Try not to think about white elephant

Well, it is official... FED has just put in the minds of people the idea of deflation... something I feared when I discussed dollar/equity/commodities relationship some time ago in the post Dead cat bounce or change of sentiment?.

Now, everyone else, please try not to think about deflation!

Original story at CNBC website

Shoes... dropping... PART2

I am not sure why I am talking about shoes dropping in these series of posts... Blame lack of knowledge of spoken English I think... But this is the closest expression to what is happening to the markets I know of.

Talking to other traders, especially on the FX side, makes me think about decoupling effect. I am talking about US decoupling from the rest of the world. The difference in the economic data in the recent days had been obvious. As a result Dollar is being sold heavily, while equity and commodities seem to have broken risk relationship.

I think the US is the most flexible economy in the world and adjustments to market conditions happen there faster then everywhere else. Therefore, what we see in the US will happen to the rest of the world sooner or later due to open borders, global trade and finances. Globalisation will be blamed in the end for spillover effects into other economies. What can you do about it? The obvious answer is protectionism. Trade barriers, subsidies and preferential treatment of local companies might help one country to weather problems in other countries. But I am not sure how much value will be eroded in the end... time will tell.

While everyone, except on FX side, is reluctant to gamble on the US GDP markets tomorrow, technical picture is slowly deteriorating for equity indices and oil. S&P is looking to post an outside bearish reversal day if it closes below 1103. Coupled with a failed attempt to push through 200d moving average and what appears to be a lower high should make people nervous:

Oil, despite initial strength seems to be falling under 200d moving average as well:

As I said nobody wants to make any bets going into GDP numbers tomorrow. I won't make any either...

My favourite market

Shoes are dropping elsewhere but not with this market... Still my favourite remains NYMEX gas. It was couple of weeks ago I mentioned I would expect it after a consolidation to break higher since long term support held:

So today we broke through 200d moving average and all other shorter moving averages. I would not put a target this time, but rather work with stop loss order to let this market trend... strangely enough this is fundamentally one of the most bearish markets... go figure

Shoes... dropping...

Well, I agree, corporate earnings are good, economic data is mixed, but ok, especially in the UK and Europe, equities are positive for this year... So why am I still pushing for this crazy idea of a bear market? I am a true believer that neither me nor Jim Rogers together with Mr. Trichet know where we are going with the economy. It is the market itself that is giving you hints on its future direction. Markets advance or fall, sometimes defying fundamental data. But they never stay in equilibrium, so there is always something going on... Funny when someone on the TV says that market got it wrong. Anyway going back to bear markets....


Lower highs - this has been bothering me for a while. I see lower highs in equity indices and lower highs in oil. Base metals behaved a little bit differently, nevertheless we're still lower then the highs of end of March. And this is not what I want to see in a recovering world economy. Obviously there is no money to be made using big picture, so lets look at short term trends.

Looks like the shoes started dropping today. US is still open so anything can happen but for now... S&P opened higher today but is at the lows of the day... if it finishes in red and especially under 200d moving average I would call it a top, a lower top. Risk/reward will tilt towards going short:

Oil and equities correlations are still good. Oil failed to push above 200d even though it had every opportunity. Lower high:

Such developments in oil would imply that USDCAD triangle is likely to resolve to the upside:

Euro is struggling above 1.30... Will the head and shoulders target be reached in such environment? I doubt it:

While I can be wrong, feels like "risk off" positions might end up quite profitable...

Last words

There is very little going on right now in the markets, so I thought I would entertain you with some jokes...


Last words of people of various professions:


The last words of a chemistry student: "Professor, believe me, this is really an interesting reaction ..."
The last words of the crew of the Airbus: "Look, the light blinked ... "
The last words of an astronaut: "No, everything is in order. I have enough air for another thirty minutes."
The last words of a truck driver: "These old bridges will stand for eternity!"
The last words of racer: "hmm, does the mechanic know I slept with his wife?"
The last words of the gatekeeper: "Over my dead body."
The last words whaler: "So, now he's hooked!"
The last words of the night watchman: "Who's there?"
The last words of the computer: "Are you sure? [Y / N]"
The last words of a photojournalist: "This is a sensational shot!"
The last words of a restaurant owner: "Did you like it?"
The last words of the  lion trainer: "I thought you fed them!? "
The last words of the President's son: "Dad, what this red button?"
The last words of the policeman: "Six shots. He had spent all his ammunition ..."
The last words of the railway engineer: "Do not worry, this train will pass through the adjacent road!"
The last words of the driver's wife: "It is clear on your right"
The last words of an electrician: "They should disable the ..."
The last words of the biologist: "This snake is known to us. Its venom is not dangerous to humans."
The last words of pizza delivery man: "You have a wonderful dog ..."
The last words of a chemist: "And if we heat it up a little bit?"
The last words of the detective: "The case is simple: the killer is you!"
The last words of a diabetic: "Was it sugar?"
The last words of the wife: "My husband will return only in the morning ..."
The last words of the inventor: "So, let's test ..."
The last words of a platoon commander: "Yes there is no living soul within a radius of 10 kilometers ...."
The last words of the butcher: "Lech, throw me that knife!"
The last words of other professionals: "Do not bother me, I know what I'm doing!"

And to add from myself:
Last words of Timothy Geithner: "There is no double dip" (heard today)



And I think you can continue and continue...