I have been distracted the last couple of days by outside business interests, my apologies to regular readers for missing a day. Obviously there is alot going on right here which I will get to in a moment. First, I thought it might be interesting to post the market everyone raves about in the liberal media, Shanghai. Of course China is the world's savior and is just going gangbusters, or is it?
If you look at their composite stock market you might have expected to see a different picture than what CNBC leads us to believe is happening there. We have seen some recent strength, remember the world is one trade now, so everything has gone up the last 2 months for the most part. However, look at how far off the highs we are in this market, does this really look like something so strong it will lead us out of this mess? Not to me.
This week we have had some "topping" action in quite a few markets, will this lead to declines? Of course we never know that. It is possible the "NEW COMMERCIALS" the Fed, has pushed things as far as they can with the little games they are playing. They cannot click every single persons mouse even though I think they would like to be able too. At some point some corrections or more than that are going to occur. I have said in previous commentaries that the minute they stop what they are doing we are going to have a huge air pocket burst. Since we can never know when this will happen due to the secrecy of what they are doing, we have to look to price action for our clues.
Here is the Dollar Index and as you can see we have had a bounce, but nothing earth shattering that changes even the short term trend yet. We did have a fair amount of POIV divergence at the low, but now POIV appears to be lagging on the upside. Of course if we were to blast off out of here, that divergence could be eliminated, and likely would be. Watching the overnight action, I would assume the Fed has conducted POMO again, since the ES has once again been brought back "mysteriously" for the brink of a crash. Those who study this everyday can check to see if that is the case or not.
I think the next trade is buy the indexes on this dip, then look to reverse to the short side up against the highs. I do not have signals either way at this point yet, but they are looking like next week should bring this action to a theatre near us. Today, I think we just sit back and marvel and what we are not likely to see again in our lifetime, the US government trading the stock market basically, and staging another late fourth quarter comeback. Once this economic cycle passes, I think changes will occur which will outlaw this type of thing in the future. Once the public gets completely in the know on this, I doubt they are going to be able to continue to do it. I read yesterday that Roubini is supportive of the PPT and what they are doing. He has been right about several things, but been consistently dead wrong about the stock market. I am not sure his opinion means anything at all.
The last chart is one trade I made this week in Natural Gas that worked out well. I was just in it for 3 days, but a good 3 days it was. You can see it made over $3000 per contract. This market seems to trade independent of most other markets, the crazy uncle so to speak.
Have a great weekend, and get ready for next week, it should provide us with a lot of action.