Bimbos and Window Dressings.

Do you know her? You should because as per US Govt. she is a “Genius” worthy of special visa for individuals with extra-ordinary ability.

I am not joking. So far her “extraordinary ability” seems to be limited to appearing in the Playboy magazine as their Miss November 2010. Her name is Shera Bechard, the Canadian-born former girlfriend of Playboy Enterprises founder Hugh Hefner. Now you know that America is in trouble.  

And if we get time to look around, we may find “Fast and Furious” that I wrote about yesterday is here on schedule. Did someone say that there is no proof of month end window dressing? May be not but there is enough proof of quarter ending window dressing. After the disappoint of no QE 3, it was least they could do to goose up the books, so that the report to the investors would not be that bad. And of course we have to recover the $5 billion that “Whale” lost sometimes back. Or is it $ 9 Billion. What do the small differences matter anyway? It’s all free.

Somehow, we had advance information of these shenanigans and we are not surprised. The 1365 level in the 1^st week of July, which I wrote about 15 days back, is almost here. In fact I would love to see it reach 1380 by the end of the week. Because we also know what is next. Don’t be surprised to see that mood has suddenly turned positive and folks start talking about technical indicators giving buy signals. Although you cannot fool all the people all the time, but when Government is on your side, rather when you own the Government, you can come pretty close to that.

So let us enjoy this nice weekend in the grandeur of delusion that we live in free democracy. At least we are lucky enough to buy drinks and gamble as we wish with the food stamps. Isn’t it a great country or what!

Thanks for sharing my take on the end game. Be safe out there.

Patriotic Rally?

All the noise for less than three points? Definitely not worth it. If you jumped on the short side during the day, you must be very disappointed today.  May be one more attempt to the downside will be made tomorrow. But so far 1300 level have held throughout the week and depending up what happens tomorrow, I think we have a tradable base for the next patriotic rally. I better give a nice name to the coming rip. How about “Fast and Furious”?  Congress and Holders both should be happy.

What caused today’s massive “U” turn, only the manipulators know. Rumour is, someone purchased $ 3 billion worth of emini contracts and that caused the stampede. Whatever it is, it is not a definite trend. Just stupid gyration of momentum chasing bots.  And while we will get another rip soon, selling is by no means over. I keep writing, there is no panic in the market and as such no bottom yet. May be the bottom will come around 1230 or so and it will come by end of July.

Whatever it is, this guy cannot stop smiling today. Although the Court said the Obamacare is a tax on American people but the congress has constitutional right to tax Americans. It was a funny kind of day when FIX news and largely irrelevant CNN came out shouting that Obamacare has been repelled by US Supreme Court and then the stock market revert back up on some other rumour.  But Gold and crude did not recover much. Crude is over sold by a mile and is due for a bounce. May be it will bounce along with the equities next week.

The real news was that Barclays Bank has been caught with its hand in the cookie jar. The fine it has been asked to pay, $ 450 million + is just a slap on the wrist and is nothing compared to the tsunami of legal challenges facing it. I think it will have to make provisions for billions of dollars of legal settlements.  Who might be the losers in this rigging? One group that comes to mind are the investors who purchased short term bonds from the banks linked to LIBOR rate. The name of the guy looking over it is Bob Diamond. Kind of rimes with Dimon, whose bank now appears to be sitting over a loss of over $ 5 billion. And when they are caught red handed in wrong doing, they blame the small fishes in the food chain. The boss gives tacit approval for the wrong and illegal acts and collects millions of dollars of bonuses. Just what Barclays did between 2005 and 2009. And it is not just Barclays, HSBC, RBC, CITI, UBS and many others are involved. Is it any wonder that the Bankers are vilified and called Banksters? There is “Systemic Dishonesty” in everything that these TBTF Banks do. But nothing will happen to the big bosses. Didn’t we just see that during the Senate hearing of Jamie Dimon?

Tomorrow there will be photo-ops from the Euro leaders and some sort of statement. While for the sake of market, I think they say something soothing, personally I hope Germany tells them all to drop dead. Now the Euro cup final will be played between Spain and Italy. This is what is called “Battle of two losers”. ECB must be very proud that both its sponsored countries have made it to final.

Anyway, the last day of June is mostly bearish. Dow down 15 of the last 20 and Nasdaq down 6 straight. I think it will be down day tomorrow and that fits well with the pattern of 2011. Last July there were 5 red days before it made the final top. So far we have 4 red days. So one more red day is in order. Tomorrow will tell the story.

That’s it for today. Thanks for reading http://bbfinance.blogspot.com/ . Please join me in Twitter (@BBFinanceblog) and do re-tweet the post if you agree with it.

In No Man's Land.

We are in that zone again, that 30 point up or down move day after day from middle of May onward.

By and large there is not much action really in the market and it is as if folks are going though the motion for the benefit of day traders. Or is this the calm before the storm? And already the hourly charts have moved from over- sold to over- bought.

Today everything was up. Equities, gold, crude, bond and US $. The divergence between equities and FX is quite big.

So who will catch up? If there is some good news from the four wise leaders of Europe, may be Euro will go up and equities will reach moon.  We will have to wait and see. If on the other hand, nothing comes out of the 913^th Euro meeting, we may see bit of selling. Tomorrow is going to another important (impotent?) day for the market. The fate of Obamacare will be decided and then news from Euro summit. As you all know, I hate to take or even suggest to take any position before uncertainty. 

I am still debating whether to take any long position in the coming rip-fest. It will be like what I wrote yesterday: picking up pennies in front of a steam roller. There is nothing in the market except central bank liquidity which can move the market higher. Either the Fed or ECB or someone from somewhere will have to feed the junkies. Till that happens, the road is pointing down.  

I think the best trade now would be to wait for the market to reach either resistance or support and see if they hold. It is not necessary to force a trade here or take a trade just because we are bored. In the mean time,let me share with you a nugget of gold, an Analog which is not silly.

(Hat Tip: ED Matts)

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Bear Flag and Unfilled Gap.

I am not an expert in TA, not by a long shot. More of an arm chair technical analyst. But it looks like a bear flag to me. What do you think?

Also there is this area of unfilled gap which I have been writing about for a while and that is my target area before any bounce. Well, if the market decides to ignore that gap, I cannot argue with it but I think chances are high that tomorrow we will see another down day and maybe we will get a chance to fill that gap. That is also the area of strong support. All in all, not yet right time to play for the bounce.

If you look at the chart of yesterday, we were due for this green day. Should I call this an Analog? Nah! I don’t have much faith on Analogs. They are fun to watch when they happen, but it is suicidal to take action based on Analogs. We better have some other edge in trading or investing.

Nothing changed fundamentally in the world today. Despite the tension in Middle East, Crude did not budge much. Gold is hanging there by a thread. Euro land remained front and centre of the market. And no one is talking about the bigger mess that is America. But this constant up and down without a clear direction is draining for both the bulls and bears. You really have to be super smart to win in this market or luck or both. The last sell-off which took SPX from 1358 to 1314 has severely discouraged the bulls. Today it gained a mere 6 points which it may give back tomorrow and some more. If the plan is to discourage retail and then jack up the whole thing on super light volume, then it is successful. We will soon know. Even if we want to play for a bounce, it has to be super quick and for a very short time.

Every world leader is talking of growth and austerity. The leaders of the failed states like Greece or Spain are blaming Austerity for the ills of their country. But where is this “Austerity” that they keep talking about? They have not reduced spending. Per latest report, Greece did not reduce the number of its public sector employees that it agreed when it took the bailout. Why I am not surprised. What austerity measures Spain took or for that matter France or Britain? What % of GDP they saved through Austerity? What these countries have been doing all these years if they are talking about Growth only now? Politicians are same everywhere be it Spain or Uganda. May be now-a-days they are less corrupt in Uganda.

But these things will run its own course and nothing will change however we may shout. We just want to eke out a living and survive from these crooks. That’s it for today. Thanks for reading http://bbfinance.blogspot.com/ . Please do re-tweet of you think it is useful.

Calvin Economics.

So far things are going as anticipated. No major surprise yet. The 1300 line held in SPX and the gap in SPY has not yet been tested. It is as if the last 15 trading seasons did not happen. Why last 15, we are back to where we were on January 31^st of this year. All the euphoria of March now seems like a distant dream. The moods are as gloomy as it can get and yet folks are so conditioned with the Bernanke tonic that there is no real fear or panic in the market. Here in North America, we have found a good scapegoat to blame, that is Europe and particularly Germany. Why Germany is refusing to wallow in the mud like the rest of the PIIGS? Why it is refusing to do the same thing that others have done, i.e. borrow and spend what they do not have. Yes, the poor Greeks may have lied and cheated and extorted and spent money which was not their in the first place but so what. After all, you can print money out of thin air. Hasn’t the great super power America done that over and over again? Nothing has happened to America, yet.  But do not despair, even if Germany is not ready to walk to path of destruction, the great nation of American is committed to kick the can down the road. Till the road ends. And all roads end somewhere sometime. But I do not know much. To understand it better, ask Calvin how it works.

Enough of macro economic nonsense. There are smarter people than me, like Bernanke or Kurgman, who know what is best for America. I am just concerned how I do save what little I have from these gentlemen and their brothers. This weakness / sell-off in market was well anticipated and  I wrote that there will one more bounce in the 1^st week of July. In the very short term, the question is, when does that bounce starts and when does it end.  I think it is possible that we will see little more selling. Then on Thursday the honorable manipulators will have something to hang their coats on from Europe. The last two days of window dressing can start in earnest whereby they can suck in the fresh 401K money coming in the market in the beginning of July. So I would expect bounce from Wednesday or Thursday till about the 1^st week of July. Do we play this bounce? It all depends. Are we investors? If so, stay away. Are we nimble traders? Then give it a shot. But remember, it is like picking up pennies in front of a turbo charged steam roller and the steam roller has aids. (Hat tip: Josh Brown). Short term, one hour charts are bit oversold and a bounce can happen.

The pattern is looking so similar to last year.

No need to match 2011 SPX with 2012 AUD and then match 2012 AUD with 2012 SPX. If you like analogs, simply match 2011 SPX with 2012 SPX. Such a rally is a selling opportunity but be aware of the levels.

I think July will be very exciting for the bears. Because unless there is pain and panic, Bernanke will not be able to hand out money. I am repeating myself 461 times now but so far my theory has proved right. There is only so much wiggle room left for these bright folks. It is like playing chess and anticipating the next move of your opponent. Only we are playing against those who want to fool us forever. With its ZRIP policy, the Fed is forcing Pension funds and ordinary investors to take unnecessary risk while on the other hand it provides free money to the TBTF banks to bet against. With no growth in income, job or economy, you can easily guess the direction of the market, no need for a PHD.

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Another Weekend Rambling.

Everywhere you look today there is a mention of how Chinese data is fake. Yawnnn! Have they discovered God in the laboratory? Of course almost everything that comes out of any Government is false. China may be faking 90% of what is reported but look closer at home. I think almost everything that USA reports are blatantly false. Be it BLS job data, GDP data, Housing data, Loan data or even serious things like WMD. Colin Powel even lied before the UN and US went to a false war on false pretext. So I fail to understand what the big deal about the false data out of China. Whoever believed it in the 1^st place please raise your hand. You must believe in tooth fairy as well!

Europe has been the front and centre of our life for the last few months. But so it had been in these very months of 2010 and 2011. Every June, from 2010, we feel that Europe is coming to an end. The fact is, America will falter before Europe. If Europe is struggling because of its massive debt, if Japan is in depression because of its 200% + Debt:GDP ratio, just wait when the chickens come home to roost in USA. With its $100 Trillion unfunded liability, many more trillions of dollars of Muni Bonds, almost 100% official debt to GDP ratio, destruction is staring at the face of USA. Many of my American friends think that USA is the best house in the bad neighbourhood. Actually, it is the best camouflaged booby-trap in a jungle.   

In a ZIRP environment, the only solution left to the Fed and politicians is to print more money. Already the money supply is running at 9% and yet we see deflation all around. The 10 year yield at the height of the economic crisis in 2008 was 2.10 % and now it is 1.67 %. So the bond market thinks that we are closer to a disaster now than we were at 2008. Every successive QE has demonstrated the law of diminishing return and just to get back to 1400 level of SPX, Bernanke will have to pump another trillion dollar. Even if he does that, nothing will change. And yet he will do it because his political master wants him to do so. The long term 30 year cycle of bond yield has topped now and in a matter of weeks and months, we will see yields rising.  Time to scale in TBT.

The short term target remains as we discussed and nothing has changed. We might see a lower low on Monday before we shoot up one more time. If I think there is a trade worth taking, I will send the information through Twitter. The real damage will come after that which will force the hands of Bernanke. Barring one day, June 4^th, there has been no panic in the market so far and just for this reason, I think selling is not over.

Those of you who swear by TA I have a nice article for you from Brian Shannon. Brian wrote a book on Technical Analysis:

The market is tricky, and it seems so even more lately. Technical analysis is often misinterpreted as an exact science, it is merely a tool which allows us to determine potential price based scenarios before we commit our money to a position.

Lately we have seen a lot of technical analysis misused. From a couple of closes below the 200 day moving average being interpreted as bearish, to a couple closes above the 50 day moving average being interpreted as bullish, or believing that one can buy the break above the “neckline” if the inverted head and shoulder pattern and then kick back and wait for the price objective to be met. These examples of ‘failed technical analysis’ are “proof” by doubters that technical analysis is useless. If you are going to succeed in the markets, risk management should be your first priority, regardless of what your timeframe is. I consider technical analysis to be the finest risk management tool that anyone can use if they really understand the psychology of the formation of patterns rather than focusing on pattern recognition alone.

Also from Tuesday’s post — As I often point out, moving averages should not be used as a stand alone tool, but they give us a great reference point to compare price to. We want to objectively observe how price acts around those levels on shorter term timeframes The same goes for trendlines, price patterns, oscillators, Fibonacci, etc We want to be aware of these key levels which motivate others to take action so we can ANTICIPATE the likely scenarios, but wait for price confirmation before we PARTICIPATE and put our money at risk.

Price is objective, we often we are not.

So let us be objective and be aware of the bigger picture. Time is running out.

Hope you are having fun in this beautiful weekend. Stay sharp and filter the noise. Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)  

Markets Hit By BullS--t.

For the better part of last seven days I am writing about a day like today.  From “ BullS**t Ad Infinitum” on June 14^th till yesterday, I have been urging readers not to get caught up in the meaningless gyration of the stock market and for those of you who cared to listen, congrats for being in cash and safe. This is my two pence service to the ordinary investors who are regularly taken to cleaners by the Wall St. Pandits and various talking heads.

I have written on last Monday that if SPX holds 1300-1320 level by this weekend, we will see a higher high. It was a bold statement at that time, when indexes were ripping higher to talk about a lower level. And yet we are almost there now. Yesterday I wrote about 1365 by 1^st week of July and a reader asked me if I meant 1265. I really meant 1365. May be even higher, up-to 1380. So it is a bold statement even now but  1^st we wait to  see where it ends in a day or two. Tomorrow we might see a dead cat bounce before some more selling. Ideally I would like it to fill the gap on the way up which I have circled below.

As much as the up move was a fake move, you cannot trust this down move either. Basically we have been in a range for quite a while as highlighted by the rectangle.

How the folks are going to react to today’s selling? Till yesterday, there were talks of end of correction, start of new bull phase because the market did not sell off after the QE disappointment. Will they short the market again now that GS has recommended its clients to short the market with a target of 1285? If GS has recommended a short trade I would rather take the opposite route, more so when short term cycle is indicating a bottom tomorrow. Let’s keep in mind that cycles are not an exact science and the bottom may well come next week. But taken everything together, I do not expect a huge sell from here immediately. As I said yesterday, there is still Quarter end window dressing to be done and beginning of the month 401K money to be stolen.

I am holding to the GLD for now to see where it goes till the 1^st week of July. I kept it as insurance, just in case Bernanke went crazy and declared QE. I do not expect it to do much till August but if gold falls below $1530, I will get out of it. On the other hand, I am thinking of taking a short position in Bond through TBT. That is going to be another long term play. Despite every effort Bernanke is making to keep the interest rate low, it will soon get out of control. Either interest rate goes up or inflation goes up. Bearded one has painted himself in a corner and may have only six more months. You see, I am more generous than Soros. He gave three months to the Europeans. I am giving six months to the Fed. I think it is going to far worse than what we have seen in 2008. This time there will be no country in the world to print and save.

I got quite a few response / email to my last night’s trivia and I must confess, you guys know your history. To sharpen your understanding of history, you may want to read the book” This time is different” .

Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)  

Reality Comes Back.

It’s nice to see a plan working out. It’s nice to have your stand vindicated. And now I can say with more conviction that we are going to follow the script of 2010 and 2011. More than anything else I did not suffer from any anxiety attack and chew my nails off thinking what Bernanke will do.

Precious metal sector and Bonds were giving signal for quite a while that QE is not yet on the menu. Does this mean there will be no more QE? You must be kidding to even think like that! Of course there will be QE and it will be on August 1^st.  It is like joining the dots and draw a figure. It is that simple once you understand the principles at work.

Let us keep our focus in various time frames. Longer term we are screwed. The challenge then will be how best to preserve the capital. More than anything I am worried about possible social unrest that all the unemployed, hungry and armed have-nots will unleash. They have nothing to lose. It has already arrived at so called developed nations like Greece or Spain.

Even intermediate term, it is not that difficult to predict that stocks will go up one more time. Question is when the intermediate term begins. Let us apply our collective commonsense again. If QE is due on August 1^st, then the intermediate term begins at August 1^st and ends with the US Presidential election.  So now we have narrowed ourselves in the short term, which is between now and July 30^th. Question is, do we care? As an investor, I would not but as a trader I would like to take advantage of the coming volatility. We do not care that the system is rigged. Only thing we care about is bring on the right side of the rigged market.

Coming back to short term, I expect to see some corrections for the next few days. I do not think it will be huge and by the 1^st week of July, we will possibly reach around 1365 in SPX. Give or take few points of course. That would be a good place to take a relatively risk free trade. But we are still another 10-12 days away and a lot may change in between. You may ask, if there is no QE why should the equities go up at all in the 1^st place? That is because of the 2^nd quarter ending book adjustments and beginning of the month 401K allocation from the pension funds. There is another fancy name for manipulation, it is called window dressing!

So now all distractions are out of the way and not much rumour to play around with. We just wait for the last bit of window dressing be done with. Till then we patiently wait and see all the useless gyration of the respectable manipulators and applaud them for saving the world. Before I sign off, here is a trivia. Send me the answer if you can. Which is the most respected and loved drug dealing family of the world. A hint, the family has retired from opium trade for over 60 years now.

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Patience, Dear Mr. Watson.

SPX did remain elevated on Wednesday, i.e. today and I think it is all due to the QE expectation. Stock Traders Almanac has this to say: One of the driving forces of this speculation was a report from Goldman Sachs. Jan Hatzius, Goldman’s Chief U.S. Economist said that they “would be quite surprised if we saw no easing this week.” This was enough to stampede the bull all day. 

Disappointment is going to be huge if dear Uncle does not come up with something substantial. At today’s level, Ben cannot justify further liquidity pumping. I think SPX have to drop substantially, may be 1200-1250 level for the Fed to act. Even Greece did not go out of Euro zone. So where is the crisis?  As of today SPX reached and exceeded 1360 level. I was talking about this level when SPX broke 1284, not in very distant past. Only about 15 trading days back. But it took SPX much longer to reach here than I anticipated. I went out of the long position around 1340 level and after that SPX has moved in a range for about six trading days before breaking up. I am tempted to take up a short position tomorrow morning if the market opens higher but I have promised myself to stay away from any temptation. I think a better opportunity to short will come soon.

If Equities are going up expecting new QE, that enthusiasm has not been shared by the precious metal sector. Gold is having difficulties passing $ 1630 level. I may get out of the GLD position by the 1^st week of July, depending of course on the price action. If GLD remains at this level without breaking higher, it may be prudent to get out and re-enter at a lower level.

VIX was in red outside BB for most part of the day but closed in green. It has not yet triggered a sell signal and will do so when it closes inside BB. But I think in short term, VIX may fall further, to the level of 16.50 or so before it goes up again.

G20 achieved nothing except BRIC countries promised token donation to IMF. There was serious infighting and Canada lectured Europeans which they did not like. And Germany is not going to buy bonds of PIIGS either. Greece may discuss re-negotiation conditions as much as they like, but that is all wishful thinking.

So everything else now depends on the bearded mad scientist tomorrow. Alas he does not have the necessary cataclysm yet.

Let me finish by quoting Mr. David Weidner, legendary writer on Wall St. :

You can’t time the market: Also, technical analysis is phooey. Momentum plays are foolish. Anyone who wants to sell you a plan to beat the market is full of baloney. Investing schemes are exactly that. As I’ve written before, some people will tell you that you can hedge your bets. But insuring trades has never made sense to me. If you have to spend money to hedge a bet, it probably means you can’t afford to invest the money.

When it comes to markets, what can go wrong, will, and bubbles happen. The problem is we never know which is which until it’s too late.

Too often, we’re caught up in the daily fluctuations in our portfolios. What really matters is what the investments are worth when we need them.

Mutual funds are a waste of time: The fund industry was my first beat in New York. Here’s how it was explained to me: You buy a fund. The fund trails its index but you pay a management fee and other fees that are usually diminishing returns. You will pay a fee to buy the fund, or exit it, or both. Index and exchange-traded funds are the best thing to happen to investors since cash.

Hope you are keeping your powers dry. Patience is the key in such markets which are ruled by rumours and greed. Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)  

The Great Game.

I quote from Mark Grant:

“It is the Great Game. They try to lure you into their various traps; I try to keep you out. They offer headlines from countless sources and I try to tell you what things really mean. They make use of a giant propaganda machine and I chant alone in the wilderness. They make up stories and present them as accurate data and I try to give you the facts. They want your money and I want you to “Preserve your Capital.” They are as diabolical in their pursuits as Professor Moriarty was in his. They are the political masterminds and I am a sort of Sherlock Holmes trying to analyze and conclude one case after the other. You may listen or you may not but I pay for my own supper while others ask for their compensation first. It is their Game, my Game; it is the Great Game”.

“Has all my instruction been for naught? You still read the official statement and believe it. It's a game, dear man, a shadowy game. We're playing cat and mouse; cloak and dagger.”

                                           -Sherlock Holmes, A Game of Shadows

I could not have said it any better. 

Bottom line, “ Cash”, at least till FOMC is over and we see the market reaction. I am very certain that the bearded one will not come up with candies for the market on June 20^th but who knows. At least I am not taking any bet on the outcome and am content to sit it out. 

Just like last Sunday, Euro spiked up and faded thereafter. But precious metal sector did not rally. Even when Equities held up for the day, credits was down and bonds were up. A correlation between SPX and Euro shows that the sync broke today.

Normally in such situations, either one catches up. Because of the market sentiment with Euro, I think in the very short term, there are less chances of Euro going up. Logically therefore, SPX will catch it downward but it may remain elevated till Wednesday. Question is how much down SPX will go from here? And therein lays the answer for week after. If SPX can hold 1300-1320 level this week, the next move would be higher. But that will be a bull trap, not a real up-move. More so if it comes without QE. If you are confused, just remember that we will have chop fest for the next two weeks but the selling is not over.

My take therefore is the same as last weekend. Nothing has been fixed. Market cannot go up without additional liquidity. Till that comes, the risk is to the downside in intermediate time frame although in short time frame, we may see higher highs. A heaven sent opportunity for the day traders but for a normal investor it is the worst kind of nightmare possible.

Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)

Greek Vote: What Happens Next.

So now we have the Greek vote done with.
It transpired exactly as I thought. Greeks elected pro-bailout parties because they want other Europeans to pay for their debt. They elected the same political parties who are responsible for this mess in the 1st place but I suppose they have no alternative. The Fox is in charge of the hen house. What happens next?
FT Alphaville has this informative piece:
http://ftalphaville.ft.com/blog/2012/06/17/1047971/greece-the-post-election-questions/
And what about the pop in Euro? Oh that? It is already climbing down. Folks will soon realise that there will not be any Central Bank money pumping come Monday and Ben is going to disappoint as well on June 20.Nothing will come out of G20 as well. It could not have been any worse for the bulls in the short term. Things did not change and the bad news is not bad enough.
Lets see where it ends by next week.
I am happily sitting out of the whole drama.

Irrational Exuberance?

Last Monday morning TNX (CBOE Interest rate 10 year note) opened at 1.63 and SPY opened at $ 134.17. This Friday TNX closed at 1.59 and SPX closed at $ 134.14. So basically SPY was flat for the week while the yield on 10 year fell another 3.5%.

Which also means, bonds and equities are moving in opposite direction once again. I have seen this many times and situations like these are not good for investing. While the bond market, which is way bigger than equity market, is worried about deflation and uncertainty, equities are showing exuberance expecting another QE. For equities, bad news is good news. That if things get bad enough, central bankers will come in with more free money. It is not a rational thinking for growth and prosperity. Japan is an example where Nikkei fell from 38000 to 9000 and like a bug in search of a wind-shield; Japan will possibly default before Europe blows up.

So what are the options we have before us? Greece is caught between the proverbial devil and deep see. If the Greeks decide that they will continue to remain debt slave for some more time and elect the same political parties which are responsible for the mess in the 1^st place, then there is no need for action from the central banks. Do equities go up further from here? If status quo is maintained, will Bernanke come out swinging on June 20^th with QE? I have my doubts.

On the other hand, if Greeks decide to try their luck with the new hooligan and ditch Euro, (which I don’t think they will. They want their cake and eat it too. Most of them want other Europeans to pay for their debt)   there is no limit where the ball will stop rolling. Is Europe ready to call the bluff? It is a game of chicken and do we want to bet our capital on the outcome of it?

The Spanish bailout did nothing to improve the market confidence and unless there are few trillions thrown to the bon fire, it will not budge. Either way, we are screwed. It is just a question of time. I expect that the politicians and central bankers will try till it does not work anymore. You just saw what Obama just did to buy the Hispanic votes. With a stroke of a pen, he changed the definition of what is legal and illegal. Why do you think he will not pump the stock markets when the 401K of the voters is tied to the stock market? The Banksters have got the politicians by their short and curly. With each fall in share value, comes more money at ZRIP. These guardians of American freedom, TBTF banks, borrow at 0%, buy 30 year treasury and get return at 4% and give back the same treasury to the Fed as collateral.  Take few trillions of dollars, do this circular trade for few years and you are guaranteed of huge bonus and you are a genius.  Banks are healthy again even when the assets they are holding are all rotten and valueless. That is why they changed the FASB rules in the 1^st place.

How we trade and invest in such environment without losing our shirts is the challenge of our lifetime. That is why I keep telling that “Cash is King”. It does not matter if the equities go up or down for one day or for one week. So long we do not have a sustainable trend, it is better to stay out. That is the reason; I am staying out of the market till June 22^nd no matter how high the market goes. I stayed away from shorting the market when SPX broke 1284, 200 DMA and told everyone who cared to listen, not to short.  And this is my advice now. Just don’t do anything and wait for things to settle down. I may be wrong and may be too cynical but I have seen too many bad things and I can feel that the end game has started. Better be careful than greedy.  

At least I do not have any anxiety over the outcome of some stupid election. Greece has defaulted many times in the past. In fact it was the 1^st city state to default on its sovereign debt. So another Greek default will not be the last. Nor for that matter a default by Spain (16 times in History, much more than Greece) or France or for that matter US of A. Don’t be surprised, American has defaulted six times in its History and will do again in future. Only the form of default will change.  You can read it here: http://en.wikipedia.org/wiki/Sovereign_default .  So let’s enjoy the beautiful weekend with family and friends while we can. Life is too short to chase useless stuff.

Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance) Lets have the conversation going.

BullS**t Ad Infinitum

Before we get serious, let us laugh out loud seeing the sheer stupidity all around and how the market is moving like drunken sailor with a bottle in hand. My apologies to the drunk sailor for inappropriate comparison. 

On Monday the market was down, on Tuesday the market was up, on Wednesday the market was down, today the market was up and any takers for tomorrow? If I have to guess, I would write: trend is down tomorrow. However, in my defense, I did write yesterday that if Euro holds 1.2550 levels, we will see green day.  Not that I know any better. Sometimes we just get lucky. I think I wrote sometimes back, better be lucky than smart!

But you have to give credit to the Boyz. The rumour was brilliant and like true pavlovian dogs  the market spiked up. As Josh Brown says :” Central bank rumors are like big boobs - some are real and some are fake, but most guys are happy to play either way.”  I feel bad for the guys who were short in the morning and I still maintain that there are lots of bad shorts out there who are trapped. Folks who are short from 1284 level. And it also demonstrates that the market believes in coming QE and is waiting to jump on the bandwagon. It is not a question of whether it will come; it is, when it will come.  And is the selling / correction over?  Again, my feeling is, not yet but we are getting close.

Today’s rumour fueled tape fudging was strictly for the day traders. If you are a normal human being, looking to safeguard your assets and investment, you should totally ignore it. It’s fake, fake and fake.

We are still in that triangle which I showed yesterday. I did not do anything new to it apart from today’s market action and that is all the TA you need to know.

There are few takes from all these nonsense:

·         They will again try to solve the problems of the world with more debt and liquidity because that is the only thing they know.

·         At some point deflation will give way to inflation and the monetization of debt will start in earnest. Already the Fed is buying the Treasury Notes it sold just hours back. It happened today and yesterday and they are not even trying to hide it anymore.

·         With inflation come higher interest rates. The bond trade is about to turn upside down.  Trillions are invested in bonds, much more than in equity. And the pain will be felt many times over.

·         They are desperate to maintain the status quo and losing the game. They know it and are scared. Already there is talk of capital control in Europe. Worse things will follow.

Pay particular attention to what is happening to US bonds. Europe does not really matter. I think we will see the high of TLT by June 22^nd.  If I had any investment in bonds or bond funds, I would get out in any new bond rally.  For now, just avoid the temptation to chase the momentum like plague. I keep repeating, we are not going to miss anything worthwhile and the only rule of the game: Do not lose capital. I am not touching anything in the market with a 20 ft bargepole till end of next week.

Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)

Just Another Day.

If you have seen even a little bit of Jamie Dimon’s testimony before the Senate Banking Committee you should be able understand why we are destined to doom. These are the people who are supposed to safeguard America’s wealth. Instead these people were just about rolling before the almighty king and were severely apologetic about the inconvenience they have caused to the” Demon”. Most of the so called Joe Six-packs are so enthralled with Kim Kardahsian’s  sex tape and nude picture that they have no time to think about the real issues. But however much I may dislike JPM and other TBTF banks, come August, I am going to buy the shares of JPM. It is the best house in a bad neighbourhood.

So yesterday it was a sucker’s rally after all. Today it gave back half of the gains of yesterday. Tomorrow it might gain another few points and this up-down dance will continue for a while. If 1.2550 holds in Euro, we may see a bounce tomorrow. For the last 5 trading days we are moving in the following range.

Although I am not a great fan of IHS pattern, it does look like one forming and if we hold the lows of June 4, we may be due for good bounce.  With Greek election due this Sunday and FOMC on June 20, which I think will be kind of disappointing for most; I think we will hit a bottom by June 22^nd. Till then I expect the market to move sideways in a range. Some are expecting a huge bounce on Monday, June 18^th but I am doubtful and would not put a wager on it. With so much headline driven movement, why would you want to risk your capital either way? I keep repeating, we are not going to miss anything and it is better to give up few points in order to identify the true trend.

Gold appears to be holding the line for now and I am holding my GLD. But when the QE comes, Silver is expected to outshine Gold by many miles. I would not be surprised if Silver is able to cross $ 50 landmark this time. We have to be patient because the corrections are not over yet.  But we are getting there.

For the next seven trading days, I would keep repeating myself that be in cash and cushy. Identify stocks or sectors which you think have held up well during this downturn / correction and which logically will do well in the next up-move. Because with his re-election in November, Obama will do everything to ensure that stock markets are up before that. And if you have any favourite stock or sector in mind, please share it with us. I am not a stock picker and I generally go with sector specific ETFs but sometimes a well selected stock will give higher return. One sector I am looking with great interest is the Bio-tech sector. Let us know what your pick is.

Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance) Lets have the conversation going.

Sucker's Rally?

Nothing much to say today. Yesterday SPX dropped 41 points and today it recovered 20 points. Looks like a dead cat bounce and more like a sucker’s rally. It was a gift to those who were long yesterday morning, a chance to get out. Now, I am talking very short term for the next few days or till the end of the week and I expect SPX to test its low of June 4 by then.

I think the Greek election is on Sunday, June 17 and most traders will reduce their holding before that.  That is one unknown factor no one has any control. Wolf Richter has following to say:

On June 17, when Greeks try once again to choose their next government, they may decide their country’s fate—or not. One thing is for sure, whichever parties will be able to form a coalition government, they will push for more bailout billions, but this time, forget the conditions, the structural reforms, the austerity. Just give us the money. And however much we want. They’d watched how Spanish Prime Minister Mariano Rajoy had asked for a bailout ... after reassuring everyone with utmost sincerity and for the longest time that neither Spain nor its banks would need one.

Not a detail escaped the Greeks when, after the bailout meeting on Saturday, Rajoy proclaimed victory, saying he’d been offered €100 billion, no strings attached. That’s what Greek politicians wanted to hear—and they jubilated; the yoke of German-imposed structural reforms and austerity had been broken. It didn’t matter to them how much German, Finnish, and EU officials protested that that’s not how they understood the agreement; there were, in fact, lots of strings attached, they said, which makes you wonder if there was even an agreement.

And so Greece’s election may not decide the country's future in the Eurozone, but may simply prolong the extortion racket to keep the money flowing, freely this time, and in liberal quantities—efforts that the Troika may consider distasteful and brush off with disdain. But it’s not even certain that the winning party will have enough votes to form a governing coalition or that any parties could agree to form one. In which case, a third election would be required, a possibility that Antonis Samaras, leader of the conservative New Democracy, called “suicidal.”

How long Germany and other Northern European countries will put up with this extortion racket is to be seen. The pink elephant in the room is Italy and no one is talking about France. But I think we will have to wait for another six months to see it all unravel.

Even if Europe survives through money printing, USA may not. If you think you cannot trust the Bankers, what do you think about the politicians? Who do you think has fu**ed up America more, Bush or Obama?  But this is not the place for political discussion and yet our financial security is intricately linked with what these crooks do. Unfortunate but true.

Coming back to market, for the past four trading sessions we have moved in a range while the Bollinger Band is getting narrow.  Up one day, down the next. But those of us are in cash, have nothing to worry about because as and when the opportunity comes, we will be ready.

That’s it for today. Thanks for reading http://bbfinance.blogspot.com/

Monday Madness.

Sometimes you can win just by following the simple and obvious path. Looking back at today’s price action, my call for closing the long position on last Friday afternoon and get the hell out was absolutely correct and spot on. The euphoria of Spain bailout did not last long. I took a short trade on Euro yesterday when it spiked open (I wrote this exact thing on last Friday ) and closed it in the afternoon today. May be I closed it little early but with sentiments at extreme, I do not want to take any chances. Take the money that is on the table and run. No need to be greedy. Other than that, I have no skin in the market madness.

While it was the widest range day in SPX futures, I do not think going forward the selling will be too deep or heavy. But the best way to find that out is to wait it out and see where it goes. The reason I think the selling will not be very deep is: there are lots of bad shorts out there. What I mean is that when SPX broke 1284 last time, many folks who trade by technical analysis, shorted the market because the 200 DMA was broken. Now these folks are trapped and they will cover their short position around 1290. This means there will be lots of buying around that area. I also think that market will reverse in the area of SPY $129.50. That was the gap up area and I expect the reversal to take place by Wednesday or Thursday.

Sentiments are as bearish as I have seen in many years. It seems everyone is convinced that Europe is going to explode. The last Cot report is stunning in the sense that while the commercials are super long in Euro, the non-commercials (Large Speculators) and retails are super short.

I have never seen such extreme positions in my life. If history is any guide, the commercials have always been right in calling the turns.

And do not forget the stimulus God-Fathers, who are getting ready to unleash their powers and this time, nothing but the shock and awe will work.  I am not sure if we will see it this 20^th June, but I am very sure of its coming by 1^st of August. Coordinated actions by all the central bankers of the world to kick start the world economy! More like kick the can down event but that will help us to retire rich, hopefully.

Trading wise, we are happy to be in cash and wait for good opportunities.

Hope you are enjoying my banter filled market calls without too much TA or EW or Analog or any other kind of voodoo.  If you are, please pass it along to your friends and circle and join me in Twitter (@BBFinanceblog). Thanks for reading http://bbfinance.blogspot.com/ .

Let The Circus Begin.

The Ringmasters Pet by Ben Boling

Europe has been saved. Again! The rescue package worked out for Spain shows that when it comes to giving free money to Banksters, the real masters of the universe, the Politicians will find out new and ingenious methods. The EU went out on limbs to provide money to Spain without demanding  any conditions associated with bailout.That is the beauty of the MMT. You just have to write cheque to yourself. In any case, the modern money, which is not backed by any real asset, is an illusion, a figment of imagination, which the politicians and TPTB (The Powers That Be) can create out of thin air and make the sheeples dance and sing and do their bidding. As I say, never underestimate the powers of the CBs( Central Bankers) and now ZH can take a hike for next six months.

So are we going to see a repeat of January when the equities will keep going up and up to another galaxy? I would rather wait till the bearded one shows up with money here at home. What has happened in Europe has just put a band-aid on the bleeding banks and will help restore the calm in the market. More likely we will see a pop on Monday morning but I had other reasons for the pop. I do not think we are at the moment ready for new bull phase but I think at this point we are going to deviate from the last year’s script. We will have a correction soon and I now think that we will not have a lower low. In that case we have seen the bottom.  It is still too early for safe investing and trend has not yet developed but more and more it looks like we will follow the Presidential year cycle pattern.

There is still risk of whipsaw in the market and this bottom is not going to be an event but a process.  Last Monday I wrote “Muppets Beware”. http://bbfinance.blogspot.ca/2012/06/muppets-beware.html  When CNBC, Crammer, GS, every one of those tries to scare the hell out of investors, we would be aware that something is in works. It is going to be choppy few weeks for sure and not yet conducive for sustained bull run. “O” needs good August till October. 

I quote the following from The Reformed Broker:

“ John McCain was running steadily ahead of Obama in 2008 - with a message that "the fundamentals of the economy are sound" no less! - until the September meltdown of Lehman Brothers.  That event was the trigger that shot Obama ahead of McCain and essentially ended his campaign.  Contrary to Hollywood's take, it wasn't Palin's idiocy or McCain's age or anything else - simply his defending of the Bush Economy in the midst of this hundred year's storm.  He looked ridiculous and out of touch, his optimism juxtaposed with the apocalyptic headlines that had jumped from the business section to the front page.  By the time he was "suspending his campaign" to try and fix everything, it was already over."

As long as we understand that markets are rigged by these honourable folks, and we get an idea as to how it is rigged, we can place our bets accordingly. Nothing else matters.  After election will be a different ball game altogether. We are watching the last hurrah and while we are at it, why not enjoy the show.

Week Of Hope and Helium.

Pardon me for referring my older posts to bring home the points because mostly we read selectively and remember what confirms our belief. This is called “Confirmation Bias”. Yesterday I wrote: “Is the rally over? Somehow I do not think so. I think it still has few more days of fuel left and we may see the uptrend resumed tomorrow.”  So we have had today. I wish all my calls would be always so correct!

But the overnight action was not very convincing and in the morning I decided that I will not hold positions over the weekend. In a headline driven market, where the market acts in a schizophrenic manner, it is too risky to leave open positions in a counter trend rally. In any case the bounce has been weak so far.  I expected 1340 would be taken out by now but we are still struggling to get past the high of May 29^th. So in the morning I sent out tweets that I plan to exit all positions during the day on a bounce. It is better to take profit when you just had a 500 point pop in DOW over hope and helium. I still have GLD which I will hold for now.

So now we are in cash and cushy.  No tension going over the weekend and worrying whether Spain will be able to save its crappy banks and kick the can down for few more months. If Spain does ask for bailout, it may either start a new wave of selling or start a relief rally. I do not know and I do not want to take any chances.  If you have noticed carefully, today the big boyz were totally absent and the volume was almost half of normal. No wonder we had a melt-up in the afternoon. But unless Uncle Ben shows up with the money bag, I have no intention of going long. I may play between support and resistance in a very small scale, but that is not investing. That is gambling and you have to be very clear that you are risking your capital in the hope of finding space between elephant’s toes. And I do not recommend it to regular folks looking for safe investing. Now is not the time yet.

So what’s next going forward? I am conflicted whether we will follow plan “A” which is to follow the script of last year or plan “B” which is to follow the Presidential election year cycle.  It is quite possible that we have seen the bottom on June 4^th. But it is also possible that more selling is to come given all the uncertainty. More the reason to be careful and not commit to any particular position. As I have said before, I am sure we will have a test of the lows but I am not sure of lower lows. If that is the case, then I have a nice Elliott Wave chart to share with you.

It has been made by Jamie Seattele, who is a currency technical analyst by profession and does this for living. I respect Jamie’s work and I thought it is worth sharing with the readers. But it does not mean I agree with him. It’s just another possibility.

If 1267 was the low for SPX then this plan plays out. But we do not know. Either way, the point A in the chart coincides with my call for bounce and we are almost done there. May be little bit more on the upside on Monday. Why do I think we will have some more bounce on Monday? Mainly because of the price action of Euro.

From this hourly chart of Euro you can see that Euro broke the trend-line and is now re-testing the lower part of the line. In all likelihood, it will go up to test 1.2550-1.2600 level and fall back. That can happen on Monday.  When that happens, it will be a good place to short. Another potential short candidate is Crude if it reaches $ 88 and fails there. In the afternoon, while SPX and Nasdaq flat lined, Crude started going up and I hope it goes up a whole lot more.

But McClellan Oscillator is at a level from where market cannot go up much higher and the logical route is down.

So now we wait for the correction and see where it ends.  That will give us an idea which plan we are going to follow. There is no rush and we are not going to miss anything worthwhile by being careful. End of the day, hopefully you are going to thank me for my relentless call for safety and cash. When we are playing with our future and retirement funds, it pays to have a cautious coach.

Enjoy the beautiful weekend with your loved ones. Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)

Bi-Polar Disorder of 1st Order.

Today’s post will be quick and short. The market displayed its bi-polar nature today and ended the day with something like a bearish reversal candle. This is the reason I keep telling that if you are in investor and not a day trader, you are well advised to give the rally a miss. Again, this behavior is completely expected because this is a counter trend rally and it is bound to fail anytime. It reached my 1^st target which is 1330 and reversed from there. Is the rally over? Somehow I do not think so. I think it still has few more days of fuel left and we may see the uptrend resumed tomorrow.

I am holding QQQ, Crude and Gold ETFs and I do not like the price action in Gold one little bit. As I wrote yesterday, I will see how it goes for few more days and then go out of it. However, intraday, it touched $ 1580 and bounced from there. On a weekly chart of GLD, we see that while it is below the long term trend line, for last three weeks it has touched 3 standard deviation on the lower end. The rubber band is too much stretched on one side and it may as well snap back.

So I will hold it till early next week to see where it goes. I have a longer term target of $ 2500/oz for gold but a good entry will be very helpful.

Crude on the other hand is a different story. My longer term target for Crude is $ 70 and so this is just a counter trend play from oversold position. It reached $ 87 intraday today and I should have gone out of it then. Let us see what happens tomorrow.

Euro and SPX is moving hand in hand like a love struck teenage couple.

But the short position in Euro is humongous and is a contrarian indicator. The Speculative Sentiment Index (SSI) of FXCM shows that crowed remains net short in Euro/ USD and further gain in Euro is likely.

That is one reason I think we will see more highs in the equities, at least in the short term.

That’s all I have time for today. Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)

Rip The Face Off Rally.

That was some monster rally! It was special in many ways. This was the biggest SPX rally since 12/20, biggest VIX Drop since 5/21 and biggest 10 year yield jump since 3/14. But we are not surprised because we knew it would come. I have been writing about it since: gosh, I even forget myself. This is the reason I did not short the market even when SPX broke 1284. I am afraid I keep repeating myself so very often that you might find it un-exciting. But on the other hand, I have called most of the major turns and bounces correctly without being dramatic. Now that the rally is here, what do we do with it? That depends what is your goal. Are you able to follow the futures overnight and be ready to pounce on the keyboard of your computer the moment the market opens? Do you consider yourself a nimble trader? If so, then you are ready to play. But if you have a regular job with kids and family, you have to go to office in the morning and do hundred other things besides being glued to the computer, you might give it a pass. For those regular folks, cash is king.

There is nothing fundamental in this rally. I have been showing this chart from the age of Adam.

This is a weekly chart. So let us see where it reaches by the end of the week.

What I am sure off is that we will test the lows but I am not sure whether we will have new lows. Like the Elliot wave guys, I have two possible counts. The preferred count is that we go up this week or early part of next week and selling resumes from June 20 when Bernanke extends Operation Twist and does not come up with real free money. The alternate count is, this being a presidential election year cycle, we deviate from earlier script and keep going up if Bernanke starts QE 3 on June 20.

 (Actual not updated)

 For now though I will stick with my preferred count.

In the morning before the market opened I sent out Tweets that I plan to go long on Nasdaq, Crude and Gold. If you have joined me in Twitter you would have got the actionable twitter even before the market opened (8.30 AM Eastern) and you would have been ready to take part in this spectacular rally.  The model portfolio has been updated with the positions. But I am not really happy with Gold and I might dump it in a day or two depending on its price action. It is signaling that there will not be any QE on June 20^th. Euro on the other hand declared that the world is not going to end just yet. I know it is a false hope but if that gives the bounce, I will take it.

Let us see how the market digest this rally and what is in store tomorrow. I would be happy with 1330 and surprised if we reach 1360, although that has been my range. But market is the boss. We just want to be in the good books and on the right side of boss.

Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter to get those actionable tweets. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)