Wednesday, June 20, 2012

Reality Comes Back.

It’s nice to see a plan working out. It’s nice to have your stand vindicated. And now I can say with more conviction that we are going to follow the script of 2010 and 2011. More than anything else I did not suffer from any anxiety attack and chew my nails off thinking what Bernanke will do.

Precious metal sector and Bonds were giving signal for quite a while that QE is not yet on the menu. Does this mean there will be no more QE? You must be kidding to even think like that! Of course there will be QE and it will be on August 1st.  It is like joining the dots and draw a figure. It is that simple once you understand the principles at work.

Let us keep our focus in various time frames. Longer term we are screwed. The challenge then will be how best to preserve the capital. More than anything I am worried about possible social unrest that all the unemployed, hungry and armed have-nots will unleash. They have nothing to lose. It has already arrived at so called developed nations like Greece or Spain.

Even intermediate term, it is not that difficult to predict that stocks will go up one more time. Question is when the intermediate term begins. Let us apply our collective commonsense again. If QE is due on August 1st, then the intermediate term begins at August 1st and ends with the US Presidential election.  So now we have narrowed ourselves in the short term, which is between now and July 30th. Question is, do we care? As an investor, I would not but as a trader I would like to take advantage of the coming volatility. We do not care that the system is rigged. Only thing we care about is bring on the right side of the rigged market.

Coming back to short term, I expect to see some corrections for the next few days. I do not think it will be huge and by the 1stweek of July, we will possibly reach around 1365 in SPX. Give or take few points of course. That would be a good place to take a relatively risk free trade. But we are still another 10-12 days away and a lot may change in between. You may ask, if there is no QE why should the equities go up at all in the 1st place? That is because of the 2nd quarter ending book adjustments and beginning of the month 401K allocation from the pension funds. There is another fancy name for manipulation, it is called window dressing!

So now all distractions are out of the way and not much rumour to play around with. We just wait for the last bit of window dressing be done with. Till then we patiently wait and see all the useless gyration of the respectable manipulators and applaud them for saving the world. Before I sign off, here is a trivia. Send me the answer if you can. Which is the most respected and loved drug dealing family of the world. A hint, the family has retired from opium trade for over 60 years now.

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