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The Commodities ETF (DBC) began and ended today (Tuesday) at
the apex of and in between trendline resistance and support, as shown on the
Daily chart below…an important one to watch tomorrow and thereafter!
An indication of weakness would likely be confirmed by a failure of
AUD/USD to regain and hold above 1.05, along with further
weakness in China's Shanghai Index, as discussed in my posts of
August 17th and August 15th.
The market rose on Friday, and started when Europe opened and continued until an hour after our market opened. The reason given was the good employment report. That reason is obviously a deception, as we lost hundreds of thousands of jobs. So what could it be?
My contention is the Fed started to add to reserves into the banking system Thursday/Friday (Repos). The last time this happened (Dec 2008) the miners and metals bottomed and then two months later the market rose.
So the market reacted positively to this, gold and miners showed strength, and as these repos continue, you will see a move to hard asset stocks and commodities, a move out of bonds, and then it will pressure non commodity assets as margin pressure will crush earnings. But first we will make new highs in equities.
The Fed has no choice but to add reserves to the system or risk sovereign and banking collapses. Reserves have been falling for a year, and the only reason the market is flat and not down is the volatility crush and short squeezes that forces risk on. Both are done, volatility at lows and short interest down considerably. Jawboning promises of liquidity is done, and we are at peak earnings and margins, so reserve building is the next step. Plus they must give the banks more cash to leverage up to buy gov't debt and to support the market price and their profitability.
Well, my fellow Slope-a-Dopes, where to from here? The blizzard rages on, that much is clear/blurry. The whiteout will arrive as the storm's violent fury reaches peak strength. The only question that remains is will it bury us alive, or will we escape certain death by borrowing Ben's 300hp QE fuel injected turbocharged snow blower to dig our way out. Will the global economy rapidly descend into a deep freeze sending all financial thermometers to sub zero Centigrade, or will the coming coordinated round of massive global Central Bank snow blowing thaw all risk assets back up to Fahrenheit 451?
I hope everyone is enjoying the weekend. It is beautiful here in SoCal and I will be a beach rat this weekend. Last week my trades worked out just fine with two frustrating stop outs at break even that eventually climbed right back up,and one beautiful day trade before earnings (AMZN, DO, and QCOM respectively). My other trades are still active or were weekly spreads that expired.
Energy has been a beast, and we may get some rest next week ( I wonder what it is sniffing out; war or QE?) The currency metals are simply not wanting to go down anymore, but I am still mostly writing spreads and day trading GLD with weekly calls and puts.
I am also still short FAS and SPY, although I took off half of SPY on Friday's close. FAS broke its bear flag channel, and I am expecting FAS to be in the 60's soon enough. I also am going to short PNRA and CMG on all rips when stochs go OB. Higher energy, higher food, higher taxes, and zero wage growth is a recipe for disaster for these companies. Grocery stores are dying and people need that stuff, wait until these restaurants try to pass these higher costs along. Below is my current active trades, and Y_T_D results, and some charts to enjoy.
www.arum-geld-gold.blogspot.com
