2007 blog entries
The trend is our friend...12/30/2007
Gold is up about $3 as we write and we continue following the strong extant trend in it, and the same with the various agricultural commodities. We'll be watching wheat closely for signs a temporary bottom is in, and the S&P 500 (currently up one in the pre-market) for a possible short position.
Update 12/31/2007 - we wish all a prosperous and Happy New Year, and may it not be as dark as many fear.
Out of half of the gold additions from last week at decent profit, up trend broken. Also took 2/3 of the existing profits in sugar and beans.
Update 1/2/2008 - quite the move in gold, we added a bit to our longs as insurance. Exited remaining sugar longs but still have the beans. Added a small S&P short position.
9:20 AM PST - added substantially to S&P short and also some to gold longs (*duh*) and bean longs. 10:43 AM PST - backed off on some S&P shorts, still expecting more downside but stops are stops. 11:22 AM PST Wheat appears to have bottomed and we expect to enter longs tomorrow. Sugar may have ended its short correction too. 11:28 AM - back in the short S&P position closed about an hour ago.
Update 1/3/2008 - small adds to all long positions, still short the S&P. As expected yesterday, added wheat longs this morning. We're currently carrying the maximum leverage with which we're comfortable - well over 6:1 - and will likely not add anything more.
Update 1/4/2008 - added substantially to S&P shorts on unemployment report (late post, computer troubles). Lightened up again (substantially) on CEF, and some on gold futures longs.
Recession and the basics12/23/2007
We've gone out on a limb and called the US recession as having started in July/August 2007 (even though the NBER will likely not call it as having started that early) and its reflected on our newer charts. Our best current guess is that it'll be over in March/April 2008. We'll change it as our views and conditions change.
Longer viewThe watchword of the next few years is the "basics" - as in food, water, minimum/basic housing & health care, energy, and assets that are not subject to artificial control and are not heavily debt related. 2008 will likely be "The year of the basics".
Gazing deeply into our crystal ball, our best current guess for the earliest peak of the current Dow/gold cycle is mid March 2011 or early October 2011, based partially on the work of Jim Sinclair.
"The Federal Reserve intends to conduct biweekly Term Auction Facility (TAF) auctions for as long as necessary to address elevated pressures in short-term funding markets. The Board of Governors will announce the sizes of the January 14 and January 28 TAF auctions at noon on January 4." (source)
Update 12/24/2007 - Note a change to our Dow prediction on the forecast page. Sugar continues in a very strong move.
Enjoy the probable Santa rally however long it lasts, and Happy Holidays to all!
Gold 1966-1980 versus now
Barron's Gold Mining Index 1966-1980 versus now
New commercial paper charts
Update 12/26/2007 - sugar & beans continue to do well, added back our position in beans that we dropped last week and a bit more. The second $20 billion of TAF money will be active tomorrow.
Another record high in SecLend operations today - $16.5 billion accepted.
Update 12/27/2007 - added back a bit to our gold longs. Bhutto's assassination is very significant from a geopolitical stability viewpoint.
Another $12.5 billion drop in the SOMA balance for next Thursday. This is disinflationary.
Tightened up sugar stops. Wheat seems to have support just above $9, basis nearby. Exited gold longs from this morning, follow through not there.
Update 12/28/2007 - add back the bit to gold longs, not sure whether we'll carry it through the weekend. We're close to the maximum leverage we're comfortable with carrying on beans & sugar longs but will probably add a bit after the 1st.
9:57 AM PST - The two TIO auctions today were extraordinary. $20 billion was offered but only $2.65 billion was actually accepted... and this was at interest rates between 3.9% and 4.12%. Added significantly to gold longs in spite of the upcoming weekend - this translates to "US dollars not wanted on the short term".
Wheat down a lot today, probable temporary bottom forming...
The BDI (Baltic Dry Index) continues to drop (down 7% in 3 weeks), implying a global slowdown and more pain in US stock markets. It was just over 2,000 in early 2006, and is now just under 10,000 - for what its worth. The SSEC China index is also down about 20% from it's all time high of about 6000 since October. Commercial paper spreads continue to grow, showing that the credit & liquidity crunch is not improving yet.
Update 12/17/2007 - added to all three ag positions (wheat, beans & sugar). Another TIO operation - $2.5 billion.
Update 12/18/2007 - sold a bit more gold longs into recent strangth. Reminder that Friday is quad witching. Moist significant news today - the $500 billion or €348 billion two week below market (4.21% - the 10 year rate is about 4.35%) short term TOMO like injection by the ECB. The ECB is being much more aggressive than the Fed, and the BoE is also now officially supporting Northern Rock. Central banks are in "cooperating partnership" mode more than we've ever seen. Another TIO operation for tomorrow (15 day term) - $10 billion. SecLend operations continue at very high levels. 9:10 AM PST - quite the "commentary" that with all the billions of temp injections, etc. lately that US stock markets are not rallying.
Tightened up stops on all ag positions.
Update 12/19/2007 - lightened up on wheat and beans positions, added to sugar. Added Term Auction Facility (TAF) data to our TIO & TOMO tracking charts on our page. The total pool is approaching a record high... "interesting" how the gold market is not responding.
Update 12/20/2007 - stopped out of all wheat and 1/3 of bean positions, added more sugar. No change on gold positions, except lightened up significantly on CEF.
Update 12/21/2007 - tomorrow is the Bradley turn date (± one week). Today is quad witching... where the option writers do their best take away profits. The Baltic Dry Index continues to point at a large correction before the end of January 2008, and likely much sooner. Will likely add back the long bean positions closed yesterday on Wednesday, the 26th. Sold all but a small ("insurance") long gold position into today's strength.
All time record SecLend operation today - $19.9 billion submitted, $16.1 billion actually auctioned & accepted. The Fed *really* wants higher rates, or at least for them not to fall much.
We think it's likely that Monday will be an up day on US stock markets, since there'll be a $4 billion TIO in effect, and most recent Mondays have been down (contrary opinion). But Tuesday is FOMC day and Friday is quad witching day, plus we get PPI and CPI too. We're watching the Fibonnaci levels on gold and oil, and will likely continue to lighten up on gold as well as probably adding to wheat and soybean longs as the market is telling us.
Longer term thoughts:
- A Creeping Corralito is likely to be a longer term path of the US dollar. It has certainly become significantly less convenient to move money in and out of the US over the last few years.
- As of June 2007 nominal GDP in trillions - US $13.9, Euro $16.8, Japan $6.2, China $3.0. We point this out both for perspective and balance against articles in the various press, but also as a commentary on the likelihood of the rest of the world avoiding problems as the US recession (slowdown if you insist) develops.
- The general idea that the US will decouple from the rest of the world and that there will be little effect on the rest of the world flies directly into the face of a main and very key trend of the last few decades - globalization.
Update 12/10/2007 - nice moves in gold, wheat & beans so far today. We sold more of our gold position into the strength and are unleveraged. Note also that our SecLend signal has likely fired for a bond short.
Another $5 billion reduction in the Fed's SOMA balance to come on Thursday - this is a deflationary or disinflationary action, and is similar to a negative permanent repo (POMO).Source
Update 12/11/2007 - 4 of 7 of our proprietary (a daily version of the 10 year minus CPI+lies chart on our forecast page is one, for example) gold buy signals fired late yesterday, for what its worth. Very strong SecLend OMOs the last two days - opened a TBond short. $4 billion one day TIO tomorrow. 11:27 AM PST - out of TBond short at a small loss.
Update 12/12/2007 - wild volatility, and we're still steering clear of those markets. 9:44 AM PST - SecLend very strong again today, and the $4 billion TIO seems to have been at least partially effective. Sugar finally is making the expected move, and is right at overhead down trend line resistance - we're watching closely for a break above it, and opened a tiny long position. No other changes.
The source announcement from the Fed on the new TAF (Term Auction Facility) to help the current liquidity/solvency crunch areas. "By allowing the Federal Reserve to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations, this facility could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress." So far, these just look similar to one month TOMOs from here, with the exception of them being available to many more "institutions". The 6 month $24 billion swaps with the ECB and SNB are within the range of allowed TOMOs. Data will be available here.
Update 12/13/2007 - The Fed will be doing what boils down to a reverse POMO of about $15 billion today - source, perhaps to help offset the new TAF operations(?) - we're uncertain of the reasoning. Net add of $5 billion in TOMOs today. An $8.6 billion TIO is in the works for Monday ($20 billion was offered - most of the bids were below the 4.125% minimum). We lightened up on our mining funds and CEF today.
Update 12/14/2007 - late post, under the weather with flu. Added to beans, wheat & sugar longs and sold half of remaining gold futures longs. Monday TIO total now $36.6 billion.
Short term, we're still looking at a temporary top in gold & silver around mid December, although it may already be in... and will likely sell our remaining current longs on any significant blow off... or around $745-765 basis spot. If we miss a huge up move, so be it... there's lots and lots of up & down moves to come before the hard asset cycle peaks many years from now... and in lots of other areas besides gold & silver too. For what its worth, the next buy point looks to be around the next Armstrong cycle turn date in March 2008.
There's a good chance in our opinion that if PMs break more than a little, agricultural commodities and probably energy will break too... we do have a globalized world and liquidity problems will affect everything. There ain't so such thing as an uncoupled globalized world. As always too, we'll let the market tell us where it's going... and keep our core PMs regardless.
Our charts & work continue to show mixed signals on the US stock markets but given their recent performance, we're still bearish... and on the side... and also note a Bradley turn date of 12/22 coming up.
Update 12/3/2007 - Lightened up quite a bit on wheat & beans. Regarding the short gold recommendation from Goldman Sachs, keep in mind that they're been short gold futures on the TOCOM for many many months (link).
Major intermediate term item - Henry Groppe predicts oil to fall back to $60-80 (link). Note that our own long term minimum oil target is $250 per barrel, on a best guess basis.
Update 12/4/2007 - the expected re-challenge of the recent gold highs is underway, dropped spreads. Nibbling back at some wheat & beans longs.
Update 12/5/2007 - it appears from the last two days of SecLend action that the Fed is fairly happy with where the 10 year and 3 month rates are. Oil likely headed for a challenge of the 61.8% level at about $81 - no trades though. Both wheat & beans are showing short term triangles, and we'll follow any upside breakout while also being aware of false signals due to too tight of a trend line on the triangle ("chart painting"). Very likely that we'll establish a USDX long position tomorrow morning... and start lightening up on gold longs too, barring a break above $803-806 spot between now & then.
Update 12/6/2007 - 8:34 AM PST, we're still holding off on any changes in long gold... and watching for a decent entry point for a small USDX long.
Update 12/7/2007 - lightened up a bit more on gold longs and are now close to unleveraged. No change on wheat or beans. Almost went long USDX but will wait until Monday to allow for anything "unusual" to occur over the weekend. Note the $4 billion TIO is only a one day operation, and also does not become available until Monday.
Most likely yet another nice up week in PMs ahead... and as usual, we won't fight the market trend or momentum. Still looking at bean and wheat longs for another ride. The TOMO & TIO pool balance is still running about 60% above average, allowing an up in stock markets (but we're not going there) too.
Update 11/26/2007 - added long beans and wheat. Some significant coordinated actions by the Fed & ECB to add temporary liquidity via TOMO & SecLend type operations announced today for the period from now until early January (link 1, link 2).
Update 11/27/2007 - stopped out of our gold & silver longs earlier this morning, but still carrying the ones put on in August and the remaining spreads. Beans & wheat looking good but put fairly tight market stops on. High whipsaw potentials exist across most markets as we transition to a broader recessionary & global slowdown environment. Dr. Copper has also spoken...
A large warning - the predictive work on our forecast page is based on algorithms which do *not* have any recessionary or similar factors built in. Use them at your own risk, and do your own due diligence, as always.
Announcement (repeat): unless something unforeseen occurs, we will be dropping daily and regular commentary on our blog as of no later than early January 2008.
Update 11/28/2007 - trying a sugar long again, to go along with the beans and wheat. Another unusual one day TIO today of at least $3 billion. Interesting bounce in US stocks markets - perhaps an attempt to form a right shoulder in the developing H&S? 8:13 AM PST - very close to breaking a significant down trend line...
Battle royale continues in precious metals - we still expect a blow off before an upcoming temporary top.
Update 11/29/2007 - no changes, except backed out of sugar position at a tiny profit and added to wheat on the strength. We're bemused about the stock market move yesterday and also wonder if a sucker's rally might be underway.
Thought for the week: "A relatively small percentage of the population can twist and corrupt the financial system, destroying the lives of hundreds of thousands of their fellow citizens, because its profitable, and because they simply do not care about the damage they do to others. The dirty little secret is that capitalism, like any other form of social structure, requires policing, regulation, laws, and enforcement to prevent the predations of sociopaths and con men, no matter what weapons they may choose to employ." Source
Update 11/30/2007 - lightened up a bit on gold, out of silver at a profit for now. Wheat & beans trades going quite well.
We still think its likely that the low $770s in gold (basis cash) is in the cards before at least a short resumption of the uptrend... black swans notwithstanding. Possible S&P short in the 1480-1490 area, basis cash. Still a bit hopeful on our tiny sugar long. Good coffee base is in, possible explosive move at hand since it's close to significant resistance. Rice & bean complex still moving big - up about 20%+ since August.
We continue to juggle our spreads based on the gap trends & momentum.
Update 11/19/2007 - added S&P short positions, out of sugar. Ooops on our coffee guesstimate, momemtum slowing on soybean oil.
All time record high Seclend submission today at $16.145 billion. Added more S&P shorts... considering a small net short in PMs as a hedge via lifting some longs in our spreads. Lightened up a bunch on miner fund.
Update 11/20/2007 - closed S&P shorts at a profit. Two TOMO operations today but only a net gain of about $4.5 billion in the pool (current total $52.25 billion, significantly higher than the 2007 ~$28 billion average pool balance). No change on PM spreads... yet. We did hit the 61.8% Fib retrace yesterday... 11:05 AM PST, we're starting to lift the short side of the spreads and expecting a resumption of the upmove. Will likely be adding some bean longs on any reaction, same with wheat.
Update 11/21/2007 - no changes, and probably none on Friday either. TOMO balance up another $3.75 billion, and a $4 billion 4 day TIO that starts on Friday.
Happy Thanksgiving to one and all.
Update 11/23/2007 - so far, so good on our expectation on another run at the recent metals highs. Lifted most of our spreads.
So many cross currents - we expect the coming week to be quite choppy as the markets world wide keep adjusting to the new reality involving a US recession, a likely Euro area slowdown, falling/choppy stock markets, over heated commodity markets, derivatives risks, under pricing of risks, etc. The game of "chicken" that the Fed is playing with the dollar continues to be "interesting" in the sense of the old Chinese curse.
Quite the reaction occuring in metals - our spreads are working as hoped.
Update 11/12/2007 - a few more spreads put on this morning. Still holding sugar positions, and we could end up being stopped out at a not insignificant loss. We're watching the rounded bottom and french curves trend lines closely.
9:13 AM PST - we were offline since yesterday afternoon due to a very unlikely set of circumstances (this is our first upload since early Sunday) that took our normal and two backup systems off line. We're currently looking at removing some gold spreads due to sideways range trading in recent hours, but silver hasn't firmed up yet...
Here's the Fibonacci numbers for the gold move since mid August, basis cash:
Announcement (repeat): unless something unforeseen occurs, we will be dropping daily and regular commentary on our blog as of no later than early January 2008.
Update 11/13/2007 - not much change, watching the different month changes in the futures contracts to know when to lift which side of the spreads. Still hanging in there on sugar. The S&P move today may be setting up a decent shorting opportunity... time will tell...
Update 11/14/2007 - S&P strength has us waiting, no shorting opportunities appear viable until another chance around 1525-1535, basis cash. Lifted the short side of 1/3 of our PM spreads... and another 1/3 lifted. 12:41 PM We've changed our minds on the S&P, and are still looking at shorting. The market is weak, plus the TIO & TOMO pool is low. Note: CPI reports tomorrow morning...
Update 11/16/2007 - out of all but a small long sugar position at a loss. Still holding long gold & silver, in spreads, and still thinking we have more upside in this run. Was tempted to go short the S&P but didn't, the reaction wasn't as strong as expected and our confidence isn't high enough to trade it yet... partially due to it being options expiration week.
Still likely steady11/04/2007
Who know... but our best guess is that the existing trends will stay in motion in commodities for the coming week. Holding sugar, gold & silver longs... and may add to gold longs later today (gold is level with Friday's close as we write)... although we're close to carrying the maximum leverage with which we're comfortable now.
Update 11/05/2007 - added some silver, tightened sugar stops on 1/2 our position. Missed the breakout in rice, but the trading volume is still too low for our preferences. Still holding our initial long gold position from August and are currently carrying about 4:1 leverage on the full position, and about 2.5:1 on silver. Our expectation is that we'll be moving more towards silver over the next few days to weeks. Among other reasons, our silver prediction chart on our forecast page is near another relative bottom.
SecLend about $9 billion today, still watching the trend line on the 10 year. The live cattle market remains a conundrum - it's been stuck in a wide trading range all year.
Update 11/06/2007 - Zero TOMOs or TIOs so far today, quite unusual. Added to silver longs, up to 4:1 now. 7:58 AM PST - TOMOS just late again, it came in at $4.25B. 10:35 AM PST - SecLend also late... at around $8.8B. We're tempted to put on our tinfoil hat and comment about lateness of making the data public... but will stifle for now.
Update 11/07/2007 - big TIO on deck, $8-22 billion offered. $8.75B TOMO. Silver is being its wild volatility self - get used to it, much more to come. We're awaiting the end of the spike down, expected to be in the 14.80 to 15.20 range basis cash. 8:19 AM PST - back into prior position, looks like 15.35 cash will hold... 9:40 AM PST - TIOs came in at $12.065 billion, 4.375% interest rate. Plenty of ammo for a ramp up in stock markets, but we're not taking the bait.
We're backing off silver & gold long positions for now and are back down to about 2:1 average...
Note: the volatility component of the algorithm of our silver prediction has just been updated, and it has made quite a change in price expectations after approximately mid December.
Update 11/08/2007 - a mild warning... we have received an unusually high number of calls from acquaintances and their friends asking about gold & silver, etc. Our contrary opinion indicator light is beginning to glow...
We're back up to 3:1, and also added a few sugar longs.
(Update 11/09/2007 - lightened up more than usual for the weekend and added some hedges with long dated contracts, odd things happening with interest rates... no change in sugar position.
Wednesday will likely be key10/28/2007
We have both the 1st report on 3rd quarter GDP and also the FOMC meeting on Wednesday, so we don't expect to do much trading until after both are in. Interestingly enough, the TIO pool balance will hit zero on Wednesday... and we're slightly biased to the S&P long side... but not enough to trade. The Bradley 17th turn date is still pointing negative... and when measured in gold, the Dow is down 17% since mid July.
We'll be watching silver very closely though and may add to our longs.
(Update 10/29/2007 - 6:26 AM PST added some gold & silver longs on the recent reaction. 6:43 AM PST - $2 billion 3 day TIO. 10:50 PM PST - moved cotton stops up to protect profits. Will probably back off some on our gold & silver longs tomorrow (perhaps convert them to some spreads?) due to the upcoming GDP report and FOMC meeting - risk management is paramount when carrying high leverage. Soybean oil has broken out and soybeans are close to breaking into new highs... still watching for a sugar reaction for an entry.)
(Update 10/30/2007 - late - $12.23 billion TIO, two TOMO ops totalling $17 billion... very unusual historically for the Fed to do two TOMOs on a day other than Thursday. Backed off as expected with some of our leveraged gold & silver positions for risk control partially via some spreads, took some profits in cotton.
Apparently a false breakout or short term bull trap on the bean complex... and interesting how oil is tracking with the fibonacci numbers we noted last week... also, exited the cotton trade fully. Possible bottom in coffee and sugar looking good too - we'll see after the GDP and FOMC tomorrow, may enter both.)
(Update 10/31/2007 - removed 1/2 our spreads due to unexpected positive GDP. 9:41 AM PST - huge SecLend operation, almost $11 billion. Note that the GDP deflator came in about 2.4% lower than the average for the last few years - if it would even have been average, GDP would have been around 1.5% instead of 3.9%.)
(Update 11/1/2007 - Silver showing it's 'dark side'. We were stopped out early this morning and are awaiting the spike bottom for re-entry. Small S&P short position put on pre-open, added on smaller than expected $2 billion TIO. Indication of some ESF activity in the dollar... 7:27 AM PST - back into silver with very small position, testing the waters, added back the gold spreads that we dropped yesterday. 8:02 AM PST - fast moving markets today, out of S&P shorts... and finally established a small sugar long.)
(Update 11/2/2007 - late - another very good day for metals. Dropped all spreads [*duh*], added to silver & sugar longs. If it wasn't Friday, we would have added more gold longs. )
Another that was the week that was...10/21/2007
A little exercise on oil prices and possibilities, prompted by a comment from t. dossman (hat tip)... a Fibonacci calculation using the 2006 high and the early 2007 low shows targets at a 138.2% level of $89.07, a 150.0% level of $92.42 and a 161.8% level of $95.76. The Thursday close was around $89.40. These are observations, not trading recommendations.
Still holding gold longs, S&P shorts, cotton longs and still watching for an entry to long sugar and/or coffee. The most likely actions will be adding to current open positions though.
(Update 10/22/2007 - 8:35 AM PST our power and internet were out until just a short time ago, so we had exited all but slightly leveraged positions in gold longs and S&P shorts via phone many hours ago. Now that we see the full picture, we've exited the rest of our S&P shorts with substantial profits. We've also moved up our mental stops on gold into the $720-735 area, basis the December contract. 12:38 PM PST - adding substantially to gold longs.)
(Update 10/23/2007 - no changes so far. Risk/reward too small for us on an S&P long, but coffee & cotton longs are possible... kudos to dossman on the short term oil call.)
(Update 10/24/2007 - no changes. Major cusp developing at this time is most instruments and we're watching very closely. Coffee & cotton have hit our buy point, and we'll likely enter tomorrow depending on the call and open and first 30 minutes of trading.)
(Update 10/25/2007 - probably another mild or slightly better up day in the S&P - $2 billion TIO and a about a normal Thursday TOMO (no trade though). Opened another cotton trade and awaiting a reaction to enter coffee.
10:34 AM PST - silver back on our radar, ity's way overdue for one of its trademark explosive moves.
6:56 PM PST - added some silver longs.)
Announcement & reminder: unless something unforeseen occurs, we will be dropping daily and regular commentary on our blog as of early January 2008.
Still watching for an expected explosive move in silver, and holding our gold longs. Wednesday is the most important Bradley turn date of the year and CPI will also be released on that day. We'll also be paying particular to TIOs to see if another big operation is afoot. We'll probably add to our cotton and coffee longs too.
(Update 10/15/2007) Stopped out of 1/2 our coffee position, looks like a squeeze in progress. Added a small S&P short earlier. 8:37 AM PST - we have poked above Dec gold resistance and fallen back, not an unhealthy reaction...the battle royale continues. 9:37 AM PST, stopped out of remaining coffee position, added to cotton. 10:14 AM PST, expecting to re-enter long coffee around 1.30 basis nearby - strong support.
TIO operation of $5 billion appears to have been "not enough". 11:32 AM PST - out of S&P shorts. 11:41 AM PST - added to gold longs and established a very small silver long. Holding off on re-establishing coffee long until tomorrow, there may be another push down to flush weak longs.
(Update 10/16/2007 - short the S&P again on a weak TIO today - only $2 billion. Added to S&P short on light TOMO & TA trends. Close to being stopped out of silver position, sold some gold into the small rally. Bought some coffee in the mid/high 128s based on a 5 minute chart rounded bottom. Cotton not behaving as expected, tightened up stop and made it an actual market stop. 12:54 PM PST - exited 1/2 of our S&P short and loosened up the market stop on the rest, just in case we get a wild overnight reaction and/or CPI surprises... and tomorrow is the Bradley turn date...)
(Update 10/17/2007 - no changes other than adding to S&P shorts on the break. Possible rounded bottom in sugar... also considering lightening up on some miners... 11:57 PM PST, sold the S&P shorts from this morning. Sold 1/3 of the miners we bought in August - probably more to come but it isn't a profit until the trade is closed.)
(Update 10/18/2007 - Brought our mental stop on gold up to the area around $720, and adding some market stops to recently added positions due to a disturbing pattern on some of our internal charts. Cotton doing *quite* well, stopped out of coffee at a loss. Looking for a sugar entry point and a silver add point.)
(Update 10/18/2007 - Added more S&P shorts and will probably exit most positions before or at the close. Also added a few more gold and cotton longs. 8:28 AM PST - attack underway on silver, probably will cause a short gold drop. Stopped out of very small silver long.... 9:49 AM PST back into with a bigger silver long.... 10:24 AM PST, dropped silver longs (a wash) and a few gold longs for the weekend, just in case. 12:33 PM PST - quite a move down in progress. We're watching for a momentum slowdown in order to exit most of our substantial S&P short position for the weekend. One hell of a week!
We did exit 2/3s of our S&P shorts near the market close.)
We're still bullish on precious metals in the near future, and bearish on the dollar. The yen has almost reached a 38% retracment level on its June-Aug move so this week could be a good time to re-establish a position. Still looking at copper, coffee and natural gas...
(Update 10/10/2007) There have been no significant changes in our gold positions, we're still in a trading range awaiting a confirmed break either direction... and we're still generally bullish through late November or early December. TOCOM shorts have dropped for two days running so that's a slight bullish indicator.
Gap not filled yet on copper, but took a small coffee long today.
(Update 10/11/2007) Not much question left on gold's direction - we added significantly to our longs, and also established a small S&P long. Looking to add some silver... and oops on the S&P long, we're out with a small loss (yen reversal... and we even noted the likelihood of it last Friday)... we may go short tomorrow depending on TIOs & TOMOs. The coffee trade is doing well and more than offset the S&P loss.
1:44 PM PST - backed off a bit on gold longs due to yen behavior.
(Update 10/12/2007) Another large TIO operation starting today ($9 billion injection)? Put on a small cotton long, added to coffee... no change in gold. Possible new SecLend operation under way...
Time for silver?9/30/2007
Precious metals still looking good. Silver looking likely for one of its almost trademarked explosive moves (COT silver commercials are still unusually light and the gold/silver ratio is near the high of its range for the last year). USDX hit new all time low, and still none of our indicators show any ESF or other intervention... one might think it's being allowed to drop...
We'll also be watching for an opportunity to short US stocks markets based on trend break, end of quarter "action" is over and TIO operation has peaked.
Announcement: unless something unforeseen occurs, we will be dropping daily and regular commentary on our blog as of early January 2008.
(Update 10/1/2007 - another $5 billion TIO today. We've implemented actual trailing market stops at staggered levels on our gold futures, and added a few contracts too. 10:47 PM PST, profitably stopped out of all our positions with the tightest stop levels.)
(Update 10/2/2007 - stopped out of 2nd of 4 tiers on our gold longs. 9:28 AM PST - manually exited 3rd of 4th tier. The only real profits are the ones in closed trades, plenty of moves ahead. Back down to about 2:1 leverage.)
(Update 10/3/2007 - on the way back down to 1.5:1 leverage. $700-715 target looking more likely.)
(Update 10/4/2007 - continuing to lighten up and lock in profits, headed for under 1:1 leverage. We don't think the move is over. Sold more into the rally near end of day)
(Update 10/5/2007 - no changes, under 1:1 leverage on gold longs. Long a bit of coffee on the breakout. Rice looking good, but the volume and liquidity is still low for our taste. Copper & natural gas also interesting... cotton has an amazing "blocked" chart pattern... )
oops and pluses9/23/2007
We sure blew it on the Fed call and got tagged for a loss last week too, but overall it was a very good week. We're approaching a few key TA points and a short gold or USDX bounce is not out of the question.
As always, we'll try our best to let the market tell us and not try to impose our thoughts and expectations on it. The trend is our friend, as always. We'll likely add more gold long contracts this afternoon when the market opens or tomorrow... or both. We may even add some silver contracts back on too... the down trend has resoundingly been broken and COT commercials are unusually light. COT gold shorts are close to their max short position for the last year - for what its worth.
6:04 PM PST - added back the long golds we took off on Friday.
(Update 9/24/2007 - lightened up again on gold futures. Uptrend in jeopardy... took a small loss... standing by to see if up trend line support holds...so far, so good. 9:29 PM PST - lightening up again significantly, protecting & booking existing profits. Dec 2007 support around $730-732...)
(Update 9/25/2007 - added back some long gold. Two of our pretty reliable internal charts are still looking a bit bearish, so we're not adding big and have placed market stops for overnight, as is usual for us the last week or so.)
(Update 9/26/2007 - all time record high TIO ($85.5 billion) and TIO+TOMO ($141.5 billion) pool balances achieved today. Looking for long S&P entry point... and in for a medium sized position at 7:36 AM PST. Out of 75% of our gold longs with substantial profits... too dicey. Out of 1/2 our miners and S&P longs, temporarily until things clarify some - possible TIO & TOMO peak. 12:55 PM PST Out of all S&P longs.)
Announcement: unless something unforeseen occurs, we will be dropping daily and regular commentary on our blog as of early January 2008.
(Update 9/27/2007 - Added a very few gold futures longs, potential breakout on deck. Yen patterns look to be forecasting down US markets tomorrow, no entry yet. The TOMO & TIO operations also look to have peaked.)
(Update 9/28/2007 - the triangle in gold & silver has been resolved, we added again. Watching for S&P short opportunity, a break below 1516 basis spot will probably be enough for an initial small position.)
Bumps & grinds...9/16/2007
We're still of the mind that Wall St. will get a shock when the Fed does not do what's expected. Whether they'll make no change or only doing .25% or less isn't the question in our mind, just that the Fed action will be less than expected and hoped for by the Wall St. bump & grind crowd.
Keep in mind that the $30+ billion injection from the TIOs last week will be available on Monday and likely create an up market... and in tinfoil hat department mode, perhaps it's intended to "protect" the stock market after the FOMC announcement on Tuesday.
We're also watching closely for an attack on gold and are prepared to lighten up or even go short for a quick ride down.
(Update 9/17/2007 - took some gold profits near the close, and will likely re-establish them and add more tomorrow very early.
Another big TIO add today - $10+ billion - and the markets being down speaks volumes about their short term lack of strength and various credit and liquidity and recession concerns.)
(Update 9/18/2007) - an *extremely* unusual TIO this morning. $9 billion offered and *zero* accepted. In other words, not one bank wanted to borrow anything. Upped our gold long, added to CEF and similar.
On the TOCOM, Mitsui continues to liquidate their gold shorts and GS isn't adding much - their short position is less than half the peak of just two months ago, and less than 1/3 of its peak last year.
ooops - we sure blew it on the short S&P position, and are licking our wounds from the explosive move against us. At least it was a relatively small position we took before the announcement. At least we shorted the USDX after we closed the S&P short.
12:23 PM - we violated one of our rules and went long the S&P.)
(Update 9/19/2007 - Late update due to computer troubles. We added to S&P longs this morning, new highs ahead. Another TIO this morning of $6.45 billion, total pool now at $70.33 billion. Significant adds to long gold futures, dropped the USDX short.)
(Update 9/20/2007 - don't like the looks of the market today, exited S&P longs, added gold. Possible counter trend move in the yen is on deck too...
(late) we'll likely stay out of the stock market today - it's options expiration day. And we're pretty close to max leverage we're willing to carry anyhow, considering our gold futures longs.
9:11 PM PST - lightened up some on gold futures due to options expiration - may add back tomorrow depending on short term action.)
(Update 9/21/2007 - very late, forgot to post an update. We did lighten up on gold more on Friday - partially due to price action and partially due to not wanting to carrying much leverage through the weekend.)
Our proprietary broad cycle "turn indicator" will fire tomorrow or Tuesday, so we're still skittish about a "turbo" long in gold or silver. Both the yen and Nikkei are down substantially (7:50 PM PST), so it doesn't look like a good day tomorrow for the US stock markets.
(Update 9/10/2007 - 9:37 AM PST - less move in gold than expected so far today. SecLend fairly light today, 10 year target around 4%.
Yen reversal, stocks up... and finish very slightly down. )
(Update 9/11/2007 - late update, added more to our gold long position. Added & adding more selected miners (DROOY, SSRI plus a few juniors). Very light SecLend, yen still providing "guidance" to US stocks. Still expecting no Fed Funds cut and will likely short right before the release - assuming no major changes like a big stock market fall between now & then.)
(Update 9/12/07 - dropping some leverage in gold futures temporarily.)
(Update 9/13/2007 - backing down to about 2.5x leverage in gold futures, momentum issues continue... now 2.0x...
HUGE pump - $21 billion TOMO, $21-36 billion TIO (actually ended up as $35.38 billion at about 4.64% interest). Long the S&P 500.
Back up to 2.5x gold leverage... still looking a bit toppy...back to 2.0... dropped all long silver positions.
Added to S&P longs, looks like we'll break the reverse H&S - target of new highs although volatility and the surprise factors are too high for us to be comfortable carrying substantial overnight S&P long positions. 1:03 PM PST - out of the S&P long.
9:43 PM PST Lightened up again on gold futures - no leverage in use.)
Surprise, surprise - more whipsaws ahead9/3/2007
The markets remain treacherous for short term traders, so we're still practicing the third option of bull, bear or on the side.
We'll be getting out of the rest of our miners on Tuesday, but as it looks now will be keeping our toe hold in long gold futures... with a tight market (not mental) stop. If it gets hit, we'll still have a small profit.
Guess we won't be selling our miners today. Added substantially to gold futures long, opened a silver long and an S&P 500 long position. Mr. Market is being very kind to us, and our gold prediction chart work luckily seems to have called a turn again.
8:16 AM PST - Also looking at cattle and beans longs... and natural gas.
(Update 9/5/2007 - very late update due to an emergency - spotty updates today & tomorrow. Out of S&P 500 long as of about 6:15 AM PST, also lightened up a bit on gold long.)
(Update 9/6/2007 - added significantly to gold long and a bit to silver longs. Proprietary broad cycle "turn indicator" will fire on or about Monday, so we're still skittish about a "turbo" long. Fairly large TOMO today...)
(Update 9/7/2007 - shifted large percentage of assets to CEF and similar protection vehicles, more to come.)
Non weak week ahead?8/26/2007
From last Friday - long gold looking good for next week, took a medium sized USDX short position today. We're still mostly on the side in US and world stock markets, but biased on the upside this week again, and more than last week... and watching the yen for cues, as usual.
(Update 8/27/2007 - $2.5 billion 7 day TIO.)
(Update 8/28/2007 - Went short the S&P 500 this morning.
Value of Gold vs. the Dollar - What Most Investors Don't Know About Gold and the U.S. Dollar
Out of S&P 500 short with a nice profit.
(evening)Big run on the yen underway, going short the yen and out of short dollar position... and out of yen as the trend changed with a very small profit. 2007 - the year of the Whipsaw.)
Urban Survival noted a few charts we created recently comparing 1929, 1937, 2000 and 2007 - links are here, here and here. Note that they are updated very infrequently.
Whipsaws, volatility and not fighting the market8/18/2007
Watching the yen still remains very key. The huge move on Thursday and reversal on Friday, along with the discount rate cut, may augur well for a temporary bottom... we'll see. We have our seat belts fastened and our tray tables are in the upright and locked position.
The USDX has broken it's short term uptrend line. China's SSEC stock index had a high around 4900 and closed the week below 4700. Coffee is right at its intermediate trend line support after quite a drop last week, and is a likely play this week on the long side. Silver did what it normally does in a recession and dropped, gold is still in its broad trading range of $620-$720. Soybean support at $7.00-7.20 - the head & shoulders fired. Sugar almost had an outside reversal. Possible (likely?) price break down in wheat next week. Natural gas initial target $7.60-7.90.
A very light posting week ahead due to external obligations.
(Update 8/22/2007 - a $5 billion 5 day TIO this morning.)
(Update 8/24/2007 - We're now tracking the Fed's weekly discount window activities on our Fed watch page.
Large $18.4 billion net outflow from the Fed's custodial account reported yesterday leads (largest outflow since 1996 where our data begins) to a significant down move in the dollar today. Long gold looking good for next week, took a medium sized USDX short position today.
Whatever the markets say...8/12/2007
There are too many contradicting signals for us to make any calls on US or world stock markets, although we are slightly bullish on the short term. Watching the yen will be key. Our cynical side has us wondering if a relatively calm week is ahead.
For perspective, the Fed add/rescue of liquidity problems via TOMOs (very short term loans) during the last 5 days was about $83 billion whereas it was over $250 billion the 5 days following 9/11. The other injections from other central banks were also primarily via short term loans.
We continue to watch and will perhaps add to our natural gas and gold longs, and will probably re-establish a soybean long. Coffee looks to have bottomed but is also near key overhead resistance and has not closed above it two days. Wheat still looks to have room on the upside.
(Update 8/13)Re-established soybeans and added to natural gas positions, as expected. Coffee still intriguing. Closed 1/2 of our dollar hedge.
This seems a good time to remind again of an overall issue that we noted on our forecast page a while ago: "Warning: Note that our predictions should not be taken in isolation from other factors. For example, the US recession that we believe that we're in as of mid 2007 will affect all the predictions. They're basically just mechanical formulas based on money creation rates and do not have all factors built in."
(Update 8/14 - dropped the other half of out dollar hedge (trade deficit dropping part of the factor). Zero TIOs and TOMOs today, very unusual. ECB temporary loans down to $47 billion. Took some natural gas profits (support around 6.60 basis nearby), tightened soybeans stop. 9:04 AM PST - took profits and down to a very small gold long. 9:13 AM PST - out of soybeans at a profit. The liquidity crunch is having broad effects across all markets.)
(Update 8/15 - two days in a rows now with no TIOs or TOMOs - unprecedented.
Back in natural gas with a larger position. Dropped all but one contract of gold long. Stopped out of soybeans at a profit. CPI downtrending as per the inflation prediction on our forecast page... so far. Expecting more of a bounce of the S&P, Dow, etc.
8:55 AM PST - we did get a $7 billion one day TOMO, it was just unusually late. Mostly MBSs... and another huge SecLend op, looks like attempted TBill support from here.)
(Update 8/16 - *wow*, quite the rout all over the place. T-Bill down hugely, almost a record down day drop so far. The only thing we're holding is our natural gas longs, and we even lightened up on them - way too many whipsaw possibilities.)
We don't expect to change or add much before the FOMC meeting on Tuesday, and although no change in rates is likely, the next 7-10 days will mark a significant turning point on the intermediate term in our opinion. We're still watching natural gas, and will likely open some longs in precious metals, as well as probably opening an S&P trade based on the extant trend on the S&P 15 minutes or so after the FOMC meeting results are announced... assuming no large TOMO or TIOs operations on Tuesday morning.
(Update 8/6 - yen flag has resolved and we're back in. Target 86.5+ or 115.8. $5 billion TIO today.)
(Update 8/7 - we waited longer than 15 minutes until things clarified and then entered an S&P long. We expect to be out by the close. $4.5 billion TIO today.)
(Update 8/8 - Got our feet wet with a tiny long position in natural gas. Out of the yen position again. Added to beans. $12.5 billion TIO today, went long at the annoucement for a ride up. Huge SecLend operation this morning.)
(Update 8/10 - $35 billion TOMO, $2 billion TIO, SecLend average at $2.4 billion. Add to natgas, out of beans for the weekend, lightened up on USDX hedge. Likely green or only slightly read markets by end of da, but we're still on the side.>br> 10:41 AM PST - a 3rd TOMO operation has been announced for the day... $3 billion more for a total of $38 billion - $62 billion in the last two days. Small long added in gold.)
Still long the yen since we haven't hit our 84.50+ target yet, have a small short in gold and still watching natural gas. We were on the side in the S&P on Friday and don't expect to do anything tomorrow, although we're slightly biased to a small up day... and as usual, could turn on a dime... and with a healthy awareness of being whipsawed.
(Update 7/30 - added to gold short (TCM), starting position of a soybean long back on. Later - will probably lighten up another 50% on our yen long tomorrow.)
(Update 7/31 - we did drop the 2nd 1/3 of our yen position today, and will probably close it out tomorrow. Encouraging move today on natural gas towards a hoped for double bottom.
Note that as of last Friday, we're also keeping a long term short position as a hedge on the dollar as "insurance" against a dollar black swan. It covers over 3/4 of our overall dollar exposure and will be held until we're more certain on the short term.)
(Update 8/2 - out of the yen position. Added actual stops on our gold short position for protection. Natural gas moving as expected. Note that the yen pattern could be a flag, so we're on the alert for a break out and continuation of the trend)
(Update 8/3 - back in long beans, got stopped out/dropped gold shorts for the weekend - close to even. Having a tough time getting synced into the S&P, have missed most of the moves... a nice reverse flag though with a target of about 1410-1420.)
We expect to concentrate more on precious metals than other markets this coming week, and will also beware of bounces or wild whipsaws on Friday due to the GDP (Q2) release. The only change in our position last week was going back to a very light TBond short position and bean long.
Another very light comment week due to still being away from our normal trading environment. This will continue on & off through August.
(Update 7/25 - dropped 1/2 of yen long and USDX short and 2/3 of gold long, TIO operation means small S&P and Dow longs for a very short ride, dropped small TBond short, watching natural gas for a small long off a reaction low. 8:09 AM PST - dropped rest of USDX short, and gold long, add to stock longs, considering gold hedge... 8:56 AM PST - out of stock longs at a nice profit. 9:13 AM PST Standing by for possible re-entry to USDX hedge only position, adding back to yen long - trend is intact on yen.)
(Update 7/26 - flipping to short gold, out of miners at a small loss. Very rough weather ahead for the bulls probable in most markets(?). Approaching our yen target of very roughly 84.50 and will likely lighten up.)
(Update 7/27 - out of 1/3 of our yen longs. may drop another 1/3 later today depending on whether it stays sideways. 7/28 - still in 2/3 of the yen long)
Lots of whipsaws in many markets - especially recently. 2007 is turning into the Year of the Whipsaw as forecast for short term traders.
The week ahead - more of the same, but with a long emphasis on precious and other metals, as well as the S&P 500. We continue to ride the trends on T-Bonds, yen, USDX, beans & gold although momentum slowing a touch in the USDX. SSEC continuing sideways. Another probable light comment week due to being away from our normal trading environment.
(update 7/18 - just consider us out of all markets and trades. We're not, but circumstances currently prevent us from keeping the blog current.)
Still dicey & mixed7/8/2007
We're still looking to add to the yen position, depending on how the trend develops... and might reverse on a dime too. It's just the character of shorter term trading and trends, especially in currency markets. The broader dollar indexes are continuing down and the USDX "should" follow.
We'll be watching closely to see if another TIO operation starts next week toom and likely standing aside if it does since it failed last time - that does not augur well for US stock markets. The Chinese SSEC index fell all last week except Friday, for what its worth.
Possible longs in gold and/or silver on deck too.
(update 7/10 - our patience in the yen has paid off and we added to the position. Probable long in gold or silver or both today, just waiting for a reaction - we're above the 200 dma. May add to TBond shorts depending on the SecLend op today or tomorrow - watching the short term trend line. 6:54 AM PST - added a gold long. 9:37 AM PST - no TBond add, SecLend light, lightened up.)
(update 7/12 - late - added to TBond short due to SecLend, added some to gold & beans longs, looking at a silver add but probably not due to so many markets we're currently in and the risk profile being out of balance. Added to miners.)
(update 7/13 - Another TIO operation started today to help support US stock markets, a $13 billion hot money add. Possible day trade on the SPX. Waiting for SecLend to see how much of the TBond short to carry over the weekend. Gold & the USDX quiet, the expected battle around 80.50 on the USDX is underway. All open positions show nice profits. - SecLend below our expectations, dropped 50% of TBond shorts for the weekend.)
Same as last week... but we're not yawning6/31/2007
China Sets Up Sludge Bilge (at Russ Winter's blog) stands a good chance of being the actual trigger for a bigger US stocks drop as well as the start of a Yen reversal. Fair warning...
(update 7/2 - we have short USDX, long yen, long beans and a small S&P 500 short positions. 5:47 PM PST - note that very little leverage is being used, mostly these positions are hedges although we do expect them to be profitable)
(update 7/4 - just a note - the Chinese SSEC index dropped over 5% yesterday. 9:44 AM PST - looking at an oil short and a T-Bond short. 10:41 AM PST - back in a TBond short position. 11:52 AM PST Another note - the annual change rate of yuan appreciation has accelerated greatly in the last 3 weeks.)
(update 7/6 - 7:22 AM PST - exited the S&P 500 short at a small loss, don't want to carry it over the weekend. Added to beans position. We sure wish there was still a TBill futures contract available. Possible add to the yen position on deck...)
Mixed to bearish6/24/2007
The Baltic Dry Index (a measure of worldwide shipping prices) is showing a pronounced world slowdown underway.
Too many cross signals, no specific trades in mind as of today... although we remain tempted to short the S&P 500 and USDX. In the conjecture and tinfoil hat department, we wonder if the recent movements couldn't be characterized as a "managed" down move.
The precious metals remain in their down trend / trading range since mid April. Our read of behind the scenes indicators of the BoJ still shows no relief from their support operations.
Personal issues have intervened, not much to say about the upcoming week. The TIO operation will likely be continuing to support the US stock markets.
Daily updates are unlikely, at least for the first part of the week.
(update 6/19 - lightening up on S&P longs today. Starts & permits numbers are receiving the bearish treatment in spite of permits being up a bit. Lightened up more on beans. Fully out of TBond short due to uptrend line violations.)
(update 6/20 - no TIOs in two days, lightening up on S&P longs again. Watching close for possibilities of a big drop... [after market close - we got the drop and reversed and went short, and are now flat. We're still looking for more TIO action but there's over a 50% chance that we've seen a signifcant top now. It just depends on if and when the Fed and/or Treasury step in again.])
(update 6/22 - We got more TIO action but it isn't working, and program trading was about 76% of total trades last week - probably the offset. We're still on the side but close to shorting.])
That was the week that was... quite the move in TBonds, and frankly unexpected that they'd explode that way... and also witness to the high usefulness of basic TA trend lines to keep in a trade for explosive moves as well as warning about momentum and direction changes for us. Click here for a snapshot of SecLend vs. the 10 year TBond showing various trend lines. We expect to drop back to 20-25% of our highest TBond short position and wait for a bounce... and will re-enter if it doesn't appear within a day or three.
This seems a good time to remind of an overall issue that we noted on our forecast page a while ago: "Warning: Note that our predictions should not be taken in isolation from other factors. For example, the US recession that we believe that we're in as of late 2006 will affect all the predictions. They're basically just mechanical formulas based on money creation rates and do not have all factors built in."
We're very wary of an early TIO (US Treasury 'Term Investment Option') daily operation starting this week - the Paulson cavalry could easily mount a "rescue" operation. Still holding off on the yen long, something is bothering us that we haven't managed to put a finger on yet.
(update 6/11 - late - Very quiet and blah day around the world, except for the $9 gold move - and its already given back $2 of that.
S&P 500 wise - on balance volume and accumulation/distribution are weak but other TA signs are showing closer to a bottom than top. It's been over a month since a POMO, SecLend was light today, TOMOs were about minus $2 billion net and no TIOs in sight. No signal, but we did lighten up on TBonds and will likely exit the position tomorrow.)
(update 6/12 9:37 AM PST - not exiting the TBond short yet.
Alert4:13 PM PST Something odd going on - possible black swan dead ahead in the US dollar. Just a warning, especially if you have all assets in dollars...
1. Huge TBond move in the last two weeks.
2. Dow Jones Newswires - "US Treasury Awards $8B In Reopened 10-Year Notes At 5.230%" at 1:18:21 PM EST includes this: The Treasury received no bids from foreign and international monetary authority accounts on a noncompetitive bidding basis.
3. Greenspan not worried Chinese will dump Treasuries
4. The Fed is still, as of today, pushing for higher rates on the 10 year TBond with their (SecLend) operations.)
(update 6/13 - still holding bond & bean position. The relative calm today is welcome. Reminder - quad witching this week.)
(update 6/14 - a new TIO operation started today - a $16 billion add/injection. We're long the S&P again.)
(update 6/14 - a $12 billion TIO add today, we added to our S&P long and also dropped 1/2 of our T-Bond shorts. We're keeping a few contracts since SecLend is still being pumped. Added to beans long. Looks like a blowoff move in the yen underway - we're still on the side and watching.)
More and more bullish signals, both on our Dow target (raised to 14,250 to 14,750 before a correction... and no guarantees as usual) and even more so on precious metals (the ECB has ceased gold sales until at least September).
Lowry's (the oldest [since 1939] and one of the most reputable technical analysis services on the Street)... Buying Power Index crossed over its Selling Pressure Index for the first time in 21 months (Friday).(Hat tip to westpacific for the info pickup)
As a side note on yen, FXY is the symbol for its ETF. We're still on the side and watching closely.
We would also be remiss to not point out the 4300+ high on the China stock market this week, and the three days down following it. It's around 4000 as of the Friday close. Just like the price of freedom being eternal vigilance, successful trading & investing requires vigilance... plus an ability to let the markets tell their own story.
In the slightly out there area, we note that the Bradley model shows a turn date coming up around the 14th, and another "most important" one in mid October. More data here.
(update 6/4 - no position changes. The SSEC (China stocks) continues to drop and is now down about 15% off its high. The Yen turned today, but it's not enough of a signal...yet. Accumulation and on balance volume are pretty flat in the S&P, and the TOMO and TIO pumps aren't doing much.
10:10 PM PST. SSEC down another 5-6%. It's an S&P shorting opportunity - medium/high risk at 1536-1540, basis cash but a tight stop above about 1544 should keep the risk of loss managable... and a break below about 1517 should lead to much more.)
(Update 6/5 4:39 AM PST - Initial S&P target 1527 basis cash, Both the NIKK & SSEC were up, so it's a small position, and may only be a one day trade. USDX looking pretty weak, but for now we're covered with the silver longs. ISM non mfg much more positive than we expected - we're out of the S&P trade with a small profit [7:34 AM PST - too early, obviously but we're being overly cautious due to carrying very high leverage overall]. 9:37 AM PST - added again to our TBond position, probably for the last time due to extreme overall leverage in our portfolios.
[1:54 PM PST] Definite trend line break in the Yen, and assuming nothing odd with the BoJ, SSEC, etc. we'll be going long tomorrow.)
(update 6/6 - lightened up 1/2 on Dec silver long, momentum ligher than expected.)
(update 6/7 - lightening up this morning on all positions due to personal reasons. Possible TBond momentum shift ahead, stock markets dicey (possible big drop ahead - watch for trend line breaks as usual.) and not much TOMO & TIO support. [later] Out of all silver longs, small short position in S&P.)
(update 6/8 - will likely only be carrying the TBond and beans positions through the weekend. Keep in mind that 2007 in our opinion will be a relative year of the whipsaw for trading, one example being the USDX with its current huge jump today. We're out of our S&P short temporarily.
If it weren't for some personal reasons, we'd probably be long the yen right now... we're on a small break and not trading much, having learned over the years that it's unwise to trade when there are "personal issues" going on.)
Still... and adds, plus updates5/28/2007
We're still carrying a silver short, S&P long (added some on the dip on Thursday), soybean long, USDX long (although we lightened up to a small position on Wednesday), and added a new T-Bond short on Tuesday.
The trend, as always, is our friend... and we continue to watch both our silver shorts and S&P longs very closely during the main trading day. Black swans do happen... and the ISE Sentiment Index is at a dicey level.
On the possible horizon in the trades we're looking at is a yen long. We're very close to major support and the BoJ is doing "interesting" things with their surplus/shortage balance.
(update 5/29 - out of our silver shorts and USDX longs - 5/30 - maybe premature, but banking profits is a good thing.)
(update 5/30 - we expect to exit half of our S&P longs at about 1518-20 basis cash. We ended up exiting near the close. Part of the reason is personal.)
(update 5/31, early - we expect to add significantly to our T-Bond short at market open due to a big SecLend injection on 5/30. Late - out of the rest of our S&P longs (doji), added to TBond shorts, likely adding a yen long tomorrow or Monday.)
(update 6/1, early - we did add to the T-Bond position yesterday and again today, and expect to establish a silver long tomorrow - trend lines, etc. notwithstanding.
Later - we took a huge position, half in June and half in Dec, and are carrying the Dec and part of the July through the weekend - not for the faint of heart!).
Bonds, silver, gold5/21/2007
We forgot to add a T-Bond short to what we're looking at in yesterday's post. The Fed's SecLend operation has really been pushing. And as long as we're posting, we expect to reverse our silver short and go long tomorrow in either gold or silver, or perhaps both. (update 8:41 AM 5/22/2007 - TOCOM GS, Mitsy etc. shorts jumped, holding off the buys)
Steady as she goes5/20/2007
Not much change since our last comments on 5/15, except for the Fed credit stat which has dropped below trend like it did before the 2/27 drop, but not as much... yet. TIOs haven't returned to zero yet due to additional operations.
We still currently expect a correction to start between 13,500-14,000 on the Dow... and as always, a significant trend line break is necessary to establish a position.
The Dow, S&P 500, NASDAQ, FTSE (Britain), DAX (Germany), Nikkei (Japan), AORD (Australia), CAC (France), HSI (Hong Kong), BSE (India), SSEC (China) and even the EEM (Emerging Markets index) have all been relatively flat for the last week or so... and Fed temp repos have an unusually low balance... and the Treasury TIOs pool balance has dropped 50% in the last week and is due to hit zero around the 18th, depending on whether there are any small operations.
We've pulled our S&P long stops up very tight and made them physical instead of mental, we dropped 1/3 of the position today and will likely drop more this morning. We may go short if the trends continue, assuming of course that we get an actual trend line break as confirmation.
Longish and watching...5/13/2007
Still long the USDX, still watching the SSEC (China) for breaks, carried a small S&P long over the weekend and will add this week based on drops to trend lines and assuming no more reverse Fed repos.
Still waiting for an expected larger drop, likely this week or next, in precious metals to go long again.
Note that we did get a surprise after the FOMC meeting with a gold drop on Wednesday and market drop on Thursday, but to be honest it wasn't the type of surprise to which we were referring.
Flat... plus... flat5/8/2007
We did open an S&P long yesterday but went flat again this morning due to unexpected weakness pre-open.
We're still holding a small USDX long, with an unusually tight stop.
9:24 AM PST There was a $3.5 billion TIO this morning, so we're back in on another S&P long trade. So far, so good on the USDX long too.
12:23 PM PST We expect to exist all positions either today or before the FOMC meeting tomorrow.
Color us (probably) long5/5/2007
Barring any Monday surprises with China or India, etc. and with attention to trend lines, we'll be moving off the sidelines and adding small long positions. Assuming no large surprises from the FOMC meeting on the 9th, we'll add again. The various credit indicators ( here ) have bounced back with more authority than expected, Fed credit (see Fed watch page) had a $17 billion add last week, and neither TOMOs nor TIOs (see daily page) are in crash/drop territory. Note also that we still expect a significant correction, but from higher levels and are still paying very close attention to the SSEC (China) with highs expected in the 4100-4300 area.
We may even take a long USDX position, with a tight stop.
As always, we're only looking at short term trading, there are no guarantees, and please see our disclaimer at the bottom of this page.
More of the same, plus FOMC on the distant horizon4/29/2007
The TIO operation is still going, the SSEC continues parabolic (China will raise reserve requirments again - to 11% - as of May 15th), credit creation rates continue to decline on a relative basis, etc.
We do expect some kind of surprise after the Fed's FOMC meeting on May 9th (Wednesday after next).
Still, plus another TIO operation starts...4/22/2007
Not much change from the last two weeks in either what's occuring or what we're watching, other than we should mention a U.S. Treasury $22 billion (so far) TIO hot money injection near the end of last week.
(see our daily page for more info on TIOs.)
Our warning indicator took another upside surge this week, mostly due to the continuing fall of the dollar index. The sensitive credit change rate chart is also still in it's general down trend. The banking index is still quite weak and does tend to lead U.S. stock markets down.
We continue to monitor emerging (EEM) and key Asian foreign stock market indexes for trend line breaks...
Very early warning4/6/2007
Our early warning indicator of a U.S. financial crisis took a sudden leap this week, almost doubling from a very low level. Charts and details on its construction and accuracy etc. here.
Also note that our most sensitive credit change chart ( here ) continues to degrade and warn of another correction at least.
Not an April Fool's joke - we're watching the emerging markets index, the Shanghai stock exchange and other similar ones like India (BSE) for signs of weakness.
No more subprime credit3/24/2007
We're at least as tired as many of you in hearing about the various sub prime credit issues, and their probable effects.
Off the beaten path though are all the other major credit types and how they're doing, and what it may mean to the U.S. stock markets and economy. Here is a new chart showing the 13 week change rates for the 5 major credit types, and it's not exactly looking great in our opinion. The similarity in pattern to last May's decline is unmistakeable.
If the Fed and/or Treasury don't continue to make some very significant hot money injections (see the daily page on our regular web site) or some other similar rescue does not occur soon, we expect a resumption of the bear/down trend within 1-4 weeks. We're watching the trend lines, MACD, RSI and other indicators for specific timing.
We've had a number of inquiries asking how we called the 2/27 drop.
Our primary analyst, bart, had posted most of his analysis on Friday 2/24 on an internet board here. The first three messages tell almost the full story, the only item missing being the large drop in Fed credit but the data wasn't available at that time. The primary indicator was the Armstrong Global Business Cycle, followed closely by our own Dow prediction.
Our opinions are pretty clear - see our forecast page and also monitor our daily page. The daily page tracks Fed and Treasury 'hot money' injections and can alter & override our forecasts.
Quite a move today in gold, and tracking with both our gold and inflation predictions on our forecast page. Do note that we attempt to forecast or align the prediction charts with lows, not highs, and the high in May 2006 occured "late".
Not the top, but...2/11/2007
We don't think the U.S, stock market break on Friday marks a significant top or break but wouldn't be surprised at a small drop next week... and it's also not impossible that it does did mark a top (see rate of change drop on repos, it's similar to April 2006).
We will be unusually alert around February 24th though as the 8.6 year Armstrong cycle peaks, and again around March 15th. Currently, the middle of June looks to be a time frame for explosive moves upwards... for what its worth.
The Fed did some big adds this morning in the TOMO area, about $18 billion. Expect some big up days and another run to break the recent stock market highs.
Very unusual behavior12/22/2006
In roughly the last two weeks, the Fed has added almost $8 billion via the 'hot' money of coupon passes and another $16 billion in temporary repos. On top of that, the Treasury had added over $46 billion of TIOs (their version of temporary repos).
And the U.S. stock markets have not gained?!?
The S&P 500 also closed very near the uptrend line on Friday.
If we don't have quite an up day on Tuesday... well, we certainly wouldn't want to be long the general market on the short term.
Tuesday, 12/26/2006 - we have the up day.
As of late May 2006, about 73% of our trades have been profitable since the beginning of the year.
Things that make you want to go hmmmm..."It would be fair to say that monetary and credit aggregates have not played a central role in the formulation of U.S. monetary policy." -- Fed Chairman Ben Bernanke, in a speech in Frankfurt on November 10, 2006.
"The Chairman noted that the President had recently signed the Financial Services Regulatory Relief Act of 2006, which among its provisions gave the Federal Reserve discretion, beginning October 2011, both to pay interest on reserve balances and to reduce further or eliminate reserve requirements. The Act potentially has important implications for many aspects of the Federal Reserve's operations" Source: Fed minutes from Oct 2006 (emphasis ours)