A headless market is about to break its neck...

Its not pretty...and with the bankrupting of the rediculously large amount of fully margined accounts it may just get downright UGLY. It takes preparation not to find yourself in front a running freight train...I truly hope that many of you are prepared. On this blog what is happening is NOT a surprise, though apparently to a few analysts from Deutsche Bank, Citi and Goldman, who were "wheels off the wagon" bullish, they will of course be surprised. And though they are rank as amatures, have no idea what is going on and shoudl be summarily terminated, they will still get to keep their jobs. I guess helping people lose their purchasing power is a serious profession that pays highly. I am of the mind set that preparation is worth the hassle.

I hope that these patterns are wrong, but its nice to know that you are prepared, if you are, and will not suffer a huge draw down and damage to your purchasing power. The sad thing about a deflating market is that the money that the market manufactures by the simple agreement to pay higher prices completely vanishes. Poof, going, gone and gone...unless someone is short against those declines the money is completely gone. I work hard to preserve purchasing power and to attempt to keep some of that money from vanishing from the system. This is a part of me and my partners portfolio approach for the protection of assets. Douglass Lodmell (lodmell.com) has the some of the best asset protection structures available and we have worked together to design a rational and constructive approach to storing value and manage purchasing power fluctuations to a constructive portfolio approach for overall safety. We seek to do this in a manner that attempts to insulate from anything from collapses in the leveraged financial system infrastructure and equally from collapses and inflations in prices.

This safety thing is serious business, and I think more people should stop thinking about gains - and should rather be thinking about safety and their cash as an asset. That asset should be protected. Today, shorter term US treasuries traded at negative yield as I have been talking about. If the patterns posted in the charts below, play out - I believe that the yields will breakout for an extended run of negative yields whereby, to store your money with the US government you pay them 1%. I think that without this type of breakout the bonds would very likely enter a bear market. However, paying to store your assets, cash and otherwise, is not an new concept. If you want to custody your money at Pictet (which is linked on my blog) you have to pay them 1%.

We have been trained to think that banks pay you...but what you get in exchange for that is banks playing fast and lose at their casino...which is fine if you are Alan Greenspan, Ben BURNanke, Sandy Weil, Lloyd Blankfine, Henry Paulson, Jamie Diamon or a host of other wealth transfer and destruction specialists...but its not fine if you are a hard working and tax paying citizen.

Farage gets it...

A Blog to watch...

I want to make a special mention of what Tony Pallotta is doing on his blog http://macrostory.com/. First he is doing an exceptional job. I truely is amazing what happens and can happen in the blogging community where people generally work for free or very little compensation. Tony is an example. He blows away analysis by the big firms and he posts when you want to see it not a few weeks later like Goldman Tax likes to do. He does end-of-day wrap ups and economic data analysis all delivered with a generous helping of common sense and objectivity...but not without opinion. Most blogs I have seen attempt to tell you want you want to hear...something for everyone..."The market could go up...or it could go down..." as some fairly prominent analysts I know continue to trumpet so that they can keep getting paid while offering little of value. Tony does nto dot his...he says it as he sees it - and he is objective. I recommend that you all put this blog on your watch list and read it regularly. I do not read very many blogs for market analysis because I find it very noisy and distracting, but I do read Tony's regularly.

Here is the link again... http://macrostory.com/

Today's market action was deliberately designed to confuse

I will be posting charts as soon as I am able...however, the market is NOT a long here despite the deleveraging going on...what I need to reiterate is that deleveraging works both ways - if you have shorts, you need to cover and if you have longs, you need to sell. With a little intervention, deleveraging of a few insolvent institution's structured products and derivative trades in europe and the Russell rebalancing thrown for good measure - things can get weird. I especially do not seek to day trade days which huge gaps because this type of abberation can get extreme and is not predictable - though the action following it over the next few session usually is. We apparently got both types of deleveraging activity today with especially whacky behavior in names that have been heavily shorted - like Netflix for instance.

A highly likely scenario here is for a complete reversal of this candle and a break of its low tomorrow or Monday. Also, expect follow through on the dollar and on the EURO...there is much futher to go with these moves and the market will follow them.

I do want to recommend that you listen to this interview with Nichole Foss by James J Puplava in April this year. Its excellent and I find it hard to disagree with her on just about anything. Click on the title below to hear the interview:

Preparing for the next Tsunami

The peaking of oil prices and the coming Depression. Resource Wars to follow.

Well, this was a reasonable way to wake up today...

It looks like my positions and posts are paying off...Personally, I think there is a waterfall decline dead ahead...I expect a breakout in the dollar to the upside and much lower prices in the euro in the short term.

An update from Bill Still...

Now we know that G-Pap really mean the exact opposite of all the things he said over the last few days...if Greece accepts all the bailouts then they will have exactly what the prime minister promised they would avoid.

Please, Please...try to pretend its anything but a short squeeze...

I will post some charts in addition to this commentary. My systems took new shorts today near the close. The reality is that this is a short squeeze and in no way changes my comments from the weekend. I have been travelling and its a challenge to put up charts...but the setup remains and I expect it to be triggered by the dollar. On Sunday, I posted that I thought it may take one to maximum a few days for the dollar to reverse...well tomorrow I will likely get the reversal signal that I look for at major turning points. I have posted each one as they happened with the dollar and each has been accurate nearly to the day...there is a possibility that the signal may not trigger tomorrow but its not very high at this point therefore, we added a lot of dollar contracts today near the lows (and euro shorts)...and I expect that we will be seeing the dollar taking out the 76ish highs very soon. Oil looks terrible...about time for Goldman to come out with another "Buy" reiteration. Silver is completing its bear flag while the EURO is ending its countertrend bounce in preparation for a 3 of 3 impulse pattern down. The markets are indeed in a precarious place and likely to face a sharp reversal at any moment that could trigger a waterfall decline. Longs - well, they will be dangerous but exciting if you like that type of thing.

Hot particles from Fukushima making there way to the US...

Too bad Fukushima is not an issue any more for the Lame Stream Media. In any case, in europe the incident is making the news significantly more than I have seen in the US.

Ever seen a global margin call? This is what it looks like...

There are market participants that have done their level best to create the over-leveraged condition of our markets and the world. Due to those conditions we are now in a GLOBAL MARGIN CALL and the call has not been covered. It will be but it will not be a clean and smooth process, it will be hairy, smelly and very ugly. Anyone thinking that we have seen those conditions needs to reacquaint themselves with the flash crash and its anything but fat finger trigger. It, therefore, gives me pause to tell you that, based on what I see, I believe that Goldman Tax has established a significant commodities/energy short similar to the structured products shorts that they put on in 2007 and 2008. And this, while they are full on the bandwagon trumping up their story for "long" certain markets in the commodities and risk asset space and while selling any credit product that's not glued to any oil producing nation that will sign for them.

Goldman is showing long trades in many individual markets, commodities and currencies that represent simply atrocious positions and most likely a conflict of interest on the part of the firm if they were to be investigated. Personally, I want to know more.

I generated well over 100% returns during the last 10 to 11 months on medium risk level accounts that I would say ended up trading nearly the universal opposite of Goldman published trade recommendations. I do not specifically seek to trade counter to Goldman calls, nor have I attempted to do so in the past. The fact, however, that the majority of my positions have been opposite of theirs so often only became obvious to me after the pattern continued persistently into this year. But, point of fact, by being opposite their recommendations most of the time in the markets I trade, I made significantly better than 100% return. That must certainly put the Goldman client in a rather disadvantageous position since in the end I was apparently taking quite a bit of money from them...on my part, I am not putting out disinformation, unlike my perception of Goldman, who seems to have an affinity for taking a lot more money from their customers than those customers may readily think via what I see as nefarious means.

In any case, back to the markets. I see a lot of people looking at the dollar pullback on Friday as significant and for the proverbial bounce off the 200 day moving average to construct a perfect head and shoulders pattern from which to establish perfect short positions...I do not think that this market has the liquidity to produce those kinds of results...I think that there are many insolvencies in various stages of playing out. Many are in no small part being additionally fueled via the margin requirement reductions that were published just before the markets dropped...hey if you can lose money with 10 contracts of ES it must be better to be able to get 15...one has to wonder what the real basis was for reducing these requirements – it certainly was NOT the reduction in market volatility. I am still struggling to figure out how one of the most volatile markets I have seen can be the basis for reducing requirements. But the result is that as with Silver, the losses that many people are nursing are now larger than their gains from the “Buy the “F***in Dip” days and are likely to get much worse. What I see dead ahead is the global markets MARGIN CALL...and I think it will be unfolding imminently.

Euro pattern playing out...dollar confirming bullish

I am currently travelling so, I do not have time to put up a lot of charts...but here are my thoughts. I think that there is a very good possibility that today's run is a flash in the pan short squeeze and will get little if any follow through. We need to get used to those by the way...especially since everyone likes to be calling bottoms. I am watching the euro like a hawk and the dollar which confirmed a high probability bullish setup today. The reality is that the currencies are going to dictate what happens here...even though rates spiked big today in the 30 year I do not view that as significant to the equity markets perse. I think currency action will dictate market action at this time. I think that Silver and Oil as well as quite a few other commodities retested today and have patterns setup with probabilities for failure. Its also my view that the new shorts that some of my systems started building near today's close may turn out to be prescient. As I indicated in earlier posts, I closed the majority of my shorts on the indexes which were initiated near this years highs a few days ago. I did find significantly better risk reward trades in other instruments like the euro and the dollar which will also likely dictate the action in the markets over the near-term.

As a side note, I do think that it is entirely realistic for shorter term treasuries to trade at negative yield and though I am not trading the interest rates directionally at this time as I view the trade could go either way depending on whether or not fear of risk assets hits more powerfully than fear of debt instruments or vice versa. Personally, from several months ago, I was partial to rates continuing to decline for a while which they have done...and I think that there is still a good probability of that continuing into the future for US debt. Certainly, as I indicated in a post about that same time, I guess about a month ago, that the 30 year treasury looked possibly A-B-C-ish and somewhat countertrend which could mean that it could be done on the upside soon.

A Euro pattern to watch

Oil is power...but power is not Oil

These charts reinforce that the dollar rally is NOT a bounce in a bear market move but potentially the start of a powerful and sustained rally. There are clear reasons that the Saudi chart looks like it does and there are clear reasons that the implications of the implied move in the markets and oil should be expected and understood. Its not going to be pretty...but to me this scenario is going to play out and while I have tremendous respect for Jim Rogers, I believe that the exponential curve is going to take care of commodities and that the expungement of hidden and obfuscated insolvency especially in the derivatives markets and banking system will curtail pricing power and inflation in all asset markets. I do not believe that holding your purchasing power via commodities is the most optimal way to play out what has been occurring in the commodities markets...but please remember Goldman Tax is promoting long oil and other commodities to their clients, which likely means that they are bad trades as we can see by their horrible oil and copper trade so far...and its going to get MUCH worse.

Overview

Initially, when I started watching these charts, I was struck by the clear patterns that also coincided with my systems consistently biasing short for the last 7 months for swing trades. The reality is that during that time the systems have won nearly every trade they have taken and have had an abundance of double digit return months. However, I was left wondering about the curious setups and discordant behavior I have been watch that suggests cataclysmic price movements ahead. Curiously, the charts below support two observations...a very strong and persistent rally in the dollar and that the next version of the 2008 catastrophe will not be banks but centered around energy and sovereign nations. Another irony is that the impending energy market blow up has been christened with the catastrophe at Fukushima.

Bubble Mechanics, tall buildings and ski slopes in the desert

In the late 1990's Saudi Arabia had a break-even of less than $10 per barrel, in 2003 it increased to the low $30 range, by 2009 to 2010, break-even rose to the $50's and the 2011 break-even now is over $90 per barrel. Additionally, the 2011 break-even for Bahrain, Oman, U.A.E, Qatar and Kuwait has more than doubled on average, from 2003 levels.

I think we can all remember the Dotcom phenomenon...a time in which people from all levels kept seeing and forecasting higher and higher prices while at the same time similarly increasing their spending and personal and corporate break-even's. The reality is that in the middle east they have built the tallest buildings, temporary man made islands and temporary indoor ski slopes...not satsified with mania such as that, they have been working very hard to monetize and leverage nearly the entire margin possible from their only real asset "oil" so that they can support on-going and rapidly expanding government spending and malinvestment.

Rising costs for oil producers is widely credited as being the reason that prices will not drop. However, I believe that one could use that same logic in the recent Silver bubble that is currently bursting and the dotcom, technology and housing bubbles.

We are now left with the weary and tired commodity and energy bubble. Quite simply, the argument that large investors can leverage themselves to the teeth and somehow collude to keep prices up, thereby propping up their bubble ad infinitum, is ridiculous. Long-term capital management, Soros and the pound the banks and their CDO's, CDS and structured products all have become targets of scarce liquitity and well funded adversaries who can easily blow apart a widely known trade or financial weakness or incongruity. The financial anomaly in sovereign oil producing nations does not stand much chance either.

Anyone stupid enough to push their break-even to $90 (let alone has the gaul to predict break-even next year at $110) with oil prices currently at $95...deserves what they get...in this case total financial annihilation. Moreover, the sovereign's have another problem, they mistakenly believed that oil passing the peak of the exponential bell curve meant scarcity of supply could drive infinite price appreciation. They are clearly wrong, just as the silver bugs preached a similar peak silver story...it was misguided and is being proved wrong. There are some differences, however, to normal debacles in that oil producing nations will attempt to further curtail supply to prop up prices...this approach will likely fail due to their and everyone else's pending insolvency...the dollar will make it impossible for their scarcity and peak oil argument to work...there surely will be other influences like other producers who can actually get oil out of the ground for less than 90 dollars a barrel...but, regarless of losses, the sovereign's will need to continue to sell oil at those huge losses in order to obfuscate their financial insolvency for as long as conceivably possible. In the end, there will be a competition for who can sell the most oil first as the rush for cash spreads. Their plans will not work terribly well and by the looks of things the indoor desert ski slope.

So, the result of all this is that regardless of a dollar move to the upside, the sovereign oil producing nations are in deep trouble and insolvent. With the dollar rally, prices for the many commodities including oil are in for a very significant decline. These markets will be driven a similar issue - the need to covert a non-cash asset into cash.

Some charts...

I can see no reason to expect a pullback in the dollar. I see every indication that this chart wants to rally hard - much harder and longer than almost anyone expects...if this is to occur, expect a very challanging environment for risk-on and inflationary trades.

Please refer to the chart below for a shorter-term target on the EURO:

A look back and forward with Douglass Lodmell...

Another in the series of interviews with Douglass Lodmell...you can visit his site at http://lodmell.com and his blog at http://www.themindofmoney.com/blog/.

Below is a detailled analysis of the realities associated with sustained exponential growth and natures brutal resolutions of these perversions.

Yes accoring to the NRC...nuclear power generation IS safe

Are we going to believe them? I certainly don't.

Fukushima...is not be news worthy anymore but is stil the biggest news going...

I have never done used profanity on my blog before but here goes - FUCK THE MASS MEDIA!