Tuesday, November 2, 2010
AM UPDATE
We have some minor 1 min negative divergences that are probably contributing to the slight negative bias in price. Really nothing much more then that has developed at this point. There is a possible topping process going on in the EURO 5 min chart as is has made several lower highs/lower lows. We'll see, but I think intraday the EURO's direction will have a lot to do with the stock market's direction.
10 comments:
Brandt,
Can you please update the longer time frames for the different indicies. I have been away for awhile and need to get caught up to speed. Has their been a change of any substance/does it appear that they might be churning their short positions for long? Are we still solidly showing a negative divergence on the longer time frames. How does the 10 year bond look if Bill Gross is positioning himself for this news? Lets step back and take a look at the big picture for a minute. VIX?
What do you recommend for stops for SONC and CHINA.
Jack, yes I'll get those charts up for you. They are little changed though-still negative.
Wrattray, SONC I would probably put a stop a bit below the lows of 10/29 around $8.75, but that depends on your risk management/position size.
As for CHINA -4.40 -4.452 on the high end-again depending on your risk management/position sizing. I'm saying those levels, but if you can be a little under or at least not near the actual low or whole numbers (ie-instead of $8.75-$8.72) it would be better.
Brandt, if you get a chance, can you check out CPMCF? I know its a penny stock, but it's been doing phenomenally recently
The David Stockman interview on CNBC was very enlightening and really paints a grim picture of the world markets.
DVGWEB I don't have 3C access to penny stocks, sorry.
Jack I missed the interview, can you give a synopsis?
Basically he is insisting that the US government is already at a Greek style crisis with relation to debt and GDP. If you figure that all government debt including municipal is accounted for we are in deep trouble. Our debt service is could easily top a 1 trillion a year with a rise in interest rates that approach 500 basis points from current levels. This isn't much of a rise considering that once they start to move up the problem becomes prevelant and therefore it compounds the problems which in turn make rates go up more. 1 triliion in debt service a year could nearly cripple our econmony from a Gov't standpoint. The global debt service is roughly 9 triliion dollars that used to be swapped arround. It is becoming increasingly difficult for this to take place. In addition the world currency wars are going to contribute to many future problems. There was so much more it was hard to keep track of. To many holes in the dike!!!
So are you thinking the treasury charts I posted are predicting a rise in interest rates? The divergence seems to be be coming-from my best guess, from PIMCO's selling.
If we start to see consistent selling pressure or just the refusal to put money to work at such low interest rates, I would say yes. The FED has a problem. Strong econmony or the hint that it is actually rebounding and people may start to put their money back to work and invest in companies. This takes away money from other areas such as bonds. In order for bonds to become more attractive, the interest rates needs to go and provide a better return. This will not be good for our debt service as it will erode funds from other places. The other problem is that people are starting to keep more cash on hand. If I can't get a decent return at my local bank (.05% not very good)why would I risk it. It is the same as putting it into my mattress. I think you are seeing this already. Even Bill Gross is calling what the FED is doing the biggest Ponzi Scheme on record. When rates go up, hold onto your hats. It is going to be one bad ride. IF the short bond ETF's are showing signs of accumulation, they may make a good investment at some point. I just don't how long the FED gan keep plugging all the holes without eventually cause a global crisis like we have never seen before.
In addition, if rates start to go north, the FED's balance sheet will take a hit as the value of the assets shrink due to better returns on newer debt. The FED has been buying MBS and Treasury Debt for some time and has created a situation that holds rates hostage. As investors shy away from our debt either because or negativity or just poor returns, the FED will be the buyer of last resort. What happens when you use your MC to pay your VISA or worse; both your VISA and MC are maxed out and you resort to counterfeiting money in the basement. Effectively, the US is going to print away the value of the dollar and it's debt. This probably won't be good for stocks, but commodities might enjoy a good ride. Physical delivery might be best for gold and silver. Right now the paper traded market of these items is largely unsupported by pyhsical delivery. What I mean is that if every piece of paper that said the holder owned 10 ounces of silver were to call for actual deliver, it couldn't be done. I have read commentaries on Kitco that indicate the silver market trades a roughly 100 to 1. That means there is roughly 99 paper trades that can't even be deliver if the holder were to request it. Imagine if there is a rush to claim your silver and what that would do to the price.
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