Back Again

Sorry - been busy with other commitments although back again and will try to be more consistent - wish the trading would also be!

Market is flip-flopping around and seems pretty directionless. I said in an earlier post that a top is in the process of building. Since momentum to the upside has been strong and relentless to the upside the last 6/7 months one cannot reasonably expect it to just flip to the downside without a fight. One can probably imagine the market/momentum as that of a large tanker - once momentum in a certain direction has been built it takes a fair amount of time and distance for it to stop. Apparently tanker engines are switched off kilometers before ports are reached!

If one looks at the ALSH it has reached an area of strong resistance which previously provided very strong support - since that line in the sand has now been broken - it is NOW very strong resistance. I feel this will contain the advance and will be the point from which the next decline will start.

Looking at the FX market an interesting pattern is emerging. USDZAR seems to be basing and fighting to gather upside momentum.  Remember for now the relationship is USD up = stock markets down. (Of late this relationship has been dis-proven at times though.... keep em peeled... )

I'm still sitting short after lightening my exposure somewhat in the past week. Lets see how things pan out this week which is nearly at an end.

Careful is you are long you might just soon be wrong!

Good

Trading

Well I got that wrong!

OK powering ahead and all the Bulls are patting themselves on the back. Don't get to smug just yet Buddy - when complacency sets in and you think you can do no wrong - that is the time to question your thought process.

I have to admit this relentless push upwards has taken the wind out of my sails - as well as cut into my trading stake, but I've been taught an important lesson. Trade the market NOT the economic reality. The market moves on its own steam and is its own beast...

The economic reality is things ARE NOT improving,  this market WILL tank in the not too distant future when sentiment darkens and more and more people experience the recession/depression. Sentiment is a key driver of markets and at this point in time people still harbour memories of stocks climbing 20/30% a year and money being made by simply buying and holding.a stock. How quickly they forget the tumultuous drop of October 2008. This to my mind is a warning of what is still to come... be careful out there I believe a topping process is IN PROGRESS at this stage.....volatility is bound to pick up in the next couple of months and when downside momentum gathers steam it will be a frightening sight.

Personally I will be hunkering down reducing shorts and waiting for the topping process to play out over the next couple of weeks. Once I take note of momentum switch to the downside I will go aggressively short - although take note having a solid stomache for shorting is a prerequisite - I learn t this lesson in Oct 2008 where 5% up days on a stock tanking is common place. IF Oct 2008 was a 1 and we are heading for a 3 wave down once this 2 up wave has completed we could see volatility which makes 1 look tame, so be warned.

So for now sitting on my hands and trying to survive with current shorts in hand. Inter-market divergences are starting to happen where new highs are not being confirmed by all indices - a sign of exhaustion. Rolling over is not a synchronous process but a game of dominoes as all eventually topple....

Good trading

Week Ahead - quick post....

I'm expecting the week ahead to be a solidly down week for the ALSH/TOPI - probably several weeks before a noteworthy bounce comes around. Why? The USD is about to engineer a short squeeze of mammoth proportions that's why. The highs of EURUSD have not been violated although it came close. IF these highs are violated on a daily close basis I will have to conceded that we could drag our heels higher, lets admit to ourselves the push to the upside the last couple of weeks has not been of the earth-shattering variety.

The highs of EURUSD was recorded 23 Sept 2009 at 1.4845. Lets watch this level intently.... I'm still short the stock market although patience is wearing thin - ditto my grub stake. This week is make or break for me and this Bear (which could be the last one standing) is even starting to doubt his bearishness.....

Good trading

Still Soaring....

OK so this sucker is not going to lie down easily.... EURUSD is powering ahead and USDZAR broke below the mini uptrend level although both as yet have not broken above and below (respectively) their high and lows - WOW now even I am confused. EURUSD is a whisker away as I type this: 1.4817 where the previous high recorded was 1.4845 on Sep 23. So all is not lost until these highs (and lows) have been broken, although my confidence levels have diminished somewhat.

I'm still heavily short the stock market although have been stopped out of my EURUSD short. I'm going to sit on the sidelines a bit and watch EURUSD, if this puppy melts up I would be truly surprised as the Sentiment index - DSI is sitting at a measly 3%  Dollar Bulls which leaves no-one to sell Dollars - anyone still got some?

Things currently do not add up, markets are rallying for the wrong reasons as fear of supposed inflation swells although where is the inflation ???? CPIX is dropping, house prices are dropping , food inflation is dropping, we are in deflation people!

As the old cliched saying goes - "markets can stay irrational longer than you can stay solvent" - I might be well be tested on this theory....

All I can say is be careful out there - Blogs that I have been reading that have been uber Bearish are starting to lose there Bears one by one. Bloggers that were unable to type |Bull" are doubting their Bearishness - these are all signs that the Bear is only just around the corner. We could be in a seasonal inversion this year: where we rally in October a traditionally bearish month and drop the rest of the year a seasonally bullish period - just to REALLY throw Traders off the scent.

Gold may be blowing off to the upside and can have incredibly volatile swings - look back historically to the 80's when gold spiked up over $800 - are we heading for something similar I don't know. I truly expect gold to follow the deflationary route which is down with all other asset classes - at this stage it is defying gravity and powering up. Gold is a great hedge against currency devaluation which all central banks seem hell bent on or a hedge against uncertainty - which lets face it, there is plenty of...

In the greater scheme of things I'm expecting deflation to really come home to roost over the next couple of years which should act as a drag on gold, commodities and all assets in general including equities, houses, food etc. Only much later inflation will start taking hold and probably extend in hyper fashion as countries could default on their debt, wars break out and significant restructuring of economies will happen. This is the period in which I expect gold to flourish. So don't preempt me buddy - I'm routing for you, not just yet!

By the by - anyone have more info on SHP (Shoprite) re Steinhoff possible merger - I'm short the sucker and this chart just tells me watch out below....

Up and away we go........ POP!

Is the rally over? Maybe... I am watching EURUSD closely as it has quite a bearing on the ALSH. I have shorted EURUSD over 1.47 with tight stops and will watch how things pan out. If this is the end of wave 2 then wave 3 down is only getting started and could take us a lot lower - ditto for the ALSH.

Interestingly enough the USDZAR is maintaining its upward trend as well for now. If this breaks it could be a sign that we are heading for new highs in the ALSH causing me to reassess USD strength and equity weakness.

 The ALSH rallied nicely today as expected putting on 1.45%. There probably is more upside in store for us tomorrow morning at least although lets see how things pan out in the afternoon.... I'm expecting a stalling out process now starting from tomorrow through to Friday and then down again. Lets see how tomorrow pans out and see if it goes according to plan...

Week Ahead

The week that past played out more or less as expected with EURUSD dropping - although according to my alternate count. There is now a possibility of a C wave correction up back the old target of just over 1.47. Which would be the 61.8 fibo retracement of the 5 wave move down.

There are many more 5 waves down add this is only the first of many. The next wave down will be a "humdinger" - wave 3's typically are.

The ALSH has very neatly tested its support line and one can only but expect a bounce from here. I would not expect it to make a new high but stall out below its previous high. Possibly getting as high as 25300-500. This is all in synchronicity with the FX Markets - the inverse correlation at this stage between the USD and the stock markets is hard to ignore and until this relationship breaks down lets not ignore it.

Shorting the coming bounce could be a very profitable exercise as wave 3 down will be a fast wild ride down - crunching through the rising support line and causing technical havoc so to speak. As stated in a previous mail - overwhelming consensus at this stage is for a correction and then marching north once again. My sense is this "correction" (as everyone expects) is rather the next leg down breaking past previous lows.

So expect some volatility and a bounce in the coming week - yes dead cats can bounce - typically not very high though. Once this bounce runs out of steam and momentum dies down look to short aggressively and LOOK OUT BELOW

Have a good trading week

Kick