What's bothering me now

Before I take off for a long weekend, I just wanted to share with you some risks I see to the markets and that can derail all of my scenarios...

1. Deflation talk continues to accelerate and while it is known that prices tend to fall in such environment, I feel that immediate reaction to acknowledgement of this fact is uncertain. Dollar/commodities/equities relationship in the last several years had not been "real" supply/demand relationship... moreover there is a possibility of food inflation given the drought in Eastern Europe. Yet more and more people talk about deflation and from what I read in the news some are actually buying long dated bonds as protection. Go figure what it will be deflation or inflation

2. Some time ago I spoke about web bot software that predicted increasing tensions involving the US that might lead to a 3rd world war... Feels like that tensions between Iran / Israel and the US are likely to escalate given the assassination attempt of Iranian president and recent report on terrorism by the US where they called Iran biggest state sponsor of terrorism...

Is the glass half full or half empty? PART2

Just a follow up on the recent post...

Please keep in mind I will be out the office tomorrow, so in my absence markets are likely to move hard. call it a bad luck, but experience proves it.

Correlations between assets are picking up and feels like we're going to the normal risk on/risk off mode:

Meanwhile, markets are mostly going sideways at the top of their ranges under key levels, S&P stalled just under 100d moving average and 1130-1135 is the level to watch:

Oil is showing signs of trend exhaustion at the conjunction of various resistances and as I mentioned 82-83 level gives a good risk reward for a short position:

NYMEX gas has turned upside down following an outside bearish day reversal. For this market $4.50 has to hold - which is a channel support off august09 lows. If broken, this will be a significant damage to bull scenario I had speculated about since May this year and I would not be surprised to see a test $3:

Overall, there is a risk of significant correction in the short term as not only risk assets, but assets with low correlation show downside possibility. Put this two together and this makes good case for economic situation to worsen in the nearest future.

Have a good weekend

Is the glass half full or half empty?

My track record of being absent at work and missing something big in the markets is amazing... Keep in mind I will be off coming Friday, so expect something big to happen on this day, possibly NFP's will be a big surprise.


Deflation talk accelerates, now growing into a debate whether FED is to speed up money printing... while important as such, no obvious consensus is seen yet.

Answer the following question: is the glass half full or half empty? There is nothing wrong in answering either way, Eevery day we ask ourselves the same question, when reacting to economic data and majority wins. Yesterday it was the optimist camp that won the battle. However, it feels like yesterday's move was short covering rather then something else as volume in indices was very low. Last month performance in equities resulted in outside month bullish reversal pattern. While it is a sign of caution this actually makes little sense for trading as time frames are shorter for active investor/trader.

Does this change the picture? Are we going higher from here... Ehhhhh, I am not convinced. Start with equities:

S&P500 is still trading in bear market, according to my other scenario: having broken through 200d moving average it is sitting right under 100d and not far from June's peak, only sustainable gains through 1300 will make me change my mind:

The rally on Monday started with Chinese markets and looks like it might end with it as Shanghai index collapsed in the last minutes of trading to end up the day lower then Monday's open resulting in outside day bearish reversal:

Oil, while being up, still shows signs of range trading rather then a strong trend, especially when equities are to remain weak. Probably it is a good sell at $82:

EURUSD has effectively reached head and shoulders target and is currently a function of risk appetite rather then internal strength. my Need to wait for reversal confirmation under 1.31:

Outside bearish reversal day in Nymex gas was a surprise as well, while I think the market will rise over the long term, this signal cannot be ignored - time to tighten the stop losses:

Happy trading all!

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...