Wednesday 3 October 2012

Wooing Wednesday.

Wednesdays are the most profitable day of the week: Stock trader’s Almanac.

However the cycles are still down and the next two days may do some damage if at all. That is bears last chance for now. For the last three days SPX has closed in green and two of the three has been inside days. SPX hourly is in a massive triangle and it will break one way or other.

Normally the 1st break, up or down is a head fake and the real move is opposite. Therefore I think the move now will be down and test 1430 before taking off. We will know in a few days. The Bollinger Band is narrowing on a daily chart and it normally creates a narrow bottleneck before the big move. So we are coming close to the end of this sideways movement since September 17. A correction can take place both in price as well as in time and not going anywhere in terms of price with lapse of time is a correction as well.

Few days back I showed you the monthly chart of Euro which I thought looked like a bull flag and has more potential for up move in a longer time cycle of a month or so. But when you look at the same Euro hourly chart, it is showing a kind of Head & Shoulder. Now this is on a much shorter time scale of may be less than a week.

The two charts are not really conflicting. On a shorter time scale, it is possible for Euro to test 1.27 taking equities and precious metal down for a day or two. But on a little longer time scale, Euro can move back to test its high of 1.31 and take other risk assets high with it.

RBA reduced the interest rate by 25 basis points and that is killing the carry trade. No wonder AUD is down to 1.02 and the correlation between AUD and Equities may be breaking down.

However, I think the upside in equities may be limited. Apart from my cycle work, I see high OXE put call ratio. As of yesterday the index put/call ratio stands at 1.31.

This means big boys are buying more puts on indices while the retail is buying more calls on equities.  Does not mean immediate danger but if you remember how COT commercials work, the biggie accumulate enough for a long time, slowly, in a stealthy manner while retail is oblivious of the danger. Then one day, we will wake up in morning and see that  the futures are down 30 points. The lights have been turned off and nobody told us that the party is over.

Therefore I am more interested to take position in PM sector. I think silver will reach $40 in a month’s time which is about 17% from here. With AGQ which is 3X, we might get a 50% return in a month’s time.  And then we get out and sit on cash again and decide whether we should short. There are some sectors or specific stocks which can give higher returns than SPX. For e.g. I think PNRA will give above average return in this one month. If SPX gives another absolute return of 3%-5%, PNRA might give double that. Or bio-tech sector for that matter. Nothing is written on stone but these are probabilities.

Yesterday, in the W.O.H + Report 1, I said Oil is headed down but I never expected a $ 5 drop in one day.Today Oil got hammered but PMs did not give much. Hopefully next few days will offer some decent chance to get a better entry. Nobody has lost money by being patient. As I write this, /ES is testing the highs of last Monday and is about to turn back. I am somewhat bearish till next Monday.

I want to share a must see Kyle Bass interview.

This is the fundamental story folks. This guy understood the fundamentals in 2007 and made tons of money.
I got overwhelming response from readers about W.O.F+ and what I found out is that we have readers here from all over the world. I would love to share the point of view from you readers from different parts of the world. Today I bring you some thoughts shared by Mrs. Claude Ray from Switzerland:

Just some thoughts relating to EU:
We are hearing so many rumors that Greece should leave , then  Germany ..and now spain  
Every part of the Spanish economy is failing. A bailout will only prolong the pain and for now the market wants and expects it (another excuse to stay up on any kind of  hope )
 it will eventually lead to the same thing: only the creditors will have changed from investors to the ECB/EU. 
Germany may be finally coming to the realization that Spain really is too big to bail but not too big to fail. 
 Greece now expected to need as much as 40 billion euros in addition to the last 130 billion euros and the prime minister "asking" bond owners to cancel their new bonds so the country can improve its debt ratios and qualify for another tranche of aid ,the outlook there is not good either. 
Two weeks ago the estimate was another 11 billion euros, then it jumped to 20 billion and now as much as 40 billion and the country is still spiraling down after being in recession for five years already. The markets are repeating the scenario we saw with Greece but Spain is much larger 
 The debt and impact to Europe and the rest of the world is going to be at least 4-5 times worse because their claimed debt is closer to one trillion euros. How much they really owe is still unknown.
 Eventually they will realize they can't keep pouring money into these bottomless pits”

Tomorrow we will hear from Marc from Spain as what he sees happening in Spain. That way we might get a picture from the ground, instead of propaganda. When readers share their live and thoughts, this blog will become a real community. I would like to hear from readers in Germany as to what ordinary Germans are thinking about the whole mess. Our friends in Portugal can say what is happening there. Folks from China can give us a heads up if China is going for soft landing. Send the economic story of your country and we will share it.

You all have been great and have really helped me when I appeal for support. Only, please do not stop and continue your supports to keep the blog running. I will keep reminding you how important your help and support is to me. Without your help and support I would not be able to function.

Thanks for reading  join me in Twitter (@bbfinanceblog)for the real time market updates and calls.


  1. BB, again, thanks for your work everyday!

    Are all those ads around supportive to you? i am not sure but usually click those on the right.

    China is on national day holiday until this friday. nothing much here.

    someone say the oil price will be going down to 30 dollars each. Can it be possible with so much liquidity?

  2. Hi,
    I like the direction you are taking this blog with W+ and more timely tweets during the day. Thank you.

    1. Trying to add value and develop a community where we can share and learn.
      It takes so much time!
      Thanks for being a part of it.