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Nov 03 9:42 PM•FXB, ERXComment!

Disclosure: I am/we are long ERX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

WHAT? The British Court says Britain can't exit Europe? Well, not exactly. But Nigel Farrage is warning of betrayal and public anger. The argument of the court seems to be that democracies can't be trusted to be sober enough to make the politically correct choices; for anything really important, we need to trust political professionals (read THE ELITE) to make such decisions for us. In other worlds, the aristocracy needs to trump the democracies. Good news for the oligarchs.

The aftermath of today's surprising decision by a UK high court to rule against the government's Brexit stance, pushing a Parliamentary vote to ratify Article 50, may have major consequences for the political landscape of the UK according to Deutsche Bank. As DB's Oliver Harvey writes, the court's decision today reduces odds of a "hard Brexit" and weakens PM May's position, which makes a 2017 election now the German bank's most likely scenario.

Here is a recap of what happened for those who missed it, and what Deutsche Bank thinks will happen next:

UK High Court Rules against government prerogative

This morning the High Court ruled against the government in a judicial review brought to prevent the triggering of Article 50 without a parliamentary vote. The judgment, which can be found here, concluded that:

'it has been established for hundreds of years that the Crown - i.e. the Government of the day - cannot by exercise of prerogative powers override legislation enacted by Parliament,' and that 'the Court expressly accepts the principal arguments of the claimants…[that]…the Government does not have power under the Crown's prerogative to [trigger Article 50]'.

The British Pound blasted our portfolios today (nearly all SHORT the Pound -- we still are). This made us want to look at the curriencies a bit closer.

FXB jumped; but is still PROP2 SHORT.

The Japanese Yen is a hot topic button. Japanese leaders want a weaker yen. They don't really know what to do: they have done all the right things to have the Yen weaken (all the wrong things, in facct), but it keeps ascending. Is Japan pressuring the FED to raise interest rates to buoy the Dollar against the Yen? (Be careful what you wish for.)

Forgive us for repeating this US DOLLAR chart every night. Our view is that the US DOLLAR is the MOST important chart of all. If the Dollar rises, everything else gets scared. This most recent BEAR CHILL we are passing through is a FED-generated CHILL. This chill, and its backlash, may make it harder for the FED to actually raise rates.

Look at the CHILL in our DASHBOARD.

China is survivng. Gold and Silver (the new currencies) are recovering. Here comes the Yen and the Euro; there goes the Dollar. Oil has been kicked in the throat. Remember, a war with Putin, if it is not a shooting war, will be a Dollar War, which is also an OIL WAR. (This discussion is an undercurrent with what the FED is now threatening.)

Yes: look at that TRADING TEMP. Starting to get chilly. 55°. We decided to run a chart of the TRADING TEMP and UDOW. We did not make a nice chart. Excel is NOT the thoroughbred is once was. I'll get a better chart eventually, I promise.

The UDOW is blue (I think); note how the two move together and how the TRADING TEMP above 80° seems to be a SELL SIGNAL. I wish I had more data to study this over time. I will figure something out.

BAROMETER trying to bottom. All this selling (I think) is a sign of PANIC in the electorate. My gut feeling says Hillary is falling.

Let's fiinish our look at the currencies. FXE is still a short.


The Pound is rising; the dollar is mixed; the best currency today was gold and silver. GOLD/TIP shows this. So does GOLD/UUP.

Those of us who are long gold and silver stocks look pretty good at the moment.

Our SHOCK TRADE system is off to a bad satart, admittedly. We did have a bright moment. Our LONG DEC calls on DRV (Short REstate Stocks) gave a COVER SIGNAL at the end of trading today. We put in an order to sell these calls at 3.0, above the 2.75 offer. We bought these at 1.25 a week ago. This is exactly what we want from this system. We want this system to become a stead INCOME trade. It is not where we want it to be -- but this is a glipse of where it will be.

We know DRV could go higher. We want a system that consistently wins regular battles of 60%. We can live with that.

Our VIX-8 trade of TZA is off to a bad start. We bought DEC 30 puts. TZA has roared higher, to our disappointment. It is trading at 33.48 after today. In addition, the two trading triggers (IT SPEAR and LT SPEAR -- see the two bottom panes in the chart) have both gone positive, cancelling out the trade. Sort of. We still have prop1.

The chart shows VIX-8 overlaying the chart -- and now missing the recent SHORT SIGNAL. VIX-8 SUPREME, however, is still a short -- because VIX is still negative. This is suggesting that this rally (this selling surge) is NOT the real thing.

Let's look at TZA earlier in the 2014 phase.

We want to cover this position when the RED SPEAR is negative (it is already positive) AND when EMV is oversold, below zero. We think thi is still a positive trade potentially. Clearly we are putting a lot of trust in PROP1. Time will tell if it is so justified.

Here's our report:

11/3/16 Column1 Column2 Column3 Column4 Column5 Column6
SPEAR CHANGES            
JNUG 13.642 3 0.774 * Junior Gold Miners Bullish ETF 3x  
GVA 46.42 3 0.742 Granite Construction  
NUGT 15.386 3 0.649 * Gold Miners Stocks Bullish ETF 3x (NYSE:O)
VRX 19.165 -25 0.462 Valeant Pharmaceuticals  
CTS 17.5 1 0.21 CTS Corp.    
AG 8.71 -15 0.192 First Majestic Silver  
OCN 4.175 -1 0.102 Ocwen Financial    
LODE 0.24 -19 0.003 Comstock/Goldspring Mining  
DAKP 0.043 -19 0.003 Dakota Plains Holdings  
AXPW 0.016 5 0.002 AXION    
VNR 0.57 -1 -0.054 Vanguard Natural Resources  
OREX 2.41 -23 -0.124 Orexigen Pharmaceuticals  
DUST 34.5 -7 -1.58 * Gold Miners Bearish ETF 3x  
JDST 23.611 -7 -1.853 * Junior Gold Miners Bearish ETF 3x  
CTL 22.98 -5 -2.005 Century Link    
EMV CURRENCIES            
        NEW POS NEW POS  
EURAUD=X 1.446 -25 Short     Euro/Australian Dollar
FXB 121.66 -15 Short   Enter Short British Pound ETF
FXE 108.028 -15 Short Enter Short   Euro vs Dollar ETC
FXY 93.79 3 Short Enter Short   Japanese Yen ETF Daily
INRAUD=X 0.019 -25 Short Enter Short   Indian Rupee/Australian Dollar
INRRUB=X 0.954 -21 Short     Indian Rupee/Russian Ruble
YCS 62.435 -23 Flat     Short Japanese Yen
USDARS=X 15.1 -25 Long   Enter Long US Dollar/Argentine Peso
USDEUR=X 0.9 -5 Long Enter Long   US Dollar/Euro
USDGBP=X 0.802 -5 Long   Enter Long US Dollar/British Pound
USDINR=X 66.683 -5 Long   Enter Long US Dollar/Indian Rupee
USDJPY=X 102.891 -23 Long Enter Long *** USDollar/Japanese Yen
*** Not confirmed by PROP.          
        NEW POS NEW POS  
EURBRL=X 3.6 -23 Flat     Euro/Brazilian Real
VIX-SS CURRENCY            
        NEW POS NEW POS  
EURCAD=X 1.486 -5 Flat     Euro/Canadian Dollar
JPYCNY=X 0.066 -5 Flat Exit Long   Japanese Yen/Chinese Yuan
JPYRUB=X 0.614 -5 Flat Exit Long   Japanese Yen/Russian Ruble
MXN=X 19.185 3 Flat Exit Long   USDMXN - US Dollar - Mexican Peso
AUDNZD=X 1.048 -5 Long     Australian Dollar/New Zealand Dollar
USDTHB=X 34.94 -7 Long     USDollar-Thai Baht
SHOCK TRADE            
        NEW POS NEW POS  
DRN 17.51 -25 Flat Exit Short   * Real Estate Stocks Bullish ETF 3x
DRV 16.27 7 Flat Exit Long * * Real Estate Bearish Stocks ETF 3x
EDC 58.03 -7 Flat     * Emerging Markets Bullish ETF 3x
FAS 27.74 -5 Flat     *Financial Stocks Bullish ETF 3x
JPNL 44.732 -1 Flat     * Japan Stocks Bullish ETF 3x
SOXL 43.3 -5 Flat     * Semiconductor Stocks Bullish ETF 3x
SOXS 16.21 -15 Flat     * Semiconductor Stocks Bearish ETF 3x
TECL 43.9 -7 Flat     * Technology Stock Buliish ETF 3 x
TECS 20.71 -13 Flat     * Technology Stock Bearish ETF 3 x
^VIX 22.48 9 Long     CRB Volatility Index Daily
* OFFER TO SEE DEC 14 calls @ 3. Bought at 1.25.        
Gain of 59% in a week          
VIX-8 3x ETF SYSTEM          
        NEW POS NEW POS  
EDZ 24.635 -13 Short Enter Short   * Emerging Markets Bearish ETF 3x
ERX 29.57 -7 Long Enter Long   * Energy Stocks Bullish ETD 3x
JPNL 44.732 -1 Flat     * Japan Stocks Bullish ETF 3x
TECL 43.9 -7 Flat     * Technology Stock Buliish ETF 3 x

EDZ and ERX is suggesting that the oil selling is ending. Oil is up fractionally in Asia tonight.

We're getting closer to the bottom here.



Disclosure: I am/we are short FXB.