Exciting Time Ahead.

Let us start by looking at the daily chart of the emini or /ES, the SPX futures, the favourite toy of the Boyz. You saw how they took the futures down overnight and then spent the entire day in the range. What retail is supposed to do?

Looking at the daily chart of the SPX futures, I see that the BB is narrowing. /ES had earlier gone out of the BB on 14^th September and after that has not been able to cross over 1460 yet. It seems logical to me that /ES will touch the lower band of the BB or come close to it. Earlier I had indicated that the bounce level is 1430. Cycle says that it should happen in a day or two.

The 15 min charts in most indices is looking like a bear flag  or at least a continuation or consolidation pattern which indicates more selling ahead.

So far the down leg has been one step and at least one more push down is ahead.

Gold has been consolidating below $ 1780 and silver in the range of $34. Silver at least not looking good in the hourly chart. If you remember, I had said earlier that Silver bounce level is $ 33.80. Today, it touched that level few times and bounced from there. Did not close below. The significance of closing below that level would mean a short term sell signal. I think it will again test that level tomorrow. The hourly BB is as narrow as I have seen in ages and pointing downward. It can all change in a flash and not too much must be read into it. We will see what tomorrow brings. Gold may test $1780 again in the overnight session before testing $1770 again from where it bounced today. All in all, the PMs are behaving as we thought they would. If they hold their level, maybe we would consider going long. As I have said before, even if there is a sell signal in PM, it will be short term.

The cycle bottom tomorrow/ day after. But there may be another temporary scare by October 15^th . But I do not think it will cause much damage.

Today Nasdaq was much weaker than SPX. In the W.O.F+ report # 1, I had said that Apple downside target as $ 640 and if it closes below, it means problem. Today Apple closed at $ 638. While a bounce in Apple is due and will test its high and a Dec. Call may be a good play for the brave hearts, I think Apple has seen its high at $700 for quite some time to come. Apple may not be able to cross $700 again for a very long time.

TBT sold off. Those of you who received the WOF plus news letter # 2, know that I had written that TBT will correct somewhat in the coming days and if it makes a higher low, it will be time to long TBT. Another play for the more adventurous of you is to sell TBT puts. Even if you are assigned the stock, you will get it at a lower price because you would have got the premium. This is one option play which I think is a low risk game.

I am yet to receive your feedback on the 2^nd newsletter which went out yesterday. As you can see, already most of the things written in issue # 1 and # 2 are coming true. Used properly, these reports can be valuable investment tool. Or at least I hope so.

I plan on taking trade after quite a while and I hope all of you will make tons of money and bless me! But do make your own due diligence analysis and have proper risk control. Only GS and JPM can win all the time because they are the house.

You and I are the proverbial suckers handed out duds.

 Thanks for all the donations and supports. Your continued help and support is important to me to keep the blog running. Please remember to disable Adblock.

Thanks for reading http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls. And if time permits visit and comment on http://artofbetterlife.blogspot.com/

Space Between Elephant's Toes!

The 2^nd Newsletter of W.O.F + (World of Finance plus) went out today to those of you who have signed up. I hope you like it. Apart from some interesting charts, it was also presented in a very professional manner. Not everyone has opened it yet. I am waiting for the reader’s feedback. There are two trade ideas for the decade. I liked the graphic design of the Newsletter, showing a light bulb and the text “Ideas worth sharing”.

So far the calls are in line and praise the Lord for his mercies. I have seen too many newsletters and blogs selling fear and I realized that fear is a very good business model. However, we forget that markets go up and go down and if we get hung up on one idea, we miss opportunities, may even lose money. However, you must do your due diligence and take responsibilities for your own action. You must have proper risk management measures and not speculate at all. This blog and newsletter is not for speculation.

I am not a professional blog writer nor am I planning to make a living by selling newsletters any time soon. But I am definitely enjoying the writing part and have even started another blog on “Art of better life’ http://artofbetterlife.blogspot.ca/ where I want to share my life’s learning. It is still a work in progress and there are no targets or deadlines in that blog. I just to want to be me.

Making money from on-line advertisement is not easy. It is like looking for space between elephant’s toes. Google is the leader in on-line advertising and most of the bloggers are part of Adsense, where one gets paid for clicks on the Ads. But Google is known for closing the Adsense account without any reason if they think that the blogger is doing something illegal.  The terms of service states that:

The reason for termination: Ineligible clicks generated by any of the following actions:

1. Clicks generated by the website owner.

2. Asking or encouraging users to click on the ads.

3. Creating automated scripts that generate clicks.

4. Any other method solely meant to generate clicks.

So you see, I cannot actually ask you nor should you say something which is not within the terms of service.  Old_lefty had a very nice comment day before: http://bbfinance.blogspot.ca/2012/10/fooling-around-friday.html#comment-form

I have signed up for in-line text Ads, where when you take the mouse on the highlighted word, an Ad pops up and it gives a few cents. The following chart will tell you all.

And then there are affiliate marketing like Amazon where the blogger gets paid when someone buys something from Amazon using the link in the site.

None of them will make you rich and most bloggers do it anyway for the love of it. I am no exception.

Traderwanabe wrote the following on 5^th October:

Hi - question ...what kind of mothly donation do you think woud be good. Maybe you want to post a suggested donation. I have found your insights to be very valuable and woud like to see your blog continue t thrive. Quite frankly you have prevented me from making some trading mistakes I ordinarlily would have made. Alos you are willing ot take a stand ....alot of the blogster give you both the bullish case and the bearish case and then leave it for you to decide which is really no help at all. You could even post a suggested donation ....maybe becasue leaving it open-ended makes people wonder how much they shoud do and then they don't do it all becasue their afraid if they do too much they left money on the table and if they do too little it didnt make an impact and then so what was the point.

I answered the following:

I have some funny story of my life, which may be I should share with my readers in future.
I was burnt out and I decided to take some time off till end of this year and I thought let me share what I have learned from my mistakes with others. Frankly, I see too many folks selling newsletters as a means of getting rich themselves, instead of helping others and I wanted to be different.
I am glad that I have been able to help you in whatever way and I hope in the coming months, I would be able to help everyone make money. 

...............................................

I have received donations between $20 to $50 and I do not want to impose any condition on anyone. Times are tough for everyone. If folks make money in the next 6 months, may be they will give a percentage of their profit as donation.
End of the day,so long I can justify to my family that the time spent on the blog is not a waste of my time, I will do it.
So I am trying to monetize the blog by display ads, inline ads, affiliate program and Amazon link etc. Lets just hope that there will be a combination of donations and online ad revenue which will help me devote quality time here.
Thanks for asking and I sincerely hope that I am able to help you in your journey of financial freedom.

And that remains the guiding principle.

Some exciting opportunities are coming up which, if identified and acted upon properly, will help us to achieve our financial freedom. I want to help as many of you as I possibly can to achieve that goal. If I am successful in doing that, everything else will follow. Even if I am able to help you save your money, I have achieved something.

Tomorrow the bond market is closed. I think we will see a bottom by Tuesday or Wednesday. I will tweet if I think that the opportunity is right for going long in precious metals. Again, I don’t think we will see any major sell off and you know the levels to watch.

Thanks for reading http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls.

Please Don't Front Run.

I see and read in many blogs and forums that folks are talking about “Top” and as we had a failed test of high, the trend is now changing. Knowledgeable writers are saying that market rose from June low on the hope and expectation of QE and this rise was in fact a hope rally. Now that the surprise factor has been taken out and as tops are formed at the high, time is ripe for a major pull-back.

While I do not doubt the fact that it was a hope rally, I do not agree with the assertion that we have a top. I have learned that calling a top or a bottom is a fool’s errand.   However I do see is a giant top formation which, according to my analysis, will take few more months to complete. We must also keep in mind that the powers that be is pumping money at a rate never seen in the history of mankind and that itself will delay the fall.

I have been on the sideline since June and I see lots of impatience all around. Taking a trade because we think we are missing out on the next big thing is a sure recipe for losing money. Instead, I have suggested watching the range. It is almost certain that SPX will now test the lows and we will see a correction. Rather than guessing how far it will go down and front run based on that guess or some secret instrument like one particular TA which you think has never failed, why not watch the range?  Like I said yesterday, if /ES or emini or SPX Futures goes below 1430, we know that the correction has some substance and we may take the short side. But if it bounces from this level, we can think of going long, at least till it re-test 1468 again. 

Given that we are at the final stage of the election cycle and having shown all those beautiful charts and graphs, may be you would agree that folks who can manage to show that employment rate has indeed gone down below 8%, are capable of pushing the stock market to new high. That was the sole purpose of QEI. If you remember my posts of May/June/July, I did mentioned that QE will definitely come and it will come in September, simply because they will have sufficient time to juice the market for election. Timing is everything. Too early and the market will peak well before election. Too late and it is of no use. So a QE made sense in September purely from the election point of view, however much Bernanke may say that his decision has got nothing to do with politics. Pure baloney.

Technically speaking, in the weekly chart of SPX, I do not see any negative divergence like the one we saw in 2011.

After election, these folks would not care much about what you and I think anyway. If O wins, you will find a much different administration because he won’t care much for compromise which was his effort in the 1^st term. After all, he cannot get re-elected for 3^rd term and therefore, he could care less. Therefore a severe economic contraction is guaranteed in 2013-14 but we will cross the bridge when we come to it. For now, for the next week, let us see, if SPX futures are able to bounce from the range, whether gold and silver hold their line which I mentioned last night and play accordingly. Wait a little while longer before taking the plunge.

Thanks for all the donations and supports. Your continued help and support is important to me to keep the blog running. So please do whatever you can. There were some excellent comments from traderwanabe and old_lefty. Tomorrow I will write about surviving a blog financially.

Thanks for reading http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls.

Fooling Around Friday.

The NFP numbers were in line with the expectation; it is the drop in unemployment numbers which surprised everyone. Old Jack of GE tweeted that all this was hogwash and cannot beat the Chicago style. I was just wondering, if Bernanke logic is that he will print and pump till labour market improves, and now that labour market has improved according to Govt. will he stop printing now? Has QEI achieved its objective?  What? Am I out of my mind? No, I am just fooling around on a Friday evening.

They do everything in the name of middle class and poor folks. But rich in America has been the most beneficiary in the last four years of the messiah of change. Not a single crook has been prosecuted for their involvement in financial crimes and mortgage frauds. Corzine walks free after vaporizing millions of investor’s money.  What middle class and poor folks! All we have to know is that the system is totally rigged.

Anyway, enough of this political nonsense.  Yesterday, I showed you the various levels which are important for our investment decision. I wrote that gold and silver is vulnerable short term and I would wait a little while more before taking the plunge. Today we have the vindication. I also tweeted the targets to look for. 

Bounce target for gold:$1760, silver $33.80. May not happen today. Bounce from there-buy signal, go below that-short term sell signal

I do not think gold and silver will cross below that but even if they do, the sell signal will be short term. If we know the targets/ ranges, we need not front run. We have a very clear plan of action. Like one we have for SPX.  Here I must clarify various terms I used in the past, which may have caused some confusion. While SPX is the cash market, open 9.30 AM to 4 PM Eastern, Monday to Friday, the future markets for SPX are open 6 PM evening Sunday till 4.30 PM Friday, non-stop, 24 hours. It goes by the name of /ES or emini. When I gave the target, I was speaking of the SPX futures because that is where the TBTF banks manipulate the market. They pump up/ goose down prices on very light volume overnight and by the time retail comes back next day, markets are already higher or lower.  So we know that only when futures of SPX or /ES crosses 1460 convincingly and stays above, we can be long. On the other hand if the futures go down below 1430, time to short. Again, once we have the road map, we need not front run.

Two days back I wrote: Normally the 1^st break, up or down is a head fake and the real move is opposite. If you remember the triangle, SPX broke on the upside and yet failed to close above our target price point.

In a normal market, I would say it is a bearish reversal day but in this new normal market when Bernanke and O team does not want to take any chance, I am bit worried to call for major sell off. At least till election. But it is definitely a failure of the test of the highs and now the market will test the nearest lows.

Stock trader’s Almanac has the following chart;

As you can see, many things are matching. We had a failed test of high, we did not cross /Es 1460 and we are following the election cycle pattern. So everything tells us that we will have a minor dip by the 8^th trading day of October. That falls on 10^th October. And I have been taking of a cycle bottom around 9^th/10^th October since many moons back.

According to that cycle, the major upswing will come around 15^th trading day, which is around or just after October OpEx.

Now you know the road map and can plan your asset allocation. I will be allocating over 70% to PM sector. If Silver does not close below $33.80, it will most likely cross $ 40 around 10^th November. Gold expected target around $ 1900. Whereas SPX may or may not reach 1500.

Well, that’s all for an interesting Friday. I have some very touching emails and comments and one was from traderwanabe. I know everyone out there reading this blog, wants to help me but this is not the only blog you read, and sometimes, people tend to forget after a day or two. Making money from on-line blogging is like finding space in-between elephant’s toe. So damn difficult! But little help extended by many good folks every day, can make a difference.  I will show you the proof tomorrow. And that is the reason I keep reminding everyone about loving the blog. At the same time, we cannot overdo it or talk very openly every day, otherwise, big G will banish us.

Thanks for all your support. I do hope to make a difference in your life and trading. Both in terms of how you trade and when you trade. I sincerely hope that all of you make tons of money without taking too much risk. Since June the market has been a meat grinder and if we did put our hand in it, we could lose our hand. Now I see some clear opportunities emerging and I think we should be OK going forward.

Thanks for reading http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls. Last but not the least remember to disable Adblock.

Thumping Thursday.

While I was right in saying that the triangle will break one way or other, I was wrong in my anticipation of the breakout direction. I expected it to break to the downside and then move up. Now it has broken to the upside and yet failed to go past /ES 1460. The importance of 1460 can be seen in the following chart of /ES.

As you can see 1460 region has been a major resistance point in the past in many occasions and with every failed attempt, it becomes stronger. It has to break that level, stay there for a while, so that resistance becomes support. Till that happens, I would consider it as a failed test of the high and the road would be down, at least in short term.

But look at /ES chart again, until and unless, it breaks down 1430, there is no reason to go short either.  It is solid support zone. This 30 points are our chop zone and so long the /ES is moving in this range, we have no interest to join the song and dance.

Immediate Action plan? If /ES goes above and stays above 1460, long the market till Nov. 10. If /ES breaks below 1430 short the market for 10 days. In between, twiddle thumb and be in cash!

In the melt up today, silver acted very strangely. While gold reached near $1800, silver barely budged over $35. When all the ducks are not in line, we cannot shoot. Even if one of them is out of line, it raises a red flag. As of now both gold and silver is extended. The RSI is overbought and cycles are not supportive. However over bought can remain overbought for a long time and just because RSI is overbought, does not mean we cannot go long here. There may be a pullback but the long term goal for Gold is around $2500-$2900 and for Silver around $50 and we may reach that goal sooner than expected.

Looking at the hourly chart of Gold, it seems that Gold may be breaking up. $1780 has been resistance for so long and it has now broken that resistance.

We need to see whether gold comes back and test that earlier resistance and whether it bounces from there. If that line holds, we can long with comfort.

The seasonality on gold shows that there is normally an October dip;

The up-move in gold price is in line with the seasonality and therefore I am somewhat cautious going long gold here. A pull back is in line with seasonality, technicality and cycle.

Silver on the other hand has not been able to break its resistance as we can see from the hourly chart.

SLW (Silver miner) broke through the resistance line and as you can see from the hourly chart, it will soon come back to test that broken resistance line.

RSI of SLW (in Hourly) is looking over bought and is turning down. It is possible that the price will pull back and only when the resistance becomes support, we can say for sure that the breakout is valid.

And Apple was red again. As you know it is an economy by itself.

All in all, not all ducks are in line yet.

There are few sectors which I think will offer to double the money quickly and Natural Gas may be one of them. Another would be short bond. But I will discuss them in the W.O.F + report on Sunday.

Back to the market romp. Bloomberg (or was it ZH) has the following on the FOMC minutes:

FOMC PARTICIPANTS SAW `SIGNIFICANT DOWNSIDE RISKS' TO GROWTH
FOMC PARTICIPANTS SAW `PERSISTENT HEADWINDS' TO RECOVERY
FOMC PARTICIPANTS SAW FISCAL POLICY AS A `DRAG' ON ECONOMY
FOMC PARTICIPANTS SAID HOUSING MARKET IMPEDING RECOVERY
FED OFFICIALS SAW MANAGEABLE BOND BUYING RISKS, MINUTES SHOW

And yet, the market thinks it can go higher to the moon because Bernanke will print till infinity.  Or just because Mario said ECB will buy govt. bonds from the already insolvent countries. Euro and equities rose on that? WTF? Some of the countries are blowing up and hyperinflation has reached their shore. For e.g. Iran. As you heard Kyle Bass saying yesterday, inflation will reach our shore sooner than we can imagine. The Fed has a great history of foreseeing the coming problem. They saw the tech bubble, they saw the sub-prime mess. I am sure they would see inflation coming as well and would be able to manage the bond buying risk and every other possible nightmare. Sleep well folks, Uncle Ben is covering your back! By the way, Canada may be thinking to raise interest rate sooner than expected.

May be it shows that price movement is not dependent on news after all and cycles do play some part? Talking of cycles, the last cycle top was due on 7^th September but it came on 14^th September. Now the next cycle bottom is due on 10^th October. So let us see what next week brings. Technical Analysis point of view, I do not find the markets very attractive and a pull-back is needed. But if cycle bottom and market holds up, then maybe it is a go after all. In any case I would be over allocating to PM sector.

Today I want to share what Marc has to say about Spain. Like Greece few years back, Spain is now at the front and centre of everything.  Mark has to say the following:

Note that I'm from Catalonia, that north-eastern region of Spain that seeks to become a country on its own.

The "nicest" thing in Spain is that our "leaders" speak different things to the country than to our Euro neighbours (like saying  jobless claims are improving, our banks are awesome and safe, etc to us in Spanish and then that we are screwed in English to FT.com ...). So you can look at national TV news and see everything is ok, or read about Spain "outside" and book a flight to leave the country....

Anyway, about the Euro, I'm sure it will be fixed (any alternative is far, far worse) but, as Spain is a big part of the problem the fix will come in the Spanish way: 

"Tarde, mal y arrastras", which could be translated as "Late, wrong and painfully slow". It could be a national motto just like "siesta". By Late I mean "on the very last possible minute" so any fix will be really painful.

Just, as a nice example, our former President Mr. José Luís Rodríguez Zapatero didn't acknowledge any crisis/recession until 2010-2011 (On 2008 he stated "Spain is in the Champions League of the Economy"), which means that until that point (and still today in some regions) our government was working with budgets that assumed higher revenues every year... YES, REALLY.

You get the point, we are slow fixing stuff, and any fix is temporary!

Again, please share your thoughts, your expertise, knowledge, where you see the next opportunities or threats. Let us make this a vibrant community with participation from you all, instead of just me doing the blah blah.

Now for some politics. How did you enjoy the last night’s debate? Although everyone thinks O lost this round, I think he may have done it purposely. If he would have won this debate, it would make the base very complacent. Now the base would be worried and work extra hard. The same thing happened four years back. McCain won the 1^st debate and O came back strong in the last one. Voters will remember only the last debate. So there is no advantage of winning the 1^st two. But it screwed the blog Ad revenue because many readers forgot to show their love.

Thanks for reading http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls. Last but not the least, remember to disable Adblock.

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 1^st 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 http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls.

W.O.F +

It was a” hurry up and go nowhere” kind of a day. In the morning, around 8.30 AM eastern I sent out this tweet: “GMA. Going to be like yesterday. Risk rally on old stories and fade during the day. it has to break either way. Tiring” . Around 9.40 AM eastern this tweet;” Cash SPX opened with the same range of yesterday. Oil is selling off. PM sector is weak. We may get some selling later”.  Then we had our little sell off and at around 12 noon eastern this one: “Well, we have the sell off and I think we are done for the day.rest of the day will be Chop Zone.”

There were lots of other tweets but basically those three sum up the day. More the reason you should join me in Twitter (@BBFinanceblog) so that we can communicate real time market action.

Coming back to the market, 1^st let’s take a look at the daily chart of Euro:

To me, it looks like a bull flag and I think it will run towards 1.31 before it dives down again. Is it any wonder that markets are not selling off which everyone expects it to?

The short term cycles are down for few more days but as you know, I have changed my correction target to 30 DMA from 50 DMA and once we get a bounce from 1430 area, it will be time to go long. I am waiting for the corrections in precious metals but instead they are consolidating in this range for the next up move.

By the way, ED Yardani has this nice chart on Gold and Debt Ceiling level.

I do not see US debt coming down anytime soon, which means gold prices will go up and up.

In the morning I mentioned about WOF+ , a weekly news letter which will be delivered to your inbox free every Sunday evening. The 1^st report is appended below.

I am sure, with every week, the report will improve more and will be a treasure trove of information for your investment / trading. Only catch is, initially, it will be limited to 1^st 100 readers who sign up for the report.  Read the report, see if you like it and send an email to :BBFinanceblog@gmail.com, with the subject  as WOF+. I will contact each of you and set up the distribution. For more on WOF+ read here: http://bbfinance.blogspot.com/p/wof.html

Many of you have sent donation and many have disabled the adblock. Your support definitely makes it worthwhile to provide more and more free content. It took me almost four hours to compile the WOF+ Report 1. So, please help to keep this blog free and growing. After all, I can survive and devote time to the blog only when you extend help. I have also signed up with Amazon and a big link of Amazon is right next to the blog. When you need to buy anything from Amazon, do keep in mind that you can use this link. The holiday season is fast approaching.

Thanks for reading http://bbfinance.blogspot.com/  join me in Twitter (@bbfinanceblog)for the real time market updates and calls.

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World of Finance Plus

Weekly report: September 30, 2012, Sunday.

·         Stocks: Bullish short term, Bearish intermediate term and long term. A top is due around November 9^th – November 16^th.  Between now and the targeted top, general market is expected to remain choppy. While a run to 1550 in SPX is not ruled out, it will depend if SPX is able to close above 1460-70 convincingly in the coming week. A big topping pattern is being played out.

·         T-Bonds: Neutral short term, bearish intermediate and long term. It is possible that the bull market in the bond market is coming to a close. The Fed now owns almost 1/3^rd of the outstanding T bills and is able to manipulate the yield but it may lose the control over the yield in its pursuit of inflation. It may be time to take profits on TLT and reduce the exposure to the fixed income allocation.

·         Gold and Silver: Bullish intermediate and long term. This is one asset class which falls in the category of ABCD (Anything Bernanke Cannot Destroy). The liquidity pumping by the central bankers of the world coupled with coming deflation will ultimately result in Stagflation. While most asset prices including equities will likely go down, Gold and Silver will likely benefit. The immediate price target for Gold is around $1900 and for Silver $ 40 by Mid-November. However a pull back to 30 DMA and / or consolidation in that range is required before gold and silver can start the upward journey.

·         Oil: Crude cycles are down for the rest of 2012. With the global economy is a downward spiral there is no reason for oil to go higher unless there is a war. A war will be coming in our way sometimes in 2013 but for now Oil has more to fall.

·         Grains: Corn, Wheat and Soybean have reached cycle top and I do not think there is much more upside scope for the rest of 2012. I would book profit and get out for now. The ETFs like DBA are a sell. However, US drought and increase in world population will keep the pressure on grain prices and longer term grains should be a part of everybody’s core position. End of the year would be a good time to review the possibilities of entering that core position. Right now, it is wise to stand aside and let the prices come down.

·         Specific Stock: Apple: The immediate target is around $ 640 and bounce from there. It will retest its high of $ 700+ and only if/when it cross the high with conviction, we can think of higher price target. For now, I do not think Apple will be able to make new high. On the other hand, if we see a lower close than $ 640, then we have trouble ahead.

·         Other DOW heavyweights: Other DOW heavy weights like IBM, GE , CAT or WMT are showing signs of topping and we need to keep an eye on them going forward.

·         COT Report: The long position in Euro has reduced dramatically as explained before. Reading the COT report on CAD is little different. As Canada is the largest exporter of Crude to USA, it sells CAD and buys USD. Therefore the commercial position in CAD is generally always short. It is the degree of short which determines the direction of crude. As of last week there was 173K short vs.250K short of the week before. In other word, the CAD short position has gone down by 30% which is negative for crude. We can expect the crude prices to come down in near future.

 T bond prices have a strong correlation with Jap.yen. The latest COT report shows that the Net short position in Yen is increasing and therefore we can expect the T bond to sell off in near future. This is consistent with the comments regarding the T Bonds mentioned above.

·         Stock Picks: As of now we are waiting for the right opportunity to get invested. Be ready to come out of the position quickly and cut the loss if the things do not work the way we want them to work. It is always desirable to have a stop loss. These are the lessons I have learnt the hard way. Some of the stocks and ETFs I am looking at are:

1.     XBI

2.     CDE

3.     DGP

4.     TBT

5.     SGEN

6.     PNRA

More on them as we get closer.

·         401K Plan Manager: QEI has been in play but we have not yet seen the liquidity bursting the dam. May be the dam is getting filled up and somewhere, unexpectedly it will overflow. However he may think, Ben has no control over the un-intended consequences and flow of money in different sectors. As of now the Allocation model is as follows:

33% cash + Future Contributions = Money market Funds, Retirement reserves.

34% Equities = Keep it simple. Divide between blue chip stocks, Mid-market Growth Stocks and dividend stocks.

33% Fixed Income = Short duration, Total return & Real Return funds.

Going forward, we may need to allocate some funds to precious metals but it is not that simple.

 From ehow: “Contact the company holding your IRA or 401(k) and ask about the availability of gold mutual funds and exchange traded funds. If you have a self-directed IRA with a mutual fund company you should be able to invest in mutual funds of gold mining stocks, or in mutual funds that track the price of gold. If your IRA or 401(k) is with a brokerage firm, you may also be able to invest in an exchange traded fund like the one that trades under the ticker symbol GLD. This exchange traded fund, or ETF, tracks the price of gold directly, so when the price of gold goes up so does the price of the ETF.”

Assuming you are able to invest in Precious metals either in physical form or in ETFS, Consider making regular investments into the gold portion of your IRA or 401(k) program. If your 401(k) program provides a gold option, you can allocate a portion of your regular investments into your gold investments. If you hold gold in your self-directed IRA, you can move money into that account on a monthly basis until you reach the maximum annual investment allowed by the IRS.

In that case the allocation for November should look like:

The principle will remain the same. Keep it simple. Reduce allocation from Equities and Fixed Income and increase allocation to precious metal sector. All new contributions for November should be held either in Cash or in PM sector.

And as we move towards the Fiscal cliff of 2013-14, we will continue to make changes in the allocation and do sector rotation while keeping costs down.

Please read the full disclaimer at http://bbfinance.blogspot.ca/p/disclaimer_12.html

Going Round In Circle.

One more day gone with lots of sound and fury but little result. At some point during the day, SPX was up almost 17 points but gave up most of the gain and closed little less than four points high. Considering it was the 1^st trading day of the month, that was a disappointing show. But we know that the markets are going to be in the chop zone for some more time and we are not going to play suckers!

Yes there is a QEI in place and the mad scientist was justifying his action today. He thinks that he knows that it should work but so far it is not. If the objective is to reduce unemployment in USofA, he will have to wait till 2016 at the least.  And pump in $ 40 bil. per month till then? Who knows how USA would look like then, may be like Zimbabwe.

In the morning, the unemployment figures in Europe were announced and it was not a pretty picture. And how the market reacts? By jumping higher! Given the flow of liquidity and past experience with QE, we can only expect that risk assets will go higher. But maybe, just maybe, this time it will be different and unforeseen circumstances will make it play other way round.  Europe is becoming more difficult to manage and here is the latest;

http://www.cnbc.com/id/49246892

Spain may be ready to ask for bailout but Germany is not ready. Cool! And China delayed the convention till November 8^th, which is highly unusual.

However much I think that a long term top is close, we still have to contend with the presidential election cycle and of course QEI. Many good folks are looking for a correction when they would be able to get in.I  think they will not get that chance. After today’s price action, I have changed the target from 50 DMA to 30 DMA and while a test of the 30 DMA is possible this week, unless the market convincingly breaks down the 30 DMA, the up-trend will resume soon.

Gold make the intra-day high for 2012 and looking at the gold futures chart, I think Gold will challenge $ 1750 soon but will most likely bounce from there. In case of Silver the bounce level is between $ 33.50 and $ 34. Anything lower will be a sell signal.

The linear relationship between precious metals and equities will most likely break down going into 2013. The flood of liquidity will still be chasing assets and more and more folks will go for ABCD, which is “Anything Bernanke Cannot Destroy”.  The equities will suffer because fundamentals will catch up and when the global economy is entering into a recession coupled with inflation, who is going to buy stocks? GS has now reduced their 4^th QTR GDP target to 1.8%. If the global economy suffers, I do not see crude prices going higher, unless there is a war in Middle East. Therefore the only place all these liquidity can go is something which people can hold on to. But that is still few months away.

Today bonds, VIX, PM sector , Oil, and of course equities were up. Rare on a Monday. Did you notice that for the past 18 weeks, Stocks have been down on Mondays and today was an exception to that trend. Does it mean that bull market is set to resume?  If that is the case, we better have a test of 30 DMA very soon. Time may be running out for the bears to inflict any damage. We need to test the DMA 30 which means a trip to the downside before I can be comfortable to long. However, do keep in mind the various time frames we are discussing. The Bull Run is till about 10^th November and a dive from there till February/march 2013. But one month at a time   and I will make every effort to preserve capital.  So stay tuned.

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Thanks for reading http://bbfinance.blogspot.com/  and join me in Twitter (@bbfinanceblog)for the real time market updates and calls.