Have No Fear!
QUICK UPDATE FOR TODAY – Berk will do a post later this evening.
Today’s rally snapped the wind out of us bears. I’m sure Beanie is popping his $5 champagne bottle he’s been keeping for a special occasion. I hedged myself and just smiled all the way through it. We know this is driven by the PPT and as all bailout attempts during bear markets – IT WILL FAIL.
I think you guys need a reset today – hence here are my predictions for the immediate future:
Equities: The PPT is in panic mode right now injecting massive amounts of liquidity into the markets. IT WILL FAIL. Expect a catastrophic event to take the Dow down to 10,000 and below, not next month but before the end of September. Might start as early as tomorrow or it might start next week. Position yourself properly and have no fear.
Crude: We’ll probably drop below $100 and settle around $90, which will be an interim bottom. Expect a little rally from there followed by a larger drop to around $70.
Dollar: I originally thought 80 was an interim top for our venerable fiat currency. But it’s obviously being manipulated and we might see it push even higher. Be careful playing this – I will not touch currency related trades until I see some real weakness. And even in that case I probably wait out the wave down because it might just turn into a ‘token consolidation’. We might see the Dollar at around $90 before the year is over. You can thank the ECB, the Swiss Bank, the BOC, and our own Feds. Not that I’m complaining actually – I’d like my money to be worth something before I convert it all to Gold after the big drop.
Yen: It will keep going up – the Yen carry trade is over (for now) as New Zealand lowered their interest rates further than expected. This is actually good news for us bears. Keep watching the Yen as an uptick in the Yen will produce a down tick in our equity markets. The correlation I talked about yesterday is still in full effect.
Gold: We are nearing the bottom here and I will slowly start closing out my massive short positions once we breach 715. Gold could make it all the way down to 700 but should embark on a counter rally from there as it’s oversold at this point. However, this is not the end of the Gold slide, ladies and evildoers. The long term bottom for Gold remains the 600 level. You can try to reverse into a small call position as we touch 700 but I wouldn’t go crazy there. At least not yet – I will keep you posted in my daily updates.
Please bookmark this post and look at it once a day. I’m putting my own money on the line, so I’m not just some crazed analyst with an agenda who’s accepting lobby coin in dark allies (I wish).
BTW, you need to read Nouriel Roubini’s new post – instant classic – I could not have put it any better.