Dangerous Times...

Things are starting to heat up and the Year of the Tiger is living up to its reputation. Hold onto your horse this is going to be a rough ride.

Since I have posted last quite a bit has been happening:

- The PIIGS are heading for a roasting - don't think they are the only ones in this precarious situation - most of the developed world is including the UK and USA. Have a look at who is the next domino to fall

- Greek debt has been downgraded to Junk levels... other PIIGS not that far behind.

- The Greek populace is rioting and airing their discontent with regards to the austerity measures imposed. Think the money loaned to Greece will ever be repaid...?

- EU provides a $1 Trillion dollar package to help alleviate stresses in the EU financial market and save the Euro - what are they thinking.... will it be 2 trillion next month - why not just round it up to a cool 10 trillion, Then the world will know how SERIOUS the EU is... does any of this smack of desperation. These guys don't actually know how to solve this - they have one bazooka to fire and of late it has been misfiring... Albert Einstein once said "The definition of insanity is doing the same thing over and over again and expecting different results" Think throwing more debt after bad is going to solve a problem causes by over-indebtedness?

- Last week we saw an incredulous drop on the DOW of 9% intra-day. This 1000 point slide was terrifying to even the market- makers on the open-outcry market. Think this is a warning of things to come? You better believe it. Think a 20%/30% drop in one day is impossible? Think again. When a market should be sliding but is constantly propped back up the stability is compromised and even though it is successfully held up temporarily, the situation gets ever more precarious. Think of this as a volcano that has been suppressed for years, pressure has been building inexorably as sure as the progression of time - artificially it has been suppressed but the inevitability lies ahead. When this market drops limit down - exchanges will be flooded with orders, servers will crash and pandemonium will break out. People will want to get out at ANY price. Do you feel confident putting your hard earned cash in an environment where you could loose 9% in 20 minutes?

- Trading bots or High Frequency Traders have stirred the ire of the Big Eye in the sky. These guys which provide 73% of liquidity in the US market have been fingered as one of the causes of the dramatic 9% slide. Anyone out there care what fair value is or where a share should be....? Who cares when you can trade in and out of the market sub-second and fleece the unsuspecting public by pushing prices ever so slightly higher/lower and making minuscule amounts although a couple of million times over sub-second.

- Goldman Sach's which does, I quote "...Gods work ..." seems to be the fall guy for the financial crisis. Remember the witch hunts of the 15th century - sure Goldman's is no saint but who really is? If Morgan Stanley, JP Morgan, Citibank etc had to be investigated - they would be found wanting too.

- Gold has made a new high. This is the once place that has shown remarkable stability together with Gold shares. Gold has not yet gone parabolic - when this happens you know it is in its final bull phase - till the spike higher comes - rest easy in your gold investment. Just know that things don't go up or down in a straight line and a correction could be due at any time.

- China is over-heating and its property market is on the brink of a collapse. China imploding could have some dire-consequence for SA short to medium term. China is the main importer of our heavily resource based economy and this could damage our economy and job prospects.


My take on things now with regards to investments and equities: Stay vested in Gold Shares, physical Gold and cash. Agricultural shares and base metals should also hold value although less so. Precious metals and cash are the place to be. I'm happy with cash as long as inflation does not start rearing out of control. I ultimately still believe we are heading for a deflationary crash of epic proportions.

A Bear? But the market is going up?

That is right, its still going up. The S&P500 is breaking records on the technical scales with the longest relative strength index reading since the 1990s. But if you watch carefully, we have a SECOND rising wedge formation, not only on the S&P500, but the FTSE100 and our TOP40!

Stay long but BE CAREFUL!!

All is calm on the western frontier...

So lets get an update of the long term picture - a rehash of a post of the ALSH chart which previously showed where technically some pretty heave resistance lies.

 As one can see a second test of the resistance is underway. Will it break - possibly although short term probably not. The market as it stands has been climbing relentlessly and it is in need of a breather. It it does break it could be an aggressive climb higher although lets not bank on it. The resistance (which previously was support) managed to buoy the market four times, while building a kings crown of a top.

With Marcus cutting rates to everyone's surprise, I'm expecting even more cuts as inflation will be muted and the economy IS going to struggle. Pressure from unions and from horrible growth figures will force her hand. Another surprise is looming  just around the corner - shares are heading for a hiding. I know I sound like a broken record but even though markets can blissfully ignore fundamentals these will EVENTUALLY come home to roost.

Gerald Celente an eccentric forecaster is predicting a crash of 2010 and really has a gift of putting across complex scenarios in a very clear and concise manner. Have a look at this clip and you will see a pretty ugly picture. China which is now SA's largest trading partner is really not such a goldilocks story and if they experience pain down the road we will experience it doubly so.





Good Trading

Charts for previous post....

Still a big bear on track!

It has been I while since I wrote but I have been following the market closely during this time! The break of huge rising wedge turned out to be bearish for a bit and the market turned again to test the wedge (this is my thinking at this time). I am so glad I caught the down and recently caught the reversal thanks to the inverted head and shoulders that I spotted quite early. The only reason I found this formation in our market is because the S&P500 and the FTSE100 were leading here, both with inverted head and shoulders with good breaks to the upside.

Even having had made money recently, I found myself making schoolboy errors in my trading which I would like to share with you.

1. Haste makes waste - I saw the rising wedge for ages but did not take a major long position for fear of loosing cash. If I had traded the channel and waited for the break out I could easily have double or even tripled the money I made now.

2. Wait for the break then trade - I can really could more than 3 times where I was convinced the wedge was at an end and shorted the crap out of everything. Need I say more.

3. Big downs have big corrections - After the market's tanking I shoulkd have known there was going to be a retracement to at least 50%. Once 38% was passed I should have gone long.

4. Ten minutes spend on economics is 9.5 too much - Watching Bloomberg and the Fed's statements all day will cripple your trading. Watch if you investing for the long term!

Finally, where to from here? The market broke through 61.8% retracement of the recent bear move, which was also the head and shoulder neckline, and today the 71.4%. This market is going one direction in my opinion and that is up, up, up to test the rising wedge. I believe it will fail there, but lets ride the up for now.

Good trading.

Whitey Broke Me (Pun Intended)

Foolish me - thinking the Bear market would sort out even the strongest. I did not count on Shoprite going parabolic and parabolic it did. If you went long and have been long for the last few months you have profited handsomely. Shoprite does seems to have just completed the last phase of "parabolicness" (a Kickism) that is - the vertical shoot for the stars. Parabolic shapes on charts are interesting in that they are doomed to fail. If you are brave and have any capital left now is the time to short :) No wait .....................  ........ ................... ....... ................................................................now. Seriously, jokes aside this run up has been of epic proportions and the last spike has cleaned out any shorts that were still hanging around. Will I short again - my confidence has taken a knock and I have learnt a tough lesson from the hard school of trading. Have a stop and stick to it - break this rule and you will break the bank. Yes I believe I will double my current minuscule short (minuscule in comparison to the monster of a short I had) When everyone thinks you are mad to take on a position and your common sense cries against your actions - then you know you are truly contrary.

mmmm - hint of concaveness there - no?

Have fun out there. The volatility is back and money can be made quickly or lost quickly so take a view, trade it, but don't forget to decide on a stop BEFORE you put the position on and write it down in blood.

Good Trading
Kick

Fini, she's broken

 

The FINI appears to have broken and back tested its break. What is also noticeable is the gradual decline in the steepness of this ascent as momentum to the upside subsided over time. FINI seems like a good short for the intermediate term. 

Banks in particular are ripe for a good pullback. With banks raising charges significantly over the past year or two Mr Consumer is looking for alternatives and Capitec Bank(CPI) is benefiting greatly and rightly so. Check out this link for comparisons of bank fees and you will see why in this time of prudence opening a Capitec bank account makes sense.

 

Good Trading (and changing of  banks)