Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Japanese Commodity Markets (by OilPrice)

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There has been some unusual action on the Japanese commodities markets that demands a comment.

 

I mentioned earlier this week that over the last two weeks the Japanese have revved up several new structured investment products tracking commodities.

 

There are now some "seismic signals" registering in those markets, showing these new ETFs and trusts may be having an immediate impact.

 

On Tuesday, open interest in rubber futures on the Tokyo Commodity Exchange suddenly jumped 12% (touching off a flurry of prophylactic jokes from some of my coarser Asian colleagues). Rubber Contracts Chart

 

This is a large jump. In fact, I can't remember the last time I saw a daily move of this magnitude on a major commodities exchange.

 

Most interestingly, the majority of the buying came from trade and broker members of the TOCOM. These professional buyers usually account for a very small portion of TOCOM buying. The bulk of purchases almost always comes from non-commercial customers.

 

Trade and broker members are generally sophisticated buyers. The kind who would be dealing in the structured products TOCOM recently introduced. The big jump in rubber could be a direct result of these new investment options.

 

And rubber wasn't a one-off. Yesterday, open interest in TOCOM gold futures jumped 8%. Again, a large portion of the buying came from trade members. Gold Contracts Chart

 

One surprise is that trading in TOCOM platinum and palladium futures has been relatively subdued, despite the launch of new PGM-backed ETFs last week.

 

But there's been action in other parts of the world. NYMEX palladium futures had a wild week. Last Friday, NYMEX open interest in palladium jumped 2.7%. On Monday, it fell back 2.6%. Only to jump 4.4% on Tuesday and then fall 5.5% yesterday. On near-record volumes. Palladium Chart

 

This is extreme volatility. And it may have to do with speculation that the new Japanese ETFs will increase global demand for platinum group metals.

 

Something is certainly afoot. Keep an eye on this one.

Big Picture Review

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When one is feeling adrift, as I have been, it can be constructive to take a step back and look at the big picture. I thought I'd use today's post as an opportunity to review some of the general ideas I've put forth about the months ahead.

Nothing has taken place yet to challenge my long-term projection. Early this year, I did a a time analysis of when precisely the top would be, and it yielded the date January 16, 2010. That was a Saturday, so the next trading day – January 19, 2010 – has indeed been the top so far. In fact, the high that day – 1150.45 – was accurate to 99.865% of the target I had laid out fifteen months earlier. So, provided that stop stays intact (for years, actually), I'll remain comfortable with my general outlook.

I did a deeper dive into the whole realm of time analysis back on January 8th, and it suggested a target price of 7,960 on the Dow by July 17, 2010. Let me stop right here and say I think this is outlandish, crazy, and very hard to believe. Such a fall would resemble this:

0227-dow 

The above seems crazy to me. I just can't see it happening, except for something extraordinary like a huge terrorist attack or a cataclysmic revelation in the financial markets. But let me temper my prudence by saying this, and I'm going to put it in bold just to be very clear: the one and only reason I cheated myself out of 2009's gains was because I didn't believe the insane course I plotted out could possibly take place.  Read that again. Maybe a few times. Because it was the worst trading error of my life, and it haunts me every day.

I did the analysis. It wasn't just right, it was breathtakingly right. And I didn't believe it. So I didn't act. And I am poorer for my own self-doubt.

Does that mean the above is guaranteed to happen? What, are you stupid or somethin'? But I am trying – I am really, really trying – to have a little more faith in my own analysis. Maybe I'm actually decent at this. God knows I'm trying my best.

We can modulate the drama of the above chart by recollecting the 2004 analog, offered up more recently. Both scenarios agree that, in a shorter timeframe (say, within the month of March), another bounce is in store, and as I've said repeatedly here, I am going to make a valiant effort to cover my shorts on just such an occasion, as I missed the identical opportunity back on February 5th.

I'll also say that it makes sense to me that the market has stalled here. There was very little to keep the market from recovering from its huge plunge in 2008, but take a look at the past decade. There is a mountain of overhead supply spanning years. I am highly confident the countertrend rally is over.

0227-resist 

 So there we have it. My portfolio – and my psyche – are in better shape than they were last weekend, and I'm actually looking forward to March. Let's keep a close eye on the above parallels, as they may be helpful to us. Have a good Saturday.