Two Trades

It is now time to go short the EUR and long the USD
Expect 1.29 to be seen

It is also now time to short the Indian NIFTY Index.
Expect to see the bleed until the white line that I have drawn near 4770 territory.

Interesting Indicators

Some interesting indicators to look at are -

• OTC Bulletin Board Share Volume
• OTC Bulletin Board Dollar Volume
• Divergence between indices in price behaviour like DJIA, SPX and CCMP
• MOVE Index - measure of vol in fixed income mkts
• Spread and Ratio of Corp BAA Bond Yield / Yield on 30 Yr US TSY
• Gold/Silver price ratio
• Exponential upward moving mkts (NASDAQ in 1999, Copper and Oil in 2006)
• EUR/YEN Carry Trade
• TED Spread 
• NYSE Debt Margin
• VIX
• Skyscraper Indicator
• NYSE Seat Prices
• Ratio of Insider Sales to Buys
• Mutual Fund Cash to Assets Ratio

Gold and Silver - Looking VULNERABLE - II

On Thu 20th Jan I spoke about my 17th Jan call on Gold and Silver looking vulnerable.


Look at charts below.

On the way down - Gold and Silver

On Monday 17th Jan , I wrote about Gold and Silver looking vulnerable to drop.
I think that view has started to take shape.
Please see below.

Volatility - Expect Storm/Turbulence/Hurricane 2011-12

I read a great quote recently - the seeds of risk grow best in the sweet rain of euphoria.


We saw the best Dec perf for SPX since 1991.
We also saw the best Sept perf for SPX since 1939.
This was a huge result.


SPX has remained above its 50 day MA for 4 straight months.
This is the longest streak in 7 months.
Wow!!!


The statistical vol of SPX dropped 112% since Sept 2010 to its lowest level since early 2007.
VIX dropped 38%


Strange stuff is happening here.


Equity vol has crashed but US Tsy yield vol is rising.


Mkt registered some of its largest draw-downs in the history of SPX realized vol dating back to 1950.


Spread between VIX and 21 day realized vol is at its widest level in history.


Differential between SPX realized vol and 10 Yr US Tsy yield vol is at its lowest in history.


7 of the largest draw-ups in 10 Yr US Tsy yields since 1962 occurred in Q4 2010.


2010 was the #1 ranked year for vol draw-downs.


Look at the ratio between the vol of vol of VIX and the vol of vol on historical vol.
This ratio measures how fast the actual vol is changing compared to the shifting cost of market insurance.


This ratio is at its lowest and that says that investors in vol refuse to believe this low vol environment is sustainable.


Increased interest rate vol can be the black swan that we are looking for.


It is now time to buy vol.
Lets go long the VIX.

China - Utility Prices Shoot!!!!!

Inflation may be running close to 20%.
In Shanghai, domestic gas prices have risen by 600% and electricity by 300% in the last 2 years.
This is not a good sign.


I view coming rate hikes as -ve for the market.

Irish Troubles.....

People think the Irish episode is over and that all is well.
I don't think so.
The situation is set to get ugly in the coming months.
UK banks have exposure to Irish debt and we shall see some pain on that side as well.

Belgium - Is this a WAFFLE ?

Total debt pushing near 100% of GDP for a country of 10 million people.
Political uncertainty is one risk to keep an eye on.

US MUNICIPAL BOND Market

23rd Dec 2010 note was to focus on the US Municpial Mkt for 20011 - 2012


This slide says it all.


It is not looking good out there.

Gold and Silver - Looking VULNERABLE

Silver is at $28 from a peak of $30-31.
This is a 10% drop.


Same goes for Gold too.

NKY Trade - Completed and Successful !!!!!!

Please see chart attached.
NKY touched 10620.
This was a successful trade.
Patience has paid off.

Weird Out There !!!!!

Extremely bullish feelings are in plenty and this is a cause for concern.


As I said before, the CBOE Put Call ratio is at an extremely low level and historically when you have seen such extremes , markets have turned lower


In many indices , the number of new 52 week highs have failed to confirm with the actual price peaks that the indices have achieved. This means that lower number of stocks are now making new 52 week highs. The rally is losing steam.


Mutual fund asset to cash ratio is at an extreme. They are almost fully invested. Historically at such extremes, markets have turned lower.


The II Bull ratio and the AAII Bull ratio are closer to extremes seen in the last decade or more. This is a sign of an impending correction in the market.


The NAAIM and the TSP survey is indicating extreme optimism and this level of extreme sentiment has coincided with market tops or corrections.


Surveys are indicating that Japanese NKY is being hated while people love the EM story. This indicates taking a bullish view on NKY and bearish on EM.


Volume is important to look at. As the market rally slows, trend followers jump ship and sell. Buy the dip mentality players kick in and start to buy. So it is common to see spikes in trading volume at reversal points.

Stash your CASH

Long only managers are advised to stay in CASH.

2011 is set to get ugly in virtually all asset classes.

I reiterate that US Dollar will be strong in 2011.

It is feeling like 2007 just ended and 2008 is about to start again.

I would avoid buying Silver and Gold now in spite of the fact that the world seems to be loading up on them like there is no tomorrow.

China bears seem to be right this time and I think this will come as a major surprise to market participants.

I advise extreme cautiousness and it is time to be alert for a major market reversal that is about to begin.

NIFTY India Trade - Completed and Successful !!!!

My 7th Jan trade to Short NIFTY India has been completed and was successful


Entry was at 5904
Recommended exit was at 5760


Please see chart below

Bearish Trades

Short ATX Austria
Exit at 2750

Short DJ Euro Stoxx 50
Exit at 2650

Short Term Trade - Europe

Short IBEX Spain 
Exit at 9330

Short French CAC
Exit at 3700

Short AEX Holland
Exit at 345

Short MIB Italy
Exit at 19000

Asian Mkts - Short Term Trade

Short NIFTY India Index
Exit at 5760

Short ASX500 Australia Index
Exit at 4620

Long NKY Japan Index
Exit at 10620

Long Shanghai Comp China Index
Exit at 2930

Weak Gold

Same goes for Gold too.
5th Jan call for a weaker Gold price can be seen happening as well.

Yesterday I mentioned about weakness in Spanish IBEX.
We can see that in the chart below.
This market seems to be heading lower.
Finally sometime this year it will take out its 2009 lows.

Wait and watch...

Weak Silver

My Silver weakness call on 17th Dec 2010 seems to be evolving well.
Silver faced resistance in the 30 / 31 area.
It is now down to 28.5 or so.
I think in the coming weeks we can expect Silver to head to 25.

Credit Crisis - Phase 2

In my view , deflation is set to return and haunt the markets soon.

Expect a 2008 like event to unfold in 2011/12.

All markets that rose in sync in Q1 2009 , are set to fall in tandem when the next phase of credit crisis 2 begins.

And it looks like 2011/12 could be those years.

Commodities and equities will fall in sync.

We saw energy and precious metals start the sync drawdown this week.

I expect equities to join the party soon.

I expect Spanish IBEX to start to fall going fwd from here.

Currency Markets

I expect 2011 to be strong for the USD.
Expect DXY to head to 90.


Euro looks weak in 2011/12.
I expect it to take out 1.18 Vs USD.


Expect 2011 to see weak BRL / strong USD.
Expect 2011 to see weak ZAR / strong USD.

Silver

$30 in Silver is acting like a very strong resistance.
Market looks over stretched.
I am bearish Silver.

Hedge Funds and Gold

HFs seem to be piling into Gold like there is no tomorrow.

This is a cause for concern.

I would be very cautious here.

Natural Gas

Natural Gas may trend lower in 2011.
I am bearish.
I expect to see $2 for NG by 2012.

Oil

Expect oil to head to $110-$120 area by mid year 2011.

We may see an oil peak here.

By 2012 I expect oil to take out its 2008 low.

SPX500 Put Call Ratio

Something does not feel right in the market as of now.
The SPX500 Put Call ratio has shown some activity that has never been seen before.
It rose to a 3 month high and then collapsed to a 3 month low in a matter of a day or two.
Keep an eye on the SPX500.
In my opinion we are going to see an about turn in the SPX soon.
Q1 2011 will be very interesting.