Against its European counterpart, the Chinese currency hit as low as 9.5579 during Friday’s early Asian trading. This set a 3-day low for the yuan. Read more about the yuan…

Reuters/Baghdad There is huge potential for Islamic finance in Iraq, banking officials said, and the country’s central bank said it was looking at ways to encourage the sector’s growth in response to demands from Islamic banks.

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• Commercial Real Estate – The economy’s anvil (Time)
• First ever global housing-led recession (Dr Housing Bubble)
• Ralph Nader: Obama’s GM plan looks like a raw deal (WSJ)
• GM bondholders near deadline to accept equity plan (Reuters and NYT)
• Niall Ferguson: how economists can misunderstand the crisis (FT)
• The inefficient capital markets hypothesis (Credit Slips)
• My therapeutic rant on the current economic madness (EconoSpeak)
• Emir of Qatar still studying stake in Porsche (Reuters)
• Zoellick warns stimulus “sugar high” won’t stem unemployment (Bloomberg)
• Putting a price on leaving the TARP (Dealbook)
• How laypeople and experts misperceive the effect of economic growth (Journal Of Econ Psychology, h/t Paul Kedrosky)
• Apollo units wins dismissal from Texas trial over Huntsman bid (Bloomberg)

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A very insightful videos from the Perimeter Institute in which Nouriel lectures on his interpretation of the lack of vision of bubble participants, as well as the implicit bubble-creation facilitation by regulators and economists.

Definitely worth watching.

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• Pravda, yes, Pravda: American capitalism gone with a whimper (Pravda)
• Manipulation: How markets really work (Baltimore Chronicle)
• Banks’ appraisal conflicts could continue under new HVCC rules (Implode-O-Meter)
• Gonzalez theater continues: will “decide” on Chrysler-Fiat deal on Monday (Reuters)
• Canadian/Russian Magna picked for Opel/GM savior (WSJ)
• Fortress seemingly hoping to become a Bank Holding Company by purchasing one, become eligible for taxpayer rescue (Bloomberg)
• Gordian’s Kaufman on a GM bankruptcy (Dealscape)
• Reserve management clears Treasury Fund (WSJ)
• NY AG wins court OK staying SEC pension case (Reuters)

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The FDIC’s Deposit Insurance Fund has plunged to an all time low of just $13 billion as of March 31, or 0.27% of $4.8 trillion in insured deposits. It is worth nothing that since March 31, 15 new banks have failed which includes the biggest one so far this year, BankUnited (which Marla has a special fondness for in her heart and will be providing some ongoing entertainment on). It is thus safe to say that the $13 billion has been spent in the past 2 months, especially since banks no longer issue debt under the TLGP (of which, nonetheless, there was $336 billion outstanding at March 31 - somehow when banks are talking about repaying TARP, their FDIC-guaranteed debt, by far the biggest crutch to the banking system, is conveniently never mentioned) and therefore no longer pay FDIC guaranteed debt issuance associated fees. For many more thoughts on this phenomenon, go here.

Also, DIF-Insured deposits have hit an all time record high of $4.8 trillion, an increase of $90 billion from December 31 as depositors have been seeking a safe haven from the market in Q1. It is unknown if they would have done so, had they known their “insured” deposits will cover only the first 0.27% of depositors if there is another bank failure tsunami. As there is only one more month left in Q2 it will be curious to see it there will be a rotation out of deposits into investments at June 30, concurrent with the time we will know what the current level on the DIF is. Of course, as this data will be available some time in September, by then it may be completely worthless as one would imagine at some point the mystical futures buying force, end of month convenient fund deleveraging, or whatever else you want to call it, will have finally exhausted its market pulling strength.

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After initially breaking the neck line of our Head and Shoulders formation, the USD/JPY decided to reverse course and move above the neck line. However this rally was short lived as worse than expected GDP numbers were released from the US. This news forced the pair back towards the neck…

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This is my first attempt to show the Supercycle from 1932 to the year 2000. As a member of EWI, this is their count (Prechter) and most all EWI members would agree with it as I do. I am not sure I have the last wave 5 labeled as they do, I threw the subwaves together on the fly and have never really looked at it in detail. The point is that it was an extended 5th wave peak. See how many wave 5’s there are up there?

Pretty much everything above upper purple trendline is borrowed money on borrowed time so-to-speak. The massive credit bubble that was inflated over the past quarter century has allowed a great many millions to live life above and beyond what was normal. The bills are due of course.

The 2003-2007 rally was a b cycle wave rally or an expanded flat (that is the theory).

I posted the same chart in “un-log” scale so you can see that it really got out of hand these past 25 years. Problem is everyone is trained to think this is “normal”. DOW 8000 is good “value”. Oh yeah? What makes you say that? You can also see that an expanded flat in unlog scale with a ending “c” wave drop down to less than 1000 DOW doesn’t look so goofy does it?

Why would all those billions and trillions of little 1’s and 0’s in a computer mean anything? Can they feed your cat? Can your cat eat a computer disk? A fiat currency system is built upon faith and faith alone.

That less than 400 DOW target is EWI’s and not mine. I posted it to show you what they think and they study this stuff for a living. However if you look at the unlogged version of the chart, that retrace back to the previous subwave 4 spot of 1975 is not so out of the question is it?

The orange III (circle) is the top of a Grand Supercycle from approximately 1789 to 2000. Its the “meat” part of a Millennium wave that is estimated to start in about the year 1000 A.D. in the West. This means that mankind will go on a massive sideways correction period that will last well beyond our lifetimes. Basically economic activity has peaked for many many decades even centuries. Mankind’s progress goes sideways. But depending on what year your in, it will go down drastically in Grand Supercycle corrective wave IV (circle).

In that view it kind of makes sense. Mankind in the past 250 years has populated most every part of the planet and exploited every resource. Sure we can make cool new toys but I think a world 250 years from now will not be so “gee whiz” to us as it is if people from 250 years in the past could visit us now.

There are great “plateaus” in the progress of mankind. It makes sense we have reached an apex of sorts and now will tread sideways in a long period of stagnant economic activity. But considering the size of the correction, we can only hope our way of life survives.

But back to the charts: If the cycle from 1982 to 2000 took 18 years to build, then it may take 18 years to un-do. Maybe we get that DOW 500 in 2018 I just don’t know.

A chart of US National debt, indeed total world debt, looks like a parabolic firestorm thrust high into upper cumulus of the stratosphere. It stands that high on faith and faith alone. Faith gets broken in P3.

Stay tuned.

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Its not often I throw submicrowaves up on a chart. But Friday’s end of day move was so curious I couldn’t help myself. Hey thats what I do!

I charted the end of day structure as best I could with what the waves say so far. And the waves point toward a blowoff wave 5 top.

The e-minis match up well with this also. A gravestone-ish type doji candlestick even showed up on the hourly due to the way trading stops on Friday. The e-minis actually had almost a 10 point move in 1 minute and came back down in the same minute.

I found another prominent instance of end of month spurt at the finish (its not that uncommon). It also happened on the last day of November 2002 on a Friday. The curious thing about that chart is it opened the following Monday a point higher and then collapsed back down with the first hour of trading. So this supports Kenny’s take that the market may open and hit his 921-922 target and then head down.

So how futures of course move Sunday will be some strong clues. Monday’s opening will also be key.

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First, let me say that I think the market likely hit either a “D” or “X” wave peak today. In either case, we are looking at a 5-3-5 zig zag down. How bearish and big the zig zag only the market can determine.

Lets just say that 880 holds and perhaps we get an E wave early next week and the triangle pattern stays true (good chance it will). What does this triangle Intermediate (X) wave mean?

I quote Elliott Wave Principle pg 51: “A triangle always occurs in a position prior to the final actionary wave in the pattern of one larger degree, i.e., as a…………..or the final X in a double or triple zig zag combination.”

(As a side note, I recently couldn’t find evidence of an X wave triangle in EWP and said so, but I was mistaken obviously if the book says it can be then it can)

So if the Intermediate sized (X) wave triangle is indeed the corrective (X) wave pattern, it means the market will likely see another Intermediate-sized (red) 5-3-5 zig zag UP to 1000 take place (as expected). AND this next ABC zig zag will be the FINAL zig zag up pattern in Primary wave 2. That is per Elliott Wave theory rules on triangles.

So I have developed a chart based on this theme. The upper target is just above the 38% retrace spot. About 1041 SPX. Time? Sometime this summer.

I must say charting this P2 I had assumed it would experience a 38% setback along the way but it has not. There seems to be a “sense of urgency” with P2 as if it knows it only has a small window in time in which to retrace to 1000 and just above before social mood decides its had enough and throws in the towel again.

Afterall, EWI posted a chart recently showing the SP 500 already trading at a trailing four quarter P/E of 60! Now I don’t much pay attention to P/E’s and don’t use them, however as EWI says, any indicator, even if a lagging one, that shows extreme moves, its worth noting.

P1 took about 17 months to complete. If P2 took 4+ months than your looking at a Fibonacci time of about a 25% ratio which would be acceptable.

This Intermediate sized triangle is important. Because if it stays a triangle and a breakout comes, it means the next ABC Minor sized pattern will point the way to the top.

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UPDATE 5:20 PM: added a 1 minute chart

Primary Count is the Blue Minor X wave peaked today and on Monday the next Minor-degree level corrective wave will begin to play out. I posted a lot last night on these patterns. The alternate of course is the giant Intermediate sized Red (X) wave triangle. Today’s high would have been the “D” peak. I also posted a lot on that scenario too.

In both counts, the next short term moves would be the same: Down. And the wave patterns down could very well take the same form in both patterns: zig zags.

Really the only difference is that in the triangle pattern 880 will hold as the next low. In the WXY pattern 880 can break down and the market is free to trace lower and even trace out a triple corrective pattern if need be (WXYXZ)

So the Blue X wave scenario supports some big red distribution type days and maybe the market is due for some and the first day of a new month – June – would be a nice spot I suppose to supply that down day.

Is there a straight up bullish option come Monday? Sure. That would mean that the E spot was hit yesterday and the market will break out and up come next week. But the technicals and wave structures so far from yesterday do not really support that scenario so that is a low probability at this stage. Also I see negative divergences setting up on indicators and such. In addition that would mean that Intermediate RED (X) wave would have taken the form of a triangle. I really don’t know of any examples of X waves at ANY degree to be solely triangles.

I’ll post more this weekend for sure.

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FXstreet.com (Córdoba) – The Dollar weakened further today across the board. USD/JPY fall below 95.35 and went to test 95.00. The pair rebounded to 95.20. So far today the pair has fallen 1.75% from opening price. During the American session the pair lost 70 pips.

FXstreet.com (Córdoba) – The Pound reached a fresh 5-month low against the Dollar. GBP/USD topped at 1.6199 during the American session. Currently the pair is pulling back from those levels and has found support at 1.6145. So far today GBP/USD is up 1.35% from opening price.

FXstreet.com (Barcelona) – EUR/USD has reached a new 5-month high at 1.4170 but it has been rejects strongly about 70 pips to tests 1.4100 level. Currently the pair is trading around 1.4125/35, 1.30% above today’s opening price.

DUBLIN—-Research and Markets has announced the addition of Supplier Relations US, LLC’s new report “Corrugated and Solid Fiber Box Manufacturing Industry in the U.S. and its Foreign Trade [2009 Edition ]” to their offering.

(RTTNews) – Activity in the Chicago-area manufacturing sector continued to contract in the month of May, according to a report released by the Institute for Supply Management – Chicago on Friday, with the pace of contraction unexpectedly accelerating compared to the previous month.

Manufacturers will shed more than 350,000 jobs between now and mid-2010 as the economic crisis grips the UK’s industrial heartland, a new report said.

Read the Consumer Sentiment Index at Reuters/Michigan

News

• US Reuters/Michigan Consumer Sentiment Index up to 68.7 in May (FXstreet.com)
  Fri, May 29 2009, 14:03 GMT

Reports

• GDP (Q1 preliminary): upward revision due to inventories and net exports (BHF-Bank)
  Mon, May 25 2009, 10:01 GMT

News

• US Chicago PMI falls to 34.9 in May from 40.1 (FXstreet.com)
  Fri, May 29 2009, 13:55 GMT