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ES and the Great POMO Rally


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ES and the Great POMO Rally

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  #301 (permalink)
 tigertrader 
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Above consensus payroll numbers extended gains in equities as hope continued to spring eternal on Opening Day. Although, it was the first day of what is traditionally, a month associated with bullish seasonality (see below), there is cause for concern that Mr. Market may be pulling an April Fool's joke on all the bulls. The rally continues to be on waning volume and flat open interest, while the bond market appears to be pricing in an end to QE2, as the yield curve continues to flatten in expectation of the Fed’s need to control inflation. An end to QE2 and a subsequent tightening by the Fed would raise short term rates and as inflation concerns were abated, long term rates would fall, flattening the curve even more. While we have only one marker to compare where The Fed cut back on quantitative easing, the results are not confidence inspiring for the bulls. Post QE1, the S&P dropped from 1217 down to 1064, and commodities and crude were also hit hard, while rates rose. Is the economy strong enough this time around, to continue it’s “growth” without stimulus? Or does the Fed, extend the easing cycle with QE3 and we see $150.00 crude and $5+ gas at the pumps this Summer? I'm betting on the former, which is going to make me ever so vigilant of the possibility, that this April's market could be a contra-seasonal one.

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  #302 (permalink)
 tigertrader 
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Support is 1328.50 and 1322-20 below.

Still looking for an upside target of 1337.

Very light week as far as economic reports are concerned and earnings season is a week away

For now, equities are still a better place to be than cash, and the real momentum chasing may still be forthcoming in April. If the powers-that-be can manipulate an entire market, and engineer one of the greatest bull market rallies of all time, during a time when the economic fundamentals have been absolutely horrid, and global headline news is about one disaster after another, then yes, they just might be able to perpetuate the current asset inflation a little while longer. But they can only use the “forward looking” rationale for so long, before the laws of supply and demand catch up, and mete out economic justice, once again.

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 tigertrader 
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High Probability Opening Trade

The ES presented an opening range trade with a very high probability of success due to a confluence of resistance at 1332.75 (HOD).

Chart 1 is a Fibonacci extension drawn from Friday's low to Friday's high to today's opening which resulted in a 23.60% Fib extension @1332. 45, which also coincided with the RTH only R1.

Chart 2 illustrates the +2SD from the VWAP@1332.75.

Chart 3 shows a falling $TICK and $ADD offering confirmation that market participants were selling into the rally.

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  #304 (permalink)
 Fat Tails 
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This is my picture for ES. Price action is a little above the pivot range and the rolling 3 day pivot range (which includes the balance point). This makes up for a slightly bullish to neutral picture.

There are several support zones around 1325 (auction range), 1326 (fib confluence and balance point). Resistance can be found around 1333 (60 min auction range) and 1334 (fib confluence and 240 min auction range).

If price breaks below 1325, the next stop would be around 1320.50.



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 tigertrader 
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Fat Tails View Post
This is my picture for ES. Price action is a little above the pivot range and the rolling 3 day pivot range (which includes the balance point). This makes up for a slightly bullish to neutral picture.

There are several support zones around 1325 (auction range), 1326 (fib confluence and balance point). Resistance can be found around 1333 (60 min auction range) and 1334 (fib confluence and 240 min auction range).

If price breaks below 1325, the next stop would be around 1320.50.



That's not fair! You've haven't been sharing all your indicators with us, LOL.

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  #306 (permalink)
 Fat Tails 
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tigertrader View Post
That's not fair! You've haven't been sharing all your indicators with us, LOL.

I only finished the multi time frame auction range indicator this morning. Something new.

The fib indicator is not available for free. And the colored ranges are just there to show off a bit, not needed for trading.

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  #307 (permalink)
 Silvester17 
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Fat Tails View Post
I only finished the multi time frame auction range indicator this morning. Something new.

The fib indicator is not available for free. And the colored ranges are just there to show off a bit, not needed for trading.

how much do you charge for the fib indicator? might have a potential buyer.

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  #308 (permalink)
 trendisyourfriend 
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Friday's Value Area High was 1333. Price opened within previous value area. Classical market profile theory states that responsive action should be expected hence the correct play was to fade Friday's VAH. Price tested 1332.75 before falling.

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 tigertrader 
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trendisyourfriend View Post
Friday's Value Area High was 1333. Price opened within previous value area. Classical market profile theory states that responsive action should be expected hence the correct play was to fade Friday's VAH. Price tested 1332.75 before falling.

Good point! When the market opens within the value area, it is showing signs of a balanced market. Trading from a responsive versus initiative mind frame is the way to go

Add 1333.00 to the list! One more price level to join the confluence of points previously mentioned.

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 Fat Tails 
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tigertrader View Post
Good point! When the market opens within the value area, it is showing signs of a balanced market. Trading from a responsive versus initiative mind frame is the way to go

Add 1330.00 to the list! One more price level to join the confluence of points previously mentioned.


Have a fib confluence line around 1329.75 (not shown). Below chart with a single indicator, analyzing price action.

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 tigertrader 
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Back to Basics!

My all time favorite chart format. I used to draw these charts by hand when I was 18 and a runner on the floor of the CME. IMO, they are still the best charts for short term trading. Paul Rotter still likes to use them. That in of itself, is a strong endorsement.

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 theucreport 
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tigertrader View Post
Back to Basics!

My all time favorite chart format. I used to draw these charts by hand when I was 18 and a runner on the floor of the CME. IMO, they are still the best charts for short term trading. Paul Rotter still likes to use them. That in of itself, is a strong endorsement.

interesting.
would you kindly share the template?
UC

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 trendisyourfriend 
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I do like to identify confluence areas using a longer term profile view of the market using the TPO model along with volume histogram. You'll note that volume provides objective points where a cluster of trades occured. These are areas to be aware of as price revisits these levels and one way to use volume at price to your advantage.

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 tigertrader 
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theucreport View Post
interesting.
would you kindly share the template?
UC

Here you go!

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 trendisyourfriend 
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Some locations that are invisible on a candlestick chart: Naked Point of Control.

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 Fat Tails 
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trendisyourfriend View Post
Some locations that are invisible on a candlestick chart: Naked Point of Control.

This is not invisible on a chart. There was a narrow range day on Thursday 31st, which extended into the night session (Globex) of Friday April 1. Prices then broke out to the upside and came back to that midrange on May 5.

It is not unusual that price retraces to the middle of the preceding congestion after a breakout.

The congestion was important enough, because it included the entire narrow range day of Thursday. Just the Globex session of Friday would not have that impact.

Just an alternative view, also using hindsight.

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 trendisyourfriend 
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Fat Tails View Post
This is not invisible on a chart. There was a narrow range day on Thursday 31st, which extended into the night session (Globex) of Friday April 1. Prices then broke out to the upside and came back to that midrange on May 5.

It is not unusual that price retraces to the middle of the preceding congestion after a breakout.

The congestion was important enough, because it included the entire narrow range day of Thursday. Just the Globex session of Friday would not have that impact.

Just an alternative view, also using hindsight.

Yes i agree to some extent but the ES seems to respect Market Proifle levels to the tick. It fascinates me as many times you can trade such significant levels without looking at your usual RSI, MACD or whatever indicator. It seems that to trade the ES effectively due to its narrow daily range you need to use the Market Profile tool along with volume. Nothing fancy or mathematical just location location and location and the courage to hold on your trade for at least a 5 or 10 points. Holding on your trade from 1323 to 1333 was the correct play today and fading the top at 1333+ was the second potential trade setup down to the middle of the pre market range if you know where it is located

PS the bold passage was to make fun of you. Just could not resist.

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 tigertrader 
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trendisyourfriend View Post
Yes i agree to some extent but the ES seems to respect Market Proifle levels to the tick. It fascinates me as many times you can trade such significant levels without looking at your usual RSI, MACD or whatever indicator. It seems that to trade the ES effectively due to its narrow daily range you need to use the Market Profile tool along with volume. Nothing fancy or mathematical just location location and location and the courage to hold on your trade for at least a 5 or 10 points. Holding on your trade from 1323 to 1333 was the correct play today and fading the top at 1333+ was the second potential trade setup down to the middle of the pre market range if you know where it is located

PS the bold passage was to make fun of you. Just could not resist.

I knew Pete Steidelmayer from the bean pit, and I remember when he first introduced MP, and traders started using it. Pete was not your typical BOT local - total non-conformist and independent thinker. I looked at MP a couple times back then, but I really didn't want to be bothered keeping it up while I was banging around in the pit. Of course, now that I don't have to construct and maintain the profile manually, I am now sitting at a screen, and I have somewhat taken the time to understand it, I can truly understand and appreciate the brilliance behind the man. It's an incredible testament to Pete that MP has not only endured, but continues to grow in popularity. What's more incredible is that he shared this important tool with the trading community.

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 Fat Tails 
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tigertrader View Post
I knew Pete Steidelmayer from the bean pit, and I remember when he first introduced MP, and traders started using it. Pete was not your typical BOT local - total non-conformist and independent thinker. I looked at MP a couple times back then, but I really didn't want to be bothered keeping it up while I was banging around in the pit. Of course, now that I don't have to construct and maintain the profile manually, I am now sitting at a screen, and I have somewhat taken the time to understand it, I can truly understand and appreciate the brilliance behind the man. It's an incredible testament to Pete that MP has not only endured, but continues to grow in popularity. What's more incredible is that he shared this important tool with the trading community.

The wheel is reinvented from time to time. Let us look at what market profile really is:

It is a simplified volume distribution (based on TPOs instead of real volume) allowing to produce a picture of a session. The typically used tools such as POC or value area can be obtained alternatively.

(1) POC

This is a mode of the distribution of the trades of a session. For unimodal distributions it should be close to the median and the volume weighted average price. Actually POC, floor pivot PP, VWAP and Median of the session are similar tools as they represent value.

(2) Value area

Projecting past prices forward in the future. You can also use an Ichimoku Kinko Hyo cloud or the pivot range or standard deviation bands around the VWAP. All these give quite similar results, as they designate an area where most of the trades of a past period have occurred.

Where market profile has an edge: It allows to identify different shapes of volume distribution and give an intrepretation for different types of days such as double distribution days. But this is a science on its own.

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 tigertrader 
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Fat Tails View Post
The wheel is reinvented from time to time. Let us look at what market profile really is:

It is a simplified volume distribution (based on TPOs instead of real volume) allowing to produce a picture of a session. The typically used tools such as POC or value area can be obtained alternatively.

(1) POC

This is a mode of the distribution of the trades of a session. For unimodal distributions it should be close to the median and the volume weighted average price. Actually POC, floor pivot PP, VWAP and Median of the session are similar tools as they represent value.

(2) Value area

Projecting past prices forward in the future. You can also use an Ichimoku Kinko Hyo cloud or the pivot range or standard deviation bands around the VWAP. All these give quite similar results, as they designate an area where most of the trades of a past period have occurred.

Where market profile has an edge: It allows to identify different shapes of volume distribution and give an intrepretation for different types of days such as double distribution days. But this is a science on its own.

Especially when it comes to indicators, it's all a variation on the same theme...I guess.

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 jonc 
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Tiger, how do you see the market going from here? Are there any indicative signs of which direction most traders are betting on?

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 tigertrader 
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jonc View Post
Tiger, how do you see the market going from here? Are there any indicative signs of which direction most traders are betting on?


As I stated previously, this week is a slow news week and earnings announcements begin to come out next week. However, April is a month with an attendant bullish seasonality, so the market could have surprised, and taken off this week, leaving the momentum chasers playing catch-up. Instead the market has stalled and is chopping around in a relatively narrow trading range. We've already tested the top of the trading range on very light volume, so I wouldn't be surprised to see the market sell-off and test 1300 once again. As hard as it is to justify fundamentally, price action and market structure is bullish, and it is up to the bears to prove the bulls wrong. As you can see from the charts below the put-call ratio reflects a short options bias and the chart of the COT shows that both large specs (smart money) and to a greater extent, small specs (dumb money) are short, while the commercials are long. At least from a sentiment standpoint, the market is not overbought, and has room to move to the upside if the bulls wish to mount an offensive.

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 tigertrader 
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Took profits on my longs this morning against my 1337.00 upside target, and I am beginning to build a small short position. Still a cautious bull, intermediate term, but believe there may be an opportunity here for a quick contra-trend, short term trade. A break below the RTH only R1 at 1332.50 within the first hour of trade would confirm the short play and warrant an add to the position. Will also be keeping an eye on the TF and 6J, as the small caps continue to make new highs. The current rally seems to have taken on another source of strength besides the Fed's POMO based asset purchases. The carry trade has shifted back to the yen from the dollar (for obvious reasons) and domestic small caps,(instead of emerging country investment) now appears to be the place where hot money is flowing.

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 tigertrader 
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ES came within 2 ticks of reaching the 1337.00 target that I had been looking for since last Friday, and as anticipated, sold off early in the day filling the day gap to the tick at yesterday’s low of 1327.00. The market then staged a 7 point afternoon rally which tested the low of the opening range, only to sell off after the end of the cash trade to close in the lower half of the day’s range. Bonds were destroyed, as was the bearish sentiment in equities that I highlighted last night. In the latest Investor’s Intelligence survey, bears declined by 32% from 23.1% to 15.7%. As was mentioned in the Bespoke article, "Going back to 1975, there have now been just 16 other periods where bearish sentiment declined by more than 30% in a single week." The chart below illustrates the S&P’s performance following these large drops in bearish sentiment the past 11 times they occurred. The average performance over a 1-10 week period was -0.92% to -2.07%. I have also included a chart of the market leading TF to demonstrate a confluence of Fibonacci levels at the 860.00 level. Along with the 61.80 Fib extension that is shown in the chart, is an even more important 1.27 Fib extension, from the January lows to the February highs to the March lows, that comes in at 860.00 also. However, in direct opposition to the possible-market-top theory, is a chart of the 6J that shows a dramatically falling yen, which should insure the yen-carry-trade remains strong and further funding for the U.S. equities rally will continue. That being said, earnings season begins next week and it is still very early in the month of what is a seasonally bullish month. Therefore, there is still plenty of time for the bulls to assert their dominance. If indeed, this is not the top, then based on today’s price action I would expect a quick flush of the weak longs down to at least the weekly pivot @1320.00 if not all the way down to the low 1300’s, followed by an immediate bull reversal. 1300.00 should be the last line of defense for the bulls.

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  #325 (permalink)
 Private Banker 
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As witnessed, we've seen a significant bounce in equities off of the 100 day moving average. The volume has been dismal however and we may be seeing a round top forming on the ES which is about halfway through that potential formation. Should this follow through, we could see selling pressure coming back into the market.

At this point, I'm neutral with no swing position in place after being stopped out on my last remaining small swing short position. Should we see a follow through in this potential set up, I'll be looking to establish another short position. The timing could coincide with the Fed's announcement of providing further liquidity to the market via QE3. If that does not come to fruition (no QE3), there may be a knee jerk reaction and see major selling in equities and treasuries. The Fed has painted themselves into a corner and will need to be careful with their next step.

Bonds appear to have started a new round of selling with the MACD crossing above and back below the zero line with the moving averages crossing back over to the down side. This could be in anticipation of the Fed's announcement as well. The USD is following suit however and hovering around it's recent low. I was anticipating a bounce but there appears to be no interest in taking it higher at this point.

Meanwhile, energy commodities and precious metals have continued to take higher levels out as inflation in the things that actually matter are ripping higher in the face of the Bernank.

Like I've said before, what we are seeing in today's markets will go down in history.

Best,
PB

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 tigertrader 
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As was anticipated in last night's commentary, the market flushed out the weak longs, stopping short of the weekly pivot @1320, as the low 1320's were aggressively bought and finished off with an immediate bull reversal. There have now been 5 days where the market traded above 1330 and failed, leaving us with the burning question, "Are we stalling at the highs, or refusing to pullback even enough to fill last Wednesday's gap up opening (before moving higher)?

As short interest has dropped off significantly and today's flash break was far too quick to trap any new shorts, it does not look like there will be any kind of short squeeze taking place. Therefore, we must still remain vigilant of another shakeout that would fill the previously mentioned gap and perhaps test the 20EMA@ 1315.00, (with the last line of defense still @1300.00 at the confluence of monthly PP and 50EMA). The dollar still looks poised to test 75.00 while today's quake in Japan will put more pressure on the yen, both of which are short term bullish U.S equities and supports the view for new material highs.

While QE2 may end in June, the Fed’s near zero interest rate policy(ZIRP) may continue ad infinitum, or at least until inflation is actually the result of income growth and economic growth instead of monetary policy. Once again, Keynesian money printing/credit creation has been substituted for actual wealth creation. And once again, it has led led to massive debt across private and public sectors, as nominal income not only remains flat, but in real terms is contracting at a 2.3% annual rate. True, corporate profits are up and are close to all-time highs as a percentage of GDP, but this does not necessarily reflect a robust economic recovery as evidenced by the still depressed housing market. Strong control over the balance sheet and cheap labor costs due to wage concessions and layoffs, has resulted in lower unit labor costs and higher productivity. However, while there has been an extraordinary recovery in corporate profits, top line growth has not been spectacular, and bottom line growth has not led to job creation.When QE2 ends, the business cycle should return to normal, and just like the market does so often, profits should revert back to their mean, leaving nowhere for valuations to go, but down. The burning question now is, " Is that going to happen tomorrow, April 27th, the end of June, in 6 months , or a year from now.

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 kbit 
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As was anticipated in last night's commentary, the market flushed out the weak longs, stopping short of the weekly pivot @1320, as the low 1320's were aggressively bought and finished off with an immediate bull reversal. There have now been 5 days where the market traded above 1330 and failed, leaving us with the burning question, "Are we stalling at the highs, or refusing to pullback even enough to fill last Wednesday's gap up opening (before moving higher)?

As short interest has dropped off significantly and today's flash break was far too quick to trap any new shorts, it does not look like there will be any kind of short squeeze taking place. Therefore, we must still remain vigilant of another shakeout that would fill the previously mentioned gap and perhaps test the 20EMA@ 1315.00, (with the last line of defense still @1300.00 at the confluence of monthly PP and 50EMA). The dollar still looks poised to test 75.00 while today's quake in Japan will put more pressure on the yen, both of which are short term bullish U.S equities and supports the view for new material highs.

While QE2 may end in June, the Fed’s near zero interest rate policy(ZIRP) may continue ad infinitum, or at least until inflation is actually the result of income growth and economic growth instead of monetary policy. Once again, Keynesian money printing/credit creation has been substituted for actual wealth creation. And once again, it has led led to massive debt across private and public sectors, as nominal income not only remains flat, but in real terms is contracting at a 2.3% annual rate. True, corporate profits are up and are close to all-time highs as a percentage of GDP, but this does not necessarily reflect a robust economic recovery as evidenced by the still depressed housing market. Strong control over the balance sheet and cheap labor costs due to wage concessions and layoffs, has resulted in lower unit labor costs and higher productivity. However, while there has been an extraordinary recovery in corporate profits, top line growth has not been spectacular, and bottom line growth has not led to job creation.When QE2 ends, the business cycle should return to normal, and just like the market does so often, profits should revert back to their mean, leaving nowhere for valuations to go, but down. The burning question now is, " Is that going to happen tomorrow, April 27th, the end of June, in 6 months , or a year from now.

I just wanted to thank you for your analysis, it seems like you really have a grasp of what is going on.
I look forward to your future posts
P.S I know Pb will see this and I wish to thank you as well

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 tigertrader 
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For the sixth consecutive day, the market revisited the 1333-1336 area, only to be summarily rejected and sent packing to lower levels, coming within a few ticks of filling the aforementioned gap and testing the 50% retracement level (1300-1337). This of course leaves us wondering, “ Are the bears finished, or is there more to come?” In any event, the bears must certainly feel emboldened after today’s performance, as they head into next week’s earnings season, options expiration, and CPI report.

The dollar continued it’s descent and closed near the 75.00 level, while bonds found support near the monthly S1, and in what may be considered a very liberal interpretation of an inverted H&S formation, may be hammering out a short term bottom.The bulls meanwhile, might be starting to doubt themselves with crude topping $113.00 a barrel, gold reaching 1475.00, and the CRB index making new all time highs.

If bonds firm up and accept, and rates fall while the FEd maintains it’s near ZIRPolicy, then equities and commodities will still make sense to own from an asset allocation standpoint (for the near term), and barring any surprise disappointments in earnings, the market should make new material highs next week. Technically, the market is very strong across all time frames. Price has been in a virtually linear advance since last July, and is now hovering just below the next Fib level (see the last chart below). Since the post crash bottom was made in 2009 price has been turning at major Fibonacci retracement levels, and a break above that level would be near term very bullish, with little to no resistance clear on up to the 2007 top. But, on the other hand, a turn down from that Fib level would mark the end of this uptrend.

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  #329 (permalink)
 Fat Tails 
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When comparing absolute values over a longer period, merge-backadjusted charts can be misleading. Although they display the relative size of swings accurately and can be used for Fibonacci analysis, they do not display absolute levels in a correct way. The effect is worst for contracts that are rolled monthly and have a permanent contango such as CL.

But even for DX I would not trust in a backadjusted contract, although it is only rolled every 3 months and the offsets are probably small as they are result of different interest rates, which have all come down recently.

Therefore for charts with a lookback period longer than 3 or 4 contracts, it is probably better to rely on continuous contracts.

The chart below shows a continuous contract for DX. I think that it will probably hit the first target and then may test the lows of 2008.

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 Fat Tails 
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Some links allowing a fundamental view on the Dollar Index.

https://www.cbo.gov/ftpdocs/117xx/doc11705/Budget_Chartbook_Show_SlideShare.pps

https://www.cbo.gov/ftpdocs/117xx/doc11705/Economics_Chartbook_Show_SlideShare.pps

The Only Two Charts That Matter For The US, And A Q&A On The Fiscal "Debate" From Goldman Sachs | zero hedge

For 2010:

-> Net Business Investment below 1% for the first time during the last 60 years
-> Highest Long Term Unemployment since 60 years
-> Highest Vacancy in Housing Units since 45 years
-> Worst Budget Deficit since 40 years exceeding 10% of GDP
-> Stocks and Commodities are rallying

Can you imagine a US Dollar Index at 40?

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 Private Banker 
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Fat Tails View Post
Some links allowing a fundamental view on the Dollar Index.

https://www.cbo.gov/ftpdocs/117xx/doc11705/Budget_Chartbook_Show_SlideShare.pps

https://www.cbo.gov/ftpdocs/117xx/doc11705/Economics_Chartbook_Show_SlideShare.pps

The Only Two Charts That Matter For The US, And A Q&A On The Fiscal "Debate" From Goldman Sachs | zero hedge

For 2010:

-> Net Business Investment below 1% for the first time during the last 60 years
-> Highest Long Term Unemployment since 60 years
-> Highest Vacancy in Housing Units since 45 years
-> Worst Budget Deficit since 40 years exceeding 10% of GDP
-> Stocks and Commodities are rallying

Can you imagine a US Dollar Index at 40?

Great data points! From a technical perspective looking at the USD, it appears to have broke below it's supporting trend line . There was a nice bullish divergence on the big picture chart at the lows of 2008 and price bounced but ended up getting caught in a wedge pattern for most of 2009 and 2010 and has since broken down. 2009 lows, here we come!

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 tigertrader 
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After rallying through the first part of 2010 due to the sovereign debt problems in Europe, The $ began to decline despite the fact that those sovereign debt troubles have continued. A declining dollar tends to increase inflation, and decrease demand for dollar-denominated debt. At least for the time being, a declining dollar is good for stocks because it increases the value of exports and makes our products more competitive on world markets. However, the U.S.is a net importer overall, so the balance is clearly negative. Consumers are just beginning to feel the effects of lower income and higher costs, and inflation is only just beginning to work it's way through the pipeline. At some point in time, if not already, businesses will also begin to feel the effects. While rising food costs may not be a concern for businesses, the rising cost of energy and raw materials will certainly have an effect on the bottom line.

Eventually, higher inflation and higher interest rates will surely not be good for stocks.

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 tigertrader 
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There's the gap-fill. Needs to hold and rally from here, to keep the bull's hopes alive.

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 trendisyourfriend 
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There's the gap-fill. Needs to hold and rally from here, to keep the bull's hopes alive.

RUSSELL too closed its GAP. Was watching both.

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 tigertrader 
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The bulls must certainly feel that their attempt at new material highs is an exercise in futility as the ES ventured above 1330 for the seventh day in a row only to fail from that level again. The market then sold off and looked like it might hold Friday’s settlement @1324.00 only to sell off further and test major support near the weekly S1, daily 20EMA. 50% Fib extension, and upside gap. A lack of strong buying interest at these levels must have the bulls concerned that short term follow through to the downside may be forthcoming. However, they must have found some solace in the fact that the market didn’t close below the weekly S1. Alcoa, the largest U.S. aluminum producer, reported first-quarter profits that beat analysts’ estimates after prices rose for the lightweight metal, with little to no attendant market reaction to the news in extended hours trading. The fact the bulls are unable to mark up the market after the good news is not constructive for the market short term. Barring a gap up and run opening tomorrow, follow through selling will most likely become a reality.

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 Fat Tails 
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A simple calculation per today

US public debt per today: $ 9,652,196,858,759.48
Source: Debt to the Penny (Daily History Search Application)

US interest payments in March: $ 24,460,282,823.69
Source: Debt to the Penny (Daily History Search Application)

US population per today: 311,152,205
Source: U.S. & World Population Clock


Are you the head of a family of 4?

Then your share of the debt is $ 125,000.
Your personal share of interest is $ 10,50 per day or $ 315 per month.

In case that the Fed will raise interest rates, your share will increase. So may the will wait a little bit longer, and if you are lucky the bill will be paid by foreign and domestic bondholders.


What about Europe?

European Union (27) public debt per 3rd quarter 2010: € 9,429,378,600,000
Source: Eurostat - Data Explorer

Population of European Union (27 countries: 501,103,425)
Source: https://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tps00001&plugin=1

However the figures cannot be directly compared:

-> the figure for Europe is the gross debt, which makes it better
-> it is quoted in € not in $, which makes it worse
-> Europe's population is considerably higher, which makes it better
-> The income per capita is lower compared to the US, which makes it worse.

Europe is no better than the US. Humans are generally irresponsible, governments have further developed and cultivated irresponsibility, which is mirrored by the current state of the environment and public finances. There is only one thing worse than a human being, a group of them. Have bought the book "Crowds and Power" by Elias Canetti for my son. He is reading it now. The second key to understanding what is going on is game theory. Collective benefits are different from individual benefits. Moral hazard cannot only be used to describe the behavior of financial institutions, but is even more widespread amongst politicians.


Conclusion:

Sell the $, or buy something which is quoted in $. I am astonished, for once I made it back to the topic, the Great POMO Rally.

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 jonc 
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Do you guys see yesterday fall as a dip or the start of a bigger correction?

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 trendisyourfriend 
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jonc View Post
Do you guys see yesterday fall as a dip or the start of a bigger correction?

I see this as a game being played during the option expiration week. We often see these moves up/down during this time.

You might want to check this precision report ( clickme) when it's available. It offers an interesting perspective.

Also, as a quick recap of the night action, you might want to read what James Dalton has to say just before the day begins:

James Dalton Trading | Market Recap and Updates | Free for Traders

Hope this help

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 tigertrader 
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jonc View Post
Do you guys see yesterday fall as a dip or the start of a bigger correction?

The weak hands threw in the towel yesterday after repeated attempts by the bulls to punch through and make new highs. The bears took the lead and the market sold off for the majority of the day, but was met by strong bull leadership near major support @ the weekly S3, daily RTH-only S3, Fib retracement and extension levels, daily 50EMA, and the monthly PP. The bounce continued into the ETH session and took out the previous sessions high @1315.50. 1320-22 is now critical resistance for the bears to defend. The bulls still enjoy the home field advantage as we are in the midst of earnings season, in what is still a cyclical bull market - the odds are the market is most likely to run on positive news rather than negative news. However, a rejection of 1320-22 points to at least a retest of yesterday’s lows and a possible break.

Support areas include: 13311.75 (VAh), the daily gap/pivot area, weekly S2 and closing VWAP, from 1309.75 to 1310.25 and 1308.25 to 1309.00, but likely not below.

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 tigertrader 
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Long @1312.00 against the VAh - covered 1/3 of my position at the low of the opening range@1314.75. Looking for the market to take out the high of the opg, range @1317.50 and test the R2 @ 1320.00 level. Planning to cover another 1/3 at that level, and hold the balance. Market internals are not strong enough to warrant pressing-and-adding to my position.

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 trendisyourfriend 
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I posted this comment a while ago about the 1min opening range. The opening today is almost a copy conform of what i described here ( clickme). I like to use the 1 min range as in many cases, it serves as a good area of support or resistance later on in the day.

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  #342 (permalink)
 Zondor 
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Note the close correlation between the ES and the CL today.

Does this mean that everything is just trading inversely to the strength of the dollar?

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 Fat Tails 
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Zondor View Post
Note the close correlation between the ES and the CL today.

Does this mean that everything is just trading inversely to the strength of the dollar?

The $ is the quote currency for index futures and commodities. So there is always a positive correlation induced by its strength or weakness. Sometimes you think that you trade index futures, but in reality you trade the dollar index.

Below a small chart showing correlation over a longer period. Typically index futures are topping prior to commodities. This is due to the larger cycles. When the economy is overheating, the FED or the other Central Banks lift interest rates, which puts an end to the stock rally and also depresses the bond markets. Inflation tends to be higher and investment flows shift to the commodity markets. History then takes it course, stocks will decline and the general recession will eventually lead to lower commodity prices....

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 Private Banker 
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Speaking of the USD, it's getting real close to 2009's low of $74.21. At this rate, we should hit it by tomorrow or early next week. There was a nice bounce in energy and metals related commodities today. Crude appears to have found support at it's weekly S2 level which was also right on it's supporting trend line on the daily chart interval. Silver is continuing it's run straight up as is Gold. The ES has continued it's round top formation and is danger of slipping back into the Abyss.

I'll be looking to start establishing a short position in ES should this continue from here. Today the ES had a nice bounce however, the next few days could prove crucial for the equities market but I'm thinking the game is up at this point. We'll see though, I'm not one for market predictions. I just react to what I see on the charts.

Cheers,
PB

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The only thing that's got me worried is that everybody and their brother is looking for the same thing we are. I would feel much better, and would be a lot less circumspect, if the sentiment was a lot more bullish. Even Bill Gross wrote a bearish article.

Below is the link to the Bill Gross article. It's not one of his best articles, but is compelling nevertheless, not because of the content of the article, but because of the implication of why he wrote the article. Gross, the penultimate establishment insider appears to be hedging himself in front of QE2 ( s/b Titanic2). While the article tells me that things may be far worse than I had imagined, it is still a glaring example of another player positioned the same way we are.

Im still more on bullish bias as of right now. It seems like the /ES is just consolidating trading within a range. I will be bullish until the 200 mva breaks and the trend breaks. However I don't see it going much higher at 1400 i will definately be a bear a polar bear.

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 kbit 
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If Volume Is the Weapon Of The Bull, Then....

ran across this today...take a look at the volume chart. I know it's no revelation here but interesting to see it over a few year period

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 Linds 
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thx kbit

I'd be interested to see how tigertrader, privatebanker and others interpret that.

L

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 Private Banker 
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kbit View Post
If Volume Is the Weapon Of The Bull, Then....

ran across this today...take a look at the volume chart. I know it's no revelation here but interesting to see it over a few year period

I think the answer to this is simple. This is my reason for starting this thread. The Fed has found a way to successfully goose the stock market all the way up to where it is today. Their POMO is a back room agreement between the Primary Dealer banks (PD's), the U.S. Treasury and of course, the Fed. The Treasury issues bonds/notes, the Primary Dealers go in and buy them up and immediately turn around and sell them to the Fed (at a premium + commissions at the tax payer's expense). The cash received by the PD's are then used to buy high Beta stocks to goose the stock market up. Then the High Frequency Trading churn bots step in trading the same shares back and forth to themselves while not really taking a net position. See the attached chart from Zero Hedge.

I think many "Average Joe" retail investors are long gone or far less involved then they were in recent years. Many high net-worth investors and institutions are now having a lower percentage of their portfolio's dedicated to equities and are utilizing other asset classes to provide equity like returns with lower standard deviations. This explains the far lower volume IMO.

So, the entire POMO is nothing more than another financial game created by the Fed that has successfully manipulated the stock market higher providing an endless bid because of their liquidity injections. If this were to stop, we would see an immediate correction in prices.

Cheers,
PB

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 trendisyourfriend 
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KonQuistador View Post
Im still more on bullish bias as of right now. It seems like the /ES is just consolidating trading within a range. I will be bullish until the 200 mva breaks and the trend breaks. However I don't see it going much higher at 1400 i will definately be a bear a polar bear.

There is a good summary of the situation here:
---
"We're starting to see companies passing along their costs to consumers, and that's going to be an ongoing concern," said Bruce McCain, chief investment strategist at Key Private Bank.
---
Clark said investors are setting up for next week, when more than a fifth of S&P 500 companies will report their quarterly results. "Earnings are going to be positive overall, and that's going to be bullish for the market until the summer," he said.
---
source:
Market Report - Apr. 15, 2011 - CNNMoney.com

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 Lornz 
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I just found this thread, some great commentary in here. I'm looking forward to following it in the time to come.

-Lornz

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 jonc 
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So, the entire POMO is nothing more than another financial game created by the Fed that has successfully manipulated the stock market higher providing an endless bid because of their liquidity injections. If this were to stop, we would see an immediate correction in prices.

Cheers,
PB

PB, what do the Fed want to achieve here by driving the stock market artificially higher? Who had they in mind to be the main beneficiary of this exercise, the banks?

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 Private Banker 
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jonc View Post
PB, what do the Fed want to achieve here by driving the stock market artificially higher? Who had they in mind to be the main beneficiary of this exercise, the banks?

The over all ideology behind the POMO is to provide liquidity to the markets which in turn will drive investors to risk assets vs. non-risk assets (Treasuries being the benchmark for risk, i.e. risk-free returns). The beneficiaries of a higher stock market per the Bernank's quote, "will give equity investors the feel and comfort of their portfolios and net worth rising in value". Meanwhile, the currency in which the benchmark stock market is denominated in has been losing value since POMO began.

So, the proposed beneficiaries of the POMO are equity investors but in reality, the Primary Dealer Banks have benefited from this far beyond any investor. I know the media makes a spectacle about how this is only benefiting the top 1% of the population but in reality, many HNW investors only have a small portion of their portfolio's invested in a traditional buy and hold equity structure. Every wealthy individual investor I know only has a small percentage of their portfolio in equities. These people are already rich and not trying to take on more risk to get way richer. The majority are in the wealth preservation mode of their assets in these uncertain times. This means they are in high grade fixed income securities (if that really exists anymore) and Real assets such as precious metals, numismatics, high end art, real estate such as timberland, farmland (Corn, Wheat, Cotton, etc.) and minerals/energy (not so much in residential or CRE) with some exposure to hedge funds (FoF's), private equity and things along those lines that are not as traditional and feasible to the "Joe Retail" investor. I don't know one HNW investor that has their entire net-worth in equities that hasn't hedged it in some way via a derivative strategy i.e. pre-paid forward which is irrelevant to what the market does as they've taken a majority of that value of those assets and reinvested it in a safer investment structure.

So, to be specific, POMO is just another way to keep the primary dealer banks running as traditional trading fees and underwriting fees have fallen off a cliff without it.

Cheers,
PB

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 Private Banker 
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Nice sell off today partially from the news of the Standard & Poors downgrade outlook for the U.S. to negative with a few other earnings issues such as Citi's loss of earnings and continued concerns in Europe. To me, I'm seeing a pattern taking place here. Back in March 7th, 8th and 9th, I started selling into retracements on the ES with an effort to establish a net short position while cycling in some profits. The levels I started selling into were 1318.25 and then on down against other retracements. This move ended up running all the way down to the 100 day MA on the daily chart interval.

Today and this past Friday, I noticed the same thing has been happening with with the 1318 level. It appears that there are definitely some short sellers coming into the market and selling this level. I've attached two images of what I'm looking at from March and from now. Also, If you look on the daily chart, we are nose diving back down with the MACD about to drop back below the zero line. Maybe this time, the move will be for real and we are on the precipice of a major correction in the markets. I'll be watching this closely and will be looking to start establishing a net short position.

Cheers,
PB

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 trendisyourfriend 
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Couple of weeks of Value Area for the ES as well as last month Value area. Obviously, we are trading within last month value which technically speaking explains the selling at 1318 from an auction point of view.

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 Lornz 
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Why Listen to S&P on US Debt? | The Big Picture


Why Listen to S&P on US Debt?
By Barry Ritholtz - April 18th, 2011, 11:10AM

There is an old Wall Street joke about analysts: “You don’t need them in a Bull Market, and you don’t want them in a Bear Market.”

Which brings me to Standard & Poor’s. They put a “negative” outlook on the U.S. AAA credit rating, citing rising budget deficits and debt.

To which I say “Who Cares?”

Its not that I disagree with their assessment — I do not — but I pay it little heed. It was much more important to me as an investor that PIMCO’s Bill Gross was out of Treasuries a month ago (and indeed, is short) than what S&P says. That was all any bond investor needed to know — no ratings agency necessary.

If ever there was an organization more corrupt, incompetent, and less capable of issuing an intelligent analysis on debt than S&P, I am unaware of them. Why do I write this? A huge part of the reason the US is in its awful financial position is due to the fine work of S&P.

Consider what Nobel Laurelate Joseph Stiglitz, economics professor at Columbia University in New York observed:

“I view the ratings agencies as one of the key culprits. They were the party that performed that alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.”

Hence, the “negative outlook” of US debt has come about because the inability of Standard & Poor’s to have performed their jobs rating mortgage backed securities. Ultimately, this enabled the entire crisis, financial collapse, enormous budget deficit and now political over the debt ceiling.

Of course there is a negative future outlook. Its in large part the work product of S&P and Moody’s.

Why we even have Nationally Recognized Statistical Rating Organization (NRSRO) any longer following their payola =driven corruption, their gross incompetency and their inability to discharge their basic duties is beyond my understanding.

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 Private Banker 
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Lornz View Post
Why Listen to S&P on US Debt? | The Big Picture


Why Listen to S&P on US Debt?
By Barry Ritholtz - April 18th, 2011, 11:10AM

There is an old Wall Street joke about analysts: “You don’t need them in a Bull Market, and you don’t want them in a Bear Market.”

Which brings me to Standard & Poor’s. They put a “negative” outlook on the U.S. AAA credit rating, citing rising budget deficits and debt.

To which I say “Who Cares?”

Its not that I disagree with their assessment — I do not — but I pay it little heed. It was much more important to me as an investor that PIMCO’s Bill Gross was out of Treasuries a month ago (and indeed, is short) than what S&P says. That was all any bond investor needed to know — no ratings agency necessary.

If ever there was an organization more corrupt, incompetent, and less capable of issuing an intelligent analysis on debt than S&P, I am unaware of them. Why do I write this? A huge part of the reason the US is in its awful financial position is due to the fine work of S&P.

Consider what Nobel Laurelate Joseph Stiglitz, economics professor at Columbia University in New York observed:

“I view the ratings agencies as one of the key culprits. They were the party that performed that alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.”

Hence, the “negative outlook” of US debt has come about because the inability of Standard & Poor’s to have performed their jobs rating mortgage backed securities. Ultimately, this enabled the entire crisis, financial collapse, enormous budget deficit and now political over the debt ceiling.

Of course there is a negative future outlook. Its in large part the work product of S&P and Moody’s.

Why we even have Nationally Recognized Statistical Rating Organization (NRSRO) any longer following their payola =driven corruption, their gross incompetency and their inability to discharge their basic duties is beyond my understanding.

I agree with Barry on this one. The "Ratings Cartel" should have been dismantled after their failure to properly react to the Bank failures/Credit Crisis that they somehow missed interpreted underlying securities in the different CDO tranches. Lol! Why would anyone take these clowns seriously any more. The best part is Moody's comes out with a positive outlook for the U.S:

"Last Wednesday, President Obama outlined a revised proposal only two months after his administration presented its 2012 budget, a very unusual move that followed an alternative Republican budget presented by US Rep. Paul Ryan of Wisconsin the previous week and passed by the House of Representatives last Friday. While the politics surrounding an agreement remain contentious, we believe these two proposals together represent a significant shift in the US fiscal debate, as both would result in lower deficits and debt levels than projected in the February budget. This potential change in the direction of fiscal policy is credit positive for the US federal government (Aaa stable), although it remains uncertain what sort of budget will actually be adopted. The US stands out from other major countries as not yet having a plan for reversing its upward debt trajectory."

I'm pretty sure everyone knows by now that the U.S. is in a tight spot and the Fed is all in throwing everything they can to extend and pretend and it's results are deteriorating. I also agree that the fact that Bill Gross is all out of Treasuries is enough said.

Cheers,
PB

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 Lornz 
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Private Banker View Post
I agree with Barry on this one. The "Ratings Cartel" should have been dismantled after their failure to properly react to the Bank failures/Credit Crisis that they somehow missed interpreted underlying securities in the different CDO tranches. Lol! Why would anyone take these clowns seriously any more. The best part is Moody's comes out with a positive outlook for the U.S:

"Last Wednesday, President Obama outlined a revised proposal only two months after his administration presented its 2012 budget, a very unusual move that followed an alternative Republican budget presented by US Rep. Paul Ryan of Wisconsin the previous week and passed by the House of Representatives last Friday. While the politics surrounding an agreement remain contentious, we believe these two proposals together represent a significant shift in the US fiscal debate, as both would result in lower deficits and debt levels than projected in the February budget. This potential change in the direction of fiscal policy is credit positive for the US federal government (Aaa stable), although it remains uncertain what sort of budget will actually be adopted. The US stands out from other major countries as not yet having a plan for reversing its upward debt trajectory."

I'm pretty sure everyone knows by now that the U.S. is in a tight spot and the Fed is all in throwing everything they can to extend and pretend and it's results are deteriorating. I also agree that the fact that Bill Gross is all out of Treasuries is enough said.

Cheers,
PB

It's a circus. It's hard to take anything seriously these days, the whole situation is absurd. I learnt a long time ago that the markets can stay irrational longer than I can remain solvent (Keynes), and so I try to stick to trading what I see, not what I believe will happen. Nevertheless, the next few years will be very interesting. Who knows, maybe this is the start of the next big bull market. Aided by QE 3 - 50. It seems all economical theories are defunct at this point. I honestly don't know what to believe anymore...

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KonQuistador
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Private Banker View Post
Nice sell off today partially from the news of the Standard & Poors downgrade outlook for the U.S. to negative with a few other earnings issues such as Citi's loss of earnings and continued concerns in Europe. To me, I'm seeing a pattern taking place here. Back in March 7th, 8th and 9th, I started selling into retracements on the ES with an effort to establish a net short position while cycling in some profits. The levels I started selling into were 1318.25 and then on down against other retracements. This move ended up running all the way down to the 100 day MA on the daily chart interval.

Today and this past Friday, I noticed the same thing has been happening with with the 1318 level. It appears that there are definitely some short sellers coming into the market and selling this level. I've attached two images of what I'm looking at from March and from now. Also, If you look on the daily chart, we are nose diving back down with the MACD about to drop back below the zero line. Maybe this time, the move will be for real and we are on the precipice of a major correction in the markets. I'll be watching this closely and will be looking to start establishing a net short position.

Cheers,
PB

I shorted as well opened my position @ 1316 with a stop @ 1318.25 went to sleep woke up and closed at 1309. Im still trading on my sim but will go live in the next weeks or so. I still think the key level here is 1400, I can see another correction but not in a major way. It looks like the /ES created a double top with the highs @1336 I can see a sell off to 1241-1243 coming back to the lows it made back in March 17. It looks like it will touch the 200 day mva for a last push up. The reason I don't think this is a major sell off is because their is usually a frenzy of buying to the top something we haven't seen yet. It's going to be interesting how it will end up playing out but I sense a credit bubble being created and it's getting bigger and bigger.

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 jonc 
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Yesterday's rebound and today Europe/Asia markets seem to suggest we are continuing the climb again.

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 Fat Tails 
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Financial Times (German Edition), April 20, 2011.





Charts attached for 6E and GC.

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 whatnext 
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It's official: POMO will continue as needed after QE2 ends in June.
http://www.bloomberg.com/news/2011-04-19/bernanke-may-reinvest-maturing-debt-to-avoid-cold-turkey-end-to-stimulus.html

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 zt379 
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Hope it's not irrelevant to the thread, but thought this piece from the Guardian interesting.

How a big US bank laundered billions from Mexico's murderous drug gangs | World news | The Observer

The "fix" seems to be on in more and more ways (forgive the pun).

Here are a few paragraphs:

"Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year's "deferred prosecution" has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine."

"More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn"

"At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were "the only liquid investment capital" available to banks on the brink of collapse. "Inter-bank loans were funded by money that originated from the drugs trade," he said. "There were signs that some banks were rescued that way."


"What happened at Wachovia was symptomatic of the failure of the entire regulatory system to apply the kind of proper governance and adequate risk management which would have prevented not just the laundering of blood money, but the global crisis."

"Every moment I wake up I realize I know nothing, and then I smile..." zt379
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 Silvester17 
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with everything in life, criticizing is the easy part. the question is, what should have been done instead?

so my question about the fed's action:

1. what would have been a better solution?
2. would we (U.S.) be better off because of # 1?
3. my answer, probably not

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Here's another way to look a the "rally" from Zero Hedge:


"As silver is about to break $45 any second, we thought we'd take a minute to show the change in the S&P in real terms, i.e. adjusted for the plunge in the dollar. When one compares the YTD change in the S&P compared to the YTD change in DXY, one gets... the following. To all those who hold stocks: congratulations - you have only lost 0.18% in purchasing power year to date. To everyone else: we can only hope Goldman's next downgrade of crude is more effective. That, or take a bicycle to work."


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 whatnext 
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Big News... Might want to ready your supplies.


Quoting 
"All those who were hoping global stock markets would surge tomorrow based on a ridiculous rumor that China would revalue the CNY by 10% will have to wait. Instead, China has decided to serve the world another surprise. Following last week's announcement by PBoC Governor Zhou ( Where's Waldo) Xiaochuan that the country's excessive stockpile of USD reserves has to be urgently diversified, today we get a sense of just how big the upcoming Chinese defection from the "buy US debt" Nash equilibrium will be. Not surprisingly, China appears to be getting ready to cut its USD reserves by roughly the amount of dollars that was recently printed by the Fed, or $2 trilion or so. And to think that this comes just as news that the Japanese pension fund will soon be dumping who knows what. So, once again, how about that "end of QE" again?

From Xinhua:
China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.
And as if the public sector making it all too clear what is about to happen was not enough, here is the private one as well:
China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.

However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.
The last sentence says it all. While China is certainly tired of recycling US Dollars, it still has no viable alternative, especially as long as its own currency is relegated to the C-grade of not even SDR-backing currencies. But that will all change very soon. Once the push for broad Chinese currency acceptance is in play, the CNY and the USD will be unpegged, promptly followed by China dumping the bulk of its USD exposure, and also sending the world a message that US debt is no longer a viable investment opportunity. In fact, we are confident that the reval is a likely a key preceding step to any strategic decision vis-a-vis US FX exposure (read bond purchasing/selling intentions). As such, all those Americans pushing China to revalue, may want to consider that such an action could well guarantee hyperinflation, once the Fed is stuck as being the only buyer of US debt."


http://www.zerohedge.com/article/china-proposes-cut-two-thirds-its-3-trillion-usd-holdings
http://news.xinhuanet.com/english2010/china/2011-04/23/c_13842843.htm


I was tempted to put this in my "Waves and the Dollar" thread, out of spite, but a key point in it was that the major support level for the dollar has just become a resistance level. My 4 year symmetrical triangle chart of the dollar has a price target of 64 "if" it falls and 84 if it breaks upwards. My 30 year head and shoulders target is 35 "if" it falls 104 if it breaks up.

For those wondering - the people of Zerohedge will work with you if you have important information. They do take precautions and make precautions available for you. I was being "observed" before I started contacting them frequently and have stories of getting "scared strait" - but it wasn't ZH that caused it. I say that for those who might not even feel comfortable sending in information, much less calling, which is preferable in some instances. "Marla Singer" doesn't post any more because she's gotten five death threats. Reading posts from people like silvester17 nearly cures the new found apathy.

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 Silvester17 
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whatnext View Post
Reading posts from people like silvester17 nearly cures the new found apathy.

thanks.

as you can see, nobody answered the question and came up with a better plan. and I'll say it again. under the circumstances (interest rate at about 0%), there was not a big choice.

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 whatnext 
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I'll respond later tonight.

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Silvester17 View Post
with everything in life, criticizing is the easy part. the question is, what should have been done instead?

so my question about the fed's action:

1. what would have been a better solution?
2. would we (U.S.) be better off because of # 1?
3. my answer, probably not

1. Here are two of the many things that could have been done:

First, the completely obvious answer to what could have been done better is the Fed should have recognized the real estate/credit bubble when it was occurring. They in fact, did but pretended it was of no significance and allowed it to continue. This really began with Greenspan and then when Bernanke became Fed President, it was most likely made worse. I distinctly remember all of Bernanke's testimonies where he stated that he felt "Real Estate was not in a bubble, would not crash and if anything would simply plateau for a few years until everything else caught up with RE prices". Lol!!! They could have simply raised short term interest rates enough to stop the excessive speculation that was occurring in the Real Estate market. They could have also reduced the monetary supply by selling U.S. Treasuries and bringing long(er) term interest rates higher until the speculation in Real Estate cooled down.

The second important thing they should have done was to put a clamp down on the banks' excessive use of derivatives (Collateralized Debt Obligations, Credit Default Swaps and other covenant lite/Mezzanine financing arrangements) and the high risk taking that was affiliated with it. This would have stopped the massive securitization machine that came to be and would have made banks use far less risk because the mortgages that did not fit into the FNMA/FMCC criteria would have had to be held on their (the banks') balance sheets. As we witnessed, the fallout from the use of derivatives resulted in massive bank failures, money markets "breaking the buck" and giant mounds of garbage securities that have absolutely no secondary market and no bid to speak of.

The entire meltdown could have been prevented if they would have acted early enough. But we're talking about the Fed here. They're in it for themselves first and foremost. This meltdown afforded them with an even larger power grab.

2. We would obviously be way better.
3. I can't even imagine how you arrived with your conclusion, please explain.

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 Silvester17 
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Private Banker View Post
1. Here are two of the many things that could have been done:

First, the completely obvious answer to what could have been done better is the Fed should have recognized the real estate/credit bubble when it was occurring. They in fact, did but pretended it was of no significance and allowed it to continue. This really began with Greenspan and then when Bernanke became Fed President, it was most likely made worse. I distinctly remember all of Bernanke's testimonies where he stated that he felt "Real Estate was not in a bubble, would not crash and if anything would simply plateau for a few years until everything else caught up with RE prices". Lol!!! They could have simply raised short term interest rates enough to stop the excessive speculation that was occurring in the Real Estate market. They could have also reduced the monetary supply by selling U.S. Treasuries and bringing long(er) term interest rates higher until the speculation in Real Estate cooled down.

The second important thing they should have done was to put a clamp down on the banks' excessive use of derivatives (Collateralized Debt Obligations, Credit Default Swaps and other covenant lite/Mezzanine financing arrangements) and the high risk taking that was affiliated with it. This would have stopped the massive securitization machine that came to be and would have made banks use far less risk because the mortgages that did not fit into the FNMA/FMCC criteria would have had to be held on their (the banks') balance sheets. As we witnessed, the fallout from the use of derivatives resulted in massive bank failures, money markets "breaking the buck" and giant mounds of garbage securities that have absolutely no secondary market and no bid to speak of.

The entire meltdown could have been prevented if they would have acted early enough. But we're talking about the Fed here. They're in it for themselves first and foremost. This meltdown afforded them with an even larger power grab.

2. We would obviously be way better.
3. I can't even imagine how you arrived with your conclusion, please explain.

OK, we're not talking about the same thing.

what you mentioned is was what they could (should) have done before the meltdown. I'm talking about what they should have done after the damage was done. with other words what else than quantitative easing.

and for your conclusion that raising short term interest rates would have helped to prevent the meltdown is very questionable imo. you don't want to fix a problem by creating others. see attached charts.

I totally agree about the excessive use of derivatives. this should have been done. but then voices would appear: what about free market?

sounds familiar?

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 Private Banker 
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Silvester17 View Post
OK, what you mentioned is was what they could (should) have done before the meltdown. I'm talking about what they should have done after the damage was done. with other words what else than quantitative easing.

and for your conclusion that raising short term interest rates would have helped to prevent the meltdown is very questionable imo. you don't want to fix a problem by creating others. see attached charts.

I totally agree about the excessive use of derivatives. this should have been done. but then voices would appear: what about free market?

sounds familiar?

So, you'd like to know what an alternative to QE would be after the fact that the Fed blew it with failing to nip the problem before it blew up? Lol! I'm afraid it's a bit late at this point don't you think?

As I've said before, they've painted themselves into a tight corner at this point with limited options. I'm for letting the Zombie banks fail. It's going to happen regardless if something isn't done about them. But to be specific and answer your question, they (the Fed) should've broken these big Zombies apart and created a better, more sound banking system. But no, the facade plays on.

The only thing that QE is accomplishing is the destruction of the USD. All the other asset classes are just responding accordingly. Finance 101 teaches you the inflation trade. The Fed is blowing it again by not recognizing the inflation they've created. Bernanke has repeatedly said that this is "transitory". But that's been for quite some time now, I'm thinking this has become a bit more permanent vs. transitory. But I'm not surprised as his track record speaks for itself.

I'm interested in learning more as to why you think raising interest rates to curb excessive speculation is questionable. I've never heard anyone say this before and would like to learn the rational behind that idea.

Cheers,
PB

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 Silvester17 
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Private Banker View Post
So, you'd like to know what an alternative to QE would be after the fact that the Fed blew it with failing to nip the problem before it blew up? Lol! I'm afraid it's a bit late at this point don't you think?

As I've said before, they've painted themselves into a tight corner at this point with limited options. I'm for letting the Zombie banks fail. It's going to happen regardless if something isn't done about them. But to be specific and answer your question, they (the Fed) should've broken these big Zombies apart and created a better, more sound banking system. But no, the facade plays on.

The only thing that QE is accomplishing is the destruction of the USD. All the other asset classes are just responding accordingly. Finance 101 teaches you the inflation trade. The Fed is blowing it again by not recognizing the inflation they've created. Bernanke has repeatedly said that this is "transitory". But that's been for quite some time now, I'm thinking this has become a bit more permanent vs. transitory. But I'm not surprised as his track record speaks for itself.

I'm interested in learning more as to why you think raising interest rates to curb excessive speculation is questionable. I've never heard anyone say this before and would like to learn the rational behind that idea.

Cheers,
PB

so you're saying they should have let the banks fall, no QE and we would be better off now? lol. that was a joke, right? of course is printing money creating inflation, that's a well known side affect. that's the risk they were willing to take. or I should say had to take. just like the japanese and the english did before. maybe the destruction of the usd would not be as bad if the government would stop some of the ridiculous spending.

why do I think raising interest rates would have been a bad action? actually pretty simple. unemployment was rising. the economy was heading down hill rather fast. not really a good moment to raise interest rates, wouldn't you agree?

but here's the irony. of course it would have been better under all circumstances to stop that real estate bubble, including raising interest rates. but be honest now. lets say by raising interest rates and other actions they were able to stop that bubble, but the economy went straight into recession. guess what? sources like zerohedge or zerocoke or whatever would hammer bernanke for being so stupid to let us slide into another recession because of these actions. of course nobody would have a clue how severe that real estate bubble would have affected us. no hindsight.

I'm not saying bernanke is a genius. but I'm saying it's always easy to criticize after the fact.

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 whatnext 
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Declaring MBS null and void and replacing them with T-Bills might have been a good option.

Better than the FHA taking over guaranteeing mortgages, at as low as 3% down, with capital reserves that don’t come close to covering. Between that Fannie and Freddie the taxpayer is covering almost half of the 11 trillion housing market. What about Blanchard of the fed recommending that everyone with a liar loan be knocked down to current interest rates?

I'd be more than willing to endorse the pains of deleveraging if it was a step in ending compliance to multinational corporate demand derived from their creation of these credit derivative products.

Long term the only solution I have for the US is to readjust the imf holdings, wipe the slate clean - and have a global currency be issued with no interest based on GDP and population of each country. Even if this idea was floated how quickly would it be modified once in place…

I like that you question what the alternatives could have been silvester. But saying there probably wouldn’t have been a better solution – when I’d put up the six digits made over the last two weeks that you haven’t researched the issue well – makes no sense.

Would you rather laugh at the people who say there is government manipulation in currency than accept that it’s common knowledge among some that the fed paid out double issued bonds in the 70’s to soak up some of the inflation? Sorry to the wonderful futures.io (formerly BMT) members around the global, but I’m not a “global citizen”; there are forms of sustainable/effective manipulation that would have been good for America since then (tariffs, ect.) and I’m all for it.

One former member of ZH, whose opinions I valued, felt that we would have gone into hyperinflation if not for the bailouts. I didn’t buy this at first because I think we will because of it. He agrees.

It took me a while to realize that since the USD is issued by a cartel of private banks – those banks going into bankruptcy - would kill our currency. It is that those banks took away from US T-Bill dependence with unstable MBS’s, exacerbated the problem more than other banks towards the end, had a plan to bail themselves out in place and have effectively gained regulatory capture – that gives me pause.

The years of me digging up statements, laws and events to put in a timeline and share with the most “important” people I could find - are over.

Getting E-mails intercepted is freaky.

Watching files being extracted from your computer remotely is freaky.

Seeing them remotely open up chat rooms and post in my name is freaky.

Watching two guys open my backyard gate (because I have a dog and was up at 3:30am) and cut the connecter to open my phone box is freaky.

Not being able to access my bank account without providing information of my family and vehicle, because either the bank or a federal agency wanted to know (the bank rep reluctantly said after being pressed) - is freaky.

Death threats are freaky.

After receiving death threats and calling my father overseas to come home – but more importantly getting the contact information of a lawyer he mentored for three years and is ranked in the top 100 in the US who will rep me for free – then having the phone volume go down at that time so I had to keep calling back - is freaky.

Having a LOCAL police car waiting at my corner and the late 20’s early 30’s Italian looking “officer” turn his head away from me then press something that was right over his driver side window – which made the RPM’s of my engine go way up and pressing on the gas do nothing – was devastating. Not just because I didn’t have the balls to turn it around and get his info – but that I love the PD in my town – that asshole was the result of “fusion centers”.

I can’t help any of the problems the US is facing and if I could I’d die for it. I attempted suicide 6 months ago over it. When you fail at that you go to mental institution. I told them why I tried and the SOB’s wouldn’t fact check anything I laid out for them and said I was skitzo effective and wouldn’t let me out for two months. Personal enough for you? I made more since getting out than any of those fucking "doctors" will in two years.

Why I don’t like you Sylvester is you don’t seem to know much – but will pound down on those you disagree with over the shit. I don’t need to still be curling 4x10 sets of 55# and squat pressing 4x12 sets of 850# to put the fear of god in you – with your sweetheart puppy dog avatar – if you tried any of this on me.

But slap a badge on your chest, with the same mentality, and that’s not playing fair is it.

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Silvester17 View Post
so you're saying they should have let the banks fall, no QE and we would be better off now? lol. that was a joke, right? of course is printing money creating inflation, that's a well known side affect. that's the risk they were willing to take. or I should say had to take. just like the japanese and the english did before. maybe the destruction of the usd would not be as bad if the government would stop some of the ridiculous spending.

why do I think raising interest rates would have been a bad action? actually pretty simple. unemployment was rising. the economy was heading down hill rather fast. not really a good moment to raise interest rates, wouldn't you agree?

but here's the irony. of course it would have been better under all circumstances to stop that real estate bubble, including raising interest rates. but be honest now. lets say by raising interest rates and other actions they were able to stop that bubble, but the economy went straight into recession. guess what? sources like zerohedge or zerocoke or whatever would hammer bernanke for being so stupid to let us slide into another recession because of these actions. of course nobody would have a clue how severe that real estate bubble would have affected us. no hindsight.

I'm not saying bernanke is a genius. but I'm saying it's always easy to criticize after the fact.

Thanks for your response. My thoughts were to have had the big banks broken up before they were to fail. It's pretty clear you aren't very savvy on this topic and have turned this into more of a who's right argument so, I'll leave it at that respectfully.

Cheers,
PB

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 Silvester17 
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Thanks for your response. My thoughts were to have had the big banks broken up before they were to fail. It's pretty clear you aren't very savvy on this topic and have turned this into more of a who's right argument so, I'll leave it at that respectfully.

Cheers,
PB

that was not my intention. I really should have put it in different words, sorry about that. for what's it worth, I still don't disagree with you.

always enjoying your posts. very valuable imo.

I'll leave it at that as well, since I'm not able to clarify exactly what I mean. (sorry for my bad english)

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Silvester17 View Post
that was not my intention. I really should have put it in different words, sorry about that. for what's it worth, I still don't disagree with you.

always enjoying your posts. very valuable imo.

I'll leave it at that as well, since I'm not able to clarify exactly what I mean. (sorry for my bad english)

Thanks, no worries. I totally understand. I'm just here to make friends and have good discussions. Your English is excellent by the way.

All the best,
PB

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 tomgilb 
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This is interesting:

IMF bombshell: Age of America nears end Brett Arends' ROI - MarketWatch

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 jonc 
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It will be interesting to see how the market behave this week with the FOMC statement and Bernanke press conference.

Didn't see tigertrader posting for sometime. Misses his market commentaries.

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Private Banker View Post
1. Here are two of the many things that could have been done:

First, the completely obvious answer to what could have been done better is the Fed should have recognized the real estate/credit bubble when it was occurring. They in fact, did but pretended it was of no significance and allowed it to continue. This really began with Greenspan and then when Bernanke became Fed President, it was most likely made worse. I distinctly remember all of Bernanke's testimonies where he stated that he felt "Real Estate was not in a bubble, would not crash and if anything would simply plateau for a few years until everything else caught up with RE prices". Lol!!! They could have simply raised short term interest rates enough to stop the excessive speculation that was occurring in the Real Estate market. They could have also reduced the monetary supply by selling U.S. Treasuries and bringing long(er) term interest rates higher until the speculation in Real Estate cooled down.

The second important thing they should have done was to put a clamp down on the banks' excessive use of derivatives (Collateralized Debt Obligations, Credit Default Swaps and other covenant lite/Mezzanine financing arrangements) and the high risk taking that was affiliated with it. This would have stopped the massive securitization machine that came to be and would have made banks use far less risk because the mortgages that did not fit into the FNMA/FMCC criteria would have had to be held on their (the banks') balance sheets. As we witnessed, the fallout from the use of derivatives resulted in massive bank failures, money markets "breaking the buck" and giant mounds of garbage securities that have absolutely no secondary market and no bid to speak of.

The entire meltdown could have been prevented if they would have acted early enough. But we're talking about the Fed here. They're in it for themselves first and foremost. This meltdown afforded them with an even larger power grab.

2. We would obviously be way better.
3. I can't even imagine how you arrived with your conclusion, please explain.


Bernanke: There's No Housing Bubble to Go Bust - washingtonpost.com

"That view mirrors Greenspan's. He and Bernanke have both said it is unrealistic to expect the Fed to identify a bubble in stock or real estate prices as it is inflating, or to be able to pop it without hurting the economy. Instead, the Fed should stand ready to mop up the economic aftermath of a bubble.

Greenspan, for example, has rejected suggestions that the Fed should have raised interest rates in the late 1990s sooner or higher to slow soaring stock prices. He says the Fed got it right after that boom by cutting its benchmark rate deeply in 2001, in response to falling stock prices, the recession and the Sept. 11 terrorist attacks."

-------

I find it amazing that Greenspan won't acknowledge the mess "he" created. First with not raising rates during the techboom, and then keeping rates unnecessarily low after 9/11.

As for Bernanke, I guess you have to remember that fundamentals were strong:


I am happy we have such trustworthy and competent people in charge. Some people called it though, I remember Jim Rogers saying Citi would be a buy at $5:

Stock market 'winter' is moving in - MSN Money

"Technically, it's bankrupt, with gigantic off-balance-sheet derivatives positions whose value it cannot possibly know," he says. Though he believes some large banks can and will go under in the next year or two under the weight of billions of dollars worth of bad loans and blown-up derivatives positions, he doubts the government will allow Citi or Fannie to fail. "They'll nationalize them in some way. It's wrong, but they can't let the two largest lenders in the nation go down."

The fund manager, who has traveled extensively in emerging markets and lives part of the year in Asia, says sovereign wealth funds in Abu Dhabi and Singapore that recently made large investments in Citigroup and UBS AG (UBS, news, msgs) are likely to lose a lot of money on their ploys. "They're making a big mistake; these banks have many more problems still ahead. They should wait until these companies are really on the ropes a few years from now . . . and trading at $5 a share."

------

It looks like his call for Gold at $2000 is on its way too:

Roubini Says Rogers?s $2,000 Gold ?Utter Nonsense? (Update1) - Bloomberg

Nouriel Roubini, the economist who predicted the global economic crisis, said a forecast by investor Jim Rogers that gold will double to at least $2,000 an ounce is “utter nonsense.”

There is no inflation or “near-depression” to drive gold prices that high, Roubini said today at the Inside Commodities Conference in New York. If a severe depression came to pass, with investors buying canned goods and hiding out in log cabins, “maybe you want some gold in that scenario,” Roubini said.

“Maybe it will reach $1,100 or so but $1,500 or $2,000 is nonsense,” Roubini said.

--------

Sometimes trading/investing is so easy it's difficult. It's not that I have followed Rogers advice, but in times of weakness I have revisited some of his interviews to gain confidence enough to still "hold". To quote Livermore: "It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"
With QE3 on the horizon it appears to still be the way to go....

I completely agree with your post, and I think it's shameful how everything transpired. It's too bad the general population don't have a basic understanding of economics, otherwise maybe things could've been different.

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 Private Banker 
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Lornz View Post
Bernanke: There's No Housing Bubble to Go Bust - washingtonpost.com

"That view mirrors Greenspan's. He and Bernanke have both said it is unrealistic to expect the Fed to identify a bubble in stock or real estate prices as it is inflating, or to be able to pop it without hurting the economy. Instead, the Fed should stand ready to mop up the economic aftermath of a bubble.

Greenspan, for example, has rejected suggestions that the Fed should have raised interest rates in the late 1990s sooner or higher to slow soaring stock prices. He says the Fed got it right after that boom by cutting its benchmark rate deeply in 2001, in response to falling stock prices, the recession and the Sept. 11 terrorist attacks."

-------

I find it amazing that Greenspan won't acknowledge the mess "he" created. First with not raising rates during the techboom, and then keeping rates unnecessarily low after 9/11.

As for Bernanke, I guess you have to remember that fundamentals were strong:


I am happy we have such trustworthy and competent people in charge. Some people called it though, I remember Jim Rogers saying Citi would be a buy at $5:

Stock market 'winter' is moving in - MSN Money

"Technically, it's bankrupt, with gigantic off-balance-sheet derivatives positions whose value it cannot possibly know," he says. Though he believes some large banks can and will go under in the next year or two under the weight of billions of dollars worth of bad loans and blown-up derivatives positions, he doubts the government will allow Citi or Fannie to fail. "They'll nationalize them in some way. It's wrong, but they can't let the two largest lenders in the nation go down."

The fund manager, who has traveled extensively in emerging markets and lives part of the year in Asia, says sovereign wealth funds in Abu Dhabi and Singapore that recently made large investments in Citigroup and UBS AG (UBS, news, msgs) are likely to lose a lot of money on their ploys. "They're making a big mistake; these banks have many more problems still ahead. They should wait until these companies are really on the ropes a few years from now . . . and trading at $5 a share."

------

It looks like his call for Gold at $2000 is on its way too:

Roubini Says Rogers?s $2,000 Gold ?Utter Nonsense? (Update1) - Bloomberg

Nouriel Roubini, the economist who predicted the global economic crisis, said a forecast by investor Jim Rogers that gold will double to at least $2,000 an ounce is “utter nonsense.”

There is no inflation or “near-depression” to drive gold prices that high, Roubini said today at the Inside Commodities Conference in New York. If a severe depression came to pass, with investors buying canned goods and hiding out in log cabins, “maybe you want some gold in that scenario,” Roubini said.

“Maybe it will reach $1,100 or so but $1,500 or $2,000 is nonsense,” Roubini said.

--------

Sometimes trading/investing is so easy it's difficult. It's not that I have followed Rogers advice, but in times of weakness I have revisited some of his interviews to gain confidence enough to still "hold". To quote Livermore: "It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!"
With QE3 on the horizon it appears to still be the way to go....

I completely agree with your post, and I think it's shameful how everything transpired. It's too bad the general population don't have a basic understanding of economics, otherwise maybe things could've been different.

Thanks for digging that stuff up and great commentary. The Bernanke video was hilarious and precisely my point with the reference of his track record speaks for itself.

Cheers,
PB

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 Michael.H 
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I thought i would wait till the markets made a new high before i came back to visit this forum.

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 trendisyourfriend 
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Michael.H View Post
I thought i would wait till the markets made a new high before i came back to visit this forum.


What's your bet Michael, when will the ES hit 1400 ?

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 jonc 
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I read a few predictions a few weeks ago that S&P would hit 1400/1450 in Q2 and thought they were crazy then. Looking at the market now it seems extremely probable.

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Michael.H View Post
I thought i would wait till the markets made a new high before i came back to visit this forum.

You shouldn't let people deter you from posting on here. I appreciate your insight.

Cheers,
PB

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 jonc 
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You shouldn't let people deter you from posting on here. I appreciate your insight.

Cheers,
PB

PB, how do you see the market moving from here? Are you still contemplating a short position?

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 Michael.H 
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I don't think i can give anything else than what i already have. I mentioned that i believe we continue to go higher, and that its more worthwhile to buy pullbacks, but people continue to ridicule, and i don't have time for that crap. I don't know when we will hit 1400. Some indexes are still showing weakness such as banks, and copper still looks like its basing. Track individual indexes, leading stocks, watch volume and commodities. So far, most look healthy, or are basing. Start worrying when you see weakness under the hood. Leading stocks and indexes will show weakness before the index such as the SnP. Thats how you know wether its a pullback or a selloff. I do want to note that its starting to get a little late in the game if you want to start buying, and i'm starting to trail the markets.

I WANT TO MAKE IT VERY CLEAR THAT WHAT I MENTION ARE NOT DAY TRADES. If your holding period is less than a week, then do your own thing. This thread is about long term health of the markets( by technical standards), not little pullbacks like we experience( which for some reason people are calling a crash ???) My goal is not to catch every little blip.


I hope my myopic view of the markets isn't too difficult to follow. Catch you guys a little later

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trendisyourfriend View Post
What's your bet Michael, when will the ES hit 1400 ?

The ES will hit 1400 at the end of June around the same time QE2 ends. It will be a great time for shorts once the steroids stop, the house of cards will fall.

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 Private Banker 
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jonc View Post
PB, how do you see the market moving from here? Are you still contemplating a short position?

Hi Jonc,

The round top formation never followed through to create a long term short position. There's an endless bid under this market that will not subside until QE is gone. There's too much liquidity being pumped into the market via POMO. At this point, I feel equities will continue to climb until the QE rug is pulled out from under them. On the daily chart interval, there was a big wedge break out that occurred that could have some serious strength behind it. A good entry for this would have been around the 1329.25 area. But as Michael H. mentioned, this is a bit late in the move to be starting a new swing position. So, it's tough to say how long this will go. I'm still on the sidelines with ES. I closed out my remaining long positions back in early March.

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 David_R 
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It also looks like a reverse head and shoulders pattern that broke out. Measuring from the head to the neckline targets around 1430 which lines up with other resistance. When? No idea. It may not even get there, but just wanted to throw it out there. I never thought we would be back to where we are.

David

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 Private Banker 
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The US Dollar index has continued to deteriorate on a daily basis. We are now fast approaching the low of 2008 at full throttle. How much more can we take of this? I joked about Zimbabwe a while back and it seemed like an extreme reference. Lol! Zimbabwe's stock market was one of the best performing markets out there during that period of time. Meanwhile, their currency was being destroyed.

I believe in real dollar terms, the gains on this run in the market have you at about break even. Pretty interesting.

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 jonc 
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Private Banker View Post
The US Dollar index has continued to deteriorate on a daily basis. We are now fast approaching the low of 2008 at full throttle. How much more can we take of this? I joked about Zimbabwe a while back and it seemed like an extreme reference. Lol! Zimbabwe's stock market was one of the best performing markets out there during that period of time. Meanwhile, their currency was being destroyed.

I believe in real dollar terms, the gains on this run in the market have you at about break even. Pretty interesting.

PB, isn't a weak dollar a concern at all for the government? While I understand that a weak dollar will reduce the burden of the debt which US has but am I right to say they would also not want to see the destruction of the dollar?

Do you see the Fed would act to strengthen the dollar H2 of this year?

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 Private Banker 
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jonc View Post
PB, isn't a weak dollar a concern at all for the government? While I understand that a weak dollar will reduce the burden of the debt which US has but am I right to say they would also not want to see the destruction of the dollar?

Do you see the Fed would act to strengthen the dollar H2 of this year?

Yeah, I would think it would be a concern however, they are doing nothing to correct the situation. This is all a direct result of the Fed's QE and are trying to figure a way out of the corner they've painted themselves into. The drop in the USD has been occurring for quite some time now but is finally receiving more recognition now that we are taking out previous low's.

This is causing inflation in all things important and will undoubtedly have adverse effects on the economy (in fact, it already is). The term now often used by Bernanke is "Transitory". Well, we now have an equivalent to "Contained" which was his previous last buzz word. And we all know what happened there.

So, in order for the Fed to strengthen the dollar, they would have to end QE and decrease the money supply by selling U.S. Treasuries. Those are two things I don't see happening anytime soon. This would make interest rates go up and stop all the so called "growth" in it's tracks. Housing if not already toast would take another huge step down and stocks would correct big time.

Cheers,
PB

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 zt379 
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Two videos about that topic "growth".
Hope they are of interest to this interesting thread.

Chilean Economist Manfred Max-Neef interview on Democracy Now:

Chilean Economist Manfred Max-Neef: US Is Becoming an "Underdeveloping Nation"

Dr Albert .A. Bartlett:

YouTube - The Most IMPORTANT Video You'll Ever See (part 1 of 8)

Kind Regards

"Every moment I wake up I realize I know nothing, and then I smile..." zt379
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 jonc 
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Do you guys see the time to take a short position is here?

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 whatnext 
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I don't trade it but there are a few support levels it just bounced off of on a daily OHLC chart.
  • bottom trend line since mid-March
  • support from early March and April
  • bollinger band mid-line
MACD and Slow Stochastics are bearish.


Maybe I'd start trying to establish short positions at 132, lookout for resistance at 130, and tighten SL at 127.

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 Private Banker 
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jonc View Post
Do you guys see the time to take a short position is here?

I would agree with Whatnext on this. There appears to be a lot of support that would need to break down before I would look to start building a short position. Also, QE 2 is still running which as I've said before, is providing an endless bid. It'll be interesting to see if the massive selling taking place in other markets will bleed into equities. If it does, we could get some intense margin selling. We'll have to see though, I'm neutral right now and waiting to see what the Fed does. My intraday trading in CL has been consuming most of my time lately anyway so, I'm content with just waiting for equities to actually do something.

Cheers,
PB

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 Michael.H 
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Read rule #7 on this post, and you'll understand why i kept saying buy the pullbacks instead of shorting tops. Remember, this doesn't even take into consideration that you can trail when it keeps going higher after it breaks new highs.


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 David_R 
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jonc View Post
Do you guys see the time to take a short position is here?

I agree with what the others have said. I've posted a chart that explains what i see.

One thing I have learned the hard way in this business is to never assume anything. Whether you feel the rally has gone on long enough or whether you feel the indexes should fall because other instruments have fallen has no meaning. The markets don't care how you feel or what you think.

You asked if it may be time to take a short position. The ES is in an uptrend. I've drawn two channels and neither has been violated yet. Its still making higher highs and higher lows. Until it changes that behavior then there is no reason to take a short, unless of course it is an intra-day trade.

I posted a possible inverted Head and shoulders chart in this thread not too far back. If the pattern plays out to its potential it targets the 1430 area. So far we are only testing the Neckline of the HnS as well as the uptrend line. I guess we will see what the outcome is in the days to come.

I didn't mean to sound like a smart ass. Sorry if I came across that way.

David

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 whatnext 
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Great info - there's a lot to learn from you three.

I'm very interested as to your methodology of entering and then building on positions. Learning the signals that lead you to enter and what determines the size of contracts purchased would help me (and others) grow as a trader.

If you have said it all in other posts I'll search around if needs be - but it might take a long time.

I can detail what has worked well for me recently, its draw backs, the occasionally recurring emotional errors in judgement that have limited success and future plans on combining day trading with multi-day contracts - if anyone is interested. Haven't slept in way too long and probably should before doing so - and the markets aren't even open!

The link Michael.H gave to Anagami's thread on Donchian is well worth the DL and print out IMO. I have some questions about Michael's comment.

David R: I've only used long H&S patterns as verification of broader direction. It's hard for me to tell which way they will break and TL's make the picture clearer - maybe just because the don't often set up like that.

Night.

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 whatnext 
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Michael.H View Post
Read rule #7 on this post, and you'll understand why i kept saying buy the pullbacks instead of shorting tops. Remember, this doesn't even take into consideration that you can trail when it keeps going higher after it breaks new highs.


Key point of Rule 7: Shorting (non-leveraged) a decline from 50 to 25 will gain 50% - while going long (non-leveraged) from 25 to 50 will gain 100%.

Michael: Are you talking about a close trail where you would lose previous contracts in the correction and rebuy entirely again - or a loose trail at X% of loss or the last correction and breakout level?

If you are exiting all previous longs when the correction comes what would be the problem with trying to short it for a bit?

If holding on to past contracts (in a future with leverage and movement like the ES) what would be the problem with shorting the correction with the money you are going to use to add on to that position when it rebounds.

If someone could short 30% of the correction they would hedge against losses and against the % difference of rule 7 for the re-buy.

Didn't occur to me at first but when trading only stocks there were too many charts to focus on to do this - maybe that's the case for Michael.

Others input welcomed.

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 Michael.H 
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Your talking about money/trade management. I was simply implying that its easier to ride the trend instead of picking tops. Thats it. Im not gonna get into trade details with you. Ill let private banker or anyone else that wants to help comment on that.

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