8/31 Daily Commentary

SPX 1040 is tough support.   My favorite scenario is a false break which will mark the I1 low.  My tactics are to maintain position until the I1 turn date on Thursday.  I've reduced exposure to 2% DJ futures with a stop at 10052 and 6% QID.
There is a M/A cluster on the SPX 15-minute chart:




Also, SP futures hit the 30-minute M/A at 1053.
DJ futures have been restrained on the upside by a moving average all day after hitting the 50% retracement from Friday's high early in the session.  The down-sloping blue M/A has a tight envelope of 10,545 but I'll put my stop at 10,552.

I've been struck recently by how mystified economists and laypeople are concerning the inability of the economy to add jobs.  When I was in college I took jobs during holidays and summers in a manufacturing plant making parts for engines and a phosphate rustproofing company treating nuts, bolts, and small bulky parts.  Those companies are long gone without replacement.  We transitioned from making things to concept products.  I worked in the software biz all during the great productivity binge of the 70s, 80s, and 90s brought about by computerization of processes.  The process side decreased as the financial software side increased.  By the end of the 90s the US had what was left of it's manufacturing highly computerized and productivity gains were nominal.  By not making physical goods, in particular capital goods, we have doomed a large portion of our workforce to obscurity.  The human population functions within a bell curve of intelligence.  In particular the ability to conceptualize sytems and processes and to devise mathematical models to represent them is key to remaining employed in a conceptual economy.  In the software industry there is little demand for employees on the lower 75% of the bell curve.  Two men in a software distribution center can get product out for 100 developers.  Secretaries, same thing.  This is opposite the case when physical things are manufactured because they require machinery set-up, monitoring, and operation.  Even with robotics and computers there is a need for many plant floor employees to change the programming over for different processes as well as environmental monitoring and control, parts inventory, quality control, machinery maintenance, and much more.  These jobs are now in China where they will remain. The educational system in the US has gone the other way with teachers and educational systems short-changing mathematics and sciences in the process of turning out mediocrity and collecting federal monies.  The students being produced today are hopelessly unprepared for technical fields.  Our solution now is to grant as many green cards as we can to foreign workers to make up the gap as boomers retire. 
Wake up, America.  China has categorically rejected Microsoft products on their desktops and laptops in favor of freeware.  There are very few niches that superior knowledge can garner in the world.  That superior knowledge is shrinking all the time because the world will steal knowledge and knowledge products without thinking about it.  The countries with the least debt overhang will continue to gain in manufacturing and the rest of the world will just limp along.  Low debt in the long run means lower costs and greater policy flexibility both corporate and governmental.  America is high debt but temporarily enjoys low interest rates.  This gives us the illusion of control but assures long run economic flatline.  The developing world will continue to use vastly more resources as they industrialize and consumerize.  The only silver lining is that the high debt countries will import less and thus restrict developing countries' growth.  The depression will forestall the visiblity of the effects of our demise due to a continuation of low interest rates and struggling developing economies coping with reduced exports to the developed world.  As long as our politicians can keep the truth obscured they will continue with mad policies and delay the day when our political system is turned upside down.