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Friday, October 15, 2010

E-minis [Update 2PM]

[Update 2PM: A case of repeating fractals?]

[Update 12:45PM: Baidu looks like a wave 4 triangle. Earnings on Monday would be perfect timing for a thrust up (or hey we can have triangle failure). But the pattern suggests up to $1 Bazillion.]
[Update 12:23 A look at Amazon. I suppose it'll gap up to $200 next week on earnings (sarcasm?) 
And yeah Google sure was a surprise yet I should have figured it was going to fill that big gap down it had a few months back. It did.
[Update 12PM: Long term view of the Nasdaq and the Nasdaq100.  The only divergence was at the 2009 low. To make up for it maybe we are getting a divergence at a top.]
[Update 11AM: Uptrends intact for now. Banks are the one glaring thing that is different.]
[Update 10:20AM: Approaching dip buy spot.
[Update 8:25AM: Euro spike to new recovery highs. 4 hour MACD signal lines diverging.
[Update 8AM:  Only viewing things through the lens of Elliott Wave Theory can we make sense of the current Fed chairman worship.  Back in Spring time, mood was such that the dominant thinking of the day was that the economy was doing a V shaped recovery. The talk was always "how will the Fed drain liquidity?".  Turn the clock forward a few months and ,now that the market is back toward its April peak, and the mood of the day has us completely throwing those concepts to the wind.

Now the talk is "Helicopter Ben will save the market".  Yes it comes down to that.  No more recovery talk, no more draining liquidity. Indeed the opposite! More pushing on strings. Hyperinflation, etc.

The talk in the Spring was of deflation. I said at the time, it had become too mainstream and we were due for a "inflation sentiment" bounce. And well we have certainly got one. But even I am taken back at how the deflation argument was completely abandoned.

The currency market is a zero-sum game. If the dollar is dropping, something else is going up. And the worldwide imbalances and gyrations created are destabilizing to the global economy.

"The dollar is worthless" argument is silly. It is no more worthless than the Euro, Yen, Yuan, Pound or any other debt backed fiat money.  There is no place to hide.  If you are a small country like Zimbabwe, you do have a place to hide - anywhere else! But when you consider the dollar, Euro, Yuan and Yen, there is no hiding.

Fiat currencies are also backed by guns and bullets.  We don't think of it this way, but it is the ultimate truth.  And for better or worse, America commands the best equipped and a highly disciplined military force.  Ultimately people understand this subconsciously.   What happens to the Euro when the countries involved start pulling out of it?  What happens to the Yuan? Are you going to park your wealth in a communist country?

So in the end its an "either - or"  situation always with world currencies.

If the worse thing that can happen is that the dollar rises uncontrollably (like the YEN), then that is what is likely to happen yes?

In a Ponzi world, nightmares do come true.

[Update 7:30AM: Banking: laggard or leader?  If they cannot get off the floor, they will likely drag the market with them just as they have since the 2007 peak. Apple is great but if the financial system underneath is self-destructing, risk will retreat.

Admittedly they could just flop around while the market keeps the grind up going, but in the end it will still signify that the market is damaged.

P[3] up requires a "healthy" (or the strong appearance)  banking system to pull it off.  I don't think thats the case.

Subprime is back to the shock and horror of the CNBC bulls. And this time it may have widened its net.

Here is a question I asked the other night that I haven't heard discussed much:  Does the mortgage (EDIT: oops I meant foreclosure) moratorium constitute a "credit event" for the various derivatives associated?

What is the likelihood of a derivative cascade if this thing gets uglier with the MBS mess (and this aspect - MERS and the assembling of MBS - is getting more and more airtime - because the entire country is affected)
Yesterday's late bounce spot on the minis hit trend line and horizontal support.  It was the logical algo thing to do.
The dollar still has nice symetry as an ABC. Incredibly, or maybe not depending on how you view things, Robert Prechter and EWI upped the degree labels since the 2008 low as cycle I-II up, and Primary [1]-[2] up (stacked ones and twos up on a huge scale) with the dollar approaching its  Primary [2] down price low.
Now whatever you think of Prechter and company, they have been decent on currencies.  Its a bold call considering the dollar hasn't even bounced yet.

The bottom line is if he is correct, then we are not far from a major turn down in the markets for the long haul. Why? Because the count is running out of room
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