Due to the “Power of the Pattern” the suggestion was made to buy stocks the last day of August (see post here). Did I know one of the best September’s in decades would take place? I wish… but the answer is a clear NO! I deeply liked what I saw in the patterns, but the best September in 70 years….NOT!
If you have been a viewer of my work on dshort or this blog, you already know I am of the opinion that getting the currency markets direction correct, sure can help a portfolios performance! With this in mind, below is an update of the Euro/Yen.
CLICK ON CHART TO ENLARGE
A breakout in the Euro/Yen would most likely mean the U.S. Dollar fails at support, which usually leads to higher commodity and stock prices, on a GLOBAL BASIS!
A breakout in the Euro/Yen…Breakdown of the U.S. Dollar, would suggest that portfolios OVERWEIGHT TOWARDS International and Commodities holdings. (This should give a boost to ECH and DBA type ETF’s) U.S. Stocks should do well, relative strength though should take place in these areas!
ALWAYS keep stops suited to YOUR RISK TOLERANCE in place!!!
Chris Y…not too late in my opinion for ECH, just keep the support as a stop.
EWY just broke the neckline of an inverse head & shoulders. Like it as well!
Chris…per fear and greed. Sir John used to say the 4 most dangerous words in investing are “it’s different this time.”
I have found this phrase and mindset a key issue that either kept people from being in a market or kept them in too long. Has nothing to do with you or this discussion, I don’t beleive the fed is doing this. I feel it is just money moving around, via fear and greed.
Emerging markets that I have shared on the blog (GXG,ECH, THD and more) were up over 40% before qe2 was ever discussed. Gold and Silver the same. It is above my head Chris, what do I know anyway!
My game plan….”Ride the horse in the direction it is going” an don’t ask why!
I think the point you bring up of “fear and greed” is what concerns me. These are typically see-sawing to balance a market over time. However, when “fear” has been removed from the market due to backstops, $850B to $900B in QE2 / balance sheet maintenance in the near term with more to come if deemed neccessary (and seems likely)…I guess this is a brave new world where the creator of the money supply (the referee) has become a participant in the equity market (the game) and is now attempting to determine the outcome.
My concerns are what the reversion and return of “fear” ( eventually) to the market will look like – a gradual “organic” return visible in the patterns or something more akin to an unforseeable shock (ie, a debt ceiling raise failure or the like).
No need to respond as I appreciate you are a student of the pattern rather than a captive of trying to anticipate (take a bet on) the myriad possibilities of the future. History shows the pattern seems the more reliable.
Chris is it to late to get into ECH trade. Should have picked that up yesterday.
Re: Banks. XLF breaking out of triangle and approaching early August high. Still a ways to reach April, 2010, high.
Chris…anything is possible, here is my take.
The patterns that I love to follow, were around in grain trading in Europe a couple of hundred years go, were around in the roaring 20’s, were around in the great depression, were around during the time the babyboom generation was born, were around when Nixon left office, were around when Reagan came into office and….well I suspect you get where I am coming from.
Each of these times I mentioned had different circumstances, yet the patterns have a similar look. Why? Patterns are prices, that are driven by two things…Fear and Greed.
I will get really worried about the patterns if Fear and Greed are taken out of the equation. It is these emotions that led Sir John Templeton to make every one of his portfolio managers read the book…”extra ordinary popular delusions and the madness of crowds.”
When he told me to read it I thought…WHY? What would I get out of a book that is over 160 years old? I thought, we live in a different world, won’t this be a waste of time…His thougths, the book will be valid 300 years from now, due to Fear and Greed.
I am no Sir John Templeton Chris, nor will I ever be! So with that in mind, I attempted to “fine tune” my skills per measuring these normal human emotions, which create price trends.
I suspect you are aware I suggested to buy stocks the first of September. Humbly, I had never heard of QE2 back then. So did the market rally due to this “STORY” or due to something else…such as support, long dowside wicks, representing investors that became “TOO FEARFUL” of an asset class?
Didn’t mean to go on and on Chris…just something I used to wrestle with and I let go if it long ago. Not suggesting that what you shared is wrong or misplaced, anything is possible, I just don’t attempt to fight price.
Hope this helps a little. All the best and appreciate your question and viewership.
do you account for the possible or even likely fact that the patterns are being manipulated directly and indirectly by the Fed with the knowledge that the majority of trading is now HFT that is programmed. Give the programs the patterns they look for to achieve higher equity prices.
If you accept this, how much faith do you have in these patterns holding up? My concern is these are not “organic” patterns but highly manipulated and may mean they suddenly and without warning lose their relationships?
ck…way to go on SMN! That is why with the tools today and the patterns, we can get up to the plate, attempt to hit a single and know that we can manage risk if the price doesn’t do what we want.
Good example of cutting SMN off fast, just a scratch and letting Chile, breakout and run! Of course we have a stop on that one as well.
Even boring ole JNK and DBA acting half way decently!
Ironic that yesterday, relative strength showed up in the banking sector…BKX is on support…what if the banks would come to life?
Hey William…think about this, per “usually gains”
If you look all over the globe (I did a piece, “its a small world after all” in the archives “all the same market). These pieces reflected that the worlds markets are highly correlated.
With that in mind, as the Dow, 500 and NDX breakout, what is happening across the pond?
London, Emerging markets and others are all breaking out at the same time! In the past, this hasn’t been bad news at all. Actually it has been good news!
As I have shared a few times, other than resistance looking the markets in the face, NEGATIVE SNOWFLAKES WERE NOT TAKING PLACE. That is why I did, “where is the BEEF,” on election day. Price were looking good, so what is the BEEF with postive price action?
i guess the only way to offset those soon to be high gas prices will be with equity gains. i think i heard that the market usually rallies 3% after a mid term election, half of which occurred within the first 30 minutes of today’s session.
Canada’s largest oil company up 8% today (Suncor). Thank you Fed. That will create jobs – but not in the US!!! LOL.
Thanks again for all of your help. I am out as of smn this morning also with just a scratch – thanks for all of the great risk management advice.
Can you do an update on IYR? I think this triggered stop losses also, but wondering if it might be a good investment if there is a general breakout.
Dollar looks to have broken pretty good this morning. Is the next support around 74?
Yes on SMN. I raised stops on it yesterday, so that if something like this happened we would walk away with a tiny scratch.
SMN was for very aggressive players and the suggestion was for a very small position as well.
Too many positive snowflakes of late (breakouts in Rails, Trucks and High yields) to be loading up on the short side across the board.
I did the piece on election morning…”where is the Beef!” I wonder with so many assets at or close to yearly highs, I wondered why so many were having trouble with how things were looking.
Great job on UGL!!! Next major fibonacci target on gold (2.168%) is around $1,850.
At least I hedged my SMN against some UGL!
Are you stopped out on SMN?
I’ve been stopped out a few times over the past few months before I gave my trades enough time to prove their merit.
My inclination is to hold on for a bit, but my intuition sucks!
Thanks for any thoughts.