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Playing the Ponzi
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Why “Playing the Ponzi”? I view the entire monetary and financial system as something of a Ponzi scheme. Starting with currency that is created as debt, and running straight through a global economic model that is based on infinite growth in a finite world. This won’t end well. I’d go a step... More
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Playing the Ponzi
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  • Rally caps back on?

    A world hankering for war? No problem. Despite rising geopolitical tension, it looks like the U.S. markets may be done with negativity for now. Though the longer term patterns remain bearish, and I still believe the end is in sight, it looks to me like another push higher (maybe to S&P 2000?) is likely in the cards. Let's look at some charts.

    First, the S&P (NYSEARCA:SPY), which never got down to its support line, but did post a nice reversal pattern last week.

    (click to enlarge)

    Here's a closer look at last week's SPY reversal:

    (click to enlarge)

    The most interesting chart to me is the inverse-VIX ETF that I had been short, (NASDAQ:XIV). I closed my short on Friday and opened a long position today. We'll see how that goes...

    (click to enlarge)

    Small caps (NYSEARCA:IWM) seem to have found support and may be moving into a sideways channel. I still expect to see it break down to new lows, but I am open to being wrong.

    (click to enlarge)

    Nasdaq (NASDAQ:QQQ) is one of the most interesting charts because it barely budged off its highs! Wow. I wonder if it'll push to that upper line?

    (click to enlarge)

    With bulls still running amok and geopolitical risks rampant, it seems like a good time to stay nimble regardless of bull/bear bent.

    Disclosure: The author is long RWM, XIV.

    Aug 11 12:24 PM | Link | Comment!
  • Updating The Selloff

    The last trading day of July sure was interesting, as U.S. indexes plunged lower. I thought I'd do a quick whip-a-round of various chartological implication.

    The primary point is that U.S. indexes appear to be pulling off their highs, which has two meaningful points: 1) there is room for additional weakness before support, and 2) No major support is broken or threatened in the S&P or Nasdaq.

    First, the S&P (NYSEARCA:SPY):

    (click to enlarge)

    And Nasdaq (NASDAQ:QQQ):

    (click to enlarge)

    Weakness is more noteworthy in the Dow Jones (NYSEARCA:DIA), which is threatening to break a long-term support trendline:

    (click to enlarge)

    Small caps (NYSEARCA:IWM) have already broken support and failed on the bounce-back to resistance. The big question is whether it will push below its lows from a few months ago:

    (click to enlarge)

    Also very noteworthy is the weakness evidence in Junk bonds (NYSEARCA:JNK), which have now broken the rising support trendline from 2010 lows.

    (click to enlarge)

    All told, this adds up to significant reason for additional caution in my opinion. It does not, however, indicate "the sky is falling." This may be a garden variety pullback. However, small caps and junk bonds have a history of successfully forewarning of danger when risk appetite stars drying up. Europe bears very close watching as weakness in the some of the charts I recently identified like Switzerland (NYSEARCA:EWL) and Spain (NYSEARCA:EWP) continues to accelerate to the downside.

    Disclosure: The author is long RWM.

    Aug 01 11:54 AM | Link | Comment!
  • Cautionary Signs Continue To Abound

    I have been quite quiet of late, largely because there has been little activity of note in my opinion.

    In general, I see U.S. markets near the end of their multi-year rally (I am currently positioned pretty heavily short, though I wouldn't be altogether surprised if this slow creep higher continues into 2015), and I see signs of similar exhaustion in the European indexes. I see emerging markets as demonstrating relative strength, with precious metals serving as a wild card with significant potential upside. However, I would be mildly surprised to see precious metals move higher alongside an equity breakdown.

    So let's look at some charts. First the U.S. big boys. The S&P (NYSEARCA:SPY), though this is actually the e-mini Futures chart, remains in the final stages of a rising wedge that has been over five years in the making.

    (click to enlarge)

    Nasdaq (NASDAQ:QQQ) is near resistance of a multi-year rising channel. it could rally a bit before hitting the resistance of a decade+ rising wedge.

    (click to enlarge)

    Junk bonds (NYSEARCA:JNK) have flashed weakness of late. They are frequently an early harbinger of equity breakdowns. Even more telling than the action in junk bonds is the pronounced weakness from small caps (NYSEARCA:IWM). Ace technical analyst Chris Kimble recently noted that small caps have broken support relative to the S&P for the first time in over a decade. Small caps broke support of a multi-year rising wedge earlier this year. They have since rallied back to the underside resistance where they were recently rejected, forming a double-top to boot. Shorting small caps (via the inverse ETF, RWM) is my largest position at the moment so I feel pretty strongly about this particular play at the moment.

    (click to enlarge)

    That summarizes my caution regarding the U.S. markets, though I see very similar patterns in Europe.

    Switzerland (NYSEARCA:EWL) hit a resistance trendline over 15 years in the making, and looks to be breaking down from a recent multi-year rising wedge.

    (click to enlarge)

    But the national ETF that I am most interested in shorting is Spain (NYSEARCA:EWP). It broke down from a rising wedge at a 50% retracement of the 2007-high to 2012-low. It rallied last week and is approaching an underside test of the trendline it broke. I will be looking to short there.

    (click to enlarge)

    We are moving into a time of the year that has historically been quite volatile. Time will tell if that trend shows itself this year.

    Whatever the case, I will try to hold my beliefs loosely

    Disclosure: The author has no positions in any stocks mentioned, but may initiate a short position in EWP over the next 72 hours.

    Jul 27 8:56 PM | Link | Comment!
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