Saturday, May 21, 2011

The most bearish pattern - a bullish declining diagonal

Characteristically, people look at falling diagonals (often referred to as wedges) as highly reliable bullish price patterns. That is true in general if you are in an uptrend. However, at trend chenges...people become very used to the trusty pattern for their profits. So, they attempt to continue to use the pattern to no avail...just as many bears did on the rally out of the 2009 lows.

The irony is that the traders trapped in these patterns tend to be very well trapped and so a failed pattern produces a very powerfull move in the opposite direction. For a bullish falling wedge...expect big downside if the pattern fails...for a bearish rising wedge...expect big upside when the pattern fails.

The banks, from this participants perspective, are not looking likely to hit the positive targets for this pattern.

Friday, May 20, 2011

Want to see the future of stocks and commodities

Ask yourself a simple question...were the run ups in commodities, silver, gold and equities funded with savings and/or the results of productive economic activity? The obvious answer is NO. They were funded by awarding incompetent people, in fact the ones who caused the last crisis and have always used accounting fraud to cover their losses and malinvestments, more money and credit. The public has not received more money or credit neither has small business. The result of this arrangement has been malinvestment...and its highly combustible at this point...which is why I loaded up on the dollar overnight near the lows around 75...

If you ever wonder what the charts of commodities, silver, gold and equities will look like...look at the last Federal Reserve funded manic asset inflation - housing...and ITS STILL COLLAPSING. Whats more is that its responsible for the destruction of our currency to the tune of more than 2.5 trillion over the last 8 months...anyone wanting to put that in persepctive will quickly understand that before the fed induced malinvestments in commodities started to implode the Fed was simply pumping enough money into the system in an attempt to compensate for this destruction of money. The reality is that, in addition, credit has contracted further which has exacetbated the money supply contraction even more. Then, when one compensates for the malinvestments in risk assets that are imploding (and have MUCH further to fall incidentally), the money the fed has printed has already vanished (and will ultimately significantly exacerbate money contraction) - with one caviat...the participants in the economy paid inflated prices for consumable products and commodities and that money is also gone without having the chance for productive its a more than double whammy...

Ben has taken trillions of dollars dropped them from helicopters into buring fields and they have simply inflamed the inferno and now apparently Ben BURNanke thinks that adding some gasoline to the mix will improve the situation...the result of this nuclear destruction of money is a lack of supply and availablity of our currency - which will translate to a VERY VERY strong dollar.
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of the further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig Von Mises, Human Action

And Sovereign Debt...

And one last point, the collapse of sovereign debt throughout the world is a grave contributor to the net money supply. The US dollar is the reserve debt instrument of the world. Gold, Silver or any other commodity backed currency IS NOT DEBT MONEY...the unwind of this mess requires debt money to transact and insolvency to repair. Contrary to Eric Sprott's highly misinformed views regarding silver...Metals will NOT be a good store of value in this environment - his reputation will lay in tatters with the amount of money he will lose people with his rediculous hyperbole. Silver is at this time, a terrible investment, not a currency and not a good store of value/purchasing power.

In my view, Gold will most likely retain similar purchasing power as it does now. If you can buy 10 tanks of gas now with an ounce of gold, then I imagine in the future you will still be able to buy 10 tanks of gold or something near that. However, with cash you will likely be able to buy 25 to 40 tanks of gas...take your pick.

As many sovereign nations find the hand of the ECB, IMF and World Banks trembling with Parkinsons and dripping with disease, they will not be able to extract much of value from them...this will directly effect the US money contraction and fuel the dollar shortage. Mark the words...this is going to be a while and its going to be painful. The dollar money supply contraction implies an asset and credit over-consumption. Those instruments will collapse much further than anyone is expecting...or imagining.

Thursday, May 19, 2011

The goes the market.

Forget all those crazy elliot wave counts out there...they are too distracted coming up with scerario 1, 2, 3, 4 with alt B. One needs to watch real patterns in the market not imaginary ones.

The EURO lends credibility to the Dollar Index pattern indicated above.

now we know the situation was normal...and the outcome certain...

Some Charts

Wednesday, May 18, 2011

As the implosion continues...the implications grow for the deperate financial elites

I wonder what the ethics really are of those in charge...we know by now that BURNanke and Geithner have the character of a south american cane toad...the other financial elite cronyists, I suspect are similarly impressed with their capabilities as Strauss-Kahn...

Atleast, Nigel has the character to say it the way it is...

Sunday, May 15, 2011

Manipulation of the masses on a massive scale...

Lets take a look...the role of the press in our lives:
  1. Obama's clearly digitally assembled and altered birth certificate is a white out
  2. Fukushima is in a news black out
  3. News related to the 98% mortgage market shutdown is a black out
  4. News from Syria is a brown out 
  5. News from Libya is a brown out 
  6. News from Egypt is nearly a brown out
  7. News related to massive increases in leverage and fraud in the largest financial institutions is a black out
  8. 100+ Price to Earnings ratio for the Russell 2K is a smoked screen
  9. The complete failure and financial destruction at the hands of Fed and its QE2 are a black out
  10. Unemployment is a full white out
  11. Inflation is a white out
  12. Supply and Demand is a white out
  13. Integrity with in the ECB, Central Banking Cartel is a full white out
Our illustrious Mr. BURNanke has presented a load of crap after a load of crap and asked us to believe him. The guy is an amateur or a charlatan - most likely both. Timothy Geithner and our friends at Citibank would like us to believe that a full scale sovereign credit contraction would results in catastrophe for the dollar and the US. Well, as you can see, my posts regarding the dollar (as well as my trades) have been rather more objective. PIMCO is busy defending the most obvious trade in history...higher rates and inflation. I am not a big fan of obvious trades and I am guessing that many who are in this trade may not end up being a fan of the trade either. The dollar has a lot of ground to gain after the full fledged assault by BURNanke's QE which has destroyed twice the dollars that were intended to be created. More than 2 trillion in credit and money supply has been killed by the economy while BURNanke has quietly killed another 1.2 to 1.8 trillion with his QE2 malinvestment program. That creates a large shortage of credit/currency in an already tight environment. Expect to see a very painful situation become much more painful for the people who have fallen for the QE game and theory. I think that many notable analysts have been totally overwhelmed by what they see as a technical money printing issue...what they are not seeing is the real dynamics that are going on.

Marc Faber was recently interviewed on CNBC and while he made some very interesting and valid points...the dynamics he is talking about are old...QE has failed and there is no chance that it or any future version of it will succeed. In fact the super destructive nature of the malinvestment paradigm that BURNanke has created with this version of QE will likely lead to his ouster as Fed Chairman...notwithstanding public pressure caused by his many lies and manipulations. I think that it should be clear at this point that, though margin selling has had some effect, the primary driver of the increase in commodities was tons of available liquidity from QE and not supply and demand as the ever blind fearless leader has professed. There is simply no way that collapses like we have see can be caused due to supply and demand in such a short time and in so many markets. The reality is that the shortage of dollars, real purchasing power and the greater fool have been the primary culprits for the contraction (or demand fall off as Ben would have you believe). Additionally to that, the margin collateral increases will be blamed for the the commodities and equity markets collapse...however, though the impact of leveraged securities in notional value can be large, the reality is that the amount of money required to satisfy the margin increases pales in comparison to the notional losses. Technically, the margin increases have not required such a significant amount of cash or collateral as to be the cause of the declines. The cause is the dynamics of liquidity or absence thereof...and the results of an absence of liquidity are usually increased margin requirements - and that, while inconvenient, is the way it should be. However, there are many who are blaming the entire silver debacle on the margin increases. What will they be blaming the decline on when silver breaks $4.39 which it is highly likely to do? The same situation will repeat for market after market.

Additionally to this, we have Warren Buffett downright lying to attempt to encourage complacency and talk his book...we have Obama attempting to reduce prices by solving an apparent supply problem via the acceleration of oil production. This is for a market that Exxon testifies, is suffering demand problems...and under normal conditions should be trading at $50 to $60 a barrel. This is coming the CEO. So, any further intervention by the Government is likely to create another overshoot in the prices of oil on the downside...which by the way works rather well with the charts I have been showing. Rather than oil settling into a trading range in the 50 to 60 dollar area, intervention stands a very good chance of overshooting because its working on the wrong problem and oil can easily decline to below $30 or $20...nobody could have imagined a greater than 70% decline in 2008 and the can not imagine it now...though it appears likely to happen.

Below is an analysis of the Fukushima situation...why is this not on the news? Why is so much information repressed or preprecessed? Clearly, as I see it there are not very many explanations as to why we are not hearing about the large scale violence and killing going on in Syria...we only hear about Isreal defending its borders...but not that Syrians are being murdered enmass and are trying to get anywhere including Isreal. Its kind of funny, I agree in a very perverse kind of way with BURNanke on inflation...inflation is not the problem...however, though I see the net environment in our economy as deflationary, there are pockets of malinvestment caused by increases in credit and leverage in those markets which have directly resulted in higher prices...but remember higher prices are NOT inflation...while they are generally a symptom of inflation we must be sure not to confuse them for an inflationary environment which we most certainly do not have.

The concept that equities can be trading as such high multiples with analysts all forward guessing the exponential curve of earnings expections in a vacuum is truely mind blowing. The PE of the Russell 2000 is over 100 and the index is at the highest valuation relative to large caps ever...many of the small companies in the Russell are commoditiy related or financial...these areas are not setup for expansion of anything in my opinion. What every these people are smoking...I refuse to try it because its just much to hallucinogenic.

I don't think I need to even address the outright fraud in the BLS and unemployment rate reporting. NFP was a 75% overstatement of the amount of jobs created in the last report and the revisions continue to be in the wrong direction with such consistency that its clear that the numbers are deliberately misstated.

Then we have the absolutely high level of ethics that are underlying totally fraudulent wealth transfer and global government front operations like the IMF and stuff and one day soon enough people are going to get pissed enough to do something about it!

When you add to this weekly engulfing candles on a very large number of markets I think the realities are starting to reinforce what is going on...and its not a pretty picture.
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