QUIET ELEVATION OF EQUITIES ( QE2 )
There was a question asked about the 10 Year and why it was going up, I will get to that in a second. You can see above what I call QE2, since that is what it is really intended to do. The whole point of the smoke screen era we live in is to fool people into thinking something and to mold their behavior in accordance with an illusion. This keeps the masses in order so to speak. Panic equity selling is the last thing we need right now. It would expose what we all know is really going on underneath. However, it would solve one huge problem, dollar weakness. Now that the PPT has maneuvered us into this corner by undertaking the quiet elevation of equity prices into the biggest bubble of all time ( yes bigger than 2007 by far ), they have a real dilemma on their hands. They have created this huge inflation wave and absolutely clobbered the Dollar.
Ironically, the minute they stop playing their games we will have a commodities crash, a stock crash, and a huge rally in the dollar. They do not want any of these 3 things to happen. The problem is the US public and for that matter the world is now wise to their deliberate attempt to do all of these things, and they are coming under a tremendous amount of "scrutiny." Of course that is somewhat of an oxy moron, since all their activities are kept secret, so how closely can we scrutinize them anyway?
Most people say that QE2 will end in June, etc.. I am not so sure about that. The minute the QE is pulled away completely the above 3 events are going to happen almost instantly. They know this as well as we do. So, if their goal is to not have that happen, why would they stop? If you read the words from his speech I posted yesterday, you see that he is admitting that economic conditions are so poor that keeping rates low for quite some time is going to be necessary. That is setting the stage for QE3, QE4 etc.. One idea that has been thrown out there that does make some sense is that they agree to let QE end on the stated date, they will let everything start to crash, then they will argue that is proof that we need more, hence QE3 begins. This would certainly get some people off their back but of course solves none of the underlying problems at all.
The problem with that theory and we saw it during the 07-09 crash, is that once volume selling shows up, the PPT cannot stop those down moves, it just requires too much money. If you take a big down day of 250 points, you are talking hundreds of billions of dollars in that day to reverse that move. This is why that ploy will not work, they cannot let this cat out of the bag. I do not know what they will do but I suspect as I have stated in here repeatedly, the obvious short everything when QE2 ends trade is not going to work. I have no idea what they will do but I suspect they will not back away from this manipulation game they have mastered any time soon.
One could argue that the 10 Year note should not be rallying in the face of the ending of this crap. First of all we still have another month minimum of it, so there is no reason for a decline based on that now. However, if you look at the weekly chart above we can see why we have had this rally. Overall we are still in a major uptrend as you can see on the chart, and during the decline off the highs we had substantial commercial buying, this is a buy signal. Timing the entry is another matter but just from a fundamental standpoint, this is a good combination for a rally to take place. Once we moved off that low, we then made a higher short term low on the chart and while that was happening, the Small Speculators were selling with both hands. They reached their highest short level in history, of course right before the market took off on the upside. Although in GOLD this type of setup has completely failed, it has been a great recipe for declines for decades and still is in other markets other than the metals. It used to be in the metals also just FYI.
This is the true reason why this market is rallying. The speculation about QE and what it will or want do, whether it will end etc.. is not something you can ever trade with. You have to have an approach that analyzes what is actually happening. Yes that is actually happening, but none of us know exactly what they are doing to manipulate price. We know on the surface they are buying treasuries, but there is much more going on than that believe me. You can also see that we are now nearing the time of year when this market typically rallies as indicated on the seasonal down below. Normally we decline into this time of year, so maybe we will invert this year, or maybe we will accelerate. We are in a zone here where a sell signal could be taken. There are some things I look at on these weekly charts that are not shown, that indicate we are in a resistance zone right here. If we were to break out of here strongly, the sky could be the limit. However, if I get a good short term sell signal on daily charts I will go short up here now. I will short the 30 year and not the 10 year since it is weaker on the charts. There is no sell here now at all, so maybe one will not develop.
I do not have anything new for today for setups in any other markets. Just another day another up close.