Wednesday, December 14, 2011

Self-fullfilling prophecy and nuclear market fusion...

Much to the chagrin of many of the bulls and pseudo professionals out there, I posted the “Panic” post Fed Panics, ECB Panics, China Panics last week. I think that it is painfully clear that this post was a more than apt description of what has occurred. I find it interesting that one Steve Nelson found it necessary to publicly denounce, in a dubious manner and moronic fashion, my analysis with a highly disapproving and demeaning review.

As I have said many times, I state my view and I do not attempt to be more or less right than I deserve to be. However, I must say that the death nail for trading is complacent and ambivalent analysis. One can be short and wrong in a bull market and still make money and long and wrong in a bear market and still make money. One can also be short and wrong in a bull market and/or long wrong in a bear market and get totally killed. The difference is subtle but significant. There is no room for ambivalence or complacency n markets or analysis. The thing is getting it “wrong" is not a disaster - whipsaws, unclear thinking and lack of discipline, however, are a disaster. Half baked and ambivalent analysis that is committed to nothing, leads directly down that path and sets a trader up for compromised decision making and half hearted reactions to conditions that may come to pass. markets and trading, as living life to maximum potential, requires maximum integrity. So, as you may deduce by now, we did not waffle with regard to our analysis, trades or systems and are having a stellar month after a particularly strong November as well.

At this point, I wanted to indicate that, there is still lingering hysteria in the air of that has led nearly every Elliot wave analyst and nearly every blog I have been sent or seen to promote bullish scenarios as of the weekend, people continue to be very bullish expectant of a bounce to 1340 on the S&P500 into Christmas and expectant of more support from invisible hands. To me this is just horse hockey complacency from people who are focusing their efforts on following the least controversial call. The reality is we have just about crossed the line to where the selling we are seeing will create a fairly long-term and persistent state of selling which leads to more selling which will in turn lead to even more selling. There are many reasons for that, among them the mass insolvency in our leveraged financial system in addition to the de-amplification of money that is currently propagating like malaria in South African plains. Dollar funding is acutely in short supply yet equity markets appear to be holding up - a case that emboldens silly arguments from bulls promoting the ideas suggesting "bad news is now good" since equities are holding up.

To my way of thinking two very bad things happened today, the markets dropped below support with the euro suffering a tremendous breach and the VIX also dropped indicating total lack of preparedness or concern over the state of the risk in the markets. Additionally, the absolutely mammoth divergence I presented in my weekend charts between the EURO and risk assets continues to expand. This will be closed and is now requiring a significant double digit drop in the equity markets just to come back into something near correlation. Everyday the EURO drops the internal tension in the markets becomes more acute increasing the risks of a MAJOR market dislocation of some kind. The financial engineers have played their game and lost, the Central planners have too. They are now lost without their GPS.

In either case, there is not much that planners can do to create market stability and available funding for the rapidly contracting pool of available dollars…as the risk markets tail off here they will create  the flatulence of rapidly disintegrating values. This is NOT the time to try to bottom or top tick anything, its the time to keep your powder dry and make sure that you are SAFE. Now is the time to stop thinking “How much am I going to make” but rather “How much am I going to keep”. This includes getting some of your money somewhere safer than a leveraged institution.

We are now headlong before a massive Tsunami and the financial system is Fukushima.

Monday, December 12, 2011

As the conflict moves towards a UK exit from the EURO project…things are bound to get complicated

EURO Summit a total failure as the masquerade of unanimity unwinds

Quotes from Finland courtesy of businessinsider.
This deal is a total swindle by bankers: NO more investor responsibility, NO more Private Sector Involvement(PSI). Taxpayers will pay the profits to bankers and speculators. Democracy and Sovereignty crushed. 
This deal compounds the problems by piling more debt on the fiscally irresponsible and the fiscally prudent ensuring total destruction in all countries of europe in a few years under crushing debt and continual malinvestment and destruction of competetiveness. 
Taxpayers will pay the future bill IF the markets believe this newest set of fairytales and wishful thinking from the incompetent and anti-democratic EU-leadership duo Merkozy and Brussels bureaucrats. 
The Finnish Parliament will NOT confirm this agreement signed by Jyrki Katainen and this should have been crystal clear to the Merkozy duo before the summit because grand committee of Finnish Parliament stated this clearly in advance. 
ESM is dead in the water and once again thanks to the arrogant crushers of democracy and destroyers of sovereignty Merkel and Sarkozy absolutely NOTHING has been solved.
It would require 133 seats(2/3 of parliament) to approve recent EU-agreement where unanimous decision making has been removed from ESM. Since The Finns party led by Timo Soini and Center Party are both opposed this will NOT happen. 
Further the Social Democrats (In Finnish government with Coalition party and a bunch of smaller parties) have also said through Finance minister Jutta Urpilainen that they will NOT support majority decisions in ESM and one smaller party Christian Democrats also said the same recently. Practically only real supporter is Mr. Katainen who is the most euro enthusiastic politician in Finland. 
So hell will freeze over before current EU-agreement which removes unanimity from ESM goes through Finnish Parliament.

Sunday, December 11, 2011

Some charts of a masquerade and the witches ball

When looking at the chart below, please keep in mind that I expect the euro to drop as I indicated on the chart…but regardless of that the S&P500 needs to drop roughly 20% just to catch up with the EURO which gives us a 300+ point drop for the index. Given that the scenario includes a drop in the EURO the point drop may well be SIGNIFICANTLY more.

All this is likely to happen rather quickly too…some christmas rally that will be…and just in time to draw the laser focus of the debate theme to finance and currency which will make the only guy in the room at the debates who can answer any question related to finance with any credibility - Ron Paul.

However, all is not perfect with Ron Paul’s knowledge of finance…perhaps the initial 15 to 20% drop for gold implied by the chart below, will call into question the Gold money thesis. BTW…Gold is likely going MUCH lower than a simple 20% drop…possible (and not unreasonable) projections for Gold place the metal down 50 to 60% and of course, Silver in the single digits.

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