Saturday 24 March 2012

Free Fall Week Coming Up.

I told you so. They will somehow pain it green. And they did after the markets were down for better part of the morning. I also said that it will try 1400 again and fail it that attempt.  For the next part of the call we will have to wait till next week.

The market action of Friday confirmed two things. First, the uptrend has lost some of its mojo and a correction, however shallow is on us. Secondly, the correction will be very shallow, may be up to 1370 level before the blow off the top rally starts. Honestly, a 30 point correction is not a correction at all but sorry bears, that’s all you are going to get for now.

Many of the hedge funds have sit out of this rally and at this late stage of the rally they are thinking of joining the party.  I myself did not believe in the rally and have missed out a good 100 points which was there for taking.  One of the Fed’s regional head is also saying that there are lots of money sitting outside. The BOYZ know this and will do everything to bring that money on the table.  As such, every dip will be bought and some more.

This is called greater fool theory. We buy shares hoping that there will be another fool out there who will buy that rotten potato from us at still higher price. Till the music stops.  That is the nature of retail investing when people buy high and sell low.

But if the share prices keep going up on their own, then there will be no free money for the TBTF banks. Government will not buy their toxic assets like MBS and give them free money. So they will have to create panic. And they know that if they are able to create panic even for a short while in an election year, Obama will do anything in his power to lift the stock market up. There is no recovery anywhere! Stock price going up has nothing to do with unemployment rate of BLS. As per Gallop poll, who does that actual polling, the unemployment rate is well over 9%. Against all the hoopla that Europe has been saved, the fact is it has not been saved. Spain is daring ECB. We are seeing parabolic moves at different levels which is a pre cursor of the end game. As I have been writing, it is all a question of timing.

The TA is not a very useful tool in such manipulated market. There has to be a combination of many things but a clear understanding of the manipulation will surely help.  By the grace of God, so far my calls on the market have been correct except one, where I gave more weighted to TA over manipulation. That was a mistake and lesson learned.

Coming back to market, I expect Monday to be range bound with major damage being in the next 3 days. I plan to go long on Friday, 30th March for the blow off the top rally. I have been waiting on the sideline for a while for this opportunity. But this is not real and not for keeps. We will be running with the hares and hunting with the hounds.

Nothing much changed in the latest COT report. Commercials are still long EURO and JPY. That just re-confirms my theory of timing model. The trend is still up and dips are buying opportunity. So be nimble and play it safe.

Thank you for reading . Please forward it to your friends and join me in Twitter for live market commentary. (@BBFinanceblog). 

1 comment:

  1. "Manipulation" is a fact of life. The fed's policies in the past four years mirror its policies in the post WW2 era when they flooded the market with liquidity and kept rates down to help the economy recover. In the early 1950s, the Fed decided to let rates rise and stocks took off for a 20 year bull market. Such a move has started.

    It is the Fed's job to intervene to provide liquidity in deflationary crises and to sap liquidity in inflationary times. That is in the Fed's charter, it is monetary policy, and it is reality. The fed has a dual mandate -- employment and inflation. And IMHO, over the past four years, in the face of extreme pressure, in spite of sometimes unhelpful fiscal policy, the Fed has done exactly what it should have.

    And, IMHO, all Fed policy is reflected in charts. I, and many traders who have traded this rally more successfully than I, have been trading based on TA. Look at for one example.