Barney Bear
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wish it would turn down with some conviction
JillyB
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I think the movement now is going to be very slow ahead of the FOMC minutes at 7pm.
I have a theory with this. Take a 30 min chart and at 7.30pm trade in the same direction as the 7.00pm candle. I'm going to see if this works tonight.
Took 26 off the upswing earlier - the system had a Buy up to 12,242 and then a Sell from above this level back to the open at 12,212 - so I'm still in this part of the trade.
I have a theory with this. Take a 30 min chart and at 7.30pm trade in the same direction as the 7.00pm candle. I'm going to see if this works tonight.
Took 26 off the upswing earlier - the system had a Buy up to 12,242 and then a Sell from above this level back to the open at 12,212 - so I'm still in this part of the trade.
mark twain uk
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JillyB said:I think the movement now is going to be very slow ahead of the FOMC minutes at 7pm.
I have a theory with this. Take a 30 min chart and at 7.30pm trade in the same direction as the 7.00pm candle. I'm going to see if this works tonight.
Took 26 off the upswing earlier - the system had a Buy up to 12,242 and then a Sell from above this level back to the open at 12,212 - so I'm still in this part of the trade.
this is tricky, on such announcements there is always a false spike, sometimes quite considerable in length, only to be followed by a sudden reversal and an ever bigger spike in the opposite direction, by the time you got to 7:30 most of the movement will have taken place, nevertheless, let us know how this would work tonight.
mark twain uk
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I am getting the jitters with my short, an ascending triangle on the dow, ftse and dax steaming ahead after the close, it looks like we are heading north, decision, decision...
One of the best advice I was given was to halve the position whenever in doubt, I may do just that.
Edited: However, it has all the hallmarks of a bull trap, a rise into the 7:00 pm followed by a hard fall
One of the best advice I was given was to halve the position whenever in doubt, I may do just that.
Edited: However, it has all the hallmarks of a bull trap, a rise into the 7:00 pm followed by a hard fall
Last edited:
Atilla
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I would say everything; weekly daily hourly charts show the dow as being at the tops and overbought position. Same for the S&P500 & Nasdaq. Despite bad oil and gas supplies oil is falling still.
Dollar is also weat at 1.89 and probably will get weaker still.
I can't help thinking you are being led to the cliff edge for one big push followed by one mighty fall.
If you got your shorts on, you'll have all those monies to land on. Hold your nerve and sit tight.
As for me, in these uncertain times, I'm long on gold and short on the S&P at the mo.
mark twain uk said:
mark twain uk
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and it creeps higher and higher, slowly, grindlingly, it feels like the final shooting scene in a spaghetti western by Sergio Leone, you could hear the wind rolling over the cacti and the haunting mouth organ tune by Ennio Morricone... will they, won't they... it's going to be a long hour
mark twain uk
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Atilla said:
Despite bad oil and gas supplies oil is falling still.
Dollar is also weat at 1.89 and probably will get weaker still.
I can't help thinking you are being led to the cliff edge for one big push followed by one mighty fall.
If you got your shorts on, you'll have all those monies to land on. Hold your nerve and sit tight.
As for me, in these uncertain times, I'm long on gold and short on the S&P at the mo.
Smart Pairs Trade - especially if spx starts to out perform gold again - like it's starting to.
Then again you could have put the trade on when Gold was much lower !
mark twain uk
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"This is a market dominated by momentum traders," said Michael Metz, chief investment strategist at Oppenheimer & Co. "Institutional traders are desperate to squeeze out more gains."
"This market is getting another leg up but this is not consistent with deteriorating fundamentals," said Metz, referring to a recent spate of weak economic data. "It's a matter of days until we put in a top. This environment is just too frothy."
"We're little overbought," said Donald Selkin, director of equity research at Joseph Stephens.
The VIX [at 10.19], a technical indicator of volatility in the market, is approaching 10, which would indicate a "very overbought" level, he said. "
"This market is getting another leg up but this is not consistent with deteriorating fundamentals," said Metz, referring to a recent spate of weak economic data. "It's a matter of days until we put in a top. This environment is just too frothy."
"We're little overbought," said Donald Selkin, director of equity research at Joseph Stephens.
The VIX [at 10.19], a technical indicator of volatility in the market, is approaching 10, which would indicate a "very overbought" level, he said. "
mark twain uk
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mark twain uk
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A bit long to be read now, but interesting reading for late. (The highlighted bit in the middle is my contribution):
SUICIDAL TRADE DEFICIT
by Dr Kurt Richebacher
On the surface, it seems that there are diametrically different views at work in the markets. While the rising bond prices and the falling commodity prices apparently suggest underlying distinct economic bearishness, the sudden surge in stock prices and persistent record-low credit spreads appear to reflect very optimistic expectations about the US economy.
The turn in the US bond market started in June with yields of 10-year Treasury notes at 5.25%. A decline to 4.7% generated a 5% return for investors within just three months. Annualized, this comes to a return of 20%.
Take further into account that there is generally heavy leverage involved, multiplying this return between 10-20 times.
Considering further that this rate of decline of US long-term rates has occurred against the backdrop of a firmly inverted yield curve, implying that expenses of carry trade exceed current yields, the strength of this move seems a bit surprising. The quick capital gains, though, have richly offset these interest expenses - for the time being. But to maintain these highly leveraged positions, it will need at least one of two things:
either a further sharp fall in long-term rates providing new capital gains or rate cuts by the Fed reducing the costs of carry trade.
More surprising is the new bull run of the US stock market in the face of an economic slowdown. Approaching recessions have always tended to depress stock markets in expectation of falling profits. Well, there is a tremendous difference between past and present experience.
Past recessions were all triggered by true monetary tightening, hitting both the economy and the markets.
The current economic downturn is unfolding against the backdrop of unmitigated monetary looseness. While the Fed has raised credit costs from unusually low levels, it has done nothing to tighten credit. Its expansion has kept accelerating.
US credit demand has been running wild for consumption, housing and financial speculation. There is just one striking and ominous exception: Corporate credit demand for fixed investment remains zero. Corporations, too, have been borrowing heavily, but for mergers, acquisitions and stock buybacks, not for productive investment.
In 2005, nonfinancial US corporations spent $136.8 billion less than their cash flow from retained profits and depreciations on capital expenditures.
Simultaneously, they spent $363.6 billion on mergers, acquisitions and stock buybacks. Given their moderate cash surplus, one has to assume that the stock purchases were generally financed with borrowed money.
It is certainly reasonable to regard the strong trend of corporate stock purchases as an early negative indicator of investment intentions. Principally, there are two different ways for corporations to expand and to raise profits. One is the old-fashioned way of organic growth through creating new plant and equipment. The other is to purchase economic growth and higher earnings through mergers and acquisitions by going more deeply into debt.
What, then, has been happening more lately to US mergers and acquisitions? In short, they have gone crazy. During the first quarter of 2006, they hit an amount of $558 billion at annual rate, and in the second quarter another $554.8 billion.
This compares with continuously weak capital investment.
In the first quarter, it was $2.7 billion below cash flow, and in the second quarter, $43.2 billion above cash flow. There is an interesting comparison with the year 2000. Then, capital expenditures of nonfinancial corporations exceeded their cash flow by $310.8 billion, compared with net stock purchases of $118.2 billion.
We would say that these figures indicate a continuous, rather dramatic change in corporate policies of expansion away from new capital investment and toward "purchasing" growth and earnings. It started in the 1980s. It strongly intensified during the 1990s, and during the last few years has gone to extremes.
Stating this, we primarily have the long-term development in mind. But in the same vein, we are pondering what is going to happen to US business investment in the short run, when US consumer spending slows, or even slumps, in the wake of the bursting housing bubble. The generally highly optimistic expectations and forecasts about investment spending taking over from consumption as the driver of the economy greatly puzzle us.
To stress one important point, which appears to be generally overlooked: Some rise in capital spending is not enough. Given its much smaller share of GDP than US consumer spending, it needs a very strong rise to offset even a minor decline in consumer spending.
While the markets seem to reflect highly conflicting views about the US economy's outlook, we nevertheless presume one underlying common view, and that is the perception of very little risk of a possible recession because the Fed would, in any case, swiftly act to head off any gathering weakness. What matters from this perspective both in the bond and stock markets are impending rate cuts.
In essence, this is in line with the conventional thinking that the US Great Depression of the 1930s, as well as Japan's prolonged malaise since the early 1990s, could have been avoided by prompter monetary easing.
Whoever believes in this is entitled to be bullish both on stocks and bonds.
US stock prices received their lift since June/July mainly from lower oil prices and lower long-term interest rates. To keep heading higher, it will now need sufficient earnings growth. After an unusually steep rise in profits during 2005, analysts are predicting more of the same. Our focus is on aggregate profits, as calculated and reported by the Bureau of Economic Analysis within the National Income and Product Accounts (NIPA).
The customary way of making forecasts of economic developments is to extrapolate the recent past. Profit growth in the United States during the last two years has been at its best for the whole postwar period.
Profits of the nonfinancial sector in 2005 have jumped to $900.1 billion, from $584 billion in 2004 and $411.8 billion in 2003. These figures compare with a profit peak of $508.4 billion for the sector in 1997 and a profit low of $322.0 billion in 2001.
If you look at the profit development of US corporations over the last 10 years, you will see that it is an awkward picture. Profits fared very poorly during the "New Paradigm" years of the late 1990s, presumably a time of excellent economic performance. No less astounding is their sudden steep rise in the course of 2005, from $624.2 billion in the fourth quarter of 2004 to $1,027.7 billion in the first quarter of 2006, happening while the economy distinctly slowed.
The irony is that after a strong rise during the first half of the 1990s in the US, profits abruptly turned down during the "New Paradigm" years of the late 1990s.
For six years, from the recession year 1991-97, the nonfinancial sector's profits had soared from $227.3 billion to $508.4 billion. As a percentage of GDP, these profits had risen from 3.8% to 4.9%.
While "New Paradigm" ballyhoo and stock prices flourished in the US after 1997, business profits, as officially measured, suddenly slumped. As a percentage of GDP, they were a little higher at the height of the dot-com bubble than in the recession year 1991.
Coming to the recent recovery years, we must point to some irritating observations in the US economy. On the surface, it looks like a fabulous profit development.
From recession year 2001 to 2005, profits of businesses in the nonfinancial sector have more than tripled, from
$322 billion to almost $1,100 billion. It was the best profit performance of all time.
However, this good-looking total consisted of two extremely different parts. It was in the first quarter of 2004 that profits exceeded their peak of 1997 for the first time. From there, they shot up almost vertically.
Typically, it has been inverse that the very first years of recovery were best for profits.
Regards,
Dr Kurt Richebacher
for The Daily Reckoning
Editor's Note: Dr Kurt Richebacher is the editor of The Richebacher Letter. Former Fed Chairman Paul Volcker once said: "Sometimes I think that the job of central bankers is to prove Kurt Richebächer wrong." A regular contributor to The Wall Street Journal, Strategic Investment and several other respected financial publications, Dr Richebächer's insightful analysis stems from the Austrian School of economics. France's Le Figaro magazine has done a feature story on him as "the man who predicted the Asian crisis."
SUICIDAL TRADE DEFICIT
by Dr Kurt Richebacher
On the surface, it seems that there are diametrically different views at work in the markets. While the rising bond prices and the falling commodity prices apparently suggest underlying distinct economic bearishness, the sudden surge in stock prices and persistent record-low credit spreads appear to reflect very optimistic expectations about the US economy.
The turn in the US bond market started in June with yields of 10-year Treasury notes at 5.25%. A decline to 4.7% generated a 5% return for investors within just three months. Annualized, this comes to a return of 20%.
Take further into account that there is generally heavy leverage involved, multiplying this return between 10-20 times.
Considering further that this rate of decline of US long-term rates has occurred against the backdrop of a firmly inverted yield curve, implying that expenses of carry trade exceed current yields, the strength of this move seems a bit surprising. The quick capital gains, though, have richly offset these interest expenses - for the time being. But to maintain these highly leveraged positions, it will need at least one of two things:
either a further sharp fall in long-term rates providing new capital gains or rate cuts by the Fed reducing the costs of carry trade.
More surprising is the new bull run of the US stock market in the face of an economic slowdown. Approaching recessions have always tended to depress stock markets in expectation of falling profits. Well, there is a tremendous difference between past and present experience.
Past recessions were all triggered by true monetary tightening, hitting both the economy and the markets.
The current economic downturn is unfolding against the backdrop of unmitigated monetary looseness. While the Fed has raised credit costs from unusually low levels, it has done nothing to tighten credit. Its expansion has kept accelerating.
US credit demand has been running wild for consumption, housing and financial speculation. There is just one striking and ominous exception: Corporate credit demand for fixed investment remains zero. Corporations, too, have been borrowing heavily, but for mergers, acquisitions and stock buybacks, not for productive investment.
In 2005, nonfinancial US corporations spent $136.8 billion less than their cash flow from retained profits and depreciations on capital expenditures.
Simultaneously, they spent $363.6 billion on mergers, acquisitions and stock buybacks. Given their moderate cash surplus, one has to assume that the stock purchases were generally financed with borrowed money.
It is certainly reasonable to regard the strong trend of corporate stock purchases as an early negative indicator of investment intentions. Principally, there are two different ways for corporations to expand and to raise profits. One is the old-fashioned way of organic growth through creating new plant and equipment. The other is to purchase economic growth and higher earnings through mergers and acquisitions by going more deeply into debt.
What, then, has been happening more lately to US mergers and acquisitions? In short, they have gone crazy. During the first quarter of 2006, they hit an amount of $558 billion at annual rate, and in the second quarter another $554.8 billion.
This compares with continuously weak capital investment.
In the first quarter, it was $2.7 billion below cash flow, and in the second quarter, $43.2 billion above cash flow. There is an interesting comparison with the year 2000. Then, capital expenditures of nonfinancial corporations exceeded their cash flow by $310.8 billion, compared with net stock purchases of $118.2 billion.
We would say that these figures indicate a continuous, rather dramatic change in corporate policies of expansion away from new capital investment and toward "purchasing" growth and earnings. It started in the 1980s. It strongly intensified during the 1990s, and during the last few years has gone to extremes.
Stating this, we primarily have the long-term development in mind. But in the same vein, we are pondering what is going to happen to US business investment in the short run, when US consumer spending slows, or even slumps, in the wake of the bursting housing bubble. The generally highly optimistic expectations and forecasts about investment spending taking over from consumption as the driver of the economy greatly puzzle us.
To stress one important point, which appears to be generally overlooked: Some rise in capital spending is not enough. Given its much smaller share of GDP than US consumer spending, it needs a very strong rise to offset even a minor decline in consumer spending.
While the markets seem to reflect highly conflicting views about the US economy's outlook, we nevertheless presume one underlying common view, and that is the perception of very little risk of a possible recession because the Fed would, in any case, swiftly act to head off any gathering weakness. What matters from this perspective both in the bond and stock markets are impending rate cuts.
In essence, this is in line with the conventional thinking that the US Great Depression of the 1930s, as well as Japan's prolonged malaise since the early 1990s, could have been avoided by prompter monetary easing.
Whoever believes in this is entitled to be bullish both on stocks and bonds.
US stock prices received their lift since June/July mainly from lower oil prices and lower long-term interest rates. To keep heading higher, it will now need sufficient earnings growth. After an unusually steep rise in profits during 2005, analysts are predicting more of the same. Our focus is on aggregate profits, as calculated and reported by the Bureau of Economic Analysis within the National Income and Product Accounts (NIPA).
The customary way of making forecasts of economic developments is to extrapolate the recent past. Profit growth in the United States during the last two years has been at its best for the whole postwar period.
Profits of the nonfinancial sector in 2005 have jumped to $900.1 billion, from $584 billion in 2004 and $411.8 billion in 2003. These figures compare with a profit peak of $508.4 billion for the sector in 1997 and a profit low of $322.0 billion in 2001.
If you look at the profit development of US corporations over the last 10 years, you will see that it is an awkward picture. Profits fared very poorly during the "New Paradigm" years of the late 1990s, presumably a time of excellent economic performance. No less astounding is their sudden steep rise in the course of 2005, from $624.2 billion in the fourth quarter of 2004 to $1,027.7 billion in the first quarter of 2006, happening while the economy distinctly slowed.
The irony is that after a strong rise during the first half of the 1990s in the US, profits abruptly turned down during the "New Paradigm" years of the late 1990s.
For six years, from the recession year 1991-97, the nonfinancial sector's profits had soared from $227.3 billion to $508.4 billion. As a percentage of GDP, these profits had risen from 3.8% to 4.9%.
While "New Paradigm" ballyhoo and stock prices flourished in the US after 1997, business profits, as officially measured, suddenly slumped. As a percentage of GDP, they were a little higher at the height of the dot-com bubble than in the recession year 1991.
Coming to the recent recovery years, we must point to some irritating observations in the US economy. On the surface, it looks like a fabulous profit development.
From recession year 2001 to 2005, profits of businesses in the nonfinancial sector have more than tripled, from
$322 billion to almost $1,100 billion. It was the best profit performance of all time.
However, this good-looking total consisted of two extremely different parts. It was in the first quarter of 2004 that profits exceeded their peak of 1997 for the first time. From there, they shot up almost vertically.
Typically, it has been inverse that the very first years of recovery were best for profits.
Regards,
Dr Kurt Richebacher
for The Daily Reckoning
Editor's Note: Dr Kurt Richebacher is the editor of The Richebacher Letter. Former Fed Chairman Paul Volcker once said: "Sometimes I think that the job of central bankers is to prove Kurt Richebächer wrong." A regular contributor to The Wall Street Journal, Strategic Investment and several other respected financial publications, Dr Richebächer's insightful analysis stems from the Austrian School of economics. France's Le Figaro magazine has done a feature story on him as "the man who predicted the Asian crisis."
Last edited:
