Its interesting to see how things go…the dollar is not going to make the lower low, nor is the EURO going to make its potential high. My weekly dollar long system triggered though I am sadly not short the EURO which will likely outperform on a relative basis - meaning the short of the EURO will likely be better performing than the long on the dollar for a similar amount of capital. As I indicated I would likely be, I am short - and at this point very profitable - up over 12% for the last several weeks. Therefore, I am short the major equity markets and expect significant new lows…in fact, I am not going to be surprised with a significant market dislocation and a breach of the 2009 lows on this move.
Regarding bonds…I expect the relentless trip towards insolvency of everything other than a few sovereign treasuries…therefore, the march toward negative yield will continue for the US Treasury bond. The move will be much more extreme than people are possibly imagining. Can you really imagine loaning the US money for the benefit of getting 97.75% of you principal back? Most can’t…however yields are likely to ultimately drop below negative 2% in my opinion.
Fundamentals are useless. Most of the talking heads on TV are pumpers and hungry for airtime to promote their 2% management fees (this is why my fund charges exactly ZERO percent management fee) and assorted alternate agendas…their pumping rings hollow…and people who may try to rationalize a credit and liquidity driven market will likely be left rationalizing the remaining size of their account in addition to their thesis that fundamentals matter.
My perspective is do not risk anything you do not need to if you are long…and that includes gold and silver…which were highly profitable shorts for me again recently. I will likely short them again imminently…there will be no place to hide.
I know I have not been posting much...that will change soon.
The problem is that EVERYONE is watching the pennant that looks like it needs another low down to the 1,020 to 1,040 area in the SP500...I have not wavered from my expectation for the dollar to hit 70 and the Euro to make 1.47 to 1.5ish...The current pattern, I am afraid to say, is the worst of all scenarios...It is most likely NOT a wave 4 - it is most likely true that we completed wave 1 down and this bounce is wave 2...targeting 1,240. My clients have been alerted to this already for the last week or so...the problem with the current pattern is that it sets up a wave 3 that makes this dramatic wave down (wave 1) look potentially mild. It is certainly hard to imagine that it is possible to get harder selling than what we got on this recent wave down...however, that is sadly what looks to be in the cards. It would have been preferable to get a wave down to a new low than to have the whole move from 1,370 to 1,070 be a wave 1...but that is what it looks like to me. My systems will likely short this bounce with abandon...and I encourage everyone to think about just how dangerous this next move down has the potential to be...by the looks of things we will be taking out the 2009 lows more quickly than anyone expected.
I want to reiterate, that as I had stated before we are in a dollar and equity market sell-off. I expect both to continue lower. Many are expecting a Fed asset purchase liquidity program...if that occurs do not expect a market rally. Apparently some people think that QE2 was a success, however, just as not being in a trade is a trad in itself (I am flat right now)...this market reaction is a direct results of QE2. So, as I stated before, QE2 created a lot of money with which to make charlatan bankers to make malinvestments...but what those same idiots have accomplished is the same thing they always have done...they lost more than they made. QE2 has been a total negative for the volume of money in the system...anyone thinking that asset prices will be saved by a QE3 announcement and quite another thing coming. The fed has ZERO credibility, QE3 will be quickly sold, while the dollar will also be sold temporarily and the EURO will rally temporarily...there may be additional volatility in Gold and Silver...however, the key word is temporarily...the volatility for all assets other than cash will be oriented in one direction...DOWN...very, very far down.
I have remained objective throughout this whole market turmoil of the last 8 months...unlike most analysts and market particiapnts...Additionally, I have also made a lot of money during that time...it is time to be very careful...it is time to make sure your buying power is remaining stable or increasing. Being flat here IS increasing your buying power and THAT is a trade - a very successful one at that - which is why I am now patiently waiting for my shorts of EURO, Silver, Gold and long of the Dollar to setup and trigger...has some more work to do but it will be more than worth it.
This is not 2008...its much worse. The banks are bigger, the debt imbalances are bigger, the risks are bigger, the leverage is bigger the corruption is bigger and the lies are bigger. This is definately not 2008...its way worse and likely will create much more devastation.
The markets are pretty much playing out as expected. Upside targets were 1210 to 1220 for the SP500 futures and we got within 3 points of the lower target. However, I have to reiterate that the biggest trades are not the equity trades - though those are going to be and have been large. I am not certain that the equity trades are going to let you in easily however. The markets are at the cusp of breaking to the 1020 to 1040 target that I previously discussed a few weeks ago. The reality is that if the continue towards those targets uninterrupted, they may just end up going a lot lower if the liquidity implosion gets into full gear now.
The reality is also that european (so far) market regulators in their infinite genius, are revoking the ability for market participants to speculate short or to hedge/manage risk via short sales. This has the exact opposite impact than what they intend. It panics market participants rather than calms them. It destabilizes markets rather than promotes orderly exchange. It turns market participants who were satisfied with executing hedges via short sales for risk management into outright sellers. If the europeans go too far with these tactics, we may wake up one day and find out markets down 25% on a gap open. I think that it is entirely reasonable for the markets to exceed my targets with a direct collapse below the 666 lows of 2009. I do not expect that and it would be a disaster and a shame...but if these brain surgeons continue to lie, cheat and deceive in order to further their bankrupt values and systems...then we have a much better chance of getting that result than I would ever have expected.
However, the trades in equities are not the monsters of the era, those are the currency and debt trades and the commodity shorts. EURO, Dollar, Pound, Silver, Oil, Gold, Palladium, the softs and hards...it does not matter they are all destined for a major collapse. However, I expect this panic in the equity markets to trigger further distortions in these markets. Targets remain as I have said a few weeks back: EURO - 1.47 to 1.49 and Dollar Index - 71 to 69. The action, will not be orderly...and Eric Sprott, among many others, will be broke when the ashes are revealed. The whole situation is just downright sick. But these trades are pending and I will be in them when my systems trigger.
Ashes to ashes, dust to dust...now I am beginning to understand what they were talking about in Sunday School.
The problem is credit money…it is the root of all the corruption and extends to all of the conflicts that we are so desperately in need of addressing…it begins with our education system and moves to the defense and banking system. These groups focus on integrating people into meaningless and bureaucratic positions rather than incentivizing them to do something valuable…just look at the tenured Mr. Paul Krugman for an example of arrogance and nincompoopsiness at its finest. What does he know other than how attempt to look smart while spinning ridiculous and dysfunctional fairy tales. The subject of money: what it is, how it works and who it serves is deliberately evaded and rewarded in our society, banking system and educational system.
Meanwhile in a land that needs no new bureaucrats, the highest subscribed educational programs are for finance and law…both specialities that generally provide negative contribution to our society as a whole, while allowing its membership to leverage loopholes and our cronyist infrastructure to reap rewards - all while not getting their hands dirty, mind you, by actually doing some valuable work. The reality is our education system is a HUGE part of our cronyist based credit money goverment system. The indoctrination of youth starts with their introduction to these fields via and acceptance of the credit money system via huge debts incurred to pay for said “education” and additionally the force feeding of other credit vehicles before they even have jobs. There is no better motivator for a young person to undermine their beliefs than to get them into a compromised position where they are in debt up to their eyeballs before they even have a career. This system then lures a large percentage of these newly minted accountants, economists and MBA’s, most of whom have no understanding of what money actually is, how it work and who it serves, into the corpoate and financial system to operate at large institutions and assigns them the task of designing and executing what amounts to be a fraudulent conveyance scheme. We train them to indirectly and directly payoff anyone who gets in the way and reward anyone who would help their scheme…and finally we reward them with lavish bonuses when they do this task well. This reinforces the social expectation that Accountants, Lawyers and Bankers are actually useful professions while dissuading people fromspending their efforts on objective that are of constructive social value. Then we ensure that these professions have copious amount of opportunity by building a tax and legal system so mired in confusion that these newly minted candidates can spend their full effort figuring out how to benefit at someone else's expense while transferring the wealth and resources back into the creation and issuance of new credit which supposedly represents real money…The results of that credit schema go to line the pockets of the most senior nincompoops and supports the political elites and cronyist bureaucrats.
The world would be a much better place if the most sought after majors were music, philosophy, agriculture, science, dentistry and carpentry…even ditch digging...pursuits that actually produces something of use…playing with numbers for economic, accounting and financial pursuits create no tangible output. What they do a very good job creating are intangible results which generally add complexity, inconvenience and outright theft to society’s every day functioning. We need to get back to basics. Out current situation is no exception, the crisis that our highly trained…I mean educated bureaucrats, lawyers, accountants, economists and MBAs have now built for us out of out 2007 debacle, is now much bigger and much more dangerous than its predecessor. Nice going Mr. BURNanke (chief accountant, economist, MBA), gHEiSTner and Obama - I hope that you are proud of your ability to do not a single thing that reduced the scale of the upcoming crisis but rather have chased to deliberately use your efforts only to further the agenda of credit money and the bureaucracy that embodies it.
Until this cycle of fake money is ended…we will continue to get just the results we should expect…fake ones. The mirror, mirror is on our wall...
Well...how about that, margin requirements for futures are effectively doubled for the TF Russell 2000 futures $8,250 from $4,300. Maintenance margin is now $8,250 from $3,250. If you are in a long trade and down...the last thing you need is this margin requirement increase. In all of my systems, I plan on everything that can go wrong will...especially this kind of stuff.
On monday, there were a lot of accounts that were blown out in debt condition. That means that accounts that started the day with a positive balance actually closed the day with a negative balance. When ever FCM's get into debt account situations, as they did recently with Silver, the exchanges dramatically attempt to reduce FCM risk by raising margin requirements dramatically.
S&P 500, Nasdaq and Dow futures are next...look out...there is a lot more downside coming.
This market is not for amateurs...day trade margins are not available at Interactive Brokers...soon there will be no day trade margin at all on any of these markets.
Well, that was interesting. The markets are off the lows by quite a lot of handles as intervention makes its rounds and means attempt to revert. However, we have a problem. By the close yesterday, as people were getting liquidated, many others were hanging on by a thread. Many managers careers depend on a bounce here of some proportions and many systematic trading algorithms that attempted to play this long need a rally well into the 1200's to show a remotely credible performance and avert the potential for disaster.
The market is fickle, especially one based on using credit for investing as its foundation. It is so amazing to me that BURNanke and his band of merry credit pushers continue to attempt this exact thing over and over again despite its nearly 100% failure rate. Today, short covering in front of the Fed is making it look like the inevitable bounce can happen and save the credit junkies, over committed investors and the asundry algo systems out there that use trade exceptions and generalized buy the dip concepts to build idealized historical equity curves. The managers who based their assumptions on a credit levitated market and the "buy the dipper" traders and systems that believe "you close your eyes and just BTFD"...are about to be tested...over the next day or two.
There are just too many of market participant that need to sell. If the market ends up taking its leg down to the 1020's it will wash out all that remaining credit in the system that sits in these weak hands. In my opinion this is a high likelihood regardless of the Fed possibly announcing another buying binge. That Fed announcement may well happen, but as we see the buying binge has extremely negative side effects - it has destroyed way more capital than it has created. I am more likely to believe that such an announcement or even hint of it, will likely ultimately endup both tanking the markets and the dollar - reinforcing the recent positive correlation of the classes. In any case, we will see. It has been time to take some profits this morning in Silver and Oil shorts and wait for the high probability trades to come out of hiding...as the great deleveraging continues.
The many victims of the leveraged credit money system are appearing everywhere - in the markets of course and in Syria, Libya, London, Iraq, Greece, Italy, Ireland and Portugal aswell...though we have China and South America waiting in the wings...not to mention a highly leveraged England, France and Germany to contend with. The latter have based their expectations and capital investments on ultra rosy projections of future potential, that like all exponential curves and projections, tend to turnout vastly differently than expected...except by a few, I guess. Merkel, Sarkosy and Cameron are all dazed and confused and they are likely to get tossed out of the ring. America is on a campaign to become a private bank like Pictet and will stop at nothing to further its planned agenda to charge for deposits made to it and custodied by it. How ironic that the plan that the campaign most likely included a debt downgrade as a part of the masquerade.
The Fed is not the answer, the Fed is the problem.
Apparently, Mark DeCampbre went to school with Bernanke, Geithner and Obama...all of whom seem to be highly misinformed (to be optimistic) as to how the financial system operates.
As I indicated in prior posts, the short in energy is a big one and has not disappointed thus far...we may get a small technical bounce sometime soon, but there is MUCH lower to go here. So far, the Oil contract has been performing well - if you are short. Silver and Gold will have their commensurate collapses too rather more quickly than the guys at ZeroHedge seem to think. I am not short gold (though it is increasingly becoming a risk reward trade my systems are attracted to) - I am focusing on Silver and Energy...and the trades in the currencies which are still setting up.
As I indicated the S&P Downgrade was meaningless for the US. In fact, the downgrade works for the US in that everything else that is a higher risk than Treasuries becomes and even higher risk than it previously was - which will be a persistent driver of negative yield and performance of Treasuries as a whole. As I write this, the 30 Treasury sits at its all time highs...coincidence? No...its the way the credit money system works.
This guy Mark DeCampbre pontificates about all sorts of stuff that he has nothing but anecdotal evidence for and gets it all wrong...I think this is similar to the concept that the S&P actually downgraded the US without tacit involvement of the highest levels of our government. If you recall the recent negotiations between the large rating agencies and the ECB regarding the defaults in Europe, you will notice the the ratings agencies worked very closely in all day meetings to redefine their models and adjust the structures and capital reserve accounting for ECB bailout initiatives so that they would not trigger a default. The reality, is that the agencies do not want to lose their biggest clients - so they do what those clients want. S&P is not all of the sudden an altruist that has the sudden urge to be honest. This downgrade is part of an agenda to produce negative yield characteristics for US Treasuries and in my opinion was highly coordinated not to mention cronyist.
In any case, I saw another article by another overly educated nincompoop if you enjoy reading such things. I don't by the way, however, while on the plane and in transit in airports for 20 hours...I found myself paying attention in a sort of stunned silence. This professor has NO IDEA what he is talking about. I do believe that "panic", in this case, is a better course of action than complacency or extrapolating meaningless data forward...there is signficant potential for a quick collapse in the S&P to 1120ish and 1040 or so (especially if 1,120 does not hold. If Russell 2000 does not hold 635...then we have likely 50 more points lower to go) before a bounce and all hell breaking loose.
Mr. Malkiel, professor emeritus of economics at Princeton University, is the author of "A Random Walk Down Wall Street" (10th edition, W.W. Norton, 2011).
If ever there is a complete chalatan this guy is it...it is clear and it is obvious that Random Walk theory has no place in investing. Markets are anything but random...in fact they are highly predicable and cyclical and base little of their behavior on fundemantals or ramdomness.
The reality is that the S&P downgrade changes nothing...a downgrade of the US in this situation amounts to a downgrade of all sovereign debt of all other sovereign states and the EU aswell...in that case, US Treasuries are still at the top of the list of least bad risks. The outlook as I have painted it remains the same. The objectives for the dollar and EURO are unchanged for me, however, we now have an idea what the impetus may be for the blow-offs in the currencies are - thy will be short lived.
The irony is that there is no reasonable way that the political leaders in Washington did not know about the coming downgrade from S&P and the failure of their efforts to avert it last week. Obama and Boehmer have a batphone to the ratings agencies CEO's and ratings agencies have a custom of negotiating the compromises that will achieve the will of the political leadership or more appropriately in this case, the financial leadership.
As I have indicated before, the issue of our time is the definition of actual philosophical and practical unit of money and what it symbolizes. We treat our money with the same respect we do our entire civilization, why should we expect positive results. The reality is that the short of equities has been a big trade and as you may have noted, something that I have pretty much accurately projected on this pages with my few recent posts. For those who feel like they missed the trade - for the record, I want to state THIS IS NOT THE TRADE OF A LIFETIME YOU ARE MISSING. No trade is the trade of a lifetime in reality. And additionally, I generate significant positive alpha for me and my clients, not only by generating powerful results when I trade, but by trading sparingly and remaining unemotional regarding economics and the markets - even when I want to strangle amateurs like BURNanke. Yesterday was no exception, I have been lightly short to mostly flat for much of this trade rather than invested...or worse long. I do not have the feeling that I missed anything. My buying power is significantly increased and I am not focused on equities anyway.
The fact is that the dollar has not performed at this moment. The next fact is that economics and government activities did not cause this collapse - over leverage, speculation and greed have. Moreover, the collapse in equities has a long way to go, however, the trade I am focused on is the emerging short of the EURO and long setup in the dollar...The euro has created a highly overlapped and symmetrically constructed bullish falling expanding diagonal. These are termination moves, so a breakout up out of this pattern for the EURO will be an ending construction. It will also, likely portend one of the largest trades in history...the complete collapse of the EURO and the historic rally of the dollar. My primary focus will be the dollar, though initially I do believe the EURO will outperform the dollar on a relative basis as it will likely be weaker than the dollar is strong. However, I still see the dollar falling into the 70ish range and the EURO making an attempt at the 1.47 or above range. Once this blow-off is established, similar to the trade in equities people will have fully leveraged themselves and suffer the consequences of that action. My belief is that the results will be relentless.
Secondarily, I believe that one of the big trades for this market cycle will be in the energy complex which has continued to leverage up and to distort its exponential bell curve - not to mention the GoldmanTax long posture on the sector. The reality is likely that anything energy related will produce similar results to the "anything financial related" approach of 2007 and 2008. I, also would suggest that you read my posts regarding Oil and the middle east. These countries will be nearly totally obliterated in this collapse and the banks and people who lent them vast sums of money to leverage their economies up to the point where it costs over $90 a barrel to get oil to market in Saudi Arabia will be too. The commodities shorts in energy are a big deal and so are the inflationary and real-asset currency plays such as gold and silver. I am not that motivated by gold, but guys like Eric Sprott should be placed right next to BURNanke in my opinion in the lineup of amatures who demonstrate a commitment to a campaign of irresponsible and duplicitous prognostication. Silver is an asset and a consumable, just like the equities, energies and softs that are currently imploding to cover overleveraged market commitments. SILVER IS NOT MONEY - it will never effectively function as such and it's a cornerable market - a key characteristic that real money should not have. These people have lost their minds and understand nothing about monetary reform, systems or economics. As I have consistently said, the key symbol of our time will be the definition of the monetary unit - there will be many charlatans who try to use half baked theories to promote their schemes.
So, there you have it, the biggest trades are yet before us. If you are not in this short of equities, well you generated quite a lot of positive alpha. However, if you are long, my heartfelt condolences - I really don't have much input there other than I do not think the deleveraging is over...and will go on for an extended period. I hate seeing people lose large amounts money and I have done my best present a dynamic non-consensus view on these pages. My philosophy is that "...less is more"...especially with regard to investments and markets. I think that allocation is key - proper allocation means you can survive mistakes. Most people approach risk management with precisely the wrong approach especially for these types of markets. I try to remain clear...which means I don't watch news, look to follow advisors or analysts or read many blogs. Believe it or not, independent thinking, a simple and unconflicted adgenda and clarity are a big part of my allocation and risk approach. This is why I do not charge any management fee for any of my trading products. Think about it, by definition, if you are susceptible to thinking and doing what everyone else is, you are likely going to underperform. Even if you are completely wrong, as long as you are not following the consenus, you stand much higher odds of performing than one would expect. How can you get paid when you are trying to get something free? These are subjects which I will discuss much more in the future. In fact, I would be happy to do an interactive webinar discussion on the subject if there was such interest. Please feel free contract me at m3analytics@gmail.com if you wish.
I have not been posting much. I have not had much reason. Most of my managed accounts are up well over 150% or better at this point for the last year and there have not been a lot of new issues to discuss. In addition, I am in Europe for a funeral which took place this week for a family member and have spent a lot of time traveling recently for work, including the current trip.
Lets review, however, where we stand. Today was a very important day and has confirmed, nearly to the letter, my assumptions regarding the global markets.
I expected an overall move towards weakness in both the dollar and equities. That has occurred. I expected an overall move towards negative yield in US Treasuries and we have made that huge leap, one which should not be taken lightly, to ultimately enable the US to fund deficits and borrowing with negative yielding Treasury bonds in a much more significant way that most may be expecting. As I have indicated before, as people begin looking for return of their money as opposed to return on their money we will likely get a huge boost to the reserve status of the US Dollar...much to the chagrin of people who do not understand that Gold is not money, Silver is not better than gold and Real Assets are of little value whem people don't have the purchasing power to obtain them.
Ultimately, the real question is, "Who can be trusted to give you your money back?". Can the US be trusted to return your capital? Can China be trusted to give you your money back? Can the European Union? Russia? South America? Well, there you have it, the only country willing able and practically capable of returning your money of that group is the US. Additionally, like most investment decisions - the objective is to choose the least worst option. There is NEVER a perfect choice. China may seem credible enough, but in a credit contraction, they are seriously over extended, have unreliable numbers and reporting (just look at the level of china fraud listings for stocks - fraud is rampant there when dealing with the rest of th world) and in addition to all that, they have been secretly continued buying tons of US Treasuries while promoting the exact opposite. Now all they need to do is downgrade the US to cover their track even more. This, however, is common practice among the halls of leadership and is not unlike the 180 degree misdirection that has been going on in the US regarding the debt ceiling, deficits and non-existent budget/spending cuts. China does not want its own money in its own currency or even its country for that matter...and neither would I want my money in China if I thought I might be concerned with the very basic issue of a transactional return of said money. I am rather sure that Mr. Putin, for all his recent remarks, has a substantial amount of his money - atleast - in US Treasuries too.
I think that we are on track to see the dollar index move lower to the lower 70's or 69's and I think that we will see general predisopostion towards continued weakness in risk assets. I think the EURO will likely make it toward the upper 1.40's...1.47 to 1.49ish. Its my impression that these instruments will setup massive trades when they do reach these blow-off points. In addition, the Silver and Gold markets will likely setup catastrophic reversals when the dollar and euro complete their blow-offs - which I will likely once again short as I did with Silver near $50. My target for Silver is still below $4.39.
There certainly is the possibility that the dollar could continue straight up from here...but I think that its overall action and the EURO's states to the contrary today - so I am not really focused on that. The EURO has made a symmetrical zig-zag retracement that held firm today. Additionally, it is important to understand the macro flows here. Many large institutions and significant market participants do not understand the macro events that are going on...they are using the EURODOLLAR interest rate contract to trade yields, however, those trades are failing miserably, in some cases catastrophically, and causing a significant liquidity issue. This issue will likely continue into the near future and exacerbate conditions that are underpinning the futile and ridiculous blow off moves - up in the EURO and down in the Dollar.
Meanwhile, back at the ranch, can anyone get more out of touch than our leaders in Washington DC? Obama and Boehner clearly do not understand economics...
So, we are about to default, ehhh? I guess that's why rates, as I suggested would happen, are making new lows on the US 30 year bonds. But they don't talk about that in the media...instead they talk about the catastrophic interest rate hikes that will happen after Aug 2...sometimes its really hard to believe this is not just one big conspiracy. What's more we had a nearly 2% revision to GDP today...I question the motiviations behind that number both as previously reported which had to be known by officials to be highly inflated and the one published today. A 2% change in GDP is not a little accident that happens in a revision...but I guess with all the highly reliable smoke and mirrors going on with the employment numbers BURNanke and his buddies think they have this smoke and mirrors, data revision, data deception scam down to a science already.
The dollar is selling off along with the equity markets which I also suggested would happen...and the EURO is struggling to remain in its bounce...I expect that it will be able to make some new waves higher on this bounce. However, I can not imagine that it makes the ideal targets. Therefore, I would not be surprised to see the EURO make it to between 1.47 and 1.5.
All in all, there is no possibility of default for the US and the relative choices people have are not very good. So, here we have it, the US will not default - no question...Greece, Spain, Portugal, Italy, Ireland and a host of others will default. Emerging markets will be dramatically impacted by this instability and their financial systems and infrastructure will be compromised...where are you going to put your money when you hope to get over 98% of it back? Its not going to be silver, gold - its going to be US dollar Treasuries and a few other domination's of government debt not associated with Emerging Markets or the Euro.
I apologize for my absence. I have been travelling a lot, working on a monumentally complex release and have had a death in the family at the end of the week last week. I will be travelling to Europe this week because of that...so, I am not really getting a break from travelling quite yet. The reality is also that I see that my last post is the only one necessary to understand this market. I see the debt ceiling issue triggering a sell-off in both equities and the dollar and the result setting up one of the best trades in history. In any case, for reference, given where the dollar is trading...the EURO should be at 1.475, the SP500 Futures should be at 1,368, the Russell futures should be at 870 and the Oil should be at 114. As you can see that is not the case. I indicated in my previous post that I did not believe that the euro would make its maximum projection of 1.52...That is playing out according to plan. The dollar looks set to reach 70ish...eaking out a new low. I see the EURO as a better short than the dollar is long...however, either will be an awesome trade. As you are most likely aware...we closed our dollar longs at the 77 area for a very nice profit. The only chart worth watching in my opinion is the inverted dollar chart that I posted a few weeks ago...all the attributes in that chart are playing out to a tee. The EURO is continuing to under perform relative to the dollar as are all risk markets and the dollar trade is turning into a highly emotional and debilitating trade for most. For those who are currently loving their dollar shorts, I would recommend taking profits aggressively as the dollar reversal will likely be brutal and highly persistent.
I apologize for the lack of posts this weekend...I usually try to do a weekend overview, however, between major software releases that I have been rolling out and a business trip to New Port Rhode Island...I will begin regular updates soon.
The way I see it, we are setting up for a sell off in the equity markets and that any event driven dollar volatility will end up reversing hard and crushing the EURO. The reality is that the EURO is trading at 1.4236 right now versus the dollar at 74.79...given recent relative prices the EURO should be trading at 1.4486 right now to offset with the dollar here. That is HUGE under performance. These markets are coming unhinged and the central planners are planning something ugly indeed. It looks to me like there could be an event driven move selling both the dollar and the markets off...followed by a mammoth reversal in the dollar and a disconnect in the risk asset markets...ironically, it seems to me that the world does not have a lot of great choices...and that makes negative yield on US treasuries look better than a hell of a lot of the alternatives...and it sounds to me like a reasonable way for the US to reduce the whole politcal theatre regarding the debt cieling and default...anyway you cut it, the 5, 10 and 30 year bonds all made new highs (lows in yield) over the last few days as I had indicated I thought would happen in precious posts.
So, at this time, I have less than two hundred short contracts on the index futures left right now in my portfolios and am nearly flat - just waiting for systems to trigger new entries in the currencies and indexes. Right now, after a very rewarding two months, watching from the sidelines and awaiting any event driven volatility seems just fine to me.
I want to be clear, this is an option. My personal view is that when a continuation pattern reverses and goes the opposite direction we will likely continue in that direction. However, the triangle pattern that the dollar and the EURO made turned out, more or less, as anticipated for a first move. They produced A-B-C patterns that were very symmetrical. One of the things about these kinds of zigzags is that the three wave patterns show a high level of stress and a lack of commitment to a move...given that the moves out of them are less probabilistic...this is why I trade extreme price movements and not wave patterns. But they are a good guide and I am putting this one up because it is nagging me. The fact that the upper trendline (black) is an exact symmetrical distance away from the bottom of the "b" wave of this zigzag is highly curious and something that everyone should pay attention to.
No matter if this pattern were to play out there is no where else to go but the dollar. Kamakazi Ben BURNanke can not change that no matter how he tries and the moves in Gold and Silver are an extreme reaction that has officailly escalated into a rediculous consenus that make absolutely no practical sense. Additionally, silver is trading within the patterns as presented in my last Silver chart.
I use Multicharts Charting and Backtesting Software.
I post high resolution charts made with Multicharts and Adobe Illustrator. Click on chart for a more detailled view.
If you do wish to contact me or have any questions you can do so at m3analytics@gmail.com
Nobody Knows Anything, Rate Expectations Edition
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Heading out the door for the Labor Day weekend, with blue skies and 85°
temperatures, I had to share a chart. It’s from the San Francisco Federal
Res...
This is the End and a New Beginning
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I've been thinking about this for some time.
After 21 years of writing this blog almost daily, I've decided to stop
writing the daily updates on the blog.
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