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.
The Big Short
I imagine most of you have heard of The Big Short
One might assume that I would be standing in front of his publisher's office when the book came out to get the first copy, given the subject matter. Well, I was awfully interested, so a day or two after it came out, I went to Amazon to order it. I was surprised to see that there were many reviews, and almost all of them were one star (which is the worst).
I thought – wow, Lewis finally has a stinker on his hands, after a series of best-sellers! What I didn't realize, since I didn't read the reviews, was that all those one-stars were simply people griping that the book wasn't on the Kindle! The nasty reviews had nothing to do with the content; the "reviewers" hadn't even read the book. They were simply frustrated that they couldn't download it, so they were venting. Not cool.
In any case, I bought a good old-fashioned made-from-trees book, and I'm absolutely loving it. I highly recommend it to Slopers, since it's as good as its best-selling status suggests. (I will also note that now the average rating is about three and a half stars, now that actual readers have had a chance to put in their two cents).
Brazil ETF Appears Vulnerable
Patterns Emerging – Road Maps For May (by Springheel Jack)
The 'fat finger' spike down last week caused some serious damage to my
charts and I've largely given up trying to include the spike below the
low on Friday. I've left it out of most of the patterns that I've been
looking at since.
That doesn't mean that it wasn't significant of course. One very sharp
eyed chartist noticed that Thursday's low exactly hit the main rising
trendline on SPX over the last 20 years, which was very interesting:
The first pattern to look at on equities is the huge IHS on ES and other
indices, indicating to 1230 ES if you take Friday's low as the bottom
of the head, and 1257 if you take Thursday's low instead. I'd be
inclined to use Thursday's low as it fits my perception of overhead
resistance better:
I'm not expecting the IHS to play out immediately though, if it plays
out at all. There have been too many crosses of the neckline since it
broke for my liking and I'm looking at another pattern that I think
looks stronger at the moment. If we break up from the current short term
resistance trendline that is the top of that second pattern though, the
IHS would most likely play out.
I'm thinking that we might see a zigzag on ES for much of the rest of
May. Partly that's based on Alex
Grant's ES forecast, and here's the one from a couple of days ago:
This, like all market forecasting tools, has to be used with caution, as
it sometimes reverses or breaks away altogether, but over the last year
it has been a fairly reliable forecaster of market action, and I
generally bear it in mind. He's been on holiday in recent weeks and
hasn't updated his blog since early April, but he usually updates his
forecast there every few days, and I'm assuming that he will resume
doing so soon.
The ES forecast for May fits the second pattern that I'm looking at very
well, and that is a right angled and ascending broadening formation on
ES:
I have sketched in a forecast of how this might play out in the
remainder of May. I have it breaking up at the end, though 66% of the
time these break down, and that's because I think we are nearing an
important interim bottom on EURUSD. I've been hearing a lot of talk
about how EURUSD is doomed, that we'll be seeing parity with USD soon
and so on, and that is the sort of talk that you often hear before
significant reversals. We were hearing similar talk about USD last
November for instance.
The correlation between EURUSD and ES has been following the same
pattern in the last two weeks as we have seen since EURUSD topped late
last year. The strong spike down in EURUSD was accompanied by a
correction in equities, as it was in January, but as EURUSD has traded
sideways over the last week, equities have been trending up. If EURUSD
starts trending up too, then the rise in equities should accelerate.
I think there may be a bit more downside to come on EURUSD in the very
short term however. The obvious H&S pattern on EURUSD in the
chart below should be ignored as it would be a continuation pattern, and
head and shoulders patterns are classically reversal patterns, but
having made a significant floor just above 1.26 over the last week,
EURUSD has broken down through that floor this morning. If we go on to
make a new low, then we might drop another couple of cents over the next
day or two and ES should fall with it.
GBPUSD also looks weak in the very short term. We have a fairly
classical symmetrical triangle on GBPUSD, with what looks like a
classical break for this sort of triangle, with an initial false break
up, followed by the real break down. If this triangle reaches target, we
should see GBPUSD below 1.46 again in the next couple of days:
So in the short term I'm expecting to see ES and EURUSD break down, with
an ES target just above 1140 and then a sharp reversal up on both.
If we see a break above the recent overhead resistance trendline on ES
though, then I would expect to see both ES and EURUSD rise strongly,
with a new high on ES in the next week or two.
Gold to S/T Target, Now What?
Now nothing… because a target is just a target.
We have been
here before; those of us who have been around the precious metals
markets throughout the current, ongoing secular bull. We have been
through the extended periods of questioning by 'the faithful' as to why
the ancient monetary relic does not keep up with more heavily gamed
assets, which are not coincidentally positively correlated to the
inflated economy.
Technically, gold has come to NFTRH's near term
target, recently revised from 1225 to 1240. But what is that but a
number? There is a higher target of 1300 off of the 1.5 year long
consolidation pattern beginning in early 2008. Then there is the longer
term target of 2200. These are all just technical mumbo jumbo my
friends because gold is only ever about value in a monetary world gone
insane. Gold is anti-casino, anti-speculation and anti-risk no matter
what the mainstream media would have you believe. I always get a laugh
out of MSM headlines along the lines of 'Gold Declines in a Flight From Risky Assets'.
In phases where the global printing press is on auto-pump and hope, if
not economic activity, gains traction gold can underperform the gamed
mainstream plays like copper, oil, high yield bonds and the stock market
in the short term. But few plays are at new all-time highs. Gold
remains so, even after spending the last year in downward consolidation
vs. the stock market, many commodities and the assets of positive
economic correlation.
'Armageddon 08' saw the real price of gold
explode to unsustainable highs and 'Hope 09' has simply been a
corrective measure. Gold investors who know the value proposition of
real money in a time of scarcity of same, just yawned while gold stock
investors and traders – those who know the play – look forward to the
next leg up in gold mining fundamentals, which grow by leaps and bounds
as the real price of gold increases; in other words as gold resumes its
outperformance mode vs. the things of hope, of positive correlation.
The gold-oil, gold-industrial metals and gold-stock market ratios all
factor in as gold miner costs decline in relation to their product.
I
have been using this chart to gauge the coming of the next phase of the
rise in gold's real price. It
is a simple chart noting a similar consolidation structure to the one
that held sway in 2006-2007 as the gold sector was cleaned out in
preparation for the coming events of the outwardly obvious credit
contraction and resulting market crash.
Gold as measured in the S&P 500 has much higher to go now that the
consolidation appears to be ending right at the uptrend line drawn on
this weekly chart weeks before it was finally hit. Blog readers may
recall the original post showing this chart from March 18th, Anything
Look Familiar?
As signs of frothy sentiment that the gold
sector is noted for get whooped up again, remember that if you trade the
sector, you generally sell the euphoria and buy its polar opposite
condition, despair. I am more of an investor due to current fundamental
views, so I will probably continue to hold many or most positions
indefinitely (likely with the protection of broad market short
positions, which the above chart says is a good strategy).
With
the none-too-subtle degradation of the global monetary system and gold
bullish or rising in all major currencies, there is also a chance for a
major spike here. In the markets in general, noise levels have
increased markedly off of the dull rise to a likely top in prices and
positive sentiment in April. We will keep a filter on this noise and
keep an eye on a real bull
market's progress. This would be the bull market in gold's real as well
as nominal prices.
Meanwhile, in the background the struggles
between the inflation and deflation stories play out short term. We are
on the way to an inflationary future, but gold alone is proving itself
of value during both conditions. The system is trying to deflate; this
is being fought tooth and nail as currency is burned in the battle.
Regardless of further upside or a sharp correction to support around
1000, gold is front and center and value will be retained until such
time as the system is overhauled.
Some people bemoan that I do
not make predictions. This is not the blog for them. A target has been
hit; there are several more targets higher and one lower. These are
the markets and you need to be ready for anything, including the
possibility that things are becoming unhinged here and now. Years ago I
started my simple web presence with a simple thought; be prepared. It
still applies.
