Sorry for being away most of last week…. but I was content with the 60% move in TVIX and there wasn't much of a good trade set up after taking profits on Tuesday….But next week should be very interesting for swing traders like myself….
I have come to notice that the markets turn when most of the traders I know online, capitulate. When everyone in the trading sphere think a huge crash is coming, markets spike. When markets take off and leave all the bears capitulating, the markets again come back with a vengeance. What has helped me overcome this charade is to consistently think to myself, "what if I am wrong?" "I don't know anything" "Could the bulls be right?" "Could the bears be right?" "What is the market going to do to make the most people lost the most amount of money possible?"
And that is why I always present the bullish and bearish cases…and possible trades to act upon once the markets choose to go whichever direction it wants. Also over this year, I have switched to trading strictly ETFs to avoid unsystematic risk from individual stocks.
I am currently mixed on the direction of the market. There are some indicators telling me to watch out for a possibility of a big crash coming and there are some indicators telling me that the market has already bottomed and that I should be buying dips.
First I would like to present two macro fundamental ideas I am basing my trades upon…
1. Inflation trade- in which shorting "could" hurt you. http://www.youtube.com/watch?v=05v9H4LV_J8
Of course Jim Rogers has been short throughout 2011, despite his call that he won't short in 2009. The price of Gold and currency wars throughout the world add to the fundamental aspect for this trade.
2. Deflation trade- Before we get "hyperinflation" or "strong inflation", deflation needs to come first. There is still a possibility of a repeat of the Nikkei from 20 years ago in American indicies and European indicies from 2000.
Looking at the overall world indicies, most are above/on the 20 weekly MA, in daily sell signals, weekly buys, and monthly sells. However some have started to show signs of weakness within the weekly indicators. The dollar index has reclaimed the important black line on close Friday with a bullish engulfing candle for the week.
Bullish scenario: Atomic Bomb Index.
It has coincided with resistance that was hit in 3.10.09 and 9.23.11. However zoomed in, it is still on a rising trend-line. Bulls have a higher chance of winning, once price goes back below the Red Support for confirmation of bottom in equities.
End Game Index: Resistance gives buy signals. First one is at: 6.13.03, 4.1.09, 10.04.11.
If we break this resistance however, it will be bearish…but let's see if history repeats….
Bearish Cases: Weekly Evil Index with the 200 Simple Moving Average. Notice this has been a deadly combination in the crash of 2008. Even during last year's summer shakeout, once prices broke below the 200 weekly SMA, it was a signal to go long equities. We are currently still above the 200 SMA…but after "bottoming out" in a parallel line to that of August 2010.
The infamous Gold/Silver Ratio: in what looks like a bull flag. If this breaks out higher, silver should fall relative to gold. Combine this with the strength in the dollar index and leverage in ZSL…and it might just be a great way to end the trading year.
Barclays retesting trendline and failed.
GC Index:
Sanjuu5 Index: The overall chart is showing an ascending triangle….I am afraid if we breakout of this resistance, we will be facing a world of deflation…Of course each time we hit the peaks and fail, it is quite bullish…. but we are still sitting near this resistance zone….
Beta Index: What was once resistance is now support on August 30.2010 to Oct 27.2011…
Nijuu Index still in a down channel.
SanjuuNi Index
Bank of Japan Index
Summary: Many internal signals/charts are sitting patiently waiting for the rest of the market to signal either a "go" or "no". The action in the Shanghai Index will be very important at the start of trading Monday. If the inflation trade is signaled, I will be focusing on either TQQQ, TMV, AGQ, or ERX. If the deflation trade is signaled I will be focusing on ZSL(instead of going long UUPT), TZA, TMF, ERY.
Sure I could place a bet on which way we go…but I want the lowest risk/highest reward trade…and for that, I am patiently waiting for the smart money to decide the direction from here.
Visit me at http://heavenskrowinvestments.blogspot.com/ if you like this analysis.
