Monday 12 March 2012

Schizophrenic Market.

Yahoo Finance heading! This is true I suppose. In the morning I twitted the following:” Not shorting yet. I think the correction if any will be shallow and more in time than in price. No definite trend change yet”. And it was more of the same. There may be odd trading chances now and then for the day traders but nothing good out there for swing traders.  Let us not forget that the triple witching is this week and all sorts of funny things will happen which cannot be explained. VIX closed outside the BB and could be a possible sell set up as and when VIX closes inside BB. But even that may not go far enough.  Tomorrow is FOMC and the Pavlovian Dogs are again salivating in anticipation of some indication of QE! Talk about moral hazards.

US $ started the day on a very promising note but gave back all the gains during the day. Even then PM had difficulty holding on to their levels. Gold hang on to dear life at $ 1700 level and Silver fell quite a bit. I am staying clear of PM till the cycle bottom by end of March- mid-April. I would not be surprised by another $ 100 fall in gold. But that would be a good entry opportunity.

We are supposed to buy low sell high. But is it surprising to find out that retail investors always do the opposite?

From the chart you can see that when the SPX falls, retail sell into it. And when SPX rises retail get invested. The current set up is no different. With SPX at or near multi year high, sentiments overtly bullish and complacency dangerously high, investors are going long or staying long. While I would not recommend shorting yet, I wonder how anyone can go long now. May be they know something which I don’t. But then when all the central Bankers of the world are flooding the world with liquidity with the only purpose of keeping the share prices high, all we need to do is BTFD Just look at all the free money in USA:

And in Europe.

Even with flooding the continent with that kind of money they have not been able to avoid a Greek default. Nor will they be able to stop Portugal or Spain or for that matter Italy. It may not happen in 2012, but it cannot be postponed much further. In short term, everyone and their Grandma is expecting a correction. The BOYZ know that and they are keeping the market artificially afloat. There are two things going on here. On one side, they want to bring in all the cash sitting on the sideline and on the other hand they want to kill the entire short. This, before their best friend Ben comes with free money. In other word, kill the maximum number of long and short. Based on this theory and my cycle analysis, I do not expect any major market correction before mid-April. My evil plan says that we will see some weakness by end of March, followed by a blow of top rally, which may take us past 1400 in SPX and then go down for two months before QE3 starts.  TA be damned!

There is nothing much to add to the trend table. So, stay nimble, trade safe and do not front run based on your bias.

Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.


  1. Still long DUST, in the money quite a bit. Plan to stay short for another 10% at least.

    still long TSL, small position.

    Tomorrow and Wednesday, I plan to go in big long -- long FSLR, TQQQ and probably EDC.

  2. why dont u siply Buy this index...Peter LBRANDT has a good analog...10% up from the current level...i think thats the best view...l

    1. I don't believe much in Analog but I might buy the index end of March for a short while.