All of a sudden it dawned on me that I think we had better start to pay considerable attention to what's been happening recently in the bond markets. Ever since November of last year, the entire rally in equities was pretty much in complete defiance of falling rates (stronger bond market). Normally when rates are falling, that means bonds are rising so equities should be falling with rates. But since November they haven't. The equities markets have been supported by Goldman Sacks, JPM, BAC and the rest of that satanic den of vipers until the day the bond markets woke up. It looks like that day has quietly arrived. Normally it's the bond markets that dictate where equities are going, not the other way around. But not this time. In any case, it is what it is and now...
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| $TNX Weekly - Click here for a live and updating version |
... all of a sudden rates are exploding higher with all indications suggesting they have a lot further to rise. Rising rates would be in total support of rising equities prices. Unfreakingbelievable, but it appears that's what might happen. Rates certainly appear to be on the verge of exploding higher, meaning a ton of money will be fleeing the bond markets. This time may indeed be very different though, insofar as that the "reasons" for rising rates today are unlike any reasons in prior history and they're not good reasons. They're very, very bad reasons. So undoubtedly a lot of that cash fleeing the bond markets will be required to retire leveraged debt that was created just to buy those bonds in the first place. It'll just vanish off the face of the earth. But without doubt, an absolute
shitload trainload of it would still find its way into equities. God damn! But hey, if that means bears have to swallow their pride and make some money on the long side for a change, buying TNA tomorrow might be the smartest thing we've done in the past year.
I can just hear Dimon now
:
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"What can I say kids? That's just the way it works when we own run the whole fuckin' world!" |
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| "And by the way, thanks for lunch." [image courtesy of ZH] |
EDIT: Just for the record... the day after this article was published, TNA
did close the next session higher by 3.26% and rose by a further 2.25% the day after that, to close the week up 6.83%. On Aug. 21, four sessions after this piece was written, TNA peaked 9.3% higher.
================
The bonds have been selling off alright! Surprising that the money hasn't gone into stocks like it usually does (volume is pathetic the past 8 days). I think the safe money was in bonds, and is getting OUT, and not in to stocks. Yet. And I was thinking the bonds would not sell off until after stocks did. Maybe smart money is starting to realize that bonds aren't safe either. If Ben had to chose between supporting bonds and stocks, I think he has to chose bonds to get the massive debt funded (40% rolls over each year ... it's like an adjustable rate mortgage). But maybe the bond scare will flush more money into stocks ... who knows. Stupidity of the herd is hard to estimate.
ReplyDeleteHi there Greggor, how you doin' mate? Yeah, I've always postulated that when rates finally start to rise they will be for all the wrong reasons. One thing we know for certain is that they won't be rising for the usual reasons, to try to put a damper on an overheating economy and rising prices. Well some prices are certainly rising but that's mainly thanks to the effect of some of the QE play money flowing into risky assets other than the stock markets, like commodities.
ReplyDeleteNope, the main reason rates will be rising will be due to the credit crisis. Rates are already going ballistic in Europe because basically those countries are a bunch of broke deadbeats. No disrespect intended either, they were led down that path deliberately. And we're not one bit better... we're just going to be later. So I'm sure you're right, I too think a lot of the money that flees the bond markets is just going to vaporize... gone forever. But not all of it. And where are those remaining dollars going to go? There will be lots and lots of it for quite a while yet. So I'm leaning toward the unthinkable... that it's going to ignite another equities explosion. Why do I feel so dirty for having said that?
"Maybe those big banks who might have tried front running QE3 are getting cold feet and exiting those positions?"
Yeah, that's entirely possible. Maybe the unwind happens in both equities and bonds together? That sounds impossible. But if we think of it in terms of the possibility that most of the money that flees the bond markets just vaporizes, then yeah I'd say equities and bonds and everything else could come tumbling down together. Maybe we're on the cusp of the entire great unwind altogether? "Interest rates derivatives starting to ignite?" Holy shit Batman. We'd be talking about the big "D" man. I think we'll find out the answer real quick this time though Greg. If equities don't take off now on another huge thrust higher, but instead actually 'finally' turn lower... at the same time as bonds... then I think we have our answer. It's on!
http://thekeystonespeculator.blogspot.co.uk/2012/08/cpc-putcall-ratio-daily-chart-signals_15.html
ReplyDeleteSomeone once described the EURUSD relationship as two giant counterweights in the tptb's global forex game. I would expect the nank to use a similar strategy with the stock-bond markets.
ReplyDeletehttp://www.marketoracle.co.uk/Article34819.html (golden jackass' excellent article on the gargantuan UST derivative complex)
The UST complex is huge, fellas, it is the ultimate can to be kicked. I think we will experience the hyperinflation before rates begin to truly fall, and this current event is a ploy to buy some time. It would help to consolidate bonds as well, give it some resistance points.
That's amazing isn't it CR? And of course that's very valid info. If it turns out that we are indeed near a market top (which is what I'd say is the case if it weren't for the activities within the bond markets), then it looks like we're going to be seeing bonds and equities tank at the same time. The worst case scenario.
ReplyDeletehello AR.
ReplyDeleteFirst thought...if the bond yields are UP.. that makes bonds MORE ATTRACTIVE THAN EQUITIES.
I laugh at how everyone seems to have it backwards.
Sure, if the TREND is for lower bond prices, thats not good for those holding...but still.
--
This market is ILL. It is twisted beyond all recognition.
The old rules do NOT apply. Almost ANYTHING can happen at ANY time.
The whole situation is frakking hillarious, I can't wait for the autumn.
AR, you have guts to say this to a mostly bear audience. I like your style. We surely are in uncharted territory. Thank you so much for your commentary!
ReplyDeletehttp://blog.kimblechartingsolutions.com/
European Credit Markets – No ‘Obvious End to Crisis’
ReplyDeleteCapital Flight from Europe Widens
http://www.acting-man.com/?p=19002
Italy GDP Drops 4th Consecutive Quarter
http://www.bbc.co.uk/news/business-19162772
Italy Manufacturing PMI
Rate of job losses sharpest since October 2009
Input prices drop at fastest rate in three years
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9889
Italy Services PMI
Activity falls markedly as a result of accelerated decline in new business
12-month outlook turns negative for first time in series history
Rate of job shedding fastest for three months
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9921
You're welcome tutomu. Yeah, I'll certainly be criticized for saying anything that supports the bull case... like pointing out that when the bond market tanks, a lot of that money flows into equities. At least that's been standard procedure for the past 100 years, so unless it's 'different this time', the same should hold true today.
ReplyDeleteBUT... for the past couple of years at least, I've contended that it 'is' different this time because the next time bonds start to drop it would be for all the wrong reasons. They certainly aren't dropping because of a rate hike by the FED in order to try to cool down an overheating economy, which is normally the case. Rates are rising all over the globe because everybody and their dog is broke... a credit risk. So although in the article I came across as being bullish, in no way am I convinced that this time the money that is fleeing the bond markets will indeed make its way into equities... especially after an incredibly stupid and phoney looking manipulated pattern like the one we're seeing today. But the criminal banking cabal is just going to do what they're going to do and we're just along for the ride. I'll especially be criticized or laughed at because everybody who knows me knows there's nobody out there who who understands better than I do why equities should have hit the skids back in 2009 and just kept on falling. The bottom in March of 2009 wouldn't even have happened if not for "the bailout". To quote the worst troll who ever lived "Haha, AR went long at the top!". And of course at the time I didn't, he just didn't know how to read an article. Having said that though, I admit that the conclusion I've drawn in the piece above is that the bond market is telegraphing that funds are in the process of becoming available to flood into equities. But to be honest, this time around I'll have to see it to believe it.
If yields are up that doesn't necessarily make bonds more attractive than equities at all... not as long as those rates are rising. Because any time the world is in a phase where bond prices are going to be dropping for an extended period of time, like a year for example, it's natural that that money wants to flow somewhere else. Usually it has been into the equities markets because (at least in the past), the forces that caused rates to rise were a booming economy, rising profits, and rising inflation. None of those forces are in effect today as far as I can see. So I still contend that rates are rising for all the wrong reasons, very bad reasons.
ReplyDeleteBut as you say, eventually yields on bonds will become attractive enough to make them a decent alternative to equities. Perhaps when they hit 8% again. :-) You bet, the market is so damned ill, twisted beyond anything we've every seen before. We can thank the criminals for that.
About the last remaining thing that makes sense is that maybe the GDOW has to hit a 61.8 retrace of the March high before everything rolls over into wave 3. That would be around 1910, at around the end of the month on the current trajectory.
ReplyDelete"...end of the month"... or maybe just before the next FOMC meeting Sept. 13th.
ReplyDeleteIt's sure plausible. And seems that would price in about everything that could be priced in.
ReplyDeleteNice to hear from you sir AR!
ReplyDeleteI do enjoy your thoughts. I haven't been around much myself ... staring bleary eyed at currency waves ...
I think you identified a possibility that is hard to imagine but I've leared to be open to.
I want to see the support on AUDUSD broken before I short it -- because I'm vorried those schmucks will run stops again before dropping this ponzi. And maybe the las stop-run will be another thurust higher in equities. Maybe the Fed told the banks to not ever evber short again like in 2008 or else it's all over for all of them.
All of it coming tumbling down together is my higher ranking scenario. Equities going up ... beyond what's been labeled as minor 2? Who knows ... anything appears possible now with the damned HFT'ers.
In stark contrast to the two pictures on your blog post, one of Jamie Dimon and the other of an outrageous bill for lunch, I offer the blog's readership this 12 minute video I would hope all banksters would watch and learn from.
ReplyDeleteBanking on Change
http://vimeo.com/9419926
Something not to be liked about my post? it's disappeared.
ReplyDeleteThanks for that video DL. That's a nice find. Sadly, I'm afraid there is a glaring difference between the banker in the video and the banksters the likes of Dimon who not only aren't willing to learn anything about kindness or genuine caring about the community, but the literally can't. They are incapable because they are lacking one component that the banker in the video possesses that they don't. He has a soul.
ReplyDeleteOne can hope though. When we come out the other side of the shitstorm that we're going to have to endure, it's possible that the world will evolve into something so beautiful that right now we can't even imagine it. A world without private bankers would be a world without war. Community bankers, like credit unions could work the miracles that the banker in the video. Then, just imagine a community bank, owned by the people that is 100 times or 1000 times the size of the biggest credit union you've ever seen. Such a bank would be a blessing and we could grow the world just as successfully with banks like that in place of private, greedy, manipulating killers who are parading around pretending to be today's bankers. They aren't bankers, they're demons praying on humanity. Their day will come. When we come out the other side of the shitstorm, they will be no longer exist. That's the only answer to the world's problems.
My apologies trustee... I found two of your comments in the spam bin but they're released now. Thanks for the heads up. Disqus takes it upon itself to determine what it thinks is and isn't spam. If you've had trouble on other Disqus powered blogs and the blog owner didn't correct Disqus' errant ways, that will follow you around. I know that from experience. One particular blog owner refuses to correct Disqus and one particular troll, one who actually belongs behind bars, took full advantage of that carelessness. He had a field day with my comments. I still basically refuse to post on that site anymore for that reason, among others. But the damage that some blog owners allow to be done to individual commenters can be a real nuisance and more than infuriating. It can affect you on entirely different blogs than the one where the damage was done. We'll keep an eye on it.
ReplyDeleteThank you for the thoughtful response!
ReplyDeleteThe late great Terry Laundry of T Theory fame still has his live charts up at his website. Hope it stays that way... Here is one from today : http://screencast.com/t/0IwCsDkWIt will be what it will be, but sure looks like a backtest and a right shoulder of an upright head and shoulders for the T Theory Confidence Index (FAGIX:VUSTX). Bearish for equities. :(
What can be manipulated will be. The FED owns the US Bond market (for now). Rates will stay artificially low for the time being. There is still much sh*t to hit the fan--Europe and Japan (the biggest bug ever to hit a windshield).
:)
ah no worries, trolling is becoming an epidemic it seems
ReplyDeleteEpic beta chase rally.
ReplyDeleteGame theory tells me that defecting first (ie. being the first to exit this beta-chasing rally) is going to be the winning strategy for our hedge funds and MMs. I wonder if that is going to be EOD tomorrow, with opex closing?
That's what I would do, but maybe that's why I'm not a ceo/ trade desk manager!
Tutomu, would you mind re-submitting that link because the first one isn't working. If you like I could just edit the new link into your comment above and all would be good. Thanks :-)
ReplyDeleteI might be one person who's affected more than most by OPEX week. I hate it with a passion because of the MAX PAIN thing and the obvious temptation for the market manipulators (bankers) to manipulate the market to the position where it is most profitable for them by criminally ensuring that the 'insurance' they sold in the form of options does not pay off for the innocent fools who purchased it... their victims. But every once in a while the underlying market move is so powerful that the MAX PAIN levels don't even become a factor.
ReplyDeleteFor today, MAX PAIN levels are so far below current prices that it would take a vicious drop in order for the banksters to capitalize fully. So although I'm always suspicious, and even though a pullback seems warranted, I'm not certain this rally will end today. It's gotten to the point where I'm even wondering if the bankers are total idiots in that they think they're just going to run this market up until after the election - OR - are they setting up Obama for a mighty fall by letting the market tank on his watch? I mean, it seems absolutely incomprehensible to think the market is just going to rally for another 3 straight months. Surely there's something wrong here with the timing... if Obama is to escape being the biggest fall guy in history. That aspect of it all is very interesting if nothing else.
That's a great article TBA, thanks for the link.
ReplyDelete"I think we will experience the hyperinflation before rates begin to
truly fall, and this current event is a ploy to buy some time. It would
help to consolidate bonds as well, give it some resistance points."
In all due respect TBA, I don't see how that would be possible since almost 'any' form of inflation is surely going to be met with policing by the bond market itself. There are still trillions and trillions of dollars worth of US bonds currently in the hands of people other than the FED, and the way they fight inflation is to hike rates. They would literally dump bonds if inflation got out of hand, ensuring that rates would climb in response to inflation. Not even the FED is big enough to stop that from happening.
BUT... rates can rise right along with inflation for years. We saw that happen in the late 1970's. It literally took a couple of years of soaring rates before inflation actually came back under control back then. I remember mortgage rates hitting 18% and gold soaring to the unthinkable price of $840 and the Hunt brothers' attempt to corner the silver market drove it all the way to $50, when the average price had been around $5. It took murderous rates to contain that inflation, an inflation that was a mere pittance compared to the prospects of the 'next' inflationary cycle. The bond market will literally crash if hyperinflation hits.
Tim Knight has a good post today (not to imply that this is the first time, lol). I like the guy.
ReplyDeleteAnd of course Pretzel's post is outstanding as usual. Just published..
Wow. It's like the GDOW suddenly got in a big hurry to try to touch that fib.
ReplyDeleteI hadn't been watching it this morning but I see it gapped a bit higher and has been slipping ever since. Not a big move but it's still a rather negative bit of action so far. I have no clue why the Russell and the S&P are floating on air this morning either when the Aussie:Yen is falling like it is.
ReplyDeleteThe money's going into the oversold foreign markets for now. Take a look at Japan, Australia, Spain, Italy, Portugal, France, etc.. Very direct correlation since the last week of July. VERY DIRECT.
ReplyDeleteYep. Scrolling back through the GDOW I see every top finishes with a little spike or parabolic move like today. And the AUD/JPY sure has the look of a rolling-over top, and could be leading the way.
ReplyDeleteAs Albert Einstein said, "Imagination is more important than knowledge."
ReplyDeleteOur outside world is a reflection of our inner world. When we as humanity begin to re-cognize our inherent power, we can recreate ourselves in any way we wish.
http://stockcharts.com/public/1172710/tenpp
ReplyDeleteThere is a link to all his public charts. The one I was referring to was chart 00. Thanks!
With 60 minutes to go in the trading week, the Russell is now up on the day twice as much as the NAS and more than 7 times as much as the S&P 500. Of course it also happens to be an Opex day with volume in IWM at the lowest in approximately 550 years. In light of the fact that the Russell is almost assuredly the favorite in the long list of JPM's toys, in case you're in need of a reminder why this is happening today I simply refer you to the picture of Mr. Dimon in the post above.
ReplyDeleteThx for the excellent blog. Definitely disagree with some stuff here. I don't see how money can move from bonds to equities. That's not possible. If you sell your treasuries someone else has to buy it. Kind of like money on the sidelines myth. Unless the Fed has started some unsterilized QE no new money is flowing into the system. Also completely disagree over your 8% rates. Impossible any time soon. It will be years before that happens. We will see 1% or lower on the 10 yr before that happens. If US interest rates are 8% the entire financial system will implode and that just wont happen.
ReplyDeleteaud/usd on the ropes right now. Get in long for a possible recovery. If stopped out flip to short. If you look at march april period you can see aud/usd topped way before /ES.
ReplyDeleteThanks. That's one ratio that TX over at TrendXplorer suggested about 4 or 5 months ago might be a ratio I'd like to study and write an article about. I agreed with him... it's a terrific indicator. But I just haven't found the time to get around to it. Thanks for the reminder.
ReplyDeleteIf you can show me where I said rates would hit 8% "anytime soon", I'll retract that statement. But I didn't say it so I'd prefer if you'd just be factual rather than make assertions like that.
ReplyDelete"Impossible any time soon. It will be years before that happens."
I agree!
"We will see 1% or lower on the 10 yr before that happens."
That's debatable, but possible. I doubt we'll 'ever' see rates below 1% on TNX, but I also agree it's possible.
"If US interest rates are 8% the entire financial system will implode..."
Absolutely. If rates hit 4% the entire financial system will implode. It's not going to take 8% that's for sure.
"... and that just wont happen."
We can just agree to disagree in that one. Not only is it going to happen, it is inevitable.
I'll also go on record as saying that that call I made about the big dump at the end of the day pretty much shit the bed.
ReplyDeleteOops my bad. Apologies. I still have a hard time imagining interest rates going up even slowly to those levels. Yes Europe is 7% but only for peripheral small countries. I am not sure that would apply to the US. It seems we are following the Japanese path. Bail out the banks on the backs of the entire population. No debt writedowns nothing good. So the banks will play the borrow at 0% and lend to govt at 3-4% until their books are clean which would take more than a decade. This money ultimately comes from the people which means we will be deleveraging for quite a while. US is the supreme military power still and still has the reserve currency. I see no reason why we cant reach Japanese levels of debt and interest rates. As a citizen I don't want to see debt/gdp >200 for USA but so far I don't see either the American people or the politicians willing to do anything about it. People whine about the debt but want their checks and services. People had a chance with Ron Paul they blew it. Now as a trader I have to make money on what the politicians will do rather than whats good or what I wish.
ReplyDeleteMaybe after a decade Europe might be doing good and Euro good enough to take over from the USD? I have a hard time seeing how we can have very high interest rates with the entire western world develeraging. I see you don't subscribe to hyperinflation. I think that's very smart.
http://armstrongeconomics.com/693-2/2012-2/where-do-empires-go-to-die-and-when-they-do-die-how-do-empires-die/
Are you keeping an eye on Japanese bonds and usd/jpy? That will unravel much before the US and give us some clues to how these things play out.
http://www.youtube.com/watch?feature=player_embedded&v=jboTeS9Okak I don't know if you have seen this video. Puts the debt in perspective. If you have please ignore.
ReplyDeleteI always allow a 48 hour window for my calls. If that doesn't do it, I make it a 72 hour window. And on from there. ;)
ReplyDelete'Be right and sit tight'
ReplyDeletephilosophy of trading.
August 15, 2012
"Soros Fund Management LLC,
more than tripled its investment in the SPDR Gold Trust
in the first quarter
"John Paulson
upped his stake in GLD by 26%
with more than 44 percent of [his] U.S. traded equities tied to bullion.
Holdings in the SPDR Gold Trust are Paulson’s largest position.
"Paulson is seeking to reverse record losses last year
caused by an ill-timed bet on an economic recovery.
----------------------------------------
"George Soros
On September 16, 1992,...
Soros' fund sold short more than $10 billion in pounds...
the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound, earning Soros an estimated $1.1 billion
"John Paulson
...became a billionaire in 2007
by wagering against the subprime mortgage market"
No I hadn't seen that video. Thanks for the link. Unfortunately it didn't take long before I could see where Mr. Robbins was going with his message. His single goal, his entire purpose for presenting that message was to try to divert the viewer's angry gaze away from "the rich" and to get them to look "elsewhere".... "look anywhere but at we the rich". Sadly he's correct insofar as that if the people of America were to strip away all the wealth of the wealthiest fascist corporations, all the major banks, all their criminal leaders it wouldn't even put a dent in the debt. But that doesn't change the fact that it was those same people who got us into this mess in the first place. Funny how he didn't address that part at all, but instead is actually pleading for mercy on them. Wow, I never knew Tony Robbins would stoop to the level of acting as a shill for the wealthiest of the wealthy.
ReplyDeleteAt the end he never offered a solution either. Because there is no solution. Well actually, slashing the budget in half would be a good place to start but that'll never happen because the politicians Mr. Robbins is trying to protect with that video "don't want" to slash the budget. Too much military spending and gifts for those same rich would be slashed. They can't have that.
Oh yes definitely plenty of blame to go around at all levels. I am not sure if you know how big pharma/big agri corps collude with govt to the detriment of millions worldwide. PM me at newbfxtrader@gmail.com . I can share with you some food/medicine stuff that will blow your mind. And put you on the path to long term health pain free. We need more people like you around longer!
ReplyDeleteFlexibility is good, lol.
ReplyDeleteYes, I'm very aware of big pharma and the things they do to the detriment of society. They murdered my brother. And yes, I'm aware of the giant agri corps like Monsanto and what their evil plan is. Sorry, I don't sent out my email address to people I met two hours ago. Besides, we talk about all kinds of food/medicine stuff on this blog from time to time so feel free to post a link if you' have something you'd like to offer.
ReplyDeleteThat's all right take your time. Theres only so much I can post here. I mean no harm and potentially a lot of benefit. You can start off here
ReplyDeletehttp://www.youtube.com/watch?v=MyXa39ICIrk see all ten parts. That's just the tip of the iceberg.
Thx. I don't think Bernanke has a choice. The monetary theory we subscribe to now is completely wrong. Lending comes first reserves follow. Not the other way around. I wish I had known this earlier! http://globaleconomicanalysis.blogspot.com/2009/12/fictional-reserve-lending-and-myth-of.html
ReplyDeletehttp://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/
If I knew couple of years ago what I know now I would have put everything I had into long bonds! This is also the reason I don't see this trade being over anytime soon. We have trillions more reserves to make to catch up to lending or we should be willing to see the credit collapse. Neither one will be pretty.
Thanks newb. There's one particular troll who's so obsessed with trying to get at me that he'd stoop to any depth in order to try to get his foot in my door again, including trying to suck me into handing him my email address. Ain't gonna happen. He's banned from here and that's just driving him nuts as well. He's mainly responsible for the total demise of one other once-popular blog and now it's now only a mere shadow of its former self. Just being careful.
ReplyDeleteLots of anguish and frustration out there regarding wave counting the US indexes. People are throwing about everything they can at it to explain it, even coming up with new Elliott Wave rules, but the one thing they don't do is admit that intervention has distorted and skewed the counts on US indexes.
ReplyDeleteI don't know what drives the stubbornness and reluctance to admit it. Intervention has affected the momentum, duration, and amplitude of every move up, has tilted wave structures, and has pushed waves into rule-violating territory with regularity. On the US indexes, that is.
But just look at the AUD/JPY and GDOW -- less influenced by intervention -- and you'll see well-behaved counts that do adhere to EW principles, and indicate the move down from March was indeed an impulse, the move up from June a correction, and as the retrace has reached the 61.8 Fib area on both charts.
So, based on that, the current correction appears to be about over.
One would think that with all the intervention by the ECB, the European indexes would be showing the same phenomenon. But maybe because the funding is spread all over all the indexes in Europe the effect is more muted. But for whatever reason, the DAX has been one index I like to check out because it's still showing nice clean EW waves. Chartrambler has mentioned that as well in the past.
ReplyDeleteParis CAC looks like an example of what you're talking about. Retracement looks a bit exaggerated, almost as much as US indexes. But it's still behaving within guidelines.
ReplyDeleteI'm kind of looking for 'em to wring at least one more short squeeze out of this thing. I noticed a few doomy stories floating around in the fin news today, maybe priming the pump.
ReplyDeleteVery good post. I think Greenface mentioned that Prechter at least implied that central bank pumping had distorted the waves, or wrecked his predictions. But nobody wants to admit that. Even in the book EW Principals he says even high leverage markets can get distorted ... surely highly manipulated markets can get more distorted.
ReplyDeleteHey AR, I wanted to add the Junk bond bubble to the discussion of rates.
ReplyDeleteThis graph came from Barron's, and Stephanie Pomboy, and I added some wave labels to it.
The desparate search for yield has gotten junk bond prices up to the same point prior to the Crisis 1.0 ... or yields are down to the same level.
Which means that the default risk is being under priced again.
This can only end in tears.
Pension funds, already underfunded, will really be hurting when bonds get 10% to 20% haircuts.
This reminds me of the housing bubble ... everyone rushing to refinance, and take money out of homes because interest rates were low. Now companies are rushing to take on debt because the cost is so low.
The last bubble.
Anyway, I think JNK may be a better short than TLT. Because it's already had waves 1 and 2, and is ready for wave 3, and TLT may get tampered with by the FED for a while yet. And when the financial system starts freezing up again, junk bonds should get slaughtered.
There is room in many charts for a laste squiggle higher ...
ReplyDeleteHere is a monthly chart of AUDUSD.
ReplyDeletejust based on these two lines of resistance through opens or closes of monthly bars, it looks near done. Gotta be bearish on that. Doesn't answer the last squiggle question, but we are close. Doesn't rule out one last bear shake out and stop run either to get a tail above those lines.
Thanks Greg. I've been meaning to write an article on the ratio of FAGIX:VUSTX but just haven't gotten around to it. But that pair is an absolutely fantastic method of investigating the relationship between junk bonds and high grade (cough) US treasuries.
ReplyDeleteFAGIX tracks almost identically with JNK but has been in existence for much longer. So by using that one instead of JNK we can get a much longer relationship to study between Fidelity Capital and Income Fund (FAGIX - which is made up of truly junky bonds) and the Vanguard Long-Term Treasury Fund (VUSTX). This ratio tracks nearly perfectly with equities, nearly as good (or perhaps even as good as) the Aussie:Yen pair. And that makes sense since both ratios offer an accurate way of measuring the appetite for risk. IOW, no matter what spin we get out of the FED, the MSM or anywhere else, either ratio, the Aussie:Yen cross or the FAGIX:VUSTX pair reveal the absolute truth about what the big boys are doing relative to their perception of risk.
At this time that ratio is rising in tandem with equities (as it should and as we would expect). But ironically, the reason it's rising is NOT so much because of any action in the junk bond market but instead it's rising more because of the action in the high quality bond market (US treasuries are tanking more than junk bonds are and that's why the stock markets are still rising). In other words, although until recently the junk bond market has been rising along with equities AND the better quality bonds, the vast majority of the actual movement lately has been in the higher quality bonds and not so much in the junk bond arena. Said differently, the appetite for high grade government bonds is falling even faster than the appetite for sugar coated shit bonds with a high yield. How bizarre is that? That phenomenon is so strange that I'd have to think it'll be short lived. IOW, I'd expect the opposite to happen when equities are truly ready to tank with enthusiasm. Just wait until JNK starts to drop in value at a faster rate
than the treasuries fund. And of course, that's exactly what
you're zeroing in on with the chart you presented. It's a fascinating study and to be honest I haven't put enough time into it to really say much more. I really gotta find the time and energy to get that study done.
http://screencast.com/t/addwHVdm6
ReplyDeleteThanks Scotty. Do you have any conclusions based on your chart that you'd care to share?
ReplyDeleteIf you look at Pretzels chart the VIX seems to bottom well before the equities top. So I guess the VIX and equities could travel up for some time?
ReplyDeleteI'm not sure which chart of Pretzel's you refer to since he puts together a lot of charts in so many different time frames. But I can't remember seeing a chart of his that suggested the VIX and equities would be rising together for some time. So I quickly put this one together just to demonstrate that if the options market starts to show a little fear and it manifests itself in a rising VIX, it doesn't usually take long for equities to get the message. So no, I don't think the VIX and equities will be rising together for very long, if at all. It has happened though, where the VIX starts to slowly creep upward for perhaps a week before equities start to drop with enthusiasm. Maybe that happens this time too, although in my opinion the equities markets are making a case that they're done.
ReplyDeleteMarket internals haven't quite confirmed a top yet though so I think it might require a few more days of down action before we can be confident that the top is behind us. I think it is, but it still might not be "the" top. We'll just have to watch and see.
http://1.bp.blogspot.com/-SIvYUrSO6Vc/UDHYlJT_WHI/AAAAAAAADaA/EsgrGkPbVQs/s1600/vix.png
ReplyDeleteNotice this year the bottom in VIX was couple weeks before equities top in April. Same in may june period.
I 'thought' that might be the chart of Pretzel's you were referring to and I was going to post that one so we could discuss it. But since it didn't show equities overlaid I decided that that probably wasn't the one you were referring to. Turns out I was right the first time, lol.
ReplyDeleteAgreed, the chart I provided does indeed show that the VIX did bottom before equities actually peaked a time or two. Most of the time it doesn't but it 'has' happened. I'd consider it to be an anomaly to be honest, but whatever. Same thing happened in Feb. of 2011. In May, June of this year it did as well but the space between the bottom in the VIX and the top in equities was 2 trading days. I've blown up the first chart I put together so we can see a bit closer what actually happened.
In any event, I'm not certain what you're getting at here. Are you hoping that since VIX has turned higher that equities still have a few weeks of upside in them? That's possible. But it would be somewhat irregular since it doesn't happen very often, and doesn't make a whole lot of sense why it 'should' happen. When it does though, it's true, equities sometimes can continue higher for a week, maybe two once the VIX has put in a true bottom. For that matter, we don't even know for sure whether or not the VIX has actually put in its low either.
Yeah. I was thinking maybe VIX has already bottomed but top may churn a couple of weeks frustrate bears before actually heading down. Maybe a retest of 1.06 on aud/usd and so on..
ReplyDeleteI 'thought' that might be the chart of Pretzel's you were referring to and I was going to post that one so we could discuss it. But then I decided that that probably wasn't the one you were referring to. Turns out I was right the first time, lol.
ReplyDeleteAgreed, the chart I provided does indeed show that the VIX did bottom before equities actually peaked a time or two. Most of the time it doesn't but it 'has' happened. I'd consider it to be an anomaly to be honest, but whatever. Same thing happened in Feb. of 2011. In May, June of this year it did as well but the space between the bottom in the VIX and the top in equities was 2 trading days. I've blown up the first chart I put together so we can see a bit closer what actually happened.
In any event, I'm not certain what you're getting at here. Are you hoping that since VIX has turned higher that equities still have a few weeks of upside in them? That's possible. But it would be somewhat irregular since it doesn't happen very often, and doesn't make a whole lot of sense why it 'should' happen. When it does though, it's true, equities sometimes can continue higher for a week, maybe two once the VIX has put in a true bottom. For that matter, we don't even know for sure whether or not the VIX has actually put in its low either.
HI AR, I just saw this ... thanks. That study sounds very interesting. And it does seem odd that the appetite for Treasuries is falling faster than junky bonds. Maybe it's just a short period of time like banks who got stuck trying to frontrun QE3 or something. But if it's a trend, it's like big money is saying they think US bonds are junkier than junk bonds. While probably true, that's not very patriotic! I think your study will be a good one. And I hadn't heard of those funds. Anyway, I think it's got the possibility to shed light on movements given we have debt destruction on our hands. Slow burn now under the surface, but it's there waiting to burst into a forest fire.
ReplyDeleteAnd the shit going on with Dr. J's shiterfuge was rather funny. It starts snowballing. A good subject to run with.
Yeah, that shit was funny. Geez, Southpark sure has a lot of fun with that topic. Did you ever see the episode about the Urinal Deuce? Funnier than hell. Here's one I'd never seen until just now, while I was searching for the Deuce episode to show you. This one's something different.
ReplyDeleteThat file is not coming through ... probably some probably a shitty firewall. Har har.
ReplyDeleteYes, the AUDUSD still hasn't broken the channel line .... I'm not biting till then. Got burned last night at the neck line 1.046.
ReplyDeleteI think the link is fixed. I hate it when shit like that happens. :-)
ReplyDeletehttp://iowahawk.typepad.com/iowahawk/2012/03/inflammatory-expert-cited.html
ReplyDeletehttp://iowahawk.typepad.com/iowahawk/2011/03/feed-your-family-on-10-billion-a-day.html
http://www.youtube.com/watch?feature=player_embedded&v=661pi6K-8WQ
Hi AR,
ReplyDeleteI have hear of South Park and Ive yet to watch it. However, with the episode you just posted, I think this humor reflects the psyche of base Americana and contributes to it. As an American, I find it utterly embarrassing, kinda like this expose by the Brits:
http://www.safeshare.tv/v/fJuNgBkloFE
But then, potty talk never goes out of style through the generations or cross-culturally, I guess.
"Diaperhead"? Puuuleeez....
Oh god yeah Divinelove, the general morality in the western world has gone absolutely to the dogs compared to when we were teens. To even imagine the type of stuff that we see on TV today was unimaginable back then. Potty humor galore (which I sometimes find funny because it's just so strange to hear it at all, let alone with such complete contempt for what used to be considered as "proper"), sexual morals no longer even existent, cruelty to others become almost accepted, police brutality slowly being introduced as the "new normal"... it's just incredible. But this type of transition takes a generation or two to implement, and the bastards (oops I said a bad word) who run this world are very patient. After all, their goal of total global domination has been in place since the 1740s at least. Perhaps a lot longer.
ReplyDeleteBut it's no better in Islamic countries where they are actually a lot more honorable in some ways. Yet they think it's fine to stone women, to kill them for bringing shame to a family, etc. A week or two ago a video was shown on the internet (I wouldn't even attempt to watch it) apparently showing a man somewhere in the Middle East being beheaded with what amounted to nothing much better than a dull butter knife, by religious zealots. The story said that he just laid there quietly and endured it as if it was his fate. Well apparently it was, but it shouldn't have been. What kind of religion is that?
For sure, I'm just stunned by it all and the only hope I hold out is that once the world drops into the depths that are surely coming, that humanity will emerge on the other side with some sort of new found hope, love, peace and high standards. In order for that to happen though, the global banking cabal would have to somehow be eradicated somewhere along the line. Although we can always hope, I'm afraid it's going to take more than just 'hope'. Hopefully they'll just implode with the derivatives bombs they've loaded themselves up with.
From out here in my bleacher seat it seems like maybe a risky move, this "easing teasing." Sure, they may squeeze out a few more weeks up side, but it also may price in every dollar and then some. Then actual QE could be a sell-the-news event. And when confidence in QE fails, the easing bubble pops and it all comes down.
ReplyDeleteI agree with you. This next rise in commodities will put the nail into the Fed's plan too
ReplyDeleteAs far as I can tell, the usual fuel and ignition supplied by JPM is starting to get real old right about now. I almost get the sense it's not working anymore. The FOMC minutes were released and the Aussie:Yen pair, the best measure
ReplyDeleteof appetite for risk that I know of, tanked. Meanwhile, back at the casino equities got a boost...
for what reason nobody will ever know. JP Fizzle tried the same old, very old, play with the Russell, just the seam old play from the tattered old playbook that everybody by now is literally laughing at. And here's what they got. It looks good on 'em:
As far as I can tell, the usual fuel and ignition supplied by JPM is starting to get real old right about now. I almost get the sense it's not working anymore. The FOMC minutes were released and the Aussie:Yen pair, the best measure of appetite for risk that I know of, tanked. Meanwhile, back at the casino equities got a boost... for what reason nobody will ever know. JP Fizzle tried the same old, very old, play with the Russell, just the seam old play from the tattered old playbook that everybody by now is literally laughing at. And here's what they got. Seriously, I think this all they're going to get out of it. The Aussie:Yen pair along with $TNX and TLT all said: "WTF are equities doing? Didn't they read the minutes? Screw 'em... let's get the hell out of here."
ReplyDeletePersonally I've never wanted the equities to gap lower tomorrow any more than I do right now, just so the amount of egg on the faces of the criminals at JPM will triple. It looks good on 'em:
yup aaii had those 20 % readings and market has lifted. looks like its getting frothy but trend is still strong. wait for a trend line break. dems need this market for election results. gluck
ReplyDeletehttp://www.aaii.com/sentimentsurvey/sent_results
None of us should be hard on ourselves about making bad calls or counts not being able to figure out which way the market is going short term. Matt Taibbi blogged recently that hedge funds, run by the masters of complex and intricate trading strategies, have been unable to beat, and are resorting to unloading everything and just buying AAPL.
ReplyDeleteWhich, Taibbi points out, is pretty ironic, since it doesn't take a master trader or insider knowledge to just buy and hold AAPL.
This probably goes a long way toward explaining why AAPL's market cap is where it is.
A bubble inflated by quantitative easing and Apple. Quapple bubble.
Haha. Taibbi provided a quote from Tyler Durden that was a paragraph long. Then Taibbi said "translating that into English..."
ReplyDeleteIsn't that the truth! The writing style on ZH results in what has to be just about the most annoying reading I've ever come across. It's too bad Durden writes in that style because there are definitely a lot of nuggets in his articles. But sometimes mining them out just takes too much effort. By time I get through all the 'interruptions' and finally get to the end of a sentence, I've forgotten what the first part of the sentence was about. On the other hand, Taibbi is one of the greatest sleuths ever. Love that guy!
gold and silver breakouts may be the play here
ReplyDeleteutohh bulls over 40%. last time that happened was end of march preceding a big drop.
ReplyDeleteI seem to remember reading that there are several Tyler Durdens. And that's probably one reason the philosophies get a little inconsistent and contradictory. (One post will talk about the need for austerity, another post warns about the dangers of it, and so on.)
ReplyDeleteBut they all consistently write in that "too hip for the room" style. But it tends to sail over the heads of those who probably need to understand it the most.
And the markets pretty much ignore every dire thing ZH posts. Maybe ZH has been accidentally feeding the machine, by helping to send it an endless parade of shorting sheep to squeeze.
Hehe... Pretzel is a little rough on them. I once saw him refer to them as Zero Cred.
ReplyDeleteAR:
ReplyDeleteHad Main Platform Crash while trading 11 different futures mkts. in size. Not back up completely but have tried to login to
pretzel on 3 diff pc's and says not authorized and also server malfunction.
Is it me or is the blog down?
Thanks
If u reply to this I will get an email.
Since its Low on 12/29/11
ReplyDeleteGold has been moving up
for longer than any other up move
since it’s Top on 9/6/11.
So, per Gann the trend is up.
$GOLD has now pierced
and GLD has now pierced
it’s W pattern center high
formed on 6/6/12.
When the center high is pierced
Per Gann this is a safe place to enter.
If the market moves
as it has in the past
we can then expect
based on the HUI chart:
1 2000
A launch straight up.
2 2004
A few weeks attempt
to break the bottom of the pierce bar
[close the gap]
then a launch straight up.
3 2009
A couple of weeks attempt
to break the bottom of the pierce bar
[close the gap]
then a launch straight up.
http://britefire.wordpress.com/2012/08/21/333/
Here is a screenshot.
ReplyDeleteThanks
Forbidden
You don't have permission to access /forums/ on this server.
Additionally, a 404 Not Found error was encountered while trying to use an ErrorDocument to handle the request.
Apache Server at www.deepwaveanalytics.com Port 80
lol. You have to admit being bearish for years while the stock market has doubled in the same period is not doing their readers any favors. All they had to do was ignore the gloom and doom and buy.
ReplyDeleteHi Squirrel. Sorry for not getting back to you sooner. I was away for the past 8 hours so I must have 'just missed' your message. By now you already know that PL's server was down or something so we were 'all' locked out for a while there.
ReplyDeleteWhich platform crashed on you? Your computer or your trading platform? Don't ya just hate when that happens? I had my damned internet go down for a full day recently. I've also noticed a lot of sites going down lately and they have no explanation. Like StockCharts for example... it was down for a full day (Monday I think) and they didn't have a clue what went wrong. One of their ISP's crashed or something so they re-routed all their service over two different providers or something. I don't know how it works but StockCharts was totally screwed for a full trading day and well into the evening... like until midnight. Other sites are going down mysteriously and then coming back on-line too. I have dark visions that somebody who doesn't want the internet to exist at all might be 'practicing', lol. In any case, I find it to be too much coincidence that so many sites are experiencing trouble all of a sudden.
Since AUD/JPY did take out that lower trend line from the June low, things are, um, interesting.
ReplyDeleteYes sir. It has also taken out a level that I've felt was probably going to be a real hurdle. So it should drop from here without too much argument or influence from the world's gayest playboy, Mr. Jamie "I'm The World's Biggest Thief And Proud Of It" Dimon.
ReplyDeleteBehold the completelike countliness. No need to repeat how I think these two may be the best reflections of actual social mood.
ReplyDeletehttp://i.imgur.com/03oKG.jpg
Thanks! Those do look complete, and AUDJPY broke the channel ... AUDUSD has not quite, so your find is a good signal.
ReplyDeleteI love where you're looking Papa, focusing on areas where more 'purity' (or 'honesty') can be found. We could actually fine tune it a bit too I think, and fairly safely, by using ($NYA) NYSE since it's so much broader of a market than the S&P is, yet it's domestic. It provides the same basic honesty as GDOW does but is closer to home if you know what I'm getting at. Thanks again for your perspectives, as always.
ReplyDeleteYeah, I was leaning toward that count that took the elections and even the Santa rally into view (thinking the current correction was a 4 with a 5 down yet to come, with an ABC correction up to the end of the year). But since that count busted and is off the table, things look quite a bit different.
ReplyDeleteSince the day Obama was elected, I've felt that he was being set up to be the biggest fall-guy in the history of the universe. Then as late as only about 2 months ago I started to think I was probably wrong about that, that the markets would indeed somehow magically just keep rising right into the election. And maybe that's still the case. But I'm also starting to get goose bumps all over again, realizing that maybe, just maybe they're going to sacrifice Obama after all and fool everybody by allowing a gigantic crash that starts earlier than the historically famous-for-crashes month of Oct. One thing is certain, it doesn't matter one iota who, or which party, is in power. The bastards own all of them anyway.
ReplyDeleteMy long term EW count on the GDOW. http://mediacdn.disqus.com/uploads/mediaembed/images/301/7302/original.jpg
ReplyDeleteYour count is my Alt count (which I'm not sure shouldn't be the preferred count . . .)
It's kind of tempting to think so, but I'm not one who thinks a collapse will be deliberately engineered. Too many very powerful people stand to lose too much. I've been one to believe that a big downward social mood wave will eventually overwhelm intervention -- which maybe has been stretched pretty close to its effective limits.
ReplyDeleteI think the PTB know the limits of the effectiveness of intervention too. That's one reason they've been lobbying Greece to stay put in the EU. They know things could get out of hand.
Just want to show you why the S&P is getting support right here.
ReplyDeleteUsing SPY as a proxy for the S&P, past volume metrics show that once
1400 is breached there's almost a vacuum of volume down until 1375ish.
It should get there in a hurry. Below that, support would begin to
increase the deeper it drops until it gets to (if it gets to) 1355ish where support would likely be formidable.
It's certainly gonna get interesting if it is a high-degree wave 3 down getting underway.
ReplyDeleteYup, I'm almost certain Bernanke rattles off the same old mantra tomorrow which for some bizarre reason has somehow been twisted by the market makers to have been 'good news' when he disappointed with no announcement of QE. Same thing tomorrow I think, but one of these days his "nope, not yet" mantra is going to have the effect it 'should'. In any case, if a swift wave 3 is on the horizon, the area identified in the chart above is exactly where those things happen.
ReplyDeleteI love that vacuum volume chart, it's hypnotizing. I bet the bounce will be short and hard once it hits 1350 as I feel there are many swing trades/knife catchers poised to pounce on that, with an even larger selling response at the right resistance...
ReplyDeleteGlad you like the chart. I've found that those volume vacuums are very, very telling in that price does indeed slice right through them like a hot knife. But those levels are often defended so we'd need to see it get started by the S&P dropping down through the recent low. And this time around it also happens to be a round number of 1400 so it probably won't get through on this first touch.
ReplyDeleteI should have said that in my comment above because the futures have gone nuts to the upside based of course on absolutely nothing but "expectation" that Bernanke has unleashed his QE fury. And of course he hasn't because he hasn't even spoken yet and won't for another hour. So either JPM and Citi and the rest of those thieving whores already know what he's going to say (because they are the ones who wrote his speech) or it's just another goose job to suck in a boatload of longs for the slaughter as we watch the markets tank for the rest of today. Who knows? JPM, that's who, lol.
But as I also mentioned above, I'm short and not one bit afraid of that position although it's going to bite a bit at the open. I have a lot of dry powder so I'll just have to squeeze the old sphincter a little tighter for the first hour and see what happens after that, lol. As I also mentioned to Papa, the 6 day MA has rolled lower and dropped beneath the 12 day which is a pretty darned rare event and very reliable... usually. Mind you, I'm not being hard nosed and insisting that the markets have topped. I'm fully open minded to the idea that there is another thrust higher here to perhaps 1440ish although I just can't see why that should happen because Bernanke IS NOT GOING TO ANNOUNCE ANY QE TODAY. If he was going to announce it, he wouldn't likely do it today when the next FOMC is on Sept. 12-13th. having said that though, this is going to be one hell of a mighty open so maybe it's just the start of two weeks of more upside as they 'jawbone' the market higher until Sept. 12th. It's too bad banks are allowed to participate in the markets at all because back in the days when they had shackles on, as they should, this kind of shit never happened. It's the slickest form of theft perpetrated on all of mankind ever invented and I hope to live long enough to see them face the consequences of that. I plan on living another 90 years if that's what it's going to take, lol.
finally got the break of 1625 . gold should run much higher
ReplyDeleteYep.
ReplyDeleteI plan to update these posts sometime over the weekend.
http://highrevsopenhouse.blogspot.com.es/2012/07/july-26-2012-gld-descending-triangle.html
http://highrevsopenhouse.blogspot.com.es/2012/07/gld-weekly.html
Darkest knight posted this over at daneric's, can anyone explain to me the argument for a usdjpy collapse (ie Yen goes super strong).. I thought japan could not bear a much stronger currency than what it is at now
ReplyDeletehttp://screencast.com/t/HlnHvYfN
Thought I could hear my name across the interweb...
ReplyDeleteI'm thinking a short, sharp e wave lasting a few days before USDJPY heads towards the 60's. That would take AUDJPY with it too.
But it's clear the looong 72-year downtrend is nearing it's completion in wave terms...but hard to predict the timing if it does indeed find a low soon-maybe over the next 12 months? - but what would that mean for AUDJPY? hard to say. I have a nasty feeling that one day we wake up and everything's gone to fuck and all our hard work plotting & analysing comes to nothing- even those who predicted correctly are unable to cover their positions in time. The world gets turned on it's head with overnight Yen or dollar devaluation or some such cataclysm.....ach, just have to keep fighting I guess.
Keep on Rockin AR
Dk
weekly chart
ReplyDeleteUSDJPY still in a wedge down. I think it might find a generational low in the 60's over the next 12 months. what happens next is anyone's guess though.
http://screencast.com/t/oqa1WCujiz
Yeah it looks like the USD might start to find a bottom against the Yen maybe in the coming year as you say. I've got a hunch though that since it has been Japan's deflationary decades that have cause the Yen to be under such demand for the past 20 of the last 72 years, that same deflation in the future that would cause the USD to strengthen would also cause just more demand for the Yen too. So even though I'd have to agree with you that the USD appears to be ready to turn higher against the Yen in the next year or so, I don't think it would be explosive at all. I 'do' think the move in the dollar could be explosive against many of the other currencies, but not against the Yen. We'll see. I'm not worried about that particular pair one way or the other, lol.
ReplyDeleteusd/jpy tends to follow US long bond rates. Which could head to Japanese levels in the years ahead suggesting usd/jpy could hit your targets. However it did break out of a multi year trendline. So maybe not quite 60's?
ReplyDeleteDK mentioned upthread about how when the markets finally turn, they'll turn without a lot of warning. I got to thinking how true that is historically. If people knew things like that were coming, no one would be caught in the markets when they happen.
ReplyDeleteAnyone can write a book today and claim they would have had the genius to see the crash of 1929 coming. But in that day, few did. Most people were swept up in a "mass escape into make-believe, so much a part of the true speculative orgy" (Galbraith). They didn't think it could end. October of 1929 caught most everyone by surprise, including the titans of finance. You can read any newspaper of October 23, 1929, and analyze the charts of the day, and you'll see nothing totally unique that tips off the next day of Black Thursday with fail-proof certainty, or tips off the subsequent plunge on the following Black Tuesday.
That's why I think the prudent thing is to simply take an unleveraged short position (if you're going to be in the markets at all), stay mostly in cash, and just wait the thing out. Bubbles always burst. There's just no predicting with pinpoint accuracy when that moment will happen.
I think one of the most unfortunate aspects of any market that is starting to run on fumes is the fact that so many of us, bulls and bears alike, know that a crash could happen at any time. As a result there is a pretty big group who'd fall into the category of "those afraid they'll miss the big one." They tend to be short almost all the time in one degree or another, usually "too short". I'm not innocent of that either although for the past several mumfs I've just gone with a few indicators I like, more or less just said fk it and have played the market as if Bernanke and the Fed didn't exist. So that means I've been able to go long when the signals tell me to go long and to go short when told. I'm an obedient soldier these days. I gotta tell ya Papa, once I'm long and quite confident that the signals were correct, it's strangely comforting to know that the biggest criminals to have ever existed are on my side. It's creepy but eerily calming, not to mention easier to make money on the long side than on the short side.
ReplyDeleteDon't get me wrong, I'm very freakin' fast to jump on the bear wagon too when I get the signals I'm comfortable with. In fact I'm short as of this evening and based on some things I'm seeing, I'm not completely at ease with that. On the other hand, I'm seeing a few bearish signals I like a whole lot... like this weekly Renko chart of the S&P. Notice that with the settings I have, it has not issued a false signal at all. In fact it hasn't issued a false signal in years. By "false signal" I'm referring to a new red brick like the latest one followed by a green brick higher... a deke out. IOW, once it changes direction it means business. If past performance is of any value, then I think it's reasonable to expect that we should see at least as many red bricks as we've seen in the past (at the minimum)... and that would be 8 (the top green one and 7 reds). That would imply a drop to 1384 at a minimum.
A cable chart from DarkestKnight http://screencast.com/t/XqI4YphefQ
ReplyDeleteI get what you're saying. I think the entire market is investing on a similar sentiment right now -- "they'll never let it fall." And since the system was designed and intended to go up, not down, and many interests will do anything and everything they can to keep it going up, at any given point the odds favor a long position -- or a long interpretation of counts or TA signals or whatever. It's pretty easy to get a reputation as an investing guru. Just always call for more up side, and you'll be right about 80 percent of the time.
ReplyDeleteOn the other hand, I've lost far more money in the market long than I have short. I got slammed in the dot-com-tech crash, then slammed again in the fin crash -- even worse percentage-wise, over 80 percent down in value. I was "diversified" among many instruments, and actually was forced by one mutual fund company to close my investment accounts for dropping below their minimum. It was both ironic and a shitty thing to do, since technically they were the ones who lost the money.
I think that when I go short, I tend to be a lot more conservative and safe, so I haven't lost much. I've rarely gone long since the fin crash. Knowing what I know now, when I'm long I don't sleep well.
Kimble http://mediacdn.disqus.com/uploads/mediaupload/tmp/77a9a27ece7a9321ed4bed205462b487b8494465dc38e805cfbf55dc/original.jpg
ReplyDeleteThanks CR. For those who don't have computers and aren't able to click that link, here's what DK's chart looks like:
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ReplyDelete