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Does Bernanke Have A School Term Paper For Natural Disasters?

The Treasury market settled down this week with 10 year Treasury yields hovering above the critical 2.20% that would signal a resumption of the panic, but below the line at 2.30, a breakout of which would signal an upside reversal. The market faced heavy supply and took it in stride this week, with help from foreign central banks, but the big test will come at the end of the month when that supply will be settled. Furthermore there’s reason to think that the supply problem will only grow in September.

While the indirect bid at the Treasury auctions remains about 20% below last year’s level, foreign central banks have increased their buying in recent weeks to 25-30% of new Treasury supply each week. That had been contributing to the short squeeze/buying panic in longer term Treasuries and it is helping to stabilize stocks. Indirect bids at this week’s auctions, indicative of FCB buying, were stronger than at the last rounds of the same types of paper.

The up phase of the FCB short term buying cycle is due to end now. That will remove a big prop from the Treasuries, and could mark the end of the rally. If this is the peak of their buying cycle it would be the lowest level of peak buying in at least the past 4 years.

All of this may be moot come Monday. If Irene runs the coast of New Jersey and NYC takes a direct hit, it could bankrupt the insurance industry. What will the mad scientist Bernankenstein do then? Maybe he has a high school term paper for this problem too. Just what we need.

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This Week Will Tell If The Bear is Really Coming Out of Hibernation

 
Last week’s selloff did less damage than it may have felt like. The drop stopped in the area of 3 crossing uptrend lines, ranging in length from short term to long term. Here’s what would tell us whether the uptrend is still in force, or signal that something evil this way comes. I have added 8 new stocks to the swing trade chart pick list, including 2 shorts.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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