Fin/Inv

The clash of the titans is upon us. Make no mistake – it’s make or break time for the bears as they are running out of time as well as wave sub divisions here. Emotionally everyone has been ripped to pieces, but from a technical perspective things could not be much clearer. Either the bears close the deal right here and now or they will be squashed and again be relegated to watching the bulls take their lunch money and fuck their prom queen.

The financial establishment is fighting for its survival – with tooth and nails – as it has been for the past two years. They have used every trick in the book and some unprecedented ones that hadn’t been written yet. They’ve gotten every break and get out of jail pass one can possibly imagine – but despite having the wind in their backs the upside momentum has stalled for about one year now. But don’t underestimate them for a second – until the fat lady sings the incumbents will continue to do exactly what they have been doing and they will never ever give up.

For their survival depends on it.

We now find ourselves at a major inflection point and the big question that remains now is whether the deflationists or the inflationists will win the war. Robert Prechter and friends insist the Fed can’t possible stem the bursting of the credit bubble through continued quantitative easing initiatives. I used to be convinced of that – but having seen what I have seen for the past two years I’m not so sure anymore. I’m also now mindful of various and concerted currency games which seem to provide almost infinite support and thus a permanent floor to equities.

So perhaps the combined forces of banksters worldwide may somehow get the job done and simply socialize those losses to the rest of us – thus in the process finally destroying what ever remains of our teetering middle class. We shall see – either way we’ll probably see some fireworks before it’s all said and done – and I’m not talking about hypothetical ones.

Whatever we’ll get – I’m dressed for the occasion (yes, I’m almost that handsome – well, almost). Now, that I’ve set the stage for you guys (and have the attention of the girls), let’s look at some charts:

The least important chart today is our wave count. Quite frankly – it’s quite clear at this stage that we are in a downtrend that either resolves itself or may paint a bottom and turn into something else.

Clockwork Orange keeps us locked in that current down channel. Which means we may pop a little on Monday morning but then reverse and paint new lows later in the week.

Soylent Green territory begins after 1070 – if we push much above that we will see many funds throw their weight behind a wonderful short squeeze opportunity. Either bears or the bulls are getting squeezed next week. The bears most likely early in the week and if we push higher quite possibly the bulls. I may however point out that if we don’t turn around at the 1100 mark then we’re talking about something completely different. But we’re not there – so let’s not worry about that yet.

But those are just the current high probability scenarios going out for a week or two – what’s a lot more important here is that the current count does not leave much more room for further sub divisions – at some point this bitch has to drop like a rock. After all this is what should be happening around here. In 2008 we had a similar situation and it was driving everyone nuts. I was telling Berk how the slide was overdue and that it simply wasn’t happening. Then it happened – suddenly – without warning – fast and hard. By the time everyone realized what was happening it was pretty much over.

So, when I say that it needs to happen now then it doesn’t mean that I can’t happen. What I’m saying is that it needs to happen by early October – and by that time it should be almost over. So, that leaves us with a very narrow window for a big slide. It has happened before – and there is no doubt that it can happen. But the important message to take away here is that the whole ‘waiting for Godot game’ we had to put up with will come to an end in early fall.

Now that I have shown you the least important chart let’s look at the most important chart for next week. I posted this one last week while we were hovering around that equilibrium center line of that one year channel I suggested. And sure enough we reversed right at the 25% mark – which coincides with that magic 1040 level the funds have been having fun with for the past few months now. Buying the dip here has been a literal gold mine and like Pavlov’s dogs they will continue to do it until they get their ass spanked in a serious way.

The higher we climb in this chart the less credible the short/medium bearish scenario. At the center point the odds are about 50/50. If we push to 1100 the bears have one last opportunity to squeeze the bulls and turn this market to the downside. At the top line around 1130 the odds for the bulls will have increased significantly compared with the odds around 1140.

We need to clear this channel – one way or the other. If we push above it the bears will be in a world of hurt as the ensuing feedback loop will bring buyers back to the table. I’m not sure that’s what the Fed wants – after all a climb in equities supports rising yields in treasuries. But their game may be something completely different and I’m not putting any of my coin on anyone’s interpretation of the Fed’s game. If we breach 1130 I will anticipate further upside and will trade accordingly. Unless of course my momos scream sell sell sell at me. If that happens – well, I will be here to tell you all about it.

If we finally breach 1040 and then 1020 it will be a starting signal for what Primary {3} – there is very little doubt about that. The majority of the longs will draw their line in the sand right there and should we breach it will most likely head for cover. Maybe politics and the November election make this scenario questionable – at least that’s what some claim. Then again – it happened in 2008, didn’t it?

The daily Zero has been pretty lackluster as of late. Just compare the magnitude of spikes we saw early in the year with the snooze fest we had to put up with since mid of July. Yes, that may have been merely seasonal, and if that’s true then it gives additional credence to my perspective that September will be the make or break point for the bears. The big boys are returning now and we should see considerable increase in volume and participation.

The last buy signal we got (see dotted line) was pretty weak and it was only good for a moderate bounce. Thus far we did not see a new low accompanied by a major divergence. But then again, we did not see a big spike down either that would signal that bearish momentum was on the rise. So, I’m split here and thus the odds are split in my mind as well.

Copper started to point up last week and – to no surprise – equities followed suit. Note however, how equities have lagged in comparison with similar levels in copper. This suggests that bullish moves in equities are lagging those we see in copper – a bearish indication. Nevertheless, we are also at a pretty important level for copper – which I have tried to highlight via a blue rectangle on the lower panel. But it’s actually a lot more clear on the point and figure chart:

See, isn’t that so much nicer? I love P&Fs for support/resistance lines. And copper just touched the 340 mark which should pose quite some resistance. If it breaks above then the bearish price objective of 296 may have been revised. Maybe some P&F aficionados can chime in here as well. I have the rules somewhere but don’t have the time to dig them up tonight.

The message to take away here is to watch copper like an eagle. A breach higher would be another ace in the sleeves of the bulls.

My gold:silver ratio chart plotted against the SPX also has touched my one year sell line. Usually bearish things happen at this lower diagonal and this time should not be any exception. Again, a breach here may greatly weaken the short to medium term bearish scenario in equities – so I will be keeping an eye on it.

Currencies is really where the game is being played these days. The AUD/JPY has seemingly been set up with a turbo charger running on high explosive mix of nitro, fuel and oxygen. Seems that the BOJ has had it with lagging exports and is putting the squeeze on the Yen longs by buying the Australian Dollar. Maybe some FX traders could shed a bit more light on this for the benefit of us all.

We are close to the breaching the upper line on my stochastic but that doesn’t mean much. We may push above and become embedded after all – so who knows how high this thing may climb. And that is probably the most worrisome chart for the bears – if equities follow suit here then we’ll see 1100 on the SPX in a very short order. But if it lags then it will give the bears additional ammunition for a long squeeze once the AUD/JPY rolls over.

The DXY is clinging to 82.87 – and not seeing the Dollar getting killed is a plus for the bears. After all, the 18 month climb in equities has been greatly fueld by stomping on the Dollar in the process. You may remember the chart I posted last week which showed the SPX valued in Gold.

Bottom Line:

It’s now or at least not for quite a while for the bears. I won’t say never of course. But the wave count does not give us too many wiggles to postpone the grand finale here. If this is a Minor 3 of Intermediate (1) then it needs to start showing its colors. And the A/D ratio of 5.0+ we saw on Friday should be an anomaly that cannot be followed up – otherwise we have to concede that something else is going on. That simple.

Public Service Announcement:

In the past month I have again put additional emphasis on refining some of my automated trading strategies, with quite some success if I may say. A major reason for my revived focus is a growing realization that the retail trader is slowly going the way of the dodo. I love you guys but just don’t think there will be many of you left in one or two years from now. The market simply has become to complex, narrow, and brutal. And as the old saying goes:

If you can’t beat them – join them.

Now, I have been blessed with some pretty considerable programming experience – after all I used to be a software engineer for 15 years until I decided to retire and focus exclusively on my trading. That however doesn’t mean that I stopped hacking code – quite on the contrary: I merely had become tired of working on other people’s projects and quickly found that my skills were a lot better used working on trading strategies. I seem to have a knack for seeing patterns and putting my observations into code and thus working strategies is a very rewarding endeavor for me – mentally as well as monetary.

Incidentally, the strategies I am testing and continue to optimize until I am ready all have been back tested starting January 2007 to the present. The reason for that is that I believe that any strategy which was able to survive the past four years should at least have a fighting chance moving forward. After all, we are talking about some very dynamic and contrasting market conditions here.

There will be several announcements in the next few weeks – and I believe you will appreciate the kind of stuff I have been cooking up. And over the next few months you may see a slow shift towards automated trading. Some of it in the same fashion as Geronimo or evil.rat – which means via email or SMS notifications. But I may also finally hook into Collective2 or a similar service and thus give you guys the opportunity to trade various strategies through an automated framework.

What concerns me a bit is that Collective2 takes a big chunk out of my profits and being the greedy market megalomaniac that I am it would be preferable to find a different solution. So, if you are reading this and know of a better framework please let me know – I’m open to anything as long as it represents a viable and secure solution.

See you on the other side, folks.

Cheers,

Mole

Until yesterday night I anticipated this to be a long winded and torturous weekend forecast with much conflicting evidence and various exhibits depicting the pros and cons of the current bearish scenarios. Fortunately, I saw the light and although I am going to present a boat load of charts as well as some short term bullish evidence my position at this point is: Don’t sweat the details. For what’s coming may transpire tomorrow, next week, or a month from now – but it’s coming and either you’re positioned for it or you’re not.

It’s really that simple – forget about the short term – on a medium term basis the bulls are about to get hit by a folding chair WWF smack down style . Obviously, this has implications on how we deal with whatever transpires next week. After presenting what I deem to be some compelling evidence I offer some strategies that should keep us out of trouble plus leverage any sudden moves to the max.

In that context I greatly recommend that you carefully study my Friday update on EWP Option Strategies, if you have not done so already. Please make sure you fully understand the basic premise behind the Bull Put Ladder (a bearish option strategy) in particular and also it’s cousin the Bear Call Ladder (bullish as suspected) – although I reckon that we won’t be needing the latter for quite a while. It is key that you develop a taste or at least an understanding of these strategies as they will be key in grasping some of the trades we’ll be looking at in the near term future.

Alright, plenty of charts waiting – prepare your browser for a regular chartalanche:

Long Term View

Let’s start with our long term chart roll call first – after all I told you to not sweat the details and of course there is method to my bearish madness:

I am pretty confident you by now understand what the SPXA50 chart is – if not I recommend you read up on my recent discussion of average vs. median, which is another topic you should be firm on at this point. What we are doing here is to put the SPXA50 in context with volatility as expressed by Mr. VIX. And then we slapped a CCI on the entire frankenchart. Why? Because we can! Plus it seems to nail roll overs quite nicely. And rolling over it did just when we expected it to happen – that breach of the 100 mark worked like a charm. As you can see there is plenty of downside momentum remaining.

Same chart – except that we’re zooming out to see the last four years and are also using a MACD it on it. Which seems to move quite cleanly – always appreciated. And as you can see it just rolled over from quite severly overbought conditions – which without much of a price move. Again, plenty of downside momentum remaining.

Here we are applying the same rationale – in this case we are looking at NYSE stocks above 50-day SMA in the context of declining volume. Basically we are measuring how much those market makers are lying to us – the higher the spike the thinner the volume driving those market leaders up as rising down volume increases the divider. I know it’s a mind bender – just trust the chart as it seems to be pretty spot on – at least on a long term basis.

Having fun yet? Well, we’re just getting warmed up. This is the SPXA50 chart on its own and again we’re using that CCI as a measure of momentum. Again, I have no particular reason for having picked that one, except for that it seems to work pretty well. Last week I showed this chart and proposed that there was a lack of progress despite prices melting higher. Well, it seems that this divergence played out as expected – thus far at least. Again, plenty of downside potential remaining – long term.

The SPXA50R is the same as the SPXA50 – only difference is that it measures the percent of stocks above the 50-day SMA instead of the number. I posted this chart a few months ago as it depicted distribution as we were painting new highs for the year in equities. Quite interestingly the 84 SMA has not even budged, which speaks to the continuatin of the current downtrend.

And here we go even more long term – we are using a moving average of the SPXA200R (yes, you guessed right – stocks above their 200-day SMA). I have highlighted each time we painted ~1120 on the SPX and as you can see we are at around 60% of what we saw at prior readings. Which means distribution – which means weak hands getting frustrated and kicked to the curb – which means many of you stainless steel rats.

The proof is always in the volume – and the NYSE advancing/declining volume ratio chart again pointed the way as advancing volume began to lag downside volume after that first spike up in early July. Again, much downside remaining here.

This chart is the product of a collaboration with Tooncez and myself – I mentioned that I wanted to see a MACD style histogram showing the delta between the SPX and the SPX:VIX ratio and he sent me an early version which has been going through a few iterations since. RaisedByWolves also joined the fun and suggested to use a log on the ratio in order to bring it in line with our stockcharts predecessor.

Anyway, I think that chart is absolutely beautifully stunning. No other chart I have seen depicts the trend of the past two years as nicely as this one. Good to see red readings in the histogram and we definitely want to keep it this way. It’s now time for those readings to intensify to the downside again as we are too close to the zero mark for bearish comfort.

One more long term chart before we look at the more immediate trend. The McClellan measures the medium term and the NYSE Bullish percent the long term. Each of them is calculated completely differently but we just choose to not care and look at it as a ratio chart. Which rolled over just when we thought it would – fantabulous! Again, there is still plenty of downside momentum remaining – especially if we bounce up a little in the short term.

Which brings me to the short and medium term charts:

Short/Medium Term View

The long term remains quite clear and unless all those charts are wrong down we go. Short term however the tape will throw us a few monkey wrenches and it may be as soon as early next week:

First up, the Dollar seems to be in the process of completing a first motive to the upside (clearer on my 135min chart). Which means we probably will get some profit taking either here or a handle or so higher which will favor equities. If you have any doubts about that please remember that the entire melt up from the March 2009 lows was due to massive quantitative easing and thus the destruction of the Dollar. Let me show you how much your buying power measured in Gold has been degraded:

That’s right – relative to gold your fancy stock portfolio is still worth jack and we are near the 2009 lows. You can thank government (i.e. Fed) sponsored Dollar dstruction for that. Anyway, that’s a story for another day – let’s move on with our short term perspective.

My NYSE A/D ratio chart and in particular the D/A signal seems to be running a bit out of steam. Unless we get a strong spike to the upside on the bottom panel we may be completing a bullish Gothic Church Tower (GCT) fractal, which seems to be a harbinger of green candles ahead. How many and how long is unclear – if this is a GCT it appears to be a mild one, so the expectation is that we remain below this month’s highs.

The daily Zero also spiked down and then went flat for two sessions despite the SPX painting new lows for the month. Which also may mean that green candles loom ahead. The spike down was not super strong, but it is strong enough to qualify.

FYI – that smoothed panel has been puzzling me all last week. Either it’s right and we indeed whipsaw around a bit more, driving the bears crazy, or there’s something wrong with that reading. I’m not sure yet and as of now I recommend you simply ignore it, as it’s a fairly new version of the Zero. In case you read this after it becomes available to no-subs – the Zero is a proprietary trend indicator (there’s also an hourly and a 5-min intra-day version) and you can sign up for it here.

This is the short term version of the SPX:VIX chart I presented above in the long term section. Note that I am not using a log on the ratio – if I do this on the hourly it just doesn’t work. Which is something we’ll have to continue looking at. For now a simple SMA suffices IMNSHO.

But what I’m seeing right now argues against an immediate drop to the downside. Of course all that can change come Monday morning but thus far the downside plunge late last week was not accompanied by a strong negative reading. Could be that we simply need a bit more time and that we may get another push up before a big push down.

Mr. VIX is also creeping along that upper 2.0 Bollinger. If the bears are lucky it stays inside – if not we may see a close outside which would be one step toward an equities buy signal.

Wave Count

Based on all the above I am long term bearish but short/medium term bullish, right now. However, knowing that the long term trend can overwhelm any time I would not recommend going long here. Instead some mild hedging and in particular a ’sell-the-rip’ strategy is what I personally plan to employ.

The Blue Plate Special has the lower probability right now, despite the fact that most bearish pundits seem to be in love with it. I expect a pretty scary retracement should the bulls finally gain some ground and the dip buyers decide to pour in. But we never really know for sure – and relying on ‘just one more rip’ will in the end lead to missing the bus. Thus, I plan on holding my bearish positions and even add more starting at 1100.

Soylent Green has a bifurcation – one suggesting a drop at 1105 and then one at 1122. I think both are reasonable targets and it all depends on how much energy the bulls are able to mount. This right now still is my preferred scenario, mainly due to the short term charts I posted. But I’ve been around long enough to realize that those charts may be fooling me, thus I refuse to over complicate matters by trying to play every swing. If we get a run up then I’ll add more short positions as soon as I see momentum roll over.

Suggested Strategy:

Wasn’t that fun? Exciting times indeed and extremely interesting from a technical perspective. Now based on what we learned on Friday I propose an alternative strategy of playing a possible swing up. If we do get to 1105 on the SPX, which roughly equals 110 on the Spiders – how about a S110P/L108P/L106P bull put ladder? I’m sure BobbyLow will have a field day with this and I’m open to various suggestions – as a matter of fact, that would be your homework assignment for this evening. I would love to see some TOS simulations and profit/loss as well as break/even analysis – as a matter of fact the winner gets a free week of Zero goodness.

Cheers!

Mole

I know it’s summer and there are probably ten thousand more interesting things to do watch than this tape melting up like an ice-cream cone in Central Park. My personal favorites would be hot babes in bikinis at the beach, reruns of Star Trek – The New Generation reruns, any 3D movie in the theaters right now, or even paint drying on your deck – as long as you are in ample supply of German Hefeweizen even that can be fun.

All of the above provides a lot more thrill than watching the dreaded ’summer tape’ – especially during the ’summer of pain’, a wave scenario also known as the Soylent Sisters here at the Evil Lair. Of course if you have masochistic tendencies then I have a chart for you but let’s get you in the mood first:

There ya go – now let’s look at the Tuesday road map.

Quite frankly – it’s painful to look at even if you’re not sitting on short positions. But hey – I prepared you for something like this over a month ago – so no big surprises here at Evil Speculator. Unless of course you chose to ignore Mole’s bullish paranoia

So we are very close to the Soylent Green inflection point which we reached quicker than I cared for. I expect some kind of retracement at 1120 but don’t let that fool you – even if we push back to 1100 it’s quite possible that we reverse and push further up and breach for good.

I’m looking at the daily Zero right now and although many pundits expect this ramp up to stop right here and now I just don’t buy it. What I’m seeing on that chart is solidly bullish and unless I see a kiss of the zero mark on the daily Zero I will not load up on short positions. Besides – most of my long term momo charts suggest that we have plenty of space to run left – and this tape has not felt bearish for a minute in the past week. Yes, NYSE volume was miserable again today and there are bearish divergences on the MACD and other traditional momo charts. But heck – if the past year has taught me anything it’s that all these things mean jack if a narrow group of heavy market participants are running the tape via their PlayStation 2 joysticks.

I think 1120 may be a good spot for a quick one/two day trade to the short side but don’t go crazy and set a stop not too far away. That diagonal line, once breached, will serve as a trampoline for a strong push higher.

Now how about Soylent Blue, Mole? After all, it’s on the chart?

Well, I put it up because it’s a ‘possible alternate count’ – but quite frankly what I see on the daily Zero and the NYSE A/D chart does not bode well for Soylent Blue. That larger fractal on the A/D chart was shot to hell last week when we turned on a dime and shot higher – which incidentally was a big learning experience for yours truly. It’s tempting to look for extended patterns but this experience shows that the short term fractals (one week or less) are where the money is. Anything beyond that is mental masturbation.

The Dollar also decided to be naughty and painted new lows today. If you remember my last DXY update – I expected a turn around the 82.20 mark – which we got – but then the damn thing started dropping again. So, the next support zone is now around 81.30, which is the 1.328 multiple of wave A. It’s also right at the 50% retracement mark at 81.43. If we don’t get a strong bounce there – boy – things might turn ugly for ole’ bucky. But we are not there yet – and odds are still we’ll see a bottoming pattern near that cluster.

Bottom Line

If you were long equities – congrats – take profits now and wait for a little drop in a day or two. At that point I’ll let you guys know how things look like on the momo front. If we don’t see signs of consolidation and real topping then it may we worthwhile to grab a few more long positions. The next two days will be key in signaling where this thing will go. But remember – those time cycles I keep mentioning have us push higher into early August – so don’t be rushing into short positions now.

That’s all for tonight. Stay strong and be frosty. Even this shall pass

Cheers,

Mole

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So, the big question tonight is whether or not Clockwork Orange has a new lease on life or if today’s drop was yet another theta burning blip in our journey toward the resolution of Soylent Blue. Since my crystal ball is still at the shop we’ll have to make due with some inflection points which should guide our trading for the remainder of the week.

Charts and commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed or Evil Speculator Gold or geronimo/ES or evil.rat/ES to view this content.

Ole’ bucky has is nearing our target zone, just as expected, and it’s again time to look at long reversal odds on the DXY – as usual courtesy of retracementlevels.com. I recommend you go and check out the wide selection of other statistical trading tools 2sweeties has available. I use all of them in correlation with various systems on a variety of instruments I am trading. We are talking futures, FX, equities/ETFs, you name it. Statistical probabilities are a competitive advantage usually only available to institutional traders and completely unknown among or inaccessible to retail traders. I mentioned this before – according to reports I came across over 60% of institutional trading is based mainly on statistics. By combining statistical tools with a variety of advanced technical measures we can gain an advantage – even in this crazy market.

Talking about a Dollar update – how do you like my new proposed design for next year’s greenback? I think it uniquely visualizes the spirit of where our country is heading. Hey, I got mine, jack!

The odds on the DXY have shifted down a little bit since the last time we looked at it – but not by much. The 100% mark is now at 81.88 – which again fits nicely into my own fib and wave count chart at the end of this post. The prior 82.77 RL is registering in at a 87.44% – not too shabby and also right where I want it – see my chart at the end.

Now that we know the odds let’s take a look at the historic frequency of retracements. 83.35 had a pretty high frequency and it’s almost exactly where we put in a little bounce before we dropped further (again see my chart below). Our 82.77 RL (with 87.44% odds) has the same frequency of slightly over 13% – those are odds I can sink my teeth in. After our 81.88 RL (the 100% mark currently) the frequency drops off quite a bit.

So, how does all that fit into my DXY wave count?

Quite nicely actually and we have a lot of hooks to hang our bull costume on. First up the 82.77 RL mentioned above is very close to 82.73 which is where wave C would equal wave A. The 81.88 RL (the 100% odds mark) is also right at my 123.6% fib line which on the chart stands at 81.85. How’s that for coincidence?

But we got additional reasons to consider the long side on the DXY. The 83.15 mark would be the 38.2% retracement of the entire run up – and obviously it sits slightly above our first RL promising odds of  87.44%. If you measure the path starting at the end of Minor wave 2 back in April all the way to the top in June via a Fibonacci retracement then you will find that we stopped right at the 61.8% mark today – admittedly after a pretty forceful candle down.

In terms of price we have the 82.24 high of Minor 1 in late March. We also have potential support at the 82.91 low we painted on May 10th – also inside that cluster I have highlighted in blue on the chart above.

Nobody has a crystal ball, especially when it comes to trading currencies. However, it seems to me that we’ve got a lot of reasons to consider a long position on the DXY after a pretty textbook retracement down. It fits nicely in terms of time and form, plus the odds seem to increasingly favor the upside. I think that taking a long position at the 82.7 mark has a reasonable chance and if that one gets stopped out chances are that 81.8 will hold.

Whether or not this will have any impact on equities remains to be seen. Right now the AUD/JPY appears to be the leading index and it doesn’t seem to be giving an inch. The wave count update I presented on Monday afternoon is still valid – no changes on that end despite the assumption we’ll gap up at the open on Tuesday.

Cheers,

Mole

Since I’ve put up an extensive post yesterday forgive me if I’m doing a Speedy Gonzales on you tonight.

I’m sure few of you were aware of Speedy’s dirty little secret. Sheeesh – another childhood icon bites the dust. First the Tooth Fairy, then Santa Claus, now Speedy? Who’s next?

Anyway, if you haven’t had a chance yet please go and check out my weekend update which is now open to everyone – quite a few goodies in there and maybe a mind bender or two as well.

The first session after the long weekend turned out to be a regular bruiser – first the bears got their share and then it was the bulls’ turn. In the end (and with some help of our friends at 33 Liberty) we put up a slightly red doji on the daily. I’m sure you wonder what’s next on the ole’ wave count, so here we go:

Updated wave count and commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed or Evil Speculator Gold or geronimo/ES or evil.rat/ES to view this content.

I don’t want to put too much emphasis on a pre-holiday session but today’s tape left us with some evidence of a possible bounce. Let’s start by taking a look at the TRAN fractal I posted a few days ago as a map of what ’should be happening’.

This excerpt taken from the ‘Book Of The Dead Market’ shows us on the brink of a market about to fall off the plate. I am sure that back in 1987 the tape was pretty oversold as well and that many momentum indicators available at the time were pointing towards a correction. However, Mrs. Market was not in the mood and decided to continue downward in post haste. It was almost impossible to predict back then and it is equally impossible today.

Why would the fractal break right here where it matters the most? Who knows – because Mrs. Market is a cruel and sadistic bitch? Or maybe Stainless Steel Hamster didn’t remember the password – or even worse – faked it?

Thanks a lot Hamster Boy! Next time – remember – Klaatu Barada Nikto!

Problem is of course – having a road map can be very helpful, but it can also be dangerous if you’re looking for a road in the wrong county. In any case – a significant deviation from our current road map will tell us that we need to accommodate a correction of some sort. Of course what brings all this up in the first place is that today’s daily candle looked and smelled like a reversal and didn’t exactly fit into the picture. But it’s not just the candle – it’s also where it happened. Let me show you what I mean:

Basic stuff – simple 2.0 Bollinger on the SPX. We breached the lower line and bounced right back. Now in some way this is of course a bullish signal but then it’s also a long term bearish signal. I know that sounds nuts – but would you rather see us close outside once or twice during a holiday weekend and then have to worry about a monster snapback relief rally?

Same story on the VIX – as you can see we touched that upper boundary and snapped back. Yes, that’s bullish for equities in the short term but medium term it also allows the current upper line to stabilize and possibly push higher. What we want is for Mr. VIX to remain inside and to continue upward – if you are put holder that is of course. What we don’t want is a close deep outside and to possibly face an equities buy signal that leads to a massive reversal and more theta burn for the bears.

A bounce here would actually be quite helpful. My NYSE Adv/Decl Volume chart is pretty shot to hell right now. As a matter of fact it hasn’t been that low since the March 2008 low. I can imagine that this may freak you out – and does it for me – which is why my diagnosis is as follows:

Based on the fractal above and the situation we are now facing I believe that we need to proceed downward almost immediately. Since tomorrow is a pre-holiday trading day I am wiling to give this thing until Tuesday (NYSE is closed on Monday), but if there is any significant sign of strength tomorrow or Tuesday then we probably have to sit through a counter rally of yet unknown degree. My best guesses based on my fibs and the wave rules are threesome:

Clockwork Orange: Down down down – Minor 3 of Intermediate (1) will get us below 1000 on the SPX and then some. Again, this has to happen rather fast as we are running out of time before buying interest will step in with strength.

Soylent Blue (and it’s slightly more bullish clone): We either are painting a Minuette (ii) or today was the low of Minute {i} which would be followed by Minute {ii}. The latter is the more bullish scenario – the former is basically a more pronounced sub-division. Pretty much academic as all of them point lower.

There is also miscellaneous evidence in form of the Dollar (DXY) which is pushing down, a Euro (AUD/JPY and EUR/JPY) which is pushing up (although equities have been lagging thus far), Gold which was dropping hard today, etc.. All that can be overwhelmed by a good old fashioned banana slip as evidenced by the 1987 fractal – but the prior example shows that there was not much lingering around. Neither should that be the case this time, otherwise the fractal either breaks or at minimum we need to consider a slightly modified scenario. Which would be reasonable – as one can’t expect a fractal pattern to be accurate down to the last candle. Nevertheless, Clockwork Orange does not have a week or more to sort itself out – it needs to happen soon – and by that I mean next Tuesday or Wednesday at the very latest.

In anticipation of a short session for everyone I would like to take this opportunity to wish all of you intrepid stainless steel rats a most excellent and relaxing Independence Day. I only wish our country would be in so much better shape – but maybe the looming depression will be an opportunity for all of us to put our iPhones and Crackberries down, pull together as a people, throw out all the bums, and to again revert our great nation back to the place I decided to immigrate to twenty years ago. A lot has changed since then and unfortunately very little has been for the better – our civil rights have been significantly curtailed and our economic future squandered by short term thinking and rampant corruption in the private and public sector. Much effort will be needed to once again return our nation to the values it once stood, fought, and sacrificed so much for. Start locally – talk to your neighbors – educate them – and help each other to prepare for what’s coming. Hot dogs and red/white/blue flags do not represent the spirit of what our nation stands for – it’s up to us – every single individual to make this nation a better place. Remember the enormous sacrifice the founders of this country had to bear in order to escape tyranny – and then try to live up to it. Our motto and message to Washington should again be the one we started with:

No taxation without representation!

Cheers,

Mole

Ole’ bucky is on the move and it’s time to look at long reversal odds on the DXY – as usual courtesy of retracementlevels.com.

I recommend you go and check out the wide selection of other statistical trading tools 2sweeties has available. I use all of them in correlation with various systems on a variety of instruments I am trading. We are talking futures, FX, equities/ETFs, you name it. Statistical probabilities are a competitive advantage usually only available to institutional traders and completely unknown among or inaccessible to retail traders. I mentioned this before – according to reports I came across over 60% of institutional trading is based mainly on statistics. By combining statistical tools with a variety of advanced technical measures we can gain an advantage – even in this crazy market.

As we are now trading around 84.76 the odds, my dear Holmes, are not yet statistically important enough to get positioned to the long side. First long RL I like is the 84.362 mark and you will later see that there is another reason for my preference. 83.33 is our current 100% mark and again this reading fits right into what I’m seeing on my own chart.

Historic frequency was quite significant further up but the odds were simply not playing along. Which is why we kept dropping and it’s why I also think we are not completely done yet. I think 84.362 would be a reasonable spot to look for upside but I personally prefer 83.332 and this is why:

Current DXY count and commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed or Evil Speculator Gold or geronimo/ES or evil.rat/ES to view this content.

It’s been a while since I reported on the fate of the Dollar, simply because there was nothing to talk about. After a third wave short stopping rally it needed some time to consolidate. We are now looking at possible long levels on the DXY, as usual courtesy of retracementlevels.com.

I recommend you go and check out the wide selection of other statistical trading tools 2sweeties has available. I use all of them in correlation with various systems on a variety of instruments I am trading. We are talking futures, FX, equities/ETFs, you name it. Statistical probabilities are a competitive advantage usually only available to institutional traders and completely unknown among or inaccessible to retail traders. I mentioned this before – according to reports I came across over 60% of institutional trading is based mainly on statistics. By combining statistical tools with a variety of advanced technical measures we can gain an advantage – even in this crazy market.

So, let’s look at the odds first. Quite notable is the clear jump in probability to 86.67% at DXY 85.5 which is only a few ticks away at this point. Less than half a handle lower is the 85.08 mark which claims a 93% probability. So, it’s a fair bet that somewhere between those two RLs we’ll probably see a meaningful bounce on the DXY. And I think it could happen sooner than later:

This is why – the 85.5 mark stands out with a very salient 22% historical frequency. Add to that the 86.67% probability and it makes it a pretty good level to get positioned to the long side.

Alright, let’s put all this into context with my long term count on the DXY:

Charts and weekly commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed or Evil Speculator Gold or geronimo/ES or evil.rat/ES to view this content.

I’m a bit pressed for time on this beautiful Sunday as I am preparing for a short business trip early next week. So, since many of you know the drill and are somewhat familiar with some of the themes I post here over the weekends I will dispense with any long winded explanations and just present the evidence I am able to produce. I think many of the charts are pretty much self explanatory – where they are not I am happy to throw in my point of view.

Boy, where ever that is – those guys sure know how to par-taaaay!!

I will mostly focus on the long term this time around – and how the short term may support the overall long term trend, which in my view continues to be to the downside.

Long Term Momentum

I started to post this exotic ratio recently. The first version suggests that there may be more upside until we start touching that tan channel line. What I’m trying to say here is that the true test of Primary {3} will be whether or not we are going to make new price highs after we made a signal high.

My second version is a bit more simplistic and suggests that a touch of the upper trend line should result in more downside.What I find interesting is how much upside progress we have made on the signal line, which is really not reflected in price advance on the SPX.

A recent addition to the evil lair, my rendition of the percentage of stocks above their 50 SMA has been making the rounds on the blogosphere lately. This is my original version which mostly focuses on the long term. And on that basis the line continues to point down.

As I’m not one to get complacent after making a discovery, here’s a more short term version (i.e. 13d SMA). Which shows interesting divergences on its own, but it suggests that if we happen to make new price highs this year (hey, don’t under estimate the bulls’ ability to drive this thing up) then we would have to continue to see a lower reading on this chart to support to the Primary {3} outlook. Otherwise something else is in the works. Well, this is mostly mental masturbation for now, but keep an eye on this one.

There was quite some talk about the record TRIN reading on June 4th – some of the pundits insist that the coin side of such a high reading is that they usually first result in some upside before they turn into downside. So, you can actually use them as a warning shot that a drop is looming in the medium term future. A turn may be weeks away – or months like in 2007 – but admittedly those were different times. I agree with this on a short to medium term basis, but I don’t think we are talking months.

Perhaps my 2nd version of this chart can offer more clarity. It took me quite a while to properly interpret the signal here but I think I may be on the right track. What I’m seeing here is that the recent spike was part of slowly increasing bearish sentiment during Primary {1}. You can clearly see where the bulls got squeezed all the way towards the end of 2008.

Then we got a breach of that red line and buyers simply kept buying. This officially initiated the new up trend, which we have labeled Primary {2}. And then the tables were reversed – again clearly visible is the line where the bears were now getting squeezed every time until April.

Then again we saw a breach of that squeeze line, followed by a monster ramp up (accompanied by lower prices on the SPX). This may be the starting signal of a trend change. Well, if this turns out to be confirmed later this year then it is supporting evidence that simply reading momentum signals without context can be misleading and may lead to losses. My money is on the second chart – it is also difficult for me rationalize how a 175 handle drop on the SPX can equal a 900+ handle drop.

This is a slightly different version of my CPCE Deluxe chart. Question I’m wrestling with is whether or not we are going to the upper red line first or are now starting to reverse back down the blue green one. During a trend change situation we may indeed do the former and that would then followed by a rally into Intermediate (2). Frankly, Im not sure yet…

My adv/decl NYSE volume chart painted a serious spike which I have not seen since early last year just before we embarked on Primary {2}. So, it’s justifyable to ponder whether or not we are so oversold at this point that we’ll see another rally hurlding us toward new price highs? Quite honestly, I’m not sure how to read this one – is this a bearish signal or is it implicitly bullish?

JUNK vs. SAFETY

This chart was brought to me by one intrepid SSR whose name I unfortunately forgot (sorry!). What I find interesting here is the little dip down here on Friday.

Which is supported by my own JNK:TLT chart. But what’s also quite interesting was the divergence at this year’s SPX low. Let’s keep an eye on this stuff, shall we?

I would have liked to post my BAA-TYX spread here as well but my usual sources won’t have an update on the BAA for me until Monday. However, Hochberg mentioned that very spread in his STU and it appears that it is at minimum remaining above the 2% mark. I have it at 2.05 on last Wednesday and since then treasury yields have slightly pushed higher from 4.09 to 4.14 on Friday. If the BAA pushed above 6.19 then we would remain at our recent spread high of 2.05. Hochberg’s chart seems to indicate that but I prefer to collect my own data.

Commodities/Metals

My cooper futures chart is pointing up – so I expect there to be more upside until I see some divergence at minimum.

Well, this is really not so much about the metals as it is about the SPX. We actually turned almost precisely at that green upper trend line produced by the gold:silver ratio. Question now is – will the bears have to wait all the way back to the red one?

Medium Term

Mr. VIX finally made it through the center line of its 2.0 BB. I think it’ll probably manage to stay below for a little bit – perhaps we even see a VIX sell signal – wouldn’t that be sweet?

Wave Count

Soylent Green needs to start turning almost immediately – I give it a few more handles to the upside but it we push much past 1095 chances for Orange are starting to increase rapidly. If we push over 1105.67 (by the penny exactly) on the SPX then we are talking a whole new ball game which is Soylent Orange. And that may reverse all the way to 1130 or perhaps even into 1150/1175. No, it’s not impossible for this to happen – despite weaking Zero signal and diminishing volume readings in the futures and in the cash indexes. Let’s never forget that the bulls have a lot of help out there – drops are always considered to be negative which is why they are being fought every step on the way.

Bottom Line

None of the above tells me that we are about to drop right away and I’m 50/50 on Green vs. Orange. Reason being is that we are actually less oversold now then we were a few days ago – yes, you read that right. These massive drops usually happen in very oversold tape and the conditions were ripe early last week, but the bears squandered it. Now we have painted a double bottom and I would be surprised if we turned right away – I am willing to consider it as my wave counts offers me that possibility. But I am not ‘feeling it’ – if that makes any sense. It’s also possible that we stay inside of Soylent Green and spend a week or two painting some double zig-zag – who knows – these things are hard to predict.

The Dollar is also close to painting a multi-week or multi-month correction and that would favor equities as the Euro would gain some much needed strength. Everyone is hating the Euro right now – which is probably why it will snap back at some point.

Long term this market appears to be in the early stages of a primary degree correction. I am fairly confident that I am interpreting the tea leafs properly on that end as there is much supporting evidence. Which is why I am going to hold my long term puts into any counter rally – I have not changed my stance on that and probably won’t until the market tells me that I am wrong.

Public Service Announcement

I will embark on a brief business trip on Wednesday [updated - I will not be gone Tuesday], so I will be pretty quiet on that day (will post comment cleaners if we are getting to Sparta). If possible I will offer a quick update in the evening but I can’t promise that. Expect me to be back in full force on Thursday after the bell.

Cheers,

Mole

Finally we are getting somewhere and we now find ourselves in a trading range I can work with. We are close to a final show down between Soylent Green and Soylent Blue. Not that we care all that much anyway because the inevitable may only be delayed. And since we bears may have become a bit rusty since 2008 I’ll round the post off with some medium target practice – now that’s something you can sink your fangs in…

… like in bear’s fangs – get it? alright – I thought it was funny… whatever… tough crowd…

Kick ass genetically enhanced wave count and bearish target practice below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed or Evil Speculator Gold or geronimo/ES or evil.rat/ES to view this content.

All eyes continue to be on the EUR/JPY pair – as where it goes equities will go. Since today is a bit of a song and dance (including the courtesy of a textbook shake out just 1.39 handles ahead of the plunge into the abyss) I would like to offer a more in depth look at the EUR/JPY. Because if it continues to ‘teach by example’ then things are not looking so rosy on the equities front.

BTW, in preparation of what may transpire at some point this year I have already acquired the proper tool for the job:

On a test drive I snapped a quick shot of this:

See guys, that’s why you don’t go swimming in uncharted trading pits without Evil Speculator

Let’s start with the micro view – my 30-min intra-day chart. As you can see we did pop above that 20% mark on my stochastics but are at the brink of dropping below again. That could get ugly in a jiffy – for an example look what happened last time (i.e. on the left of the dame chart).

Now the daily stochastics is looking pretty ugly – has been embedded for a while now and still pointing down. Also note that prior breaches and reversals to the 80% mark in the stochastic mostly resulted in sideways or mildly bullish price advances. The astute SSR may wonder what that red line is all about. Well, since we dropped like a rock lately I wanted to know where the next support level may be.

Boy, did I have to zoom out – 10 years that is. The last time we were this low was back in November of 2000! Right at the end of a 65 year bull market cycle (in non-fiat gold-ratio Dollars).

Also note that the weekly stochastic is also below the 20% line and is pointing straight down! This is one monstere carry trade unwind – some massive stops have been run here. Yes, the EUR/JPY is deeply oversold now – but as I’ve said before: Markets fall off the plate in deeply oversold conditions. There is no guarantee this will happen, but if it is to happen the conditions are pretty ripe here.

Those are some ugly charts and they could get uglier in no time. The risk is to the upside – follow the lesson we learned during the 2009 bear market rally: Don’t fight the trend – especially if the long term writing is on the wall. However, allow for violent snap backs (in both currency or equities) – because the status quo will fight like hell to maintain itself. Be mentally prepared – on the down and up side.

You have been briefed – now go out and play, but don’t take any prisoners, because they won’t.

2:41pm EDT: Karl ‘No Slave To Fashion’ Denninger chimes in on today’s obvious FX interventions. Enjoy!

Cheers,

Mole

Alright, you’re not going to like this – my apologies in advance for potentially ruffling your bearish fur. There has been a nagging voice in my head for the past two days – it’s been whispering nasty things reminding me to not get too complacent here. First I tried to not pay attention but as usual paranoia did wind up getting the better of me – and I’m glad it did as it motivated me to think things through a bit more. As you know I am not a correlation trader but there are certain market forces at work right now which will complicate matters for the coming next two/three weeks. Alright here it goes:

First we got ourselves a Dollar that’s been running wild in what looks either an extended fifth (very common in currencies or commodities) or a third. Either way – expect a meaningful retracement soon, probably starting tomorrow or early next week. Similarly everyone on the planet except the Germans hates the Euro right now, which as a habitual contrarian makes me pay attention – case in point: Gold last week when everyone loved it (97% of gold traders were long) – look how that played out today (snicker).

Now although I don’t trade correlations the recent lock step between the EUR/USD and ES futures cannot be ignored. I have been very prolific on that subject and I don’t expect this sort of thing to suddenly dissolve, especially when a correcting Euro (and a dropping Dollar) may provide a welcome back wind for the bulls. So, let’s get scientific about this and look at the DXY first – and then I have a few more special goodies you should really enjoy (or at least love to hate):

As usual, first we’ll look at the statistical odds on the DXY – as usual provided exclusively to Evil Speculator courtesy of retracementlevels.com. I recommend you go and check out the wide selection of other statistical trading tools 2sweeties has available. I use all of them in correlation with various systems on diverse instruments I am trading. We are talking futures, FX, equities/ETFs, you name it – statistical probabilities are a competitive advantage usually only institutional traders and the like have access to. According to reports I came across over 60% of institutional trading is based mainly on statistics – traditional TA is quickly becoming a thing of the past. Hey, it’s an arms race out there and either we keep up or we go the way of the dodo.

Anyway, since we’ve been running up on rocket fuel we now are looking for a possibility of a drop – after we get a reversal of course. But in terms of a short reversal the short RL odds I’m currently looking at have nearly 100% probability and a 14% frequency (which is high) at the 88.186 mark – only about 0.4 handles away. So, a reversal should materialize soon which is why I am focusing on the short side now. Not that I am stepping in front of this freight train – no sirree – I merely want to get an idea of how far we may drop and then reverse. The odds tab above shows me a jump in odds around the 84.49 mark – I set the 100% odds to 82.83 which I think is more than reasonable. Just so happens that 84.49 matches my wave count quite well – and more about this below.

Now here’s the frequency tab – as you can see the 86.14 mark really stands out. Again, that is very much in sync with one of my counts I’ll show below. Next we have 85.5 and 84.49 – both with very good historical frequency – odds are we may see some support coming in here.

Alright, now let’s look at my DXY wave count and put all this into context:

Scary charts and updated wave count below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed or Evil Speculator Gold or geronimo/ES or evil.rat/ES to view this content.

Nach einem kurzem Verschnaufer rennen die Börsenkurse als ob’s kein „morgen“ gäbe – aber dem Euro scheint wohl dauerhaft die Luft ausgegangen zu sein: in nachfolgendem Artikel von vorgestern wird noch von einem Kurs von 1,2702 Dollar geredet – heute allerdings ist der Euro schon auf 1,2584 Dollar gesunken. Nachfolgend ein aktueller Chart - man muss schon genau hinschauen, um die kurze Erholung durch das jüngste Rettungspaket zu sehen. Soviel zum Thema „Wir wollen mit dem Hilfspaket unsere Währung stabilisieren“…

Hier der angesprochene Chart EUR/USD von Stand 13.05.2010, 19:50 Uhr:

Und hier ein Text dazu – gefunden bei manager-magazin.de:

11.05.2010

Trotz Rettungspaket

Euro verliert weiter an Wert

Das 750-Milliarden-Euro-Rettungspaket für die europäische Währungsunion hat den Wertverfall des Euro nur wenige Stunden aufgehalten. Die Zweifel wachsen, ob es verschuldeten EU-Staaten wie Griechenland gelingt, ihre Haushaltsdefizite tatsächlich abzubauen.

Frankfurt am Main – Der Kurs des Euro Chart zeigen hat nicht nachhaltig vom Rettungspaket der EU profitiert. Die europäische Gemeinschaftswährung wurde am Dienstagnachmittag mit 1,2702 Dollar gehandelt.

Nach der Ankündigung der Rettungsmaßnahmen von EU, Internationalem Währungsfonds (IWF) und Europäischer Zentralbank (EZB) war der Euro am Montag zeitweise auf fast 1,31 Dollar geklettert, gab aber im Tagesverlauf seine Gewinne ab. Die EZB hatte den Referenzkurs am Dienstagmittag auf 1,2698 (Montag: 1,2969) Dollar festgesetzt. Der Dollar kostete damit 0,7875 (0,7711) Euro.

„Die Unsicherheit über die weitere wirtschaftliche Entwicklung in der Eurozone ist weiterhin vorhanden“, sagte Thomas Amend, Devisenexperte beim Bankhaus HSBC Trinkaus. Durch das Rettungspaket sei den betreffenden Ländern aber Luft verschafft worden.

Entscheidend sei, ob es den hochverschuldeten Ländern tatsächlich gelinge, ihre Haushaltsdefizite zu reduzieren. So wird in Griechenland Ende Mai eine Überprüfung der Haushaltszahlen durch die EU erfolgen.

Marktteilnehmer sehen laut Amend die Käufe von Staatsanleihen durch die EZB als Belastungsfaktor für den Euro. Die Ankündigung der EZB, eine Ausweitung der Geldmenge zu verhindern, habe den Markt nicht beruhigt, sagte Amend. Die EZB müsse die Märkte überzeugen, dass sie tatsächlich die zusätzliche Liquidität wieder einsammelt.

Zu anderen wichtigen Währungen legte die EZB die Referenzkurse für einen Euro auf 0,85960 (0,86405) britische Pfund, 117,38 (120,97) japanische Yen und 1,4095 (1,4248) Schweizer Franken fest. Der Preis für eine Feinunze Gold Chart zeigen wurde in London am Nachmittag mit 1222,50 (1196,50) Dollar gefixt. Der Kilobarren Gold kostete 30.894,10 (29 693,30) Euro.

manager magazin mit Material von dpa

Sounds like the title of a movie. Yes, it’s that time of the week again – old bucky continued to run wild and if you’re still in this trade you probably want to know when to exit or when to grab a few short positions (or EUR/USD long positions). As usual, first we’ll look at the statistical odds – as usual courtesy of retracementlevels.com. I recommend you go and check out the wide selection of statistical trading tools available. This part of the post will be available for free to everyone. Subscribers then get my take of where I think we’ll see a short reversal based on my own charting and wave count on the DXY.

Let’s start again with the odds. Based on my own chart I changed the auto default 100% mark to 86.949. Once you see what I’m counting you’ll understand why. My ticker currently reads 83.82, which was one of the RLs we looked at last week. So, there is a chance we turn right here – the odds are roughly 75%. Good enough for government work as they say and if you rode this thing up since wave two then take some partial profits.

The frequency tab actually shows a high statistical/historical frequency around the 83.8 cluster. Which is why taking profits here is probably not the worst idea, especially considering the 75% odds. But I would not go short here just yet. First I personally prefer to be in the 80 percentile at least before trading against the current trend. Also, the next daily RL is a light year away and if you’re wrong you will incur quite some damage. Finally – looking at my wave counts I see much juicier entries looming above:

First up I want to point out that I drew this horizontal line before ever even looking at the RL odds tab. Why am I pointing this out? Look what it lines up with: Almost exactly 85.08 – that’s right – our next RL. I’m not making this up btw – and I find it fascinating how my own counts and my basic TA is repeatedly confirmed by 2sweeties’ retracement levels.

As expected ole’ Bucky continued its run up and the little correction we saw most likely was a running flat. Despite my count on the chart I’m not sure if this is a fifth wave however. I keep pointing out that fifths often extend in currencies and commodities, so let’s remember that. We may still be in a sub wave of three, but in terms of trading this thing this is really academic. Many Elliotticians waste their time guessing the exact shape of a wave form when they simply should plow into positions at the onset of a third wave. Finding the right exit then is where wheat separates from the chaff. As I said above – the odds are telling me to not be greedy and to take partial profits here. The wave count looks pretty motive and bullishly aggressive to me, thus I personally would keep some skin in the game at the hopes of getting to 85.08. I’d be out and then done there.

Does not mean we can’t go higher from here – we may be in a third of a third and this thing could get pretty crazy for a few more weeks. Short term I would expect some small pull back in the next few days – if so holding to 82.8 or even 82.5 makes sense as the statistical frequency for a long bounce is extremely high there. Once we see some significant down candles we’ll be talking about long reversals right here. Until let’s focus on short reversals.

UPDATE 4:35pm EDT: I just had a moment to catch up with a few symbols. EJ seems to go with the program:

Where did I say it would bounce? Hint – look at yesterday’s post. And where DID it bounce?

Not saying that there won’t be a retest tomorrow – but – that was one sweet entry in my book – and that’s how we roll here at the evil lair. Subs see those posts first and when it matters, meaning during the session or beforehand. If you are interested in becoming a Gold member then don’t waste time and sign up here.

And to show you that I’m not full of shit like some other symbols slinging bloggers here’s one that decided to be a coffin nail. CREE breached my stop at slightly below 70 and then bounced back. What a bitch. But a stop is a stop and although I believe that a bounce will be forthcoming I have to be disciplined and stick by my guns. Another lesson you will learn here at the evil lair – you don’t have to be right all the time in order to bank coin on a consistent basis. Actually you could be wrong 50% of the time and still wind up winning. Of course I do my very best to improve the odds by quite a margin – that’s for sure

Cheers,

Mole

… bis dann das nächste Land “kriselt”. Gefunden bei wiwo.de:

Gbureks Geld-Geklimper

Griechenland-Krise: Was Anleger jetzt tun sollten

Manfred Gburek 30.04.2010

Sind außer griechischen auch andere Staatsanleihen gefährdet? Haben Aktien weiteres Kurspotenzial? Ist Gold immer noch interessant? Solche und andere Fragen haben Anlageprofis in dieser Woche diskutiert – mit zum Teil überraschenden Ergebnissen.

Bert Flossbach erzählt gern von seiner jüngsten Reise nach Athen, wie er vor der Akropolis saß und über die unglaublichen Zahlen nachdachte, die seine Gesprächspartner vor Ort ihm genannt hatten. Als Vorstand und Anlagestratege der Kölner Vermögensverwaltung Flossbach & von Storch war es zu Beginn dieser Woche schließlich eine seiner wichtigsten Aufgaben, für Anleger aktuell die entscheidenden Schlussfolgerungen aus dem Finanzdesaster Griechenlands zu ziehen. Flossbach fasst zusammen: “Die Zahlen, die ich gehört habe, waren erschreckend. Die Restrukturierung der griechischen Schulden ist unvermeidlich. Griechenland ist nur die Spitze des Eisbergs. Das Hauptthema der nächsten Dekade heißt Staatsschulden. Die Steuern gehen hoch.” Leider nicht nur die griechischen, sondern auch die deutschen, so die Quintessenz.

Als hätte Bundesfinanzminister Wolfgang Schäuble dem Vermögensverwalter zugehört, sah er sich wenige Stunden später im Rahmen eines ARD-Interviews gezwungen, die Bundesbürger beim Thema Steuern zu beruhigen: Er hoffe, dass die deutsche Hilfe für Griechenland “nichts kostet”, es gehe ja “nicht um Steuergelder”, sondern um einen Kredit. Das war als Ablenkungsmanöver vor der Landtagswahl in Nordrhein-Westfalen am 9. Mai durchaus clever formuliert. Aber was sollte es bedeuten? Jens Ehrhardt, Chef der nach ihm benannten Vermögensverwaltung in Pullach, zerbricht sich zu diesem Fragenkomplex schon seit Monaten den Kopf, weil er wie Flossbach für seine Anleger die richtigen Schlüsse ziehen muss. “Man wird einen Konkurs Griechenlands nicht zulassen”, argumentiert er, “man wird Zeit kaufen”. Man, das ist die EU, das ist speziell die Eurozone und noch spezieller Deutschland.

Inflation: Die Experten sind uneinig

Den Pullacher Vermögensverwalter verbindet in diesem Punkt eine gewisse geistige Verwandtschaft mit Klaus Kaldemorgen, Sprecher der Geschäftsführung der Investmentgesellschaft DWS in Frankfurt. Auch er ist sicher, man werde sich “erst einmal Zeit kaufen”. Dann wird er konkreter: “In der nächsten Woche wird das Problem gelöst sein.” Die Folge auf lange Sicht: “Auch Deutschland wird sein Schuldenproblem nie lösen können.” Kaldemorgen resümiert: Zur Lösung des Problems böten sich zwar Steuererhöhungen an, aber sie seien “kein gangbarer Weg”. Darüber hinaus könnten die Schulden durch mehr Wirtschaftswachstum kompensiert werden. Und schließlich gebe es ja noch den Ausweg aus der Schuldenfalle durch mehr Inflation, den Kaldemorgen als “Königsweg” bezeichnet. Sein Fazit mit Blick auf die Geldanlage: Weder mehr Wirtschaftswachstum noch mehr Inflation ist für Anleihen gut. Damit zielt er besonders auf Staatsanleihen ab und ergänzt: “Inzwischen sind Unternehmen die besseren Schuldner.”

Beim Thema Inflation sind die Experten sich nicht einig. Während Kaldemorgen argumentiert, die Notenbanken könnten den Politikern nicht ohne Weiteres in den Rücken fallen, wenn diese sich zu wenig um die Inflationsgefahren kümmerten, meint Ehrhardt: “In diesem Punkt tue ich mich schwer.” Und Rolf Banz, Anlagestratege der Privatbank Pictet in Genf, findet etwas Inflation, außer dass sie den Staaten die Schuldentilgung erleichtert, aus einem ganz spezifischen Grund gar nicht so schlecht: “Sie hat den Vorteil, dass Vermögen von der alten auf die junge Generation transferiert wird.” Natürlich vorausgesetzt, beide verhalten sich entsprechend und investieren nicht ihr ganzes Geld in Staatsanleihen.

Ultima Ratio Gold

Eine besonders große Abneigung haben die Anlageprofis gegen japanische Staatsanleihen. “Japan muss sie demnächst zur Hälfte des Bruttoinlandsprodukts refinanzieren”, warnt Ehrhardt. Japan kann sich zwar noch den Luxus erlauben, den größten Teil der Schulden aus dem Land selbst zu finanzieren, aber diese Zeit dürfte allmählich zu Ende gehen. Erschwerend hinzu kommt, dass der Yen überbewertet ist, Yen-Anlagen so gut wie keine Zinsen bringen und bisher jegliche Impulse zur Belebung der japanischen Konjunktur verpufft sind.

Wenn der nun schon fast drei Jahrzehnte währende Höhenflug der Anleihen sein Ende findet und die Staatsschulden immer weiter wachsen, wo sind dann die Alternativen? Etwa bei inflationsgeschützten Anleihen? “Noch nicht lohnenswert”, sagt Heiko Beck, Produktmanager bei der Commerzbank in Frankfurt. Aktien? “Die Achterbahn geht weiter”, meint er. Flossbach konkretisiert: Er bevorzugt weiter Aktien – und fügt hinzu: “außer Finanzwerten”. Anleihen sind für ihn nicht ganz tabu, Hauptsache, sie haben kurze Laufzeiten. Anlagefavorit ist für Flossbach allerdings etwas anderes: Gold.

Weltleitwährungen auf der Intensivstation

Ist der Goldpreis nicht schon zu hoch? Ehrhardt hat dazu eine dezidierte Meinung: “Trends setzen sich häufig lange fort”, spielt er auf den nun schon rund ein Jahrzehnt anhaltenden Preisanstieg des Edelmetalls an, und als Anlage sei es immer noch wenig vertreten. Stefan Keitel, Anlagestratege bei Credit Suisse in Zürich, hebt noch einen Aspekt hervor, der in der bisherigen Ursachenforschung zum Goldpreisanstieg offensichtlich zu kurz gekommen ist: “Vorsicht bei den Weltleitwährungen, sie sind auf der Intensivstation.” Wenn man sich frage, warum der Goldpreis so nachhaltig gestiegen sei, sollte man diesen Aspekt ganz besonders berücksichtigen und nicht so sehr die Inflation, die in der fraglichen Zeit kaum zugelegt habe.

Fazit: Der Problemfall Griechenland lenkt davon ab, dass die Staatsschulden weltweit eine Höhe erreicht haben, von der sie nicht mehr herunterkommen können. Am schlimmsten ist Japan betroffen. Deutschland wird Griechenland helfen, aber das eigentliche Problem nur zeitlich verschieben. Staatsanleihen sind mit Vorsicht zu genießen, Unternehmensanleihen im Zweifel solider. Aktien bleiben selektiv interessant, wenn auch unter Schwankungen. Und Gold wird seinen langfristigen Aufwärtstrend fortsetzen, weil es als Anlageinstrument erst wenig entdeckt ist und weil die Leitwährungen sich auf der Intensivstation befinden.

Yes, it’s that time of the week again – the old greenback has been taking strides lately, so let’s see how far it might push. First we’ll look at the statistical odds – as usual courtesy of retracementlevels.com. I recommend you go and check out the wide selection of statistical trading tools available. This part of the post will be available for free to everyone. Subscribers then get my take of where I think we’ll see a reversal based on my own charting and wave count on the DXY.

As of this writing the reading on the DXY is 82.02 – statistically the odds for a reversal here are so-so. However, the frequency is pretty high (explained further below) – but for now let’s just stick with the odds. 82.664 has calculated odds of 71% – not bad, but I personally would not want to bet against the buck before 83.474 or 84.786.

The frequency distribution has us at a pretty strong reading right now and right here. So, although the odds are 50/50 the frequency here is pretty high, so it bears attention. If we manage to push higher I would stick with the odds and considering that 83.474 has a great odds/frequency combo I think that’s where the sweet spot is for anyone daring to short this thing.

Now, let’s put all this into context – again I feel that the combination of form (i.e. wave counts or TA) and function (i.e. statistical analysis and odds) can lead to superior analysis. This is the sole reason why I keep pimping 2sweeties’ work here – the rules of EWT or only one part of the equation. Unless you want to use it for inflection points it’s only useful after the fact. My goal is to change that – and 2sweeties RLs are one weapon in my arsenal.

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We have not looked at the Dollar for a while and it’s time for an update. I decided to change format a little here. First let’s consult 2sweeties’ DXY oracle – as usual courtesy of retracementlevels.com – I recommend you go and check out the wide selection of statistical trading tools available. This part of the post will be available for free to everyone. Subscribers then get my take of where I think we’ll see a reversal based on my own charting and wave count on the DXY.

As the Dollar has been churning slightly higher (in a sideways pattern but without a clear drop to the downside) we are mostly concerned with the long side for now and where exactly a reversal might occur. Maybe we are long and are looking for targets, or we are bearish and are looking for spots to go short.

As you all know I usually start with the odds. Since my last DXY post there has been a little upgrade – 2sweeties added a nifty little feature which automatically selects your odds. Pretty neat – I personally reserve the right to pick my own and my choice would have been 83.322 as we are trading at slightly below 81 right now. However, based on my own analysis the auto selection might actually be pretty close. More about this below.

On the frequency tab things get pretty interesting. First up it’s clear that the ‘frequency’ (i.e. historical precedent of retracements in this context) drop off rapidly after 85.257. So, this leaves that, 83.322 as well as 82.125 as possible turning points. Obviously they are separated by quite a bit. One and even two handles can mount up to quite a bit of loss if you find yourself on the wrong side of the trade.

From a pure RL perspective 82.125 is probably where I would go short. If I was long (I am not right now) I would probably take profits at 81.386 as this one has the highest frequency. Personally I prefer to correlate these findings with my DXY chart, so let’s take look:

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Gefunden bei finanznachrichten.de:

15.04.2010 13:01

DJ Griechenland senkt Emissionsvolumen bei Dollar-Anleihe – Kreise

ATHEN (Dow Jones)–Griechenland hat offenbar das Volumen der für Ende April geplanten Dollar-Anleihe verringert und wird möglicherweise die Emission ganz aufgeben.

Griechische Regierungsvertreter, die namentlich nicht genannt werden wollten, sagten am Donnerstag, Griechenland plane bei der Anleihe nur noch ein Volumen zwischen 1 Mrd und 4 Mrd USD. Bisher seien 5 Mrd bis 10 Mrd USD anvisiert worden.

Weiter hieß es aus griechischen Regierungskreisen, das US-Interesse an griechischen Anleihen sei gering. Sollte ein Mindestvolumen nicht platziert werden können, werde die Emission möglicherweise gestrichen. Offiziell wollten Regierungsvertreter keine Stellungnahme abgeben.

-Von Costas Paris, Dow Jones Newswires, +49(0)69-29725 310;

konjunktur.de@dowjones.com

DJG/DJN/sgs/kth

Wirklich lesenswert… Micht die Höhe der Staatsschulden ist maßgeblich dafür, ob ein Staat pleitegeht oder nicht. Ein weiteres Zitat:

“Der Euro in seiner jetzigen Zusammensetzung wird auf Dauer nicht zu halten sein.”

Gefunden bei zuerst.de:

Der Euroskeptiker und Publizist Dr. Bruno Bandulet im ZUERST!-Gespräch

Herr Dr. Bandulet, derzeit belastet die Krise in Griechenland den gesamten Euroraum. Auch Länder wie Italien oder Portugal stehen alles andere als stabil da. Zerfällt die Eurozone?

Bandulet: Der Euro in seiner jetzigen Zusammensetzung wird auf Dauer nicht zu halten sein. Griechenland ist jetzt in einer Situation, in der es für Athen sehr eng wird. Der griechische Finanzminister kündigte an, daß sich das Land zuzüglich zu den jetzigen Zinsen nicht mehr refinanzieren könne. Griechenland wird sich in diesem Jahr mit 50 Milliarden Euro neuverschulden, um die Haushaltsdefizite zu decken und um die Zinsen für vorherige Anleihen bezahlen zu können. Wir sprechen derzeit von einem Zinssatz von sieben Prozent, es sieht also so aus, als würde Griechenland dieses Jahr so nicht überstehen können. Die Griechen können nur hoffen, daß sich die Wirtschaftslage allgemein entspannt. Man muß aber hierbei auch sagen, daß die Attacken, die derzeit auf den Euro und auf griechische Staatsanleihen stattfinden, durchaus orchestriert sind.

Was meinen Sie damit?

Bandulet: So etwas geschieht ja nicht einfach so. Es sind in der Regel irgendwelche Syndikate oder Hedgefonds, die gemeinsam auf Raubzug gehen. In den USA gibt es beispielsweise einen exklusiven Club, bei dem die Mitgliedschaft bei 50.000 Euro Gebühr im Jahr beginnt. Dort sind auch die Hedgefonds vertreten, die dort dann miteinander besprechen, wie sie gemeinsam vorgehen. Wir kennen das vom Beispiel Island, das mit solchen Finanzangriffen traktiert wurde. Daher denke ich auch, daß es sich bei den gegenwärtigen Attacken auf Griechenland und auf die Eurozone um eine angelsächsische Aktion handelt.

Wie funktioniert das in der Praxis?

Bandulet: Man treibt die griechischen Kreditausfallversicherungen nach oben. Dies dient dann dazu, die griechischen Staatsanleihen „leer“ zu verkaufen – im Fachjargon nennt man das „a la baisse“ spielen. Diese beiden Elemente dienen dann als Rechtfertigung, den Euro zu verkaufen – auch leer zu verkaufen. Leerverkauf bedeutet hier, etwas zu verkaufen, was ich gar nicht habe. Mit dieser Methode schaukelt sich die Kampagne nach oben und wird letztendlich für die Eurozone sehr gefährlich. Das alles wäre aber so nicht möglich, wenn nicht bereits eine Krise existieren würde. Im Falle Griechenlands haben wir die Wirtschaftskrise ja schon lange.

Ist es für Spekulanten eigentlich möglich, ein einzelnes Land der Eurozone ins Visier zu nehmen, ohne daß dann die gesamte Zone mitleidet?

Bandulet: Ja und Nein. Das ist nicht so einfach. Griechenland ist eine sehr kleine Volkswirtschaft und steht am Rande des Bankrotts. Aber das ist auch beim US-Bundesstaat Kalifornien der Fall. Gesetzt den Fall, Griechenland schiede aus der Eurozone aus, würde dies der Zone überhaupt nichts machen. Im Gegenteil: Wenn Griechenland den Euro verlassen würde, wäre es ein Plus für die europäische Währung. Und wenn auch noch Italien und Portugal nachziehen würden, wäre es ein noch größeres Plus. Aber so läuft es eben in der Praxis nicht. Wir erleben derzeit eine große Unsicherheit in Bezug auf das, was nun passieren wird. Und Unsicherheit mögen die Finanzmärkte am allerwenigsten. Sie können diese Krise mit mehreren Instrumenten handhaben. Wenn sich beispielsweise Deutschland zusätzlich verschuldet, um Griechenland zu helfen, dann ist es schlecht für den Euro.

Warum?

Bandulet: Die deutsche Wirtschaft ist derzeit in Europa der Fels in der Brandung. Die letzten Anleihen, die in Europa noch wirklich als sicher gelten, sind deutsche Bundesanleihen. Wenn nun die deutsche Position wegen Griechenland geschwächt wird, dann ist es schlecht für den Euro insgesamt.

Was kann die EU-Kommission eigentlich konkret tun?

Bandulet: Das ist die heikelste Frage überhaupt. Wie kann man den Griechen helfen? Aber man muß auch hier anmerken: Es geht nicht um Griechenland allein. Wenn Athen fällt, wird eben Madrid, Rom oder Lissabon angegriffen, und alles beginnt wieder von vorne. Nur dann spielt sich alles in einer ganz anderen Größenordnung ab. Wenn es nur um Griechenland ginge, müßten wir uns gar nicht so lange unterhalten. Aber wenn es die anderen Länder erwischt, kann es die EU sprengen. Doch nochmals zurück zu Griechenland: Der Euro wurde ja geschaffen mit dem Maastrichter Vertrag. Darin werden verschiedene Hilfsmaßnahmen für europäische Wirtschaften im Krisenfall ausgeschlossen. Zum Beispiel ist es der Europäischen Zentralbank (EZB) ausdrücklich verboten, Staatsanleihen einzelner europäischer Länder zu kaufen. Es ist also untersagt, diese direkt zu finanzieren. Der direkte Kauf von Staatsanleihen durch eine Notenbank ist das, was wir unter „Gelddrucken“ verstehen. Es ist den Griechen auch verboten, sich ihr Geld von ihrer nationalen Notenbank zu besorgen. Ein weiterer wichtiger Punkt ist der, daß die Mitglieder der EU nicht gegenseitig für ihre Schulden haften.

Ist das ein Verbot, daß ein Land dem anderen einen Kredit gibt?

Bandulet: Nein, eben nicht. Es steht nur da, daß man nicht füreinander haftet. Damit sollte für eine gewisse Disziplin gesorgt werden. Das ist aber insgesamt sehr schwammig. Wir dürfen nicht vergessen, daß die EU-Kommission Abermilliarden Euro an Griechenland an Subventionen ausgezahlt hat…

…die hauptsächlich aus deutschen Steuergeldern stammen?

Bandulet: Genau so ist es. Und das geschieht ja noch nach wie vor. Und jetzt noch zusätzlich Milliarden von Brüssel an Athen zu überweisen, ist haushaltsrechtlich eigentlich nicht möglich.

Was ist mit dem Internationalen Währungsfond (IWF)?

Bandulet: Auch der IWF wäre ein möglicher Geldgeber, er wurde ja speziell dafür gegründet. Aber das will man gegenwärtig in Brüssel und der EZB nicht.

Warum?

Bandulet: Das wäre sozusagen eine Einmischung von außen – man kann fast sagen von den USA. Aber ich halte es doch für möglich, daß es letztendlich IWF-Kredite geben wird.

Brüssel will angesichts der gegenwärtigen weltweiten Finanzkrise die Länder der EU zum Sparen bringen. Wie soll man ein Land wie Griechenland zum Sparen zwingen? Ist das überhaupt möglich?

Bandulet: Eigentlich nicht. Das Groteske ist, daß die EU-Kommission zum jetzigen Zeitpunkt saftige Geldstrafen gegen Griechenland verhängt, weil dieses sich nicht um die Einhaltung der Konvergenzkriterien kümmert. Aber diese Geldstrafen würde letztendlich die EU wieder selber zahlen, weil die Griechen derzeit überhaupt kein Geld mehr haben. Das ist völlig absurd. Das Hauptproblem der Griechen ist das gegenwärtige Haushaltsdefizit von zwölf Prozent ihrer Wirtschaftsleistung. Das ist in der Höhe fast identisch mit dem Defizit der USA und Großbritanniens. Zudem hat Griechenland eine negative Leistungsbilanz, das macht dann nochmals zwölf Prozent aus. Daher ist Athen ein absoluter Katastrophenfall, weil es ein Doppeldefizit aufweist.

Was bedeutet ein Doppeldefizit?

Bandulet: Das sieht man am Unterschied zu Japan. In Japan ist die Gesamtverschuldung viel größer als die von Griechenland. Da die Japaner allerdings kein Außendefizit und dazu noch große Sparaufkommen haben, können sie ihre Staatsschulden selbst finanzieren. Die Japaner haben zwei Vorteile: Erstens brauchen sie die Auslandsmärkte nicht, um ihre Staatsschulden zu finanzieren, und zweitens haben sie eine enorm hohe Erbschaftssteuer. Das bedeutet, wenn ein Japaner stirbt, fällt sein Vermögen – oftmals in Form japanischer Staatsanleihen – wieder an den Staat zurück. In Griechenland sieht das völlig anders aus. Sie können ihre laufenden Haushaltsdefizite nicht aus eigener Kraft finanzieren. Die Griechen haben gar nicht das Geld, so viele Staatsanleihen selber zu kaufen. Damit ist Athen auf Gedeih und Verderb dem internationalen Finanzmarkt ausgeliefert – und damit auch den Attacken ausländischer Hedgefonds. Und die kann man nicht zwingen und kontrollieren. Sie verlangen höhere Zinsen. Und Zinsen, die über sechs bis sieben Prozent gehen, sind für Athen ruinös. Wenn es Griechenland nicht gelingt, Auslandsschulden zu einem niedrigeren Zinssatz zu machen, kann Athen noch in diesem Jahr Pleite gehen.

Am Beispiel Japans haben Sie gezeigt, daß die Höhe der Schulden nichts damit zu tun hat, ob ein Staat pleite geht oder nicht.

Bandulet: So ist es. Wenn die Zinsen, die ein Staat zahlen muß, Null Prozent sind, dann kann er Schulden machen wie er will und wird niemals Pleite gehen. Wenn die Zinsen aber hoch sind, wird der Handlungsspielraum einer Volkswirtschaft immer enger, und dann wird es gefährlich. Griechenland ist damit ein Menetekel für alle europäischen Staaten, auch für uns. Wir sind alle auf niedrige Zinsen angewiesen, weil nur dann die Staatsschuld auch zu bedienen ist. Daher sollte Griechenland ganz Europa eine Warnung sein.

EZB-Präsident Jürgen Stark gilt als strikter Gegner von weiteren Krediten an Griechenland.

Bandulet: Ja, und das mit gutem Grund! Seine Argumentation ist durchaus schlüssig. Denn wenn jetzt Griechenland künstlich weiter mit Krediten der EZB am Leben gehalten wird, schießen sich die internationalen Finanzmärkte auf Italien, Spanien und Portugal ein und setzen dort ihren Raubzug fort.

Wo haben die Finanzmärkte eigentlich vor der Griechenlandkrise agiert?

Bandulet: Auch das ist eine interessante Frage. Vor Ende 2009, als es in Griechenland richtig eng wurde, waren die internationalen Finanzmärkte noch mit dem schwachen Dollar beschäftigt. Es stand ja in der Tat die Frage im Raum, ob die USA vielleicht sogar selber pleite gehen. Vor allem China wurde deshalb nervös.

Weshalb wird China nervös, wenn es den USA wirtschaftlich schlecht geht?

Bandulet: China hält die größten Devisenreserven der Welt, weit über zwei Billionen Dollar umgerechnet. Die USA sind ebenso wie Griechenland darauf angewiesen, daß das Ausland ihre Schulden finanziert. Daß vor ein bis zwei Jahren sogar darüber diskutiert wurde, ob der Dollar überhaupt noch in seiner jetzigen Form zu halten ist, machte Peking nervös.

Hat Griechenland den Dollar quasi „gerettet“?

Bandulet: So kann man das durchaus sehen.

Wenn wir darüber sprechen, daß „Griechenland pleite geht“ – was müssen wir uns darunter vorstellen? Was würde genau passieren?

Bandulet: Der Zahlungsverzug eines Staates bedeutet, daß er seine Zinsen nicht mehr bezahlen kann. Damit ist technisch gesehen der Bankrott da. Es gibt eine ganze Reihe von politischen Szenarien. Ich nenne mal das schlimmste: Wenn Griechenland zahlungsunfähig wird, darf die EZB keine griechischen Staatsanleihen mehr kaufen, also die griechischen Banken nicht mehr mit „frischem Geld“ versorgen. Damit wären diese nicht mehr liquide. Damit würden sämtliche griechische Banken zusammenbrechen – und damit auch die griechische Wirtschaft.

Ein totaler Kollaps?

Bandulet: Absolut! Dies würde sicherlich einhergehen mit Unruhen, Aufständen und könnte vielleicht sogar in einer Diktatur enden.

Kann man Griechenland einfach aus der Eurozone werfen?

Bandulet: Das ist extrem schwierig. Andererseits hält sich die EU aber nicht immer an die eigenen Verträge. Angenommen, Griechenland würde aus der Eurozone ausgeschlossen, käme wohl eine Währungsreform in Athen, die damit sämtliche Auslandsschulden entwerten würde. Das müßte Griechenland wohl zwangsläufig machen, da mit der Wiederkehr der nationalen Währung, der Drachme, auch die Zinsen auf die Auslandsschulden sprunghaft ansteigen würden. Der Euro brachte Griechenland vor allem niedrige Zinsen. Es wäre dann wohl eine Währungsreform zu erwarten, wie jene in Deutschland 1948 oder 1923. Nur gemeinsam mit einer Währungsreform ergibt das einen Sinn.

Eine Währungsreform würde allerdings nicht nur die Auslandsschulden, sondern auch die Inlandsschulden beseitigen. Käme das nicht einer Enteignung der griechischen Sparer gleich?

Bandulet: So muß man das nennen. Die Regierung, die diese Maßnahme durchführt, wäre jedenfalls schnell weg vom Fenster.

Sehen Sie Anzeichen für die Stimmung: „EU-Vertrag hin oder her, Deutschland muß Griechenland helfen!“?

Bandulet: Ja. Vor allem die angelsächsische Presse spekuliert darüber, wann die Bundesrepublik Deutschland Geld für Griechenland locker macht. Es wären dann aber auch Frankreich und der IWF als Helfer mit dabei. Aber das ist ja genau einer der Gründe, weshalb ich von Anfang an den Euro kritisiert und ihn als einen schweren Fehler bezeichnet habe. Der Euro wurde von Anfang an von Deutschland bezahlt. Wenn wir am Höhepunkt der Krise in Griechenland sein werden, wird der Druck auf Berlin immer stärker werden, endlich Geld locker zu machen.

Haben wir überhaupt die richtigen Politiker in Berlin, die einem solchen Druck standhalten können?

Bandulet: Nein. Die richtigen Leute sind das ohnehin nicht. Es geht hierbei ja eindeutig um nationale Interessenpolitik. Doch wird die denn in Deutschland gemacht? Das Ende der nationalen Interessenpolitik, die partiell existierte, war die deutsche Wiedervereinigung 1990. Der Euro war der Preis, der für die Wiedervereinigung gezahlt wurde. Und seitdem kostet er uns Deutsche viel Geld. Das beginnt mit der Wertschöpfung der Bundesbank, die früher an den Bundeshaushalt überwiesen wurde, die jetzt durch den Euro völlig verdampft. Und auch die Handelsbilanzüberschüsse – Deutschland ist mit China Exportweltmeister – sind früher größtenteils in den Devisenreserven der Bundesbank gelandet. Heute verschwinden sie innerhalb der Eurozone. Sie erhöhen nicht mehr den nationalen Reichtum. Das Problem ist, daß die Politiker in Berlin oftmals rein fachlich völlig überfordert sind und zudem eine Satellitenmentalität gegenüber den USA haben. Nur so erklärt sich, daß die deutschen Banken und damit auch die deutschen Sparer den Immobilienboom in den USA finanzierten. Das war die letzte Finanzkrise, die wir hatten.

Landesbanken haben damals ihr Geld in den US-amerikanischen Immobilienmarkt gesteckt…

Bandulet: Ja. Man muß sich dabei wirklich fragen, weshalb sie so etwas taten. Immerhin sind es ja staatliche Banken und keine privaten. Ich denke, daß es hierzu ein Einvernehmen zwischen der deutschen und der US-amerikanischen Regierung gab. Man muß sich wirklich fragen, in welchem Interesse die deutsche Politik hier handelt – im eigenen nationalen Interesse sicherlich nicht. Aber das ist ja auch in anderen Politikfeldern zu beobachten, wie beispielsweise in der Außenpolitik. Wir sind mit der Bundeswehr in Afghanistan. Und das nicht, weil wir denken, dies sei in unserem Interesse, sondern weil dies im US-amerikanischen Interesse ist.

Deutschland müßte sich sowohl aus Afghanistan als auch aus dem Euro zurückziehen?

Bandulet: So ist es. Das wäre nationale Interessenpolitik. Allerdings hat sich die Politik in Berlin längst in ein System verstrickt, aus welchem sie nicht mehr so schnell herauskommt.

Die Warnungen der Eurokritiker wurden nicht ernstgenommen. Nun ist die Krise da. Haben sich Ihre Befürchtungen jetzt bestätigt?

Bandulet: Vollkommen! Alles tritt so ein.

Sie wurden damals als Schwarzmaler, sogar als Extremisten gebrandmarkt.

Bandulet: Ja, das war wirklich eine interessante Entwicklung. In den ersten Jahren wurden wir Eurokritiker vor allem von der Regierung Helmut Kohl als „antieuropäisch“ bezeichnet. Ich erinnere mich daran, daß sich sogar der Verfassungsschutz ernsthaft mit der Frage beschäftigt hat, ob es denn grundgesetzkonform sei, den Euro als Währung abzulehnen.

Euroskeptiker als Extremisten?

Bandulet: Genau darauf zielte das ab. Es galt als unanständig, geradezu als illegitim, den Euro abzulehnen. Aber dennoch wurde das Thema in den Medien diskutiert. Selbst in der Frankfurter Allgemeinen Zeitung erschienen eurokritische Artikel. Später wurden die Eurokritiker mit ihren Argumenten allerdings totgeschwiegen, Euroskepsis fand nicht mehr statt.

Wußten die Experten aus den großen Parteien, die alle den Euro befürworteten, denn nicht, was auf uns zurollt?

Bandulet: Das ist ja das Erstaunliche daran: Jeder halbwegs Informierte mußte wissen, was mit Griechenland, Spanien, Portugal und Italien auf den Euro und auf Deutschland zukommt. Jeder mußte wissen, wie Zahlen manipuliert und Statistiken frisiert wurden. Wir sprechen hier nicht über Überraschungen aus heiterem Himmel, wir sprechen über längst bekannte Entwicklungen. Es war allerdings lange Jahre kein Thema mehr, es war politisch nicht korrekt auf diese Entwicklungen hinzuweisen. Und jetzt trifft alles, was wir vor Jahren prognostiziert haben, ein.

Könnte die jetzige Krise nicht nur das Ende des Euro in Griechenland, sondern das Ende des Euro insgesamt einläuten? Kehren wir Deutschen dann wieder zur D-Mark zurück?

Bandulet: Ich will es nicht völlig ausschließen. Aber Sie dürfen eines nicht übersehen: Die D-Mark ist ja bis zum heutigen Tag nicht völlig ungültig.

Wie bitte?

Bandulet: Aber ja, Sie können heute noch sogar in Geschäften mit der D-Mark bezahlen. C&A macht eine sehr erfolgreiche Aktion hierzu. Wenn wir den Maastrichter Vertrag lesen, bekommen wir oft den Eindruck, daß Hintertürchen offengelassen wurden für die Rückkehr zu nationalen Währungen. Die EZB ist eben nicht das Dach der nationalen Notenbanken, sondern umgekehrt – die nationalen Notenbanken haben die EZB unter sich. Zudem haben wir in Deutschland nach wie vor die Bundesbank mit ihrer Infrastruktur. Daher wäre die Rückkehr zur D-Mark möglich.

Wie schnell könnte das gehen?

Bandulet: Solche Prozesse dauern lange. Viel wahrscheinlicher ist, daß die Eurozone schrumpfen wird. Die schwächeren Mitglieder scheiden dann aus und der Kern bleibt beim Euro. Das wären dann Österreich, Deutschland, die Niederlande und auch Frankreich.

Wäre das nicht von Anfang an vernünftiger gewesen?

Bandulet: Ja, aber es ging ja nicht so sehr um Vernunft, sondern um ein ideologisches Ziel. Das war von Anfang an der Fehler des Euro.

Herr Bandulet, vielen Dank für das Gespräch.

Vita Bandulet: Dr. Bruno Bandulet, geboren 1942, gehört zu den engagiertesten Kritikern des Euro. Er absolvierte ein Studium der Geschichte, Hispanistik, Politischen Wissenschaft und Volkswirtschaft in Würzburg, Berlin und Madrid. 1973 wurde er Chef vom Dienst der Tageszeitung Die Welt und 1975 Mitglied der Chefredaktion der Illustrierten Quick. Er arbeitete für Franz-Josef Strauß und Alfred Dregger, bereiste die Welt als internationaler Sonderkorrespondent und lebte in den 1980er Jahren im südenglischen Surrey, bis er mit seiner Familie wieder nach Deutschland zurückkehrte. Seit 1979 ist er Herausgeber des monatlichen Informationsdienstes GOLD & MONEY INTELLIGENCE (G&M) und war 1995– 2009 Herausgeber des politischen Hintergrunddienstes DeutschlandBrief. Bandulet hält zahlreiche Vorträge in Europa und Nordamerika sowie jährliche Finanzseminare in Deutschland und der Schweiz.

Charting is a bit like playing chess. Every technical analyst commands a particular repertoire of technical patterns, instruments, momentum indicators, resistance/support lines, trend biases, trading tools, etc. In the end we all somehow try to anticipate what will happen next - or at least attempt to consider various scenarios of what could happen at what stage if x happens or y will not. From there you plan your next move - and you better anticipate how the market will react to it. If you get married to a particular idea it’s checkmate in three moves or less. Which happens when you fall in love with a particular wave count and refuse to consider other scenarios.

Good analysts know that in many cases they will be wrong and if they somehow manage to survive for more than a few years the lesson learned is not how often you’re right but what you do when you turn out to be wrong (which will happen regularly - get used to it).

When looking at the current chart in the context of all my complementary tools I have very little confidence in proposing what’s next. Frankly - at this stage it seems we are stuck in complete limbo - or what I call ‘end of second wave limbo’. Let me explain:

As you can see there are various ways of how we could count this pain in the ass of a tape. Maybe we completed Minor 2 yesterday (blue) or will do so after a push into 1,128 (light blue). We all know what should come next and it would make any put holders very happy. However, life and especially trading is usually not that easy. If we push higher from here it’s also very resasonable to count the advance as a motive, which would suggest that we are completing Minute {i} of Minor A (green). This would be followed by Minor B, the first half of which would look to the bears like the onset of Minor 3 to the downside. Which would be tantamount to a bear trap clusterfuck of death star like proportions. Not a pretty picture.

I hate second waves - especially in the past year or so - because more often than not they have turned into A waves which were followed by long and painful short covering C waves a few weeks later. Even if you bulked up at the very top (like yours truly) you still suffered from theta burn by the time you figured out you were on the wrong side of the trade. As I said - not a pretty picture.

So, what to do?

Play it long term. You can’t win this one. News do not matter. Good economic news might actually tank this market while bad news might rally it. Too cynical for you? I really can’t blame you - but read this first. The magic word is quantitative easing (i.e. money for nothing and chicks for free) and it’s what has kept this turd of a market melting up and now holding up in the face of a tumbling Euro (and rallying Dollar).

TA does not matter either. I can post all the wave counts I want - it won’t really help you negotiate the mind fucks they’ll throw at you in between. Come on - how many postings and opinions and comments have you digested in the past few months? Did any of them lead to a successful trade? Rarely - and you know one when you see one as the setup is often too sweet to pass up.

Play it long term. You can’t win this one. They will fake you out if you play the small moves. It’s quite simple: Either we’re wrong with Primary {3} or we’re right. If we’re right we’ll bank a shit load of coin as we are among a small minority. Yes, doesn’t feel like it here, but we all exist in our respective monkey spheres. Trust me - 99% of all market participants think the bull market is back - we are crazy to think otherwise. Or are we?

Play it long term - especially if you trade options and hope for P3. If we’re wrong - well, we’ll know soon enough. It might take a few more weeks to get out of second wave limbo but we will. One way or the other. Once we get verification it’ll be too late to jump into the game as things will move rapidly and you won’t be able to get positioned. The pain you are going through right now is the price of admission - deal with it.

Play it long term.

Cheers,

Mole

P.S.: Did I mention to play it long term?

P.P.S.: OR - play it very short term. Ever heard of Geronimo? No? Your loss…

I didn’t have an opportunity to post during the session today but wanted to share a few thoughts with you ahead of tomorrow’s session.

Clearly the bears got burned today and that OPX gangsta style. The tape ramped all day and there was nothing but fear and short covering among the bears. NYSE A/D ratio closed at 4.7, the highest reading since November 10th. So, just looking at the momentum chances are we are already tracing out Minor 2 of Intermediate (1) - or worse

The ‘good news’ for the bears is that we should get confirmation very soon. I’m currently counting a zigzag followed by a flat. Look at that fib I painted from the bottom of my x wave. Traditionally the maximum length permitted for the c wave of a flat is 165% of its a wave. What’s really interesting about this Maginot line (look it up) is that I actually had drawn this fib during the session - way before we touched it at the close - funny how that works out sometimes.

If this is really some type of alternation (EWT speak for a combination of various corrective waves separated by an x wave) then it should stop in its track right now and here. If we push much higher chances are now increasingly pointing towards the Minor 2 scenario. Again, this is merely academic for anyone holding long term puts right now. Just so you know what you are dealing with: A Minor 2 wave can correct almost all the way to the prior high, which would be 1,150.41 - so theoretically we could push to 1,150.40 and the current count would be maintained. The second we run beyond that the entire Primary {3} scenario goes out of the window and it’s back to the drawing board for the bears yet again.

But it’s way too early to worry about that. The Dollar has been digging in its heels and conversely the Euro has been lagging the advance we’ve seen in equities. Therefore the odds still point to either Soylent Orange or Soylent Blue - pick your poison.

Early retracements can be violent and scare off the bears hoping to ride the wave down - and in the end lure them into giving up long term positions. This is part of the game and if you don’t have the brass balls to ride this out then you’re going to be left behind sooner or later.

But yes - we can’t keep running like this forever - would be good to see this thing slow down and that soon. Especially since the time cycle has now shifted downwards again - if we are starting to break away from that and there is follow through to this rally then the bears might be in trouble. I would have preferred to not see a new high for the year in the NYSE A/D department - that’s a bit concerning. Let’s keep that in mind as we run through the rest of OPX week.

Cheers,

Mole

Pressed for time this weekend - let’s get right to it. The battle of the titans looms as we have reached a fork in the road. And as the late Yogi Bera** put it so aptly:

When you get to a fork in the road - take it!

Arguments for the bears:

The Dollar bear squeeze has had the carry traders on the run. But it’s now reaching an inflection point where the Euro baby’s got decide what it wants to be once it grows up - become a bear (i.e. let this turn into a third wave), or grow some brass balls and turn into a raging bull (i.e. the drop we saw since December was a merely a-b-c retracement). Either way, I don’t think this thing is done yet as the divergence painted here on my Euro/Equities chart looks like an equity bull trap me.

Let’s zoom out of the actual Euro futures chart and for a second digest what’s been happening in the past few weeks. We basically retraced seven months of painstaking upside progress in a matter of two and half months. That’s quite a drop and it’s been quite violent. Yes, there is the possibility that it’s only a retracement but it sure ‘feels’ like something else.

Now let’s hear from the bulls:

If I drink my own kool aid I should be anticipating Minor wave 2 snapback in equities here, at least very soon based on the 10-day MA channel the CPCE painted over the past 10 months or so. This is the chart that should make the bears very nervous as the snap back will most likely be very violent. If it comes, let ‘er ride and don’t go short too early. However, once we drop towards the 0.55 range again get positioned for Minor 3 of Intermediate (1) of Primary {3} - it’ll be fun.

Nothing really sensational on my wave counts - everything is still in play. As I said last week - Minor 2 will be confirmed at 1,104.75 - the difference is only intellectual as theta burn and drops in volatility hurt one’s options either way

The orange scenario requires new lows and a drop through 1,045 - if we get it what follows could be very ugly for anyone holding long positions, so make sure you’re properly stopped/hedged.

Next week will be very important - it’s OPX week again plus we are rolling into a potentially bearish time cycle. Which is why I’m a bit skeptical about the bullish scenarios but felt it to be my duty to offer a counter perspective. Expect some volatility, headfakes, and general craziness until the tape decides upon a direction.

Just to remind you guys that Monday will be Presidents Day in the United States (originally dedicated to Lincoln’s Birthday but they have to honor every asshole these days - who’s that Washington dude anyway), so the cash markets will be closed. I think the futures might have an abbreviated session - not sure actually.

Bottom line: Chances are we will pull out of this limbo territory soon as it is now time for the real Slim Shady to stand up:

Cheers,

Mole

** He’s aliiiive - alliiiiiive I say!!!

I keep telling you guys that the news don’t matter. Which doesn’t mean they can’t spike the tape for a few hours - but if you trade on that time scale you’re either a pro and have the inside track or chances are you usually find yourself on Lester’s side of the trade (don’t ask).

Let’s talk about the Dollar - as gmak pointed out this morning, its inverse correlation relative to equities is holding up well and although we don’t trade correlations it’s clear right now that a rising buck presents a headwind for bulltards. So, I wasn’t surprised to see a drop in the DXY this morning after the Greek bailout news made its rounds.

The chicken hawks are ready to buy the dip and the bears should look towards the DXY (or EURUSD) for clues as to whether this is just the completion of an Minuette c wave (i.e. Soylent Orange) or the beginning of a Minor 2 retracement (i.e. Soylent Blue). Well, let’s consult 2sweeties’ DXY oracle - as usual courtesy of retracementlevels.com - I recommend you go and check out the wide selection of statistical trading tools available.

Rule #1 is that we must not breach 78.45, which is the top of Minor wave 1, according to my current count. If we do then it’s back to the ole’ drawing board.

There was no daily long RL right above 78.45, which is why I cheated and set the 100% mark at 78.386. It’s not that I wouldn’t expect a bounce there - it’s just that I probably would not want to go long for more than a day as my wave count would not be clear. Again, if you don’t put any stock in EWT then just ignore this bias and trade what you see according to your own system.

As you can tell the odds are not too great until about 79.171, so it’s possible we drop into tomorrow - be cautious and set your stops if you go long at 79.656. Again, this is assuming you use stops - 2sweeties does not and instead adds positions on the next long RL. For more details I strongly recommend you go and peruse his tutorials - it’s a different trading system than what I’m doing. It’s working fine for 2sweeties and if you have the discipline and the capital it might work for you.

The frequency tab is a bit more accommodating. I see a high frequency of support starting at 79.65 all the way through 78.38. 16% is a strong reading and if you combine the roughly 80% odds at 79.171 with close to 16% frequency I’d say that it’s reasonable to assume a bounce there. IT BETTER! Because if it fails that mark the Dollar bulls (i.e. equity bears) could be in a world of hurt. I’m talking Soylent Green here - not Soylent Blue (see my Sunday analysis for details on this).

Alright - hope this helps my stainless steel rats - always remember that Rome wasn’t built in one day. Give it time - expect snap backs - follow your charts/systems. BE DISCIPLINED - don’t let your bias go in the way of your trading - I know it’s hard and I keep telling that myself on a daily basis.

Cheers,

Mole

P.S.: Thanks for gmak for whipping out a post this morning - really appreciate that considering you are fighting off the Hantavirus and H1N1 at the same time.

I wonder if the boyz are saving their ammunition for the last 5 minutes again. As I pointed out yesterday afternoon - the JPM sponsored short squeeze late Friday was not confirmed by market breadth, the Euro, or any of the momentum indicators I’m looking at. It might actually have been counter productive to the bulls (i.e. VIX ended inside the 2.0 BB) and today’s regularly scheduled ‘Monday Melt Up’ seems to be a non-starter thus far. Yes, the final hour looms ahead and it’s possible that this is only a b-wave of a Minuette degree a-b-c correction.

The bulls need to get their asses out of this downside channel. They tried this morning but didn’t get very far - there is simply not enough participation on the long side. The Dollar is hanging on stubbornly as the Dollar bears may be using this little reprieve to settle/unwind some of their positions.

As the old saying goes: You can fool some of the people sometimes, but you can’t fool everyone all the time.

Again, I would not be surprised to see a late day surprise move by either JPM or GS - but even if it comes - ladies and leeches - before you panic over a few handles to the upside:

THINK LONG TERM!

All the wave counts are still in play - no changes.

Mole out.

Equities remain bid challenged - all $NYMO divergences notwithstanding. A good lesson of not succumbing to recency bias? Maybe - meanwhile sit back and watch the market do its equivalent of Goofy’s Holler:

It’s not all just fun and games at the evil lair however - after all we busy working to separate pig faced bulltards from their ill gotten gains:

I love those Fib extensions in TOS charts (hint hint - T.K.) - if this is not an a-b-c (if it is we’re screwed) then we should be breaching the 1000 mark in a jiffy. Also shown on the chart is the monster divergence between the Euro and equities which developed in late 2009 and finally resolved in late January. I kept harping on that fact for weeks, pointing out that the bulltards could only ignore the Dollar bear squeeze for so long. Hey, I’m trying - not my fault if nobody listens.

This fine chart was posted by brother Jeff Kohler over at OptionAddict.com. Jeff rightly points out that we again are looking at a bullish divergence on the NYSE McClellan (a medium term trend indicator). He’s right - only question here is if the resolution will be the same as during the uptrend. However, I’m willing to consider the possibility, which is why I posted the chart on top. We need to get out of an a-b-c scenario and for that to happen we need to push past the 165% mark (which is how far a C wave ‘usually’ extends) which would occur at (drumrolls) 971.80. If we get past the 990 mark I believe we actually have a chance of getting past that point.

So, we have quite a bit to go until we can pop the Cristal - but thus far I’m liking the ride

BTW, the Dollar is on a tear - so far the retracement levels on the DXY are working like a charm. We are now near a 14% short RL which is 80.7 - either cash out here or wait for 81.7.

I see some dip buyers jumping in - it’s long overdue - if this mark doesn’t hold right now we are looking at some EOD nastiness.

Cheers,

Mole

I really like the developing wave patterns on the currency side of things. The DXY is right on track of tracing out an almost textbook third motive. Admittedly that’s a very early assessment but the first and second waves, as well as the currently evolving third wave look very nice in terms of form, sub-divisions, angle, and velocity. I know this doesn’t look like much to most equity traders, but let me assure you that a bunch of dollar bears are sweating bullets right now.

Where do we go from here? I think it’s up - at least until the 80/81 cluster. But let’s consult our DXY retracement calculator - courtesy of 2sweeties from retracementlevels.com:

As you know I always start with the odds and considering that this may be a third wave I am extra conservative and have placed my 100% mark at 83.44. Based on that the odds for a meaningful reversal are 75.73% at 80.7 and 87.45% one handle further up at 81.75. Now under regular circumstances I’d say that 75.73 would be a decent spot to get positioned for some short side. But again - we might be dealing with a third wave here and if I was planning to go short (which I don’t - only playing the long side) I would wait until at least 81.75. Please bear in mind that this bias is predicated on me having faith in EWT and its wave counts in the first place - if you don’t, then just fade my comment and focus on the odds.

The frequency tab tells a bit of a different story. There seems to be a a cluster of reversals around 80.7 and even a stronger one at 80.06. The next two above (81.75 and 83.44) also have respectable frequency readings above 10%. What to do - what to do?

I think at the current stage of the wave count trading the short side might not be the most profitable endeavor. The main trend seems to have switched to the long side and thus it is here where you should expect to see some nasty surprises - the bucky bear squeeze is on! If you are long since 77, then either take profits at 80 or hold to see 81.7 or 83. The wave count appears to be progressing nicely and we should not fall into the trap of over trading.

If you simply look at the chart it’s quite clear where the resistance clusters will slow the Dollar’s run. Bundle in the odds I proposed and the long side is promising right now. Also, once we get a reversal in the form of another sub-division we might push up hard in a third-of-a-third type scenario. This is the money trade we should be looking to get positioned for. I will keep you guys posted when we are getting close.

BTW, if you’re interested in trading currencies like the pros by facilitating statistical odds head over to retracementlevels.com and pick among various daily calculators:

• EUR/USD
• GBP/USD
• USD/CHF
• USD/JPY
• AUD/USD
• UUP
• UDN

If currencies aren’t your thing then 2sweeties’ got your back:

• Gold COMEX (GC)
• Hang Seng Index (HSI)
• Nasdaq 100 Index (NDX)
• Oil (CL)
• PowerShares QQQ Trust (QQQQ)
• Russell 2000 Index (RUT)
• S&P 500 Index (SPX)
• SPDRs (SPY)
• S&P/TSX Composite Index (TSX)

And those are just the daily indicators. I personally use 2sweetie’s hourly E-Mini S&P 500 (ES) and I wouldn’t even thinking about touching a contract without checking the odds first.

UPDATE 4:00pm EDT: PRSGuitars is back with a vengeance - I’m posting his very interesting chart without commentary as I’m not following this particular pattern.

I would however love to see it play out But again - this is one of those ‘exotic ones’ (at least in my book) I leave to others to follow. But I must point out that the resolution does coincide with my own wave count - so we shall see.

Cheers,

Mole

The Daily Gold blogger Harvey Organ reports that ECB and other Central Banks are terminating the currency swap with the US Federal Reserve Bank as of Feb. 1, 2010. How they are going to unwind the currency swap is something very interesting to watch. It could finally trigger the long expected US dollar crisis: Collapse of the US treasury market and the US dollar itself.

In a currency swap, two central banks print their own currency out of thin air and swap them in a zero interest loan according to the exchange rate. Then after a period of time, they return the loaned currency to each other. For example the FED will loan US dollars to Bank of England (BOE) while BOE loans British Pounds to the FED. Upon the end of currency swap agreement, they unwind the trade by the BOE returning the US dollar, and the FED returning the British Pounds.

The question is how they are going to be able to unwind? The total swap is believed to be as high as US$500B. Some say as high as US$2T. If the central banks merely locked up the cash in a vault, they could easily return the money. But that would defeat the whole purpose of currency swap. Instead of being locked up in a vault, the swapped currency must have been SPENT in some way. Then the question is how do they get the money back if it is already spent, sold out or otherwise given away?

For example I long suspected where did the British get the money to buy US treasuries over recent times? According to latest official data, UK's holdings of US treasuries was up $145.1B in 12 months, while China's holdings went up only $76.4B.

Where did the UK get the money to buy US treasuries? Unlike China which earns US dollar from its trade surplus against the USA, The UK has a huge trade deficit against the USA. It spend US$2 buying US goods for each US$1 it earns selling products to the USA. Where did they get the US dollars to purchase US treasuries? If it was not from trade balance, it must be from the give out by the FED, in the name of currency swap. It cost UK nothing to print British pounds and then exchange for the dollar, just like it costs the FED nothing to print the dollars.

In a sense, FED is secretly buying our own debts through foreign hands, via the currency swap agreements!!!! Now, how is the currency swap going to be unwinded? What magic are they going to pull this time, asn the BOE has already SPEND out the US dollar in buying US treasuries. It does NOT have the money to return to the FED.

Likewise, probably the FED does not have the money to return to BOE either. They must have spent out the British Pounds as well as other foreign currencies, in repeated attempts to sell foreign currency and buy US dollars, to support the dollar, in recent times.

It's going to be fun to watch how the unwinding can be done. If my speculation is right, BOE must sell its holding of US treasuries to raise US dollar to unwind the loan, and the FED must also need to sell dollar and buy British Pounds to unwind its loan as well. Both would be fatal blow to the value of US treasury and US dollar.

Time to run to precious metals as your financial safe haven. Don't run to euro, as the eurozone is crumbling down. Don't run to Japanese yen. Japan has an even worse debt problem. When Japan collases under its debt it must sell US treasuries to salvage its own currency, which will trigger a domino effect leading to the fall of the dollar. The only thing safe are precious metals and commodities.

But unlike most other precious metal bugs I will not tell you to run to gold, or silver. Every one talks about gold as if it is the only safe haven. When every one talks about one thing, be careful. The world is not in shortage of gold. The world has plenty of gold that could easily lasts a couple thousand years if we do not produce gold any more. Warren Buffet famously critized gold by saying that you dig out the metal from the ground, and then dig another hole to hold up, and have to pay armed guards to watch it, what for?

I am also questioning the wisdom of silver investment. Silver bugs have been calling for silver shortage for years. But I never see any solid data to back up the claim of shortage. If there is no shortage, if a precious metal's price is only supported by investment demand, then there is a problem because anything that is purely supported by investment demand, is by definition a bubble, the investment demand could easily turn into investment supply in an instance.

The only good precious metal investment, must be one which is based on REAL industrial shortage, not by the hypothetical investment demand. If there is an industrial shortage, the price MUST go up regardless what investors believe. And price movement due to real shortage, on the other hand, can create solid and reliable investment demand. Such precious metals will provide the best performance way much better than gold.

The only two precious metals I see solid data to support a supply shortage case, are platinum and palladium. Of course my favorite is PALLADIUM. My most favorite mining stocks are Stllwater Mining (SWC) and North American Palladium (PAL), the only primary palladium producers. Russia's Norilsk Nickel (NILSY.PK) is world's largest palladium but they are mainly a nickel producer. South Africa's Anglo Platinum (AGPPY.PK) and Impala Platinum (IMPUY.PK) produces by-product palladium. Watching Platinum Today on related PGM metals news, and KITCO for price movements.


The parabolic price rally of palladium in the past one year, a performance that is far better than gold, silver and platinum, has vindicated my conviction on a palladium bull case.

Why palladium? FOUR things make palladium extremely bullish:

1. Termination of Russian government palladium stockpile sale, due to stockpile depletion.

2. Looming South African electricity crisis could strike again any time, just like two years ago.

3. Launch of ETF Securities physical palladium fund (PALL) in the US market.

4. Long term potential of palladium used in Cold Fusion, make it a must have strategic metal.

I have discussed these points in many of my past articles which I will not repeat. I merely needs to point out that Impala Platinum's PGM Supply Demand data confirms dramatic reduction in Russian palladium supply, as the stockpile sale has ended. There is now a big strictural deficit. Read more detailed discussions on GIM forums.

I do not have to cover the recent launch of ETFS platinum and palladium funds, either.You can see the powerful price surge of palladium recently, and read what fellow SA contributors have to say:

Why Gold ETFs Should Be Afraid of Platinum Cousins
Platinum and Palladium ETFs: Dare They Outshine Gold?
Platinum, Palladium ETFs Are a Home Run
Pent-Up Demand Is Behind Platinum Fund's Success
New ETFs Off to Roaring Start
Don’t Blame Platinum, Palladium ETFs

Sadly, even though people have caught attention to platinum and palladium. There has been absolutely NO mentioning of the end of the Russian palladium stockpile sale, and how palladium rallied from $300 to $1100 in 2000 merely because of a FALSE rumor related to the stockpile sale. Nobody mentioned the South African electricity crisis either, even it triggered quite a rally in PGM prices in early 2008, and another South African electricity crisis is looming again in the near future. Please read the background discussions.

And yet most people don't even know about platinum and palladium. All they know is gold gold gold, silver silver silver.

Let them have gold. I want to have palladium. And I can not own enough stocks of SWC and PAL. I have been predicting and advocating for a super bullish palladium rally for almost two years. No one paid attention until it really happens.

But this is just the start! The real fun will begin when auto makers realize what's going on in Russia and South Africa, and start to panic hoard. If it were not for the foolishness of major industrial user like TOYOTA(TM), GM and FORD (F), rhodium would never see gigantic price swings from $300 to $11000. Shouldn't industrial users acquire and keep a plentifully large stockpile when rhodium was at $300, so they do not need to pay $11000 an ounce a few years later? They never learn.


Full Disclosure: The author is heavily invested in palladium mining stocks SWC and PAL, and own PALL. The author owns silver mining stocks like CDE, SSRI, PAAS but have no interest in ETF funds GLD and SLV, as I do not trust their gold and silver holdings.

I actually meant to post this an hour ago but then received and important phone call. My apologies but right now I’m being pulled in ten different directions. However, I expect things to go back to normal again starting February - so please bear with me.

What I’m seeing right now points towards an inflection point between Soylent Green and Soylent Orange. Since I snapped this chart we’ve pushed up a few more handles but participation is a bit mixed - I’m not ruling out either until I see some follow through in the final hour today.

Highlighted on the chart is the level of pain both bears and bulls have been exposed to in the past three months. It’s been one big whipsaw of hell and it’s wearing everyone out. But let’s also consider the good news here. We bears have been bitching about those ‘damn dip buyers’ swarming in on every drop. Okay, put yourself on the other side of the equation. How about those ‘damn rip sellers’ that have made upside progress an exercise tantamount to clawing your way through a leech infested swamp filled with alligators? It’s always important to see both sides of the equation and believe me - if you’re a retail bull right now you’re not very happy either. The only market participants smiling all the way to the bank since early November are the market makers - boy, did those guys have some fun with all of us

I want to remind everyone to continue being focused on the long term. Obviously we retail traders can neither win the ramp & camp nor the drop & stop games (the latter being my own invention - copyright!!!). And we frankly should not be focused on the short term right now anyway  - which is not only a pain in the ass to trade but is also very time intensive and if you get it wrong once or twice chances are you lose everything you banked previously.

At the danger of sounding like a broken record: Look at this whole thing like a big chess game. Evaluate your options and consider various moves. Project ahead - and consider that the boyz will throw at us truck loads of red herrings, deflections, and misdirections before we see this thing swirl down the collective toilet. Bank on that - and then project out even further. Now you arrive at an Einstein point in time that is probably out at least 9 to 12 months - which will probably be the time needed for all of the tape propping and QE sponsored monkey games to taper out and this turd of a market to collapse under its own morbidly obese weight.

Quick glance at our Dollar odds - these are the short RL odds I posted yesterday. We are now near the 100% RL mark I picked - maybe I was not conservative enough given that I expected a third wave to be in the works. The next one up is 79.24 - if it pushes into that I expect to see at least a quick one day reversal. Would I trade that? Hell no - as I pointed out yesterday, the ole’ greenback is on a run now and carry traders are running around screaming with their hair on fire - deservedly so I might add

Okay, everyone now say out loud:

“Pai’-in”

Gotta love that Cockney accent… if you want to get laid here on the West Coast you better start practicing.

Be smart - shop Evil-Mart

Cheers,

Mole

Good ole’ bucky is bumping its head - I think we are looking at a rough ride before we see further upside:

The reversal cluster shown is based on the recent top as well as a month worth of sideways chop back in August 2009. This range needs to be overcome before we should expect strong/fast advances in the Dollar. What’s pretty apparent visually is also backed up by our retracement levels, again as usual courtesy of 2sweeties over at retracementlevels.com.

I set the 100% odds at the recent peak as advances have been slow as of late and were met with strong selling near the recent top. So, it’s reasonable to assume we will see at least a slight retracement should we push that far anytime soon. Based on that we are currently near a short RL with about 68% odds - not bad but not great either in my book. 77.92 looks juicier with roughtly 83.5%.

The frequency however is spiking right at the current 77.42 RL - so if you are adventurous this is where you might want to start going short ole’ bucky. If I was interested in going short here I would wait for 77.61 - after all we are expecting a third wave to the upside and if that one hits things will unfold quickly. Thus you don’t want to sell too far down as it might get painful if this thing rips higher.

In general I however don’t see a really clean and clear short trade right now - the main trend now appears to be to the upside and instead of going short I am looking for long entries. Perhaps that one has come and gone for now but if we get a drop below 76.5 I would be very tempted to short EUR/USD.

Cheers,

Mole