Anti Gravity Equities

A very painful lesson the bears had to learn the hard way was that you can not fight the Fed – especially as a retail trader. In the very end – yes – they will get their way – I have no doubt about that. But most likely it will be an hollow victory as none of them will have any skin left in the game. We stainless steel rats however grab the crumbs that slip through the cracks – we don’t have pride and we have long given up on expecting any sense of justice. As the saying goes: don’t hate the player – hate the game.

I don’t have any huge revelations to make today – the main theme for this weekend update is to depict what/who is responsible for $4 gasoline and exploding food prices all over the world. From a trading perspective this is of course secondary but the scope of Banana Ben’s undertaking is so unprecedented that at some point it will produce dislocations across various markets, and that is something I want you all to be aware of.

When do I expect that to happen? Last year if you ask me, so please don’t ask me. Seriously we cannot possibly know as floating this turd is now a concerted effort of the global elite. I’m unfortunately not part of that crowd – maybe some day – and then I wouldn’t be able to tell all you rotten low-lifes 😉

So, in the past two years the name of the game has been to repeatedly flush ole’ bucky down the toilet, which per my SPX:GOLD ratio chart (posted last week) is solely responsible for the S&P trading at 1300. The poor Dollar has now become the official bitch boy of the FX world. Meanwhile neither financial scandals galore, Wikipedia disclosures, earth quakes, tsunamies, nuclear melt down in Japan, etc. have been able to pull the plug from Bennie’s anti gravity device. By the way – I think I know how he does it – let me demonstrate:

Let me walk you through this. A known fact from our experiences is that toast always lands butter side down. We also know that cats always land on their feet. If you put both of those together – voila! A perpetual anti gravity device. This is the same type of financial math Ben Bernanke must be using when expecting continued economic growth and financial stability by devaluing the Dollar like a mad monkey on rabies. Fat chance that any job growth or economic expansion will ever compensate for the printing of Trillions of Dollars in the past two years. If you believe that then I have some beach front property in Arizona you may be interested in.

Anyway, on to the charts – it’s a medley of perspectives focusing on the medium to long term. But I must warn you – it’s not a pretty sight…
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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I guess Dollar bears readings in the upper 90 percentiles do not matter when you have a power drunk Fed chairmonkey running the printing presses. We slipped below that long term support line and where we’re heading from here is anyone’s guess. So far it’s lower lows and lower highs – and as charting purists we would have to see a push back above that line to not expect more of the same.

Silver – long term chart. Quite an eye opener when you realize what this chart really means. I mean almost every chart we look at each day is a ratio between a financial instrument and the Dollar. Does silver really buy you a lot more than it did back in 2000? Maybe by a reasonable margin – but NOT eight times as much, that’s for sure.

If you think the previous chart was bad then you better cover your eyes. I have drawn a line where Banana Ben re-launched the Fed’s POMO auctions and flooded primary dealers with cheap cash. Look what the gold:silver ratio did in response. Coincidence? I think not!

So, what are you saying Mole – we are going to continue upward forever?

No, not really. There will come the day that even POMO cash can’t stem the flow and when that day arrives you will probably want to be on some remote island with gold, bullets, and plenty of sweet water. May be tomorrow – may be five years from now. Just don’t come to mine – my evil lair will be heavily defended.

More medium term I am looking for patterns across my charts and see very few I like. A reasonable one is a possible repeat of the setup we saw last summer. We came out of a much deeper retracement then however and thus were propelled into the 2010 short squeeze from hell – the shorts are still feeling that one. The two rectangles mark a possible setup, and medium term it seems we are positioned for higher highs.

However, if we are to see a little retracement short term – either downward or sideways – then next week is probably the time. My NYA50:NYDNV chart has reached a resistance line – however it’s worth noting that despite the long signals being spot on the short setups have been spotty as of late. But the potential is there if the shorts are willing to take it.

As you all know by now – copper usually calls the shots when it comes to preceding moves in equities. And it has been the one big fly in my bullish ointment. That is what I call a divergence and although it’s possible that copper is going to turn any day now I don’t think equities will be able to ignore this in perpetuity.

Bottom Line:

Long term I am still bullish – still have not seen any evidence that would lead me to change my outlook. Medium term it’s reasonable to expect a little shake out, so I have a hard time being long anything but a few select equities right now. The real fun really is in FX – especially now that we have ZeroFX to guide as along. I also hope that Scott will decide to again post some of his setups (hint hint).

Cheers,

Mole