Raising only a sign of warning at the moment...

I have mentioned roughly two weeks ago that you should not underestimate weak dollar as it stalled at its 50d moving average:

and then I left for a week on vacation... what happened since then? While I was expecting a sharp drop in dollar index and consequently a rise in equities and commodities, the latter ones in fact put a significant rally, while dollar fell just a fraction of what we got used to recently. Well, you cannot blame for mixing cause and effect relationship. equities and commodities did rally... and at least currencies did not screw my image ))))

anyway, what is next?

well, medium term volatility expressed by Bollinger Bands is falling for most of the markets and feels like September is going to be quiet. Nevertheless there ranges which can be played with. Also, we approach significant resistances foe S&P , copper and oil so for the moment I would just raise a warning sign to the recent rally.50d moving average for dollar index looks to be a good resistance and I would raise a red flag if we move above it.

S&P is approaching 200d moving average and upper BB and while it feels like there is no reason for the market to change short term trend I would get really nervous being long if we stall at this level. No reason to go short yet though, even if I continue to believe we will see much lower levels over the long term:

Chinese government, with it latest move to investigate market manipulation in rubber market is screwing my head and shoulders patter for Shanghai Composite. Also looks to be a boring market for the moment:

Oil has a potential to rally further as rose above most of the moving average and following a reversal day on August 25 the trend upwards might continue further. Again it goes against my bearish view, but I just cannot argue with the market. risk/rewards is still good for a long trade with a stop loss somewhere below moving average congestion yet I would not add to longs in here following my end of august bull case. I think it is time to get a little bit nervous about this market as well:

Copper is showing sings of trend exhaustion. Base metals were the strongest performers among risk assets. Will it lead the way down. This market is dominated by CTA's, so thinking their way, I would start liquidating my long positions, especially if Shanghai fails to to confirm Head and Shoulders pattern:

So at the moment I would only get cautious at the recent rally, but short term down trend  has yet to be confirmed. A series of lower highs in most of the market still suggest longer term down trend....

When do old news move the market?

This is my first post after a short vacation... first of all some feedback on places I visited:

1. Why Grasse is called the world's capital of perfumes if lavender fields are not there? in fact I did not find any fields and we drive more then 300km around Grasse. Wiki says that since 18th century perfume ingredients were cultivated in Grasse, so where are they?
2. The coolness of Cannes is over exaggerated
3. Overall at Cote d'Azur, local food is called pizza.

4. Yet, you can find lots of small, nice and quiet harbours west of Cannes (towards Saint Raphael). The most common food there is still pizza.

Going back to the markets... I cannot get rid of the feeling that this is not yet the end of the world as I expected it. Yes, we still have the same old skeletons in the closet, but there is nothing new. I said before that people are used to huge swings in the market and I doubt that recent news on European banks are the reason for market collapse. Having said that I obviously have to discuss the risks to this statement... There is a possibility that market decides to test banks balance sheets. So one need to watch developments in the sovereign debt markets... There had been no economic news otherwise so far this week, so at the moment we're digesting these bank problems...

No charts today as I am still sorting out staff while I was away.

Who is right, the bulls or the bears? PART2

Bull's do not get excited too much, but for the time being I am with you...

FED did not say anything meaningful today and, to my mind, markets took it ok... such statements as "we will do anything we can" always have two ends and it really is a gamble how markets will treat them .. there are basically two options:

1. we believe you and everything should be ok if you say you are prepared to do anything and
2. hmm, let's see what you are made of and we will test your ability to do what you have promised.

Clearly the collective mind of financial community decided to go with the first option... I hope we won't have a need to test FED's abilities in the nearest future.

Especially as I am packing to go for vacation, so there will be no posts for 1 week.

Have a good weekend!

History does repeat itself... or it doesn't? PART2

In the end history does repeat itself...

With dreadful economic data coming out from the world's biggest economy, markets managed to pull a gain yeserday. Still not sure whether economic data is to get better or this is Q.E. (quantitative easing) expectations. Time will tell.

Meanwhile, all the bulls, please switch to the first gear as temporary bottom is in place, what is more important stop levels are known. Lets see what is going to work out of this rally. I do remain a bear over the long term, but feels like this one still has a potential. One thing I learned is that I never should underestimate weak dollar... Currencies led the rally and looks like commodities are catching up:

Oil has put a daily bullish reversal I was looking for. And we're back into the channel (yet move upwards still is a corrective one in the overall bear market):

Copper has found some support at 200d moving average as expected. Overall, visually, copper consolidations normally are continuation patterns:

Dollar index is being squeezed between 11d and 50d moving averages, so something has to give up, and if the trend of the last days continues we will see a move towards 200d:

1040 area in S&P looks to be a good support:

As I said stop loss levels are know, lets see what is going to work out of this one.

Who is right, the bulls or the bears?

looking back through my posts I noticed one thing: I do change my mind often. Even though I started writing this post in May I had a few opposing ideas on market direction during such short period of time. Feels like I just cannot make my mind... well, no not really...

Consider this, we have seen the equities market falling by over 50% and then rallying by almost 80%... (funny thing these percentages - even though we rallied more in % terms, we're still lower then when we started). Anyway, so investors are aware that in fact we can do both, fall hard and rally hard. This changes people's mind as they know now that such things are possible. So nobody is surprised by such wild moves any more.

Big swings are common these day and I believe there will be no more panic in the market for the time being and 10% moves either way will be common going forward. Bulls got it right - we see 10% rally and everyone gets excited... we fell 10% - no panic whatsoever. But this is what probably is keeping smaller investors away from the market... small investor that has buy & hold attitude... you just cannot afford these swings in your portfolio. And it is ideal environment for traders as markets remain directional short term and they don't care which way market moves as the can go either short or long.

So I say everyone is right these days, bulls and bears. There is reasonable chance to have both bull market and bear market within a much shorter time frame then people were used to. you just have to choose your side carefully and the most important thing is to be able to switch them.

History does repeat itself... or it doesn't?

Just in the wake of last FED's meeting I warned that market psychology can play tricks on us... as a reminder the statement was: "the worse the data is to come the more market will think that FED is to deploy quantitative easing"... but at that time I called for an intra day bounce.

This time market is making a shift again towards expectations of more easing rather then focusing on bad data. And I get a feeling this will not be intra day, but something that will be with us for some time. Looks like it is time to switch to beginning of 2008 attitude when the market was moving up on bad data rather then good one...

This will probably end up with another crisis, but I would not even try to call a top for this as I still remember calling a top in oil at 120 while it rallied for another $27 after..  So where do we start:

1. Dollar  obviously... Dollar index looks to have found a top at 50d moving average... moreover we might see a bearish daily reversal if we close below 82.84... good risk reward play selling it probably through long EURUSD.... in fact I would prefer any currency pair vs USD with the exception of Yen. Dollar index chart:

EURUSD is also bouncing off and while it has fallen through most of the moving averages, if dollar fall to continue, EUR will be the beneficiary of its weakness:

2. Equities and commodities...Need  to see also some sort of reversal pattern today and/or tomorrow to confirm a bounce. S&P still looks weak, but not disastrously weak as it held the range:

Oil is a dangerous play, so need to wait for reversal:

Copper probably would be a better play as there is some support under it (100d and 200d moving averages):

In general feels like any bad news will be met with renewed dollar selling - the scars of 2008 have not healed yet... good news will support the market as usually.... The other possible explanation I can find is that market has bottomed as economic data is set to improve going forward.

Over the longer term I still remain a equities and commodities bear and dollar bull, but you just cannot ignore such signs.

Time to get contrarian

going back to my question whether the glass is half full or half empty... well, we're slowing down, but its not dramatic (except for housing in the US of course). It just does not feel right now as the end of the world as I imagined it... I do believe we will see negative growth due to either
a) sovereign problems or one of other pillars of financial system is to collapse or
b) consumers retreat and we will see deflation as the result


but I don't see it yet in the system... even deflationary fears I spoke about earlier retreated to give space to food inflation.

So I think we will see another swing up in the markets, however I don't feel there is anything worth trading now. The picture neither looks complete for a move up nor for a significant move down. This statement however is a step away from technical picture I see in the markets which is calling for more losses in equities, oil and gas, consolidation in base metals and FX. Again I would not chase any scenario yet... not until September when most of the people come back from vacation.