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10/26/2010

***All corresponding charts are included in the same dated post on my Tumblr blog***

 Macro:
  • Sweden’s Riksbank raises main repo rate +25bps to +1%. The rate was raised preemptively to fight inflation, as their economy has taken off and they want to keep inflation low. They also recognize that “the strength of the recovery in the United States and Europe remains uncertain.” 
  • China, Sweden, Norwegian, and Australian Central Banks have all recently raised rates to combat growing inflation. America is essentially doing everything it can to ‘lower the rates below 0’.
  • EWG is pulling back, and as the strongest country in the EU, if it pulls back to the 20dEMA, I probably will go long. 

Market:

  • Today was a hammer bar in the SPX, but that was probably due to the POMO. The market manipulation couldn’t take the market above yesterdays intraday lows, let alone close above them. USD is still rallying, so I believe it will work off this oversold condition and the market will tank. The Government and the Fed may be able to hold the market up through elections, but there is no denying a correction (at least) must take place here. I am already short weak stocks/sectors, and if they run up more I will be happy to add to the short at the right time.
  • Other than today’s POMO action, the plan is still the same: overbought, manipulated market; oversold, manipulated USD. 
  • The next high SPX targets are 1202.5 followed by 1210.7   Any reversal pattern at those price levels and I will scale into shorts aggressively. 




  • I shorted the Yen today via YCS due to the 
  1. Yen strength making it overbought
  2. Dollar bullied into weakness making it oversold
  3. Bad outlook from Japanese Government
  4. US Treasury rates starting to rise

Positions:

  • COF short (+5%)
  • VXX long (+4%)
  • XLY short (-1%)
  • YCS long (+0%)


Disclosure: Short COF, Long VXX, Short XLY, Long YCS