Print Print Baby

I have written ad nauseum about the hopeless economic mess that we find ourselves. We all know about the ballooning debt and the derivative mess caused by opportunistic and irresponsible bankers. However they were not acting alone, they acted under the direct knowledge and support of our federal government and other governments around the world. We are is such big trouble the mess is so huge that its is bringing the world economy to a standstill and his own verge of collapse.

So now these very same banks, bankers, financial sector companies are on the hook for massive losses for  these derivatives that they created which  made them huge profits in what we can call a pyramid type scheme. For this reason and only this reason, under the auspices of this “too big to fail doctrine” so to speak. A saying created during the during the 2008 financial crisis, central banks globally are in the process of manufacturing or printing money which will essentially get all the banks in the financial institutions off the hook. They will get away Scott free, and as usual the average citizen will suffer, as we will all live in a super inflationary environment.  

And so I may sound critical, but I'm not. I don't think anyone has a solution for this gigantic mess. I am only critical of how we got here. I am critical of the failure of our president and our politicians to not protect our citizens by NOT putting the people responsible for this mess in jail. Where is the justice they speak of? They put a guy who has there priors for selling nickel bags or less sometimes in jail for 25 years. The guys who steal billions of dollars from ordinary people and pretty much put the entire world economy on its knees, they get a bailout and huge x-mas bonus, WOW. It's so ridiculous to think that this is actually happening and they are gonna get away with it.

Okay that's enough complaining. What should be done to protect ourselves and how can we make money in this environment. I firmly believe that soft commodities, there are many AG commodity ETF’s that are great for this purpose, simple basket is DBA where you get enough exposure. Then you have specific Ag plays, I think sugar, cocoa are good, oil (USO), and in physical metals (not ETF’s GLD or SLV). Stocks across the board especially tech will also move higher but their value of the paper will do erode overtime due to inflation.

I will put up some charts later today. Happy Monday 

PM's set to breakout

CLICK ON THE CHART TO ENLARGE

CLICK ON THE CHART TO ENLARGE

This Rally Has Got Legs

Legs

In my Sunday post i had mentioned there maybe a rally coming to wall street but I didnt expect this massive gap up, crushed all my shorts to break even to a little up. And I think there were powerful events that occurred last week and over the weekend, where the ECB took the reigns from Germany, they are now dug in deep and fighting for survival, there is way too much at stake not only for them, but for the US as well.  

So that is why I am longer pessimistic on stocks and commodities, basically the ECB is taking over Europe, Germany has been summarily Bi&*h slapped.

So the feeling is that we are in "risk on mode", and the ECB is going to hyperinflate their way out of this mess, thats why you saw oil, silver and gold as well as other commodities jump yesterday on excellent volume, obviously there was a lot of short covering but there is real buying. Click the link below, excellent article, talks about what happened and where we are going from here. It is by Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously an editor for the Wall Street Journal.

Oh and by the way after the bell, Fitch reiterated the US AAA credit rating but changed the outlook from stable to negative and this has done nothing to upset the markets, so we know this rally has legs!

http://beforeitsnews.com/story/1427/016/NL/

Santa Clause Rally Coming To Town?

So a few days ago we went short and that has paid of handsomely as we have had seven straight down days. The hourly charts show an oversold condition (MACD and RSI are in oversold territory) but the daily chart MACD is nowhere close to bottoming, RSI is getting oversold, however there is no panic indicated by a VIX that for me needs to get in the mid forties before I get excited, so I think there will be a bounce but no change in trend. And again we need to respect the news, if there is more bad news out of Europe the selling will continue despite the oversold conditions.

 Note the bottoming RSI and MACD, these are more sensitive than specific, but it should give you a heads up that the selling needs a breather or seller exhaustion. 

Could we just fall to the bottom of this channel (1100) only 50 points away from my target, would just be too easy, note the RSI just above 30 beow is oversold and the MACD is not even close. 

 Multiple tops on the ADX, heading to its lower end of sideways channel, again RSI just above 30.

 Oscillator is just about the low end of its range, signaling we are almost at a point where we get a reprieve from selling.

 Significant reversal in investor bullishness in energy, from 90 to 23 also supports reversal. As well as financials but not as drastic.

So here is the strategy: 

Cover half of the short positions on Monday regardless of the futures or news. Close rest of positions if we have a close higher than a previous close on the SPX.

Watch the market rally, back to levels indicated and then re-initiate shorts. 

Caveat: NEWS

Now to my EUR/USD short

The dollar looks to break out and the euro is breaking down, also see USD/JPY as that trend is reversing. If the euro hold up it could rally to 138, right now its signaling it may just fall off the cliff.

Finally take a look at Citi as a example for big banks because all the charts of GS, JPM look similar:

So we have a nice set up for a reversal, looking forward to this coming week. 

Short-Term Reprieve From Selling?

So we have had four days of selling with out significant volume but investor confidence has been shaken but not enough to cause panic selling. I think there is still much complacency regarding the turmoil at home and abroad as the media continues to dumb down the public. My general observation is that people are very matter of fact about the situation. Euro-zone is on the brink of collapse and this failed German Bond auction is a SIGNIFICANT event that has gotten little or no attention. It show extreme lack of confidence in resolving euromess. Some people feel this will cause the ECB to start printing money. Mike Pento, "It is either assent to printing trillions of Euros or watch the Eurozone crumble into the dustbin of history".

You would think that with all this selling that there would be more fear, but the VIX though elevated in term of historical price has not reached the fear of the August through September period. We would have to see it rise dramatically before calling a bottom is this new range what I think will form.

Now lets look at the charts that show investor confidence or bullishness:

These four charts show that over the last 5 days or so bullishness is starting to come down but still way to high. The only conflict I note in the charts is that the RSI has entered oversold in most cases while the MACD is still at the upper range. We must remember that things can stay overbought or over sold for long periods of time so we don't want to jump back in to early. In this case with all the uncertainty out there I prefer to be late than early and would like to see price and MACD at the bottom end of the range, always keeping in mind Quantitative Easing and US intervention into Europe's banking system trumps all charting.

This next few charts show the S&P 500 and some key indicators:

As I have mentioned in earlier posts the S&P 50 has violated supported and is clearly headed to 1100, the ADX or advance decline line has not reached its 5 year support level, the MSI is not giving an oversold signal and has further to fall, the only contradicting signal is being given by the McClellan Oscillator.

Now lets look at Banks, Oil, Gold and Silver:

The banks are in real trouble at home and abroad, and if the governments do not intervene a cascade of events, ones like we have ever seen will take place making 2008 meltdown look like a bad night at the craps table. The Germans are beginning to or for all intense and purposes turned their back on the eurozone and with their bond yeilds climbing, meaning their borrowing costs are rising, how can they loan PIIGS et al money. Its just a matter of time before the Euro fails. And we should care not only as investors but as concerned citizens. Paul Krugman a Nobel Prize winning economist has been quoted as saying "the ECB could be in the process of destroying not just the euro, but the world".

Oil has held up very well due to rumors of Iran being attacked by Israel, but now that too is started to roll over, and from this point has the farthest to fall.

Here is the 5 year monthly Gold chart that reveals a possible double top which will be most assuredly confirmed this month as you can see an inverted hammer printed. This would lead me to believe we are entering a deflationary environment much like 08, that could accelerate to something far worse given the scenarios play out as I have previously spoken about. 

Silver is in big trouble, its floundering like a wounded animal and the only thing that will save it money printing and that ain't happening even though there  people out there that contend there will be a QE3 and more but when and how long can you hold is the question. For those that have been stacking the metals, they are not worried about the fluctuations because the fundamentals will win out in the end. But right now we are on the roller coaster on the way down and it doesn't feel good.

The dollar looks like its going to breakout and the euro looks like "impending doom".


FXY looks like its done going up: I'll leave the reasons for this major reversal in the yen to economists. The strong yen is heavy burden for Japanese exporters, and Japan's government debt has swollen to nearly twice its gross domestic product, but neither has deterred the yen's ascent until recently. The charts showing a shift to a weaker yen suggest capital could start exiting, magnifying the currency's decline.

In addition, a clear weakening of the yen could ignite the so-called carry trade, in which traders borrow yen to buy assets with higher return potential elsewhere. That borrowing of yen effectively is a short sale of the currency, which could further add to the pressure on it.

I'm keeping an eye on this development as these trends when they reverse in currencies lasts for months at a time. There are leveraged inverse ETF's to take advantage of this. 

Assessment and Strategy: Short Euro, Short equities (banks and energy), Long PM's.

Caveat: If there is a QE announcement out of Europe or US then cover all shorts immeadiately regardless of the technicals.

Breakin Inside

The market is breaking down, all sectors except for Gold and Silver are down. The major market sector are below support except for gold as the rush cash continues. I am not sure why Gold and Silver are up today.

TARGET 1100, but keep an eye on the MACD, if that bottoms first we will get a dead cat bounce before more selling continues. The media, the politicians are in denial as to the magnitude of this crisis or they dont want to scream fire in a movie theater and want people to exit calmly, who knows. But the lack of information is leading to average investor complacency. Preserve capital at all cost.

Perfect Storm

I wrote that these Eurozone or ECB would not work together back in mid-October, and that the main stream media is not telling the story correctly. Today I am reading that Merkel says " The time for living on borrowed money is ending". Take that PIIGS. The louder the calls for ECB to print, the louder Germany is telling the PIIGS they may need to be annexed for their own good.

As you may know but possible don't care, Europe is in a world of hurt. Why you should care, is that when the European banks fall, it will take down the US banks as well. What you are seeing right now is that all asset classes are being liquidated because the world needs money. When everyone raises cash, everything else goes down.

It has been over a year now and the Union hasn’t done a single thing to get Greece going again. Greece itself hasn’t helped its own cause either by continually missing targets and expectations. Italy’s is a joke as well and i am certain their problems are bigger than what is being reported. Now we add Spain to the mix don’t think for a moment that any news that attempts to paint over the current situation is genuine. The European Union is closer than ever to dissolution. The experiment has failed but the suits in charge are too ashamed to admit to it.

Now we have MF-ing Global to pull confidence lower, why has no one been arrested? MF Global is one of the most outrageous and brazen abuses of customers by Wall Street insiders. It has been receiving so little attention by the mass media, it shows the extreme moral hazard in which the average American unsuspectingly operates.

MF Global is worse than Madoff. It was not a Ponzi scheme. The customers were not betrayed by a fraud. MF Global was overseen by the government and the guarantees of a major global exchange. MF Global stole(Gold Silver other property) confiscated, and sold these assets. In some cases this very property was stolen again by the creditors and criminals who now conceal it in an attempt to claim it as their own. You'd think this only happens in the Third World Countries, what is the world is going on?!?!

As bad as it already is, I fear this is just the tip of the iceberg, more will be revealed as they say. We don't know how high this goes up in the political food chain. 

Strategy: Short financials, no its not to late. Whats about to happen will make 2008 look like a walk in the park. Short energy, its only held up due to Iran jitters, that Israel may attack Iran's nuclear facility. Short the SPX. Stack Phyz. If you don't want to do this go 100% cash.

Intermediate target for SPX 1100, if Europe falls apart we will get lower than the 2008 lows on the SPX.

MF-ing Global, The Super Con-mittee and Euro-boneheads = Deflationary Death Spiral

The Super-Committee has its deadline this week and a good resolution seems unlikely (see headlines), which is what most expect. Obama helped to set this impasse up by extending the Bush tax cuts at the beginning of 2011, which are now a major sticking point.

I have an open mind to the theory that this is a bit of chess, with Defense Department cuts being set up by default if no resolution is reached, although they will only start in 2013.

Most politicians would hate to put military spending cuts on the table and take responsibility for them. A failure by the Super-Comm makes the cuts 'automatic.'

We also have headline risk due to European sovereign debt issues that no one seems to be able to get together and fix. The Germans who have provided the lion share of the bailouts are opposed to all the plans previously presented. now they are opposed to Eurobonds. They just wish right now that they never got involved, its been a bad relationship for them. They wanna take their ball and go home.

Futures are down big across the board this morning and Silver iis the most hard hit. Take a look at the charts below they are self explanatory. I explained over six weeks ago how this would play out, that the masters in europe could not and would not get it together and it would drag the US down. Plan accordingly.

 

Hyun Song Shin: wanna know how important Europe is to us. MUST READ

Paul Krugman "The paper covers much more ground than that, of course. This is the latest in a series of papers arguing that the U.S. shadow banking system consists in large part of … European banks. This suggests that the creation of the euro had large implications even in US capital markets; and of course it suggests that the financial fallout of the euromess could be very large here as well.

In short, the ECB could be in the process of destroying not just the euro, but the world".

Trend Reversal: Possible Crash Ahead

S&P 500 closed below 1220 support level yesterday and if we have a follow through down day today with a close lower than yesterday we are most likely headed to 1100 on the S&P. Everything else is breaking down as well. Silver was the most hard hit yesterday. Yesterday's decline occurred despite an up day for the Euro. 

On the ADX monthly chart we see a bearish inverted hammer beginning to print. Remember I wrote last week that we were right up against resistance and if we don't break out to the upside we wouldn't be going sideways. There is just too much bullishness given the fundamentals. All the charts below show the trend or range breakdowns in some cases, this is the usual occurrence when what ever the equity you are trading is below the 150dma, just timing it is difficult. 

Headed to 51.5

Barely hangin on, watch for the 132 break before short.

 Oil and Gold are the two healthiest charts. Watch for 164 for support but I doubt it will hold.

Silver is a disaster a close below 28 would be disastrous and will start a cascade of selling.

Having said all this we have to remember this is not a free market and the central banks in US and abroad can intervene (change the rules of the game so to speak) and we would have to adjust our line of thinking.

EUR USD PM's

TEST 120 if 132 breaks?

Time to prepare for further selling

In my previous posts I have been warning about the European debt crisis and their ineffective treatment of the cancer that is spreading daily will cross the ocean to us and today we get a warning. I have been writing about this since the middle of October.

In any case there is still time to take money off the table or go short. Lets look at the banks because they have been in trouble and the banking index chart looks uglier by the day and yet bullishness of the investors is at the highs of the range. This is an extremely bearish development.

 Bullishness is high, the MACD is crossing down and there is a long way to go downwards.

On the 6-month chart for the banking index we can see that the banking index is perched on important support at about 38 at its 50-day moving average. While this support could could yet generate another minor rally towards the resistance shown above, it is clear that we are now at a critical juncture and failure of the support would be expected to lead to a sharp drop.

Ditto for BPSPX, bullishness high end of range, MACD crossing over  we are right at support, we could get a one or two  move up followed by a major down leg to 1100. Asia will be down big overnight and the futures will plunge at the open. A close below 1220 would be extremely negative.