Friday, November 11, 2011

When the cat is away…BURNanke is in the fray

The reality is as we sit here assorted non Greek/Italian bond markets are imploding. The US bond market is closed and there are way less places to play in the markets today without that market open. Of course if you were a mentally challenged central banker you would prefer to try paint rosy pictures on days when there is less money in play - even while around you Rome burns…

Forex and Repo activity is signficantly reduced without active trades in the Bond markets to support…this makes Equities a fund place for Central Banksters to play when the cat’s not on duty and additionally, you have money flow in the markets chasing momentum that would normally be chasing bond momentum.

Meanwhile the dollar index is in a zigzag pullback and testing its support trend line off the highs as well as finding support at its 300 day MA.

Here are some charts…

Wednesday, November 9, 2011

With three wishes they could be rich… long as they can put off paying for the Hamburgers until Tuesday.

The interesting thing about our markets is that this is the EXACT condition that is going on throughout the financial system. People are using short-term financing (usually through overnight repos) to pay for longer-term obligations and further their accounting control frauds - what’s more - they think that they can get rich doing it. The reality is that the managers who collect the bonuses or over-committed books, often do get rich, but their firms often also go broke and have the added benefit of making sure tax payers end up paying the bill - the result is that economy and financial system suffers. These are the exact conditions that brought down ponzi schemes like Bear Stearns and Lehman among a fair list of alternatives - short term credit covering huge losses has disappeared. Its gone. Financial managers usually seek to arb their risk…in my opinion any derivative/tertiary risk is actually greater than the source/natural risk since new risks are introduced that have not been accounted for. We are dealing with that now.

Banks and large investment firms have financed leveraged and losing positions in many asset classes through many techniques from their illustrious carry trades to the most common Repo trades. The window on these short cuts is now sealed and broken…yet they still hold the assets they are seeking to get rich with…but can not afford. Its not too far from the Wimpy situation - wanting to have a hamburger today and pay for it on Tuesday - only to be out gunned by sorcerers who think they can make money of a money losing deal if they can get their magic wishes…which they ironically don’t even know what to do with.

The other irony is that people who are embedded in the mix, are all clamoring to get into gold now that they feel like they can’t trust leveraged cash or assorted assets…the problem is they are really acting based on their three wishes and of course you can’t eat gold…nor may you be able to easily pay to eat with gold for some time to come…it just another asset the global overleveraged ponzi schemers will be required to sell before they implode. I see no good outcome for quite some time for any asset whose price was levitated by access to cheap short-term (or even long-term) credit based capital.

Good luck market…this is not going to go well…Ben, Tim and Trich and most of the big players are in some deep doodoo.

As expected…the flags have broken out...

the ZigZag bounces are done...The EURO has broken its flag down…and look out below and the Dollar has broken its flag to the upside…and look out above…this will be VERY BIG and the S&P500 is doing so now and BTW EMD (S&P Midcaps 400 Futures) is leading the way down and is continuing its recent trend toward significantly weaker trading than S&P…targets for these flags are below1.28 perhaps even to parity on the EURO, Dollar in the upper 80's to anywhere in the 90’s and the S&P500 below 1000…it will all happen faster than most are thinking possible…there will be bounces of course, but people will rest all their hopes on them and not remember them for very long…

Anyone looking for the Buy the Bounce…and BTFD to come and save the day…this is different game and they will most likely be sorely dissapointed…Short-term cash is gone…and there is a run on the banking system - forget any single bank…its the whole system people are running from…what’s more the margin call that accompanies the run is contagious and will spread anywhere it can go.

And the are off and ON THEIR OWN…no handouts coming from Russia or china or the US in time to save this stinking pile from its true nature...

For a little reference, a key played in the deriatives and REPO market can keep up this charade going any longer...LCH Clearnet is:
LCH.Clearnet (previously known as the London Clearing House and the Paris based Clearnet) is a British independent clearing house, serving major international exchanges and platforms, as well as a range of OTC markets. LCH.Clearnet clears approximately 50% of the $348 trillion global interest rate swap market, and is the second largest clearer of bonds and repos in the world, providing services across 13 government markets. In addition, LCH.Clearnet clears a broad range of asset classes including: commodities, securities, exchange traded derivatives, CDS, energy and freight. As a clearing house, LCH.Clearnet sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When the trade is registered with LCH.Clearnet, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, LCH.Clearnet steps in. By assuming the counterparty risk, LCH.Clearnet underpins many important financial markets, facilitating trading and increasing confidence within the market. Initial and margin (or collateral) is collected from LCH.Clearnet members; should they fail, this margin is used to fulfil their obligations. The amount of margin is decided by LCH.Clearnet’s risk management teams, who assess a member’s positions and market risk on a daily basis. LCH.Clearnet Group is regulated as a Compagnie financière by the Autorité de Contrôle Prudentiel (France) and as a Recognised Clearing House by the FSA. LCH.Clearnet is 83% owned by its users and 17% by the exchanges that it serves.

Tuesday, November 8, 2011

Ladies and gentlemen…the EURO has failed

Today marks the beginning of the reign of terror that will plague the EURO. The patterns in the EURO from a chart perspective are now complete and the cycle will be reverting back to the slow motion bank-run that will become the fast-motion one in but a few hours.

Post MF Global Account Transfer Bump

Well, there you have it…the markets were given their dope, junkies that they are, and we have pretty much what I expected…sharks are circling as the bait feeds on its scraps.

We have building strength in the dollar, weakness in the euro and an out of control equity market. The patterns on equities suggest a little more push up…the dollar however, is consolidating bullishly and is about to begin an epic move…much of which will likely occur in a matter of just a few days of trading. I will post some charts shortly…any rally in the ES is likely to remain below 1278…additionally,it should be noted that as I had indicated the buy signals in the 30 year UST triggered in 137’s and second in the 135’s…UST’s are now 141 and likely going much higher (lower yield)…Gold and Silver and Oil are getting in their last highs for a VERY long time…I believe that among the best shorts around are going to be in the energy complex as I have stated many times before. I had covered my Oil shorts in the low 80’s. CL, YI/SI and YG/GC are ideal shorts up here. One other comment about the Equity indexes. the EMD (Midcap 400) has been significantly under performing the last few days intraday…this is usually a pretty reliable warning sign that the market has worn out its welcome. Of course it did outperform on the upside initially during the beginning of the last bounce.

Meanwhile, Goldman Sachs, Morgan Stanley and others like them are scrambling to look solvent…when its obvious that they are not…there are no good Christmas presents coming in the next months…only coal in the stockings this year.

Sunday, November 6, 2011

Some more charts...

We have islands (indicated in yellow) with head and shoulder pattens combined with hanging men candles...not pretty...unless you are short and there are not that many of them left.

Niall Ferguson speaks on TED

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