Wednesday, July 13, 2011


The above picture of the Executive Branch and Congress at the poker table I think about sums it up when it comes to what is going on right now. I have to admit I do find this whole thing fascinating. I am surprised the Repubs have not rolled over like they did last time, maybe they finally get it? In the end we will find out. It has been my prediction that they would roll over again and still might, when faced with the fall out of what they could be blamed for. It is ironic that they potentially face down side for doing the right thing, while the abusers of what has got us here are heroes for hocking us more into debt. I once again listened to a liberal tell someone after they told her they paid 55% in total taxes living in New York, that it was his obligation to pay more to help us all out. Who in the hell would be motivated to work if they got to keep less than half of what they made? As I have said it is time to quit listening to the dumb asses. Being stupid is just not cute anymore, it is just being stupid. If she and Buffet feel so obligated to pay more, I will email them the address for the IRS if they need it, they can just mail in the checks.

As I have stated I have mixed emotions on this. The trading opportunities on the down side are going to be just tremendous if Barry wins this hand. If he loses it there will be a more muted effect. Betting against ourselves in this case will be the way to go if the ceiling gets raised. A friend of mine told me to watch a movie called the Road if I wanted to get a true depiction of Armageddon. I watched it last night and boy was he right, a very sobering movie with an all star cast. At times it is hard to have the conviction to act on what you believe, both in trading and as we are seeing in politics. This movie features an unclear definition of how Armageddon came about since it starts there. It is doubtful that these financial things could lead us to that type of outcome, but the doom and gloomers predicting runaway inflation are missing something very important in their analysis. I we are all pushing around shopping carts full of whatever we can scrounge up to try and survive, nobody is going to give a damn about a Gold bar, it is food that is going to be the prime asset. Riots will break out over food as people try to stay alive in many of these scenarios people talk about. Storage places for Gold will be destroyed and raided by people. Law and order will cease to exist. These types of things are hard to imagine but these people are convinced they are coming, so who knows maybe they are right? To be clear, this problem of debt plaguing the world is a BIG PROBLEM.

The one overall thing to keep in mind which I still cannot believe nobody is talking about, is that the spending cuts they are talking about are not cuts at all. They are reductions in the rate of growth of spending and hence it's decline against the percentage of GDP, so they call them cuts. On Bill O'Reillys talk show he had a guest who made this point, and he shouted her down. He does not even understand this and he is about as on top of things as anyone could be. This is why I have to tip my cap to the Dems, they have been able to mask this somehow, but having the media on your side always helps when you want to hide the truth about something.

I can't wait to hear the latest turn in this story, because it probably is the biggest single moment in our history. If these folks don't get this right the game is over for us here. I have no idea which way this will go, even though I am sticking with my prediction that the Repubs will be cowards and roll over in the end wanting to preserve their jobs. We will just keep spending and pay the piper ultimately in a few years.The other thing that I always found ironic about politics is that the guys who decide things are of the age where for the most  they would be jettisoned by the private work force as being too old and not as competent as younger people.

The first chart is that of the Dollar Index, the first place where people think we will see a large decline if we defaulted on our debt. As per usual, I tend to disagree with that thesis.

We do have a possible indication of some trouble here in the DX. On the recent break above recent highs, the POIV indicator was lagging quite a bit forming a negative divergence. You can see we went right back down as a result. If you believe the Stock Markets of the world will plummet on a default, then it is likely the dollar would soar. On the surface you may say that makes no sense in that a default would mean the credit of the US is now no good. However, here is another way to look at it. The credit of other countries is still worse, and has been no good on paper for awhile now. I think we would have a huge flight to quality into the DX as everything else rolled over. The markets have a perverse way as we have seen of proving the majority wrong at the most inopportune times. We just saw this with the end of QE2 and the huge rally that followed which is completely the opposite of what most people thought would happen. At this point it is all just speculation and as I have said repeatedly, you need to follow your trading rules and not get caught up in this debate no matter how fascinating it is.

If you have sells take them, if you have buys take them. Trying to anticipate which ones will work and which will not due to some arbitrary political influence is a losers game. The next two charts are first, what I am looking for at this moment, and second what the software projection shows. This is an example of why I say this projecting stuff is a guideline not the grail. It this case it gives a very bullish projection where the first chart shows what I am looking for. Keep in mind just because I show what I am looking for that does not mean it is a trade that will happen. You need to have a plan so you are prepared to act when certain things play out in the future.

The reality is we are stuck in a big trading range at the moment and are basically in the center of it so this is not an ideal spot to trade in either direction. I am looking for what I have drawn because most of the things I watch have turned down so it tells me to look to sell rallies. If the next chart is correct, and we just zoom back up again, it is likely things will turn back up and I will buy dips. Pretty simple, I don't push it just to make a trade, that is a good way to part with your money.

Be careful getting too emotionally involved in what is happening, stick to your guns. The talking heads on TV for the most part do not trade, so don't listen to what they are saying.


Anonymous said...

How bout them treasuries? Seems like today might be a good day to short them?

Chris Johnston said...

Maybe as a day trade, they look like a buy the dip in a few days setup on the daily chart to me at the moment