton freighter, Wall Street and other governments are frightened out of their boots because a drop in the US rating would add something like $100 billion of cost - in interest - to the annual federal budget, which is already way out of whack.

Whether it be Obama's refusal to put a concise deal on the table, or the Tea Party wing of the Republican party insistence that there be no revenue enhancements in any kind of deal, the result will be the same as it has been for the past 12 years for congress and the presidency: abject failure, and a hike in interest rates.

Without poring over details of how the past three years have played out, we are approaching a seminal moment in the history of the United States of America and in the financial policies post-Bretton Woods. Nixon's closure of the gold window was the first inflection point, at which currencies were no longer backed by gold. The accumulation of nearly $15 trillion in debt and the failure of government to not only foresee the problem, but then to not be able to deal with it, is the second great event.

With just seven days until the government begins defaulting on some debt, markets are skittering about like schoolchildren at recess and there's nobody in his or her right mind who wishes to be exposed to inordinate risk at this point. With each passing day that there is not a deal and signed legislation increasing the debt ceiling, expect markets to recoil in terror. By Friday, we could be witnessing an all-out crash as many participants choose to sit on the side rather than engage in the dizzying dance of death.

The outflows from stocks were seen mostly at the end of the day, when the major indices peaked just after 2:00 pm EDT. From there until the close it was nearly free-fall, with all of the day's tiny gains wiped out in a flurry of near-panic selling.

One hates to beat a dead horse, but this debt ceiling debate is still alive and kicking, barely, and it will dominate financial news until something - anything - is done to rectify the situation. Absolutely nobody is holding their breath waiting for that, however.

Naturally, there were swing trades and day trades made during the session, but nobody is staking out new positions in the most uncertain market of the past two-and-a-half years.

Dow 12,501.30, -91.50 (0.73%)
NASDAQ 2,839.96, -2.84 (0.10%)
S&P 500 1,331.94, -5.49 (0.41%)
NYSE Composite 8,331.67, -25.90 (0.31%)

Declining issues overwhelmed advancers for the second straight day this week, 4096-2434. NASDAQ new highs 29; new lows: 36. NYSE new highs: 44; new lows: 46. Combined totals: 73 new highs, 82 new lows, a slight shift to the negative for that particular indicator. Volume was reliatively light, as expected.

NASDAQ Volume 1,716,556,125
NYSE Volume 3,988,655,750

Crude oil advanced modestly, up 39 cents, to $99.59. Gold racked up another record high, gaining $4.60, to $1,616.80. Silver notched a 38 cent increase, to $40.70.

The S&P/Case-Shiller Home Price index showed marginal gains of one per cent in the month-to-month numbers, but most of the 20 cites surveyed showed declines on a year-over-year basis.

New home sales sunk to 312,000 on an annualized basis in June. Some analysts were calling the number "unexpected," while the home construction industry has been in outright depression for more than three years.

Any further declines will be "expected" and those acting surprised will be executed by a firing squad of Mexican construction workers, as soon as they can be rounded up from immigration detention centers. (That's a joke, folks.)

Correlation Trade, Weak Dollar, Hot Air Boost Stocks

About the only thing hotter than stocks on this 21st of July, 2011, was the weather, with temperatures hovering around the 100-degree mark in much of the nation, but especially in the Midwest, Mid-Atlantic and East coast. But the correlation trade - short dollars, long stocks - was in effect throughout the session, which meant that stocks had to soar... and they did, closing in on the nearly three-year highs set back in late April.

Coming off a string of recent earnings report beats by the likes of Google (GOOG), Apple (AAPL) and IBM, one would have expected the NASDAQ to lead the way, but it was the S&P and Dow Industrials which showed the greatest percentage gains of the day.

It's obvious to anyone with more than a passing interest that the banks have been at their manipulative best of late as financial stocks have led the way each of the past two sessions, even as these very banks put in quarterly earnings showing losses, pay no dividends, are largely insolvent and the nation lurches ever closer to a debt default and ratings downgrade, the latter being all but inevitable after the well-rehearsed clown show in Washington, DC.

One can hardly blame the elitist banking class for boosting their own portfolios at this juncture. After all, its been proven that whatever risks they take will be guaranteed to win, since the US government is back-stopping the whole TBTF crowd. They might as well take while the taking is good. It may not be the same in a fortnight or so.

For the rest of us, the alternative for the day was to find air-conditioning, drink plenty of fluids and watch the circus from afar. The risks of trading in stocks is far too high for the average plebeian. And so it goes, that the rich get richer. The poor, and, especially those stuck in the middle, may get the ultimate revenge as more and more people turn their backs on the world's most corrupt system of governance and finance and default in record numbers on school loans, car loans, mortgages, credit cards and all manner of financial obligations.

The end to this grand farce of fiat money is coming, regardless of the degree of normalcy bias built into us all from TV and the media. The waiting, admittedly, is a royal pain. Either way, it's death by deflation or inflation (which seems to be winning lately), or both.

Dow 12,724.41, +152.50 (1.21%)
NASDAQ 2,834.43, +20.20 (0.72%)
S&P 500 1,343.80, +17.96 (1.35%)
NYSE Composite 8,411.45, +129.62 (1.57%)

As one would expect, advancing stocks beat back decliners in a big way, 4901-1692. On the NASDAQ new highs reached 88, while new lows came in at 25. The NYSE had even more of a pronounced bias, with 154 new highs and 20 new lows. The combined total of 242 new highs and 45 new lows would seem to suggest that the rally has legs, though one never knows when or if Europe will fall completely apart at the seams, sending the Euro lower, the dollar higher and stocks down. Volume was actually quite fantastic. Perhaps some new suckers (investors) were brought into the foray.

NASDAQ Volume 2,253,718,500
NYSE Volume 4,812,432,500

As goes the dollar, so - in the opposite direction - goes oil, and with the dollar down, WTI crude leapt back over the $100/barrel mark in the early part of the session, but backed off to close up only 73 cents, at $99.13.

Naturally, gold and silver were hammered to death, with gold losing $9.90, to $1,587.00, and silver falling 61 cents, to $38.95 per ounce.

The conditions are about to change - for silver, at least - as the Hong Kong Exchange will introduce a silver futures trading mechanism at the open of business on Friday, which will be shortly after 8:00 pm EDT. By this time tomorrow, the price in Hong Kong may be $44 per ounce and quite a bit lower here in the states.

We shall see soon enough.

No Follow-Through Off Tuesday Smash-Up; Hong Kong to Trade Silver Futures

Stocks lingered near the flat line for nearly the entire session, eventually succumbing to selling pressure late in the day, making Tuesday's low-volume rally appear more spin than substance. As usual, in a stunning reversal of fortune, financial stocks were the top-performing sector, up 1.02%, while six of the twelve sectors showed losses and the highest percentage gainer among the six winners - outside of financials - was basic materials, up 0.45%.

The big beat by the banking sector was highly attributable to the fact that the majority of trading on Wall Street is handled by these very firms, proving once more that the too-big-to-fail banks operate without scrutiny from the SEC or any other regulatory body, as self-dealing and insider trading runs rampant.

Sizing up the market as a whole, one could surmise that it is in desperate straits, stuck above the 200 and 50-day moving averages and just below the nominal highs of late April. A steady diet of sideways trading should be of benefit to the high frequency and momentum hedge funds and day-traders, but it's a difficult balance to maintain, especially when one is highly leveraged, as most of the larger firms are.

Having reached the midpoint of earnings season, it is notable that the major indices are less than one per cent higher than when second quarter earnings began in earnest on July 11 and lower than where they were just prior to the onslaught of corporate reporting. It's an amusing scenario, even as most companies have met or exceeded expectations, albeit, for many firms, lowered ones.

With the debt ceiling debate in Washington nearing end-game, stocks seem to be running in place, pacing off the worry of just what kind of stunt the clowns in congress will pull off next, the latest rumor calling for a short term interim raising of the debt ceiling, or having President Obama employ his powers under the 14th amendment, which, according to Bill Clinton, gives the president authority to raise the debt limit without requiring congressional approval.

The key take-away is 10 words from section 4 of the amendment, which says, “The validity of the public debt shall not be questioned."

In typical obstructionist fashion members of the Republican party have already begun questioning the assumption that the president could go solo on a debt ceiling raise, with some members mentioning impeachment and lawsuits.

If nothing else, invoking the constitution on shaky legal grounds would no doubt wind up under the purview of the Supreme Court, take months to wrangle over and eventually end up with a nice downgrade in the US credit rating and higher interest rates for all. That would effectively defeat the whole intent of the Republican and Tea parties for starting this fight, as losses to the Treasury in terms of increased spending to cover higher interest on borrowings would cause even deeper deficits in years to come.

As it is, Moody's and S&P have already raised eyebrows and issued warnings about taking the debt ceiling issue too far afield, and there's a chance that even if an agreement is cobbled together, a rating downgrade could already be in the cards.

After a while, this entire escapade of Washington Gone Wild becomes a futile, badly-managed fiasco. The debt ceiling should never have been tied to budget considerations in the first place. In the end, the Tea Party wing of the Republican party has to be seen as the unwise villain in this sordid, sick affair.

Dow 12,571.91, -15.51 (0.12%)
NASDAQ 2,814.23, -12.29 (0.43%)
S&P 500 1,325.84, -0.89 (0.07%)
NYSE Composite 8,281.83, +27.45 (0.33%)

On the day, winners and losers were nearly split evenly, with 3289 advancing and 3241 declining. On the NASDAQ, there were 71 new highs and 34 new lows. New highs led new lows, 95-19 on the NYSE. The combined total of 166 new highs and 53 new lows is a positive sign for marketeers, though comparisons will be harder to beat come September, October and November, as stocks scored heavy gains in those months last year. Volume was the same as every other day this year: sluggish.

NASDAQ Volume 1,874,350,375
NYSE Volume 3,767,229,500

WTI crude oil was down for much of the session, but finished 64 cents higher, at $98.14. Gold was off $4.20, to $1,596.90, and silver dropped 66 cents, at $39.56, though it traded below $38.50 earlier in the day.

Tomorrow will mark the final day of singularity for the COMEX silver market as Hong Kong will begin trading a dollar-denominated silver futures contract on July 22, tapping into rising demand for all metals coming from China. This could potentially create an enormous run-up in the price of silver, as the Hong Kong exchange will be seen as an offset to COMEX (and Anglo-American) hegemony.

It will be interesting to watch the vicious price swings once the exchange gets its feet wet and orders begin flowing from not only China, but India and other Pac-Rim nations as well. Many are hoping that the Hong Kong exchange will operate in an honest fashion, exposing the manipulative ways of the COMEX and the shorting strategies of JP Morgan Chase and HSBC.

A new player in the global silver trade might be just what the doctor ordered for holders and hoarders of silver.

Italy Settles Down, But Stocks Slide Again; Google Amazes

With the continuing debt crisis in Europe taking an unusual day of rest, US stocks opened on the upside but could not maintain momentum as stalled talks over the US debt ceiling weighed heavily.

It's almost a certainty that the government clowns in Washington will come to a compromise solution similar to the budget deal in May - too little, almost too late, and sure to not address the most pressing US issues, those being housing, jobs and our very own burgeoning debt crisis.

With both sides still at odds over the scope and details, the nation is paralyzed by indecision, regulations and a tax policy that has - like the rest of the federal government - gone off the rails.

In Italy, austerity measures were passed, allowing the Italian government to issue much-needed 5-and-15-year bonds to finance continuing operations. The plan has many facets, and should (though it won't) serve as a blueprint for US measures.

That did not, however, help traders in US equities, which has this week given back much of the gains made over last week's spectacular five-day rally. Markets hate uncertainty, and even in the midst of earnings season, US stocks are very much a mixed bag of tricks, teetering on the brink of collapse.

It was a fine day for Google (GOOG), though, as the giant internet search and service company boasted profits well above Street estimates. Reporting after the closing bell, the company reported $6.92 billion in net revenue in the second quarter of 2011 and non-GAAP earnings per share of $8.74 on expectations of $6.54 billion in revenue and earnings per share of $7.87. The stock was trading up 12% in after-hours, up more than 63 points.

Dow 12,437.12, -54.49 (0.44%)
NASDAQ 2,762.67, -34.25 (1.22%)
S&P 500 1,308.87, -8.85 (0.67%)
NYSE Composite 8,191.13, -55.67 (0.68%)

Declining issues beat back advancers, 5019-1495. Though the headline numbers were hardly spectacular, except for the NASDAQ, which lost 1.22% on the day, selling was broad-based. NASDAQ stocks showed 56 new highs and 35 new lows, while the NYSE posted 46 new highs and 45 new lows. The combined total spread of 102 new highs and 80 new lows continues to deteriorate. Volume on the day was relatively solid, though that should be bearish for investors.

NASDAQ Volume 1,923,346,875
NYSE Volume 4,298,657,500

Economic data was mixed and uninspiring. Initial unemployment claims dropped to 405,000, though it was the 16th consecutive week above 400,000, another non-encouraging sign. Retail sales for June came in at plus 0.1%, and the PPI actually fell 0.4%, though the core number, which excludes food and energy, rose 0.3%. Business inventories were up 1.0% in May, as companies cited slack demand.

Commodities were also mixed. WTI crude oil fell sharply, down $2.36, to $95.69. Gold, though, set another new record high, gaining $3.40, to $1,589.30. Silver added 54 cents, gaining to $38.69 per ounce.

With the week drawing to a quick conclusion, Friday's data features the June CPI reading, the Michigan survey of consumer confidence and earnings from Citigroup (C).

Stocks Stall While Precious Metals Soar

Well, that week-long, pre-holiday buying rush seems to have come and gone now that the three-day weekend has passed, which really isn't surprising, considering how vaporous and baseless the entire five days rally was.

Low volume, as usual, was the telling factor in the melt-up last week and now it's gone, maybe for good. There are no more suckers in the market, or at least not as many as there were a few years ago. One look at today's volume numbers will stamp that as fact. Today might go down as the lowest volume trading day of the year, though there have been so many, it may not, and besides, nobody's keeping score.

One the other hand, precious metals did astonishingly well. There seems to be another shift to safety underway and nothing is safer than gold, and maybe silver, if the price manipulation would ever cease.

Other than the obvious, there was little to report from the exchanges. One wonders how the CNBC anchors manage to stay awake on days like this.

Dow 12,569.87, -12.90 (0.10%)
NASDAQ 2,825.77, +9.74 (0.35%)
S&P 500 1,337.88, -1.79 (0.13%)
NYSE Composite 8,404.63, -20.85 (0.25%)

Advancing issues had a slim advantage over decliners, 3278-3231. On the NASDAQ, there were 149 new highs and 27 new lows. The NYSE new highs beat new lows, 173-7. Combined new highs: 322-34. As mentioned, volume was dismal.

NASDAQ Volume 1,569,571,875.00
NYSE Volume 3,676,082,750

The real action was in commodities. Oil surged again, gaining $1.95, to close the day at $96.89. Gold was boosted $30.10, to $1,512.70, while silver gained an inordinate $1.70, to finish at $35.41.

The world still waits for the congress and president to decide on whether or not to raise the debt ceiling. Both houses remain in session, even though the week is usually reserved for yet another undeserved week-long vacation. With any luck, congress will allow the government to borrow to its heart's content before the NFL settles their issues.

Truthfully, more people are concerned about the NFL season than the debt limit. Obviously, one can live without a functioning currency, but Sundays without pro football is an unthinkabel reality that nobody seriously wants to consider.

Greece Passes Austerity; Next Up: US Debt Limit

While there was little doubt that the Greek parliament would "do the right thing" and pass the 5-year austerity package in order to secure another $17 billion in their continuing slavish relationship with the IMF, ECB and EU, the results on the streets of Athens suggest that the plan may not be to the liking of the average Greek, if there is such a creature.

Imagine this happening in the United States. A consortium of banks hold the US government hostage, saying, in effect, "do this, or we cut off your allowance." The this being the layoff of thousands of government employees, wage cuts for others, a 10% tax increase and the selling off (privatization) of state assets, one wonders how the Greek populace will like living in abject poverty for the remainder of their lives. In America, one need not wonder. It would most likely pass, but the popular fury and anger would be ferocious.

So it is in Greece, where protesters hailed rocks and stocks at police throughout the day and police returned with salvos of tear gas. There was a great deal of looting and confrontation with the police, but few arrests. It seems the Greek police, some of whom will be paid less in a few weeks than they are now, or may not have jobs at all, have a bit of a heart for their countrymen and women.

Essentially, along with the 10% tax increase, services will be cut by about 25%, along with available government positions and wages. $50 in Greek assets will be privatized, begging the question of just what the Parthenon may be worth to some European oligarch-trash who wish to add it to their art collection.

The measure passed with a vote of 155-138, with some abstentions, since the Greek parliament is comprised of 300 members. But one has to wonder just how long it will last before the money-starved Greeks begin to turn on the government again and again, seeing the bailout as nothing more than another stalling tactic for a bankrupt nation and largesse for the elitist bankers.

Stocks and commodities both were buoyed by the passage, as the globalists averted another crisis in the flawed and corrupt fiat money system. So, the result, higher prices for everything, except, of course, wages.

The next chink in the armor to be fixed would be the US insolvency issue, that of raising the debt debt ceiling so the world's largest net creditor can continue to borrow and spend until the elections of 2012, at least. The deadline of August 2nd approaches with all due haste, though both houses of congress will not be convened at the same time, if they keep to their schedules.

The House was already in recess this week and will be until July 5th, though the senate recess - scheduled for July 4-10, is in doubt, with Democrats seeking to cancel it, and Republicans all too willing to stay in Pro Forma session, fearing recess appointments by the President.

With any luck, the tow houses of financial horror could actually do some deal-making between the 10t of July and the August 2 deadline, and that would be almost a surety, as both houses will recess on August 8 and not return until September 5, after Labor Day and well beyond the statutory constraints of passing a new debt ceiling.

Just like in Greece, however, it's expected that the senate and the president will approve some kind of deal at the last moment, ensuring maximum discomfort and anxiety for the good people of America. Of course, any talk of a balanced budget amendment, currently being espoused by various Republicans, should be recognized immediately as a complete sham, though there is some hope that some semblance of spending restraint may be written into any new bill. The long money is on the government beating the deadline by days and getting back to doing what they do best, spending money they don't have.

Dow 12,261.42, +72.73 (0.60%)
NASDAQ 2,740.49, +11.18 (0.41%)
S&P 500 1,307.41, +10.74 (0.83%)
NYSE Composite 8,228.50, +92.52 (1.14%)

Gainers beat losers by a solid margin, 4185-2361. On the NASDAQ, new highs were better than new lows by a 100-29 margin, while on the NYSE, the new highs outnumbered new lows, 81-14. The combined total of 181 new highs to 43 new lows suggests that we're back to "risk on" for the foreseeable future, though, being summer, a sideways trend always has great potential. Volume was light, but not actually awful.

NASDAQ Volume 1,816,885,000
NYSE Volume 4,316,723,500

WTI crude futures rose remarkably again, up $1.88, to $94.77, along with gasoline, which has been rocketing of late. The most recent price gouges have not shown up at the punp yet, though they surely will by the weekend. AAA reports that the average price of a gallon of unleaded regular is $3.54, with higher price in the more populous states of the Northeast and West coast.

Gold got a little nibble of a bid, rising $9.10, to $1511.20. Silver spiked 92 cents, to $34.86.

Tomorrow morning initial unemployment claims numbers may do damage to the current three-day rally in stocks, though a positive report could produce more cries of "soft patch" and a continuation of the "risk on" trade.