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Wednesday, April 04, 2012


GAME CHANGER




Something quite interesting happened yesterday, The FED flinched. We have been sailing along on fumes for some time now, kinda like a Chevy Volt. Most professionals I know have been looking for some type of decline to begin here. Everyone knows the economy is a shambles in spite of the outright lies being tossed at us by Barry & Co. I am pretty sure that the FED would like to be able to stop being day traders to keep this thing up here and somewhat of a trial balloon was launched yesterday when the FED minutes were released. I don't think they want to do QE3 and I don't think they wanted the do the prior two versions of it either. In spite of outward appearances to the contrary, these folks are pretty intelligent people. They know what the end game here is if they can't start knocking down the balance sheet.

Unfortunately, when the Balloon was shot down with a LAWS rocket and the market just fell sharply on the release of the minutes, they had to rush in quickly and buy the ES during show time to stop a bad close from happening. It is so blatantly obvious when they do this it is incredible that more ink is not devoted to this. Now that we see today's action so far barring their noon buy programs, it is plain to see the market is speaking loudly that it can't rise without the FED buying futures to support it and masking the truth. As I listened to what had to have been 20 outright lies coming out of Barry's mouth last night when commenting on the Ryan budget plan, it became perfectly clear that we are not ever going to get the real truth about the real state of the economy.

If the FED does ever decide to pull back, the stock market is going to roll over.

The action in GOLD was interesting yesterday, as it has just been clobbered on the news of potentially no more QE3. Of course for those of us who are not biased in either direction this is pretty much conclusive proof of where the manipulation if there has been any in the metals has been, upward. The FED is trying to create inflation, arguing there is manipulation to suppress prices is just ignorant, sorry! The FED is in the business of creating bubbles to establish alternate places for people to go to make money when other areas fall into downtrends. If you can't see that you need to go see an eye doctor. You can't let a blind belief cloud your vision. For God sakes people do your own research about the history of Gold, and stop listening to all the rubbish from the Gold hucksters. Almost every point they make is all based on a theory of an alternate reality that will develop, there is no precedence at all in history for what they are calling for.

The line in the sand for GOLD is still the December low of 1528.8. If we close below that I think the bubble will be well on it's way to the deflation I have been calling for. Where it ends up who knows, but $500 or less is where I suspect this is ultimately going, perhaps much lower. I was long this week and took a very small loss as indicated by the arrows on the chart. One concept in the COT world that is very important is that failed signals are signals in the opposite direction. This failed buy signal is a sell signal. When commercials try and defend a level and fail, we often see huge moves take place. Since the long term cycles now are lining up with a failed COT buy signal, that is a very ominous sign for this market. Timing bubbles is always tough, and I am ticked that I am not short here because of how bearish I have been, but my short term tools did not catch this one. So be it.

I don't think we get into any major problems in the ES until we get under 1380. If we penetrate that level and bounce, I will be looking for a short entry.

Good Trading


10 comments:

Michael Tredr said...

it's funny because after my batting cage session yesterday (and i've been racking up more of those with the market chops lately), i went to barnes & noble and saw and interesting book, i think the title was along the lines of "Tail Risk Killers" or something like that. The author is making the argument that in the Fed's manipulation of the markets, they're actually setting us all up for catastrophic adverse moves in all assets WHEN, not IF things get too unsustainable. I thought it rather sad that the book just came out recently.

HT said...

Great post CJ. Thank you.

John M said...

Michael....for those of us who have believed what that book is saying will come to pass since the Greenspan days, the timing is kind of interesting. Lame, but interesting.

My respect for Chris aside, I tend to think the metals get better here before they get substantially worse, but we'll see. The charts will show the way.

colin said...

Chris, what I'm impressed with is how tight your stop was. It moved a bit in your favour but your stop was below the previous days bar.

Do oyu not get stopped out too often then ie not give it enough soace to wiggle? In this case of course it worked well in your favout.

thanks

Chris Johnston said...

Michael I agree with what that book says, that is what will happen eventually

Colin

I rarely get stopped out when I place stops in the market like that then have the move continue back in my direction. In this case when that low went we had a lower short term high than that of a few days before, which confirmed the structure of the market was down. There is no reason to have stops too far away in a case like that it is just throwing money away. Had that high been higher than the high on 3/27 making the structure of the market up, my stop would have been further back.

Chris Johnston said...

John

As long as the December low holds in Gold everything is still ok for the perma bulls. It is the takeout of that low that would change the whole dynamic if that were to happen. Now what I hope for is a bounce to short this thing and just hope it doesn't free fall

Anonymous said...

Hi Chris,

About a week ago you mentioned that even though they had dipped the treasuries looked like a good buy. And as we have it, now they are rallying. I didn't buy the dip but instead tried to short the bounce and was successful for a little bit but was stopped out. I think you mentioned that it wasn't a good sell on a bounce either. I wanted to know how you drew these conclusions. Thank you

Chris Johnston said...

COT very bullish setup and also some short term things that are proprietary that I don't show here

Steve said...

ES is under 1380, so looking for a bounce to short

Chris Johnston said...

yes