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Monthly Archives: October 2010

October 20, 2010
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Ace
dollar, Dow Industrials, Federal Reserve, nymo, US Treasury

The US $ Reversed It’s Fall Today and the Dow Sold Off 165 Points–Is this the Big Reversal?

October 20, 2010 dollar, Dow Industrials, Federal Reserve, nymo, US Treasury Leave a comment

http://www.cordes-beregnung.de/pinochet/5673 A student of mine (if I may be so bold to call him one of mine!) has been using many of my favorite indicators to predict the turns in the markets. Today, he pointed out that the McClellan Oscillator (NYMO) was down- crossing zero which can often lead to strong  in changes in the direction of the markets. I agreed with him as for a short term interpretation….and the Summation Index (NYSI) takes accumulations of these readings, as he  seems to know. So, a consistently negative NYMO reading is going to make NYSI more negative…and vice versa.

site rencontre gratuit roumanie But to make his charting more complete, I challenged him to  step back and look at the fundamentals! I believe the best chartists still keep the fundamentals in perspective, only if to validate what they are seeing on their charts.

script pour site de rencontre If I may draw a quick comparison here: you have surely heard the old saying among IT professionals that the results one gets out of their computer programs is only as good as the data one feeds into their computer programs. In other words, the old adage “Garbage in, Garbage out!” (or “GIGO”) is something to think about.

http://sport-hippique.nl/malynok/6284 To this end, let’s think about his statement today in which he said:

https://www.gostatewide.net/marderos/2092 je cherche un site de rencontre vraiment gratuit “With this, the USD reversal and heavy selling of oil and other resources, I feel the top has been set.”

site rencontre gratuit orthez So I ask him why he feels this to be the case? Is it because his charts tell him this in a convincing way? I ask that he pause for a moment and think about the other old adage which is “statistics don’t lie, but people do!” Since charts are based on statistics, we have to ask ourselves if it is our human mind that is interpreting what we see in chart form to be the correct interpretation?

rencontre à elizabethtown streaming megavideo Rather than put him on the spot (which is not my goal here!), I will go on to answer the questions I raise by attempting to give him (and my readers) another side to the stronger dollar scenario we now seem to have.

To do so, we have to look at the financial headlines of the past 24 hours.

…and in the news last night, we come to learn that the US Treasury Secy Geithner publicly declared that the US does not support a weak $ policy. Suddenly, the overnight currency markets tighten up as shorts race to cover off that statement.

Then, China surprises the world by raising interest rates 25 bp for the first time in 3 years. A higher interest rate, in theory, serves to slow down growth in China, which is further cause for concern among those who are riding the risk trade in commodities and gold.

OK, so this explains WHY the $ gained in strength over night. That’s all fine and good and matches up well with your chart interpreatations.

BUT NOW, I say let’s think if these two events will have a lasting effect on a $ reversal or will lead to more $ momentum.

Of course, they could…but my hunch is that the effect is short-lived, and this is where understanding the fundamentals and the strategic set-up could make this a short-lived phenomenon.

https://www.orthodonticpartners.net/mirtyew/2291 1) Treasury Secy Geithner says the US $ will be defended and we will not try to pay off our debt with cheap money! Well, hoo-ray and good, Mr. Geithner!

…but there is one BIG problem I have with your statement! YOU are not the one who controls the money supply nor the printing presses of the US! That job belongs to the FED which is headed by a fella (Bernanke) who insists the best way out of our predicament is to throw printed money out of helicopters into as many hands as possible! To wit, Mr. Bernanke through one of his FED governors announced yesterday that he plans to purchase $100 billion a month of Mr. Geithner’s treasury (debt) paper each month in a new round of Quant Easing! In other words, Mr. Geithner can no more defend the $ than could you or I. Anyone reading literally into the words of Mr. Geithner may discover that they have been temporarily duped!

http://emilymarchblog.com/maglayd/5707 2) China’s move to raise interest rates may well slow down the hot real estate market in China just a tad…and maybe slow down some buying of commodities and speculation in all things China? That is the intent!

Then again, there is the flip-side observation where higher interest rates in China help to attract more investment money from places that are de-valuing their currencies such as the US, Europe and Japan. In other words, higher interest rates in China (and a stable currency due to the peg to the $) fuels the dollar and Yen carry trades! What could happen is that after a short selloff period (the knee-jerk reaction you see now) could reverse as big money players decide that the 25 bp move is not very significant and that China’s 2.25% overnight interest rate creates a nice 225 bp profit center for them…this is known as the carry-trade. And for those who do not know exactly what the carry trade is, it is where BIG MONEY hedge funds and other big investors borrow in cheap dollars and Yen at ZERO percent interest and invest in those parts of the world that pay much higher returns. In China, a big hedge fund can borrow $$$ at 0% and invest in overnight Chinese govt bonds and earn 2.25% return at virtually NO risk!…or if the carry trade gets strength again, the hedge funds can then branch out further along the risk continuum and buy gold, silver, and tech stocks in places like China and other hot investment areas of the world.

My point being, is that having some knowledge of the economic backdrop and how it might play out makes the interpretation of the charts all the more interesting!

I do not read the charts as negatively as this follower does…I see an ADX that has barely changed on most of my major index charts. In many sectors, the 50 and 200 day lines are still quite supportive and rising.

I have to take the view, until otherwise shown, that today’s pullback is of a temporary nature. I believe that if one goes net short here and now, they may have jumped to conclusions too soon. IMHO!

Respectfully, ACE

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October 13, 2010
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Ace
bonds, Federal Reserve, Geithner, gold, QE2, treasuries, US Treasury

When to Sell Treasuries

October 13, 2010 bonds, Federal Reserve, Geithner, gold, QE2, treasuries, US Treasury Leave a comment

Someone asked me recently how to spot the top of the Bond Market (“bubble”) and how a cap on the 2-yr yield by the Fed’s actions might be something to watch?

My reply is that the FED impact on short term yields is something I would tend to ignore. Keep in mind that the FED’s greatest impact is typically on the short term yields–they most directly affect those yields with their direct purchases and sales. Also, even if the 2 yr or other short term paper should start to see rising yields, the gains to be made on the short term paper for shorts is less than they can make on the longer term yields, such as the 10 year notes and the 30 year bonds. The reason for this has to do with the number of years of payouts…the more payouts,the greater the “discount” effect to the yield, which is an annual percentage.

So, if one is preparing to short the bond market, the best place to short is on the long end, and TBT is perhaps the best vehicle for the average retail trader to play in this regards. Another decent play is PST, which shorts the middle of the yield curve, but typically,the gains will come harder and faster on TBT.

Keep in mind that the FED has less control of the long end of the curve, and really QE2 is ALL about the long end of the curve, as normally, the FED stays out oflonger term paper except during extraordinary times.

If we buy into the concept that the media and Wall Street feeds us, then the yields on ALL treasuries will remain low for quite some time, as “you can’t fight the FED.”

However, if the events of the 2nd millenium have taught us anything, it’s that old tried and true maxims often fail to live up totheir prior billing!

So, what could cause the FED to lose control of bond yields? The answer, I think, lies in the currency markets. Asthe FED lets the US$ slide, it weakens the value of US treasuries held by foreigners, such as the Chinese. If the value of treasuries are lowerin $ terms, then the Chinese and Russians may dump the bonds wholesale on to the markets. Yes, we do have the Japanese buying up our bonds right now to offset this pressure because Japan is trying to lower thevalue of its currency to stay price competitive on exports.

But if the selling of treasuries by China and Russia and others should increase dramatically, it may overwhelm the Japanese efforts…

This is also the reason why GOLD is such a standout now …

Someone asked me several weeks ago here if I thought it was time to sell off bonds, and I said”NO.” I said to watch for a low of 2.25 to 2.35% in interest rates on the 10 year…well, we hit under 2.35 the other day, did we not? My call has proved to be right…(wish I could find that post!)…

Butthe latest charts show some weakness in the LT bonds, though the weakness is so far, a short term trend. To get to the point where Iwould cash in all bonds and go short the bond market, I am watching for the 20-85 downcross on the TLT chart. Should that cross occur, I would short bonds for the long run at that time.

CLICK HERE TO SEE CHART OF THE TLT

Typically, the 20-100cross is the confirmation of a sell (most media heads talk about the death cross or 50-200, but that cross is usually a lagging indicator)..the 20-100 is more of a forward indicator…but usually, I see sell offs well under way by the time of a 20-85 cross, and so I watch closely for this now…then 20-100 is the confirmation of that early warning cross, should that occur. Also, when these crosses occur, it is assumed that the price of the index is still moving in a downward direction…any sudden, sharp reversal would cancel the effect.

Also,on the TLT chart, we have a perfect set up on the ADX graph…a -DMI upcross over a low, flat ADX line is often the start of a powerful new trend, so this needs to be watched closely.

For the LT bond investors, I am NOT YET calling for a sell off in bonds, but be awarethat the chinks in the armor are starting to show, and it needs to be monitored closely. Those invested in mutual fund bond funds need to beespecially cautious, because unlike owning a treasury note or bond directly, the mutual funds do not hold your investments until maturity!Therefore, the mutual fund bond holder is at greatest risk once a sell-off is occurring.

ACE

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October 12, 2010
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Ace
gold, gold miner

Eldorado Gold in Bullish Position

October 12, 2010 gold, gold miner Leave a comment

Someone told me over this weekend to sell gold, because they say it’s overbought. I’m not sure I agree with that assessment!

Eldorado Gold (NYSE: EGO) has a bullish 3-weeks tight pattern in its handle! This one may choose to explode to the upside very shortly?? Some people believe that EGO is being held back because they think EGO may be planning to buy another miner…but I think the rising price of gold is putting pressure on this one to go higher, buyout or not!

CLICK HERE TO SEE CHART OF EGO- Weekly View

ACE

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October 9, 2010
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Ace
ETFs, hedge funds

The Long-Short Strategy of Trading

October 9, 2010 ETFs, hedge funds Leave a comment

Anyone who has been following me a while will notice that I play percentages and odds…I am rarely ever 100% bull or bear, but I try to align my portfolios to be favorable in the main direction, and increasingly, it is the long position that is favorable. There are hedge funds that use a similar strategy, known as “long-short” strategies, using leverage. My leverage comes from playing explosive stocks for the long side with some hedges in 2x and 3x short ETFs. (I tend to play the 2x ETFs because the 3xETFs offer too much negative leverage in a rising market–and they are more dangerous in volatile periods.) Some of my long positions are further leveraged by playing call options which can rise exponentially when my stocks are hot.

If anyone remembers the great baseball manager, Earl Weaver (Baltimore Orioles), I think it can be said that my trading style somewhat resembles the way that he strategized baseball, by going with the odds but always using a bit of caution along the way. He always had the odds with him when he switched pitchers to face batters at key moments in the game…he put in top defensive players late in the game, banking on holding the lead.

In football, there was John Madden who coached the Raiders , and he often struck me as a percentage guy…going for short safe passes to his tight ends and backs… and using the clock well late in tight games by passing to receivers along the sidelines. And most important of all about Madden, he strategized the gridiron like a chessboard–he knew all too well that great field position would stack the odds in his team’s favor, and so he had the best possible player in the often ignored punter position…a fella named Ray Guy who was probably the only punter ever drafted in the first round of an NFL draft…why? Because he was so ideal for Madden’s strategy of keeping the opposition pinned back deep in their own end of the field which ultimately gave his teams good field position, assuming his defense didn’t get the opposition to cough up the ball for easy scores first. Madden’s strategy with Guy was pure genius, if you ask me.

The point being here is that both Weaver and Madden had good teams year in and year out, even when they did not always have the best, highest paid players at every position. They played the odds…the percentages…that’s what I try to play too, and with my handy charts and a bit of understanding of the economic backdrop, I think I am doing quite well with some very handsome winners! Thank you. 

Ace

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October 6, 2010
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Ace
china, fed, japan, treasuries

China painting US and Japan into corner?

October 6, 2010 china, fed, japan, treasuries Leave a comment

Has anyone noticed how China is trying to position both the US and Japan into a corner?

China may stop buying US treasuries soon…and leave both the FED and the JCB holding a bunch of worthless paper? The Chinese premier has been in Europe this week trying to convince the ECB not to go along with the US.

At the same time, we have the JCB buying up US$ in an attemtpt to weaken the YEN…and Japan takes the $$$ it buys and invests them in US Treasuries.

…and wait until the US raises tariffs on Chinese imports…you can pretty much see that is coming.

The whole thing is developing into a major story, if you ask me…one thing is for sure…buying gold and silver now could be a very smart move over the next 12 months.

Ace

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October 4, 2010
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Ace
etf, Head and shoulders, Standard and Poors

Bearish ETF Shows Market Weakness is Developing

October 4, 2010 etf, Head and shoulders, Standard and Poors Leave a comment

SH which is 1x short the S&P500 shows a weakside pSAR flip
today…let’s see if the SH can overcome the recent neckline it fell
through?

…or is this just a headfake by the Bears and will SH
continue downward ultimately to the typical H&S target which would
be about $42? We’re at a decision point here today…it should be
interesting to watch.

Ace

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October 2, 2010
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Ace
apple, nasdaq, weekly chart

Apple falling…Will Nasdaq tumble shortly?

October 2, 2010 apple, nasdaq, weekly chart Leave a comment

As I was reminded today when listening to the Fast Money show, AAPL makes up 20% of the weight in the Naz 100 (NDX).

On
the WEEKLY chart, AAPL shows a descent by both the RSI(2) and the
StochRSI…this seems to hint that the NDX may be under pressure the
early part of next week…unless the other stocks in that index can
overcome AAPL’s downward move?

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