Dow in 2010 = Dow of 1929?

Adam at Ino.com thinks it could be so.  An interesting video:  Deja Vu All Over Again For the Dow?

It's a succinct video that meshes with one of the two primary NFTRH plans.  Either way, I agree that there is a date with strong support well lower than here.  When we get to that point, it will be time to finalize a decision on NFTRH's  'plan A or plan B'.  But Ino uses the triggered down MACD (very important) and retrace points correlating to the crash of '29 and subsequent recovery.  I will note that time frames are different (Hope '09 extended longer than Hope 1930), but the structure is very similar.

Anyway, and interesting video.  I don't use MarketClub because I tend to use instinct and psychology (for better or worse) as part of my trading.  But I am going to be interested to see if the unbiased Ino system generates a RED arrow down.

Denninger not buying the Chinese threats...

Here goes Karl again, on full overdrive: 

China Flaps its Jaws (Again)

SLV & GLD

Time for the gold-silver ratio to take a rest as hope pulls a comeback.  As such, I got rid of my GLD but am holding onto all of my SLV (both bought last week per NFTRH71) for a trade.  Bet some people never thought they'd see that here on the blog that has seldom given silver much respect.  GLD was replaced by GDXJ and HMY for a little upside pizzaz to go with SLV and several other holdings.

Oh but the big play could be in the short positions, which are modest at the moment.  So I will now ride PM positions, hopefully to targets in the near term but become ever more focused on where to short this pig going forward.  Targets targets everywhere, upside and downside. 

Yes, the markets have become fun again.  Hope '09 was boring.  Of course, they could break down the GSR once again at which point I would have to get my ego in line and reevaluate.  But until then, they are not to be trusted.  Odds overwhelmingly favor this being a suck in of the contrary indicators who sold last week.

Greece... Rah rah it's all okay now!!

Everybody back in the water.  Especially you AAII individual investors, you NAAIM investment managers and you newsletter writers.  Sheesh, you guys backed off your hyper bullish stance all at once, sold and got sidelines unwittingly becoming tools for contrary analysis.  

Now get back in there guys! It's okay now.

Just when I was beginning to doubt myself, the great and powerful Oz sweeps Greece under the rug.  Just like Dubai.  This mess is coming apart at the seams, but first we need to whoop up some misperceptions and get the old greed/fear game going full on.

US Financials - A Sad Picture

This is a chart I originally did as XLF was breaking up from the downtrend line.  This demanded that Fib retrace levels be illustrated to see where hope and greed might abort.  Well, look at this pathetic picture.  The only thing added today is the red box showing some enthusiastic downside volume.  This chart is disgusting.

3 Amigos of Liquidity Stress

No matter how pumpy any short term broad rally might be - and its intention would be to re-instill confidence - the indicators of contraction should drain said confidence soon enough.  If a rally does spark, and that is now a big if, it is ill fated say the 3 Amigos.

HUI Weekly

After doing a 15 min. chart showing critical support for subscribers in an email update yesterday, I thought I would dial out Huey to a longer term perspective by weekly chart.  This is a stripped down version of a chart NFTRH has used for the last several months to define upside targets (check, 475 long since accomplished), downside supports (we currently sit on the first important one at around the EMA 75, with more below, including a 'no brainer' at which I would be a strong buyer).

Not a great looking picture, is this?  There are relief rally targets up above for the eventuality that 'they' sweep Greece and other issues under the rug, plug a mini-denial rally into the grid and shake out some shorts on the broad global markets.  The current plan on precious metals equities is to be a seller at these upside targets, and a buyer at strong 'bottom feeder' supports.

A lot of the risk has been bled out of the PM's since December, but I can't help but think that gold is going to get drawn like a bug to a light to the big picture support at or a hair below 1000.  Gold stocks?  Still roughly correlated as they are to the stock market, I expect more downside before the herd realizes the superior fundamentals in the making.

Let's see what today brings.  But one thing I can be firm on is that volatility and misperception lay ahead in all market areas.  Governments need to fund their ongoing and inflationary bailout operations.  But to do so, they need the lever to pull.  The lever is named Prechter.  The lever named deflation.  The lever that is made of confidence in US treasuries and other global debt paper.

Gold stocks should not - and probably will not - run with the broad markets and commodities once their unique fundamentals are asserted.  But for now, they are unfortunately part of the same construct.

Why is it so important to watch the 'indicators'?

Why is it so critical to watch indicators like leading market ratios, sentiment, the ratio of gold to silver, money supply, etc.?  Well, one look at this nominal SPX chart provides an answer; trying to figure out the nature of a similar downturn to that of last June/July devolves into a mere guessing game if all you go by is straight technicals on the SPX daily chart.

SPX dumped the neckline of a small H&S topping pattern, spent 4 days below it and then said screw this, time for hope and greed to make a triumphant return.  It was right around that point that I began to realize that my projections for the duration of Hope '09 might need to be expanded.  Boy, did hope and denial ever expand... right into this latest break. 

But it is more complex than simply watching indicators.  The gold-silver ratio for example rose strongly in June/July (implying market downside), but broke out of its weekly downtrend line for only one week before falling back.  Current weekly GSR has now completed two full  weeks of breakout from its most recent downtrend line, has constructed a good looking MACD and formed an inverted H&S bottom pattern.

Yes I know, you have to be a total geekoid get-a-lifer to be into this stuff.  Well, if you knew me in real life you would see that I am not very cool and do not display a dynamic personality.  But I am into this shit because - call me weird - I just love to make money or at the least, preserve capital and remain as detached from convention as possible.  It's the secret recipe of succeeding in the financial markets.

Sorry for the self-involved last paragraph but you must understand, you, the blog reader are all I have got (aside from NFTRH subscribers who actually assign a monetary value to my opinions) when it comes to communicating these things.  In real life nobody but nobody wants to hear it.  Now that's weird if you ask me.  Most people want to make and protect money, but when it comes to the necessary work to do so, it's not happening.

Thus ends another technical analysis post that jumps the track.

NFTRH71 Out Now

After the letter is written, proofed and mailed out to subscribers I generally need to take a break from it all.  This morning I went out for a run in the err, brisk New England fresh air.  Head relatively clear, I can then take another look at the letter and write this 'out now' post before heading out to help coach my kid's softball clinic later.

#71 looks at the strong reversals in many markets, discusses the structure of portfolios in alignment with short, intermediate and long term views and seeks to define what the would-be recovery's nature will be.  I have strong feelings in that regard.

Many markets currently remain correlated which, as a precious metals guy, does not make me overly bullish on the intermediate term.  Yet profits were taken on most the NFTRH bear positions while PM positions were increased on Friday.  Hammer candles are showing up all around, and this includes some areas that give me pause, again from a correlation point of view. 

The bottom line is that the trend followers in the newsletter industry, professional money management industry and the AAII (individual investors) quickly came well off their hyper bullish (contrary indicator) stance.  This serves as a platform where markets can rally.  For a while.  But we have definitely exited the tedious phase where every jock on autopilot can make money (or preserve capital).

Full Hubris '10 has likely ended, and now it is time for vigilance.

NFTRH71, out now.

Enjoy the rest of your weekend.

NFTRH 1 Year Ago - Commodities

Long before the absurd rationalizations popped up lately explaining why the copper component of Hope '09 was not a speculative mini-bubble but rather, based on inflationary fundamentals, there was a newsletter writer getting bullish on copper because the downside hysterics were getting out of hand and the chart looked oh so good.  This was despite the protestations of some well respected fundamental analysts.  I got bullish on oil too and I recall some deflationist bashing on SeekingAlpha for my bullish troubles.

This is what makes a market.  Luckily for those of us who wish to simply get it right, there are way more trend followers than real contrary types. 

Okay, self-congratulatory preamble aside, here is an excerpt from NFTRH19, dated February 7, 2009:

Commodities

‘Doctor Copper’… ‘Every bull market has a copper roof’… ‘China is still growing, albeit at a slower pace’… ‘The US infrastructure spending will put upward pressure on industrial commodities’… Have I missed anything?

[Copper chart omitted]

The chart of Copper does indeed look bullish (i bottom feeder).  Again, there is that tell tale rise above important moving averages.  NFTRH remains open to a continued rise in the commodity complex, probably attended by some or all of the stories noted above.  It remains a trade only pending further macroeconomic developments.

Oil remains the asset that I have been proud to be so right on and yet so wrong on for your viewing and entertainment pleasure over the last couple of years.  Perpetually bearish on this most hyped commodity heading into Armageddon ’08 and yet, totally screwing up in both top calling and now bottom calling.  There is a certain comfort in knowing that all is as it should be.

As such, I remain bullish and in bottom calling mode and indeed, the volume on the most popular oil ETF.  USO, may indicate a climax, as it went to fresh lows (27.35) during the day on Friday, rebounded strongly and sagged once again into the close, holding above the previous low of 27.73 from December.  I believe the trouble oil is having getting off the bottom compared to other commodities is related to the levels to which its hype value was played (even today, the Democrats are ramming through ‘green initiatives’ as part of the supposed stimulus) and to which incorrect assumptions have been embedded in the public consciousness.  Peak oil, while potentially valid longer term, became Gospel.

[ USO chart omitted]

The CRB and CCI commodity indices look constructive for a bottom as does the GYX (industrial metals).  Commodities, at the very least, allow for some upside in Hope ’09 as does the MOO Agribusiness ETF.

Below is a chart of Provident Energy Trust (PVX), which was added back to the portfolio after being ejected post ex-dividend.  The reason being the desire for a bit more positive exposure to the economy and the bullish flag noted on the chart below.

Like many stocks and markets, PVX sported bullish divergence into the December lows.  PVX then got caught up with Santa and went too far too quickly, the result of which has been a nice looking consolidation on declining volume.  In other words, a very nice looking bull flag.  If the flag actualizes into a bullish breakout, the noted target comes into play, although lower resistance exists, as shown.  PVX pays a significant dividend (I keep it in the IRA to mitigate Canadian taxes and should be reviewed thoroughly), which makes it a price appreciation and income candidate.

[PVX chart omitted]

Commitments of Traders

Those who wish to get a leg up on what the CoT structure of gold and silver are like this week (as of Tuesday) might wish to go here and hang around waiting for the release @ 3:30.  Sort of like we do on Fed day when our policy makers pretend to make important decisions.

Commitments of Traders

I'll edit a graph into this post later.  I wonder if it will be as good as I suspect.

Edit (3:34)  The graph is not updated yet but it appears gold made progress, silver made excellent progress (why, I even bought SLV earlier today) and it looks like some commercials don't like Uncle Buck very much this week.  Please, I beg of you to look at this mess like a contrarian.  The herd is buying dollars and dumped its silver and gold.  Wash, rinse...  Edit (6:40)  Adding CoT Gold & Silver graphs. 

A good day my friends... a real good day.

Now go have a nice weekend!

VIX - Thing of beauty

I sold the VXX because this volatility play is well, volatile.  And because the VXX is an etn (as opposed to an etf) and there is counter party risk in times of stress.  Still holding other bear positions against precious metals.  Edit (3:50)  Less bear positions still... time to let the PM's run a bit I think.

Rut Roh - Dow big picture threatened

EMA 25 is kind of important...

Copper

Dohhh, copper down again?  Why yes, that's what happens to bubbles.

I think about a certain blogger who rationalized the rising copper price against rising warehouse inventory by publicly writing that it was "smart money" stockpiling for future inflation.  Can you say topping indicator?  I think about how junk like this gets put out in the public sphere for innocents to digest.

I think about scores of Chinese retail buying and hording the stuff.  You know, the Chinese people who have only recently had access to financial markets and who could be considered the most naive of the naive? 

I think about how Prechter gets to be right once in a while.

Dialing in a daily view of the USD

We looked at Unc's monthly view, which says take a break.  Here is a daily using proxy etf UUP.  The target is up there, and the question is will it pull back first from over bought (by a herd that will doubtless come to hate copper, silver, gold... you know, the metals)?