Shifting Of Tectonic Plates

The earth is made up of moving tectonic plates and yet we don't ever feel them moving, except when it is too late. That's when we have tsunami or earthquake and have death or destruction upon us.

Believe it or not, the tectonic plates of our finance world are moving and moving fast. Today the central bankers of the world led by Bernanke of the Fed are giving the last moment gift to the top 1% of the oligarchy. Because very soon another tsunami or earth quake will visit us soon which will make 2008-9 look like a movie trailer.

I am not a fan of Prechter or ZH and I do not like to continue spawning storing of imminent collapse. I have been long till January and have been on the sideline since. But we have not shorted the market despite various indicators saying top. Nor did I buy the theory of collapse of the world till now.

However, I see that we are reaching an important infliction point. My favourite route remains SPX reaching an important top in April, followed by a deep correction in summer. That should be followed by another sharp rally in Q3/Q4 before the onset of a deep bear market.  The exact timing of going long or short will vary and will be available to subscribers. These are general market direction but we use many parameters and price points to decide when to go long or short. The guiding principle is that the only way of wining is not losing.

For the month of Feb/March, many have paid subscription only to hear me say : wait , don't short, need confirmation of this or that before taking any action. There were no instant gratification because we are not looking to score on every 10 point turn. Rather the focus is on weekly or monthly trend and not get distracted by the news. If that is your focus as well, you are welcome to join the gang of subscribers. But if short term trading is your focus, I am not the right guy.

Hope you had a great Easter weekend and all ready for the month of April. It is going to be exciting in fits and starts and most likely will demonstrate the formation of an important top. But we are not going to front run and will wait for confirmation before taking any action.

Wish you all best of luck in your trading / investing.

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Same Old, Same Old.

It has been a while I did a post here.
Fact of the matter is, while I am super busy and all the sabaticals that I took last year is now catching up with me, there is nothing much to do but wait patiently.
Yesterday the markets had a bearish reversal day. And today it is pumping up. All to convince the sheeples that the only way to get rich is TBFD.
So what yesterday's selling was all about? Did you say Cyprus?  Oh yes. The Euro politicians have shown that in case of emergency, they will put their hands where ever they can. Earlier they would socialize the loss and privatize the profits. Now they would rob the common men to save the Banksters. Great news now that we know that no body's money is safe.
And what is today's ramp all about. It seems because home prices are now at the highest level since 2008? So the problem of Euro Zone has been solved and we have the collective memory of a gold fish.
But none of these news drive the market. Rather they drive the retail investor sentimement. And speaking of that the powers that be (TBTF Banksters) know how to manipulate that retail sentiment. Over the last few months, the bottom level is being convinced that we are at the beginning of a new bull market. Only then the retail will buy stocks and they normally buy at the peak.
However, I think we will continue to see this rollar coaster ride for the major part of April before any decent correction. So my advice to the subscribers have been to stay on the sideline and avoid all kinds of temptations. It is still not the time to short yet.
We may get occational day or two when we will have 1% sell off but again we will see markets being pumped up on low volume. Doing anything in such sitiation is bad for our financial health.
I know it is damn difficult to remain patient for month after month and do nothinig when the entire 24/7 news media is trumpeting how we are missing on the golden opportunity of getting rich and retire quickly. But that is their agenda. Our goal is to protect our savings and investments.
Just remember, what goes up, comes down. And Wall St. is not above the laws of gravity.
 

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Quo Vadis SPX?

Some say SPX is headed for the moon. Well, that was bit of an exaggeration, but surely we hear talk of SPX 2000. Personally, I think a long term top can be found around 1600. The question that I ask, whether that long term top is now or still few months down the line.

While many are pointing to various extreme reading of various indicators, I do not see any sign of correction yet. Only once so far the sell signal was triggered but that did not match with my other indicators and I decided not to short even when the sell signal was on. On hindsight, it was a good decision because had we been short, it would have caused us emotional pain and in some cases, the short positions have been puked already resulting in actual loss.

While I am advising subscribers not to short and stay on the sideline, for some of you who are short already, I would say that bear the pain if you do not want to book the loss. Nothing goes up for ever and this moon rocket is also subject to the law of gravity. Ben and other powers that be think that stock market is equal to economy and a higher stock market means a strong economy. So the never ending money printing and inflating the balloon goes on. We have seen this many times in the past.

And we know how it all ends. This time is never different. Only we do not want to front run and get run over.

So far the bubble has been formed in Equities and we have not yet seen the rise is other asset prices like Oil or PM sector. Before the bubble burst, we will see all these asset classes rise again. Oil should take out its all time high and gold should make a new high. Question is when. For now, the BOYZ are working on a simple plan. That is to get the retail and lagging fund managers move in to equities. It works on the simple hope that some else will buy the stocks at a higher price at a later date. If you don't believe, just look at the chart of Apple few months back. When Apple crossed $ 700, they were  talking about Apple $1000 and folks who bought Apple at $ 700, were hoping to flip it around soon. Same story now with something else.

Dow ended in red this Friday after 10 consecutive weekly gains and 8 new all time highs in a row. And SPX is trying to make its all time high. I think it is so damn risky to go long here but also not the right time to short. Not yet. There are other fish to fry in commodities and there is less risk there.

The blog posts have been irregular and my apologies for the tardiness. I intent to post at least two/three times a week but time is difficult to come by. In any case, I did not have much to say since my last post except repeating that:

Cash is King.

Have a great weekend folks. 

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Everything Must Be Great

DOW made new high!. Yeeeee.
Now everything in the world must be al-right and every American is now rich. The retirement accounts are filled to the brim and no body cares what the crooks do.
But I feel little sad for ZH and Prechter. These guys are running out of ideas about what to write about the imminent collapse of USA. Not only the collapse (which was just round the corner) never materialised, even a 10% decent correction is also not on horizon. Only last October they were saying that QE4 has failed to do its magic and QE is dead. So far I have not seen anything anywhere saying sorry, we were wrong.

Anyway, now that Indices have or are in the process of making new high, where in the sentiment cycle are we?

I personally think we are in the Euphoria stage. The retail is just now getting excited about the rally while the TA guys have given up.

Our collective memory is short. Otherwise, we would have simply looked at what happened during the same period of last year.

This is a daily chart of SPX from December end of 2011. Does the up move of 2012 looks similar? If they look like ducks, walk like ducks and quack like ducks, then most likely they are ducks. And most likely this years pattern is just a repeat of last year. And by that token, the bears should remain in hibernation till the better part of March. 

We went out of all long positions by end of Jan. with SPX around 1510. So far we have given up about 30 points rally but we have no emotional roller coaster ride. We are what is called reluctant bear, sitting on the sideline. Just waiting for the move to exhaust itself. We have avoided all temptations to short because our model did not give us the go ahead signal. And we are not looking for the end of the world, not yet.

Coming back to the market, the shearing is not yet complete. 

I think the BOYZ will spend another couple of weeks to corral most of the sheeples. Retail almost always buys at the top and why it would be any exception this time? And for those TA enthusiasts looking for all sorts of elusive Da Vinci Code for the Top and shorting relentlessly, only to lose the underpants, I have news for you. The Fed is buying Bonds almost every day for the month of March! (POMO Days are here again).

I am not for a moment saying that buy buy buy. On the contrary, I think if we are long, its better to take chips off the table and raise cash. We have gone off gold and silver sometimes back and are waiting for the cycles to bottom. But I am not shorting anything yet. Subscribers will get email when the signal comes and they know the levels to watch for.

So far the market is moving as per my base line projection for 2013. If ZH and Prechter can continue till 2014, they might have some chance of gloating. But that's a long shot. We will take one month at a time and put forward our steps very carefully. From now till next few years, before I make any investment or trading decision, I will be asking myself: how much will I lose, if I am wrong, instead of thinking how much will I make. 

Its a jungle out there. So don't front run and trade safe.

Have a great weekend folks.

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You Want To Know What Is Risk?

What is risk?
Risk is the amount of money you will lose if you are wrong.
To know how ordinary investors chase beta and lose money, you must read the following:
How to lose money
It is said the bulls make money, bears make money, pigs get slaughtered.

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Test Of The High?

Today the indices were up for most of the day but some late selling forced them to close in red.
Was it was a re-test and failure of the last high? I think it is still early to call today's action as failed re-test.
However, SPX is still above 1500 and DOW still above 14000. I would like to see indices making a lower low 1st and then re-test the 1530 level in SPX and fail there. Only time will tell whether the market will actually behave that way.

But what lead to the last hour selling? Was it fear of Sequestration or just regular pump and dump action?

But more than the red indices, I would like to draw your attention to Gold which again closed below $1600. I think the bounce in Gold is over short term and we will see some renewed selling. So those of you thinking about catching the falling knife, better be careful. However when the mood becomes totally negative on gold, that would be the time to go for it. We will have to wait a while longer for that to happen.

Nothing much is happening anywhere else really.

Equities will continue their up and down dance for a while more. Grains are still making a bottom before the rally. No much to do in Oil and Nat. Gas either.

All in all, we are in the waiting mode. Our sell signal has been triggered but something else is holding us back from going short at this point of time. I am expecting some whipsaws in market action and better to avoid emotional and moral hazards.

Folks normally get frustrated when there is not much action. We think we always have to buy or sell but in reality, we don't have to. Sometimes it is better to give up short term gain for longer term opportunities. This is one of those times.

March subscription is still open for two more days, before the next Newsletter comes out on Sunday and if you would like to avoid walking in the dark, you are welcome to join the gang.

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Bull vs Bear. Who Is Winning?

Few days back I wrote that the bull may be wounded but not dead.
Today's market action again proved my point. One day SPX down 2% and next day it is up almost another 2%! Go figure.
The fact remains that upside is limited but Ben is not ready to accept defeat so quickly and easily. And as you know, there is no easy trade. When everyone is expecting the "Top", it remains in hiding. The market will kill the early bears and suck in the late bulls. And another new month is coming with new fund allocation. Why give up all the free money?
But why every 10-15 point move up or down make such huge news? For one, the 24/7 news media is hungry for sound bites and dramatizes every small insignificant issues. But the more important thing which was point out by Josh Brown of The Reformed Broker is that, almost everyone has jumped in the options bandwagon and are playing with leverage. A 1% move has multiplier effect when combined with leverage. This is not investing. This is speculating. And speculation is anything but good for long term financial health of an individual investor.
So where do we go from here?
For one, I have avoided the urge / temptation to go short for now and have advised subscribers likewise. I am sure I will lose some of my subscribers with my constant call for caution and not having enough action. But the fact is we are making a top and direction is not clear. We have a sell signal and yet I am hesitant to take action based on the sell signal. And it is my policy that when in doubt, do not trade. I would shoot, only when all the ducks are lined up in a row. Sometimes give up short term opportunity for longer term clarity.
Folks who have been in the market long enough know that we make 80% of the profits from 20% of the trades.
Going back to the question, who is winning the battle of bull vs. bear, look the following picture for an answer:

It is the TBTF Banksters who are winning.
Yesterday Jamie Dimon told an analyst covering the bank to go F**K himself.  The following is from Reuters:

At a J.P. Morgan investor event this week Mike Mayo, an analyst at CLSA, who has been a critic of large banks and, at times, Dimon, asked if J.P. Morgan wasn't at a competitive disadvantage compared to more highly capitalized peers. (Here is a playback via Business Insider: link.reuters.com/fys36t)

Mayo: I think what I hear UBS saying in the presentation is that if I'm an affluent customer I'll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

Dimon: You would go to UBS and not JPMorgan?

Mayo: I didn't say that. That's their argument.

Dimon: That's why I'm richer than you.

This exchange shows what is wrong in the system and Jamie Dimon personifies the arrogance of the Banksters and how they game everything.

In this environment, it is important that small investors start with "Return of Capital" not "Return on Capital" because the fat cats will steal everything otherwise. Avoid risk and everything else will follow.

That's all for tonight. Good luck trading every one.

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