Monday, June 27, 2011


I am still looking for a bounce, I have not changed my mind on that one bit. The above chart of the Bernanke 2000 shows what is the strongest of the 3 indexes run by the Federal Reserve. If one is inclined to go long in them this would be the one to chase. There is a unconfirmed rumor out there that they are considering turning these back over to the public at the end of this month. What a nasty rumor that is. As Jack Nicholson said in a few good men "you can't handle the truth." It is clear that is how our leaders view on us regular citizens as they just lie over and over again to us. Can we be trusted with such a responsibility as the stock indexes? Is it possible the we the little people can actually handle a free society? Me thinks not.

As we have seen leading up to this rumored handover, the markets have been tanking. I have said all along that trades this obvious we need to be careful with. The most obvious trade in history has to be to short the indexes at the end of June. It may in fact wind up being a good play after all if we rally into that time frame which I think we will. You can see in the above chart, that the Large Trader Proxy has now crossed to the long side, so that should give us a bit of a lift here. The Large Traders are the trend drivers, so once they get long it is usually the side we want to be on. We do now have some overhead supply, so rallies to me are sells after a few days or a week, but we can deal with that after the rally takes place. There is also a month and quarterly end up side bias, that should help us stabilize here at least for the time being.

Lets take another look at Silver, a market that recently I had shown a map of what had taken place in the 80's and how similar this was. You may recall it called for sharply lower prices and we are getting them now. It is yet to be seen if the fraud of this whole up move is being exposed or not. When I see bulls say we could retrace 60% and still be in an uptrend, it makes me think the game is finally over. Keep in mind you pay a 30% premium to the spot to buy coins or the hard asset, so that represents a monstrous loss if you combine the 60% loss with the 30% premium on top of it. Does that sound like a good way of protecting your money? Some store of value that is! Although they say the reason to buy is that it has never gone to zero, and I guess this 60% to 80% loss they are faced with is not 100%, so it is ok. Folks, it is all the same. You can throw a blanket over all of these hype stories on things from the pet rock to the Mazda Miata, to the Internet craze to housing, to Silver and Gold. It is all just BS and in the end the movie always has the same ending. If you get burned by this it is your own fault.

If you look closely at that chart this move down is over $82,000 per contract, and just are just a moron if you have held it this long. When price falls like this there is never a perfect place to get out, you really need to exit on strength. When you see this huge expansion in volatility and price moves up as sharply as this did at the end, you just have to see this as a climax, it always is. if you do not get out at the exact high who cares, it is much better than giving back half your money, that is foolish. This is just the markets giving you an incredible windfall, you need to say thanks and take it. If you have been sold the bill of goods as to why this is just getting started, this will happen to you every time. Those stories are always there at the highs in price of almost anything. Investing and trading is about taking profits and not being greedy. If you have given this much back go look up what greedy means. Hopefully you just have to make this mistake once. Maybe this will re-ignite and make another run we never can know for sure, but you certainly will have plenty of chances to get back in, if the uptrend were to re-establish itself.

While we are on the topic of fraud, let's look at China. This ranks now as the new BS story du jour. The mustard is off the Silver hot dog now, so of course we have to shift our focus on suckering more of the public into a new idea. China is consuming X amount of Blah blah blah. They are going to take over the world as the economic leader etcc.. Now aside from the raw absurdity of this claim by these scoundrels, just look again at the weekly chart of their stock market. Shouldn't this be just a rip roaring bull market? The truth is this is a bigger house of cards than the US was at it's highs. The fraud in their accounting is just now coming to the surface, and they are more highly leveraged in construction and real estate by far than we were at our bubble peak. This is going to be really ugly when it really starts coming down. When coonfronted with these stories use some common sense.

The moral of the story today is, do not get fooled by these shams. These bubbles people inflate to take advantage of you and lure you in just at the wrong time are everywhere. Do your own research and do not buy into arguments with no historical basis in truth. It will not be different this time due to some rocket scientists thesis as to why it will be. Making your decisions based on what historically has been the case may not result in you catching every move, but it will help you avoid these shams.

Good Trading to everyone


Marcus said...

The fact that shorting at the end of QE2 is so obvious is further proof that we should go with it. The last trades this obvious were to bet on commodities, stocks, currencies, & metals after the Jackson Hole announcement; to short Treasuries after Nov. 2, etc., etc.

The Fed wants to project an aura of invincibility and authority - Ben says oil will fall, and presto the IEA releases stocks.

The whole point of ending QE2 is to convince us that we need a new round, we need the central banks to save us. And if they want to herd traders and money flows in a certain direction, then by all means, let's get ahead of the wave and go for the ride.

It will keep working until it doesn't, but in the meantime there's a lot of money to be made by simply watching the gangsters at the top.

John M said...

This is hysterical:

"There is a unconfirmed rumor out there that they are considering turning these back over to the public at the end of this month."

This calls for an 'Amen':

"You can throw a blanket over all of these hype stories on things from the pet rock to the Mazda Miata, to the Internet craze to housing, to Silver and Gold. It is all just BS and in the end the movie always has the same ending."