Sunday, 31 July 2011

Dark Clouds Over The American Dream.


For over 200 years, America has been the place which draws the best and the brightest from all over the world. It is the place where dreams come true.  

In his definition of the American Dream, James Truslow Adams said in 1931, "life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement" regardless of social class or circumstances of birth. 

Let me quote from Wikipedia: “The idea of the American Dream is rooted in the United States Declaration of Independence which proclaims that "all men are created equal" and that they are "endowed by their Creator with certain inalienable Rights" including "Life, Liberty and the pursuit of Happiness." “

Such noble words!  “Life, Liberty and Happiness”. Is there anything else in life? Yet, we now find that our dreams for a better life, a better future for the next generations are being increasingly threatened.  The middle class, which forms the back bone of the American Society, is being squeezed like never before. Somewhere along the line, the dream has been robbed by the Grinch. The Grinch exists on both sides of the aisle. Today the top 0.01% of the population control over 70% of the wealth.

 The last ten years have been exceptionally bad. We waged wars which were not needed, gave money to the super rich under political patronage, and even when the Oligarchy bought the country down to the ground with its financial frauds, we socialized the losses while privatizing the profits.
 
Three years after the financial tsunami, not a single person has been punished. Those responsible for the messes are bigger than before. They wrote a 2000 page law which promised much, but delivered little. One year after the Dodd-Frank Act, we still have no consumer protection as promised and only a handful watered down laws have been written so far which are totally ineffective.  We put lipstick on the pig and made it beautiful. Grinch has really robbed our dream.
  
The giant Ponzi scheme that is being played on us is now reaching its end game. The illusion of prosperity cannot be carried on much more. The growth built up on borrowed money is collapsing like a house of cards. Look at the dark clouds on the horizon.

•           The socialist economies of the Europe has almost but collapsed. The unemployment is Spain is almost 40%.
•           Growth is negative in Italy, Greece, Ireland, Portugal, Spain, UK.
•           Banks in Italy, Spain as well as France are dead men walking. With the slightest weakness in the global financial system, banks in these countries will be denied further liquidity, so necessary to keep them alive.
•           Japan has been in depression for decades now with little sign of any life in the economy and with a debt to GDP ratio of over 200%.
•           GDP growth is now officially 1.3% in the USA and 0.3% in Canada.
•           Much closer to the shore, shipping container traffic is slowing, rather, decreasing alarmingly.
•           The growth in China since 2008 is purely construction driven, with very little domestic consumption growth. This is another Ponzi scheme that is about to collapse soon, bringing the commodity sector down with it.
•           The ports in China, the export powerhouse of the world, are seeing their total numbers falling dramatically.
•           There is no job growth in the USA nor there any real income growth for the last decade. The consumer spending which constitute 70% of the economy is unsustainable when the QE is taken out of the system.
•           The major shock is going to come from the Balance Sheet Contraction at a global level. Here in the USA, just the residential housing sector has lost well over $ seven trillion value from its peak. Add to that useless MBS that the financial institutions hold, trillions of dollars of derivatives based on such valueless properties, and we just sitting on a ticking time bomb.
•           The frauds in the financial sector continue and more than ever, Government is now a part of that fraud, aimed to keep the status-quo going.
•           Since 2008, over $ two trillion has been pumped in the system, to give the wealth effect based on the misguided trickle-down theory. All it has done is to increase the debt to more dangerous level, where the law of diminishing return is now in play. It has merely helped keep the big banks alive yet reducing the market value of assets in their books. If the banks follow the proper accounting principles, and start marking their assets to the market, instead of fantasy, each one of them will be bankrupt. Yet, today they are pillars of our financial system.
•           We have not touched the Geo-political tensions that are smoldering in different parts of the world. Bombing of Iran by Israel is a real possibility. The unrest in MENA region is going on and Syria is about to explode soon. China is having serious tension with its neighbor in the south sea region. In South East Asia, Pakistan is an unstable country with nuclear capability and the fountain head of global terrorism. Pakistan with its proxy Muslim fundamentalist military dictatorship is hell bent on destroying secular democratic India. India and China are having issues with water. Drinking water is going to be a major flash point and potential conflict point in the future.

These  list can go on and on. But there is no way the western civilization can continue to enjoy the lifestyle of the last 40 years. The payback time is here and now.

The debt drama is just a diversion from the real challenges. I never doubted for a second that America will raise its debt ceiling. Each politician owes his/her position to some special interest groups. Do you ever think GS or JPM would allow the USA to default now? After-all even the most power-full politician in Washington has just one head on shoulder. This drama was just to scare the general population to sell cheap. The next chapter will be euphoria. The Boyzs who control the markets, know that the end is near. They now need to make one last effort to suck as much money out of the ordinary Americans and their retirement funds and savings.

It is a monkey business alright. If SPX can fall 50 points in three days, it can also go up 100 points in six days. Do not be surprised to see the markets making new highs in August. But that will not be the beginning of a new bull market. Rather, it will be the beginning of the end. Hope you have not sold out in this panic. Sell when the market is experiencing an out of the body high and be prepared for the next storm. It is coming. 
   
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Friday, 29 July 2011

Market Analysis and Outlook, July 29.


We need to re-visit my yesterday’s post to make a sense of what happened today.  Among many other things, I made the following points:

·         I think we are still in a Bull market, although it is coming to an end. 
·         Tomorrow the QE2 GDP will come out and it may miss expectations. Coupled with uncertainty, this may trigger the SPX to dip below 1300 level.

And this is what exactly happened today.

I am not so much worried about the debt drama as the falling GDP, in-spite of the huge Government stimulus that has gone in the economy so far. The growth engine is coming to a stall and smart money knows it. They also know that the situation in Europe is still worse. That is why US T.Bonds are in such high demand even when AAA rating may be in question.  SPX came down hard, touched the 200DMA and bounced and that says a lot.

The market action today is signaling that a bottom is in or will be in soon. See the hammers in the Index.
All selling in the past have bottomed when such candle patterns have emerged.

SPX went down up-to 1282 level and bounced back. Couple of times, even came in green.

And VIX went through the sky again. That is three days in a row VIX has closed beyond BB. The fear factor is now in high 20s and I have written repeatedly in the past that for the selling to complete, fear factor has to be in high 20s. We got that today.

VIX also has a spinning top today. ” After a long decline or long black candlestick, a spinning top indicates weakness among the bears and a potential change or interruption in trend.”( Stockcharts).

Once again, I think a bottom was in today.                                                                 

But here is the paradox. On one hand a bottom is in and on the other hand the economy is stalling. Will we not sell now? Isn’t it time for another bear market to start?

I have been repeatedly saying that the world is not going to end on 2nd August. Although the US economy is almost at stall speed, it has not yet reversed. So we will muddle through, if there are no other external shocks. Even if the unemployment is at 10%, it is still better than Europe or Japan. The US Banks, in a bad shape as they are, still are in a better shape than their European counterparts.  And there are plenty of cash on the sideline. The market will not go down unless it has soaked all the cash up.

So I expect the stock market to rocket upward as soon as the drama in Congress is resolved. We will be greedy when others are fearful and fearful when others are greedy. It is easy to understand the fear, but difficult to understand and control the greed. In a few weeks, when the market is going up again, we will forget this crisis and MSM will present all the good and beautiful stories. We will think that the good time is not going to end. 

That is when we will turn bears, not today. 

Thursday, 28 July 2011

Endless Drama.


As far as drama goes, it cannot be any better. Nail biting, thrilling, turn at every hour. You name it we have it. Dems are blaming the Reps and vice versa. Who is to blame on this debt drama? Who bought Americans to the sacrificing alter? Look at the following chart.

You have the debts as a percentage of GDP by the Presidents of both colours. You decide which party is to be blamed more. I am in neither party. However, it seems to me that when Bush II got to drive the car, the ratio was below 60% and when he handed it over, it was well over 80%. Hmmm. Interesting to say the least.

Who is winning the debt debate? After all, this is all about the next year election and winning the hearts and minds of the voters. Again, I do not carry any favour from any party and I am sure things will remain the same whichever party wins next Presidency. But from what I read and hear, I do not think Reps have conquered too many hearts of the independents. As everyone knows, independents are the key to the White-house.

The current president was elected on Democratic Party ticket, but he has turned out to be George Bush II.  All his policies have been directed at maintaining the status quo and giving more freebies to the super rich and big business as well as to Wall St. To his credit, he is a great reader from teleprompter and says the right words for the poor people.   

But I know who are not winning. The average Americans are not winning. And Chinese must be worried sick that all their hard-earned money may soon be worthless. I wrote few days back that American can never repay its debt and it is a sucker’s game. I never expected that it will be proved right so soon.

In any event, the economy is going down and what will trigger a black swan event is not known. I feel that Spain and Italy will implode soon and that will trigger the dominoes to fall.

I still think, they will get past this debt debate in the last possible minute.  Some readers have asked why I am not more bearish at such uncertain time. Reason being, there is not much uncertainty about the outcome.  Chances are 99% that the limit will be raised. The credit rating is another matter altogether. The uncertainty is about time.

I think we are still in a Bull market, although it is coming to an end.  The following picture explains the bull market.

If you see the DOW, it has so far made higher lows and higher highs and is well above the 200 DMA.

I have underlined the lows in the chart. I expect it to make one last high before the turn.  The resolution of debt ceiling drama may be the trigger for that. So I was not ready to go short at this point. The market is fuelled by, amongst other things, liquidity. And there are enough liquidity in the market right now.  See the Mutual Fund Cash/Asset ratio.

It is still bullish.

From 2010, we have heard so many times that the sky is falling. Double dip panic, Greek panic, Japan Earthquake panic, China panic, Muni panic. At each state, they have scared us to sell cheap only to buy  back at higher level. They would shout boo and we would jump.  But the point is, from Feb.2011 we are moving in 5% band and we have not broken that band in any direction yet.

Today, the McClellan Oscillator is deeply oversold.

VIX has crossed BB twice in a row.

Yesterday VIX jumped 35% over it’s previous close. As far as panics go that was huge.

The market may go down one more day before finally bouncing back hard. Tomorrow the QE2 GDP will come out and it may miss expectations. Coupled with uncertainty, this may trigger the SPX to dip below 1300 level. But as soon as we have a resolution of this drama, we should have a huge relief rally. There is a 1% chance that things get blown away by the collective death wish and then we have that black swan event now.  But the odds for that is less.

God bless America.

Which Way Thursday?


Phil Davis of PhilStockWorld has an excellent article out this morning, as always.

In his unimitable style, Phil points out to the McClellan Oscillator, which is also one of my favourite technical indicator.

Phil shows that the Boyzs have been manipulating the market on a regular basis every month. They panic us to sell stocks to that they can buy cheap and then pump it up so that they can sell high. Isn’t it the same argument I have been making all along? This is happening like clockwork quarter after quarter.

Apart from various TA, which I am sure are great for trading, market is always ruled by greed and fear. Greed builds up slowly and price increase leads to more price increase. Fear acts all of a sudden. Imagine you are alone in a room, reading a thriller and engrossed in it. Now imagine your partner entering the room silently and screams the hell out of you. What will you do? You will be startled, panicked and throw the book and jump out of the chair. After a minute or so, everything is cool and OK.

Today’s situation is similar. The Boyzs are trying to panic us.They have panicked us. And we are looking for information wherever we can find them.  What is a regular housekeeping matter has been turned in a power grab by the Republican Party and they will pay heavily for this. We deserve the politicians we elect and the misery they bring along with them.

I have been in this situation before and only thing I can tell is what I would do. Just close eyes and stop thinking. If the market goes up big time, I will sell. If the market goes down more, I will buy.

I do not think the world is going to end on 2nd August, I think it is one month down the line.

Wednesday, 27 July 2011

Roller Coaster Wednesday.


Today‘s market action was a warning shot to Congress.

It was a great day for day-traders and bears alike. SPX fell 2% and it was a sea of red. Today bears are rejoicing and bulls are fearful but just a few days ago it was just the opposite and we were talking of SPX 1370 +. So is it the beginning of the bear market? I doubt it. On 1st of June also the market fell 30 points. Once again let me invoke the bigger picture. But sure there are more churning ahead.

1st the Bull side of the story.

·         See the SPX daily chart.  

All the churning is in-between those two lines. And there is lots of money still waiting in the sideline. As I noted yesterday, in fact lots of money is coming in from Europe and other parts of the world, who still consider USA to be a safer place and they don’t believe that USA will default.

·         Today was a major distribution day. The next day is usually green.  The VXO (old VIX) actually touched the upper limit of the BB and went through it. Most likely it will also churn in the two bands that I have drawn.

·         The 10 year yield still did not break 3% line.

·         Gold fell.

·         And Seasonality induced rally is right around the corner.

Even Bloomberg says Banks don’t see any panic.  In fact S&P itself does not believe that US will default.
Reuters says: “Top Republicans and Democrats worked behind the scenes on Wednesday on a compromise to avert a crippling U.S. default, looking to salvage a last-minute deal from rival debt plans that have little chance of winning broad congressional approval on their own.”

And now the bear side.

·         One concern I have is that the SPX broke below the 50 DMA.

·          $NASI gave sell signal.

·         One of the best TA is Cobra and he also thinks that lower low ahead. You can visit Cobra’s web site at  http://cobrasmarketview.blogspot.com/ . It is treasure trove.

So now you have both the view to take decision. If you remember my earlier posts, my original plan was to "sell the news". That is, be market neutral on 1st of August after the deal is announced at the last moment.
I am consistent with the theme that all these are part of forming the top and we shall be seeing the mother of all shorts soon. So far the Cassandras have cried fear, panic and despair from May and yet the market is a tight range. Can the good times go on forever? Sure they cannot but they can last longer than most people think. Perma bears like Rosenberg have called out for double dip recession and immediate collapse of US $ and stock markets so many times that I have lost count. I have also lost money listening to them. Bear markets never start on televised real-time bad news.

 I see the whole thing a good trading opportunity and absolutely bad for investors. So once again, be very nimble. I am still holding to my longs and watching. As I said yesterday, I do not mind being wrong because nobody can be right all the time, but I would hate to be wrong for a long time.

Be safe out there.

Tuesday, 26 July 2011

Afraid Of The Debtmageddon?


I borrowed the word from Lee Adler.

Right now it is easy to be afraid and difficult to be objective.  So let’s review the market actions in that light.

SPX came down about 5 points today. Big deal! If there is going to be Debtmageddon , there should be mad selling. What the smart money is doing? Why are they not selling out yet? Once again, let us look at things with objectivity.

Below is the SPX daily chart.

We are above than where we were one month back.

Shouldn’t there be a sell-off of Bonds, pushing the yields higher?  After all, the AAA ratings are about to go. Look at TNX, the 10 year bond yield indicator.

Nope. The yield is still below 3% whereas the 10 year average is 4 %.

I am not a big fan of TA. I think when you torture the data for long; you can make it confess anything. So for each bull case in TA, there is a bear case, all from the same chart. However, let us look at the following hourly chart.

It looks like we have kind of a bottom or base.

For me more important is the money flow and I will borrow a chart from Lea Adler of The Wall Street Examiner. This is one indicator I follow amongst many other.

As you can see,  cumulative net money flow is still positive and well above the SPX.  Lee’s chart is “based upon the theory that as cash moves between money market funds and the banking system, there's a relationship between that movement and the movement of stock prices. As you can see, it has correlated well with stock prices over the past couple of years.

In his latest email newsletter Lee writes as follows:
“It seemed that virtually every market observer expected that event to have a bearish impact. My expectation was that it would not be felt until mid July due to technical factors having to do with the Treasury supply settlement schedule. But over the past month, the indicator shown above began to surge, boosting support for the market just as the Fed was ready to step away.

Hysterical media pundits have been loudly proclaiming that the sky is falling as a result of the approaching US Debtmageddon. The markets, however, are revealing them as the know nothing clowns that they are. In fact, the opposite of their dire predictions has been occurring, with both stocks and bonds remaining resilient. The Treasury market is even rallying today after the uber depressing N'Obama Boner show last night. You gotta laugh.

The chart above makes clear the reason for this market resiliency. Money has been flooding into the US banking system over the past month. The source is apparently capital flight out of the Eurozone. While I don't track the data at the source of those flows, we know from anecdotal reports that there's been capital flight out of parts of Europe. Other US banking system indicators suggest that this is the source of the surge of cash into US bank accounts. The cash account balances of  US based foreign banks have been surging in recent weeks. So have their trading accounts. Deposits in domestically chartered banks have also surged, but their trading accounts have not. It would appear that that the resiliency in the US equity market has been driven by foreign private buying. The Fed's data shows that foreign central banks have not been a factor. This is coming from the private sector”

For some reason private capital all over the world considers US to be safer than Europe and I suppose they know more than I do. But this is one reason I have not gone short yet.
But I am not blindly long and I may switch sides all of a sudden inter-day and shout “let’s get out”. Follow me on Twitter to get my latest calls.

Once again, make no mistake; these are all part of forming the top. But we do not want to short when the market is still going up. That is not smart. I talked about 27th July before and we are almost there. For me the most crucial dates  are between 27th of July to 5th of  August. And I willl be watching the market activities closely to see if my calls are still valid. You see, I do not mind bring wrong, but I do not want to be wrong for a long time.

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Fear Mongering Tuesday.


Last night I read an interesting theory.

If the debt ceiling is not raised, then bonds get downgraded. People sell bonds and move the money to equity. If the debt fiasco is sorted out, then we have a rally in any case because of higher asset allocation in shares. It seems stocks and bonds are going to move in tandem. 
Not sure I buy into this theory.

However, one thing I am sure, USA cannot afford higher interest rate on its bonds. So the moment 10 year rate crossing 4%, we can be sure of a market crash. So that people panic and go back to bonds. In any case, we are getting closer to a major crash when the rich Banksters will shout QE 3.

For now, month end asset allocation is coming up. I think 27th July to 2nd of August will be quite interesting period of the stock market.

Market is assuming that the real showdown is next year and so it is not yet that much worried about the debt ceiling issue. Assuming the worst, in the short run, where will all the money go? In stocks or bonds of other countries?  Not a chance by long shot. Perhaps the yields will go up, but then life continues. At least in the short run.

From Bloomberg : The U.S. government can avoid a default for at least a month after the Aug. 2 deadline to lift the debt ceiling set by the Treasury Department, said John Silvia, chief economist at Wells Fargo Securities LLC.
“The Federal Reserve and the Treasury can work together to generate enough cash probably for the next two or three months to avoid any kind of automatic default on the Treasury debt,”

Greater-than-forecast tax revenue might give the Treasury until Aug. 10 before it runs out of cash, Barclays Capital said in a report last week.
So you see, August 2, is just a self imposed deadline by the politicians for the game.
More from Bloomberg: “It’s very unlikely that we’re going to default,” Silvia said. The Treasury already has “cash flow that’s available” to last two weeks after Aug. 2, before resorting to any special measures.
Even if the two parties fail to reach an agreement to raise the debt ceiling in time, officials will still be able to stave off a default for at least a month, Silvia said. Bond investors have realized they will probably still get paid in the event the impasse goes past the deadline.”

Michael Feroli, chief U.S. economist for JPMorgan Chase & Co., said a Fed contingency plan could allow banks and other financial institutions to temporarily lend their Treasury securities to the Fed in exchange for cash. Such a move would be aimed at easing any credit strains caused by a default, he said.
“In general, I think they’d want to temporarily substitute the Fed’s credit in place of the Treasury’s credit,” Feroli said.

The long and short of it, what you hear is not the complete truth. There are many shades of gray which we don’t see or know. But the people with serious money have already thought about it. If they have not panicked yet, why would you? I am not saying that you do not have serious money, but I am sure your investment advisor has already told you what I am telling here.

As I keep telling people, this is not an investor’s market. We have to be nimble to get out at a short notice. Things can turn ugly very quickly. But bear markets are not televised in real-time. Therefore I am still long and will remain long for a while more.

I wrote last night, I do not expect much of fireworks today. Perhaps from tomorrow onward. In the mean time just sit tight and let the fear pushers do their daily job. The US $ is down and Euro is up. Can I say, I told you so!

If you are enjoying this commentary, please send this link around to your friends. Also, I am in Twitter, you can follow my updates and calls in real time.

Be safe out there.


Monday, 25 July 2011

Is This A Great Country Or What?!


The partisan politics is destroying America. This is a nation divided and a dream comes true for the Oligarchy who now effectively owns this beautiful country. The two party system of democracy is the worst curse that even the enemies of America could have wished for it. This two party system is sucking the life blood out of the American democracy.

I present you with two cartoons just to show my love for both the parties..

Coming back to debt ceiling debate, I suppose what goes back, comes back. Here is something from our dear leader:
“The fact that we’re here today to debate raising America’s debt limit is a sign — is a sign of leadership failure. Leadership means the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”~ Senator Barack Obama, 2006

Has anything changed in the last five years Mr. President? Yet, we want the debt ceiling to be raised and it will be raised in two days time, despite the game of chicken that is being played by both sides. Raising the debt ceiling will do nothing to solve the mess that we find ourselves in, but at least it will kick the can down for a month or two.

The good news for the evening is that both the parties have presented plans for raising the debt ceiling. The bad news is that both are non-starters.  You cannot wake up a person who is not sleeping. And the President is going to whine more on national TV. Man, does he love his teleprompter! This game will continue for some more time untill one side blinks. But blink one side will for sure. Republicans know that if they blow up this debate, they will effectively hand over the congress and next Presidential   election to the Democrats on a platter. They are daring Obama to pull the trigger and we have to wait and see if he can.
From MSNBC: With their revised plan, House Republicans backed off an earlier insistence on $6 trillion in spending cuts to raise the debt limit.
And Obama jettisoned his longstanding call for increased government revenues as part of any deficit reduction plan.

So you see the mating dance of the tarantulas continue. (Picture courtesy : macromike)

But where does it leave you and me and the giant casino which we all love to hate. We would be better off remembering that we are just small pawns and insignificant bits in the giant scheme of things of the big boys, who rule the casino. From a technical perspective, not much damage was done. I was looking for a drop of 10-15 points in SPX. The market did drop 15 points but clawed back half of that. In my morning post I wrote “The market in all possibilities will start lower and may slowly work its way up. The world is not coming to an end, yet.

Sure enough, markets followed the script and SPX ended the day with a loss of 7 points.  At some point NDX even went positive, before closing in red. I went long along the way. The market is still on buy signal.


Most likely tomorrow will be another boring day and I do not expect any fireworks tomorrow.  As usual, Zero Hedge is having a good time predicting the impending doom of America, all newspapers and talking heads are full of horror stories.  But the market is calling Washington’s bluff. From CNN Money: "I think fundamentally, the market is telling us it doesn't believe we're truly going to default. Somehow, some way there will be a decision," said Jack Ablin, chief investment officer with Harris Private Bank in Chicago.

Is there a guarantee that the issue will be resolved in the next few days? No, there is no guarantee of anything in life. There may be a collective death wish among the politicians that we don’t know about. If so, we will have the curtains called before time. I would be watching the market behavior keenly for the next few days for any possible signs of reversal of course. 

But for today, let me finish with an internet humor. (Hat tip to marketsniper of slopofhope.com)
Senior health care solution--according to Maxine  
 
Senior Health Care Solution 
 
So you're a senior citizen and the government says no health care for you, what do you do? 
 
Our plan gives anyone 65 years or older a gun and 4 bullets. You are allowed to shoot 2 senators and 2 representatives. Of Course, this means you will be sent to prison where you will get 3 meals a day, a roof over your head, and all the health care you need! New teeth, no problem. Need glasses, great. New hip, knees, kidney, lungs, heart? All covered. 
 
And who will be paying for all of this? The same government that just told you that you are too old for health care. Plus, because you are a prisoner, you don't have to pay any income taxes anymore. 
 
IS THIS A GREAT COUNTRY OR WHAT?!

P.S.
By the way folks, do you recall my post on Euro where I said Euro will go to 1.50+ ( http://bbfinance.blogspot.com/2011/07/euro-will-survive-for-while-and-larry.html ).
Euro just broke 1.44

Debt Ceiling Monday.


The market action of today or tomorrow is inconsequential in the grand scheme of things.  In the short run, momentum chasing blind maniacs are hitting the buttons. They are not guided by economic logic. The logic of trading is now with the HFTs and ALGO traders which no one understands.

Overnight ES Futures touched a low of 1322 showing a loss of almost 20 points at one stage. It is now at 1332 having pared its loss by half.  The European exchanges started the day in big negative territory, but have since climbed their way up and are almost in positive territory.

So relax guys; this is a classic case of fear and greed paying out in the marketplace. From May onward the stock markets are selling off and on, yet the VIX never went past 24. So where is the panic? The big boys were selling premium in an orderly fashion all through the sell-off. Now they are creating panic in a different way. The media (MSM as well as blogosphere) is full of imminent doom and demise of the USA. Bear market does not come on bad news. Rather, bear market starts on good news, on euphoria. When nobody expects the sale to start, it does.

Primal sentiments, greed and fear govern the stock market. Nobody understands it better than those who buy low and sell high. Those who buy in the face of fear make money. But before that we have to understand if we are in a bear market or is it just a correction. I have shown these charts before and nothing has changed since then. We are going to see a minor correction on the face of hype and I think it is a buying opportunity.

The SPX is in a rising channel.

The DOW has formed a megaphone and would likely hit 14000 1st before 5000.

Nasdaq and other indexes have formed a bullish engulfing pattern on the weekly chart.

I wrote that I would be looking for a 10-15 point correction in SPX and we might get that today. In the short term, for the next month or so, the markets will push higher and as has been the trend so far, markets will jump a lot in one day on very thin volume.  So for me, dips are a buy.

This looks like a typical bear trap. Go up two steps and then come down one step. Keep the bears interested in the game. Generate more shorts and then take them out in one big move. As I have said before, I will not be shorting the market now; I would rather try to get in. As I am not a day trader and my time frame is longer, I am ready to take the heat for a few days before the market goes in my direction.

The market in all possibilities will start lower and may slowly work its way up. The world is not coming to an end, yet.

P.S.
I posted the above before the market open.  At the opening SPX dived down to 1330 level and has been clawing back since then. NDX is already in positive territory.
Although half the day is still to come and many things may happen in the next 3/4 hours, markets are following the script, so far.
I have taken three trades on the long side. Just wanted to say, I walk the walk.

Sunday, 24 July 2011

Its Fake, Fake, Fake, Fake!


Right now the whole country is fixated on the debt ceiling drama. Why not include Paris Hilton for some reliefs and oomph while we are at it. It seems Mr. Boehner is now the most powerful man on earth, holding the fate of the world in his hand. As far as soap operas go, it cannot get any better. We forget why we are here in the 1st place. I am not going to start a debate  who is right or who is wrong, because both these parties are the two sides of a counterfeit coin. Whichever side you choose, it is still fake, fake, fake and fake.
video

As I said earlier, I think the market will huff and puff for a day or two before it shoots up. I shall be waiting to “buy the f*****g dip”.  Do not get confused by my call when I say that stock markets are not going to fall yet. I am bullish in the very short term but super bearish in the intermediate and long term.  Why I think the stock markets will go up in near term? Apart from many proprietary indicators and formulae, I also try to think like the Boyzs.
Let us look at the following chart. It is a correlation between SPX and Fed’s Balance Sheet.

As you can see, the rise in stock price is the direct result of liquidity injected by the Fed. So now that Fed is no longer pumping money into the system, why it is still going up?  Elementary my dear Watson! Because the Boyzs want “get everyone go long, then we dump them”.
Look at the Seinfeld clip again. They are good! I mean the people running the fake rally. This rally will run till all the money sitting in the sideline has been sucked in and all late comer bulls are fully invested. Do we run away from this rally? If you are a long term investor, then yes, you should probably stay away from this rally. But if you are a trader, you might as well enjoy this ride and make money. That is the best revenge you can take.
I shall be calling out the market turns as I see them. Read my market calls and rate my work .Keep reading “World of Finance”  for the up to date information and stay one step ahead of the game. ( http://bbfinance.blogspot.com/ ).


Also keep in mind this is neither an investment advice nor any solicitation for buy or sell of securities. Please read the full disclosure / disclaimer.

Saturday, 23 July 2011

How Did He Know?


Yesterday I wrote: “In all possibilities, we shall see the debt deal early next week, by the 27th of July at the latest.”

And today Bloomberg said: ““Over this weekend Congress will forge a responsible path forward,” Boehner, an Ohio Republican, said in a statement after the White House meeting. “House and Senate leaders will be working to find a bipartisan solution to significantly reduce Washington spending and preserve the full faith and credit of the United States.”

More from Bloomberg: “Boehner told Republican lawmakers yesterday he would need to introduce legislation by July 27, one lawmaker said; to ensure both chambers could enact it under their regular procedures before Aug. 2, when the Treasury has projected it will exhaust its legal borrowing authority.
Senate Republican leader Mitch McConnell of Kentucky said top lawmakers are “committed” to preventing a U.S. default.”

Now I am wondering, does Mr. Boehner read my blog? Otherwise how did he zero in on 27th July? Or am I turning psychic? I am surprised! (Just kidding).

I also said: “In any case, they won’t let the top 0.01% suffer any loss on their investments but all action will of course be done in the name of the ordinary Americans!”

And sure enough : “House Speaker John Boehner told Republican lawmakers they need to provide a positive signal on a plan to avert a U.S. default before Asian financial markets open tomorrow” 
( Bloomberg)
And the President said:” It’s very important that the leadership understands that Wall Street will be opening on Monday, and we’d better have some answers during the course of the next several days,”

I really did not need any vindication of my cynicism!


Please watch the following interview of Michael Hudson:

You see, once you understand how the great minds work, what are the relationship between the oligarchy and its minions in power, it is not really difficult to forecast the market movement. You do not need waves or any other voodoo technique. All is needed is simple common sense and an understanding of few leading indicators. The COT report helps in identifying the movement of serious money and analysis of market sentiments confirm the coming move. No need to pay money to ilk of Nenner, Prechter or any other forecasters.

Make no mistake; we are this much closer to the mother of all shorts. 2008 will feel like movie trailer. But we are not there yet. The Boyzs will 1st take us to the garden path. In the coming month they will present the most beautiful scenario of growth and prosperity. There will be statements of hard lessons learned and how all ideologies are now going to work together to make the” American Dream” come true.  “Change you can believe in”. The stock markets in all probability will reach new highs. And when the guards are down, the magic will be extinguished in a flash.


Should we dance with the wolves? That depends on our individual risk tolerance level. But trading without any bias will help. I see millions who are convinced that the market will fall tomorrow and they are always looking for the top, placing their short bets, only to lose it time and again.

Be nimble, be cautious and above all be a cynic.