Saturday, October 10, 2009

I have a question...

If I were to...
  1. increase the number of troops by large numbers in Afganistan to fight 100 Al Qaeda operatives
  2. snuff out lives of Pakistani, Afgan civilians and American military personnel alike, 
  3. threaten and aggravate Iranian tensions by trumping up information that gets treated as new though we have known about it since 2006, 
  4. fail to remove a single military asset from Iraq
  5. mire the closing of Guantanamo Bay in bureaucratic paperwork
  6. begin the process of starting protectionist trade wars 
  7. solidify the misguided economic policies of the US and the Fed (and previous administrations) into a quagmire of malinvestment and deceit that will drive global economic destabilization that would, by it nature, have a high likelihood of resulting in conflict 
...then can I please get one of those nifty Nobel Peace Prizes too?

One request: Please make it possible that I be assessed based on 9 months of my stated track record.

One more question: Was Obama REALLY surprised? He applied for the nobel peace prize in February 2009 being president for less than 12 days and before he had ANY noteworthy influence on any significant foreign policy in his career. 

Ron Paul has an interesting perspective...

Friday, October 9, 2009

Market Observations - VIX kisses

VIX kissed the expected. Now I am waiting for the reversal - should be quit a show.

The corporate bonds chart below needs no lables...Clearly the market rally is diverging with the smart money in bonds...we need to watch these bonds early next week.

My scenario seems to be coming together nicely...Dow pushed out a minor high extension and maybe we can get a little more from the SPX...but otherwise the market is most likely nearly done.

Thursday, October 8, 2009

Market Observations - Shake Out?

The minimum requirement for the dollar pullback has been made a new low...I would prefer to see a more capitulatory low...but I have NEVER seen so much bearish talk about the a low is very close and in fact may be in...

As for the markets...I am watching wedge patterns that should end up coinciding with the top of our rally from the march lows.

Transports are not confirming DJ, SPX or COMP. The Transports and Nasdaq Composite are producing a perfect backtest of the rising wedge. With indexes very near their highs, the VIX is not near the lows that it was when markets were here before. Financials are showing loss of momentum and NO volume. There is also a black candle for today's close. Oil made nice moves today....but still has not broken out of its seems like that will not happen.

One more spike is all this market has left in it...Gold and Silver and the Dollar all seem to have a little left to go...possibly satisfied by a single gap or move up tomorrow or monday...and just while everyone is looking........up!

I was going to post a chart of the dollar...but Kenny did an excellent one...I included it below...but please check out his blog at here

Russell 2000 Chart

Wednesday, October 7, 2009

Market Observations - Fake Out Shake Out

Nice consolidation day after two days of short, what's next? Well, since most people are focused on how high this move will go...I suggest we look a little deeper.

Upside targets are so close here that we can almost spit on them (pardon the vernacular). Gold 1085, Silver 18, SP500 1085 to 1100, Dow 10,100. This up move has been a torture I know. I have learned a lot about how insane people can be in chasing extreme government and special interest meddling can whacked the concept of herding really is once it has started. Now it is nearly complete. And we will likely have good excuses for some sort of emotional reaction. Ok, Alcoa reported better than expected earnings. And the Initial Claims numbers + Wholesale Inventories might be just the ticket. However, from my perspective upside is the one spike reaction that is left...most likely occurring sometime between tomorrow and tuesday.

Why do I think this? Well, first its the posture of the VIX. A spike high will bring the VIX back to testing its down trend line and horizontal support. These will likely formidable support. Oil. Oil has vastly underperformed my expectations so should have been able to break out of its pattern. I can not rule out a breakout...but so far...the action in oil is much too divergent from Gold, Silver and the Dollar to write off. The Russell 2000 index is substantially lagging the SPX...given the energy components and financials are the largest group in the index...this is a revealing condition. Distribution days are abundant on all equity indexes with uptrend lines directly above. Additionally, pullbacks recently have been getting larger at 39, 47 and 60 points. So, big cracks are showing. Then there's the Dollar itself. Supposedly, the dollar is dead, gone, buried...but it won't die. I think my alternate scenario will come to pass here as I indicated recently. A spike in inflation assets will be combined with a spike lower in the dollar...possibly into the 74.50's or 75's - but it does not have to go that far. Best would be to take out recent lows. Overall the chart of the dollar is looking pretty complete.

Again, I want to underline that the key to the market is the dollar. I have been working on several pieces chronicling China and JP Morgan. We should expect a currency move to drive the markets. China, is on life support - despite what the popular belief is. Not to mention Japan. A stress from an Asian financial system is something coming out of left field for most people...especially Peter Schiff or Marc Faber...but that is exactly what we are most likely going to get.

In any case, what I am looking for are elements that cause conditions for a swift reversal. A quick up/down reversal may not occur...and the market may want to drag this thing out...but I think everyone is too worn out for that...we should be watching for a reversal to occur just when everyone is analyzing targets for the up move.

If a quick reversal does not occur...fine - no damage done. But I think that it is appropriate to treat any spikes as high risk reversal possibilities...and err on the side of downside bets in those cases. If you ask, at this point, what people are expecting - I would think bears are looking for more torture and bulls are looking for continued upside. The only thing both camps are not looking for is a bullish move up and a bearish move down in the same time window. But that's what I am looking for.

Tuesday, October 6, 2009

Another one -" The demise of the dollar"

"In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years."

What I find interesting about this is that it will make all the inflationists to happy. However, as we have seen with this market NO trade is allowed to be easy. On that basis alone, inflationists should be careful about counting chickens. But clearly the dollar move as I indicated in my "Market Observations" post last night is not complete. I think my alternate scenario that I have been discussing has gained stature. I expected the dollar to rise to the upper boundary of its diagonal. It has not even done that before breaking decisively below it once more. Today's market is very important. If we can get selling into this gap - that what I want to see...that's the only thing that will keep the current market structure pointing immediately down.

When all the rappers decided to get paid in euros rather than dollar's that was the top in the euro...I guess when the manipulators and government officials decide to do so also...they will be equally well or better timed. 

see article here

Market Observations

Ok, I have been remiss...I did not feel that well today and did not get around to posting until now.

First lets look at the markets. I have my concerns. It is easy to paint a bearish brush on the market in the form of market structures or counts that are bearish until they are not.

This is what I see:
  1. Gold looking bullish. 
  2. Dollar under resistance and not impulsing
  3. Oil looking like it may want a push up
  4. Gaps remaining to be filled
Ok those are not buy signals, but they are warning signs that the market may want to probe up for a better retest. The charts are not making me comfortable.

What am I looking for? 
What would make me comfortable, would ideally be a gap up tomorrow followed by an energetic sell down reversal. This would apply to equities, Oil and Gold. However, I am concerned that we can get a fake out here and end up with a rally back to test some gaps and resistance in the 1050 to1060's. There is a benefit to this occurring if it were to do so. Bear's who have finally gotten a taste of a small win after being beaten up may misinterpret a move up to retest as something more bullish than it would likely be. Additionally, it would serve to convince weak handed bulls, that the waters really are safe and they can buy dips even if they are scary ones.

One of the negatives to any move up in gold is that silver has reverted of its old warning signal of non-confirmation. We should see Silver remain in a non-confirmation of Gold if we do get a pop.

VIX has triggered a standard dev short-term buy signal and there are still a lot of constructive looking charts out there. So, all of this should not surprise to work together to create a push up into the Wednesday to Friday area. Gold, Oil, and Equities...are what I am keeping an eye on. I am just laying out a case. Its not a bullish case, but certainly a push up here will feel bullish to a lot of market participants...and that may be the objective.

CCI array is showing supports here and a potential bounce. But we are getting high quality divergences (plotted over prices) that usually only occur at tops and bottoms for the daily SP500 emini futures.

While I am not in love with the count below for Oil, it is not totally out of the question...its on the table.

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