Like an island…in the middle of the atlantic…the tsunami comes

perhaps its the pacific - its much colder water too. However, the reality is that yesterday’s gap and the patterns it placed are confusing many. The presumption is that the market is bullish…when we covered a month ago it was bullish…however, we did not go long that move. Now we sit precariously perched in a market looking for divergence and bullish extremes…and we also sit at very high probability reversal levels.  However, it is important to understand that the scope of a larger downtrend…divergences and bullish extremes often do not have time to build. This case looks to be no exception.

There are now complete patterns in the that should be scaring the pants off anyone who is approaching long that particular currency. The setup in the EURO postures for a move of epic proportions…perhaps 1,000 to 2,000 pips down in a matter of a few days. The risk markets are likely to correlate to the movements in the EURO as they did this time. In any case, as I indicated in yesterday’s post…the euro points to parity with the dollar and I think that that progression may likely happen faster than can reasonably be anticipated.

Also, of note is that the already strong buy trigger that triggered last week for US 30 year bonds is still intact and bounced off it…they are about to trigger another risk on desicion point…for the long trade ofr the UST 30 year.

It appears to me that we are setting up an Island top…and I think the water will not be of the nice calm Caribbean sort.

Powerful decline awaits…some quick charts

I did not have time to annotate the charts…however, the short squeeze into the resistance has occurred in quite a few separate markets. In addition, we are sporting one ugly gap…looks like it will not be a pretty. Additionally, I want to point on the pattern on the longer-term view of the EURUSD…this pattern is setting up for a breakdown and the measured move is indicated by my target arrow…which puts the euro near parity with the dollar. This will likely occur rather much faster than people may be expecting when it happens. This is especially the case when you consider the fourth chart and the clear zigzag bounce that the EURO has had. The implications are rather grave for the EURO. Of note also is that that Dollar has ticked near a major support level which can be seen in chart 6. Lastly, one of the things that occurred today that increases the likely hood of a powerful failure is the overshoots of the rising and falling wedges as displayed on the last chart. We overthrew the wedge boundaries and the result will likely trigger a reversal that ironically is much more powerful than the overthrows. Also, a last note, the usually leading NASDAQ dramatically underperformed its counterparts today.

Mind of Money Interview of Robert Prechter

Douglsss Lodmell interviews Robert Prechter - this is a really good interview and I think rather timely. The dynamics of the market and the financial system are covered very well in it and I think its one of the better ones I have seen of Prechter...I highly recommend that you watch it in its entirety.



On a markets note, we simply came up to and hit my target at 1250 on the SP500 and the market structure has changed little. Credit fueled drunken lunatics are driving shorts out of position and longs into position as precisely the most expensive times and central banks are desperate to try use any asset as potential symbols of solvency...the Gold, Silver and Oil shorts finally triggered today and the currencies are shaping up nicely. US 30 year Treasuries triggered long on monday and that IS NOT a good omen for this rally. I think that as I have said before and as Bob says in this interview...its time to get safe! or as safe as possible...the drop is not going to be pretty at all.

Market dynamics or dynamic markets?

Well, that was interesting a nearly 5% move in the ES intraday low to high…some key facts of worth, the VIX is in a clear bull flag and bouncing off support. US Treasuries put in bullish cycles a few days ago and did not get near their recent lows when equities got near their highs…the same applies for the dollar, which is sporting a rather nice looking pattern…and a head and shoulders on the 120 minute EURO chart...for all the noise about 2 trillion bailouts the EURO did not seem to energetic…having remained below its 61.8% retrace today…

So, all in all, though the systems have taken some very nice profits…they are still short and the same scenario still seems to be in play - a triple top rectangle….rather bearish indeed and highly probable too.

Many people are expecting a complex set of waves up over the next few weeks…the action in the dollar and the VIX and our pattern say otherwise.

On another note, we continue to have massive accounting fraud in the earnings of all the major banks…Citibank’s clear manipulation of its books is just one example of an outright abomination. The market is saying we do not believe you will pay us back Mr. Citibank and Citibank is saying our clients are so good we can reduce loan reserves…and call both earnings. There is only one option, if the market thinks that Citibank is at increased of default - what its saying is that Citibank clients are likely at even higher risk of defaulting. How Citibank can turn that into 3.8 billion of earnings via loan loss reserve reduction and the decline in their own debt value, is simply unfathomable. In fact, given this situation, Citibank should have increased loan loss reserves not decreased them.

Kyle Bass - following in John Paulson’s foot steps

“The value of the metal in a nickel is worth six point eight cents,” he said. “Did you know that?” 

“I just bought a million dollars’ worth of them,” he said, and then, perhaps sensing I couldn’t do the math: “twenty million nickels.” 

“Actually, it’s very difficult,” he said, and then explained that he had to call his bank and talk them into ordering him twenty million nickels. The bank had finally done it, but the Federal Reserve had its own questions. “The Fed apparently called my guy at the bank,” he says. 

“They asked him, ‘Why do you want all these nickels?’ So he called me and asked, ‘Why do you want all these nickels?’ And I said, ‘I just like nickels.’” “I’m telling you, in the next two years they’ll change the content of the nickel,” he said. “You really ought to call your bank and buy some now.” - quotes from Kyle Bass

This is the funny thing…Paulson made an historic trade, his psychology of success cost him his values and granted him complacency - so, he forgot the most important rule…when you have a success and confidence you are sure to need self doubt and humility…

Reading Bass’s quotes, it is apparent that he believes in his view so much that he is capable of marrying ridiculous analyses and obtuse risks…this one is ridiculous, however, theoretically its reasonable risk trade. NOT because of the silver content - but because the Nickle happens to be legal tender and due to the potential of its buying power increasing due to the “paper in it” and while the very silver he so desperately wish to have declines precipitously…and this despite Bass’s totally superficial analysis and understanding of the monetary system…The reality is that HE has to store all those coins, that is not cheap and it WILL significantly impair the risk/reward on the trade…Bass will be lucky to break even on it over the next several years…though I am not so optimistic about some of his other risk trades.

It takes people betting the farm on ridiculous trades and popular consensus views (the debasement and real asset hedge is VERY VERY popular) to make market moves that have conviction.

Market Update...

I will be posting some charts later today to add to this post…(as of 10:49 pm I am totally wiped out have not recovered from 10 oscillations from zero to 26,000 feet and back yesterday testing out a King Air B200…will post charts in the morning) But as far as the markets are concerned, I would like to share some observations from friday. It is important for me to point out that as opposed to most blogs and professional services that charge for their opinions and usually give you two opinions and subsequently claim the best one post history. I present my view, it is merely a view but is a focused one. I have never found that I can make money in the markets by flip flopping…I don’t have time to waste doing that…either I am wrong or I am not. In the case that I am wrong, I want to determine it early and manage that condition proactively...the most effective tool for proactively managing risk is proper allocation.

Hence, my view and posture has not changed at all since my last post…the market was SOLD by institutional traders especially into the short squeeze at close on Friday. In fact, it looks to me like the primary activity in the markets has once again been a roller-coaster of leverage becoming de-leverage…longs became shorts after blowing out of their trades and now they are blowing out of their shorts. In addition to that, you have all the asundry liquidations by the various insolvent and liquidating financial institutions around the world. With all their crazy derivative and leveraged risk positions this does not imply that asset prices must go down...and can indeed imply quite the opposite. The most ridiculous thing is that NOW that we are above that trendline…most will likely look at it like a breakout which will likely further their whipsaw. I am quite confident that this breakout will be a retest overshoot and thus a failure.

The dollar has lost downside momentum and looks powerfully positioned (hence we have reentered the dollar in the 77.12ish area. The EURO has lost its upside in a spasm of de-leveraging…while, its counter part, the dollar is sitting above a multitude of major supports and that to me has profound implications for the whacky diatribes and promulgation I am hearing about.

Oil, Silver and Gold are all set and generated partial short triggers on Friday…I think the ride down will likely not be interrupted by a zigzag for the markets- meaning that we put in a pullback here to a higher low and then proceed to a higher high as a part of this move. If that were to happen, however, the targets would be in the 1250 area for the S&P500. While it is inruiging to make that guess on this pattern - I am not in the business of guessing such things for profit. I do believe that the market will likely fall here and that the trip will be a rather powerful unwinding - hence, I do not favor our current wave up being an A wave of an ABC zig zag up...my positioning is looking more for nearer-term reaction...and is highly biased to the action of and in the currency markets which are indicative and at the center of our storm.

Markets setup for a fall…and possibly off a cliff

After covering shorts in the 590's for the Russell 2000 - the 1080's for the S&P500...we triggered short today and have very high quality fills near the highs...I am expecting this trade to be powerful. We sold the dollar for the dollar in the 80's and now are long again in the 77.20's...I expect that the dollar will regain those lost points much more violently than most would think and rush to new highs. So, additional to short triggers on the equity market...we got triggers long on the dollar...and now will likely get triggers short on Oil, Silver and Gold tonight or tomorrow...all in all, its the same story and same channel. People who were long got stopped out and went short...only to get hammered and highly leveraged on this current move...by now, many people are most likely flipped from short to long again and on all out leverage in order to try to overcome the losses on at least four failed momentum swing trades. THIS IS WHY I do not trade momentum or breakout trading...it just does not work over all. If you only trade at extremes you are much better off.

In any case, today we broke out over resistance on the S&P500, which for all intents and purposes looked like a clean breakout, took out stops and got people really convinced that they needed to be long. - the reality is that the breakout failed, as usual and we closed under resistance. While this rally has gone higher than I expected, it has tested and slightly overshot the resistance zone...and I believe that people are unprepared for what is about to befall them. I do not think people will get the chance to get in or to get out in a satisfactory way and that will cause quite a bit of volatility in our already leverage junkie markets.

The EURO has additionally, convinced participants - especially apparently Goldman Sachs clients, that it will be saved and is going to be fine...as I have said before, in today's markets the goal needs to be to short the shorts. When shorts capitulate - SHORT! That appears to be what we have now.

Market update

I am sorry that its was such a busy yesterday morning that I was unable to post. We have been covering shorts into the lows of overnight and morning Tuesday and the prior close...we were nearly entirely flat before the open Tuesday and flat by the morning and I had a post in progress…as, I have a quite a few trading desks to check confirm with traders to check in with, it was just too busy a time to compose it and get it out…again, I apologize and in the future I will try to do a simple one liner if a similar case occurs.

Regardless, I do not see the larger move as done by any means. The reality is that this bounce is credit fueled squeeze of leverage and will further reduce available liquidity in the markets. It will probably last a little bit longer than one would think, maybe a few days more (but its not wise to count on that) to accomplish a better retest of the resistance.

But my larger-term target zone is alive and beckoning...it is not a good idea to play on the long side of a market that can at any time drop 100 points from no where...and most important it is important to take profits incrementally no matter how stupid you feel when you are doing so...

We had the biggest 40 days of trading in history for me by employing the concept that we accentuate activity that is 180 degrees contrasting to generally accepted norms...yet at the same time attempts to be as conservative as possible in doing so...This is what I tried to get across in the recent webinar's and interviews...trying to be safe in the end can make you a lot of money by opening you up to new possibilities.

We WILL be getting short again as previously and will be long the dollar as well.

Here is an important update to my oil view and previous analysis...playing just as is should...

The S&P500…its not over…its just beginning...

its possible to count impulse waves on the SP500 as indicated with the numbers in my chart. However, almost all patterns are really just single, double or triple zigzags as I mentioned in my previous post…therefore, I am preferring to use the zigzag for this analysis. Additionally, we are a convergence of many supports…I indicated just a few…and they all come in around these levels…if this support area goes…its not going to pretty. I also included a possible double zigzag scenario which essentially will also satify the traditionalist impulse wave view...

This meltdown is just beginning...

The cataclysm begins...

I will be posting a few charts this weekend…I am seeing quite a lot of mistaken analysis the recent days. I of course, have been aggressively long the dollar and short assets and am accordingly up substantially (meaning over 50% net) in September for medium to aggressive allocations and over 10% net for conservative ones.

My interview with Douglass Lodmell on “The Mind of Money” from last weekend was a final attempt to get some color out there about the coming gargantuan margin call. That margin call has begun and it will not likely finish with a nice clean bounce off convenient levels…this margin call represents the exact references that I made in the video. Its a margin call on all the crazy illiquid leveraged trades that the banks have been doing to generate income and cash-flow without real accommodation for risk. We will likely see several banks, and larges ones too, blow up or go under due to these types of positions and next week will likely represent a pivotal gutting of their assets and remaining cash. There will be a mad rush to obtain non-credit money…that means unencumbered dollars…this will further undermine the asset quality on most bank balance sheets. We will likely begin to see Jamie Dimon’s ponzi scheme at JP Morgan and Blankfine’s a Goldman Tax to begin to be revealed in all their glory in the near future and the credit-lines of major financial institutions like Morgan Stanley, Bank Of America, Well Fargo and Citibank called in. European banks will likely fare even worse. Overall, this will not likely be pretty and it will make the unwind so forceful, in my opinion, that it will likely make our initial margin call in August look like a baby…as nearly every arb/correlation strategy, diversification and leverage strategy becomes strained and overwhelmed…Flash in the pan managers like John “Can I PLEASE close my fund now” Paulson, Eric “what what I thinking" Sprott and David “my equity curve looks like an EKG chart” Tepper who have confused luck with genius and their AUM curve with their equity performance curves - will likely usher in the next phase of their legacies - "life support".

Accordingly, as I see it from a larger-term wave count, we are in an impulse wave of an impulse wave of a C wave zigzag down. This means in Elliottwave terms, we are in a very strong wave 3. I generally, prefer not to put impulse labels on market structures and almost always label things purely as single, double or triple zigzags. Market activity falls very well in to zigzags and the urge that people generally have to find an impulse wave where there is not one is very strong - so there is a lot of bias that comes in unnecessarily. However, in this case, I do believe that we have a zigzag three wave bounce in June, followed by a clear zigzag three wave bounce off the lows in August. I have almost never seen a wave 4 take this form. What it looks like is a double zigzag down or that the bounce off the lows is another wave 2 which sets us up in another wave 3. The fact that the macro picture is likely to become more intense than 2008’s will likely be recognized by a few brilliant minds after its too late and this will most likely be represented in next weeks action. Accordingly, I expect that the market will test 940 to 1,000 in the SP500 next week and ultimately (maybe a lot sooner than logically expected) will not hold there, with clean options to trade to much much lower levels as I have indicated in previous posts regarding out pattern. Lest I leave it out, Gold and Silver among a host of other commodities will also likely suffer broadly as well in the festivities...as they are beginning their trip to much much lower levels.

What is very disturbing about what is occurring is that the markets have so little real liquidity in them, meaning non leveraged cash that there is not enough money for shorts to hold short positions and certainly not enough money for people to hold long positions. This can be seen by the ridiculous volatility - meaning people’s books are so strained that even a small pop causes their shorts to be forcibly covered and drops trigger the predominant long positions to be involuntarily unwound and sold. Many more people are long than are short and most people are over invested in both directions - this results in stress in both directions and creates irrational and wacky behavior such as we have been seeing over the last few weeks and days.

Again, I will post some charts detailing the market this weekend as a follow-up on this post.

What do social programs do to benefit our society...

Perhaps this is something Obama should think about before coming up with more harebrained ideas…

Meltdown…

Of course Journalism is not coming from anything close to mainstream in the US…try Aljezeera, CBC and RT for more interesting reporting…This video is of history, just keep in mind that what is about to happen is not…there is a compulsion among people to view a big even that can be documented in a memoriam in a piece like this as an indication of the event being behind us…history, however, is still being made and the event is still on going.

The funny thing is that the emerging meltdown of 2011 is WAY bigger than that of 2007 and 2008…few in the press is really talking about it. The actors in the last crisis did everything they could to promote double dealing and cronyism and the setup the BIGGEST financial calamity of all time. And who is watching the boat…the water is very rough and the storm has not even started. But I believe it is going to hit in the immediate future...


part 1:

part 2:

part 3:

part 4:

John Stewart Interviews Ron Paul

Again to get real journalism you have to go to the comedy channel

The Daily Show
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

The Daily Show
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

The Daily Show
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Its a Mutiny…guess who’s in command?

Video Update: Mind of Money with Douglass Lodmell

I did another in the series of “Mind of Money” interviews with Douglass Lodmell.

The obvious and contagious precious metals disaster/scam. is running ahead full steam - Gold is down 100 dollars as I write this and silver by well over 4 dollars. The reality is that all the Silver and Gold pumpers will likely come out again trying to make excuses for their markets and their mania…meanwhile I have made it clear their case was flawed and empty…zerohedge.com really needs to stop coming up with new theories on this Silver and Gold Debacle they so much did not want to see and start getting some better thought out research out there. However, I am quite sure they will come out pumping silver and gold once again. As it is right now, there should be some sort of bounce from the 26.5 area for silver and may be some pause in the EURO implosion…but both will not likely last long if they happen…
if the video is blurry be sure to choose 480p resolution…240p looks terrible.

Is Warren Buffett really the old man, uncle, grandpa you can always count on...

Look lets face it…the world of levitation and creation of wealth via the credit is fraught with risk…its also a form of gambling that few can resist. Warren Buffett, is no exception. He has built an empire financed by, built from and operating with the core ingredient of credit money. His insurance companies, his banks and most of his enterprises survive, breath and grow because of their interface with this system. Now, there is one thing that I will grant Mr. Buffett, he’s a really smart guy. But lets face it, he’s not grandpa. He’s not honest. He’s not focused on altruism or even capitalism. And whats more, he’s not built his empire on a foundation of bricks and he knows it…the one thing that he is, is predictable - you can certainly count on him in some rather intriguingly consistent ways.

The fact is that Mr. Buffett has consistently given horrible and conflicted investment advice which quickly gets filtered by the media to look rather different. He has consistently cronied up to anyone who can help him with his schemes. He advertises cute phrases which make things sound simple and congenial, but the reality is that they are anything but. His defense of Moody’s was essentially based on “How could I know, how could they know that there was a bubble in real estate and related products if 300 million people could not figure it out either.” I do have a video of his preposterous attempt at defending these guys - I will look for it. The reality is that Warren made a lot of money on the backs of those 300 million fools and he made a lot of money because of Moody’s business model of being paid by the issuer of financial products for their ratings. This is why, if you must know, the United States was absolutely complicit in arranging the debt downgrades that we have received from them.

I can not help but post this video of Buffett. I posted this post in May of this year...Warren "No Big Risk to the Economy" Buffett - disinformation…his interview is for you to judge. Please keep in mind that at the time, we had not had a recovery, it was clear to me that double dip was wildly optimistic and that hyperinflation was an imaginary delusion and that we are and have been in a very large scale depression…not a great recession - the only people who could call the continued debt and real-estate collapse a recovery are economists, analysts and apparently Warren Buffett. Is it really possible that I am smarter that Buffett? Or is it much more likely that Buffett is a very very smart guy (much smarter and more devious than me) embedded in the highest levels of cronyism and power who knows that he MUST absolutely lie and decieve in order to get his way? I think the answer is obvious, that is less than a 1% chance that he was not keenly aware that the risks to the economy were gargantuan, the risks to the financial system were even larger and that the risk of the mother of all deleveragings could happen at any time was imminent. But instead of telling the truth he lied…just like he did about his new tax the rich initiative. I suggest that you question his motivations and integrity on that one too. This is definitely feeling like a 2008 redeaux and deja vous all over again.

Here is his interview earlier this year - a few days after the S&P500 hit is highest point from the rally off the 2009 lows:

and here is his horrible and disgraceful testimony - under oath mind you.