No Clouseau This Time

Last years runup was one of the all timers with the head of the CFTC inspector Clouseau "not understanding" how it could happen. That idiot of course was involved in classifying speculative funds as commercials allowing them to run the price. Thank God he demanded an investigation!

Here is how Texas Tee looks on a weekly chart. Notice how incredibly closely correlated to the Dow average this market is. This market has no historical basis for this, and in fact I did a comprehensive study on that relationship when I used to write my newsletter. I did it because I was so tired of hearing CNBC, one person in particular, explain equity swings based on the price of Crude Oil. Of course the study found absolutely no basis for this claim whatsoever. He is one of the hosts not a guest commentator, in all fairness to the guests.

Notice how well this market has followed the seasonal pattern, making the drop on schedule, then the low on schedule. We are due for a decline based on seasonals now. Also notice how well the commercials have done in picking buys on dips for us here since the low. All three red arrows spotted good buying opportunities for us when we were able to see they went long.

At this point this markets fate rests in the hands of the stock market. It has been lagging a little, but still almost moves up and down tick for tick with the Dow. I have been calling for a decline in stocks, so by association that would mean a decline here. I do believe that is the greater probability, but really do not see a trade opportunity here right now. If anything, the daily has buy signals right here. I am not taking them due to the seasonal down bias.

It is unclear here whether stocks will ramp up again, the recent high that was made if it were to get taken out decisively could launch the rock and roll show again, and this will likely get pulled along. If stocks do decline, this will likely go down. Big picture, I think Crude is going way lower than these prices before it is all said and done, but there is nothing to justify a trade right now.

BONDAGE!!



Here we have the 30 yr T Bonds weekly chart. We are nearing one of the better seasonal dates to be long this market as indicated by the arrow furthest to the right on the chart. Our friends the commercials have not really been of much help recently in helping us call the swings ( red line in third graph ). What has been of good value is one of my custom versions of COT study. Notice with the 3 Gold lines how well these sharp changes forecast the next move well. Unfortunately, there is not a good indication right now via this indicator.



We have had some commercial selling net over the recent weeks and months, so that does support a potential sell here, but the daily shows up short term buy signals right here on this dip into the seasonal period. In this unique period where so many markets are inextricably linked in ways they have not historically been, it is imperative that we view things in relation to these other markets.



So in summary here is what I see. A panic rush to the metals, gold specifically by small investors, the big players selling with both hands there. A stock market in a very strong uptrend and even though I have been calling for a decline, no meaningful one has happened yet. We have the dollar getting pummeled. Energy prices relatively weak.



In deciphering this it seems we have somewhat of a decoupling of the energy tie to stock prices, which never made any sense to begin with, a good thing. Metals tied at the hip to stock prices, with the currencies right there with them, of course the dollar being there in an inverse fashion. Bonds are decoupling a little also, as they are stronger than what I would have thought considering how strong stocks have been.



Net net, where the stock market goes is going to determine the fate of many of these other markets so in my personal trading any position in any of these I treat as the same as the others. If short Silver for example, that is basically the same as shorting the stock market. Being long bonds is also like being short stocks. Long currencies would be equivalent to long stocks. As a result, take this into account when determining position sizes in trades. If you were to be long the Euro, Gold and the SP 500 and short Bonds at the same time, that really represents one position times 4 in risk. All those trades will likely work or fail together, so you would need to take 1/4 of the risk in each one to have the same overall risk.



This has rarely been the case in the past, but it has always been the case that you need to know what the correlated markets are and adjust your risk accordingly.



I am trying to get long bonds and short currencies today, and long the dollar. I always buy above the market and sell below it, so I need moves in the desired direction before entering. So far none of the orders are filled so we will see what transpires. I have adjusted the risk as per what I just explained. I hope to get a more clear read on the Bond market overall soon but in the abscence of a clear sell on the weekly, I am deferring the the seasonal buy zone for long entries.

Am I just a Golden Fool or is this a top?





Gold is exploding this morning continuing its upward trend. This does not change the fact that it is setup for a decline. Being setup for a decline is different from a sell at the market call. We will have to see when the COT report comes out if this is the small specs again, but I suspect that it is. As you can see from the seasonal, mid month is about when the seasonal high kicks in, so this is par for the course here so far.





I have labeled a 5 point megaphone pattern that is in effect now which is a trap pattern I have written about previously that has been around for a long time. I did not create it, just learned of it. What is required for a short entry is a close below the prior bars low, so if that were to occur tomorrow, it would be a sell by this patterns rules.





Silver is a much weaker market by price pattern, and why I did the short trade I posted there this past month that worked out so well. That is also where I will be going to short this when I take another swing at it.





There is one possibility I can see for this market to really take off here and I will state that now. Rarely but occasionally, commercials ramp up the hedging they do like they are in this market by building a huge short position. They try and contain price will all their might. However, at some point they wind up losing more in this hedge than they can afford, so they capitulate, and give in. When this happens they go in and buy covering all of their shorts which causes a monster spike upward, that is quickly reversed. This is kind of like a rocket booster firing, it creates huge momentum for a burst, then fizzles out and a roll over of epic proportions happens. This is what occured in Natural Gas last year. It is very rare, but has happened a few times over the years so something that could happen here.





This is why it is very important to have entry and exit techniques that are sound. Just because we have this wonderfully setup market, it does not mean you just go out and short it, there must be some shorter term patterns to support the entry. Fundamentals are hard to time, you just have to watch them and be aware of them. The Gold bugs have completely different logic for their bullish view than this, it is not based on commercial positions but more on a gloom and doom economic view. They could be right, I am just a dumb trader.



If you think about it, so far my call for this market to top has been wrong, although I have said that this is a zone, not given an exact day for a top. However, I have made quite a bit of money on the short side in Silver over the last few weeks, while the market has basically gone sideways. This is what trading is all about.

"It's Money that Matters"



One of my favorite songs by Randy Newman, also the topic of the day, the US Dollar.



Here is a very busy chart, so let me dig into what all of this is. First of all the chart is that of the weekly dollar index, with the Black Line overlayed which is the closing price of the DJIA. I have green lines marking the very tight inverse relationship that has developed between these two markets. As you can see, they are trading in very tight correlation. Which is driving which is the subject of alot of debate and as per usual, I have a different view than most on this.



First of all, this inverse relationship is something that is not typical historically between these two markets. There has not really been a consistent relationship of cause and effect between these two markets. It is my feeling that the dog is the Dow and it is wagging the tail ( Dollar ). When I watch these markets next to each other, it is the DOW that moves first, which is then followed by an opposite move in the dollar index. I have never seen it be the Dollar first followed by a stock reaction, not one single time even on an intraday chart.

It is my belief that the reason this relationship currently exists is that really the only piece of good news in the world economically has been the stock market rally. When stocks are rallying everyone just generally feels a bit more optimistic. Individuals see their decimated retirement accounts increasing, and they become a bit more optimistic about the future. It allows a little more wiggle room for many bad things too happen.



One of the things the PPT has done over the last 10 years is to "arrange" for rallies in certain places that allow people to make some money while other things crumble around them. The Tech boom, the RE bubble, stock rallies etc. While inflating certain things artificially and doing this on a rotating basis, it has basically built the house of cards that fell last year.



Now we find ourselves in a quandry that the ammunition to inflate something else right now is being found in things that are obviously going to cause larger economic problems in the future. So, in the midst of all of this, a relationship between the dollar and stocks has developed that is more a sign of the times than really based in economic fundamentals. This could decouple at any time due to this, but it has persisted for awhile. Enter the PPT. They know that inflation risk is potentially out there yet we are in a deflationary spiral, so that risk for the moment is nominal at best. They can stimulate all they want without worrying about this. They have engineered this stock market rally and kept it up for awhile now which in turn has kept the dollar weak. However, if we do get a significant stock market decline, assuming this relationship stays intact, we are going to get a big dollar rally.



We are at the time of the year where seasonal peaks in many currencies have tended to occur, which is another supporting element for a dollar increase. The commercials have a fairly heavy long position in the dollar, but their buying which is the red line in the third graph was not able to stop the dollars decline earlier this year. I also look at GOLD as being a market setup for a huge decline as I have written about recently, which would also be bullish for the dollar. I think the stock market is making a significant top right here, again bullish for the dollar. We will know this week whether the stock decline last week is just a retracement, or the beginning of something bigger on the down side.




As a result, even though some direct dollar fundamentals are there for a rally and some are not, I have to lean to the long side of this market for the reasons just reviewed. It is hard to find anyone anywhere who is bullish the dollar other than a few traders who are some of the worlds best. That is the company I want to keep, not that of the armchair economists thinking that the dollar is going to get crushed.

I am a short term trader so I do not always trade in the same direction as the big picture views I have, I take what I see when I see it. I have made some money on the short side of the dollar recently even though I have been looking for a rally. As a result I still could do a short side trade in this market. However, for the big move, I think it will be up not down.



As I always say, I could be wrong and that is what stops are for.

We are headed for a big down opening today after the NFP report. As you can see this chart shows a buy on it, what does that mean? How could that be there when I was so bearish a few days ago, basically Friday?



That buy signal is a short term mechanical timing signal based on the Vix and a few other things, it is not a long term entry. If you look at the bottom of the chart, you will see the oscillator turning down confirming the down momentum we are obviously seeing in price. Bigger picture for a downside move this is what we want to see. However................



The gap down open we are about to get could very easily be reversed for a short term bounce, again the idea I have previously discussed about trapping the most people. I will be taking short term profits in some of the short positions I put on the other day on this open. This does not mean I am bullish, it means it is time to ring the register a bit on a big trade win. I will not be taking this buy signal and going long.



I was listening to one kid on CNBC this am after the number was released, who was essentially being consdescending to Bill Gross about his future outlook, when Bill Gross has been dead on correct with what he has done in recent months is so typical. I do not know why people can't set their ego's aside and just believe what they see. I know personally that when my ego gets in the way in trading, I lose money virtually every time. Who the hell is he but another liberal on the spin band wagon? The report was not good, any moron can see that. I would like to see his account statements to see how much money he makes or likely loses in trading with his profound insights that make him superior to Gross. Better yet he is probably an economist who does not even do any investing at all, and is wrong most of the time and it does not matter.



Gross has been right, why not give him his kudos and respect his opinion, even if you disagree. After all he has made billions from being right over time.

When I mentioned yesterday that I went short the SP 500 here is the trade I did. Short entry was 1053.75 and exit was 1043.

Why in the world did I exit so fast? Trading is a thinking man's game and you have to react to what happens. Yesterday was quarterly end, so my logic was that when we got the quick sell program move down, the institutions would do everything they could to rally the market to preserve what was a great qtr for them. They did not want a 400 spot layed on them in the Dow.

I got a bit lucky on the exit, it was somewhat of a guess. I did not expect to see it move down that sharply and had intended to hold this trade when I entered. However, when that sell program just crushed the price that quickly, I "knew" a reaction of some type was likely.

I did re-enter a short position in the SH when the SP 500 bounced back up to 1058 toward the end of the day, which is a position I plan on holding for a bit.

Sometimes you have to take what the market gives you regardless of what your plans were entering into something.

DON'T MISS MY BIG PICTURE COMMENTARY AT THE END OF THIS POST

Here are the results of the Silver trade I suggested the other day, how I did it. We are now having a bounce up today, which should setup another short entry any day now, perhaps tomorrow.



My entry was right where I indicated it should be at 16.82 below the low of that day on the chart I posted the day before it. I work with exit targets, so when we got down close to it and started to bounce without my number being hit, I went to the market to take profits. It wound up right at 4K per contract as I have indicated on the chart.



This is a perfect example of a fundamentally setup market combined with a valid short term entry and exit. It is the correct way to trade in my view, and I have tried just about every approach that has ever been thought up or written about over the years.



One big picture thought for the time at hand. The markets always have a way of trapping the most people looking the wrong way at the wrong time. This is not necessarily true of just regular every day activity, but more so at critical junctures.

It is my opinion now that the move that would trap the most people looking the wrong way is a huge dollar rally and huge stock decline, accompanied by a big rally in bonds and drop in Gold. Of course they are all linked so if any one of them happens so will the others. The danger now is that I don't feel from just the general vibe of things, that very many people now are worried about a stock market drop anymore.



The other anecdotal evidence, is the ads in the paper to buy your gold items for cash, urgently. That is akin to a front page wall street journal article about how you can't lose buying real estate for an investment in 2005. Certain things just jump out at you as very odd and signs of a top. This for me is one of them, especially when I combine it with the fundamental setup at hand for Gold. We also do have that sell signal from Friday in stocks based on commercial selling in the indexes. There is also a lunar/astological cycle in play here. I am far from an expert in this area, but I cannot dispute how accurate some of these darn things have been historically. Larry Pesavento who is one of the kings of this approach stated on a radio show I heard the other day that he thought Monday was the high based on this.



I would not usually pay attention to that, but when it comes at a time when all the other things I watch are in place, I think we got some trouble here. Time to exit longs or be short depending on how aggressive you are. I shorted the SP futures this am.

Just in case anyone is not sure what to do here is the summary

SELL!

House keeping first:

1) I hope anyone who is a short term trader took that Silver trade entry from a few days ago.
2) The final numbers from the COT report do support the Friday post with one exception, the sentiment was not as bullish. However, the sharp spike down in the Commercials position is confirmed, hence this sell setup is in place.

Here is a market that seems setup to fall, the Australian Dollar.

Notice in the graph with the red line the huge commercial selling we are getting and have been for the last few months. Combine this with what is now a very heavy long position by the large specs, the black line in the same graph. Notice how they are now at the same amount of longs as they were when the high was made last year and how much lower the price is. Also, the commercials are at the same level of shorts that they were at that same peak.

Neither of these positions are at historical high or low levels yet so it is possible more room to run could be at hand. It is typical for comms to fade trends as they are hedgers by nature. As a result, you can not just go out and sell the minute you see something like this. Had you done that a couple of month back you would have been clobberred.

What this does tell you is too look for entry patterns now that support this fundamental setup. It certainly would be better if we had this picture without as large of a rally as we have had, but you can't always have everything perfect. In face my experience has been when everything is perfect, I lose money on the trades!

Here we have a picture of our beautiful government sponsored stock market rally. The nice uptrend is apparent. As anyone who reads here knows, I have been wrong recently about the selling opportunity that I thought was here.





The last commentary on this, I had exited my short for a small loss recognizing we were heading higher. We have gone higher since that time as I thought we would. However, we now once again have some interesting things developing. The Blue line on the top chart is the price of the 30 yr bonds. You can see from the olive lines on the top chart that the bond market had been rallying sharply prior to the lows being made. This is a known bullish pattern, and it worked, the market rallied strongly out of those lows. That was one reason of many that I posted late Feb that I thought a rally was coming.





Now we have the opposite situation, bonds declining with stocks rallying, a known bearish pattern. Timing this is another matter, this is a big picture fundamental situation that can take weeks to reverse the price direction as it did at the lows. It is just something to be generally aware of as a backdrop in your analysis.





In the sub graphs, you see the red arrows. These final weekly positions are not in stone yet because the COT report has not been released. These are projections, so they could change. If they were to stay here, we have sentiment back in the bullish camp( bearish ) and my hybrid COT index in the bearish camp ( bearish ). There is also a technical indicator at the bottom that is too complex to explain here, but that is a sell pattern in it.





So, we have a fundamental bearish interest rate situation, with three shorter term bearish indications. As a result, once again I am looking for sell entries. This is not a sell at the market situation, it is a now look for whatever patterns you use to get in and out of things with, and take the sells not the buys.

Here we have a potential sell signal in Silver. I wrote the other day about Gold being a prime setup for a decline. Silver and Gold do trade together, and this market appears to be a tad weaker than Gold, so that is where I am looking to get short.

If yesterdays low were to go today, we would have a valid short entry, indicated on the chart. This may look like a basic 1-2-3 pattern, and I suppose it is technically. However, with a 1 -2 - 3 you really want the first leg to break a trend line and this has not done that.

This market is setup fundamentally, seasonally, and now we have a chart pattern. As a result this is a trade that has to be done win, lose or draw. We never know from trade to trade which ones will turn out to be the gems and which will be coal. I spend alot of my waking hours trying to pre-determine this to no avail.

As to the Gold Bugs that I have argued with recently, there is no way of knowing if this will just be a trade or a major decline. However, the fundamentals say a large decline. Time will tell. I still maintain that if you are someone who has had the foresight to have bought Gold or Silver in bullion or coins, you have had a tremendous run.

Don't get greedy

IS THIS A GOLDEN MOMENT?

To the left is a cash Gold weekly chart. You will have to click on it to enlarge it, there is alot going on here. Below price the first pane is the commercials positions, then next below that is the small speculators gross position in number of contracts held.

There has been an overwheliming media blitz on this market and why it should go to 1500, 2500, I even heard 10,000 from Joe Battalia( he was quoting someone else ). The question is, is this the time to get heavily invested in GOLD? Who knows maybe it will reach these lofty numbers.

If you look at who has been buying this market on this recent runup, it is Small Speculators in record numbers, basically me and you. While at the same time, the Commercials ( the large players with the most money ) have been selling it. It is not shown here, but the Commercials have their largest short position ever in this market right now. They clearly are in a bearish mode. Notice what has happened each time historically when this combination has been in place, where the Speculators net long position was at the level it is now ( horizontal line in third pane ), and the commercials have been heavy sellers. The red arrows mark these instances. We have had substantial declines in this market when this combination has been present.

Anecdotally, I literally do not know of a single person other than me that thinks this is a fantastic shorting opportunity. Maybe I am the village idiot, but I am a trader, and this is a very good setup for a decline. On a shorter term basis, a few things I look at shorter term are very close to lining up for a short entry and it could happen this week. Whether or not the commercials will be big buyers on a decline, will determine whether or not I am bullish on any decline.

I do not think with this combination in place, it is a good time for someone who is contemplating a long term investment here, to commit money to this. It is clearly a time for a trader to look for a short entry. Seasonally we have also tended to decline, make a top in October, so we are close there as well.

I have commented that this is now a bubble, now you can see why I think this graphically. The small money is driving this last move not the big.

Well after reviewing just on a preliminary basis and as well as reading one of the COT gurus takes on the new COT report, my preliminary conclusion is that the game is being rigged further. They are keeping some things the same but the added items are the ones that concern me.

If you think about the 2008 Crude runup and how that was perpetuated by the CFTC and their mis-classifying CIT funds as commercials, basically allowing speculators unlimited position sizes. Then combine that with that idiot or liar depending on how you look at it, Gensler who feigned outrage and vowed action. You have to conclude that this whole thing is just one rigged outcome.

It appears to me now that in the new report, the PPT may now be allowed hedgers position sizes and also have it be obscured to the point where we will not know, it makes me think that any meaningful decline could be off the board for quite some time. This is going to allow them to basically permanently rig the uptrend if I am right about this. I still need to read the other gurus review of this to see if he has different insights, but that is my preliminary take on this.

In the face of a record number of lies being told by the new administration, is the greatest one of all, the pledge for more transparency. This could not be more opposite of that. If I was not actually living through this period in politics I would simply never have believed this type of thing could occur in the US.

It appears to me that what has been decided behind closed doors is that they government is going to take over the stock market and make sure it does not go down. The reality of it is, this benefits alot of people but what I think will happen is that it will stay flat. In most socialist historical examples, things just kind of stay the same, the big swings are taken out. So, they are taking out the downside, but also likely the upside.

I will come back with more once I have reviewed this further.

Here we once again have a megaphone pattern on the daily E mini SP 500 chart. You can see the night session so far on Sunday is very weak. The trigger for this pattern is a close below the prior days low, so we could see it on Monday. The PPT will be lurking and will not like this action when they wake up in the morning if it stays here, so we will have to see if they will allow this. When the volume is this light they can push the market around very easily.

I will not play this entry as my main pattern I look for is not there and there is not enough confirmation on this trade for me. However, we know a correction is coming at some point and now that is likely to be at a time nobody expects. This setup for tommorrow probably qualifies for that. They have now made another new high so many may feel very comfortable we are off and running again.

This can potentially be a classic trap pattern where a new high gets made then is immediately reversed. These can be very powerful moves in the opposite direction when they occur.

Foiled again

Referring back to my last two posts on the Stock Market, August 29 then the one following where I said the mood had changed, it is time to admit to being wrong. I pitched my SH short position 2 days ago and took a small loss. As a trader there is a time to admit when you are wrong, and quickly head to the sidelines. This is how you survive.

The last minute rally before the holiday on the futures buy program by what appeared to be the PPT was my first alarm. I actually added at the close that day in case it was not the PPT. The very next trading day it was proven to be them by the price action. At this point also if you look at the chart, Sentiment has gotten pretty negative, a bullish sign. Also, my hybrid indicator of the COT report has moved back into bullish mode. Also, we have had yet another sell indication, the red vertical line fail.

When you get failed sell signals it is simply telling us not to sell, kind of obvious right? In all seriousness, when a series of sell signals fail, that is a buy signal in my view. I am still of the view that this market is being almost completely held up by the US government right now, which makes me fearful of a downside air pocket at any time. Since it is being done for political reasons surrounding the health care debate, they could let it drop any time to make a point if the bill appears to be going down.

This is overall as a result, just a treacherous environment to trade in, one of the most difficult I have ever seen. I will still be looking to see if another sell signal shows up, but will be very demanding of it at this point. We are almost at the point where the last trade trigger I use is going to turn up, which will eliminate sells entirely for awhile. It has not done so yet but will in a few days if we do not get a decline.

Net Net, I am now flat, and if yesterdays low gets taken today I will likely re-enter a short side position. Barring that is it time to be on the sidelines here.

Here is my nemesis market for this year, I have been wrong one time after another here. Although I am going to blame one of my mentors for this who has been bullish all year and just been way off.

Ultimately it falls upon us as individuals to be responsible for what we do, although the trend in society is certainly to blame everyone else and not yourself. I am a throw back, so I admit to being just awful here and I should have seen my errors on my own before now.

How did I blow this? Mostly as you can see there was heavy commercial buying all the way down here during this cliff dive. I know that in general that is bullish, but also that commercials hedge quite a bit, so when you see it in a strong downtrend, it does not mean nearly as much as when it is in an uptrend. This is where my error was made. Once the pivots were taken out, the uptrend was over and I should have been looking for commercial selling for shorts.

As you can see, we have gotten that in the last two weeks, and bingo a big decline. If the dollar does not stabilize here, the whole deflation scenario goes out the window. Just by watching the markets as a whole we do not quite have the plethora of uptrends in commodities to make me overly worried yet about inflation, but it could be a matter of time.

On a side note, if anyone who reads this has any political influence, I would love to see them stir up something on the PPT. What they are doing now is just so outrageous that they are ruining the markets. Markets need to be allowed to function normally, just forcing them in only one direction to support an Intern who gives a speech every day on something is just beyond anything I ever thought I would see. It is also an abuse of the PPT's original intention when it was formed. They were supposed to support huge plunges, not further political agendas on a daily basis.

So what if the market happens to go down on a day health care is discussed. That does not mean anything. They need to quit trying to manipulate every thought people have for gods sake. Maybe people don't like certain ideas because they are lousy, and those ideas should be modified. Have we entered a phase where a group of political insiders are going to tell us every thought we should have?

Golden Opportunity

Rarely does a sell setup get better than this one. We had that explosive run up in Gold this past week and as you can see, the buyers were the dumb money not the smart money.

As you can see from this chart, the commercials have been sellers of this market during this run upward. We are now once again in the 1000 resistance range, this being the fifth trip up here. From a technical standpoint, normally the 4th push breaks through and generates an explosive move, in this case it did not.

The key thing to note here is that the Large Traders who are trend accelerators have reached their maximum long position and have not been able to push this outside of the range it has been in. When you combine this with commercial selling, it leaves the small speculators with the burden of maintaining the buying on a level that will support this market.

As we all know anything can happen in the markets, but this is a very low risk opportunity for a potential huge trade on the downside. If you are a gold bug, I would not suggest buying this market at this juncture. If you are a two way trader, look for sell signals. Even if we get a breakout, it is hard to see how price could be maintained at that level with the dynamics I just described.

Also, as you can see sentiment has sky rocketed and rarely do rallies come from this type of situation.

Well it appears the mood of things has changed somewhat for the time being. This is an intraday chart of the SP 500 futures, and as you can see now all the rallies are being sold as opposed to all the dips being bought.



Todays comedy from the spin masters was that it was good news that weekly unemployment claims were only 560k instead of the 570k that was anticipated! Are you serious? How in the world do people keep their jobs lying like this. I am not sure if it is just me getting cynical with age or if the media has just completely lost all sense of integrity.



However, the grand act of manipulation is ahead of us tommorrow when the NFP report is released. They will doctor the current number but look for a revision on the last months doctored number to accompany it. In other words, they falsify the data or play with it to show a certain current month number then revise the previous months fake number to it's real number. They hope for that to be a behind the scenes number that gets overlooked with everyone focusing on the current headline number.



This is not a new trick from Barry's group, it has been going on for decades. However, they do seem to be ramping up the doctoring of things.



Look for a sharp spike up that gets reversed on that report tommorrow. I think we are in a sell the rally mode here for a bit.

HOT FOR TEACHER?





Great song by Van Halen, and also my mood. I guess I need someone to teach me what to do.





We have several conflicting signals at this point. To the left is the Pit contract for the SP 500, shows a very bullish picture except for the seasonals and a synthetic COT Index ( the red line in the top graph under the price ). This synthetic index has been a very good predictor of direction although not perfect. On the other hand the emini SP 500 looks almost the opposite of his picture, with very bullish sentiment and commercial selling. In general the emini has been the better predictor of price movement in the last 2 years, the volume is much heavier there.





What to do?





There is a new technology which allows projecting price movement matching recent activity, and if that is used as the tie breaker, it is showing a flat to slightly upward move for the next couple of months. Historically these maps have been pretty good. Also, there seem to be way too many people now calling for a correction. As the saying goes, what everyone waits for will never happen.





I am of the belief now that what is going to transpire is some type of correction in September, but it will not be a big one, then prices will kind of meander sideways for the balance of the year. I do have a short position on in ETF's the SH as I posted when I entered my first portion. I have added to it as we creeped a little higher. If we do get the downward move at the beginning of September, which I expect, I will exit this position. I no longer believe at this point that there is a large profit opportunity in this trade. It is marginal at best, and a scratch or a little better is probably the best that can be hoped for.





I will monitor all of my tools if a corrrection does occur to see if there is anything taking place that warrants a change of this view. I have watched one sell pattern after another either fail, or in the case of the Megaphone pattern, not get a fill on the orders. Failed sell signals are buy signals.





I have been of the opinion that the dollar would rally just because the crowd that is typically wrong, was very bearish. Even a blind sow finds an acorn, and they appear to have one in their grasp for once there. Of course if a sharp stock move down were to happen, the dollar is going to soar. At the moment that does not appear likely.



Part of trading is admitting when you are wrong and getting out without getting hurt too badly. I think the bulk of the upward move has occurred here but the trend is very strongly up and alot of historically bearish indicators are failing here. As a result, it is just not a good trade setup anymore. If we were to get a downward move then a quick retracement that failed the highs, and it was accompanied by commercial selling, that is what it will take to setup this trade well for a short sale.



I will be there if that happens. Back to my corner and wearing the Dunce cap for blowing this market call. Fortunately my trading was better than my market calls this month.

Friday was certainly an interesting day. It is entirely possible that I am wrong about this top and we are just going to go straight up. There is certainly alot of political engineering going on with this rally as I have discussed previously. HOWEVER.....

We now have a megaphone type pattern which I have written about in the past. I am certainly not the creator of this pattern, but I have used it often since I learned about it 10 years or so ago. Generally it is most significant when it occurs in extended market conditions like we have here. I like it when the legs of it have symmetry like this one. Also, if Fridays move were to be reversed just after making new highs, it would be a classic trap move.

Since the NAZ has a weaker pattern than the SP that is the one to short if a short play is made. Basically a close below Fridays low on Monday triggers this trade. As a short term trader I have to play this trade if it triggers and will probably enter it intraday if we go down. There are also a couple of other things I look at that are saying Monday or Tuesday could be the high, so my feeling on this is that if this is to be a top of any type here be it short term or long term, this needs to come down right now.

Add On Here

Now that we have gotten another push up, I added to my SH short position on todays gap up open above yesterdays highs. I do not know if they can keep pushing this, but these types of opens at times can be traps.

Keep in mind that this is a position trade not a short term in and out type of situation. Ironically some of these moves up are not being driven by the PPT, they basically show up on down days not days where the market is strong from the get go. If you google Plunge Protection Team, there is actually a couple of very good articles on them.

One thing the american public might not be too pleased with is to find out that some of the huge derivative losses in these large banks that got bailout money, were from PPT buy programs during last years wipeout downward. Interesting choice, they helped stabilize your 401k's eventually but also took your tax payers money to pay for doing it. I wonder how a poll would come out on that?

I have orders in to sell below yesterdays lows today in the SP 500, no idea if we get there, and also orders to sell at yesterdays highs, basically a gap fill trade. Also hard to say if that will happen.

Meanwhile back at the ranch, this overnight futures move has brought alot of commodity markets with it and they are setting up nice sell signals for next week. Unleaded Gas, Silver and Copper, and some of the currencies as well.

Lets see today if the gap holds, the intraday trade has been so light lately that it is possible we just move sideways all day from this open, but we will just have to wait and see. In a normal market time, this gap would have a decent probability of being reversed.

Buck You!

This is a market that in all honesty I have been wrong about recently. If you look at the green arrows on the weekly chart of the Dollar Index, they represent buy signals or buy areas based on fundamentals.

Recently many of these have failed, which could be argued is actually a sell signal. In watching the price action of the markets, I have a completely different view than most people, be it right or wrong. When I watch the intraday ticks, I see the dollar reacting to stock prices, not the other way around. Some experts are claiming the dollar is driving everything, I say stocks are, in other words the opposite of that view.

I was recently in a Heating Oil short that wound up being my best trade of the year, just exited it. During the trade it was evident that every time the stock market rallied 50 points, Heating Oil also rallied. There is absolutely no historical relationship between these two markets. However, recently since the economic downturn, really the only ray of light has been the stock market rally. It has carried many markets with it.

In 23 years of trading I have never seen the almost tick for tick relationship between so many commodity markets, and stock prices. It makes absolutely no sense fundamentally. My theory is that some whiz kids at the funds have zeroed in on this recent phenomenon and created mechanical buy and sell programs for all markets based on this relationship. This is an overly optimized trade, which will eventually result in these funds getting clocked.

I have been guilty of over optimizing trading systems, so I speak from experience here. Getting back to the subject here, if I am right about this stock market top, it is likely the dollar will get a big lift off here as it seems to be trading almost directly opposite tick for tick, the DOW. It also appears that many currencies are topping here, so that makes for more reason to believe we have a dollar low.

However, my favorite reason for this call is that every wize guy in the world thinks the dollar is going to crash, and I love being opposite the herd even if at times I am wrong.

Looking at the arrows you can see the commercials have recently been heavy buyers, and sentiment was recently very low, the small fries with sentiment graph. Also, Valuation vs Gold was very low. These are all reasons to look for a rally not a decline.

GOLD BUGS - I wish I could call Orkin on them

I heard on a popular radio show recently "once Gold gets to 955 it will go right to 1000." Actually once it hit that number it went right to 900. So just to define that, with commissions and transaction fees that are charged, if you bought at 955 for that free ride to 1000, and paid the close to 40% added fees to get the coins your adjusted basis is 1337. When the price went immediately down to 900 you had a brilliant loss of 46% on your "investment." This took place in about 4 weeks, at least the stock market took a year to take half your money.

I guess they have the right to decieve you, it is after all the american way. Figure out how to take someone else's money in a dishonest way. Ironically these people cite the same experts at the big brokerage firms and their expertise in making these calls. These are the same experts who did not foresee the housing or stock market crashes, yet they are now to be relied upon? A free information packet? If I hear that again I may just start shooting. They offer something free that will lead you to lose 45% in two weeks!

As you can see from the chart at the 3 points marked, every time the commercials have gone into the sell zone we have had declines. This is what really drives market action, not these god damn phonies trying to squeeze commissions out of you. Now we are in that sell zone again, so I would expect we will see another decline. I am looking for a short entry in the metals right now.

LET IT BE, LET IT BE, LET IT BIE oh LET IT BIE.......



This is a great old Beatles song and also a message to the PPT. Why in the world won't you let the market just have a natural correction?



Here is a 5 minute chart showing the PPT at it's finest in the last few minutes of yesterdays market action. Of course I have harped on this repeatedly, and here is the real reason why I don't like this. This type of action is going to cause a V top and a huge downmove when at some point a fund liquidation area gets reached, and even their volume will not be able to stop it. I think had they just let a natural corrective move happen, this trend could have really had some additional legs.



It still could have, but if you go back in history and look at times when the government has tried to artificially control prices on things, eventually market forces take over and big moves in the unintended direction occur. It would be normal and healthy to let the market correct some here, but just artificially improving closing levels to stop it is just postponing the inevitable, and I think making it worse.



All that aside, this may allow for legging into more of a short position for me up here which will be nice. I was kicking myself mid day yesterday having not put my full position on, thinking I might have missed the opportunity. They really fooled me yesterday, I told many of my colleagues that I did not think the PPT was going to show yesterday.

As Howard Stern's father used to say to him when he was young, "Don't be stupid you moron!" I found myself with that thought at yesterday's close. What an idiot I was to state I thought they would not show up.

The next post will be on the dollar, we might be on the verge of a major rally there.

Time to get short



I rarely do this, post a trade right when I do it, but will take a shot at it today. I just put a position on with the SH etf to short this market on today's opening. I think with all the things I mentioned recently, along with the seasonal, and this tremendous divergence in this oscillator, it is time to look for the decline to begin.



I have no idea if it starts exactly today, but the only thing missing from making this a perfect setup is a heavier commercial short position. However, what has been happening recently is the commercials doing scale down selling and scale up buying. As a result, they are not giving us the advance notice they used to.



The negative in this trade of course is the PPT along with several funds that have every interest in keeping this up for as long as possible. The PPT for political reasons, and the funds just to keep their bonuses alive. However, at some point natural market forces are going to push this down. The public is just way too bullish right now as well as the advisors which is even more meaningful.



Valuations are very high also along with some trend measures reaching historical levels. You did read that right, on some levels this could be argued to be the greatest rally in history. One trend indicator I use has only reached this level one time ever, so by that measure this could be argued to be the biggest or tied for it, rally of all time. Keep in mind we have moved 50% or so in just a few months.



When all of these things get put together, it tells me this is the time to not only be out, but to be short. There are those last hour buy programs that have shown up every day like clockwork, and there is no reason to believe that will not continue. It might be the PPT, and most of the time it is, but it is also institutions as well. No matter, this trade is a hold not a short term play.

The challenge with this is going to be once the correction begins, how to guage if it is a pullback or a big picture trend reversal. I will tackle that when it happens. If we continue to creep up I am going to scale in more to this trade.

Here is a chart for those who doubt the PPT exists. This is the last thing of this nature I will post here. After this for those who still feel it is not true, just go elsewhere. I am only going so far to talk about this. With the communist regime we have now, there is no doubt they will come after me if I push this too far.



What I have here is a chart of the SP 500 weekly and below the position size of the large traders from the COT report. Large traders are fund managers and as a result are momentum traders. The typical pattern is for them to be heavy long at peaks and heavily short at lows. They typically buy at 20 day highs and sell at 20 day lows or thereabouts. They then pyramid positions with profits adding more longs as prices rise with the profits they have made, etc.. This is due to how they invest their money. However, what you notice on this chart time and time again, is actually heavy long positions on big pushes down. Since we know that large funds liquidate on these moves that leaves only one group left that can afford to lose this type of money to try and stop a move, the US Government.



Any fund would have been wiped out by riding a move of this size down, and none of them were in this market. Notice also how the positions lighten on upmoves, again the opposite of what fund managers do. This tells you that it is mission accomplished when the bounces occur and time to get out. It also tells you that since the overall size of the position in this category is going in this direction, the party doing this also has more money than anyone else in the game so they can overcome the total of what all the other players in this category are doing just by themselves.



This mystery component in the Large Trader category, acts completely the opposite of every else in the category. They also apparently have unlimited capital. They are not allowed to be classified as hedgers and get into the commercials category, so who could this possibly be?



This group has unlimited capital, and buys when prices go down and exits when they go up a little but still at lower prices than where they entered, taking tremendous losses time and time again.



There really is no mystery folks, it is the PPT. I do not see why anyone would be surprised by this with all the political nonsense that goes on every day. I really do not think this is anything to be concerned about in the least. Just get used to anticipating where they will show up and profit from it. They showed up right on cue last week right after I posted that chart. The argument is always that intervention just delays the inevitable, maybe so, but it makes the rides down a little smoother and I do not believe there is anything wrong with that.

The other interventions that are going on right now are far more disconcerting to me than this is.

Crunch Time

Here is a 5 min intraday chart setting up a prime PPT appearance opportunity. We know they are doing everything they can to hold this up until they get all the socialist programs passed if at all possible. There are several reasons why at the very least a correction would have under normal circumstances, already happened.

Interestingly enough, I do have a potential short term sell signal finally today if yesterdays low gets taken out. This chart shows us basically two ticks away from doing so. This time zone of 11:35 as I type this is prime time for these guys. Let's see what they do.

It has been easy for them to support this due to the light volume in that they have not had to commit alot of money in their buy programs to accomplish these end of the day lifts they have been performing. It more or less is proof that they are the buyers. However, at some point I think they are going to let one of these sell attempts through then try and support it after it drops a little.

They are under the spotlight right here so let's see what they do!

ARE WE HEADING FOR TROUBLE?

I know these charts are hard to see with all the lines on them. Most of you won't know what all the lines are anyway. Just focus on where the two red arrows are and the olive green line heading down in the second graph.

The first red arrow indicates an extreme overvalued reading with stocks vs bonds. Big declines have occurred in the past when this condition has been present.

Second, the red arrow in the third graph indicates an overly bullish reading between small traders and advisors, also a bearish condition.

Third, the olive line in the second graph shows commercial selling beginning to come into the market place. Also a bearish sign when in a downtrend.

The short term trend is still up, but I am looking every day for my short term indicators to give me a sell signal. It will be all in on the short side when one shows up, and I am hoping for that this week. I am looking for a sharp decline here to start any day now.

ES Weekly Chart

Here is a chart of the E Mini SP 500 Index. A couple of posts ago I displayed a 5 point Megaphone type of pattern which is a reversal pattern. It required a close below the prior days low for entry on the short side. This has not happened yet. It does appear to be smooth sailing here as the bottom graph shows the Commercials occupying a comfortable long position and the trend being up.

One of my mentors Larry Williams has called for a top to be made here in the next couple of weeks. His market turn calls are beyond incredible so I have to take a look to see what could support that. There are two things that jump out here as being supportive of a decline. First, the middle graph shows stocks valued vs bonds, and it shows stocks extremely over valued. Second, the bottom graph shows in Green a sentiment measure, which is reading a very bullish number. Both of these things generally lead to declines in the market. However, that does not mean you just run out and sell when you see these readings.

What might be the best thing to look at to time this is the ADX indicator. It is a measure of trend, and generally when it gets to a very extreme level it indicates the end of a trend. It is approaching that level but is not there yet. Also, the Vix is indicating a turn is imminent.

When all of these things are put together, it tells me we have to look for a decline to begin within the next two weeks. It is frustrating sometimes not getting the highs and lows right all the time. This is impossible and a fruitless excercise. All we can do is put the odds in our favor and make the trades on the side of the probabilities. There is more market manipulation than at any time in history by the PPT so that is making short side opportunities harder to time. We just have to accept this for what it is because it is not going away any time soon.

Can I frame this?

This move yesterday late by the PPT was an all time classic. They do not want this rally to stop until they get all their spending back doored behind the american public. The sell signal that is out there now could be a nasty one and they know it. I posted that pattern yesterday showing one possible way of playing it. However, a false breakout to new highs that reverses is a well known pattern in all circles. When we combine that with the economic reports which for the most part are quite dismal other than the ones they are manipulating, and we have a potential for a nice move down if it were to get started.

Will it happen, who knows. What is clear though on a day like yesterday where alot of markets were teetering on breaking, was the end of the day save by the PPT buying futures to stop it. It is really difficult to predict when they will show up, but generally it is during periods where there are big picture reasons why a large down move would not be good politically.

Keep in mind as much as I think Barry the Intern is the worst thing that has ever happened to the world, this is not exclusive to him. The PPT has been operating for a while prior to his arrival.

Just sit back and observe the beauty of it on a day like yesterday this 5 min chart of the SP 500 should be framed.

Here is a pattern taught by Kevin Haggerty although he stole it from someone else and gave it his own name. He calls it the RST, but it is basically a megaphone pattern. Just to keep myself out of any trouble, I will not explain the rules other than just to display this here.



It is an expanding pattern of pivot points that resembles a megaphone, and it is a reversal pattern. There is another modified version of this called a Wolfe Wave. I did have that sell signal based on the Vix that showed up a few days ago that so far is terrible. Although it is just designed to identify a zone not a enter at the market when it shows up. However, the best ones do move price within a day or two which that clearly has not done, so it has to be labeled a losing signal.



Generally these megaphone patterns work best when they have symmetry like this has, legs of similar lengths in price and time. Also some oscillator divergence of some sort should accompany it and there is some of that here. It should work pretty quickly on a close below the prior bars low if it is valid. This is the first day it is valid, so look for a close below the low of a previous day for an entry here.



The cycles now are calling for further upward movement for a couple of weeks or so. I have blown the short term buy that I put on down at the low of this swing, exiting way too soon. I have not shorted this move yet fortunately as I use these signals to alert me to look for something not just to blindly jump in. It saves me from getting run over when they are early or wrong.

Mission Accomplished

As you can see from the chart, there is now an exit signal displayed coming into today. As I had stated, this signal was a short term signal that works over a few days period of time. I exited most of my stock trades on the close yesterday with a couple left to exit today at the close.

It does appear a potential short term sell signal will generate at the end of today, but we need a strong close for that to happen. Bigger picture there is a mixed bag here. Some of the indices are showing commercial buying and some are not. It is certainly possible we could have an upmove here. However, the trend remains down overall so I am just looking to sell strength when it shows up into that downward trend.

Keep in mind that there is a general bias to the upside above the 200 day moving average and to the downside below it for individual stocks. As a result try to trade in that direction in general. This is true basically because many fund managers really watch that average so it almost becomes a self fullfilling prophecy for it to work.

The 200 day has no edge in futures trading at all, it is a stock market phenomena.

We have a short term buy signal here as displayed for the Stock Market with the green arrow on todays bar. You can see from just looking at some of these signals that they generally give us a move over the next 2 to 5 days after triggering.



I think this sets up a bounce here that will set up a great sell setup in many markets mid month or so. Bigger picture I think this next down move could be significant but we will just have to see how it sets up after this bounce. This particular signal without getting into too complex of an explanation is based on the VIX.



I do also expect Bonds to decline as this rally occurs, setting up a bigger picture buy in that market. Many of the commodity markets have been absolutely obliterated in the last week, Energies and Grains in particular and Metals. This confirms the resumption of their downtrends, so rallies in all of them are selling opportunities.

After a day like yesterday it is usually important to not get so tied up in one day and to view things in a higher time frame. I know these charts are hard to see detail in, so just focus on the bigger picture. As nice as this rally from the March lows which I did call has been, it is still a rally in a longer term downward trend.





The red arrows indicate a proprietary combination of several things that tell me when to short the market. I also have them for buys but as you can see none of them show up on the chart which speaks loudly just by itself. You can see that on the way down they worked well, were a bit early on the way up. This is typical, they are not designed to pick exact spots, they are alerts to look for entries. We have been flashing these for awhile now, so once we find ourselves in July and in a known seasonal down period, have sell signals in a long term downtrend, that means we need to be looking to short individual stocks and the indices. This is what I have been doing and will continue to do until this picture changes.





If we combine this with what appears to be a top in commodities and currencies, and low in bonds, everything speaks in the same direction, lower prices for stocks. I posted about a month ago that it was time to get out of stocks, and we did rise a bit more from there. That was a general comment and not a day trading comment. It was made based on what is displayed here. It would be better to have the bottom pane more bullish which is actually a bearish signal. Fading sentiment is what we want to do, not go with it. The shift toward the emini's with commercials is underway and that weekly chart shows a more bullish reading with sentiment, which is bearish for stock prices. The preponderence of the evidence suggests down. It is possible that if during this decline the sentiment gets really negative it would support a test of the low and another leg up. That is something I will be watching as we move lower.



Big picture I think 2012 is when the ultimate low will be made and it will represent one of the greatest buying opportunities of all time. Between now and then we will have good swings both ways but I expect the big picture trend to remain down. If things develop in a way to change this view I will post something here to indicate my change in posture.





One of the very interesting developments is the very tight link between stocks and virtually everything else that is traded. You can watch intraday and when the dow rises literally everything on the board rises, and vice versa for declines. I have never seen anything like this and what it tells me is that the only thing that has really improved in the economic picture is that we have had a stock rally. As a result, when that appears to falter, everthing else that has been artificially lifted by it also falters.





Intermarket relationships tend to come and go making it impossible to model a trading approach after them, but I find this particular link very interesting. I just think it foretells of trouble not prosperity. There is really no fundamental reason for this link to be this tight.

What the Buck!

Here is a market that has confounded me this year so far. You can see the green arrows on the screen of the weekly chart of the Dollar Index. These are proprietary combinations of factors that dictate buying a pullback in an uptrend, some have been good, some have not.

There is very good reason to believe that we have another big leg up in this market coming by historical cyclical analysis. However, we are still in a shorter term downtrend. There is alot of jawboning about economic reasons as to why the dollar should decline. There are many that make sense conceptually, however I do not trade off such things. They are way to hard to quantify risk with and often can take years to play out. Also, I am of the belief that we have entered a long term deflation cycle that started last year and should continue for some time, so the inflation skit does not mesh with that view. I think the inflationary things the government is doing will just slow the rate of deflation, which behind closed doors is their real goal.

If we look at this chart we do see the commercials in the second pane green line at the top, being heavy buyers on these dips. This is bullish. In a perfect world my small fries with sentiment would be more bearish. You can see rallies have occurred when the readings on the bottom pane have been low. It might well be that we need to blow out these recent lows to get that sentiment more bearish to form this low, I am not sure. I am looking for buy patterns to get long here and have just not seen any yet.

I said in my last post that I thought the bond market has a ways to run and as you can see it is doing so. Pullbacks are a buy in this market now likely through October. I had stated that we needed a higher low to confirm the trend change and as you can see we have gotten that now, so the trend is up, buy the dips. Do not get tied up in this bullshit from the gold bugs about how interest rates have to sky rocket based on all the money we are printing, blah , blah, blah. I would bet I make more money on one good trade than these clowns do in a year. Although they do charge a 30% commission, so I guess they are not that dumb. They can snooker the public better than most people.

Regardless of any fundamental analysis we might do the price action needs to confirm that or it is all bunk. The trend is up now so until it breaks back down, buy the dips and tune out the noise.

Also most currencies look like they are topping here which means the dollar is likely to have an upleg here which would be consistent with the long term cycles.

After finishing my last post I scrolled and saw than in the first week of June I did mention that long setup in Bonds. Here is the trade I made just exited this morning. I do think that this market has a long ways to run on the upside. This trade was exited simply because it hit a profit target objective and was against the trend.

We still do not have a higher low or retest point yet which would confirm a trend change. All we have so far is a sharp counter-trend move. When you trade aggressively against the trend like this you need to take profits sooner to stay alive. I am looking for a dip now that forms a higher low than the one on this chart, and will look for a buy spot if that happens.

I mentioned in my last post that a minor sell signal showed up for the SP 500 and was worth taking. Displayed over to the left is the result of that trade. I used a smidge of discretion exiting as it technically fell 1 point shy of where my limit order to take profits was, then started to bounce. No time to be greedy when something like that happens, so I just quickly went to the market to exit. It may not look like much on that chart, but that trade made quite a bit of money.

However, the bigger portion of the last post was on the dollar and it's potential long setup. That was also triggerred and the dollar has moved up somewhat, but not as quickly as I thought it would with the stock drop that occurred. There is some international jaw boning about world reserve currency etc.. Maybe that is why the dollar which appeared to be going gangbusters, has stalled. I have no idea, I do not trade on that kind of nonsense anyway. However, it does appear that we have a major top at hand in many commodity markets, probably for the rest of the year. As a result, I expect the dollar to continue to move up overall.

I heard an intersting comment about all the money the government is printing now and how inflationary it is. The comment basically said it is the velocity of the money that causes inflation, not just the supply of it. If it is being horded, it will not be inflationary. I think in general that is what is happening and why we are still in a deflationary environment that should continue for awhile.

I have also been bullish on bonds and made a nice longside trade there that I just exited today. I am not sure if I ever posted anything on bonds here or not, but traded some emails with some readers of this telling them I was bullish. I continue to be and will be hoping for a pullback to enter on the long side again. Also hoping to sell a rally in stocks if we are lucky enough to get it, this could waterfall here.

Well right on cue, a minor sell signal showed up for stocks, and we got a bounce here in the Dollar. I had stated previously that there was not a sell signal in sight for stocks, then all of the sudden it showed up quickly. Is this a really strong sell signal ? No. However, we are in an area where it is worth taking.

This bounce in the dollar is a good enough bounce, when tied into the larger picture cycles and major support, to signal a buy now here if we move back down as indicated by the line on the chart. All this means is that we need to form a higher short term low now, then we can buy a break out above it.



Will it happen? you never know. If for some reason we get a sharp stock decline this could just shoot right up out of here without a pause, but odds favor somewhat of a retest of the low, which will be our buying spot. If the cycle is ready to kick in again, this market could really move up quickly from here. If these lows do not hold, you can probably kiss the dollar goodbye for awhile. This makes it worth a shot on the long side due to the possible big move that could happen, good risk/reward ratio.

Here we have Bonds, a market that is setup to make a low. We have the seasonal low time period at hand, commercial buying, and very negative sentiment.

This does not mean just run out and go long this market, but what it does tell us is that we need to be looking for signs of a trend change to get long here. Seasonals are simply a guideline for us to look for something, they are far from a holy grail for trading. However, this is one of the most consistent seasonal patterns that exists in the futures markets.

There is no question that there is more government manipulation of markets going on now than what we have seen in the past, but there is always this type of thing going on somewhere. One thing we have certainly had proven to us without a shadow of a doubt, is in alot of industries the last honest man has left town quite some time ago. We cannot believe virtually anything that comes out of a CEO or Senators mouth nowadays. Just accept this, it is what it is. This should not preclude us from making money trading.

Here is the battered US Dollar Index. This is a market that I have been wrong about. I have mentioned the long term bullish cycle that kicked in last year and seemed to support price right on almost the exact day it should have to be valid. After that prices did rise nicely for quite awhile. However, we have gotten into quite a steep downtrend here. The commercials have been buying, but not an a super aggressive rate, and not enough to support the price yet.

We are now in a zone where if the long term up cycle is going to be valid, the price needs to be supported somewhere in the area of where we are right now. Since alot of the dollar strength has come from stock market weakness and a flight to quality situation, it is doubtful that this market will find support unless we have a stock market decline.

I have stated in here that we are due for a stock decline, and I still feel that way, however, there are no immediate sell signals apparent. So, until that changes, I do not expect much to change here. There are alot of people who focus on economics who say this move is caused by all of the deficit spending, the fallacy with that is that none of it has been done yet, it has just been approved. Be that as it may, you cannot trade based on large macro-economic views due to how inefficiently those views translate into daily market bias. Even when you are right, timing a view of the next several years into daily activity is impossible.