FXI-SPY ratio... bulls may want to avert their eyes

This updating chart continues to plod along daily, showing further degradation to the bull case. Chinese FXI led US SPY into the downside of last fall and again to the upside of Hope '09. The longer the ratio fails to find its footing, the more intense the bearish omen for the bullish case.

But then, I am a guy with a bearish bias (and a maladjusted attitude) so maybe I am willing all these charts to beg caution. Or maybe not.

See previous post showing this negative indicator.

Dow - Reverse sym-tri?

Taking a look at the Dow, we see a momentum divergence on weak summer volume. The index remains above short term support and now we have the potential of a reverse symmetrical triangle forming on the Dow, to go along with various potential patterns we are looking at on the SPX in different time frames.

This is technically not a good picture at all. There is no telling how long the index will cling along to the underside of the top line, but there is a lot of downside potential even if the triangle pattern remains intact at the bottom line. But sym-tri's are continuation patterns so you know what that makes reverse sym-tri's right? Just another bit of caution on a market that has so many caution indicators flashing now it'll probably break to new highs any minute now. ;-)

VIX - Not quite yet, but...

NFTRH48 out now

NFTRH48 came out yesterday and after providing yet more perspective on my particular stance (NFTRH's big trade for 2009 was essentially in the books in May) makes a strong case for why you should subscribe, as follows:

"This is war against a world full of players, some of whom are actually smart. But also, some are impatient, living within their egos, are trying to force things or worse, are promoting agendas. I am content to let the markets come to me and tell me the answers to the many questions posed above in today’s report.

I should put this teaser promo on the blog this week: ‘Come sign up for Notes From the Rabbit Hole so that I can illustrate for you the drying paint of a months-long holding pattern. If you think that would be a tough read, try writing about it every week.’

But I have a very strong feeling that I must not try to force anything right now. Things will become clearer before too long. It’s that old ‘patience’ thing again."

Oh yes, there is much analysis of stock markets, sentiment, commodities, precious metals and the situation in USD/US Treasuries as well. Finally, some sensible discussion of gold and general portfolio composition/structure.

Have a great remainder of your weekend.

PS: I have often given a rough ride to the gold bug 'generals'; one of whom, Jim Sinclair, in my opinion tends to talk too strongly in emotional tones that can get unsophisticated investors too firmly entrenched in battle mode against some very powerful crooks. I receive Mr. Sinclair's emails still, both for contrary indicators and education. Today I find something in my inbox that I personally found very educational. Sinclair provides a link to this historically educational document 'Will Gold Reach 5000+?' by Martin Armstrong.

Edit (8/31 @ 9:05) A guy who years ago was highly influential in my education about the gold sector used to call Sinclair 'Foghorn Leghorn', or in the words of Henery Hawk a 'loud-mouthed schnook'. As in 'Foghorn Leghorn is crowing again, time to take cover'. Thus illustrates the main reason I am on his email list. A stellar contrary indicator. Mish checks in with his not so polite view this morning: Countdown to Dollar Implosion Madness

From day one I have wanted this blog to be a place free of hype. Way more people want to have their perceptions reinforced than challenged. Hype is pervasive, and the gold sector is one of its most active breeding grounds.

Uncle Buck bides his time

The dollar still holds our critical level. Anybody care?

Gold - time is running out

Gold is boring even the most ardent boosters as it heads into a seasonally positive period off of this bullish pattern that is now the better part of 2 years old.

This is why I love the markets. Perceptions and misperceptions are allowed to sprout and fester. People are allowed to be greedy, wanting, impatient, angry, fearful and confused. People are allowed to become the counter party. In the previous post I talked about the herds 'sitting happily in USD' in Q4 of 2008. Bingo, counter party ready made to be taken advantage of.

Today in gold, we have some different potential intermediate term outcomes all wrapped up in a big picture bullish situation. But it is the shorter terms that will give us our counter parties. The ones who need to be fooled into taking the wrong side of the macro trade. I am going to expand this theme in NFTRH48, but for now, you should be able to get my general drift just by looking at the chart.

More perspective

Every so often, I am going to reach back into the past to reproduce things I wrote in wildly different times, in the effort to remind where we have been and to stay focused on where we are going. I have firm big picture beliefs that have not changed even as the intermediate and short terms remain subject to refinement and/or revision. From NFTRH4 dated October 18, 2008:

"From a contrary point of view we see the clowns in Washington stuffed into a tiny little car in one ring while the second ring in the global money circus presents a daring high wire act by the ECB as the third ring features Asian tigers jumping through flaming hoops. Credit remains frozen, at least to those destinations that even smell like the leveraged offenders in the lead up to the global financial crisis. The money is there. Authorities have created tomorrow’s moral hazard, but it is not getting out into economies or even market ‘plays’. No doubt the fear overhang from situations like Lehman’s CDS derivatives disaster is heavily in play here. This can change, especially given that more and more people are coming to believe it won’t. I call that a growing counterparty sitting happily in USD...

Meanwhile, things are setting up nicely for a contrary play where the entire world is so gripped by credit and economic contraction, and freshly printed funny 'munny', rather than blasting out full force from monetary policy spigots, just oozes with the viscosity of prerefined crude oil and the media still work Armageddon ’08 into the terrified public’s consciousness in a would be run up to the great(est) depression. Funny thing is, a majority of the new depression mongers were just months ago blissfully aboard the great inflation trade. This is the way markets work. Always have, always will I suppose. We may indeed get a depression, but with the pile of ‘money’ being willed into existence, any reduction in the viscosity of the goop dripping out of the spigot is likely to signal it will be an inflationary one. Watch all sectors closely going forward."

Pesky long bond still hanging in there...

FXI-SPY ratio... another bear trap or something worse?

Is this really news?

Hi, I am Peter Cardillo. They call me 'chief market economist at Avalon Partners', but in reality I am simply that financial media mouthpiece, telling you all the sweet nothings you long to hear. Year after year after year...

NEW YORK (Reuters) – Stock index futures were slightly higher on Tuesday on news that Ben Bernanke will be renominated as chairman of the Federal Reserve and ahead of key consumer confidence and housing data.

U.S. President Barack Obama will renominate Ben Bernanke for a second term as chairman of the Fed on Tuesday, a senior administration official said.

The renomination is being viewed as a positive by U.S. markets, said Peter Cardillo, chief market economist at Avalon Partners in New York.

S&P 500 futures rose 1.6 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 17 points while Nasdaq 100 futures added 2 points.

How about the simple truth? Gold is happy that the inflator is in and the USD is unhappy that the inflator is in. Let's see how long this lasts.

Edit (9:06) Here is a short excerpt from NFTRH47.

Gold measured in all kinds of things

Here is just one of the ratios that gold has done some great - yes great - work with (GLD and QQQQ used here as proxy for the Gold-NDX ratio).

Did anyone really think gold was just going to keep on going to the moon as measured in everything else? Was human sentiment going to lay to rest deep below the earth with Hades?

Or was this all coded and dialed in since March? Hmmm? I'll go with the risk/reward ratio and it says to Bottom Feedus Extremis 'buy these ratios!' which I will do slowly over time and with great patience and through different means. Gold-silver, gold-copper, gold-oil, gold-euro, gold-stock market... these are the keys to the kingdom people. Or have they already mentioned that over on CNBC?

JAG - NFTRH trader +23%

Thank you sir. JAG was regurgitated by players exposed as nothing more than over leveraged gamblers. They sold it down to 2 bucks, where NFTRH said thank you very much and bought value. Then JAG picked up too much steam and of course my profit taking urge won out. This stock has been traded several times as it has been a post-recovery leader. This most recent trade yields a respectable 23%.

Again, thank you sir. See you again, soon. JAG at 9 is not the same as JAG at 2... or 4. Know what I mean? BTW, this stock first came compliments of Otto Rock and he had some info about it in this week's IKN Weekly that helped me decide to sell on today's nice pop. Thank you too sir.

Edit (1:46) How bout we replace the JAG shares with a starting position on GLD? Yeh, less risk in gold then gold miners at the moment. And for fun, why don't we initiate some puts on SLV. Long gold, short silver? Sounds about right. I realize the usual suspects are very bullish gold, but I bought it anyway.

Risk v. Reward sucks...

...but then, I have been parroting that for months now. So be it.

The VIX is in a falling wedge and trying to establish a short term uptrend. It is entirely within the bulls' greedy power to break this condition however. After all, they've got the short term tail wind of Bernanke's happy jawbone but perhaps more than that, they've got the power of inflation by policy. Da munny gots ta go somewhere!

So we remain at a critical juncture, by many indicators in a high risk environment. If the bulls pull off a new inflation cycle, we will know where to deploy. They have not officially pulled it off and set it in motion however. Not yet. We don't put it past them because we remember how so many bears used the crutch that 'the VIX stopped working' early in the last bull cycle and it could happen again. But as yet, nothing is settled.

NFTRH47 out now

NFTRH47 starts off with some perspective on the market and explains why my stance is still 'cautiously patient' with respect to a new inflation cycle. You know of course that the new inflationary cycle, when it gets here, is going to sort out winners and losers by their ability or lack thereof to discern the real meaning of inflation and its effects.

I really got into the big picture monthly charts this week as the broad SPX is again looked at as it closes in on some key levels. Also the Nasdaq and Hong Kong markets have some very interesting big picture technicals and since these are leaders, it will be important to watch them. There are also some important definitions with regard to risk vs. reward as opposed to top or bottom calling.

Two important commodities, oil and copper are looked at technically from the monthly perspective as are the precious metals.

The US dollar and the long bond are at limits that tell the same story as copper and the other inflation players, only in reverse. We are in a high risk environment for each of two diametrically opposed outcomes. Very interesting juncture to say the least.

NFTRH47 wraps up, gives its gut feel, talks about portfolios and then tries to clear its head for an enjoyable weekend. You do the same!

FRG - NFTRH's favorite hold

No, it's not a reco. I have held it since 2 bucks. Ridden it up, ridden it down. It's a long term hold for me. Nice to see quality recognized however.

Good way to lead into the weekend. Speaking of which, have a good one!

The life of a short

Or should I say the short lifespan of a bear in this market? Regardless, to our our China FXP gain of 20% we now add a loss of 12% booked on the financials SKF short as good risk management demands I abort. No emotion - doze dirty rotten bullzzz!!! - just move forward. Oh and while we're at it, let's say goodbye to the ZSL silver short as well for a -6%. It was not mentioned here, but there it goes anyway. Long da minahs now with no interference.

We are left to wonder what kind of games are going on at op/ex but we realize that risk management does not care about games. Speaking of op/ex though, what I thought was a stink bid on some VIX calls have just filled. This will be a low risk way of getting bearish into December as they can go to zero and not really affect anything.

Gold, weekly chart

Well, I rest so easily about gold - over the span of years, never mind days, weeks or months - that I do not check on its nominal USD price very often. But I know that many market participants micromanage the hell out of it (really folks, is it worth the energy expenditure?), so this morning I thought I'd give it a review, by weekly chart.

All good... okay, analysis over. Next!

Just kidding.

You know, I tend to become a little irritated about the jocks and TA wizards peering into the price of gold, making grandiose statements (whether bullish or bearish) and getting people all stirred up, lumping gold with silver, oil and the rest of the inflation trade and contributing their part to the massive mis-information hype machine that adds to the general confusion out there. So much so that I realize I border on antagonism and have annoyed (at best) more than a few gold bugs and inflationistas. I can't help it. I am a sort of perfectionist and disgruntled non-joiner.

Here is the situation on gold. Blahhh. And that's good! This monetary metal needed to work off the excess. It needed to decline in relation to the positively correlated world of assets and if I existed in some kind of fairy land instead of the real world, I'd say that I hope it remains in a downtrend against all the other stuff. That is because it would show me that I live and operate in a sound, healthy and honest financial and economic system. Unfortunately however, I live in the real world.

Gold is coming along nicely as it continues to under perform. The next advance can only happen from a solid base, which is what is being built here. I have not ceased being bullish since 2002 and there is certainly no reason to change now. The question is, will the bottom line of the ascending triangle be hit first at around 800? I have not shown the lower probability line that intersects the 700 area, but I suppose that is a possibility as well. No matter, the weekly chart of gold is bullish and there is a shelf life on the opportunity to get aboard the good ship Safety.

The intermediate term target remains 1300 and one day, when the public becomes fully alarmed about the degradation of the financial system, well, will gold's price even really matter?

Some people think there are evil criminals at the controls of the monetary system. I think there are idiot bureaucrats at the controls. Either way, they are doing what they always do (destroying value) and so is gold. It has retained its value, as always.

Here is the SPY 60 min. updating again...

Bully pushes the limits. In fact he plowed through the red line and the moving average and now threatens the bears' last line of defense.

One caution to bully however... I am seeing bear flags all over the place. Here is a dandy on an NFTRH chart for HYG, the junk etf and its ratio to the 'safer' IEF treasury fund.

You can go here to look at all my auto-updating charts, including a few I have used in NFTRH, like this one for HYG which was drawn while it was still in the wedge and well above support. Nice bounce, eh?

BTW, viewers can vote for the list at the bottom and I guess it makes me more popular @ stockcharts.com or something. I just recently started storing charts on the public list. I'll have to make a separate non public one for NFTRH charts but will put a lot of fun updating things here on the public list for us to track going forward.

MT hits the nail on the head...

This post is part promo sure, but it is much more than that. New subscriber 'MT' gets to the very heart of what I am trying to do with the NFTRH service. He expresses better than I have been able to what the hell I am trying to do. He expresses the why with regard to the 'A different market letter' stated on the ad to the right over there. It ain't for everybody. Some people want an all-seeing guru to hold their hand. I am most certainly not that.

One of the things that was recently incorporated based on subscriber feedback is more interim email updates as market events dictate. The following came in response to an update sent to subscribers this morning. The update contained no profound thoughts or action items. It simply showed what one trader is doing and delineated the difference between the world of the trader and the world of the sober financial survivalist.

Sir,

I've only been a subscriber for a short period of time and already I feel I'm getting more than my monies worth.

I don't want someone to hold my hand and tell me what to purchase. What I need is a sharp mind explaining to me in near real time his or her thought process on how to navigate this market without idealism, hope, propaganda or blind bias.

It seems you are exactly what I need. --MT


**********

Michael, that is music to my ears. All too many people want a stock picker or guru genius. The truth is that we are all just people. A rational, revisable and ongoing plan is the best approach. Do you mind if I reprint your mail?

Regards, Gary

**********

Be my guest. As individual investors or traders, the only way to "win" is to empower ourselves. That only happens when we stop allowing other conflicted, biased people with agendas think for us and begin to think for ourselves.

I need a shot of courage to act on my beliefs. That courage comes from someone else examining my beliefs for honesty, intelligence and common sense. Since you share my beliefs and attitudes, you provide that third party review I so desperately need.

If I don't have someone else examine my thought process, I am prone to information bias where I seek out confirming information and ignore contrary information. A sure prescription for financial and emotional disaster if ever I saw one.

American Spirit Emerging

Amid the cacophony of TA wizards, tin foil hat wearing fundamental doom sayers and the ever conventional major financial media, there is a rational voice. Every week John Browne comes out with a view of modern finance and economics that is short on hyperbole and long on rational thought.

Today, he sees the American Spirit Emerging.

Any doubt now?

Any doubt that you operate in a gambling addicted and manic market environment with the attention span of a gnat? Here is today's rationalization headline from Reuters:

Wall St. up as rebound in oil boosts sentiment

Yes, that's good! The inflation is working!! Yey... RAH RAH SIS-BOOM-BA!!! GOOOOO TEAM!! Who cares about the opposite poll that we will likely swing to at warp speed if this sentiment breaks down the door and gets out of the barn. Evil oil execs and all... that was so 2008.

Wouldn't it be refreshing to once in a while see honest major media headlines like these?

Wall St. up as dollar takes another lurch toward devaluation

Investors cheer higher oil price in show of unified will to inflate

Market to Fed: In helicopter Ben we trust

SPY 60 min. updating...

Like we did recently with the FXI, today the SPY is updated with its line in the sand. I am not short the SPX, but I think this gives a nice parameter on the current would-be correction.

Today has pushed, but not broken, the envelope.

Attn: Subscribers (& blog readers) i Inflationista

I have a bullish technical chart of the long bond a few posts below. I have a good chance of short term euro correction w/ USD bounce. I have a warning about the possibility of the running of the Inflationistas and an email update to subscribers this morning illustrating parameters and possibilities. So much so I guess that one of my most accomplished subscribers is apparently not sure of where I stand.

So, in the event that NFTRH's stance is unclear and that general blog readers might have gotten a wrong impression, I am and have been an 'Inflationista', per the post below from a little over a year ago. Nothing has changed and any 're-load' of the inflation gun is a short term affair. I believe we are headed for a whopper of an inflationary future. We are watching a long term moving average on the long bond, and if that is violated, it will be inflation panic sooner rather than later. Until such time, risk is high for another deflationary dunk - quite possibly the last one.

From July 10, 2008:

i Inflationista

Michael Panzner has just written a piece highlighting Mike Shedlock's blog post which itself centered around a letter received by Mish from a 'former member of the hyperinflation is coming crowd'. I have received emails recently from readers about Mish's views on deflation. I guess he could be described as a 'deflationist' as could Michael Panzner - whose work we value and regularly publish at biiwii.com - and of course Robert Prechter, a man who I have noted many times was a strong influence on me; especially after I read Conquer the Crash in 2002. These are all very smart and thoughtful men.

So with all that said, I do not take Michael Panzner's 'Inflationistas Coming Around' lightly. I have permission from Mr. Panzner to publish anything of his that I find of value and in this piece I find lots of value because it gets to the heart of the matter; it gets to the definitions of inflation and deflation. If you believe inflation is rising prices then of course you believe deflation is declining prices. Here is a three year old email I sent to Rick Ackerman - reprinted on his site - in response to a provocative article Rick wrote on deflation. It gets to the heart of why I am one of the 'Inflationistas'. Especially these lines:

"In my view, the inflation game is played against the deflationary impulse or need to correct. It is the Fed and other forces pushing on a string, and one day they will find the string simply goes limp and all the inflated chickens will then come home to roost...

"deflation (at least in capital flowing to the US manufacturing sector) has been a good thing, driving progress and productivity; but it [deflation] has been perverted in recent years/decades to the point where it is cast as bad, while inflationary policy is cast as good...

Deflation is a wellspring of progress and resulting lower prices that has been poisoned by the easy money crowd."

The national (and global) front porch is loaded with chickens. Clucking, confused, bloated birds with nowhere else to go. The Fed is 'pushing on a string' and talk of deflation is growing by the week. In a genuine deflation 'scare', this needs to happen. But when you define inflation as increasing money supply - similar to that which Mr. Greenspan promoted earlier this decade, then that 'pushing on a string' can only be inflation, regardless of what prices on most goods and services do. The Fed is inflating and global policy makers stand ready to fight the dreaded forces of deflation (in prices) as well, although many developing regions are still dealing with the effects of the last inflation - booming prices.

Recall that Greenspan's inflation regime took some time to take hold (credit and housing bubbles) and it is far from a sure thing that today's policy makers will be successful in keeping the bubble economy alive. But that does not change the fact that we are in for a whopper of an inflation cycle. It's all in how you define inflation. If the Fed is successful, gold will pick up on it before positively correlated (to the economy) commodities and then under-perform as it did in the middle of this decade. If the policy does not succeed, the collapse predicted by the 'deflationistas' will indeed visit us, in which case there will be a continued mad scramble for liquidity, which means cash and gold. And one of those two will actually have intrinsic value in such a scenario. But the point is that there will be massive inflation (by policy) even as the collapse in credit and general liquidity continues.

I am not a gold bug. I would much rather be a sound US Economy bug. In fact there are productive segments of the US economy that are faring relatively well and benefiting from inflationary policy even as the US financial sector, arguably the former beneficiary of the greatest bubble (in confidence) of all time, continues its collapse. This is a confusing time. This is not a drill. It is time to get this right.

Free Elliotwave Theorist

There is a banner just above, but I want to call special attention to this because as I noted previously, EWI had called the rally and now Prechter warns about its end and gives perspective on his view of the big picture. [Insert standard 'Prechter was wrong for years' boilerplate here] but he has been very right over the last year. I know, because I had signed up for 3 months of EWI's services at a sensitive time and I watched them book bearish profits and be very right on this rally, along with yours truly.

Now, do I agree with all of Prechter's conclusions? The answer is no. Do I get value from his analysis? The answer is yes and has been yes since I read Conquer the Crash in 2002. It's the Elliotwave Theorist, and its free. Just get it.

From EWI: Why are the truly big economic catastrophes so "big"? Put simply, it's that such a small number of people prepare themselves beforehand. Think about 2008 and you'll realize it's true. What's more, once you read Bob Prechter's recent 10-page Elliott Wave Theorist, you'll see that even fewer people will be ready for the soon-approaching worst leg down of the unfolding depression.

In this issue, Bob gives a warning he's never had to include in 30 years of publishing – namely, that the doors to financial safety are closing all over the world. There are but a few opportunities left and little time to take them. Even as this happens, the terrible irony is that so many people believe the conventional wisdom, which claims "the worst is over."

It's not too late, but the doors really are closing shut. Learn what you need to know now. You're a few clicks away from your free 10-page issue of Bob Prechter’s Elliott Wave Theorist. Go here to download it now.

SPY 60 min., you buyin' it?

Euro - You buyin' it?

This settles it...

With its membership including heads of investment firms, economists, equities analysts, financial advisers, gold bullion market insiders, commodities traders and even a Texas cattle rancher (hope all's back to normal John), I have long felt that the NFTRH subscriber base is an intelligent and diverse bunch. But this settles it.

As a kid I used to read Mad Mag all the time. I haven't seen hide nor hair of it or thought about it for decades and now? Turns out one of NFTRH's subscribers is the artist who does the covers.

I guess this is just an unimportant blurb in the grand scheme of things for most readers. But it go me jazzed up. I know the letter is not for everyone, but the kinds of people it has attracted is not lost on me.

Say, wanna see something bullish?

Well, at least it is bullish to me, Bottomfeedus Extremis. Now, I have been awaiting the punishment of the 'inflationistas', and what better way to administer it than the long bond breaking out from weekly consolidation. Here is TLT as our proxy for the $USB 30 year bond.

I think I am going to buy this thing for a trade and for a little more protection against my gold miner positions. We will no doubt get to our inflationary future, but not with every resource bull on the planet on full pump once again.

Long term treasuries are contrary my deepest fundamental big picture beliefs so this is just a trade, for better or worse. I cannot think of anything more intrinsically worthless than United States Treasuries. Well, maybe one thing.

A daily chart w/ good looking MACD was shown this weekend in NFTRH46.

Edit (1:56) Mish checks in with some similar thoughts on treasuries. I just saw it and published it a few minutes ago, I swear. BTW, I have taken positions in the TLT but I would like you to note that that is not an actualized weekly break out on my chart, since the week is not even one daily session old yet. So, I am long and like Mr. Shedlock, make no recommendation (now or ever) that you should be. I do not mind being on the same stance as Mish, however.

Edit (2:20) What the heck, this is what NFTRH46 had to say on Saturday...

"Let’s look at the long bond as represented here by the iShares TLT fund. This chart looks like a ‘buy’ to me (bottom feeder) so therefore, a potential deflation impulse, complete with disoriented inflationists and a US dollar pop look like a good possibility. Consider that if you are strongly long, you are in the company of the AAII and an increasingly bullish financial media, or at the very least a financial media that has ceased scaring the public to death 24/7 and is now comfortably back in its normal mode of peddling convention."

Attn: NFTRH subscribers...

It is beginning to look like we may be able to begin charting 'buy targets' again on the gold stocks. Let's see how this week goes, but if all goes well it will be time to at least begin looking for low risk buy areas on HUI and favored miners.

This may be a theme for NFTRH47 and let me tell you it would be a lot more interesting than the 'bull/no bull' thing that has been going on lately. Also, if HUI looks like it is getting to a buy level sooner than next weekend - remember, we want to be PATIENT - I will send out an email update along with perhaps a couple miners charted. But for now, just remember all our parameters on the daily, weekly and monthly charts.

I love the smell of napalm in the morning...

Here is a final update of the FXI (self-updating) 60 minute chart. It is final because I no longer care what it does from here on as I just sold its double inverse, FXP for a 20% gain at what looks like potential support for this crack addicted market.

The measured downside of this short term top is attained at 39 and we move on.

In the broad markets, it looks like all the usual players are assuming all the usual positions. Is it just me, or do you also like it when dislocations - of whatever magnitude - hit the markets?

Another one turns...

Carl Swenlin, a respected and unbiased chartist whose work is published at biiwii.com has gone bull up based on a cross of the EMA 50 over the EMA 200, as happened into 2003's cyclical and inflation fueled bull. Now I know, many readers want the blogger to stop with the inflation bitching and just focus on is it a bull or is it not. Sorry, no answer yet. I am not a big believer in moving average crosses because they are fodder for the whipsaw in my opinion.

So yeh, I stick to my plan that holds this is a bear market rally until such time as I am 'turned' by the bull. If that occurs, you will hear plenty of talk here about bull markets in nominal terms vs. the more telling ratios to gold, commodities and perhaps strategic global markets.

I do not believe in perma-bearishness in a world of inflation by policy. But nor do I believe in blindly calling bull with no further discrimination or bias. I am very biased; I want to be where the REAL bull markets are.

NFTRH46 out now...

...and here is an excerpt: NFTRH's Proprietary Contrary Indicator

We then get right into the broad stock market as a new technical possibility, still merely a twinkle in the chart geek's eye, presents itself. If it comes to pass however, expect it to come hand in hand with all the emotion and mis perception that the herd can muster. #46 then discusses commodities and quickly reviews the technicals on the gold sector before riffing along with my most pure thoughts about the sector.

USD/Euro, long term treasuries and more. All packed in for your consideration in NFTRH46.

Have a great weekend!

FXI updated again...

This is kind of fun. Today we find the FXP inverse play alive and well. We live on, and in the manipulated and momo driven stock markets, that is an accomplishment. Never take the crooks and crack heads for granted and never think they cannot hurt you.

Tomorrow, as part of NFTRH46 I am going to look at the potential king of all contrary indicators - ME! Sentiment is the play remember.

Invest with this man

Sarasin's Baertschi Favors Equities, 'Riskier' Assets. And I thought the Swiss were generally buttoned down and sensible. Back in my days of alarm (in 2004) at the oncoming disaster in credit and derivatives, I actually went out and added Swiss Francs to my 'get safe' initiative. Now I realize that the Swiss are not some ideal of human monetary and fiscal soundness. They are just people; globally connected and convention following just like the rest of the herd. But I digress...

Mr. Baertschi really riffs along well here trotting out all the good buzz points like the wall of worry, and all that 'money' (funny munny created out of nowhere and once again looking for legitimacy in 'things' of value - yeh, we're back on our old - pre 2008 - message for the time being) on the sidelines, and how this munny wants to chase the markets because it missed the rally. All this at a time when the 'dumb money' is getting ever more bullish.

Crack dealing, Swissy style.

Still walking the line on FXP

Here is the updated 60 min. chart of FXI. It is the same one as shown yesterday, self-updating.

FXI still walks the line and I remain short via FXP, walking the line too.

Silver

Let's take a look at something that gets relatively little air play here on this blog, other than as a tool in ratio to gold (the gold-silver ratio is looking pretty sad by the way, which means party on Wayne, party on Garth). Let's take a look at silver.

It is ironic but not surprising that the HUI and silver tend to be better correlated than the HUI and gold. This gets gold bugs cheering 'yey, silver is leading!', with pom poms and all. Silver leads the way higher into speculation and ultimately, euphoria. So now the dour blogger looks at the daily chart of silver.

Everything looks good to go for a try at the 16 level. The support it is finding at the 50 day moving average is important. The caveat would be that silver had better rise to the 16 area, which would negate the potential of a right shoulder of an H&S top forming.

Still short China - for the moment

60 minute chart of FXI shows a clear line in the sand for profit taking on the short position (FXP).

I don't mind admitting that I am better at managing downside panic than upside blow offs. Bottom feeder and all...

Edit (4:10) At 41.84 on the FXI the position almost stopped out. But by a thread it remains intact. Now let's see if overnight blows the position out. As I always say about shorting, I remain in a state of 'no undue hopes for success'. It is better that way, and while the bulls' sentiment is getting unhealthy and the dollar's sentiment is downright bullish (3% bulls), the process of sorting things out can be a grind at best and painful at worst.

FTEK - sold just below target

As stated, no greed here. Just mechanical profit taking. Jim Cramer can get ahold of FTEK and spin it higher for all I care. The trade is now complete for a commitment of under a week and an 18+% profit. 'TA does not work' they say.

Thank you again my little gem. Yesteday's chart is live and updated here.

Hope goes global

Global Confidence Jumps on Signs Recession is Approaching End

“It’s clear the recession is over and some kind of recovery is underway,” said Nick Kounis, chief European economist at Fortis Bank Nederland Holding NV in Amsterdam, and a regular survey participant. “We have the biggest monetary and fiscal stimulus policy in history, globally, and we’re starting to see it work. Probably the next debate will be about how strong and sustainable the recovery is.”

The crash was global, the recovery in market sentiment is global so it is fitting that the return of major media pap is global as well. Here is a warning... convention is back in force. See that chart? See that cascade downward? The wizard's curtain was washed away in that waterfall. They call this 'the' recession. They obsess on whether it is or when it will be over. They talk about recovery. They are the major media who were scaring the crap out of the general public when it was more appropriate to be bullish. Now they are managing 'the' recovery for us, as if all is relatively well and this is simply another, albeit more intense bump in the road to Keynesian nirvana.

The financial system ended with the events of 2007 and 2008. Look at the chart. The entire magic show came apart at the seams and has been stitched back together with funny munny policies the world over. Funnier still, this may actually be spun into a new cyclical inflationary bull cycle. Emphasis on 'may' because nothing is resolved, despite a growing number of analysts who are giving in to the bull's call. In the boots on the ground world of stock market sentiment, the absolute worst of holders are becoming more bullish as the wise guys get cautious. With its new tools in place, you know we will continue to watch the sentiment picture closely in NFTRH.

If a new and somewhat sustainable cyclical bull is to generate in the next 4-6 months, I tell you brothers and sisters, this pig should take a break here and scare out some of the newly brave and test some significant support. Alternatively, if we go directly into a couple more months up toward our 'most optimistic' targets (and ironically a monthly bull signal), the major financial media are going to lather this thing to a terminally positive level. All the hold outs, the 'dumb money', will have bought the story. So much for sustainability. The 'cyclical' bull will have come and gone in perhaps a mere 6-8 months. Players will have played and bag holders will have to assume their usual position.

No, it will be more sustainable to get a correction now, test support and then mount a bull; a nice new inflationary bull in which sector and geographical selection would be of paramount importance. But let's see what we actually get. There are several scenarios and time frames in play.

Meanwhile, Mr. Kounis above ponders the strength and sustainability of THE recovery. Here in America we can't drive a half mile without seeing our 'stimulus at work'. We are a bankrupt nation with a printing press running overtime, but man are we going to have some great roads and bridges. This 'make work' is going to add productive capital to our economy exactly how? On the other side of the union behemoth stands the banking and financial leviathan, beneficially printed out of acute and fatal troubles of its own. As yet, they are not actively contributing to the productive economy in any way commensurate with the government's corporate welfare.

Today is Fed day and the 3 month t-bill says that Mr. Bernanke can pretend to stay the current course while longer term treasury yields, still elevated back to long term (downward) trend say that he can pretend that while inflation pressures have shown an uptick, they are still under control (NFTRH is following a very important 'trigger' point on long term charts). Fed language may change a bit; more pretending but with perhaps a new wrinkle.

Regardless of whether or not the global stock rally continues immediately to an ultimately garish high (with attendant red-lined positive sentiment) or it corrects into a) a test of strong support into a new global bull market or b) falls out of bed (and out of corrective wave 'C') and into the nightmare projected by crash forecasters, unsound policy is at work behind the scenes. Greenspan on steroids. Moral hazard gone steroidal, and this time it is global.

NDX - A leader showing negative signs

FTEK - Green play making noise

Long time blog readers know this stock. It has been my favorite 'green' play since it was a pre-Cramer, undiscovered and undervalued gem at 5 bucks several years ago.

NFTRH noted that this was added in both accounts recently at around 9 bucks as the chart looked like it could 'play a little catch up' with the bull rally. There's the break out and there's the target. I usually sell below targets, so this is in no way anything other than a trade that is well in process and nearing completion.

Good old FTEK... it's not that terrible 10Q and its current overlooked status (forgotten by the Cramer clowns) tell me that this will be a keeper one day when I actually believe the bull and believe that inflationary monetary policy is gaining traction into certain favored areas. That day may come sooner or it may come later.

I think it is a decent bet that political incorrectness is going to make a comeback in a big way. I for one am already tired of the 'go green' herd. But I'll plan to capitalize on their religion none the less.

Come Mr. Tally man...

Mr. Tally man? Where you be at Mr. Tally man?

Attn: NFTRH Subscribers...

Just a note to let you know about I change I have made to NFTRH's research tools. As you know, I had been using the excellent DecisionPoint.com for certain sentiment indicators. The problem was that I was UNDER-utilizing the service. DP has way more charts and data over a broad area that I don't need. So I say goodbye in favor of something that is much more focused on NFTRH's needs.

As of today, NFTRH is up and running with a subscription to SentimenTrader.com, which to a contrary sort like me, is very exciting. I am looking forward to getting to know this site and keeping up with what the 'smart' and 'dumb' money are thinking. Many of my sentiment and macro fundamental indicators are the ones I create on Stockcharts.com. Much of what SentimenTrader provides is information I would not otherwise have had access to. This is an upgrade to NFTRH's toolbox.

I was prompted to check out SentimenTrader by an email sent from a subscriber showing 'public opinion' on the USD. I got excited. I am a geek.

NFTRH45 out now

"...we know that grandma is back, mistress of the obvious, trotted out on CNBC and calling for a new bull market in a classic case of trend following with the SPX above the magic 1000 level and the VIX in the dumper.

In authoritative tones: 'We do think the new bull market has begun…'

What do we think? Well, you are a diverse and independent minded readership, so I don’t know what you think. But what I think is that the big picture monthly chart of the SPX shows that the bull callers have jumped the gun. Perhaps this has to do with so many of them having missed the bottom as they were too busy being under fire, blamed for the mess that had gone thermo-nuclear on their well established conventional wisdom. Watching the above linked Abby Cohen video, I see a near robot with maybe a few human impulses manifesting in odd facial ticks and verbal nuances, or in the words of subscriber Paul “According to Dr. Wifey, exaggerated and pronounced eyebrow raises means the speaker doesn’t believe what they are saying” . ‘Dr. Wifey’ is Paul’s PhD psychologist wife, who viewed the video. Personally, when I look into those eyes, I see a sort of horrific banality and not much more. I wonder what the herd sees."

Oh, and there is actually a lot of analysis as well, focused mostly on the broad market and precious metals, bull or not bull, and time frames. NFTRH45 out now. Have a good weekend.

Went out to wield a chainsaw...

Which was a lot more fun than watching the garish and oh so predictable display put on by the markets. Came back and what did I find? The S&P ended the day on the sag, back down below our 38% Fib target. Nice. What else did I find? The latest CoT report on gold.

Rut Roh. The specs love gold and the commercials? Not so much.

SPX 30 minute chart

Here is the kind of chart that day traders are looking at, or should be looking at. S&P 500 in a 30 minute view shows how important trend lines can be (not very, when compared to lateral resistance and support levels).

Well, we have still not hit our minimum and favored upside target yet of 1013 or the 'throw over' level noted in NFTRH as possible by a monthly (big picture) view. That is a level at which point NFTRH would have to begin considering a new bull market. First things first, the 1013 is simply a 38% retrace - to visual lateral resistance - of the entire crash. At this point it's all according to plan.

I see where Abby Jo has recently declared new bull market. Wonder if I'll be joining her soon. Don't know and at this point don't care. All the bull calls, from Russell to Cohen have been part of the plan. They may or may not end up being right on a cyclical bull. The charts will tell when they tell.

Edit (2 minutes after posting) Bingo... SPX 1013. Now if only it would reverse right this minute! Yeh, fat chance I know. :-)

Da Piggies...

"BKX has come to our long held target of the SMA 200. That does not mean it will now obediently decline from here. In fact, the sneaky MACD does not look good to me if I am a bear. An analyst I respect, XXX XXXX, has a ‘widows and orphans’ short on the piggies. I do not want that trade at this time. There is room for the BKX to assume the lead in a final surge of the hope trade up to respective market targets. The BKX itself has heavy resistance in the 45 area." --NFTRH43 (July 25th).

Well, what a difference two weeks makes. This index is now over bought and riding the momentum higher. A good signal for a top might be a major media source trotting out a technical analyst to tout the 'golden cross' of the SMA 50 over the SMA 200. Problem being, that supposed technical tool is about as useful as a one armed paper hanger. Or at least I think it gets way more notoriety than it warrants based on my experience.

The banks, after under performing the S&P 500 from late Spring to mid-Summer have indeed sprung that 'final surge' in leading the markets higher. I have indeed sprung another short on the financials (for which I have no undue hopes of success) but if this is a euphoria fueled 'C' leg higher, I will have to abandon ship quickly.

Like the BKX, various markets are approaching upside targets. Can they go higher still? Yup. Is the risk untenable? You are kidding me, right? This rally is (or should be) yesterday's news and now it is time to watch the dollar, which NFTRH is doing. As long as Uncle Buck remains shut out of the party, the festivities continue. But do you remember how pissed off he got last time this happened?

SPX 60 minute chart

Pysched II

This is a promo, yup. As I was updating the subscriber feedback page on the website, I came across this blog post that was one gentleman's inspiration to join NFTRH. My first thought was 'why did I give away such valuable information for free in such a real time manner on the blog?' and my second thought was that 'I am a TA and market geek and it is what I do'. Well, did anyway. For the sake of my new business, which I take very seriously, I must tone down the freebies, at least as far as the core issues go.

When I wrote that post, Psyched, I was very concerned about the obvious euphoria surrounding the gold stocks as they gained the next leg up in unison with a world of broad stock market participants suddenly becoming quite brave as well. The time to be brave was HUI 150-175 and again around 250-260. NFTRH was brave then. The time to be scared was HUI 360-400 and NFTRH was scared then, as my aggressive selling illustrated. I began buying back some gold stocks in the HUI 330-310 range and advised that while I cannot call a bottom, we are now '70 HUI points lower' and the risk profile is much better.

I have other targets in play now, and you might not believe the range between them. One is higher than some might think and the other is lower than others might find, err, convenient. They are both in play with lots of options in between. Patience and ongoing diagnosis is key.

Consider risk vs. reward and keep your head screwed on straight amid the blow horns. It's not rocket science people. I am using several different time frames in support of ongoing themes to make sure we are checking things from as many technical and sentiment angles as possible. Markets are ongoing, almost living organisms. They must be subject to ongoing check ups, prods and pokes.

Want to short so bad I can taste it, but...

Take a look at IYR. Take a look at the target, it's a measured 51.50 off of the broken neck line of an inverted H&S-like object. The reason I say H&S-like is because, like the broad markets, this is thing did not fall far enough and chop around before the upward thrust and we are floating higher on summer volumes.

But the target is the target and it probably doesn't care how it gets achieved. If it's summer hopefulness then so be it.

I did short China again yesterday however, in my chronic attempt to catch one or more of these ponzi schemes. Also, I have a bid in for calls on the VIX that may or may not fill if the market gets one more strong spike higher. Yikes. But I think I will leave real estate alone for now. Oh, I also tried to short that HYG chart in the post below, but no shares available. Now, I am well long - mostly miners - and cash. Don't get me wrong. I think shorting here is anything but a no brainer.

Attn: NFTRH subscribers (and blog readers) - Risk

After the update on the HUI's monthly chart this morning, I sent out another quick update on something I think is potentially pretty important. Unfortunately, due to a website hosting upgrade happening this week, I am not sure you got it. These updates come back to me as well and I did not get mine back from the server so I assume you did not receive either.

It was no real biggie. The more important update was that on the HUI. But when I write 'risk is rising' here on the blog, I think there is no better indicator for that than the junk bond etf, home of the most brash speculators, which until yesterday had not had a down day since early July. Today, it is threatening a second such day. Think that's significant? Yes, me too.

Recall that our measured target, shown in NFTRH43, was 83 and now there is the first sign of red in nearly a month. Here, risk (junk debt, the very definition of risk) has literally been rising day after day, until yesterday.

A(nother) word on R.I.S.K.

It is RISING.

Seasoned market players know of the paradox contained within upside market blow offs. The paradox holds that as a given market rises, sucking in the holdouts one by one, ten by ten and 10,000 at a whack, the wall of worry loses supportive bricks, one by one, etc.

The public is in da house and da public just cannot take it anymore. Da public sold in March. Da AAII bullish % is starting to lunge upward. Minimum upside targets are still not attained and the market is locked and loaded for these targets or higher.

You cannot micromanage a blow off. What you can do is look around at the influential heavy hitters who have gone bullish. You can look at (what was it, Newsweek?) the 'Recession is OVER!' major news magazine cover. You can look at Joe Blow, bangin' down da door and wantin' in.

RISK IS RISING. This has been a message not from a perma-bear in pain, but from a market watcher who had his big trade cashed in by the time May rolled around, raised the risk profile and now participates happily and in a measured way as the final stages of this leg lead into what comes next.

Uncle Buck did not RSVP

In fact he was never even invited to this party, just as his invitation to the last great bull party must have gotten lost in the mail. I mean, back then they at least pretended to want him around, with Mr. Snow trotting out the 'blah blah blah... we believe in a strong dollar... blah blah blah... a strong dollar is in the national interest... blah blah blah...' boiler plate. Whatever China wanted Snow to say, he said. It was simple.

Today there is a bit more of an 'every man (or levered up economy) for himself' feel to events. China attempts a massive inflation to bail out a national Ponzi scheme of its own while the US is left to attempt a devaluation in broad daylight. With the goal of raising asset prices measured in the inflated currency and diminishing balls to the wall levels of debt that were panicked into the system.

Here is the monthly (big pic) chart of the dollar. The bull party goes on as long as the USD remains on the outs. The chart mentions 'banana republic'. What I mean is, if the dollar loses the lows of 2008, then there can be no arguing that the next phase of the inflation problem is on. Yeh, we've lived with inflation all our lives. But this would be err, serious. The bull party could go much higher - to best SPX (and HUI for that matter) targets noted in NFTRH44, but if the dollar makes new lows, considering that this would be uncharted territory with no support, the boom might very well morph into the 'crack up' variety. Silly bulls... you don't want a crack up boom, believe me.

NFTRH44 out now

NFTRH44 went out yesterday and the game plan it has laid out since winter remains intact and therefore NFTRH, with some slight revision along way remains... right. But this is the financial markets and today's genius is tomorrow's has been. So, given that the broad market has not yet achieved even my minimum upside target, the analysis is by definition, right. But it is the nature of the rise, encompassing the sentiment backdrop and various inter-market relationships that will tell whether the analysis will remain correct.

For a newsletter writer, the environment continues to slowly become more interesting each week. Sentiment is really coming along now, just as it had been forecast to do many months ago off of extremes in the other direction. It will actually become very interesting if I am forced to alter the analysis into the management of a new - if inflation fueled - bull market. At this point however, there is no alteration. Just a continued plod forward toward resolution.

Have a great remainder of your weekend.