Tuesday, July 10, 2012

Recession Anyone?

My apologies for yesterday’s absence. However I sent out Twitter message late at night that I plan to start shorting from today.  In the morning also I sent out tweets that I will be starting to short today. When I saw the bounce failed at 1360, I thought it may be the right opportunity for a low risk entry. I am glad that it worked out nicely. But it is just the beginning and I think the fireworks will continue for few more weeks. If everything goes as planned, we might see SPX 1200. However, markets never go up or down in one straight line. We already have had 4 red days and hence a green day is due. That will be another opportunity to add to the short positions.  After adding our favourite short positions, we just need to sit patiently till Bernanke shows up with money.

I keep pounding the table that there is no growth. No job growth, no income growth, global economy is slowing down and whether you agree or not, USA is in much worse shape than Europe. You don’t see it because Uncle Ben can print and the size of the economy is huge. Here is a very interesting interview with Laxman Achuthan of ECRI.

This is a great interview and given the short time given, he touched upon many important issues. I request you to listen, view it multiple times.

As pointed by Laxman, in the developed world, Recession leads to deflation. Govt. money printing has not been able to stave off deflation, ever. You may ask Japan, who are now printing for the last 20 years and yet Nikkei is down to 9000 from 38000 and their DEBT:GDP is over 200%. Bernanke fears deflation like plague. So it is very much certain that we will see another massive printing soon. But till that happens, markets will head south.  This time, technical will catch up with fundamental.

I am trying to shut out the noise and not get affected by the movement of 5 minute charts. So far the bigger picture has played out to the T. My earlier call of SPX 1365 +/- few points in the 1st week of July has been valid so far and I think we saw the top on July 5th with SPX at 1374. Now let us see how my call of SPX 1200 by end of July plays out.

I want to share with you a US Dollar chart from Chris Kimble

If this plays out, my SPX call may well come true.

The model portfolio has been updated for your reference. I am still holding GLD as I am not sure about the immediate price movement of gold. It has a potential to reach $ 1400/ oz due to deflationary scare, before we see any traction but I have decided to hold on to it for long haul.

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