Party Could Be Over - At a Minimum All Cash the Prudent Move

dndn was a good stock months back it shot from around 7$ to around $14 that was a nice rally it had to bad i never bought i would of made a nice penny

bigbill it's nothing personal.  my main point is that DNDN and others like it are not for me.  I see substantially more downside risk than upside potential.  yes it popped from the 7's to 14 and that was a short squeeze created by a news event.  i don't have the ability to predict news events so therefore I don't buy hoping and praying a news event happens.  i buy when the chart tells you to buy.  anyways, as you can see it made a round trip back down towards $7 so the boys dumped what they had left.

when DNDN got absolutely pummeled last August falling from $38 to under $10 in less than two weeks on monstrous volume that was the signal that it is game over.  everything else is noise.  just a style preference for me as I avoid these types. 

FYI: You give good advice but your screen name bothers me and probably sways others to distrust you as well.

Interesting day today.  U.S. equities popped over 3% last week on skimpy volume in an oversold bounce and then the cheerleaders got everything they wanted.  Yippeeeeee another bailout.  Free money to pass around.  But, after a initial pop European equities and U.S. equities faded big time.  I say today was interesting because this is the first time in this era of central bank intervention and desperation money printing where risk assets shrugged off a new bailout announcement.  Hmmmm.  Interesting.  Unless the Spider moves above 1365 on big volume I still see the charts and data pointing down to stay in line with a major trend change (with minor rallies on the way down).  Also - credit default swaps on Spanish debt soared today after the open and yields on long term spanish debt rose sharply as well.  The EURUSD fell as well after popping overnight.  Remember, the main war zone is ES followed by EURUSD.  it's obvious the "smart" markets (debts and currencies) are calling a spade a spade here.  Oh yeah, remember Italy?  You know the country the cheerleaders forgot about and want you to believe isn't a problem. 

Last week also saw Shalom speak before Congress and the ECB doing nothing at its meeting.  It may be that Central Banks are trying to see if the markets can survive on their own.  The FOMC meets on 6/20 so I'm sure the kool aid crowd will be calling for QE3 every single day between now and then.  The USD continues to maintain relative strength.  Gold and Silver are still in a downtrend (despite today's modest pop).  Oil is completely broken down and down from $110 to $82.  All of these things suggest that at most the Fed extends Operation Twist (remember Operation Twist does not expand the balance sheet).  These things suggest that the Fed will NOT be expanding its balance sheet anytime soon.  Yet, stocks are really not that far off their highs and seemingly loaded with dreams of more QE. 

Shalom's in a tough spot:

- Bernanke knows full well QE doesn't accomplish anything other than providing an artificial and temporary boost to risk assets
- he knows more and more people see QE as simply a handout to powerful Wall Street banks since they broker this "free money" as the Fed's primary dealers
- he knows that the Fed's credibility as an institution is on thin ice and anything that could potentially hurt or help any particular candidate facing a big election soon could be problematic for the Fed
- Bernanke has stated numerous times in the past that monetary policy is most effective with the element of surprise and that monetary policy in general has significant limitations.  Everyone and their brother expects the Fed to print more money at some point so how on Earth can he surprise anyone at this point?
- the yield on the U.S. ten year is around 1.60%.  Bernanke can't make the case that he needs to drive long term rates lower.  the worse the situation in Europe gets the easier it is to keep rates low as the crisis helps the Fed keep rates low (for the time being)

So will Uncle Ben pull off some type of miracle on June 20th?  My instincts tell me he continues to talk a good game (lines up the coke on the table but doesn't let the junkie snort it) but does not expand the balance sheet . . . . . yet.  But I have no way of knowing this.  I know the currency market is the largest and most liquid market in the world.  I know the debt markets are the second largest markets.  Both of these are saying no balance sheet expansion.  Stocks on the other hand have more than 70% of daily trading volume controlled by computer algos that get a hard on every time Merkel says she had a nice breakfast and they have repeatedly drifted away from what the "smart" markets are saying. So we'll see if this time is different I suppose.      

The dominoes could start to fall on Sunday when the Greeks hold their elections...... and they think that escaping austerity and the Euro Union will solve their problems. 
Merkel and Co. know full well that continuing bailouts does not force Greece to change its ways.  So what is it to do.    It is screwed either way of either continuing to finance Greece's problems, or have Greece leave the Euro, which sets a dangerous precedent for other dominoes to follow. 

Next 7 days are worth following closely, and we haven't discussed today's lack of enthusiasm for a Spanish bank-bailout...

rush - i did mention this specifically in fact it is the reason why I posted.  check the beginning of my post.

my whole point was that I felt Monday was particularly important because we did NOT see risk assets (stocks and commodities) react favorably to yet another bailout.  this is a change.  furthermore, after falling initially the prices on credit default swaps (insurance to protect against a debt default) on spanish debt flew to the moon.  interest rates on spanish debt rose as well.  the EURUSD fell over a percent after rising on the initial reaction to the news.  All of these things are completely opposite of what the policy makers would want to see happen.  part of what I am saying is that the central bankers and policy makers MIGHT be losing their ability to control these markets. 

I've always felt that although central bankers will continue to meddle in the markets there will be a point where the junkie does not get high from additional drug use.  to me Monday was the first major signal that markets could possibly be seeing through the bullshit and not reacting positively to every bailout announcement.  you know the spanish bailout won't work and is bullshit.  i know that as well.  the markets know it as well.  EVERY SINGLE bailout since 2008 has helped address issues with liquidity in the short run.  this is all fine and dandy but the real issue is solvency.  not one single bailout has tackled the issue of solvency and therefore each of them has merely kicked the can down the road for a few months. 

I agree with you on Greece. 

Good thread

So whats your prediction of things to come by the end of June and the end of this year?

.. Not good.  The Shit-storm is still yet to hit.   The crisis in Europe is infecting all parts of the globe now. 

The fallacy in the creation of the Euro last decade is that 18-countries could be one big happy family.    The currency will dissolve over time because the people and economies of the member countries are so different.    Does anybody even know a great export from Greece or Spain ??


The only silver-lining in this is that I think most U.S. banks have insulated themselves from a lot of contagion.  There has been enough time to prepare for the shit-storm that is sure to hit...... Let's hope.

Well the FOMC concluded its meeting yesterday and as I felt would happen they did not announce an expansion of the balance sheet yet.  They opted to continue Operation Twist which is balance sheet neutral.  Remember:  balance sheet expansion is code for money printing and "free money" sent out through the primary dealers (major Wall Street banks among others). 

So the circle jerk continues as the kool aid crowd will now cheer on the fact that Shalom Bernanke hinted that QE3 will definitely come at the next meeting (from the perspective if the kool aid crowd), so now they can stay long because they want to front run the August Fed meeting.  I'm still leaning towards Bernanke wanting to lower expectations for money printing so that he can "save the day" if/when markets really start to fall apart.  If the Spider breaks above 1365 meaningfully we could certainly go higher in the short run and even test the 1422 high.  IBD switched to "market in confirmed uptrend" but they were very clear about it being quite iffy.  So, we'll see.

Meanwhile, markets NOT controlled by algos dictating high frequency trading and not literally supported by the Fed suggest all is not well.  Oil is down from 110 to almost 80.  Copper is down from 3.95 to the 3.30s.  If the economy was so strong why are these commods clearly in a downtrend?  The dollar, EURUSD, oil, gold, silver, and most importantly debt markets did not suggest balance sheet expansion and sure enough they were right.  Stocks are in a completely different universe so we'll just have to wait and see who ends up being correct. 

Spain and Italy are really on the ropes but remember this is a war.  ES, EURUSD, and the Dax in that order.  That's what they (by that I mean the central bankers and policy makers) will continue to try and prop up to convince you "everything is fine".  Should find out relatively soon.  Either a break above 1365 to test old highs potentially, or the USD moves higher off its recent consolidation and risk assets resume what I feel is a significant trend change that started in March/April.   

Still on the sidelines with GLD and SLV as I have consistently stated.  These charts do not look appealing at all.  They tried to break above their declining 50 DMAs while everyone was getting drunk on the "let's pray for QE3" kool aid but they could not break out above those levels consistently.  Now we know there is no balance sheet expansion for the time being.  Charts tell me no and the primary stimulus for a big move appears to be dormant so therefore I will continue to wait for the levels I mentioned previously.

For anyone new:  historically the metals moved in line with inflation expectations but in the last 5-7 years they tend to move more in line with USD and more importantly how recklessly Central Banks are printing money.  Since priced in USD the moves by Bernanke tend to have the most influence. 

I do believe there will be one major, enormous parabolic move in the metals but just not yet.  Not yet. 

Philly Fed took the air out of the market today.

USD consolidated gains in the last few weeks and looks to be resuming the uptrend.  As much as they (again by that I mean central bankers and policy makers) try to inflate EURUSD it is having trouble holding 1.26/1.27.  if Spider closes the week below 1342 on heavier volume than the prior week then 1305 should be next followed by 1248 (with little pops up along the way). 

Of course, Shalom has people looking at this along with the ECB so if we go through these levels it becomes extremely likely we will see more and more rumors of cutesie new bailouts or Eurobonds or QE or other forms of intervention that are supposedly going to solve all of the world's problems in an instant.  Essentially all risk assets have at this point are bailouts, intervention, and rumors and hype about things like QE.  Looks like Bernanke and the ECB for the time being as I stated will only line the coke up on the table without letting the junkies snort it so it should be interesting to see what happens. 

Interesting drop today, for sure it is larger than I expected given how well they have propped it this far along.

Not sure if that was it yesterday I am still looking for 1305 potentially.  It hit 1309 and popped a little.  If it dips again below 1310 there should be a little rally to 1320-1335 (I know that's a big range) before a move down to 1248 and ultimately 1150ish and maybe even 1010-1040.  Not sure if "they let it" go that low before another bullshit bailout or intervention move.  Nonetheless, as of right now I don't see a playable rally until it gets to these levels and we see a legit follow through day. 

IBD just switched back to "Market in Correction".  it was flimsy from the get go.  Only the Naz had a follow through day and that was two Fridays ago when the increase in volume was from options expiration.  The NYSE, Dow, and Spider never followed through.  Leaders struggled to break out and when they did it was weak and most got smacked back down below their proper buy points. 

We should be heading lower overall which of course makes it all the more likely they try to fool everyone with some new bailout scam. 

Same pattern, one down day and they try to pump the market on mixed economic reports, with no strength into the close.

Job growth in the U.S. is anemic,  and yet they get excited about today's number on housing.   Makes no sense.    It is unsustainable if new jobs don't support a growth trajectory. 



Europe is still a ticking time bomb that still has yet to face its real "debt."

I am just baffled.  This market goes up when it should go down.  I just don't get it. . 

JMC,

The circle jerk continues.  As I stated here numerous times when the charts and tools I use along with many, many other people are strongly suggesting we are going lower then at that point you can expect new bailout announcements and/or rumors of new bailouts.  sure enough the Friday before this past week we got an alleged new bailout, short squeeze in the EURUSD, short squeeze in Oil, and some end of quarter window dressing.

Lots of negativity with few positives lateley.  Bought shares of FAZ today and also a some calls.  I think now is a good time to position for a downturn.  Faz is a good pick if you think so.

I agree.   take a look at TZA as well.

Markets seem to be in a state of suspense right now..

Investors seem to be waiting for Bernanke's next move,  so they can again pounce on  stocks.

I think there is some truth to that.  In my view there are still very, very high doses of Kool Aid being passed around and expectations of QE (VIX, put/call ratio, low volume up moves, etc.).  I question what all these people are looking at.

- despite today's pop Gold is in a clear cut downtrend channel since March and it had a "blow off top" last August.  Same for SIlver.  Same for Oil (currently in a little counter-trend rally initiated by a short squeeze)
- USD has maintained very solid relative strength since March and is on the verge of breaking out to new annual highs
- EURUSD can't maintain a solid bid EVEN WITH damn near every central bank on the planet intervening to prop it up

I could give a shit what the clowns on CNBCheerleaders say because these three market signals (facts not opinions) tell me balance sheet expansion is not coming soon (unless an epic plunge or breakdown in the system). 

Furthermore:
- despite what you think of Bernanke he has never stopped a program suddenly in the middle of execution.  he has stuck to his word when formally running a program (QE1, QE2, TWIST, TWIST2).  He said TWIST2 until the end of 2012.
- the Fed minutes just released did not suggest a bias towards easing in fact they suggested the opposite
- two weeks ago central banks in China, the ECB, and England all announced some sort of easing.  Risk markets yawned and shrugged it off. 

I agree with you that plenty of people are waiting for it and they think QE3 will send the Spider up to all time highs, but unless I am completely stupid I don't see what factual signals they seem to be seeing that suggest QE3 is imminent. 

Should get a weekly close below 1365 today for the second straight week and possibly a weekly close below 1342.  I'm still monitoring 1306 and 1365 for confirmation.  Had another "confirmed uptrend" by IBD a few days ago but it immediately ran into distribution and leaders have been acting poorly.   

Another weekly close below 1365.  Yeah I'm sure it was just a coincidence they tried to keep it above that and it ended up a couple points below.  1306, 1342, and 1365 my main levels for now. 

Don't know what else to say besides if people can't see that Spain is really, really on the ropes here then they are not paying attention - and Spain is only one issue.  That EURUSD once traded at about 0.80 and that was when people didn't think Europe had any financial issues.  Personally I see dramatically more risk to the financial system right now than I did in 2008, yet the VIX stays below 20 and people seem perfectly happy drunk on Kool Aid assuming there will be always be another bailout and said bailout will always create a sustainable rally in risk assets.  We shall see.

Overnight 10Y UST is at all time low yields.  Must be a reason why all this cash is willing to live with a putrid 1.44% yield.