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.

No Cigar Yet

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I am amazed to see how quickly the sentiment changes from
euphoria to doomsday. Was it last week, there were talks of SPX 1500 or higher?
And now the coming doom! Part of the reason being the Fed has taken out the
surprise factor. For last three months the Pavlovian dogs have been drooling
about the coming QE and now that it is here, they are caught in the headlight.  And so far we just had about 2% correction.



Qfinity and Insanity

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Well, we did see a green close yesterday, and we
still have two more days to see the test of the high. In this day and age of
Qfinity anything is possible and team O&B may not like to see the market
red for too many days. It is now illegal to have red close for more than two
days in a row.  However if we do not see
the test of the high by Friday and we see continued weakness, I would advise
caution if you are planning to go short. The cycles are up till around 25th-27th
September. After all, the test of high is only about 10-15 points away and
unless we have seen a failed test of the high, it is too risky to short.

That Bernanke put is reflected in the following chart.

Investors Intelligence Sentiment Chart

The bullish sentiment is now reaching the danger zone but
not everything is extreme yet.

Yesterday, both bonds and equities were up. Gold and silver spent
the day hurrying up and going nowhere. But Crude gave sell signal. However,
given the geo political madness in Middle East, I do not want to take a short
trade on Oil. Thanks but no thanks.

Forbes also talks about gold:

If you remember, I had written before that I expect gold to
reach around $2500 in near future and I am waiting to get long gold again, now
that every central bank has started printing money and inflation will come
before they realize it. I am waiting for a good entry in PM.

Things may seem quite but it is churning inside and it is
highly unlikely that a triple witching week will be quite. It is time for
portfolio adjustments. So better be careful.

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Quo Vadis?

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The 1st meaningful economic data after Helicopter
Ben announced QEinfinity  was the Empire Manufacturing
 index, and it was a disaster.  It was at its lowest level since 2009,
dropping to a minus 10.4 reading. No wonder Ben sees something which we don’t
and he is very afraid.

At the same time, it is like a mad professor unwilling
to accept that what he is doing is not working. In his mind, QE must work even
if by "work" he means risk assets going up along with commodities. And I think
the 4th quarter GDP reading will come at 1% or below.  ECRI is defending its call that USA is
already in recession.

From Early
last week, ECRI notified clients that the U.S. economy is indeed tipping into a
new recession. And there's nothing that policy makers can do to head it off. 

ECRI's recession call isn't based on just one or two leading indexes, but on
dozens of specialized leading indexes, including the U.S. Long Leading Index,
which was the first to turn down — before the Arab Spring and Japanese
earthquake — to be followed by downturns in the Weekly Leading Index and other
shorter-leading indexes. In fact, the most reliable forward-looking indicators
are now collectively behaving as they did on the cusp of full-blown recessions,
not "soft landings

And yet we expect the stock market to reach somewhere near
1600 in SPX. It’s so eerily similar to 2007-2008. On one hand I see the market
price action following the Presidential cycle pattern. The following chart is
from Bespoke:

Election year cycle

On the other hand I see that OEXA200R is at the top of the
range and historically there is not much room to run higher.


And then there is so much liquidity in the market ,at least
$85 billion a month from here till Nov.

So which way folks? We know economy is tanking but we also
know that liquidity trumps at least in short term.

In situations like this I turn to my cycles and crystal ball
for direction and they are saying that we most likely will follow the
Presidential cycle. Which means we will possibly find a correction by end of
September and a final push to new highs by the election?  2013-2014 will definitely be nasty unless the
Fiscal Cliff thing has been worked out by then. But given the deep political
divide between the two parties, any compromise looks very unlikely. Just look
at the following secret video of Romney.

May be he is telling the truth but telling truth is never a
strong quality of a politician. That’s why Obama was so successful in the 1st
place. His occupational training had prepared him to avoid truth in any kind or
form. But what do I know of politics and my ill advised head butting in politics
is of no use in finding what the stock market will do.  

We had a little bit of a correction today some of which was covered in the last few minutes. I think this week we will see the markets
going back and forth and a test of the high by Friday, the triple witching day.
If the market fails to make a new high by then, most likely we will see a 5%-7%
correction which will be a buying opportunity.

Lets see how things work out.

Thanks for sharing my thoughts and reading World of Finance.
Join me in twitter (@BBFinanceblog) and share with your friends.