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  • Bernanke Speaks

    PLEASE NOTE THAT MEMBERSHIP RATES ARE SET TO INCREASE ON MARCH 4.

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    A new day, a new bounce.  As we discussed late yesterday, SPX has reached the bottom of the purple channel that’s guided it since 1343.  So, naturally, we’ll get some reaction — probably at least to the white midline at 1495.

    Whether it sticks or not is pretty much up to Ben.  Press conference at 10AM EST.

    The yellow channel on the 30-min RSI shows decent support here.  Looks like resistance at the purple midline, though, likely in conjunction with the white midline mentioned above.

    I’ll be surprised, though, if we don’t make it all the way back to 1497 for a proper back test of the H&S neckline – yellow dashed line.

    UPDATE:  09:40 AM

    That’s close enough for me.  I’m closing my ST long position taken yesterday (3:50PM update) at 1490 for a 6-pt gain and will let my core short position ride — for now.

    Many Bernanke pep rallies have left me feeling like a crash test dummy.  I’ve learned to keep my stops tight or stay on the sidelines all together.  For intrepid day traders, I suggest staying nimble.  A breakout or breakdown is to be expected.

    But, we did just complete a H&S Pattern, and that counts for something — as do the incomplete harmonic patterns.  We’ll take a look as soon as the Bearded One is done scolding Congress for messin’ up a good thing.

    UPDATE:  12:30 PM

    Equities are clinging to gains following Bernanke’s testimony — which was mostly a non-event.  IMO, he said nothing to help the bulls’ or bears’ case, which means Italy and the sequester will likely drive prices over the next several days.

    We should continue to see periodic bounces over the balance of the day, but the onus is on the bulls now to turn the trend.  We’ll keep an eye on the 5 and 15-min RSI charts to determine breakouts that merit an intra-day long, and revisit the daily charts to get a sense of intermediate-term possibilities.

    continued for members… (more…)

  • Charts I’m Watching: Feb 25, 2013

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    ORIGINAL POST: 09:30 AM

    High potential for a pop and drop this morning, with key levels being 1523.74 and 1527.10.  I’m operating on the assumption that this is a bounce in the midst of a larger move lower.

    Recall that we shorted at 1530.50 on Feb 19 (the 2:45 update) and went long for a bounce at 1499 on Feb 21 (10:20 update.)

    I’m taking profits on the long position here at 1523.60 and going full short again.  Any move up through 1524 is cause to consider an intra-day long.

    Why am I suspicious of this rally? The dollar has back-tested the 25% line in the big rising channel, as well as the 1.272 Fib in what looks like a Crab to the 1.618 at 82.281 (and red .618 at 82.136.)

    The DX daily RSI also looks strong, having broken out of and back-tested the red channel and making a beeline for the intersection of the white and yellow channels.

    UPDATE: 10:00 AM

    SPX is taking a crack at the .886 at 1527.10.

    I’ll take an intra-day long position at 1524 with tight stops.  Keeping the short position unless we move up through 1530.

    UPDATE:  10:10 AM

    That move didn’t take long to fail. A reversal here leaves a nice tag of the top of the white channel, a tag of the 75% line of the light blue channel, a near tag of the .886 (1525.84 v 1527.10) and a nice reversal candle on the 60-min chart.

    Closing the intra-day long at 1524, and full short again from 1523.60 (above.)

    UPDATE:  11:25 AM

    SPX broke back down through the big purple channel midline, which augers well for further downside.  Watch for a backtest to the midline (around 1519.)

    UPDATE:  2:00 PM

    We’ve racked up a nice 24 points since shorting this morning, which is especially cool on the heels of the 26-point gain from our long position (the bounce from 1497) and the 32-point gain since originally shorting at 1530.50 on the 19th.  That’s a 5%+ week — much appreciated after the market’s directionless churning in the days leading up to 1530.

    As we approach the .886 retracement (1500.54) of the rally from 1497 to 1525, we should be on the lookout for a bounce at the still-important 1500.  A good place to start is the  RSI channels on short-term charts like the 5-min. A break of the upper bound of a well-defined channel is always a warning signal of building momentum.

    The US dollar is approaching our 82.22 – 82.28 price target and the top of the daily RSI channels we charted this morning.  It will likely need a breather before attempting higher.

    Much of its strength is being attributed to euro weakness which, of course, is being blamed on Berlusconi’s unexpected success in the Italian elections.  It goes without saying that his reelection would be a disaster for the euro zone.

    The EURUSD, which had carved out a solid channel to the moon (well, 1.39 anyway) broke down and backtested the channel that’s guided its upside since last July.

    We should expect some support here at the .886 of the 1.2996 to 1.3710 rally at 1.3078 (also a potential price channel bottom in yellow.)  It’s also the bottom of an RSI channel (below in white) on the daily chart.

    But, I’m not so sure that this support will hold.  We could be looking at a drop to the bottom of the red/yellow/white RSI channels, meaning the pair takes out 1.30 support.

    As unpopular as Monti is with Italians, Germany thinks he’s just swell.  He’s been a team player, falling in line with Merkel’s efforts to salvage Germany’s investments throughout the continent.

    Berlusconi, who was heavily criticized by his former contemporaries around the time of his resignation, is a wild card whose election, at best, would leave Italy with a divided leadership at a time when a unified front seems essential to the euro’s continued survival.

    This is not what the bulls needed, especially as they try to get through the sequester week unscathed.

    UPDATE:  3:00 PM

    Adding the complications of the euro mess to the sequester mess makes for a very tricky path ahead for equities.  Last week, I theorized that a decline to 1490 would make for a deliciously ambiguous setup (for market makers, at least) to fleece the greatest possible number of investors.

    Does that scenario still make sense?

    continued for members… (more…)

  • The Fund

    A couple of months ago, I mentioned I was looking into starting an investment fund.  I’ve decided to move forward with it.  There are several reasons, but the two main ones are:

    1. FORMAT: using a blog to convey market information that produces consistent results for the average armchair investor is difficult; and,
    2. BUSINESS MODEL: while enormously enjoyable, the amount of work I put into the website is, unfortunately, not proportional to the financial reward.

    THE FORMAT

    As we come up on the one-year anniversary of pebblewriter.com and two-year anniversary of pebblewriter.blogspot.com, I’ve taken a long, hard look at the website’s effectiveness.  What I do is sometimes fairly complicated, which explains why almost half of our members are investment professionals (investment advisors, brokers, etc.)

    The balance are split between pretty serious investors who have the time and energy it takes to learn and implement my techniques, and those who don’t (seriously, who wants their surgeon taking a break during an appendectomy to trade his portfolio?)

    In blogging, it’s tough to write a post that satisfies the needs of all three groups.  Some members want to know how the watch works, while others simply want to know what time it is.  Others, especially those new to the site, just want to be less confused.

    Even when I pen the perfect post, there’s always the issue of getting information out quickly.  Charting already takes a lot of time.  Making the charts presentable and offering even minimal explanation obviously takes even more.  In a fast-moving market, this can affect performance.

    I believe a fund would allow investors of all kinds to benefit the greatest from the research I do. When I make a trade decision, they won’t have to worry about deciphering the information or being available to act on it.  It’ll just happen.

    I’ll continue to offer research for determined do-it-yourself’ers who don’t need quite as much hand-holding — perhaps offering periodic webinars to discuss things in more detail.  And, of course, I will continue to offer specialized services to those professionals who use my technical analysis to augment their own analysis.

    BUSINESS MODEL

    My hope in starting pebblewriter.com was that it would grow enough through word of mouth that I could make some reasonable coin while putting in only 40-50 hours/wk and still have the flexibility to hang with the family, travel, etc.

    Instead, I’m putting in about 70-80 hours/wk and making a little more than I did as a first year associate straight out of B-school.  Old Wall Street chums with the same level of expertise as I do average 10-30X and have a lot more free time.

    I’ve studied some of the other successful web-based investment services, and have come to believe most are really better at marketing than they are forecasting markets.  Frankly, I’m not interested in building a marketing company that offers investment products.  I am very interested, however, in being an excellent forecaster for those investors who value (i.e. are willing to pay for) such services.

    Though most on Wall St would laugh to hear me say it,  it’s not always about money.  About 70 of my friends/co-workers didn’t come home on 9/11 because they were busy chasing money.  We all gotta go…but I’d like it to be in pursuit of something meaningful and enjoyable. I really enjoy the challenge of forecasting markets, and love helping others reach their financial goals.

    But, if I’m going to spend 10-12 hours/day away from my lovely family, I owe it to them to provide something tangible such as, say, a decent college education or the occasional trip to Disneyland.  And, I owe it to subscribers not to burn out.

    THE PLAN

    In 2012 (from inception March 22), pebblewriter.com members who went long SPX when I called bottoms and sold short when I called tops would have earned about 100% on a highly diversified, unleveraged portfolio.  It turns out this was no small feat — more than 2X the best-performing hedge fund’s 2012 return.

    According to Barron’s, only one of the hundreds of hedge funds tracked by HSBC earned over 40% in 2012; only another 7 earned even 30%. The average fund earned 7.32% and about one third actually lost money. The S&P 500 itself earned returned about 16% (including dividends.)

    My plan is to generate high risk-adjusted returns for investors in a hedge fund using the same techniques I use every day on pebblewriter.com to determine tops and bottoms.  But, instead of  writing about them (and trading for my own account) I will go long and short broad equity markets (primarily the S&P 500) and, to a lesser extent, currencies and risk instruments such as VIX.

    The portfolio might occasionally be all or partially long or short, or even all cash.  This would be a slight departure from the website, which generally reflects either 100% long or 100% short. This added flexibility would allow the portfolio to reflect the degree of confidence I have in a particular move.  It would also allow us to move to the sidelines in the event of high-risk situations such as an election or FOMC announcement.  I would use no leverage other than that required to hedge existing positions.

    The fund would be managed by me, but all assets would be held by a third-party custodian such as BNY Mellon or State Street.  Another entity such as Citco or Apex would provide administration and a major accounting firm would provide audited tax returns.  This isn’t the cheapest way to run a hedge fund, but it’s the safest.

    I intend to keep the size of the fund manageable, which to me means no more than $100 million.  The legal stuff is in the works, but the plan is for a private placement for about 100 accredited investors.  The US fund would be domiciled in Delaware, but I’m looking into a master-feeder arrangement with an offshore fund in either the Cayman Islands or BVI for non-US and tax-exempt investors.  About $5 million in capital is already earmarked.

    Minimum investment would mostly likely be $100,000, though there might be a limited number of smaller slots for non-accredited investors.  Fees would be the standard 2/20 hedge fund structure and feature a high-water mark and hurdle rate to be determined.  Liquidity would most likely be quarterly.

    Annual pebblewriter.com members would receive several perks – my way of saying thanks for being an important part of the journey.  First, annual members would get first crack at the 100 subscription slots.  If there are still slots available after annual members have subscribed, I intend to open it up first to other members, then those referred by members, and lastly to outside investors.

    In addition, annual members who invest in the fund would be eligible for a rebate of their unused subscription fee to pebblewriter.com.  So, an annual member who paid $950 one month before investing in the fund would receive $870.83 (11/12 of 950) back in quarterly installments over the course of their first year.  And, subject to the lawyers’ okay, I plan to offer annual members an additional 10% discount on their first year’s total fees.

    It’s hard to say exactly when everything will come together, but I’m shooting for late March/early April.  I can’t offer any more guidance at present, but want to stress that the above perks will be offered to annual members on a first-come, first-served basis.  My goal is that every annual member who desires to participate will have the opportunity.

    But, when the slots are gone, they’re gone.  So, the best way to ensure a spot is to: (1) become an annual member right away; and, (2) act quickly when the offering goes live.  Those current quarterly and semi-annual members who wish to become annual members now may have their current membership extended by one year, and would thus be eligible for the membership rebate and fee discount as described above.

    PEBBLEWRITER.COM

    As for pebblewriter.com itself, I intend to migrate the website and customized services to a more sustainable model that won’t compete with the fund.  This means that the cost of an annual subscription will be raised to $2,500 on March 4 (except for charter members, whose rates are fixed.)

    I understand this represents a steep increase for some, but it is comparable to the annual fee charged to someone making a $100,000 investment in the fund, or a $150,000 investment in the average equity mutual fund.  It will cover the cost of hiring additional administrative support for the website (sign-ups, log-in issues, etc.) that will be necessary once the fund is up and running as well as much-needed enhancements in technology and communications.

    Speaking of running the fund… I plan to run it from Carmel, California where my family and I reside.  An added bonus for fund investors, the Monterey Peninsula is one of the most beautiful places in the States to visit. While checking up on your investments, you can take in the ATT Pebble Beach Pro-Am golf tournament, the Monterey Jazz Festival, the world-famous Monterey Aquarium, or a drive through gorgeous Big Sur.

    Carmel is about a 90-minute drive south of San Jose/San Francisco, but is also served by the Monterey Airport which offers a 7,600 foot runway and several excellent FBO’s as well as direct flights via United, American, US Air and Alaska Air.

    It will help immeasurably to have a good sense of how many US vs non-US members plan to participate in the fund — if and when it is offered. So, look for an email in the next day or two asking for your opinion. In the meantime, please don’t hesitate to contact me, as many of you already have, with any questions about the fund or the website.

    I’m excited about taking this next step, and will continue to do my best to earn the faith you’ve shown by being a part of pebblewriter.com.

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    important note:  

    The above is not an offer to sell or a solicitation of any offer to buy any securities. Offers are made only by prospectus or other offering materials. To obtain further information, you must complete our investor questionnaire and meet the suitability standards required by law. The  fund discussed above is strictly in the planning phase, which means it might never be formed nor offered to subscribers. If it is, essential elements might differ significantly from those discussed above.  The information contained on this and every page of pebblewriter.com is subject to our Disclosures and Use Agreement available here.

     

     

     

     

     

     

     

     

     

     

     

  • Charts I’m Watching: Feb 22, 2013

    ORIGINAL POST:  09:25 AM

    UPDATE:  09:30 AM

    SPX overshot our initial target by just a couple of points yesterday, reaching the channel 25% line at 1497.29 before getting the bounce I expected at 1499/1500.  Note that SPX completed a Bat Pattern down to the .886 in the process (larger white pattern.)

    The .618 Fib of the decline from 1530 is up ahead at 1518.09 — also the 1.618 of the 1422-1266 decline last summer (1518.57.) It intersects with the channel midline either later today or early Monday.

    Daily RSI reached the white midline as we expected, and is currently backtesting the purple midline. It’s still too early to say whether the new falling channel I sketched in yesterday is legit or not.

    The dollar is backtesting the channel line it broke through Wednesday after completing a Butterfly Pattern (the small white grid) to the 1.272, but the 1.618 awaits at the confluence of the purple 1.272 and red .618 up around 82.1-82.2 after the backtest is complete (not yet, I think.)

    The big question: what happens after the backtests are complete?

    continued for members… (more…)

  • On Our Way: Feb 21, 2013

    ORIGINAL POST:  9:50 AM

    SPX is off another 10 points so far, for a total of almost 30 since we went full short at 1530.50 on Feb 19.  Look for a bounce at 1499/1500 – a psychologically important line in the sand, and also the .886 of the rise from 1495 to 1530.

    It also satisfies pebblewriter’s corollary, which is that the market seeks levels at which the greatest ambiguity can be maintained.  At 1499, the market could be setting up a bearish Crab Pattern down to  the 1.618 at 1472.82 (shown below in purple) which would find support around the Sep 2012 high of 1474.

    OTOH, SPX could be setting up a bullish Crab Pattern (in yellow) to the 1.618 up at 1555, which also happens to be the 1.618 extension of 2012’s 1474 to 1343 decline (1555) and the 1.618 of 2011’s 1370 to 1074 decline.

    So, which can we expect?

    continued for members…

    (more…)

  • Charts I’m Watching: Feb 20, 2013

    As expected, equities have sold off since tagging the 1.618 Fib of the July 7 – Oct 4, 2011 sell off — dropping as low as 1522.19 this morning.  While it’s gratifying to see a reversal at a major Fib like this, it won’t mean much until SPX can make some new lows.  I’d be thrilled just to see the purple channel midline broken. I remain full short from 1530.50.

    There’s great interest in the Fed minutes due out at 2 EST.  Will the new FOMC composition affect the language re QE?  How did they take last quarter’s GDP decline?

    Housing starts and permits were released this morning.  Overall, starts fell 8.5% since December.  But, it was multifamily residential that was really responsible — declining 27% from Dec 2012 nationwide, an alarming 41% in the Northeast and 62% in the Midwest (versus 16% and 30% in last year’s Dec/Jan comparison.) The South and West regions rose modestly, as did permits.

    The EURUSD has found support at the .886 (yellow pattern) of the Feb – July 2012 selloff.  The rally fizzled several weeks ago at 1.3710 — just above the Feb highs — after initially reversing at the .786, hinting at a Butterfly Pattern objective of 1.3877.  This is also the 2.618 of the white pattern and the .618 (1.3832) of the purple pattern (May 2011 to July 2012 decline.)

    If the pair manages to hold the .886, it augers well for a move up to that target level.  The next white channel level to intersect 1.3832 is the midline around March 18-20.  The bottom of the white channel is currently around 1.3250.

    The dollar, in the meantime, has retraced the losses sustained the past two days.  In the process, it reached the midline of the white channel since Feb – so, we’ll be on the lookout for resistance.

    Remember, DX RSI broke out of a daily channel (red, below) on Monday and back-tested it yesterday. It also successfully back-tested the midline of the rising purple channel and is poking up above the yellow 75% line — so, the upside case is clear.

    What, then, would a dollar break-out mean for stocks?

    Quick aside: just read the FOMC minutes from stem to stern (available here) and there’s nothing of any importance that I can tell.  This is really no surprise, given that the last statement was virtually identical to the previous one.  Here’s the discussion of the statement:

    The media is reporting “increased concern” about the level of QE and inflation, but there is very little change in the outlook and the hawks are still vastly outnumbered by the doves.  I suspect that as long as inflation stays under control, and the dollar remains in a trading range — meaning no new pressures or relief for importers/exporters — the FOMC will leave things pretty much as they are.

    Getting back to the dollar and equities… It’s always interesting to compare the DX and SPX.

    Stocks are a mirror image of the dollar through from 2010 through October 2011. At that point, however, they generally move in tandem — except that, as DX forms a pretty docile channel, SPX leaps out and forms a rather extended rising wedge.

    DX has been locked in a trading range between the .382 and .618 of its decline into May 2011, while SPX has obviously blown through its May 2011 highs.

    Since last September, the comparison is especially interesting. DX spent about 6 months bouncing between the .382 and .500 Fibs, while SPX retraced 127.2% of its 1474 to 1343 losses (actually more, but it looks like it’ll probably back test to the 1.272 today.)

    Now, if DX starts to make a move, how will SPX react?  Will it react?  The dollar will need a serious push to get through current levels, since today’s equities weakness/dollar strength produced a Bat Pattern completion at the .886 — just as DX RSI also reached the next higher channel line.

    While, SPX has broken channel support…

    …even though prices reached a potentially important channel midline.

    In the end, I suspect it all spells a breather for SPX’s downturn and DX’s strength – at least until the RSI’s are reset and each can take yet another stab at a real breakout/breakdown.

    I’m holding with yesterday’s short-term forecast/scenario [the 2:45 update], but am open to revision if SPX can push strongly through the channel midline.  I should get a chance to post again tomorrow morning.

    GLTA.

     

     

  • Charts I’m Watching: Feb 19, 2013

    The dollar index has cleared an important hurdle to higher prices.  Note RSI has broken above and is back-testing the red channel on the daily chart.

    Of course, it’s not a back-test until it reverses and stays higher.  The first key level to confirm a breakout are the Jan 4 80.995 high — at which point DX will run into the 25% white channel line.The harmonic picture is muddled at best, as DX has tagged the .886 retracement of the move from 78.725 to 81.515 three separate times – preferring to remain in a trading range rather than breaking down or out.

    Breaking this RSI channel is the first very (potentially) positive news for the bears in quite a while.  One caveat, there’s probably a 50:50 chance that the DX RSI will need to tag the midline of the rising white channel before the reversal really gets going.

    One potential problem here is that the midline and the red channel top don’t intersect until early March, so this could mean sideways currency markets for several weeks — which would likely be accompanied by higher stock prices.

    For the past week or so, I’ve been opening intra-day long positions on strength while maintaining a short core position.  Today is no exception.  I’m closing my intra-day longs here at 1526.50, as we’ve reached a 1.618 Fib level of the latest move up.  A move back up through this level, and I’ll add them back on again.

    I must admit, though, that I find the SPX RSI chart a little unnerving.  If DX looks bullish based on a channel breakout, SPX does, too.  Chart coming shortly — if my internet signal will cooperate.  I’m writing today from a hotel lobby in Lake Tahoe, and the connection is a bit slow.

    SPX is obviously trading above the upper bound of the big rising wedge again today (the yellow TL).  This marks five days in a row, though we’ve managed to close below it every day.  As we’ll discuss today, the next day or two is vitally important to the market’s overall direction.

    I put the yellow TL at about 1524 today (1521 on the arithmetic scale rather than log).  This is drawn from the July 21, 2011 high of 1347(inception) through the Sep 14, 2012 1474.51 high.  IMO, a strong move through this TL would be very bullish and practically guarantee 1553-1555 — with one caveat.

    In 2011, there were three potential Point X’s to kick off the downside and calculate the upside: 1370.58 on May 2, 1356.48 on July 7 and 1347 on July 21.  I referred to these in the post All The Pretty Butterflies in calling the April 2012 high.

    I favored the 1347 high because it best fit with the definition of a Butterfly – a Point B reversal at the .786 retrace. The 1356.48 Butterfly didn’t quite reach its .786, and the 1370.58 Butterfly didn’t come close.

    As we found out, the 1347 pattern was the correct one.  It signaled a reversal at its 1.272 Fib of 1421.05 and, in fact, the market reversed at 1422.38.  The decline from there to 1266 set up another Butterfly Pattern (in purple). The 1.272 actually targeted 1464, but SPX stretched to reach the .886 of 1576-666 at 1472 (ultimately reaching 1474.51).

    Because 1347 figured prominently in two important patterns, and neither of the other potential point X’s have seen any real reaction off their Fibs, I have pretty much discarded them.

    But, I show them above just in case.  This market is currently flouting, if not completely ignoring, the rules.  And, the 1356.48’s 1.618 at 1530.58 might suddenly decide to assert itself.  It’s just above current levels and would make for a nice intra-day high.

    And, the 1370.58’s 1.618 at 1553.39 lines up very nicely with the 1.618 extension of the 1474-1343 decline (yellow pattern.)  It also would fulfill a measured move I’ve been tracking.

    On the chart above, the distance from (2) to (3) is 207.77.  Adding 207.77 to the 1343.35 low (4) yields 1551.12 – right there with those 1.618 Crab Pattern completion points. If SPX can break through 1530.58, there are no other Fib levels between there and 1553.

    Obviously, we are still looking at strong negative divergence on the daily and 60-min charts. And, with the sequester looking more and more likely, we’re not lacking for a catalyst. But, the market continues to shrug off some pretty strong headwinds.  I still wouldn’t commit new capital at these levels, and I sure wouldn’t be long and unhedged. But, a close above that yellow trend line and 1530.58 Fib would be hard to ignore.

    More later.

    UPDATE: 2:00 PM

    SPX broke back above 1526.50, so I put the intra-day long on yet again.  As we approach 1530.58, I’ll take another stab at lifting it.  We’re certainly not making any money with this approach, but I’m much less concerned with a sudden 30-point updraft than a sudden 100-pt downdraft.  I seem to have plenty of company, however, and this concerns me.

    OTOH, today’s USA Today headline reads: Mutual Funds Breaking Records.    The only thing missing is the exclamation point.  Inside the Money section, you can take your pick of “Has Dow Outgrown Crazy Days?”, “It’s Hard Out There for a Repo Man” and the imponderable “Fast Foreclosures Help Home Prices.”

    Turns out judicial foreclosures slow things down because the banksters are occasionally restrained by the rule of law (that must really suck for them.)  When it takes too long to kick families out of their homes, it creates “real uncertainty.”  Of course, so does having your former neighbors living out of their Toyota.  Guess that’s where the repo man comes in.

    More shortly.

    UPDATE:  2:45 PM

    Taking another stab at an interim top here at 1530.50 — lifting the intra-day long, full short again. Tight stops on this sucker; as mentioned above, whole lot of blue sky between 1530 and 1553.

    Remember, this is the 1.618 of the Crab Pattern formed by the 1356.48 to 1074.77 decline between July and October 2011.  Downside targets that matter include 1474.51, of course. But, first, let’s think about the scenario that would confuse the most people: a decline to 1490-1497 that would leave open the possibility of a new Butterfly/Crab higher to 1553-1555.

    I’m being summoned for Dad duty (the kids are off school this week and it’s snowing outside – yay!) so I’ll leave it at that for the time being.  I’ll be back later this evening to tidy things up and answer any questions.

    GLTA.

  • The Euro is Doomed

    From Bloomberg, reprinted in its entirety:

     

    Saxo Bank CEO Says Euro Is Doomed as Currency Woes Resurface

    By Mahmoud Kassem – Feb 18, 2013

    Lars Seier Christensen, co-chief executive officer of Danish bank Saxo Bank A/S, said the euro’s recent rally is illusory and the shared currency is set to fail because the continent hasn’t supported it with a fiscal union.

    “The whole thing is doomed,” Christensen said yesterday in an interview at the bank’s Dubai office. “Right now we’re in one of those fake solutions where people think that the problem is contained or being addressed, which it isn’t at all.”

    The euro has gained 8.2 percent versus the dollar in the past six months and reached as high as $1.3711 on Feb. 1, the strongest since Nov. 14, 2011. The European Central Bank forecasts the euro-area economy will shrink 0.3 percent this year and ECB President Mario Draghi said on Feb. 7 that the currency’s gains pose a risk for growth and inflation.

    While the euro has strengthened, the economies of Germany, France and Italy all shrank more than estimated in the fourth quarter. Ministers from the 17-member euro area met during the week to discuss aid to Cyprus and Greece as a tightening election contest in Italy and a political scandal in Spain threaten to reignite the region’s debt crisis.

    “I’d be a bigger seller of the euro at anything near 1.4,” according to Christensen, who said he isn’t making any speculative bets against the currency.

    The euro declined 0.2 percent to 1.3332 against the dollar, falling for a fourth day.

    Shrinking Investment

    France is grappling with shrinking investment, job cuts by companies such as Renault SA and pressure from European partners to speed budget cuts. While Germany expanded 0.7 percent last year, France posted no growth and Italy probably contracted more than 2 percent, the weakest in the euro area after Greece and Portugal, according to the European Commission.

    The economy is on the brink of its third recession in four years and the highest joblessness since 1998. Prime Minister Jean-Marc Ayrault said Feb. 13 the country won’t make its budget-deficit target of 3 percent of gross domestic product this year as the economy fails to generate growth and taxes.

    “Another possible fallout is getting rid of some of the countries that are being ruined by being in the euro, notably the southern European economies,” Christensen said. “People have been dramatically underestimating the problems the French are going to get from this. Once the French get into a full- scale crisis, it’s over. Even the Germans cannot pay for that one and probably will not.”

    Cyprus Election

    Cyprus has been shut out of debt markets for nearly two years with lenders including Bank of Cyprus Plc and Cyprus Popular Bank Plc losing 4.5 billion euros ($6 billion) in Greece’s debt restructuring last year. The nation is holding a presidential ballot today where the economy is the main issue rather than reunification of the divided island.

    Spanish and Italian bonds rose last week as debt sales allayed concern the nations may struggle to raise funds before Italy goes to the polls to elect a new prime minister. Yields on Spain’s 10-year bonds fell for the first week in five as European Central Bank President Mario Draghi said the country had achieved “enormous progress” in its reforms. The spread between Spanish 10-year bonds and comparable German securities decreased two basis points to 354 basis points.

    Spain, which plans to sell three- and nine-month bills tomorrow and bonds maturing in 2015, 2019 and 2023 on Feb. 21, faces a sixth year of slump. Output is forecast to contract for a second year in 2013 with unemployment at 27 percent amid the deepest budget cuts in the nation’s democratic history.

    Record Debt

    Public-sector debt is at record levels, having more than doubled from 40 percent of gross domestic product in 2008. The European Commission, which is due to update its forecasts this week, sees it rising to 97.1 percent of GDP next year.

    “It’s the political world that has been extremely supportive of the euro, not for economic reasons but for political reasons,” said Christensen, a long-time critic of the single currency who now lives in Switzerland.

    TPG Capital, the private equity firm started by David Bonderman, bought a 30 percent stake in Saxo Bank in August 2011 for about $560 million. Christensen and co-founder and co-CEO Kim Fournais maintain majority ownership of the company.

    The Hellerup, Denmark-based bank said in August that first half profit dropped to 44 million kroner ($7.8 million) from 346 million kroner a year earlier.

  • Just Another Day: Feb 15, 2013

    Just another day in the financial markets…

    The G20 works feverishly to hold a summit that doesn’t disrupt world markets, while our elected “representatives” work feverishly to position themselves for a standoff that will.

    The mainstream media provides detailed reports on a $4 billion pyramid scheme that’s been exposed, barely mentioning the $17 trillion one that has corrupted markets and could destroy the economy.

    Credit rating agencies are fined billions for lying to investors, and threatened with annihilation if they dare tell the truth.

    We ignore the long-term jobless so we can report 8% unemployment instead of 23%, and send out debit cards to 47 million hungry and impoverished Americans so the rest of us won’t have to witness unsettling bread lines.

    And, the bankers who started it all continue to receive billions in bailouts and Cabinet posts.

    The stock market couldn’t care less about any of this stuff – only that the Fed continues to pump $85 billion per month into the markets in order to “ease unemployment.”  [Expect it to test the 1524.69 highs again today…you know the drill: intra-day longs.]

    *  *  *  *  *  *  *  *

    I have to run out to chat with a bunch of middle school kids about the working world.  Preparing for it has been a very illuminating experience.

    I plan on holding short into the weekend, but will monitor the situation “from the field.”  I should have a chance to post again before the close.

    Here’s where we are right now:

     

    UPDATE:  3:50 PM

    RUT daily chart is essentially unchanged from Feb 5.  RUT completed one Crab at 920.95 (purple), and is about to complete a second at 933.36 (white pattern) which will also be a tag of the channel top.

    The Global Dow’s goose looks positively cooked.  On Feb 1, GDOW came within 8 points of completing a very well-formed Gartley Pattern (white) and 4 points of completing a measured move (in red.)

    And, just yesterday, the daily RSI broke down below the midline of a well-formed channel that dates back to the Mar 2012  .618 Fib tag.

     

     

     

  • What Recovery?

    source: eurostat.ec.europa.eu

    It was thoughtful of eurostat to include the US in their chart.  Funny, that’s not the chart one would picture based on the MSM’s steady drumbeat of “recovery!”

    Germany, which had previously taken an ambivalent attitude about the soaring euro, might change its tune following its worst GDP print since Q408.  The main culprit?  Exports, which fell 15.4% from November – the worst monthly decline since 2007 – and 5.7% YoY.  Straight from the Bundesbank:

    Housing figures for Q4 should be out soon, but look for a continuation of the slide.

    A falling euro might increase exports, but make oil even more expensive – the same energy/export conundrum in which Japan finds itself.

    UPDATE:  12:20 PM

    SPX continues to move sideways.  The H&S pattern completed yesterday busted, completed again, busted, and is working on completing a third time.  This is a very ugly pattern, with hardly anything normal about it — especially the 3 right shoulders.

    It should have already paid off yesterday with a trip down to 1511ish.  The red channel I drew yesterday is holding nicely so far, but a departure to the downside this morning was quickly erased.  It even fell through the larger red channel midline but rebounded.

    Clearly, the bulls are trying valiantly to defend the 1520 level.  But, can they?

    continued for members… (more…)