Monday, August 8, 2011

8 Aug 2011

 Long decline from the peak around November of last year.  Remember when I always said that the indexes don't really matter because they will end up catching up to the breadth.  These past few weeks have been the catching up.  TSV is very low, but can go lower.  See white line.
 Despite the meltdown in risk, the dollar can't get any traction as both it and the Euro are in a race to the bottom.  The Swiss Franc is essentially going vertical. 
 Gold has been marching upwards.  Nearing fourth standard deviation and my red trendline.  If this is not in Log (see bottom right corner of price chart) then it has already broken through the trend line.  Pick one.
 VIX is actually hitting its 500 day 4 std Bollinger band. Insane.  Remember 3 std is 99.7% of the time.  Yes, it turns out that I did predict shit hitting the fan.  It seems a lot of other people did too.
 Still more stocks in long term hold long (50 ema over 200 ema) patterns.  I imagine that won't last much longer. 
 Hold short short term very high.  Highest ever.
Hold short medium highest ever too.

Now that I post pretty much only charts I do want to bring this up.  Remember when my alter-ego ran this blog in late 2009 and 2010, and I would complain that pumping stock prices and manipulating the economy higher through things like low interest rates, QE, TARP, Cash for Clunkers and the Home Buyers Tax Credit would only raise the cost structure, encourage capital flight and eventually in a lack of bids when people realized the economy, congress, and Bernanke have no pants and stuff would fall extremely fast.  It appears that is happening.  But the flight to safety isn't to the US dollar which we at least had happen in 2008. 

Tomorrow, the Fed minutes are released.  I don't really know many options he has because he has painted himself into a corner.  Instead of dealing with pain from a lower level, we are now dealing with it at a higher level.  Remember that it is easier to "manipulate" Dow at 5K than it is at 10K.  The dollar can't rally against the Euro in the face of extreme risk-weakness and tons of bad economic news out of Europe.  Fortunately, treasuries have rallied so the government can auction off tons of debt at low interest rates - this paves the way for more monetization.  However, gold is calling the bluff of the govt and central bankers.  Maybe gold is just rising in anticipation of QE3 and it will be a sell on the news event.  Who knows?  What options does he have?  Negative interest rates?

I'm glad that my clients and I are out of the market and have been since mid July (and mostly out in April) when I rode the last relief rally.

"You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets."
Peter Lynch

Good luck.

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