Congratulations, we are all Japanese now. Welcome to eternal ZIRP and an economy trapped in the doldrums for about a decade, if not longer. Thanks a bunch Banana Ben! Not surprisingly equities have been on a rampage since today’s FOMC announcement.
Things are getting complicated again as that VIX sell signal is pretty much shot to hell now. My own personal rule (it’s not official) for disqualification is either a push beyond the recent high on the SPX or a drop below the lower BB on the VIX. We got the former just now and although it’s still possible we see a little correction the odds of the signal resolving have now diminished significantly.
The weekly SPX chart is showing us an inflection point right here and right now. If we push above 1320 then we are in the clear and there will be little resistance into 1386 or possibly 1400. Now, how does that square with the volume chart above? Well, Rome wasn’t built in a day, grasshopper – expect some twists and turns on the way while we shake out some retail retards. The volume profile should adjust in the process, but for now/today there’s little fuel looming above.
And in the twilight zone world where bonds move with equities that of course means that our ZB trade never got out of the gate. Well, we had an ideal entry and a stop only a few ticks away. However this thing moved way too fast and unless you have super sonic fingers you probably were unable to flip this trade into a long. If you happened to be long this morning then it’s time to take short term profits and wait for a reload.
Seems the AUD/JPY had it right the entire time but it’s now time to take profits and wait for instructions. Maybe we’ll get a little correction here but the way things are bubbling up we could just gyrate around sideways for a little.
As a matter of fact all of our currency trades are way way ITM – which is why I keep pimping this stuff on an ongoing basis. Look at that EUR/JPY go – I would hold it all the way into 102.5.
Sorry for the typo on the chart – things were moving fast and I had to produce a post. Anyway, my recommendation on the EUR/USD is to lighten up around 1.31 and to keep a few lottery tickets into 1.33. Fat chance of me getting a decent exchange rate this spring – damn it! Spain – how about going back to the peso?
Cable – same story – after eviscerating that 25-day SMA and its NLBL we are now near T1. You can hold a few lottery tickets into 1.573 if you like.
Even the AUD is killing ole’ bucky today – are you seeing the unfolding theme here? I actually think this beast could run a bit higher but if you have been riding this one then I’d start to lighten up today.
And last but not least cocoa is finally at T1 – also time to take some partial profits. I am keeping a few positions with a stop roughly below today’s low. This trade took us four entry attempts and finally paid off in spates. If nothing else this is a textbook example demonstrating that sticking with your system and not yielding to human emotions will pay off handsomely in the long term.
Before I leave you here’s a bit of long term bear pørn. This is a chart of the Baltic Dry Index, which tracks worldwide international shipping prices of various dry bulk cargos. The index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets (supply and demand).
Although the SPX continues to point toward 1400 on a medium term basis the BDI now joins a growing list of long term indicators/measures which suggest that 2012 may turn really really ugly. If you trade the long term then you may keep an eye on this.