Saturday, February 4, 2012

Extremes are everywhere...

Yes, I have seen the risks in the market as biased towards the downside in the bigger picture and yes, I thought the limits of the counter risks were in the 1,312 to 1,318 area on the S&P and yes, I clearly underestimated the deleveraging pressures that are driving this asset ramp…but that’s exactly what is happening, the deleveraging and resolution/derisking of derivatives obligations and portfolios in the financial system - especially European - triggered by and exacerbated by implications/clear effort to undermine contract payouts and settlements by central planners and their facilitators are driving very contrived and unnatural fractal behavior in the markets including the current  overthrows.

Usually, on bullish moves, close to close price variances are somewhat noisy and diffuse - this creates opportunity to trade. However, in these last moves in the markets, the activity driving upside price momentum is much more akin to the normal forces driving downside activity and contain little noise or price variation. At this point, the extremeness of this ultra smooth condition is TOTALLY UNPRECEDENTED. The smoothness of the data series and the collapse of traditional correlations and orderly behavior is being pushed to its limits. 

Whether one buys into the jobs report from yesterday or not…the momentum in the markets has been unsound and unprecedented in its character - as I suspect the reaction to it will also be as the current derivatives deleveraging winds down and reverts to a more normal asset to capital deleveraging process rather than the reverse. We do need to be aware that the derivatives markets are in the 800 trillion range and the obligations which are now being addressed simply in those markets alone are able to drive absolutely unprecedented behavior in markets in ways that one would never normally associate with deleveraging.

For what its worth, the bounces off the lows in the major equity indexes as shown below ARE clear A-B-C patterns and what’s more are picture perfect at symmetry. I NEVER in my imagination thought that the large one-to-one symmetry that is most common in A-B-C patterns would actually play out. I was wanted to be early as I felt getting to a 62% to 76% projection of wave A would be far more likely. Clearly, I have been very wrong with that view…and as implied, early with it as well. However, that does not change the fact that we have now reached nearly perfect symmetry and VERY long-term resistance at the same time and the reactions should be significant. 

Friday, February 3, 2012

Could this be one reason there is little commitment shown in the rally...

Where is the volume?

May the selling begin...since there is nothing to worry about

As another twisted report is issued...euro is breaking down and equities are only up a little bit from yesterday's highs...for examples the MidCaps 400 is only up 5 points from its high yesterday so far...in addition the major trend lines I have been trading have not been reached on any of the indexes...not exactly a ringing endorsement...after there remnants of shorts are purged from their positions the selling should begin.

Though I do not watch financial television generally, today was an exception and a quote that epitomizes the sentiment related to this jobs report..."Isn't is so great now that we don't have to worry anymore and everything is fine...now we can relax"...

It looks like the dollar is going to gain strength against nearly all currencies...

Could this have something to do with the dollar shortage that is being exacerbated by the handling of the CDS contracts by banks and regulators and by reference applies to all derivatives contracts? What we are seeing if you have read my previous posts on the subject from last weekend is that regulators are protecting a few major banks and willing to invalidate derivative contracts in such a way as to directly harm counterparties by ensuring that the contracts to not pay out, but that the premium writer gets to keep the fees - only without the risk or contractual obligation. IN the big picture the dollar is shown below and looks like it setting up to get stronger versus most of its index currencies.

Thursday, February 2, 2012

Some more indexes...

Chart patterns are maturing...


MUCH lower rates ahead...


With European Dollar Swaps at new extremes...the dollar shortage is acute and likely to blow up at any moment - which in this case will drive lower treasury rates. Ironically, this dollar shortage has probably been a part of the deleveraging that has driven the equity market ramp...but that kind of deleveraging WILL break into outright selling also...and it seems like the setup is there for that.

It not necessary that markets needed to go down immediately as SWAP lines increased dramatically -  since many of these banks deleveraging and using the FX Swap lines have obligations to deliver as promised for derivatives and using these swap lines a sign of desperation. Incidentally, this is why I have referred to this crazy ramp in risk assets as a deleveraging.

Some shorter timeframe charts

With European Dollar Swaps at new extremes...the dollar shortage is acute and likely to blow up at any moment.

Wednesday, February 1, 2012

Charts of a wild market

CRB was down today at the same time as equities were up. Additionally, the Russell hit a good extension off the moves off the lows of last year in aswell as a significant trendline off the rally from 2009 lows. Nasdaq 100 is also running into resistance and all of this action was not confirmed by the VIX which did not get anywhere making new lows. Meanwhile the DAX is at the convergence of resistance after filling its gap.

Tuesday, January 31, 2012

Dollar in massive SUPER bullish pattern..and ready for breakout...

On a longer term pattern…the dollar looks to be putting in a bigger cup and handle.

Head and Shoulders and loss of momentum finally showing up...

Head and shoulder patterns in Euro, Dow, S&P and many other markets…Looks like a reversal setting up for today. As an observation, the ultra low volatility grind up since December has been the lowest downside volatility rally in the history of the S&P500 for the data I have. It represents one of the few times that my systems were unable to optimally adapt to this type of market volatility for their postive risk management. I have already addressed the issue and it will of course turn a frustrating month into a great benefit. I expect the trades to close well…it is quite stunning the absolute lack of volume and the lack of volatility to the downside. The influences that have caused this action are clear…deleveraging and central planning. The markets are officially a mess, and have fulfilled their destiny to behave exactly like what they have become for the moment -  centrally planned vehicles.

In my opinion, the EURO is now on its way to the 1.12 target I have been presenting consistently. I also believe that the divergence between bonds and equities and the EURO and equities will resolve with equities reverting - not the other way around.

Sunday, January 29, 2012

Greece looks to pull an Iceland…seeks to exit stage left as Central Planners prove no lie is too big, no manipulation too small and no truth is too relevant...

As if there were any other choice, with support like Merkel’s, the ECB’s the IMF’s and others, Greece will surely be forced to default again on any agreement and haircut they make now…only interestingly, Greece, as well as investors targeted by these groups as victims will lose their investment, insurance payouts and premiums as the elites have planned…all so a few insolvent and over leveraged banks may continue to pull the wool over everyone’s eyes. Any agreement made with Greece will surely result in another default…even if the current agreement results in a 70% loss for investors not counting hedges and premiums. Even though replacing current bonds with a different bond at a haircut and with a new rate maturing in 30 years is still likely to result in default…it will allow zombie banks to pretend and extend. Too bad Greece knows the best way out of this is to pull an Iceland...
Greece plans an orderly exit out of the Eurozone according to two sources close to Mr. Papademos, Greek Prime Minister, who spoke on condition of anonymity earlier today. 
The sources confirmed that plans are ready to return to a legacy currency given the current circumstances and that such exit would be dealt with, quote “in as orderly a fashion as possible” unquote.
Greece plans orderly exit of the Eurozone 
However, the banking elite, have on the public stage, proven that they are not to be trusted via the desperation and urgency of their predicament. Their need is to extend and pretend whether its practical, reasonable or honest…all things that are required for business to succeed. Their actions and their undermining of contracts and trust will not go unnoticed. In addition, they will not succeed and CDS will trigger.

Remember this is NOT about Greece, its about insolvecy underneath all the CDS that has been written to generate phantom revenue for banks to cover up losses and pay bonuses and its about the  deleveraging of the system. Greee is just the tripwire.
 
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