Friday, October 7, 2011

More Of The Same.

Another weekend. This week Bulls got excited hoping for a bottom and a rally. But my target of 1150 in SPX which I mentioned on 26th September is still holding. I do not think we should be excited yet. The rally was just a short squeeze and nothing else.

While there is some hope of a resolution in Euro land, we are not there yet.  In the meantime, rating agencies have downgraded Italy and Spain. One has to marvel at the intelligence level of these rating agencies! What purpose they serve is anybody’s guess.Germany is pushing for larger haircut from the Banksters over and above the 21% voluntary hit they discussed before and the Banksters there are obviously not very happy. Dixia, the famous Belgian bank is about to roll over. This is the same bank which passed the last European stress test with flying colours! While ECB has said that it will purchase bonds of Italy and Spain and thus planning to start its own QE and BOE has agreed for further liquidity injection, there is no direct monetary intervention from our Fed yet. While Uncle Ben said that the Fed will intervene if needed, the TBTF banks in the USA cannot expect free money if the stock markets go up. So logically we should see more weakness and volatility.

Last Sunday I said that I expect Apple share price to fall. Apple was around $ 382 at the time of my writing. Apple came out with their new Iphone which disappointed the market. As of today the share is trading around $370, and further fall can be expected till end of October.

Gold is going back and forth in a $ 50 dollar range and I still think we should see a further drop in price.

Interesting news is coming out of China and the giant ponzi scheme of Chinese economy will soon come undone. By soon I mean in the next one year. The accounting fraud that the Chinese companies practice in NYSE is magnified many hundred times by the Chinese Government while reporting its growth and GDP. Investors and companies who have invested money in opening up factories in mainland China will lose all their investment. This is a country which does not follow the rule of law as we know it. Overnight there will be ban on withdrawal and exit of money. The trade relation between USA and China is going to get difficult when the next depression hits.

For the coming week, we should see more of the same.  I am not ready to go long yet and happy to enjoy the show sitting on the sideline.

Enjoy your weekend. A very happy Thanksgiving Holiday to our Canadian readers.