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I am not an investment professional. I do not engage in stock or currency trading. I am a blogger and investor who believes currency deflation has created an investment demand for gold, and that gold bullion is the sole means of wealth preservation. The chart of gold, $GOLD, reveals that with... More
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  • Bonds Rise And Stocks Trade Lower As Analysts See No Further Purchases Of Treasuries By The Fed 0 comments
    Sep 21, 2010 10:49 PM | about stocks: FXE, FXY, VGK, EWP, ACWI, SPY, BND, TIP, LQD, JNK, ZROZ, TLT, FAA, GLD, GDXJ, RZV, RZG, EWD, FXS, FXA, DBV, CEW, LVS, PEJ, RETL, PLCE, UCO, JJT

    I … Today, September 21, 2010, the Euro, FXE, rose near its 200 day moving average in advance of the FOMC meeting and closed at 131.83.  Vanguard European Stocks, VGK, rose 0.17%. Spain, EWP, rose 0.72%.

    But debt deflation recommenced in world stocks, ACWI, today as these fell 0.37%, as bonds, BND, rose 0.37%, on a steepening 30:10 yield curve, $TYX:$TNX, … as “No further expansion of its purchase program for Treasuries is likely”, reports the Khaalej Times, on the FOMC meeting and announcement.

    High Grade Corporate Bonds, LQD, rose 0.76. Junk Bonds, JNK, turned lower with stocks. Tips, TIP, soared to a new high.

    ACWI The chart of World stocks, ACWI, shows a lollipop handing man candlestick suggesting that the recent rally is over.

    The S&P, SPY, manifested a bearish harami, suggesting that the rally is over.

    The chart of Bonds, BND, communicates that the world has passed through Peak Credit.

    The 30:10 US Sovereign Debt Yield Curve, $TYX:$TNX Chart shows today’s dramatic steepening on the Fed’s announcement, as the longer out maturity debt investments, such as ZROZ, rose more than the shorter duration investments such as TLT.  

    Bond traders had seen the Feds purchases of US Treasuries as monetization of debt, which caused the Yield Curve to flatten August 10, 2010; and then caused bonds, BND, to break down September 1, 2010.

    This week the Euro, FXE, is likely to fall lower as currency traders call major currencies, DBV, lower to match the Bank of Japan selling Yen on September 15, 2010, to stop the rise in its currency.

    The FAA ETF is the investors weather vane; it rises immediately prior to stock down turns. Today was no exception as it rose significantly before the afternoon stock market sell off, confirming its usefulness in predicting market sell offs.

    The September 20, 2010 rally was simply a green shoot rally in a Bear Market that started April 26, 2010 when currency traders sold the major currencies against the Yen.

    II … The Bank of Japan in selling Yen on September 15, 2010, has commenced competitive currency deflation; and thus started a more aggressive from of debt deflation than that of April 26, 2010, which accompanied the European Sovereign Debt crisis, exploding on the worlds financial markets. Confirmation of competitive currency devaluation is seen in the ratio of small cap pure value shares, RZV, relative to small cap pure growth shares, RZG, falling lower

    RSV:RZG Daily

    RSV:RZG Weekly

    Sweden, EWD, rose 1.25% on a soaring Swedish Krona, FXS.  The Swedish Krona-Yen carry trade, FXS:FXY, does show a breakout. But this is not confirmed by an accompanying Euro-Yen carry trade, FXE:FXY, nor an accompanying Australian Dollar-Yen, carry trade, FXA:FXY, The rise in the Euro, FXE, yesterday and today, was accomplished by a spectacular number of purchase of long the Euro contracts   

    The world currencies carry trade, DBV:FXY, shows stymied.

    World currencies, DBV, rose 0.34% and developing currencies, CEW, rose 0.58%; the rise of the latter caused  emerging market small cap dividend shares, DGS, to rise; its weekly chart  shows how  investors  have  found safe haven investment here from the European Sovereign Debt Crisis and the Recession in America.

    The world currencies, DBV, relative to the developing currencies, CEW, has hit resistance; the outlook is down for the world currencies.

    DBV:CEW Daily

    III … The spigots of investment liquidity are being turned off. The chart of DBV:CEW Weekly communicates the major central banks in executing dollar swaps and quantative easing “has been turned off”.  


    The other spigot of investment liquidity, has been carry trade investing; but that basically came to an end on September 15, 2010, with the Bank of Japan acting unilaterally to stop the rise in the value of its currency by the “selling” the Yen, FXY.


    Now with the “spigots of investment liquidity” off, debt deflation will be actively reducing stock wealth.

    And the yield curve will be flattening reducing bond wealth.

    So total fiat wealth destruction will be getting actively underway, all thanks to the currency traders. The age of fiat wealth growth, that came through Milton Friedman, neoliberal economic policies, of “free to choose” investing and “floating currencies”, is over and done.  

    While we are in the “twilight of investment liquidity”, the currency traders activated the Yen carry trade today, September 21, 2010, to sustain the Euro, FXE, and drive it, and European, VGK, shares higher.

    And they activated the Yen carry trade in driving the Swiss Krona, FXS, and Switzerland, EWD, shares higher.

    In so doing, they “pulled” the Yen, FXY, higher; but the Bank of Japan will act to intervene in a rise above 117 and sell more Yen; and it will do whatever is necessary to stop the rise of the Yen. Yes, they will if necessary destroy the value of their currency.

    Confirmation of  the end of investment liquidity and the passage from the age of prosperity into the age of the end of credit comes from the chart of Junk Bonds, JNK. topping out.

    The currency traders and the Bank of Japan have “scorched the skies” …. welcome to the investment desert of the real … we are living in a new investment matrix … “we ain’t in Kansas no more”.

    IV … One should sell stocks short or invest in gold at this time; chart of $GOLD

    I provide a ChartList of Stocks and ETFs to sell short for a debt deflationary bear market; I find it interesting that in the midst of a recession, that the companies most injured by the recession have being run-up investors, this includes Las Vegas Sands, LVS, and the entertainment and leisure ETF, PEJ,  The chart list shows  KBE, EUFN,  ITB,     EIRL, GDXJ, LVS, EWW,  PGX, PMR, IWN, XSD, XLYS, EWP, EWD, JJT, HHH, TAN, REZ, NNI,  LCAPA,  EXPD,  PPD,   CMG ,KME,  PXN ,FDN, FIO, PSR, BRF ,CU, JYN ,FRN,  PLCE ,  PETM, TTM, RZV, XXV,AAPL, EPI,  SWH, CUT,  DTV, CF, JNK, PEJ,  QABA, EPP, DE ,  AZO , WRLD

    Its an opportune time to go short the leveraged Retail  ETF,  RETL. as well as  DRN, TNA, URE, URTY, USD, EZJ, UCO ,UXJ , UPV, SOXL , INDL , UXJ


    Retailers such as the Children’s Place, PLCE, are prime for short selling. Oil prices fell  rewarding those  short  UCO and base metal prices fell, rewarding those who were short  JJT .

    Gold rose, GLD, but the junior gold mining shares, GDXJ, traded slightly lower.

    Disclosure: I am invested in gold bullion
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