Wednesday, July 13, 2011

Sell-off, Disconnection and Negative Yield?

The way I see it, we are setting up for a sell off in the equity markets and that any event driven dollar volatility will end up reversing hard and crushing the EURO. The reality is that the EURO is trading at 1.4236 right now versus the dollar at 74.79...given recent relative prices the EURO should be trading at 1.4486 right now to offset with the dollar here. That is  HUGE under performance. These markets are coming unhinged and the central planners are planning something ugly indeed. It looks to me like there could be an event driven move selling both the dollar and the markets off...followed by a mammoth reversal in the dollar and a disconnect in the risk asset markets...ironically, it seems to me that the world does not have a lot of great choices...and that makes negative yield on US treasuries look better than a hell of a lot of the alternatives...and it sounds to me like a reasonable way for the US to reduce the whole politcal theatre regarding the debt cieling and default...anyway you cut it, the 5, 10 and 30 year bonds all made new highs (lows in yield) over the last few days as I had indicated I thought would happen in precious posts.
So, at this time, I have less than two hundred short contracts on the index futures left right now in my portfolios and am nearly flat - just waiting for systems to trigger new entries in the currencies and indexes. Right now, after a very rewarding two months, watching from the sidelines and awaiting any event driven volatility seems just fine to me.

A relook at our long-term pattern potential...

I want to be clear, this is an option. My personal view is that when a continuation pattern reverses and goes the opposite direction we will likely continue in that direction. However, the triangle pattern that the dollar and the EURO made turned out, more or less, as anticipated for a first move. They produced A-B-C patterns that were very symmetrical. One of the things about these kinds of zigzags is that the three wave patterns show a high level of stress and a lack of commitment to a move...given that the moves out of them are less probabilistic...this is why I trade extreme price movements and not wave patterns. But they are a good guide and I am putting this one up because it is nagging me. The fact that the upper trendline (black) is an exact symmetrical distance away from the bottom of the "b" wave of this zigzag is highly curious and something that everyone should pay attention to.

No matter if this pattern were to play out there is no where else to go but the dollar. Kamakazi Ben BURNanke can not change that no matter how he tries and the moves in Gold and Silver are an extreme reaction that has officailly escalated into a rediculous consenus that make absolutely no practical sense. Additionally, silver is trading within the patterns as presented in my last Silver chart.

The world has officially disconnected...

...people are actually thinking that bankrupting shorts by eliminating the capability to borrow shares will keep the markets up again...that one worked really great in 2008. But that harebrained idea not being enough, they are pushing even more credit onto over burdened people and economies and think that will work too...

While there may be a forced deleveraging here of shorts as central planning plans its own demise...however, it is incumbent on the shorts to have conviction in their positions, allocate position size with the awareness that these idiots are going centrally plan a disaster for eeryone and to take profits prudently so that there is plenty of room in their book as an overleveraged system will seek to bankrupt everyone - long or short.

We had a tremendous week covering big shorts for big profits on Monday and Tuesday...the currencies as always appear to be the key to the unwind that I have been talking about...with the focus on the Euro and the Dollar. The Euro is setting up a idealized zig-zag bounce and is near the target zone. Perfect symmetry occurs at the thick horizontal target line on the chart...though we do not have to make it there.

Sunday, July 10, 2011

Short-term pattern on the EURO...

This is the minimum of what I am expecting from the EURO...and inversly the dollar. It could get much uglier, but they can also attempt to rally hard from the measured target and the support at the trendline.
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