Currencies at war...

All bought out…with no where to go...

The dollar will rally as the market and financial system dissolves from within. There is little more to add.

There is a feeling that there is, as a friend and client put it to me “Nothing but Blue Sky”…I beg to differ with that perspective. There is a mammoth selling event setting up NOW. As you may or may not know by now, that is something I am prepared for. The market does not belong here. It has not belonged anywhere near here and its not going to be back here for a VERY long time. There simply are very few market participants who are available to be buyers, very few reasons to buy and very little security in doing so.

The Fed and central planners may desperately want to do QE…but they can not with the results of their engineering on display showing false success within equity and risk asset prices. We have reached critical mass. I will not post charts…it is unnecessary at tonight…as nothing has changed fromt he previous ones I have posted.

The corruption of leverage...

The Italian tax police was in the offices of ratings agency Fitch in Milan on Tuesday to carry out checks ordered by prosecutors investigating rival agencies Standard & Poor's and Moody's, a senior prosecutor told Reuters. 

"Men from the financial police are at Fitch in Milan," said Carlo Maria Capristo, chief prosecutor in Trani.  

The Trani prosecutors are investigating possible crimes of market manipulation and illicit use of privileged information when Standard & Poor's downgraded Italy earlier this month. 

As part of the same probe, they are also investigating the impact reports by Standard & Poor's and Moody's on Italy and its banking system had on markets and whether any crimes were committed. - Reuters

It is apparent that the cause of leverage and the need for more of it have caused freedoms to be challenged. Freedom of option, no matter how late, accurate, right or wrong is no longer acceptable unless the desire for the credit addict is fixed. Ordinarily, an action like this would scare the pants off any self respecting business or citizen...it certainly would scare the markets. However, the markets are on a drug addicted hangover and are deleveraging so they are no longer effected by information such as this. It does not matter that this kind of conspiratorial effort to keep the truth suppressed by any means is coming to a place near you. Not only that, how can your business or work be safe when you can, at the whim of some bureaucrat, be a part of a trumped up prosecution and find your accounts seized, your business and/or home declared a crime scene and your employees, neighbors or vendors used under threat to provide evidence against you...

What's more the markets just don't care...

Can you say MARGIN CALL...

Today, as with the whole ride up…we got more deleveraging. This time not only were we dealing with margin calls in equities but also in rates. EuroDollar rates contracts indicate lower yields yet 30 year treasuries indicated higher yields…that my friends translates to quite a lot of stress for people who manage their portfolios with these instruments…and that equals MARGIN CALL in rates and the end of hedged/pair based margin calls/deleveraging in equities that have been perpetually driving prices higher - specifically this has been an unwind of the trading books of insolvent European Banks. Next we will get to find out who they are. Say hello to 2008 Part 2.

Other things of note, the Dollar held a higher low and the Australian Dollar over threw to secondary resistance, Oil barely budged and Silver and Gold are doing nothing…there is a lot of info out there that is precisely targeting these markets - yet they are relatively motionless.

The target of 1,318 has been hit and the top for Equities is in and now people will have to start to get used to significantly negative yielding TBills as they break down out of their declining triangle.

Dollar kissing 50 day and neckline

As JPM and Goldman send everyone shorting Treasuries and ECB officials try to generate any good will towards the EURO by attempting to force Iran to buy EURO…both Treasuries and the Dollar are coming into support and likely will be bruising people expecting the popular outcomes. AUD is hitting my resistance lines exactly which gave it just a smidgen of upside and rates are getting very ripe in their patterns too.

Meanwhile, Equities are at their 2008 tribute line - I would like to remind that 1,318 was the target for the ES futures…and it appears we are getting right into that zone…welcome to the world of leveraged finance and central planning.

...and a rather interesting video of the European bureaucrats attempting to avoid answer any question that is harder than "what’s your name?". Meanwhile, the same UNELECTED officials can effectively and single handedly declare war on Iran and force them to buy EURO’s at the sametime…this stuff is not funny.

A Tribute to 2008…

What’s going on in rates...

Please also see this recent post: Rates about to implode…wheels are going to come off...

What should we expect from the EURO now that everyone sees wedges?...

Australian Dollar confirming impending trouble in commodities...

EURO - yes its still channelling among other things...

It would be nice to think that Oil was the beneficiary of full participation in this melt up deleveraging that we have going on...but as you can see in the INVERTED chart...oil inverted has held the support zone so far and could be beginning a long decline...in this chart a decline is represented by an advance.

Not to be left out, the Saudi markets have NOT rallied during our global equity pump...they have sold off slightly during the last few weeks and are getting close to breaking out of their little flag. See my previous post for reference. Given this latest action in this Saudi index…I am felt comfortable in adjusting the 2 − 4 line that I have placed on this chart and I do think that we are quite possibly looking at an imminent bounce off that level.

Rates about to implode…wheels are going to come off...

I make no apologies for my call on this rally. When I am early I am early. Given the judgments of the market, I have been early. However, I am looking at the bigger picture and that picture is shown in the charts I posted in this post and my previous post. 

An analogy: When you have a fairly manageable money supply and system it is equivalent to having a short string. That string will be immediately responsive to stimulation. Like a musical instrument even. So, a tight string will vibrate controllably or break. However, when you lengthen the string (like adding tons of uncontrolled liquidity as the central bankers have been trying to do) that string will oscillate wildly...to try to manage its oscillations you need to tighten it more every time is is lengthened. This is the part that the Fed and ECB are unable to do. Therefore, what is happening with the markets and the whole financial system is that the oscillations are becoming greater and greater with each extension of the string. Hence what you see in the markets is behavior that is equally unmanageable and volatile. Any little movement extends further than one would ordinarily expect. Especially the equity markets which are attached to this string and are vibrating even more outrageously. But by my way of looking at it...these levels, yes the ones over the last few weeks, are the places that mark the beginning of a waterfall decline that will hang off this weak, long and untaught string that the illustrious central planners have strung. 

Brick wall…and a market leveraging and deleveraging

When you give a monkey a gun…you can never be sure what is going to happen…other than its probably not going to be fun. When you give a bunch of Central bankers and bureaucrats authority it is quite a similar situation. The markets are being driven by the totally random nature of where and how force fed liquidity decides to go. In our case, more liquidity force fed to institutions that do not know what to do with it is causing more insecurity and more market aberrations and ironically deleveraging - the exact opposite of the intention.

The chart above shows that our markets have come back to major resistance areas. It is highly unlikely that they will be broken. A significant reaction and more likely rejection should be expected here. There is, similar to the dollar last week, a setup that would require one more upside test for equities - which should simply be a test of the resistances in the charts above. This is one of the reasons that I felt the symmertical target for the S&P500 was likely the zenith for this market move in previous posts. That target was 1310 on the S&P500 cash and 1,318 on the S&P Futures. I guess that puts us squarely in the middle of it.

EURO Remains contained as AUD weakens

The heads are coming off…and the wheels too

and a curious tidbit on the DJ Newswire:

Greece wants the European Union to delay a planned oil embargo on Iran for up to eight months to give Athens time to secure new sources of crude for its crisis-hit economy...Greece, now stumbling through a fifth year of a grinding recession, sources about 50% of its oil imports from Iran. The reason: Iran is the only country to provide Greece with oil on unlimited credit--up from 30% two years ago.

Recoil…the trap is being set

Since the open of 2012 the S&P Futures have travelled 20 points…it feels like its been a lot more because of all the volatility and the choppiness of the move. And its done a good job. Apparently, even though I do not watch CNBC, its gotten Jim Cramer bullish. Perfect! In any case, people are now bantering about the COT commercial open interest. As usual the popular banter is completely wrong. Take a look at the dollar COT numbers for the Dollar. Speculators and Large Investors are clearly the ones to watch. When their positions break to new highs…that is the beginning of a move NOT the end of one. The dollar has broken to new highs in open interest. That takes considerable effort and will not be easily undone. Moreover, when you watch for the subsequent action from a break to new open interest highs (long or short), you will see that the Dollar wants to move in that direction for at least the next 4 to 5 months and many times years…hedgers (which means commercials) do not have the same objectives are NOT an indication of trend reversals. Perhaps for some short periods they can be…but not for more.

Deleveraging continues…this version now nearly complete

My targets for this bounce off the lows, failing the first levels in the 1,280’s for the S&P 500, was a symmetrical target of 1,308 to 1,310 for the cash index. The Euro bounce targeted 1.2820 and that now looks complete in its typical extended C pattern. We will now likely start to see the markets just totally fall apart over the next few days and weeks as the deleveraging activity turns from selling a few valuable assets and the covering of related hedges to selling any and all of them that are not glued down. The unwind is now nearly complete...People have just exhausted themselves and have gotten exactly nowhere. Currently, just like with any disorganized deleveraging…the equity indexes are not orderly. TF is nto doing anything, EMD is not either…Dow at highs and EURO unable to bounce.

The upside targets are certainly viable for the cash indexes…however, the dynamics of this market activity are essentially done. I will post charts later…we just moved into our new offices this weekend and installed a ton of new computers…I apologize for not being able to post any graphics this weekend.