Quick Friday mid June recap. As we argued on the 1st of June. Good “historic” reading, when everything was higher. Let’s see if market finds some support here, but only short term. Our Top arguments below,

The Top

and don’t forget who stuffed the market at the right price and with real size.

Smart money sold the Top (again)

Latest reports out from CFTC. Everybody seems to be getting all moves totally wrong. Euro longs had increased, and Euro got crushed last 2 days. Expect reversal of this next week, when people decide to offload the trade. Click self explanatory charts for better view.

Chart Zero Hedge,

Below from Reuters net specs of commodities;

All commodities, follow link, http://graphics.thomsonreuters.com/11/02/cftc.html

Austerity sucks. Despite getting less by the day, the creditors want Greece to sell out it’s strategic assets, at fire sale prices. Akropolis in China next, while Russia controls the pipelines passing Greece? Stratfor reports;

Greece’s eurozone partners are demanding that Athens accelerate sales of public assets and allow an independent agency, likely to be heavily influenced by Germany, to lead the privatization drive. There is a risk that Greece’s ruling PASOK party could rebel against Prime Minister George Papandreou and eurozone austerity measures. But the more significant long-term issue is that Russia and China could use the privatization to snatch up strategic Greek assets.

Greece’s privatization efforts have become central for the new approximately 65 billion to 70 billion euro ($94 billion to $101 billion) bailout package being finalized by eurozone member states and expected to be approved by the June 20 eurozone finance ministers’ meeting. As the chief condition of the new bailout plan, Greece’s eurozone partners are demanding that Athens speed up its sale of publicly held assets and shift the responsibility of privatization from the government to an independent agency that would, sources tell STRATFOR, have considerable input from foreign governments. In other words, Greece needs to sell about 50 billion euros worth of public assets by 2015 and on terms that satisfy Germany and other eurozone countries, regardless of the preferences of the Greek state, which owns the assets, or the Greek public, which depends on them for employment.

Greek privatization is a divisive issue that is threatening Prime Minister George Papandreou’s hold over his ruling PASOK party. There is a danger PASOK could revolt against Papandreou and eurozone austerity measures, putting Europe’s bailout efforts into question and worsening the sovereign debt crisis in Portugal and Spain. The long-term issue, however, is the effect that such wide-scale privatization will have on strategic Greek assets, such as ports and pipelines, which could find interested investors in Russia and China, giving these powers a backdoor into Europe’s transportation and energy infrastructure.

Wonder if Russia would like to control these pipes?

…and Nasdaq is negative on the year. The gap up at year beginning is filled, and the 200 day moving average is right about here. Let’s see if this level holds?

SPX approaching that 200 day moving average, fast. Definitely risk off day, but on light volume. Let’s see if this is a shake out and we bounce, or if we start the collapse? SPX is close to unchanged for the year, adjusted for the USD weakness this year, SPX is minus….

Market tested 1295 yesterday, and has now reversed. 1275/1280 are very important levels in SPX. Dow is approaching 12 000. As we have said before, we think the market will correct much more, but with the small volumes we are seeing here, we are not shorting into the support levels, despite people puking equities, oil, gold etc. Our long AAPL vs short SPX is working for the moment. Some risk off charts, click for better view;

Some rumours from precious metals desk in London.

“Talk about gold and silver coming off on IMF and World Bank selling 50 metric tons of gold. Insiders knew….Naive longs puking…”

Maybe they need some Euros for the bail out this weekend, or?

As thetrader has been arguing for some time now, the show is run by the Fed. For a quick recap and explanation of how the Fed is buying SPX futures read Bill Bonners interview below;

“Bernanke comments keep equities in check,” says a headline in The Financial Times.

Sure enough. The Dow ended down again – 21 points down. It’s been going down for five weeks. But it’s still above 12,000. So there’s nothing to be alarmed about.

What did Ben Bernanke say? Not much really. He allowed as to how the economy was not as strong as he had hoped. But he said things were getting better. And he didn’t mention QE3. So why was the market unhappy? What difference did it make what Bernanke said? Ah…that’s the funny thing. Stock prices are now the responsibility neither of willing buyers nor sellers, neither of the bears nor the bulls…but of the US central bank.

Bernanke said he wanted higher stock prices. He used QE2 to boost them. He said the “wealth effect” would make people feel better off. Then, they’d spend more money. And then, they’d actually be better off. Of course, you can see the problem with that. If it were that easy to make people richer, why not give them more quantitative easing every day of the week?

Instead, investors know how the game works. They know you “don’t fight the Fed.” So, if the Fed is trying to push up stock prices with cash and credit, you go along for the ride. You buy stocks, confident that the Fed has your back.

The economy actually gets worse…as higher prices sit on family budgets like a fat cowboy on a skinny horse. And so, the stock market comes to reflect neither the economy nor what stocks are worth. Instead, it shows what speculators think they can make from anticipating Ben Bernanke’s next move. They watch the Fed. If Bernanke looks like he is going to pump in more money, they buy. If they’re not sure, they wait. If they think the Fed is pulling out of the stock market, they sell.

Right now, they’re selling…because they see QE2 ending…and no QE3 starting up. ‘Wait a minute, Bill, are you saying that the Fed is manipulating the stock market?’ Yep. ‘Isn’t that against the law?’ Yep.

‘How does the Fed get away with it? How come the SEC doesn’t come down hard?’

Oh, you silly goose. Stop asking stupid questions. The market is fixed. The SEC is in on it. It’s all part of the zombie system of finance. The dollar pretends to be real money. Debt pretends to be capital. And regulators pretend to be smarter than capitalists. Details to follow.

We promised yesterday to tell you more about what we think Mr. Market may be up to. You’ll recall that Mr. Market is wily. Sometimes cruel. Always inscrutable. One thing Mr. Market will not do: he will not do what people expect. Why not? Because he would have already done it. In other words, if everyone thought stock prices were headed higher, they would already be higher. From that bit of logic we infer that Mr. Market will generally do what most people do not expect…the very thing that will cause them most pain and suffering.

What’s that?

Well, what lesson have investors best learned over the last 20 or 30 years? They’ve learned that things go up. Since 1980, stocks are up about 12 times, even after the slipping and sliding of the last 10 years. After such a powerful performance investors trust stocks, over the long run. Indeed, many analysts refer to the last 10 years as a reason stocks should go higher over the next 10. ‘It is so unusual for stocks to do so badly,’ they say. ‘Surely, they wouldn’t do that two decades in a row.’

Oh yeah? Stay tuned.

We saw yesterday that the federal government’s real debt has risen to $62 trillion. No way are the good citizens of the United States of America going to put their heads down and pay that kind of debt. They couldn’t do it even if they wanted to. The history of the last 30 years is a history of debt accumulation. The future…perhaps for the next 10 to 20 years…will be a story of debt cancellation, restructuring, write-offs, defaults and foreclosures. Psst. Want to make some easy money? If you’re one of the 15 million Americans who is underwater, it’s easy. If your house is worth less than the mortgage outstanding against it, simply walk away.

Why not? Do you think the bank would stick with a losing position? Uh uh. It would cut its losses. You should too.

Read more: The Central Bank Stock Market Indicator http://dailyreckoning.com/the-central-bank-stock-market-indicator/#ixzz1OsZD3urF

New anti Austerity/Corruption protest in Spain. Close to 20 injured in Valencia. Protests planned in Girona. Is Spain back? El Pais reports;

At least 18 people, including one lawmaker, were injured after national police began beating members of the public with their nightsticks, witnesses said. Five people were arrested.

The demonstrators had begun gathering outside the local parliament before dawn to wait for the deputies, and began shouting when the swearing-in ceremony began. Among other things, they were protesting against lawmakers from the Popular Party who have been targeted in corruption investigations.

When police began to dislodge the protestors from the parliament’s entrance, several officers struck demonstrators.

In a video posted on YouTube, three officers can be seen chasing a young man. When the other protestors surround the police, one officer is seen pulling out his nightstick. Then a young woman falls to the ground with a cut lip. The video also shows the crowd beginning to gather and the police lashing out with their batons.

Juan Ponce, a freshman lawmaker from the regional Compromís party who was being sworn-in, was struck on the arm by police when he went outside to speak with the protestors. Eight policemen were among the injured.

González Pons, the Popular Party spokesman, blamed Deputy Prime Minister Alfredo Pérez Rubalcaba for the incidents, and said that if he wasn’t due to stand as Socialist candidate for prime minister he would have already had the demonstrators forcibly removed from protest camps around the country. “You either do nothing or let the police get carried away,” Pons said. “He should try focusing on solving this problem, which is becoming a problem for everybody.”

In solidarity with their Valencian counterparts, protestors in Girona have called for an all-night vigil in front of City Hall beginning on Thursday.

What They Tell You

Markets need to be free. When the government interferes to dictate what market participants can or cannot do, resources cannot flow to their most efficient use. If people cannot do the things that they find most profitable, they lose the incentive to invest and innovate. Thus, if the government puts a cap on house rents, landlords lose the incentive to maintain their properties or build new ones. Or, if the government restricts the kinds of financial products that can be sold, two contracting parties that may both have benefited from innovative transactions that fulfil their idiosyncratic needs cannot reap the potential gains of free contract. People must be left ‘free to choose’, as the title of free-market visionary Milton Friedman’s famous book goes.

What They Don’t Tell You

The free market doesn’t exist. Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. How ‘free’ a market is cannot be objectively defined. It is a political definition. The usual claim by free-market economists that they are trying to defend the market from politically motivated interference by the government is false. Government is always involved and those free-marketeers are as politically motivated as anyone. Overcoming the myth that there is such a thing as an objectively defined ‘free market’ is the first step towards understanding capitalism.

http://www.truthout.org/there-no-such-thing-free-market/1307462405