CYPRUS SITUATION UPDATE
When the news broke over the weekend that there was going to be a wealth tax on deposits I think all the BS the politicians have been pedaling about how everything is fine got exposed. I normally would not do a post just to react to something like this, but I figured some people might check in to get my thoughts on this.
Ironically we were trying to buy the Euro tonight in the Swing service at a limit price below the close from Friday, but we opened so low that it cancelled the trade because the open was under the exit stop price. Obviously, I did not see this huge sell off coming. However, I did suspect something might happen when the news broke over the weekend about the wealth tax that we were proposing to apply to bank deposits. It is shocking to say the least that they can just essentially steal almost 10% of your money if you had over 100 large in those banks. If it were me I would take the hit, take the money out and move it out of the country immediately. I have always suspected that at some point when we do hit the wall on this whole situation that things like this would happen.
The question becomes what does this mean for all of us as traders?
One thing we have to keep in mind when news stories like this break is what will the FED do? They are the de facto commercials now. Whether they outright buy the ES or orchestrate the buys of it through intermediaries we will never know. However, what we have to assess in situations like this is whether they will let a short term pullback happen then pounce when the volume dries up, or buy like fiends to try and contain it. I am not sure to be honest, I wish I was. I think we all know the stock rally has been completely created by the FED so deteriorating fundamentals are not necessarily a killer of the rally. If fundamentals mattered the rally would have never happened in the first place. I don't think traditional fundamentals matter.
We were long Bonds in the Bond System from Friday so we got a nice windfall on that trade. By the time I could even click the mouse after making sure we had a profitable opening, prices had already moved up quite a bit from the opening. We are going to be reporting the fills from the Robbins auto trade system for the official results of the system going forward. I trade those signals in 4 accounts and I think the worst fill I got was 142'15 in any of them.
I think the way to play the ES is to wait for a bounce now while maintaining a stop below the last significant pivot for longer term positions in case we don't bounce and we plunge. So far we have not broken anything significant. However, we do know based on recent comments by the President that he sees no problems with our debt or any reason to cut spending. As a result unless he changes his stance what we are seeing in Cyprus is coming here before his second term ends. I wish I knew exactly when but I don't.
I do think it makes sense to get some money into a spot where it is safe and that would mean out of banks. There is no reason to completely panic, that never does anyone any good. However, what we are seeing here is what I think so many people fear. In a severe crisis all bets are going to be off and your money is not going to be safe in a bank. Having it in T Bills is probably the safest bet. The problem there is whether or not they would be liquid in a severe crisis. I do not know.
For now what we have is a local problem that might ignite an awareness that this could be a bigger problem in other places. There have been historic times of bank runs and they have not been pleasant. I suggest that people create some type of big picture plan, put it in place and then go about your life. You can't go hide in a cave for the rest of your life. Maybe set aside in some secret place, a few months of bills in cash then call it a day. I have always thought this was prudent even before any of this crap over the last several years, so I have not changed my mind about that.
I don't think Gold is the answer but I would be willing to bet we are about to be told that it is once again. The key with Monday is going to be volume, if it is heavy the FED won't be able to stop the initial decline. If it stays light they will probably be able to contain it pretty well. Must see TV tomorrow.
For those who read the Newsletter, you know how to interpret the ADX that is displayed above.