UNEMPLOYMENT REPORT ANALYSIS/POT POURRI
The report released yesterday was case in point of the comments I made leading up to it, it was a non-story. There were little things that were bizarre about it and some funny new categories and some glaring inconsistencies as well. At this point beating a dead horse with it is not productive. There has been a tendency for a steady bid to be under the market on these days in the last few years and I will leave that up to you to speculate as to why that might be the case. Essentially we have an economy that is stalled. It is not unraveling and not growing it is just at a stand still. This is what I think in general will happen during our conversion to socialism. It is my view that the Democratic party has taken control of the political situation in our country for the next 20 years and will likely wind up having the house convert to their side in two years. As a result, the conversion to a socialistic country that has begun is going to happen.You certainly cannot expect a boom time when the job creators are being attacked the way they are. Similarly, a huge bust is probably not likely either. We are just going to have people pulling back on hiring and a general malaise. Those looking for the big crash may or may not be rewarded, that depends on what happens with interest rates. We are likely to have a net flat situation for a very long time.
Low rates are what is allowing these big corporate profits to happen and also have allowed many businesses to re-finance out of difficult borrowing situations to those that are much more manageable. I know the company I have to maintain a job with while my recovery from PFG takes place, was able to convert some short term debt above 14% into sub 6% which really helped their bottom line and enabled them to avert a potential disaster that they could have been facing when it came time to pay off that debt. Many businesses have been able to do similar things to improve their positions. All is not dire out there. How we transition from this into a boom time is the $64,000 question. The idea of kicking the can down the road on dealing with the countries debt situation hoping the economy gives them a bailout is an interesting theory. The problem with it is that with the policies likely just resulting in not much expansion we need a red herring of some type. It is clear to me things are going to move so far that the government will eventually wind up confiscating wealth from people to continue to transition things. It will start with total tax rates on wealthy going into the 70% or more range, ( some are already well into the 60's after the cliff deal ). Then it will be followed by a wealth tax, where your net worth effectively gets taken away from you over time slowly, a few percentage points at a time. As repulsive as this is, it does not dictate an immediate crash, it will just be a slow sideways grind. There will still be opportunities, you just have to look at how to have your company outside of the US since having it here is going to be that much harder to succeed. The world is flat so this is not a problem in most aspects. However, it also provides an interesting situation to contemplate. Wealth can very easily flee almost any place now since you don't have to necessarily live where you work.
We have seen in recent years people leave New York due to taxes and we will see this happen in the US over time as these punitive actions slowly ramp up. What may well wind up happening is the government enacting legislation that stops you from moving your money out of the US. It might not be a bad idea if you are really wealthy to be on top of this now. I am fairly sure this is going to happen eventually. Class warfare has been started and it is only going to ramp up. It is a winning political strategy now for the first time ever.
There is a prominent Newsletter writer that thinks the way out of this is going to be the huge boom coming from Shale Oil and Natural Gas. He has been talking about this for a year or so now, so far no good. The Natural Gas plays that he has recommended have been clobbered. Whether or not this is the ultimate bail out for all of us who knows. There are things out there you can read that explain another prior period in our history where it was predicted that Shale Oil would produce a boom and it did not happen. I am not sure on this either way. I hope he is right but I have my doubts.
There are some interesting reads in Zero Hedge this weekend. I generally don't like the huge negative bias in that site, but there are some very good articles that give interesting information. He is a great reporter, just a very poor trader as far as I can tell. It seems every rally is short covering except Gold since he has an upward bias there. This is just not accurate. Keep in mind short covering happens in down trends not up trends. Be careful with the market calls which seem to always hint prices should decline, but take heed of the other content which is often great. He covers some things on HFT and I think the obvious miss here is who is actually doing this. There are always reasons that explain why things on the surface don't make sense. I have no doubt similar explanations in regard to HFT are also known by a select few. Who is to say who the folks are that are actually doing this? How about the FED tipping off certain banks that they are about to do something allowing them to front run the action? I think we have seen ample proof in earnings statements that this is happening. There are banks with no losing trades for a few months, how else could that be explained?
What is never considered seemingly is that the PPT could be doing some of this when the ramp ups happen, either directly or through their minions. I have no idea to be honest, but the financial landscape of what is allowable to reach a certain end game has gone completely off the tracks. I am sure if we knew all the inter workings of what has been done to try and move the stock market higher, we would be disgusted. Nonetheless it is our job as traders to adjust to what is happening now not be hung up on what should be.
For now what we know is there is an upside bias to NFP days in the ES so it is just something to be aware of.
Here is Gold and the site of a blunder I made last week trading this market. We had a long position that ramped up nicely for two days for us. What I overlooked was the overall down bias in this market. Managing trading services is so much harder than just trading on your own. You know you have a lot of people watching from afar wondering what you are doing and why. I should have been more aggressive in taking the profit that was in this trade after two days, but I made a mistake and let most of it get away. A blunder by yours truly.
There is not an obvious COT setup here that I can see giving us a way to look. I still think it is imperative that the price level about $100 below where we are holds. If we go under that level we are going all the way back down to $500 or lower. As long as we hold above things are ok, and we are doing that so far. You can see where the general seasonal influence for a decline comes in at the end of Feb/beginning of March. I don't know if we will be setup otherwise for a decline at that time but I will be looking. It would be great if we got a COT setup at that time, let's hope!
I don't see any reason to be wild about shorting this market. You can see the Commercials are short but they have been for a long time and the market has risen during that whole period. It is times like this where this data is not helpful. They may be a lot of speculation about the next fight in government over the debt ceiling and what happened last time that took place. However, that is speculation at this point and the tools I use are not giving me sells here. The break down in Bonds is potentially a problem, but it is not bad enough quite yet to matter in my view.
I have not mentioned this and won't be covering it unless something new develops. I think the reality now is the attorneys get most of the remaining money as they drag this on and we the victims get screwed. I am sure we are considered rich so most people are probably happy to see us have our money stolen anyway. There is no public will to do anything about situations like this, it just is what it is. I think we have to move on, take the tax write off if your accountant agrees and assume nothing more is coming. If something more comes this year it will just be a bonus and after taking the loss you will have to declare it as income. For me this effectively takes me close to the 50% level since the tax write off is so large it enables me to go back in time and get back prior taxes paid, so effectively after that I will be back to about half of what was stolen. I wish there were better news, but there is no news and now it is old enough story that nobody cares. There was yet another story this past week about an FCM screwing around with Seg money who was fined, this is not going away so be diligent with your money. We have not seen the last of these types of things.
The best revenge we can get is two fold. First, trade the best you ever have and recover. Once you have done that the other revenge you can extract is to get your money out of the US. If enough people do this we can have an effect on things. Capital fleeing will unravel plans those might have to come take it. Use this theft as motivation when you are stuck or burned out studying trading, to motivate you to go to the next level. Full recovery would be the best revenge we can get against a corrupt system to prove they can't keep us down. I would not rule out the government conversion that is taking place resulting in some restrictions on trading taking place eventually. The one mistake I think people are making is not fully understanding the huge political shift that has happened in the US and what it will mean. It is just being prudent to have a plan if you are a trader as to what you will do if this happens. If I am right about this it will be a matter of a couple of years before this happens it won't be immediate. There has been legislation kicked around in committees about this by democrats over the last few years that has gone nowhere so far, but things are changing politically dramatically so it is time to be aware of this.
My apologies for the comments on the Bond System this past week. I was trying to make a point and I did so poorly. The point was that no matter what your method, who you follow if anyone, you have to stick by it come hell or high water. My approach may be no good, but I do stick by it through thick and thin. I just was trying to make the point that everyone else needs to do this also and the fact that some people exited the system at the wrong time was an example of not sticking by something through tough periods. I made the point poorly and came off like a cry baby so I am sorry for that.
Good luck next week