Monday, January 14, 2013

Pickles, And How Risk-On Might End

[Note: Hi everyone, Papa_Boule here. AlbertaRocks has graciously extended an invitation to me to post articles here occasionally. I take that as a great compliment, so thanks AR, from the bottom of my heart. AR even suggested that I simply repost my comment from a couple of days ago as my first article -- with a few edits for clarity of course. So here it is:]

AlbertaRocks and GregInBaltimore posed a couple of questions in comments a few days ago. AlbertaRocks mused:

"What a pickle. I wonder if it's realistic to consider that the Fed [in its ongoing easing operations] is actually, and fatally, trapped?"

It is a great question. There can't be a resolution to the current economic problems without reform, and there's no political will to reform. And the Fed can't continue what it is doing without consequences, and can't stop without consequences. "Pickle" is right.

And GregInBaltimore's question that started the little discussion was great too: "How will risk-on end?"

The conventional way bull markets end is on the highest of high notes. That's why no amount of technical analysis or Elliott Wave theory can pick a top. Bears give up, even shut down their blogs, everyone's bullish. The benchmarks point to more up side, and a lot of it. There's often a blow-off move and the news and outlooks are great. Exuberance abounds. And every major top over the last few years has come with an "unfinished" Elliott Wave count -- an expected next move up that never comes.

But this isn't a conventional bull market. I often wonder where the markets would be without intervention. This is what blows holes in the theory that the market is an accurate reflection of social mood. The reason they are intervening in the first place is to prevent the markets from organically moving downward with social mood, and to levitate them upward in opposition to it. Because of the incomprehensible amount of money they were loaned (interest free) to play with, they have succeeded. The investing going on isn't "organic." And retail investing -- where you would think most of the actual social mood is -- is still largely on the sidelines.

Algos bid the market up on every bit of good news (or bad news spun positively) in the expectation or hope that retail will respond to the news (and the upward ticker move itself) and come back into the market. But retail stays on the sidelines, and most all the action is just algos bidding the market up against each other using the free money.

It's an unsustainable game for several reasons. One of which is the one-sided inflation it causes: prices of goods/commodities rise while wages do not, so the cost of living goes up, and the standard of living and percent of disposable income for the middle and lower classes go down. Less spending means even more negative pressure on the economy.

Another reason it is unsustainable is: What is the second part of the plan once retail re-enters the market -- if it ever does? What then? Do all the big boys sell to retail and get out? That's not good, because that just means crash. Or do they then magically find the will to reverse NAFTA and restore Glass-Steagall and start real reform and break up TBTF banks? Is there an actual plan to end outsourcing and bring jobs and manufacturing back? Is wealth going to be "un-concentrated" now that it has been concentrated? Is there any will to do any of this?

Of course none of this is going to happen, not the way things are. And a lot of people sense there's no sunshiny outcome at the end of this.

So this one could end on some sort of "bad" news -- something forced by the consequences of intervention, perhaps -- that pops the illusion or shakes the confidence and brings more reality into awareness.

So, what exactly? My gut says some new scandal or financial crisis in some sector becomes the Black Swan event. But it may be more mundane. As GregInBaltimore suggests in his comment, maybe just rising interest rates will trigger it. He may be onto something there. 

Looking at the last two major peaks (the dot com and housing bubbles) as analogs may be really appropriate since this is the third of what looks like a triple top. So it may be a fractal in several different ways.

The dot com bubble ended fairly quietly without a discrete event, but with several interest rate hikes and with a court case finding that Microsoft was a monopoly.

The housing bubble was more of a case of playing itself out, prices overextending and collapsing, foreclosures increasing, culminating with the mortgage/financial crisis.

Here's an interesting possibility: It may be that these three bubbles are more than just a fractal. They may be directly related. The housing bubble may have been a lagging offshoot of the dot com bubble (when exuberance from the first led to an exuberant housing market). The housing bubble is credited with avoiding a full blown recession after the dot com bubble. Then the current QE bubble is a direct offshoot of those -- an aggressive intervention peak, to avoid a full blown recession after the housing bubble. So three peaks makes sense -- one led to the other and to the other.

And since the QE peak is not "natural," but an intervention peak, it makes sense that there won't be a fourth peak, but instead a big overdue correction. One that could start on a tiny little event, like an interest rate increase, as GregInBaltimore suggests.

I'm going to repost that simple, elegant, and eloquent chart by The Green Prince that AlbertaRocks posted, because it deserves a second look -- and even a third one. The S&P100 peaks and bottoms average about half the value levels of the S&P500. So, extending the channel to the right a bit, a slide to the bottom of the channel would take the S&P100 down to about 275. That would be under 600 for the S&P500, or even lower if the channel doesn't hold, which I think is a strong possibility -- even a likelihood, if the dominos start tumbling with this next burst bubble.

And remember, as Aunt_Pittypat says, if things get ugly, don't get ugly too. Make up your mind to stay pretty.

Click the chart for a nice full blown view
==========       END OF ORIGINAL ARTICLE       ==========

"Aaand... it's gone"

240 comments:

  1. Good stuff, PB. Of course it doesn't necessarily follow that the third and final peak of this epochal mania has to be below the other two: it all depends on which index you use to measure them. The first bubble was in the NDX, the second was perhaps best manifest in the homebuilders index (or MBS-related markets) and the final QE bubble might best be illustrated by the stock market. So could choosing a stock index to anticipate a lower peak in this third bubble be an error? Just a thought.

    Related to the Japan discussion from last week, I've found a couple of articles by Wolf Richter from last year about Japan's conundrum that are well worth reading. His website might worth adding to your favourites.

    http://www.testosteronepit.com/home/2012/9/24/japanese-ministry-of-finance-to-japanese-bondholders-youre-s.html

    http://www.testosteronepit.com/home/2012/12/17/japans-no-exit-strategy.html

    ReplyDelete
  2. Thanks PB, good read. Lots of us have been waiting for this magical market to stop levitating for quite some time. A rational person looks around and sees what is going on in our country and globally and shakes their head in disbelief at how the plates are kept spinning.

    I found it very interesting when Obama made his speech a couple of weeks ago regarding the fiscal cliff that one of the FIRST things out of his mouth was that if a deal couldn't be made that it "would affect the markets." Of course it would, and the markets must be kept elevated at all times or anyone that has any real money in them would be devastated. It doesn't matter that the middle class and retirees are being devastated though. It doesn't matter that the markets are kept aloft with fake money not backed by anything.

    They painted us into a corner back in 2008 when their solution caused an even bigger problem. Like a bad trade that they had to keep doubling down on but pretty soon you they will have to bite the bullet and take the loss. What that black swan event will be, when this bubble will pop to cause that huge loss is anyone's guess. In this fantastical warped reality no news is good news, and bad news is even better news.

    Agree with GIB that rising interest rates COULD be the big event, we don't know. We live in interesting times.

    ReplyDelete
  3. When I look at that chart I can't help but think of the Three Peaks and a Domed House pattern....

    ReplyDelete
  4. Haha... well I see it didn't take long for you to get active here once you felt comfortable that AR wasn't some sort of ogre with a troll gun.  You know where the beer fridge is, right?

    ReplyDelete
  5.  LOL. yes, let me know when it's beer-thirty. If i talk too much just tell me to shut up.

    ReplyDelete
  6. We don't keep those water cooler thingies at the ends of the hallways either.  We've outfitted this place with dispensaries of the good stuff... chilled.  Help yourself.  If you find yourself a bit too cheerily wobbly at the end of the day, just sleep over.  That's what everyone else does :-)

    ReplyDelete
  7. For any of you currency traders out there, whatcha thinkin about audusd? I am long from 10541 last night and i do believe it wants to see 110 longer term (looking at the monthly and weekly charts)

    and shorter term (although I am not much of a waver) it looks like we're in a fifth wave on a 240 chart. but i am not much of a waver so if anyone has a real count let me know!

    ReplyDelete
  8. I always thought those water cooler thingies would be MUCH better for everyone involved if they contained vodka!

    nice to know one doesn't have to drink and drive around here :0

    ReplyDelete
  9. LMAO.... vodka.  You're hard core.  But that's cool.  Very funny stuff.

    ReplyDelete
  10. no, not so much, that was the old days, i am much more tame now!

    but i DID always think those water coolers would be better of filled with adult beverages.!

    ReplyDelete
  11. The central bankers have a few more tricks up there sleeve yet.  Basel III changes makes high grade corporate bonds "collateral" for banks (being that much of the sovereign bonds are no longer AAA or have been bought up by central banks via QE).   Bidding up corporate bonds will lower interest costs to corporations, force institutions away from high quality corporate into Junk and more speculative dividend stocks etc.   If the system goes it will not be like 1929 or 2008 crash rather everything will be taken down (all 401k, currency, stocks, bonds etc).  I think this is a 'correction" and the grand collapse is still a few years away.  

    ReplyDelete
  12. Hey Blue good to see ya. 
    The AUD broke threw it's long term upper trendline, but I suspect it's a false break. It seems to me like it would be just like the market to break that key line, fool everyone into thinking it's off to the races, then pull the rug out and reverse.

    Of course, I tend towards the permagloomer side, so that could be my confirmation bias kicking in, but DarketKnight had posted a great long term chart some time ago on the other troll board. I hope he doesn't mind that I saved it to my doomer files.

    I agree with your short term thinking.  
    1.06 to 1.07 now is big resistance, and we recently closed outside the daily BBs and came back in.

    ReplyDelete
  13. hi back GF! nice to see you too! i miss all you good folk from the addiction blog.

     thanks for you input, it is much appreciated. i tend to be a permagloomer too but trying to stick with the charts and what i (think i) see there.

    hard to say, but that monthly chart sure looks like it wants to break out. it tried and failed that 106 area three times on the weekly and fourth time may be the charm. keep hitting the sheetrock and it may cave. my long is risk free if i choose to make it so, but have my stop at the most recent low. not a huge risk.

    back in sept. i was long eurusd at 124ish or something and bailed on it cuz i got cold feet and look where it is now. arghhh, one of those trades that got away. i never revisited it, which was dumb of me and so it goes...

    ReplyDelete
  14. I've got an opportunity here to show you one of those classic positive divergence scenarios I've tried to demonstrate in the past.  This one is classic... so far.

    In no way am I suggesting that the pattern develops as I've shown it on this chart but I'd say it has a good chance to do so.  The more important aspect though, is what to watch for and what to expect if it develops as shown.  The annotations on the chart should explain it so no more dialogue is necessary here I don't think.
    RUT Daily

    ReplyDelete
  15. I know, it's tough to ride the shakeouts in those trades, especially when it's consolidating. Not matter how many wave counts or indicators or fractals you have working, you're still really rolling the dice on which way it breaks. 
    I think the Euro stops going up when all the fiscal nonsense finally ends. The measured move up in price and time is around 1.38 or so in early March. That's also the May 2011 .618 retrace. Looks like a good enough target for now. I'm not touching it though. The balance of power is so unstable that anything could happen with the dollar. I like the EUR/GBP or EUR/AUD. There's less ideology to mess around with.

    ReplyDelete
  16. thanks for measured moves GF.
    yes, not touching eur right here either. it trades inversely to usdchf which is sitting on some good support after it's sell off last week. yet think usdchf will go to 90 medium term so could very well coincide with your eurusd target.

    ReplyDelete
  17. Oh missed that,
    looks like Swissie is catching a bid today

    ReplyDelete
  18. yah, swissie gots they bouncey today. woulda been a nice long from where it was sitting from friday.

    ReplyDelete
  19. I am short from about the same level. You can see the breakout last week above 1.06 came right back and close very low on friday. But we do have CHina GDP coming up. If that is good maybe we break 1.06 and then towards 1.08. But for now I am leaning bearish.

    ReplyDelete
  20. http://www.dailyfx.com/forex/technical/home/analysis/aud-usd/2013/01/14/Forex_Analysis_AUDUSD_Classic_Technical_Report_01.14.2013.html

    ReplyDelete
  21. Wow I just noticed EUR/CHF is going parabolic.
    I read an article the other day in the WSJ about how the SNB has turned into the largest hedge fund in the world, and they even opened an office in Singapore so they could trade around the clock. Looks like they are winning this trade.

    ReplyDelete
  22. ty for the chart. i must be brain dead because i cannot spot a positive divergence, or any kind of divergence, for the life of me. this helps (a bit, but darn i just don't see them).

    ReplyDelete
  23. thanks newb, you know, i saw that chart too, and just doesn't classify as a dark cloud cover in my book. on my own personal chart it doesn't either. To me it looks like more of a bearish belt hold as it's even with and not above the green candle (on the daily) albeit with a tiny wick on top. lol. STILL it's bearish.

     China GDP and some US reports, retail might matter. That 106 is level is pretty strong. I'm staying bullish for now and letting my stop take me out.

    ReplyDelete
  24. i don't follow that one, but just checked. holy heck, big green daily scepters. why the parabola?

    ReplyDelete
  25.  Hey Blueskies!
    I think it's right on the fence, but with two resistance lines that it was under on Friday at 1.055, I'm bearish, and an short at 1.055 with a tight stop.  It's a wiggler, so might get stopped out.  One is the weekly through the tails, and the other is a support broken of the past 3 months.  Will see if I can get a better chart.  But honestly, it doesn't look excited to go up or down, maybe sideways forever.  Like one of AR's charts.
    Cheers,
    Greg

    ReplyDelete
  26. could be wite wabbit about ALL of that!

    volume is waiting for some news to kill longs and shorts with one of those ballistic up/down moves.! i need to quit messing with audusd, it just seems to churn..................................

    ReplyDelete
  27. Some places I'm reading are citing the SNB intervention, but it's been defending a floor at 1.2000 for many months. Maybe they raised the floor. Maybe they just threw a few hundred billion around. Tough to say. Maybe everybody took a look at what's happened in the yen and decided it was swiss francs turn?

    ReplyDelete
  28.  lol. yeah a few billion would do it. i think they DO rotate around the currencies. seriously. and it's also like the they just throw the ball back and forth from nighttime to daytime. night takes it down, day takes it up, and vice versa. hard to get a trend. except euro and jpy.

    ReplyDelete
  29. I'm not sure if you mean you can't see it on the chart I provided... or you just don't seem to see them 'anywhere', lol?  On the chart above the dashed vertical lines show that the momentum indicators made a new low but price of RUT didn't.  Normally folks would be looking at that stochastic from the perspective "is it overbought or not?".  So maybe that's what's throwing you off?

    ReplyDelete
  30. i am up too late! but no, i DO see it on your chart. i just don't pick them out on my own easily because i'm not focused on them. i am not one who uses indicators much. i like pitchforks and support and resistance and trendlines and candles and patterns. but i really appreciated your chart as an explanation of divergence.!

    ReplyDelete
  31. Well actually when it comes time to make the decision about whether to buy or sell, you're looking at the right stuff.  Trendlines... can't beat 'em once they're established well enough to even be able to recognize one.  Even on the small time frames they offer great guidance.  I never did see any value in pitchforks but others do... and that's just awesome.  Support and resistance and candle patterns... you're definitely doing it right. 

    I 'do' monitor momentum indicators extensively but it's critically important to use them properly.  I've mentioned it before, and written about it numerous times, but still, 95% of traders look at the wrong end of momentum indicators almost all the time.  For example, they habitually look to momentum indicators for a signal that a stock or index is overbought when it's clearly in an uptrend.  That's using it wrong.  That's using it exactly backwards.  If an index or stock or commodity or something is clearly in an uptrend, then the only thing we should be using momentum indicators for is to identify an oversold condition (because the trend is up).  And they work exactly the opposite in a down trend of course.

    I know you didn't ask for any explanation like that, but since we were on the topic I thought I'd just remind any other people who might read this comment about that little problem so many seem to have :-)

    ReplyDelete
  32. Yen pairs sure look interesting this morning. Are we there yet?

    ReplyDelete
  33. I don't know about the daily chart, but I believe the 60 min looks like they this bounce has some legs

    ReplyDelete
  34. I follow/like Timothy Morge a lot. He doesn't use indicators, he keeps it pretty simple and he is what one would call a "whale" in the markets. Huge trades.
    http://www.marketgeometry.com/index.php?option=com_lyftenbloggie&view=entry&category=public-blog&id=170%3Aphilosophy-of-something-interesting-eurusd-10min&Itemid=133

    ReplyDelete
  35. I don't know but I have to pee.

    ReplyDelete
  36. I've got a fork on the 10 min dollar yen chart.
    Let's see how well it works.

    ReplyDelete
  37. let me know GF cuz i like the 240's and above.

    ReplyDelete
  38. I usually try to stick with 60 min and daily, but today I feel compelled to drill down deeper. Probably not worth it, but what the heck

    ReplyDelete
  39. audusd playing a slow game of badminton between 10520ish and 10580ish. one thing is absolutely certain, it will break either up or down!

    ReplyDelete
  40. just got this crazy message popping up on your site AR. what the heck? i disregarded it, but I am on my work MAC not my home MAC. 

    Danger: Malware Ahead!Google Chrome has blocked access to this page on albertarocks-ta-discussions.blogspot.com.Content from www.safehaven.com, a known malware distributor, has been inserted into this web page. Visiting this page now is very likely to infect your Mac with malware.Malware is malicious software that causes things like identity theft, financial loss, and permanent file deletion.

    ReplyDelete
  41. my comment disappeared AR. I just got this warning on my computer regarding the Safe Haven link:

    Danger: Malware Ahead!Google Chrome has blocked access to this page on albertarocks-ta-discussions.blogspot.com.Content from www.safehaven.com, a known malware distributor, has been inserted into this web page. Visiting this page now is very likely to infect your Mac with malware.Malware is malicious software that causes things like identity theft, financial loss, and permanent file deletion.

    ReplyDelete
  42. stranger and stranger my comments being flagged....anywhoo, Google Chrome stated that Safe Haven site has a malware problem and it infects other sites.

    ReplyDelete
  43. Where are your comments being flagged?

    ReplyDelete
  44. it was the weirdest thing. i posted the comment I got from GoogleChrome regarding Safe Haven site being NOT safe malware-wise, and up popped a message in place of my post that my comments are being flagged. then it disappeared. then i reposted it and got the same "comments flagged". then THAT disappeared. now it's normal except my original post (which was a cut and paste from Google regarding the malware) is gone.

    seriously AR, I am not crazy. At least not in that fashion!

    ReplyDelete
  45. the Safe Haven site meaning somehow google chrome picked up on the link to them in your sidebar and sent me a BIG BILLBOARD message not to continue to this blog, then it closed this page. so i had to tell Chrome to bypass the warning to get back here. lol. glad it's work's computer and not my home computer.

    ReplyDelete
  46. Thanks for that explanation!
    I am a newbie to momentum uses ...

    ReplyDelete
  47. Hmmm.  I'm not sure what that's about but I suspect it's something within the Chrome browser itself.  Your comments aren't being flagged here and as best as I can tell the links to SafeHaven are safe.  Sometimes a comment might get sent to the spam bin by accident (Blogger is responsible for that) but if I see it there I release it.  But that hasn't happened in a long, long time.  You should see all the crap in that spam bin though... all of it is phoney comments about how somebody "loves my site" then proceeds to put in a link to some asshole site like "How To Make Money Fast At Home by Making Pencils" or some shit like that.  So the spam protection afforded by Blogger is definitely doing its job.

    If you get a chance maybe you could test to see if you get those same trouble with any of the other links.  There are 2 links to SafeHaven.  The upper one is to an RSS feed and I don't really even know what that is.  The lower one is always to a recent article they've published.  Maybe it's the RSS feed thing that's causing Chrome to do what it's doing?

    ReplyDelete
  48. the crazy part was, AR, i never clicked on any safe haven links. Chrome said that Safe Haven had infected your blog with malware. maybe I can get it to give me that message again even though I already bypassed it and said it was okay to proceed to here.

    ReplyDelete
  49. Woke up today with the thought of massive debts everywhere.

    And EWI put this graph out there showing the exponentially increasing debt bubble.  That hockey stick chart is cropping up everywhere.

     (Notice it takes off around 2007 since housing collapse and tapped out equity lines meant home equity could no longer be used for college tuition).

    It talks about how college tuition prices are suffering from deflation at long last.  Nobody can pay those rediculous amounts of 40,000 per year anymore (post housing bubble).

    ReplyDelete
  50. Oh, now that really 'is' weird.  There's no malware here that I'm aware of.  AVG is constantly on the alert as well so I'm pretty confident we're ok, lol.

    Also, you said that was an office computer right?  It might be a setting by the 'administrator' perhaps?  It will be interesting to see if it all works just fine on your home computer.

    ReplyDelete
  51. yes, very strange, has never happened to me before... and i am the administrator so it's not that.

    ReplyDelete
  52. Well it looks like I'm gonna have to phone Google and tell them to smarten up, lol.

    ReplyDelete
  53. Almost all the major universities are either funded by or owned by the banks too.  Is it any wonder then that universities have been uses as milk cows for so many years?  Not to mention that what is taught at those schools is "what they want us to learn".  I'll bet at least 50% of what's taught as history is horseshit.  Which is why I'm starting to become a firm believer in the proposition that oil is actually abiotic... created by the earth itself.  I mean the entire notion that oil came from the bodies of dead dinosaurs sounds pretty damned ridiculous if you really think about it.  I mean, let's go out and shoot a horse and then come back a year later to see how many gallons of oil we can wring out of its dust.  It's all an illusion I tell ya, lol.

    ReplyDelete
  54. I simply could not believe my eyes today to see how the Russell was manipulated to the degree it was.  A gap of 1% lower and then ramped all day long, with one wicked pullback thrown in for good measure.  All the while, back in the real world AAPL was tanking 3.15% which of course pulled the NDX down pretty hard.  So WTF is the attraction with small caps then?  Nothin'.  It's just another one of JPM's milk cows.  Don't get me wrong, I go long that think when I think I can wring a few buck out of it myself... but it's just the corruption involved that makes me puke.

    ReplyDelete
  55. yeah, give 'em what for. it was freaky. i'm on my home computer using firefox not chrome and no weird message thus far. haven't updated firefox for awhile so maybe update has new and improved spying functions!

    ReplyDelete
  56.  I left a comment here today that I can't find also ... regarding the usdjpy.  Very unusual for that to happen.  Maybe it's on a different thread.  Hmmmm.

    ReplyDelete
  57.  I did not know the university was funded by the banks.  No wonder they don't teach Elliott Wave Theory!  Hahaha ... they want to keep that little secret to themselves.  Look how usdjpy followed the EW's.  Like somebody was signaling EW'ers they were safe to help the BOJ weaken their yen, eh?

    ReplyDelete
  58. Guess why I switched to FX eh?

    ReplyDelete
  59.  It is still below one of the lines ... the old support, but it's above the old resistance line on the weekly.  C'mon Aussie, what's it gonna be?  I'm tired of their games, so I reduced mine, and left a runner on with a tight stop.

    ReplyDelete
  60.  it's pretty darn blantant, the outright thievery these days. kinda like SPX always reverts to VWAP like magic on pretty much a daily basis.

    ReplyDelete
  61. Anyone joining me? Seeing a bunch of sell signals across the board. Couple of charts attached.

    ReplyDelete
  62.  tuition started skyrocketing in conjunction with easy, low interest, college loans from the government. basically colleges put themselves on that dole knowing the kids and families could borrow the money and in the meantime enslaved a generation or two to massive debt that can't be discharged in bankruptcy.

    ReplyDelete
  63. Go back at look at some /es spikes in December. Easily 50 points whipsaw if not more. There was nothing going on on the FX side. Yes risk was on but no whipsaw.

    ReplyDelete
  64. sold audusd long at 10574, it was annoying me but still made a little something.  lol. now it is free to rocket. but hopefully it will dump hard for Greg and Newb. LUCK!

    ReplyDelete
  65. Well five waves down now.
    Looks like the selloff is for real.

    ReplyDelete
  66. i just posted above, i sold my long for 35 pips, looking for something that is moving. considering a eurusd short.

    ReplyDelete
  67. Just getting started my friend. Forget aud/usd. Plenty of other pairs you can open shorts on.

    ReplyDelete
  68. http://www.docstoc.com/docs/138374979/12-11-12-To-Catch-A-Thief-webcast-Slides---FINAL

    page 40 chart.

    ReplyDelete
  69. for sure. i am really looking at eurusd as i like the pattern, the reversal top on the weekly and the high end of the BBs on the weekly plus the big resistance from september.

    ReplyDelete
  70.  both good candidates, i think gbpusd also....

    ReplyDelete
  71.  Oh right ... i keep forgetting they are not allowed to be defaulted on.  I've seen predictions that that bubble will blow in a few years ... nobody can pay them back without decent middle class jobs.  So they should start marching and demonstrating.  It's a sham.  I think community colleges will bulge .. nothing is worth 50,000 per year.  The tuition loan is too high for the jobs to be supported.

    ReplyDelete
  72.  Wow.  And everyone has just put up with those rediculous increases year after year because the loans were available.  I think page 36 is also scary ... projected increases to 55 and up looking for work.  They aren't going to find it.  Everyone thinks they will decide how long they are going to work.  But many companies are firing older workers and replacing them with younger (cheaper) workers.  So in 5 years we're going to have lots of 50-60 people out of work, needing work, and with not enough savings.  They will need to become currency traders to short the yen.

    ReplyDelete
  73. indentured servititude for millions of kids and parents. my daughter still doesn't know what she wants to do so is 21 and has a job until she figures it out. i told her not to take out any huge loans if she decides to go. There is a great community college down here in Austin that is somewhat affordable and a plethora of great certificate and two-year programs if she decides to go that route, like working in a hospital on the tech side, or dental or something. She doesn't know and I can't help her with that. My only advice is that work should not be a four letter word. Do what you love if at all humanly possible. and don't go into a ton of debt.

    ReplyDelete
  74. this is why we hate banks..........as James Garfield said "he who controls the money supply of the nation controls the nation."

    ReplyDelete
  75. I probably should have said "corporate America" instead of saying "banks".  But basically they are funded by the "now totally fascist state" and told what to teach by their money suppliers.

    ReplyDelete
  76. Blueskies, I just found 2 of your comments in the spam bin.  Of course I released them.  Even though Discus is still the comment handling system, Blogger itself still takes it upon itself to do a little policing too.  It's a good thing they do too because the spam bin is generally filled with crap like this:

    "Very shortly this website will be famous amid all blogging
    people, due to it's pleasant content
    Look at my web-site ... cheap 49ers jerseys
    " followed by a link of course.

    So anyway, I told Blogger that those comments of your were not spam and in theory it learn that your identity is safe.  Also, in Discus I can add peoples' names to the "whitelist".  I had forgotten to add yours simply because we've had so few problems here.  I guess we've had so few problems "because" I do that, lol.  So I've just added your name to the "whitelist" which theoretically tells Discus to leave you alone.  So far they have anyway.  And now Blogger should leave you alone as well.  Don't be offended... it's just bots doing what they think is right.  I just kicked both of 'em in the balls so we'll see if they behave from this point forward.

    ReplyDelete
  77. As I recall I was trading back in December so, yeah... I saw those already.  I ain't "goin' back" to get antagonized again, lol.

    I remember very clearly that in the 1980 for the equities markets to open with a gap of 0.5% was absolutely unheard of.  In fact for the markets to move much more than about 0.4% in an entire session darned near made the headlines.  It was the same in the '90's although it seems to me that the overnight gaps started to appear somewhere in the latter 90's.  And of course everybody and their dog knows what happened in 1999 to change all that.

    ReplyDelete
  78.  were my comments happy to be released????? :)

    i didn't know that about blogger. it's a good feature.  that spam is funny. sounds chinese.

    i am not offended. i only get offended by bigots, liars, rude people and those with bad table manners.

    ReplyDelete
  79. Greg I am afforded a method of seeing all comments that have been posted today and I can't even see it 'anywhere', so I don't think it's on a different post.  Not in the spam bin either.  But rest assured, issues like that concern me and I like to fix 'em asap if I can.  So far we've run pretty smoothly here.  I think that'll probably continue for the most part.

    ReplyDelete
  80.  oops lost my avatar on that one logged in wrong! wow do i look weird.

    ReplyDelete
  81. I did leave you a comment above about the fact that I 'did' find 2 comments of yours in the spam bin.  It was Blogger who did that, not Disqus.  I have taken steps to inform 'both of them' to leave you alone.  With Blogger sometimes it takes 2 kicks for them to get the message.  No worries, you pretty much have clear sailin' here now.

    ReplyDelete
  82. Geez, I really went into that in detail on Pretzel's several months ago, with chart demonstrating the differences and everything.  I have to say, it was a total eye-opener to even the seasoned vets over there.  I'll see if I can find that comment and the accompanying charts and post them here.  But basically, people forget that when (let's say a currency) is soaring, we shouldn't even be looking at the "overbought" area of the stochastics or RSI.  In the charts I used as demos in that comment over at Pretzel's, I even blocked off the "overbought" area of the RSI and inserted the comment "What are you looking up here for?  You should be monitoring the "oversold" area because this is an uptrend".

    It was bit harsh but it got the message across.  Now I admit, I oversimplify it a bit by being so "hardcore" with that rule.  Of course we monitor the "overbought" area during an uptrend.  But we only do that for clues, not for sell signals.  The actual sell signals can only come from actual price action itself.  Those divergences though, they definitely offer clues that momentum is waning.  But they are "never" a sell signal because it's in an uptrend.  The only signals that are "actionable" in an uptrend are the signals issued from the "oversold" level.

    Again... those rules are "generally speaking".

    ReplyDelete
  83.  like the mainstream media is told what to say by their major advertisers who are in bed with politicians....what a tangled web they weave......

    ReplyDelete
  84. Haha... that avatar is known as "assface".  I set that one as the default avatar, the theory being that it might inspire people to get hooked up properly with a Blogger account which would include an avatar of their choice.  So once a person is set up properly it depends on how they log in .  For example, sometimes Greg's comments show up with the default avatar and that would be due to him just logging in with a different email address or something.  It's not a problem... I just prefer that it be easier for readers to see "who said what".

    ReplyDelete
  85.  i accidentally logged in as guest. oops.

    ReplyDelete
  86. Geez David, you sure deserve recognition for going to the trouble to read all those posts and then select snippets from them.  That 'did' take a lot of time and effort on your part. 

    But we must also recognize of course that the snippets you elected to post were one's you preferred to make your case.  I say that with all due respect to you though... please don't misunderstand me on that.  It's just that all of us, yourself included, have biases.  In this particular study you did you had an agenda, a bias... to show how bullish all the blogs are.  And again, I don't say that with any degree of disrespect whatsoever... we all tend to do that.

    But for example, in your quotation from Pretzel he certainly sounds bullish.  However, he's definitely not as hard nosed bullish as suggested by the quotation you elected to submit.  Had you perhaps posted this comment from the same Pretzel, which was posted today as opposed to the one you selected from 'yesterday', "and the waves are still pointed upwards for the moment -- but I do want
    to show a few charts that act as caveats and suggest some degree of
    caution is in order
    ."

    It is for this reason that I personally have "never" given one iota of credibility to "any" of the sentiment surveys.  There are dozens of ways to spin any survey and because it's so easy to spin them... they "are" spun... every time. 

    Again, please don't look upon my comment as criticism of you.  You're a good guy who just has a terrifically impressive bearish bias.  I was even worse for that at one time.

    ReplyDelete
  87. And here's what happens when one does that...

    ReplyDelete
  88. Wow. CMG, the formerly invincible burrito (and one of the go-to buys during the melt-up formerly known as P2), is showing spicy meat filling of clay.

    ReplyDelete
  89. Holy smokes.  And take a look at its hourly chart in 'candlevolume' format.  Volume this morning is ginormous:

    ReplyDelete
  90. Which leads me to wonder how much longer the mountain can hold up if the things it was built on are starting to crumble.

    ReplyDelete
  91. Yes sir.  The action that has occurred ever since the very second the announcement was made that "Yay, we're not going over the cliff, we've decided to go bankrupt instead.", has been some of the most aggravating and contrived bullshit I've seen in months.  In fact it's even worse than the entire meltup since the Mar., '09 lows.  Mind you the Max Pain levels are so far below current prices that I expect a big shoe could drop at any second, any time between right now and the end of trading on Friday.  Because if there's one thing I know with certainty it's that JPM and the rest of that den of thieves can't refuse it's an easy robbery.

    ReplyDelete
  92. As usual the problem is the govt. if you can default on student loans then i guarantee you it wouldnt be up 1000%.

    ReplyDelete
  93. I think Tom Demark is the only one calling for a top at 1492 level...

    ReplyDelete
  94. ah, well, you can see I am dressed in my avatar today!

    ReplyDelete
  95. Pretzel is pretty much the best the Elliott Waver out there. 
    I look forward to his updates. His counting has been spot on for months, and he's pretty unbiased like you said. 
    Although I don't quite agree with this morning's Euro count, he's going to be right again about the short term implications of it.

    ReplyDelete
  96. they upsized to super burritos. but bloomberg won't allow them in NYC

    ReplyDelete
  97. does he have his euro count posted as a freebie GF? Think you have to pay for his site as I know someone who does.

    ReplyDelete
  98. He's got the count on his website. It's for the Euro ETF FXE, but it applies to the spot FX price as well.

    I believe he requires a fee just to sign up for his forum. The reason is to prove you are a real person not a spambot, and also probably as a speedbump for the potential trolls. You can give anything you want. Considering all the work he puts into his comprehensive daily reports, it doesn't seem that outrageous to me. There is a lot of good analysis from contributors. I signed up but have been to lazy to post anything, and I suppose I'm so used to disqus that it takes a considerable effort to get into the groove of another discussion format.

    ReplyDelete
  99. I actually agree with his euro analysis, except I am thinking 13030 as a potential target. I put my euro shorts on last night but was a TAD premature on that so reshorted it this morning. As always, we shall see.

    ReplyDelete
  100. It's probably my bias kicking in, but it looks more like a zigzag to me
    with c = .618*a
    which makes some sense if you look at how 'a' had more momentum than 'c' it would stand to reason that 'a' would last longer.
    Either way, your target looks like a good spot for support

    ReplyDelete
  101. You serious? They have managed to fly turds since march 2009. Only way we are going down big time is after mom and pop get back in the markets at 1600. Then they will take it down. Way down.

    ReplyDelete
  102. Japan will soon be the largest holder of US debt. 

    Japan has now just about tied the Chinese as the largest foreign holders of US treasury bonds.  1.1ish Trillion dollars for each.
    Japan has been catching up.  This month they bought 900M, and the Chinese only 200M.

    So, why would Japan be buying our debt when they don't have enough money as it is, and the world's largest debt load already (at 25-to-1 vs. tax receipts and US is at 5.6)?

    Hmmmm.  Could it possibly be that they plan to trash the yen (much more), and are looking to park money in some store of value before they do that?  Those waskly wabbits.  Who'd have thought anybody wants out debt.  But if they default on their's ... kind of smart actually.
     

    ReplyDelete
  103.  Very nice chart showing margin debt recent highs, thanks!

    "The crowd is always 5 years late to a good investment idea."

    ReplyDelete
  104. If I didn't know better, it feels like the HO is rumbling. Thoughts AR?

    ReplyDelete
  105. AUDUSD -- I've been shorting near the resistance line, and it might finally have started to fall.  Timber?

    It finally quit hugging that resistance line (old support on the daily) with a shove down from 1.0575 to 1.0513.  And for good measure, it's now below the big bad weekly resistance line it's lived under for 2 years.  On the 4hr chart, the DMI issued a sell signal (cross over with -DMI>25 at 26).  And Daneric's had some nice charts on the SP500 etc, hugging similar former support line broken wedgie now resistance lines.  With a completed [i]-[ii] counts on those too.  Could be the beginning of a [iii], eh?

    ReplyDelete
  106.  No worries, because now BANKS are the leadership supporting the SP500!

    Hahahaha. 

    Bankrupt banks are leadership.  Clearly this thing is running on fumes.

    ReplyDelete
  107. Wow. 

    And I just noticed that I've said "wow" several times over the last few days. I have a hunch I might be saying it a lot more over the coming months.

    ReplyDelete
  108. Nope, not even close.  Today there were 165 new 52 week highs on the NYSE and only 5 new lows.  Not even in the ballpark yet.

    ReplyDelete
  109. Yep, this system looks like it's going to implode by pieces, so timing is everything.
    My economic scenario is now:
    Go long USDJPY (not right now) -- this will be worth millions (it was 360 in 1973, and 88 now ... surely 125 is reachable in 2 years).  Self-funding they said for 40 years.  Ha.

    Then maybe the USD gets trashed and we'll have to maybe go long Chinesewhatever/USD.

    ReplyDelete
  110. Wow ...
    Here's an article on CNBC saying developed countries bonds are the most dangerous asset to own.
    Don't see such things uttered in public, ever.

    That a 200 pip increase in rates will decline the value 15-20%.
    And that since rates are already so low, QE4 efforts have become near useless.
    Predicts this is the year of a bond crash.

    http://www.cnbc.com/id/100386296

    ReplyDelete
  111.  Mom and Pop have nothing left.
    Everything is bumping on multiple lines of resistance -- sp500, audusd, DOW, ...  I don't think there are any buyers left up here.

    ReplyDelete
  112. And another "wow" from me too. I noticed CNBC talking about how intervention distorted traditional benchmarks a few weeks ago, Something I can't recall them ever doing before. Is CNBC starting to stray a little off the reservation? I mean, no matter how agreeable a news organization is to publishing only rosy pictures, when faced with conflicting realities, at some point it will have to actually acknowledge "real reality" in order to protect its reputation and viability as a news source. Maybe something like that is starting to happen there? Or maybe social mood is starting to affect news people too? It's interesting, whatever is going on.

    BTW I've put it off for a long time but I'm starting to really consider getting into FOREX trading. Do you have a favorite trading platform you recommend?

    ReplyDelete
  113. Brain Teaser Question for an Expert in Carry Trades:

    Is this possible?
    Could carry-traders use Japan's currency to fund another asset buying spree?  The mother of all carry trades? 
    Borrow at the yen currency levels now, and repay in a year when their currency is worthless, er sorry, worth less?
    Could investors borrow yens and buy dollars and buy the US stock market?

    ReplyDelete
  114.  That's an interesting theory ... social mood eventually catches up to the cheer-leaders.
    Maybe they are trying to scare people out of bonds and into the safety of stock investments.
    Har har.

    Hey, I'm glad to hear that, because the reward potential is mind boggling there.  I suppose in futures too, but with what's going on in the world now, I think we're on the cusp of a yen meltdown never seen before.  And heck, if the market crashes, audusd should work for that.  And you are a EW'er, and waves work much better over in FX-land.  That usdjpy count was the same one the computer programs were following.  I've never seen anything like it.
    And I got my count garbled at one turn, and was flat footed somehow when the wave three started, but it truly would have been possible to make 900% in 17 days, at 30:1 leverage.  82 to 88.  I was planning on it.  Tracked it for 4 months.   I'm sad to report that I bungled that -- didn't have an alt count at the ready, and never reinspected my count to make it fit better.  (Impossible things are happening every day.)  All it would have taken is fixing my 1 and 2 -- had 20 days to do that.  But hey, I'll catch the next third of a third.  Lesson learned.  82 was the end of 2 and 89 was the target for 3, and it'd been text-book waves. 

    So, I use www.forex.com.  I don't know, I have some reservations about the size of the company (GCAP is the ticker symbol of the parent company) -- it's market cap seems tiny.  But they have very nice charts and lots of indicators to use.  It's easy to use.  Good luck if you go that route.  I think it'd be good to have an account at the ready.  Fund it when things heat up (a wave 5 should get here in a few months) ... funding is real easy.  There may be others that are better, this is just the one someone told me about.

    ReplyDelete
  115.  Ahah ... that's the Cruel Market Theory, and it is amazing how often that's the best predictor.
    Nice observation.  If there are too many ants on one side of the floating log, they would naturally want to dunk it.

    ReplyDelete
  116. a risky play with the yen oversold and us equities overbought
    http://www.youtube.com/watch?v=zOOxuO7aTeE
    http://macromon.wordpress.com/2013/01/06/equities-overbought-yen-massively-oversold/wir_overbought-2/
    http://pragcap.com/goldman-the-yen-is-oversold

    ReplyDelete
  117. Thanks for the link Greg.  I opened it up and the first thing I noticed was that one of the 4 things I need is a Canadian address.  I have that. lol

    So the link you provided opened up Forex.com/ca.  When I get around to it I should start trading currencies again as well.  Last time I did that was in the 90's believe it or not... Swissie.

    ReplyDelete
  118.  pretzel posted this morning about being wrong on his euro call. i got stopped out overnight. back to leaving the euro ALONE for a bit!

    ReplyDelete
  119. QE3 has already been less effective than QE2, which was less effective than QE1

    ReplyDelete
  120. yeah i saw that article too on ZH. I, personally, would not be taking up long or short positions at this juncture, just too cloudy. I like your chart, fundamentally I am a bear, but it looks to me like we want to break out here...

    ReplyDelete
  121. I use MB Trading for forex. They got some good reviews and you can also trade futures, stock, and options depending on the size account you have. I have another account at IB but not trading forex with it. or anything else as I had to suck it almost dry due to my (lack of decent) employment situation and some large bills that came up.

    http://mbtrading.com/

    ReplyDelete
  122. I am the furthest from being an expert on the carry trade business as anybody you could find.  I don't know exactly what vehicles the traders use but if I'm not mistaken it's based on "rates" rather than the currency's value itself.  I could be completely wrong about that too, but that's the impression I was under.  Nonetheless, the fact that the Aussie:Yen ratio has had an amazing correlation with equities has still helped over the past few years with visions of where equities should be headed.

    Having said that, although the weekly chart for the Yen suggests it's doomed for a hell of a lot more decline, pundits are saying that it's decline will fail, that Abe's determination to tank it real good will fail.  I don't know which is right but Japan's efforts over the past many years to collapse that currency have indeed failed in the bigger picture.  I would interpret that to mean that deflation in Japan is still the dominant force.  The recent collapse of their currency says otherwise.  So who knows for sure?  I don't, but wish I did.

    So when the Yen's collapse started to accelerate like we saw it do over the past several weeks, I thought that maybe its usefulness in the carry trade business might have run its course.  What would I use for a canary then? lol

    I've heard it described as revolving around buying "high paying" Aussie dollars with cheap ("low paying") Yen.  The Yen that are "borrowed" of course.  So all throughout the years up until now, while the big boys were in the currency carry trade, the Yen which they shorted or borrowed was "rising".  Yet they made money.  They made money because the Aussie was rising even faster.

    Yet I thought it was really all about the interest rates.  Perhaps they use each country's bonds as collateral or something?  So your question is particularly intriguing because if I was in that business I wouldn't want to borrow a rising Yen to buy Aussies with unless the Aussie was rising faster than the Yen was.  So logically I'd think it would work like this:  Let's assume the Yen's collapse will continue (that may be a wrong assumption too, but let's just discuss that scenario just in case).  As long as it collapses faster than the Aussie does, the currency carry trade would still work because the ratio would still be climbing even though both currencies could be falling at the same time.

    BUT, if the Yen is going to be collapsing over the coming many months and the Aussie's rise were to continue... WOW (to quote Papa, lol), that trade would seem to me to be a barn burner of a profitable one.  So maybe you're right.  In either case, I think I can take my worry hat off because I now think that the Aussie:Yen pair will remain as an accurate reflector of the appetite for risk.

    So in answer to your question, I'd surmise that "yes", it seems logical to me that if the Yen's collapse is really and truly underway permanently, it might indeed ignite the mother of all carry trades.  As long as the Aussie doesn't start falling faster than the Yen, the ratio will be rising.  In that case, it's "risk on".

    As I said, I certainly don't have much more knowledge about the currency carry trade game than the average Joe, but logically I think what I've said above makes sense.  Other opinions may vary, lol.

    ReplyDelete
  123. i know someone else that uses FXCM, so there's a bunch of them out there.

    ReplyDelete
  124.  erk! i am long the samurai here at 89.29. maybe I'm crazy (lol) but looks like it want to break higher.

    ReplyDelete
  125.  gosh, who knows with the aussie? seems so directionless right now, but I am hoping it goes in YOUR direction!!!!

    ReplyDelete
  126. my apologies! meant to reply to PB....

    ReplyDelete
  127.  and thar she goes!! YAY!

    ReplyDelete
  128. Thanks for the vid David.  I definitely should have thrown out that caveat too when I was responding to Greg.  At the present time with the Yen oversold like it is, the ratio is indeed at extreme risk of pulling back.  Apparently JPM isn't aware of that risk though, not today at least, judging by the action in their favorite vehicle of theft, IWM.  Oops... they are one of the biggest players in that carry trade business so they do know what's going to transpire.  I agree with you 100%... to be long Aussie short Yen right now is very dangerous.  For that very reason I sure as heck wouldn't be buying the equities markets today either.  In fact I'm short.  I probably shouldn't be... I should probably be thinking about waiting for a pullback in equities for an opportunity to go long.  And I fully anticipate I'll be doing that as well.  We'll see, but right now the equities markets just look sickly overbought.  Yet threatening to go absolutely parabolic.

    While I'm at it, let me be the first to admit that I was totally, 100% convinced, that the Max Pain numbers which have all week been way, way lower than the market indicated that there would be a real hard collapse near the end of this week.  That idea couldn't have been further from what has actually happened.  So this time around my 100% conviction in the fact that bankers will steal gigantic sums of money every single time they get the chance was wrong.  They must be making their standard $25 million today in some other fashion.

    ReplyDelete
  129. Greg,  could very well be especially if treasury rates stay low. 
    However, watch out for increased financial regulations to put curbs on capital flow into the US. 
    Dodd-Frank rules are kicking in this year and are expected to cost big banks billions in compliance 
    and they recently snuck in another one which will hit foreign banks
     
    http://www.forbes.com/sites/robertwood/2011/11/30/fatca-carries-fat-price-tag/

    D-F was bad enough, but this fatca could potentially be used against non-financial entities, which might give the IRS jurisdiction over the entire universe.

    Which would be a real killer because while I don't see foreign capital a big driver for US equities, it could very well be for industry as we're starting to see with all the chatter about APPL & semiconductors re-shoring/on-shoring production. The new carry trade could be the shift in the global supply chain

    That also could be the ultimate answer to one of Papa's questions about how jobs will ever come back. The answer in the short/medium term is they won't because on-shoring will be highly automated and labor free and accelerate the trend of technical unemployment. All the while bailouts and government takeovers will reinforce this trend by supporting politically connected, mature industries & sectors that employ capital on process innovation which will need fewer and fewer workers. Meanwhile the real drivers of employment- the new industries, the novel solutions, the product innovators - are crowded into the shadows with higher taxes, increased regulations, and hostile business climates.

    ReplyDelete
  130. The currency carry trade is based on rates. When you buy the AUD/JPY you collect interest on the Aussie dollar and pay interest on the yen. 
    More generally is the investment carry which involves borrowing loans in yen at lower rates and then using that money to buy higher yielding assets elsewhere. That's what was adding fuel to the fire in  stocks in the early 2000s

    ReplyDelete
  131. Thanks Greener, that's what I thought but I admit that I never researched it.

    ReplyDelete
  132. Hey, another little wow tidbit passed by my screen today. 

    Kathleen Brooks, the research director at forex.com mentioned in here write-up today that somebody is buying spanish debt.  She is surprised anybody would do that.  Rates doen't seem to be spiking.  A month ago she predicted that would be a big problem for the markets since so much was up for renewal in 2013 -- it was all pushed out to 2013 so front loaded starting in January (thinking conditions would be better by then). But she doesn't know who is buying it.

    Could it be Japan?  Curiouser and curiouser. 

    ReplyDelete
  133. Michael Pettis is one of the best writer out there in my humble opinion.  Here's a link to a great article he published a couple of days ago on China and the fact that it plans on undergoing economic reforms.  Mr. Pettis is "a finance professor at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets".

    ReplyDelete
  134. yes, it's the small and medium businesses that create employment and they are getting squeezed out....the "middle class" of employers are getting squeezed as are the middle class of employees.

    ReplyDelete
  135. Ashraf Laidi
    ‏@alaidi





    Tmow BoJ guy says concerned about rapid JPY decline,
    after tmrow Abe says must see 2% CPI - 2 steps down 4 steps up will
    continue #forex


     

    ReplyDelete
  136. fundamental analysts will argue that currency pair values are strongly correlated with interest rate spreads

    ReplyDelete
  137. That's correct, although they say stability and liquidity, such as is the case in Switzerland and Japan, are also important. It's a longer term strategy, so gamblers like me aren't too familiar with it either.

    ReplyDelete
  138. I think that is exactly right.

    ReplyDelete
  139.  i keep thinking that too, since about 2009........................

    ReplyDelete
  140. I don't know when jobs will come back. The current government solution is to ignore the unemployed and I don't see that as a good long term strategy. That will be probably cease to be viable when we reach a point where the younger unemployed and underemployed can no longer support social security & medicare. 

    It will take a massive generational paradigm shift, but I have my doubts that this generation coming up here has it in them to carry us out of it. Even if they do, they're so saddled with student loan debt and so insulated with social media to do much anyway. 

    ReplyDelete
  141. Hasn't been easy with the choppy Euro and the sleepy AUD. Just give me a breakout and I don't care which way

    ReplyDelete
  142.  yet the yen plunge and usdjpy rise keeps astounding me. i keep waiting for a significant correction in usdjpy that never happens. just like equities. even the smallest dips are bought. every time i thought i should buy i said to myself "no wait, it's gonna correct" and it just goes higher. and not only me, lots of traders keep thinking the same thing. yeah the usdjpy long party is getting crowded-er, but where is the cool off point? my huge regret was that i didn't get long back in sept and not open my trading account until  about now.

    so in essence i totally agree with you AR, but these are interestin' times for sure, nothing seems to matter fundamentally or technically.

    ReplyDelete
  143. I know GF, it's hugely worrisome for all the reasons you state. I had a job interview last week that went really well. Granted it was a downwards move for me and not even lateral but I need a full time job, not the part time job i have.

     Got a reply today that they loved me as i had so much experience but they decided to hire an intern who used to work for them last summer. They thought I might leave if I found something better.

    They are keeping my resume on file for future openings and for freelance work but this keeps happening to me. I have tons of experience and I WOULD have taken lower pay than I usually make because the job is steady and came with paid benefits. Damn..... it's disheartening.

    ReplyDelete
  144.  LOL, yeah I know, it's like "would something please find a direction and move?" at least i made up my stop losses on the euro on my usdjpy trade today. still sitting long in that. don't really trust it, but I'm risk free.

    ReplyDelete
  145. Who is the the world is buying Spanish bonds?  Who is that stupid?

    That was the question the research director for Forex had in her summary.  Kathleen Brooks.  There are many bonds coming up for needed funding early this year, and rates are not rising, so someone is buying them.

    Pains Gains and Capital just emailed that Spain is using it's social security fund to buy Spanish debt.  Gulp.
    But that game is almost up.  90% of those assets are now in Spanish bonds.  So, soon Spanish yields should increase again.

    ReplyDelete
  146. Sorry about your job difficulties. I know it's tough out there. Wish I could help. If I ever decided to open up a Texas satellite office with a trading desk, you're the first person I'd hire. In the meantime maybe watching flowers bloom in slo-mo will cheer you up:

    http://vimeo.com/56810854

    ReplyDelete
  147.  well THAT was nice. Thanks :) I love getting flowers.

     i have blanketed the USA with resumes. Trying to get hired from out of state is pretty much impossible unless you are in some high-demand type or ultra professional position. There are tons of graphics designers out there! I ain't that special in my field. Years ago when I was one of the few people designing on a MAC things were different. Then everyone else caught on.

    Yes, if you EVER open a satellite office ANYWHERE with a trading desk let me know. I would love that much more than designing stuff.  I'd even take the coffee-girl job if it was the only one available and steady!

    ReplyDelete
  148. Oh great. What could go wrong?

    ReplyDelete
  149. I believe the Spanish pension system is buying those bonds.. maybe at gunpoint, maybe not.

    ReplyDelete
  150. even Fed official admits the Fed may be trapped
    http://www.bloomberg.com/news/2012-12-14/fisher-sees-fed-trapped-in-hotel-california-position.html

    "I'd suggest, having been in the business, that it's much easier on the
    buy side than it is on the sell side. We've never ventured into this
    territory. No central bank and certainly not the Federal Reserve, has
    ever been in this position before, and I really worry about the exit
    strategy. I know theoretically how we can do it; we've figured that out.
    There's several ways to do this. But in the end, it comes down to being able to sell things.
    ...When you're buying a significant amount of Treasuries, which is a
    very liquid market, it's not market-disruptive. It's a deep, rich
    market. On the sell side, however, if you own past a certain point --
    and nobody knows what that point is -- the market owns you. So I worry about the cost." http://seekingalpha.com/article/811031-fed-trapped-by-its-long-duration-portfolio

    Why QE3 Can't Work: Understanding The Liquidity Trap
    http://seekingalpha.com/article/869461-why-qe3-can-t-work-understanding-the-liquidity-trap

    Gold bulls predicted this trap
    http://news.goldseek.com/GoldSeek/1348665763.php

    ... but even a mainstream academic could predict this
    http://www.moneynews.com/StreetTalk/thomas-Sowell-Fed-Trapped/2011/01/20/id/383414?s=al

    "... And if you don't have the stomach for all this radical crap

    Then have the guts to stand for something or you're gonna be trapped"http://www.youtube.com/watch?v=CH7jjhn7nu8

    ReplyDelete
  151. I just posted this over at Pretzel's forum:

    My put-buying finger is itchy. Looks so toppy to me. But I'm kinda frozen. You can scrutinize and chart every indicator there is. but there's no such thing as "due diligence" when no one has any idea what secret thing they're willing to do next. They could secretly inject another 10 trillion in interest-free loans to big investors and rocket it up from here.They shoulda known that if you want to keep bears in the game you have to let them win one once in a while. They haven't been willing to do that. I'm sure a lot of bears feel like me now: burned over and over, and reluctant to get in any deeper. So, I imagine there's a lot less bear squeezin's to use for market rocket fuel available.

    ReplyDelete
  152. Hi, This is a good post, indeed a great job. You must have done good research for the work, i appreciate your efforts.. Looking for more updates from your side. Thanks forex tips

    ReplyDelete
  153. Hi, You explained the topic very well. The contents has provided meaningful information thanks for sharing info forex tips

    ReplyDelete
  154. Then I added:

    Okay, I scratched the itch a little. I nibbled with some IWM June OOM puts. I'm adding some cash to my trading account -- not much, I don't want to go much over my current 30% in -- and over the next week or two, I'll scale in a little more SH (which is where most of my trading funds are already parked). SH is unleveraged, so the leakage ain't so bad if this thing drags out a lot longer. Speaking of leakage, the worst dog of an ETF I ever bought, hands down, was TVIX. It was like that bank scene from South Park: "Congratulations on your investment. Aaand it's gone."

    http://youtu.be/_nVk25ZvTkU

    ReplyDelete
  155. Haha... I actually saw that very scene as I was watching SouthPark one night and it just cracked me up.  I just went to embed that little clip below the article and then realized "that ain't my article".  If you ever decide to do that it's a piece of cake.  If you like I could add it now so you can see what it looks like, then you could remove it if you like.  Want to give that a whirl?

    ReplyDelete
  156. By all means, go right ahead. :)

    ReplyDelete
  157. This kind of manipulation, with the S&P up 10% in 63 calendar days makes it appear that the damned thing us just going to go parabolic.  It's infuriating that this goose job is based presumably on the fact that Congress decided "not to do" the responsible thing, and instead elected to bankrupt the US government.  So money printing and overspending it is.  So that's reason to goose the markets since the November low at a clip of 68% per year?  Apparently it is.  I'm short now too, but really, I don't think anybody should short this thing until we actually see price below recent consolidation areas and a person should probable even wait until we see it crack below at least one or two rising trend lines.  It's infuriating that the Fed itself (via their minions) is the only entity buying this market.  I read recently that within a few short years the Fed could actually own 30% of the stock markets.  Good... let's hope they're holding 80% of it when it tanks and sends those demons back to hell where they belong.

    ReplyDelete
  158. To add a little clip like that you just use the tool on the editing box that looks like one of those things a director clacks when they're about to start filming a scene.  It's just to the right of the 'add an image' button.

    ReplyDelete
  159. If you don't already know this, thought yall might like this interesting and handy/dandy correlation chart. Forex correlating to SPX, oil, gold, US 2 year, and the VIX. I thought it was cool for reference as who can remember a bazillion things?

    ReplyDelete
  160. that was a noice trade. sold it  near the high cuz we weren't cracking 90 with any kind of gusto.

    ReplyDelete
  161.  Thanks for explaining that, it's always been a mystery to me how that carry trade works. 
    When people take out loans in yen at 0%, and then use that money to buy assets in other denominations, does that affect the foreign exchange rate at all?  Or are they two separate things ... is the currency rate is set entirely by the speculators on foreign exchange markets?

    ReplyDelete
  162.   Thanks for explaining that, it's always been a mystery to me how that carry trade works.

    I'm still wondering about one thing -- when people take out loans in yen at 0%, and then use that money to buy assets in other denominations, does that affect the foreign exchange rate at all?  Or are they two separate things and the currency rate is set entirely by we speculators in foreign exchange markets?

    ReplyDelete
  163. Oh, you answered my follow-up question above to Greenface ... very interesting.  Thanks.  So if people are taking out many loans in yens to buy other things, that doesn't directly affect the exchange rate.  Only all those people shorting the heck out of the yen with 50:1 leverage does that.  Always wondered about this.

    ReplyDelete
  164.  ..oh the humanity.
    --
    Where is my big balloon of hydrogen when I want one?

    ReplyDelete
  165.  Thanks!  I was not aware of that.  It sounds like FATCA will make it harder to get funds from US into banks outside US.  I know a wealthy individual who moved his money to Canadian banks in 2007 to stay safe from potential US bank systemic failure.  This seems like that will be harder to do now.

    ReplyDelete
  166. Thanks, now based on the above explanations, I understand why ... you get the interest paid while doing foreign currency exchanges.

    ReplyDelete
  167.  Thanks for your response AR!  It does help clarify to think of the relative relationships. 

    Although I do think the yen will continue to massively weaken long term.  I think there's more to this thing than BOJ trying to weaken it.  I think we are headed toward a debt crisis and yen collapse.  Not yet, as maybe we're close to a correction for a wave 4.  As Kyle Bass says, the Japanese don't know what they're asking for.  Asking for inflation when all the people who bought the bonds expected deflation forever (and a positive real return) is asking for interest rates to rise.  That will bury them in debt servicing costs.  When their debt becomes a worry like Greece's was, their currency will tank rapidly.  Kyle Bass says they would collapse under the debt burden eventually, but now the collapse will happen more quickly (within 2 years).  Furthermore, now that Japan is headed toward no longer being self-funded, what foreigner is now going to buy their bonds with currency risk through the roof (without big interest rate increases)?

    They have 25:1 debt to tax receipts.  So if someone had an income of 100,000, that would be like owing 2.5M.  And if interest rates go from 0% to 2%, that means interest would now take up 50,000 of that income.  With that level of austerity, it's logical to assume the debt would not be repaid in full.  Exports used to save them, but that's not helping now, and a recession means they can't grow their way out.  Which may be why the currency is in a third wave to begin with.

    They are betting that a weaker currency will increase exports, and that will save them.  But it will cause rising interest rates which will kill them.  So place your bets.

    ReplyDelete
  168.  Nice chart on commercial positions!  Given that the bump in early 2012 was a first wave, and this is a third wave, I would expect it to get more over bought than the first wave.  Very nice, thanks!

    ReplyDelete
  169.  Nicely done!

    ReplyDelete
  170. hey thanks Greg. yeah, i got in at the right time and out at the right time. (for a change). figured i'd take the money and run. lol.

    ReplyDelete
  171. Aha!
    So that's where you're all hiding. That OTHER blog almost kaput?
    More tech trouble recently...&  work too busy...
    ..which made me miss out on THIS super-duper trade in GBPUSD...GRRRR!
    chart from 1 week ago has worked out like a dream so far:  
    http://screencast.com/t/lWjZ2C1p8VZK
    the projected expanded flat topped out right at the 50% fib & has since collapsed...bummer.

    EURAUD
    maybe a flat?
    http://screencast.com/t/sSMZchUBK

    ..And while you're all on the subject of the AUDJPY carry trade, there still remains the UNSOLVED MYSTERY OF THE MATRIX.

    Scenario #1
    Those of you that are convinced that the Yen will continue to weaken, AND that risk markets are due for an inevitable collapse, have no choice but to declare AUDJPY will NO LONGER be correlated to risk. I think that could happen at some point, but surely not until AFTER Aussie interest rates have come down enough to nullify the benefit of the carry-trade. And if the RBA cuts more sharply over the coming year, due to say, oh let me guess...financial meltdown in Europe...credit markets freezing up again....US debt ceiling stuff...England winning the Ashes twice in one year.....then AFTER AUDJPY comes crashing down with Carry-Trade Unwind Armageddon the risk correlation may cease to be.
    This scenario would support my thesis for another low in USDJPY before it is free to melt-up properly.

    Scenario #2
    Yen continues to weaken big-time.
    If AUDJPY: risk correlation continues, that means equity/risk markets are now in early stages of a Massive Bull Market. 
    Unlikely.

    Scenario #3
    Yen continues to weaken AND AUD weakens, so AUDJPY remains steady.
    Risk markets to stay steady this year, but AUDUSD tanks - unlikely these would happen together.

    My money is on Scenario #1...and here are the charts I present as evidence:

    Exhibit A
    AUDJPY weekly
    http://screencast.com/t/KeNNK2jYc

    Exhibit B
    USDJPY weekly
    http://screencast.com/t/M3gHeLfMbG

    The AUD-JPY-USD MATRIX will be solved this year....how will it unfold??

    Enjoy your weekend.

    DK

    ReplyDelete
  172. Shoot, can't see it on my phone. Can you post a link?

    ReplyDelete
  173. 5= 1 has 60! Wow that will really screw the new government. Shouldn't be a surprise because it seems a revolving door of ineffective ness.

    In near, near term a local high in AUDJPY tomorrow or the next then a good healthy drop to kick off the US inauguration would agree with your count.

    ReplyDelete
  174. Greg,  good question. There are different tiers to the FX market:  http://en.wikipedia.org/wiki/Interbank_market      

    gamblers like us are only one. The big bank market makers move it the most. The investment carry does not directly affect price, but eventually indirectly through the banks that handle the transactions

    ReplyDelete
  175. I've been reading Steve Keen since you recommended him. His post today:

    http://cdn.debtdeflation.com/blogs/wp-content/uploads/2013/01/SigmundAndAssholes.gif


    good advice for the troll blog haha

    ReplyDelete
  176. i there i thought i was being more helpful by taking a screenshot and posting a jpeg!

    here's the link, you have to scroll down a little.
    http://www.dailyfx.com/forex/technical/article/forex_correlations/2013/01/18/forex_correlations_australian_dollar.html

    ReplyDelete
  177.  hey DK! yes i missed that gbpusd also. darn it. i even posted that it looked like a good short opportunity. ah well.

    anyway. nice to see ya!

    ReplyDelete
  178. There is one hell of a lot of wisdom in that picture.  It's funny.  But more than "funny" it's oh so true.  Being surrounded by assholes can absolutely lower one's own self esteem.  That's why I try to surround myself with people like the people who are hanging around here.  Now I feel like a stud.  Good people are good for the soul.  We do have a positive influence on each other.

    ReplyDelete
  179. I wouldn't get too friendly with that guy.  He's an Australian you know.  :-)

    ReplyDelete
  180. DK is fair dinkum :-) as they say.

    I've never met an aussie that I didn't like, loads of fun they are, and I met quite a few of them when I lived in Spain years ago.

    ReplyDelete
  181. Just a few days ago, someone at Troll Central (I'd give them a hat tip, but I forgot who it was) recommended this book.  ("Nasty People" by Jay Carter.) It's under 6 bucks for the Kindle edition.

    Due to my real-life occupation, I've read probably over a hundred books in this subject area. My shelves are crammed with them. I have no idea how this one managed to stay under my radar. It's a quick read. I read it on an Android device in one evening. I'll be re-reading it. It's one of the best little plain-language books on the subject of emotionally abusive, bullying, provoking people ("invalidators") ever -- on understanding how they do what they do, why they do it, and on getting free of their negative, undermining influences.

    ReplyDelete
  182. One other technical point I just realised.
    If AUDJPY is a flat, then [B] must travel to at least 99.40!  (Elliott rule: in a flat, B must retrace minimum 90% of A)
    Whoa!

    ReplyDelete
  183. i can go into personal detail on this subject with an old BF of mine but I won't...but very true AR, very true.

    ReplyDelete
  184. sounds like an interesting read. ty.

    ReplyDelete
  185.  you are chock full of good info GF.
     It's like a friend of mine told me long ago who trades the ES...it's not retail that moves it, it's the big players and we just have to coattail and figure out what they're doing.

    ReplyDelete
  186. NZDUSD much clearer & doing it's job as the canary in the coalmine.
    Some adjustments made - works best with the whole move from the [1] low as a flat.
    So now everything up from the [B] low is part of a big wedge for [C], approaching resolution over the next few weeks.

    http://screencast.com/t/CLgPfB63MAdE

    ReplyDelete
  187.  Welcome back DK!  We've missed you at the pub.  And we've been waiting for your arrival!  Yeah that other pub it's become impossible to hear anything over the din of yelling and name-calling.  Glad you found the pub we've been hanging out in!  Tranquility is my new year's resolution.

    I'm going to have to spend time examining your most-excellent-as-always charts (thanks for those -- good onion, I mean good on ya) and implications for a bit (especially that carry trade unwind part and the matrix and the three senarios).  A real stumper.  Because I had been figuring it that since the USDJPY has declined for many years, and come out of a downward wedge, so I was cutting the gordian knot of all that corrective stuff that came before and assuming we're just starting over at the bottom (simplifying assumptions, an actuarial specialty), so we've had a perfect 1-2-3.  But to think an obvious 1-2-3 can also be an A-B-C makes me rather dizzy -- and I hadn't looked at all the stuff before this to count that -- a stomach-churning thought.  Oy!

    I'm also thinking the fundamental picture favors an imminent yen collapse.  With debt at 25 x tax receipts (US is "only" at 5.6), and all former investor's assumptions of Japan being self-funded being blown to pieces (no matter how oft-repeated), the yen should be headed from "safe haven" to trash heap.  They should be valued like a Greece debt bomb at some point.  Their account balance is going negative faster than anyone predicted as exports are down (which is why they had been self-funded for 30 years), they are in a recession, and with an aging population, they are NOT self-funded anymore.  But why would any foreigners buy their bonds until interest rates rise?  And if the BOJ targets inflation while Japanese citizens who bought their bonds had been counting on deflation to earn a real rate of return, that's not good either (why would they buy anymore?).  And if the BOJ does weaken the yen, then interest rates will also have to rise to compensate foreign investors (citizens can't foot the bill anylonger) for currency risk.  And once interest rates rise just a tad from 0% to 1-2%, the Japanese govt. will be immediately buried in interest costs.  Leading to a debt restructuing event, and capital fleeing the country, and the yen collapsing in a heap.  That could all happen more quickly than AUD lowers their interest rates, so maybe the matrix gets unhinged.  Have to do some thinking about that squirrely matrix part. 

    Another event could be the Spanish debt yields spiking when Spain finishes spending all they have in their social security system to buy Spanish bonds (they are already at 90%, those sneaks), and with lots of bonds scheduled early on in 2013, this could set off another Euro scare sometime soon.

    P.S.  I was shopping for some EW books to supplement my not very meaty one (EW Principles), and am working on Neely's book.  Looks fairly complete and organized.  What book did you learn from?  It's time for me to start learning all those corrective waves.

    P.P.S.  If the USDJPY is in a 4 of 3, what's the chance the 5th wave of 3 could extend?  Can't post my chart of usdjpy in a reply, but it's below or in a recent thread.

    Cheers,
    Greg

    ReplyDelete
  188.  Hey, glad you liked it!  That was moi.  I had that book for my step mom and a few others in my life who have bouts of it.  I liked understanding the reason why they do it (to attempt to control others by deflating them with all past wrongs and various verbal beatings, and so they feel better about their own inferiority feelings) and how not to take it to heart.

    ReplyDelete
  189.  Exit plan? When they start selling treasury bonds we should short them.

    ReplyDelete
  190.  Merci buckets!

    ReplyDelete
  191. So true. We're just barnacles riding the whales at best

    ReplyDelete
  192. Most of the aussies I've met were the guys who come up here every summer (our summer) to play rugby while Australia has winter.  I never met one I didn't like either.  That's probably because they fit in so quickly up here.  They're very much like Canadians in so many ways.  Basically they carry approximately the same attitudes as Canucks... not arrogant, friendly.  Kind of like "as long as you don't start talkin' down to me, as long as you don't try shovin' me around, we're going to get along great".  So Aussies and Canadians have always got along just super.  Same with Kiwis... they're great folks too.

    ReplyDelete
  193. Hey Greggo
    You have a much better take on fundamentals than me. As soon as someone mentions bonds & debt, my eyes start to glaze over & my brain gets tangled up in knots. I need the visual thing with charts.

    USDJPY may well have found that generational low, but you know I always look for the Alternative.
     But I'm not just trying to be a contrarian here. Take a look at the AUDJPY chart - that Big Blue Bastard Triangle slap in the middle says to me "it's a bleedin B wave", so new low in AUDJPY coming down the track once this C leg completes. So USDJPY unlikely to be rocketing north in that scenario (although by then maybe it would be a 2 retrace?)

    Regarding extensions etc.
    Basically if 1 & 3 are roughly equal in length, good chance of 5 extending.
    Sid over at elliott wave predictions has a good page with a summary of EW rules & guidelines:
    http://elliottwavepredictions.com/wave-notes/

    ReplyDelete
  194. I have so many books in that subject area. I was pretty surprised that little gem slipped under my radar. 

    I think that Alice Miller's books get to the heart of why so many victims put up with so much abuse. It has to do with childhood conditioning and childhood-state fears that one must permit it and keep quiet in order to stay approved, accepted in the family or group, and therefore "safe." And fears that being turned out would be worse than being abused at home. The "devil you know" sort of thing.

    She argues convincingly (particularly in her seventh, last book) that a "poisonous pedagogy" like that gives rise to intimidated, compliant, obedient societies, loyal to a fault, and unwilling to speak out against bad leaders, sometimes unable to face or see or acknowledge leadership's flaws. She points to her native Germany's history as a prime example.

    ReplyDelete
  195. VIX hit 12.40 on Friday. 12.40!
    http://1.bp.blogspot.com/-eHEcD2-q30o/UPm54bMIfzI/AAAAAAAAlH4/ttQA8pT3erk/s1600/vix.png

    ReplyDelete
  196. Thanks Blue,
    I caught that move in the Loonie (after enduring days of the agonizing choppy range) and it looks like the correlation means bad things for stocks.









    ReplyDelete
  197. yes, those Canadians are A-OK, AR

    ReplyDelete