Saturday, July 16, 2011

The Big Picture.

The Perma-Bears(One gentleman comes to mind who practices voodoo of Elliott Waves) make money out of fear mongering that the world is going to end tomorrow.

The Perma-Bulls (like Birinyi) always see never ending highs in the stock market because they also make money with that bull$hit.

More money is lost by trading with a bias.The reality is somewhere in between.  While in the short term, markets are not forward looking and do things which are contrary to conventional thinking; ultimately all markets catch up with the fundamental economics. And the fundamental economics tell us that all is not well in the world. I do not want to repeat the topics but we all know that the world is hanging by the cliff. 

Manipulation is rampant and endemic. And the market always inflicts maximum pain on maximum number of people.

With that let us look at what the markets are doing. Let me again clarify, I am not a bear, nor I am a bull. I do not day trade and my views are longer term than say a 5 minute chart. With that bias, let us look at the big picture from 1997.

As you can see , the SPX has been trading in the range of 750 to 1500 and it is in a rising channel.  The short term moving averages are well above the long term moving average.  At this point of time, the market is just 10% -12% away from the top. Why should they give up that last cream now? They would rather push the market higher in the face of bad news, with absolutely no volume and mess up all TA to trigger buy orders and then go down.

Let us look at the weekly chart of SPX. The price is sitting in the middle of BB, which came up after touching the lower band. The price is well above the 50 DMA and is sitting on 20 DMA.  I am thinking that the next push up will be in the range of 1370.

Let us look at US$.

The ETF of US$, UUP was trading in a triangle. When it broke the triangle on the upside, I thought  we shall see a huge jump  in US$. But it came crashing down and most likely it will now break to the down side. A perfect example of a head fake? When Moody downgraded Portugal and major players were selling shares of Italian banks in a big way,  I thought we shall see Euro touch 1.35 and below. But it was not to be.  Euro held steady.
The US$Index could not break its resistance at 76. It touch the upper band of BB and came down. Will it touch 72 again? With the race of the competitive devaluation of the currency, Ben is a clear winner.

Look at silver. SLV came down to around $ 32 and there it consolidated for a long time, going back and forth. It created a nice support and resistance. Now it has broken through the resistance. Who says “Risk is Off”?

Then from next week the earning season starts in earnest. Already Google has given a boost and we are waiting for Apple to start the party in earnest. The game of low balling the projection and exceeding it, is in full swing. When the actual exceeds that fake projection, see how much fun we have!

I am not a chartist or a TA. Yet so many charts! They are just for visual aid, for understanding the concept. However the past statistics are no guarantee of future. So these charts and moving averages count for nothing.  What count are the minds of the manipulators. If we can think like them, understand how they can inflict the maximum pain, and play accordingly, we shall be OK.

 I am counting from backward. I think the market is in the process of forming a top. But they do not want to spoil their summer vacation. So the instructions to the ALGOs are to push higher till August. That way, bear stops will be destroyed and more bulls, yield hungry fund managers will join. However these non-believers will join the party at the top. Till that time it will be a rally driven by gas. Then Poof!

For now, I shall be going long slowly and very cautiously. I might be in negative territory for a while but I am ready to live with that.

Just my personal big picture and not an invitation to follow.