Monday, July 2, 2012

Cake Is Getting Baked.

Well, nothing new to write anyway. Its baking time and we have to be patient. While SPX and Nasdaq eked out small green, DOW was in red. McClellan Oscillator in the mean time is trading the danger zone.

But that does not mean that prices cannot go any higher. It is half day trading for tomorrow and closed tomorrow.  So we will have to wait and see where it all reaches by Friday. I hope it goes up and reaches the level of 1380 in SPX which will be a safer place to take any position. In fact lots of things have to line up before we can shoot. I would love to see SPX at 1380, Gold at $ 1650 and Crude at $ 87 by coming Friday.

I am little disappointed with the price action of Gold but with US$ higher for the day, what else can we expect. Crude was also marginally lower. As I have said before, I plan to get out of the GLD in the coming bounce, the final of which I would expect in the next few trading days.

The earning season starts in full swing from next week and it may not be pretty picture coming out. There is no growth story anywhere and borrowing and spending does not mean growth, whatever Hollande may say. If history is any guide, France has always been terrible with money management and unlike their Northern neighbor, the Germans; they refuse to learn from their past mistake. And every time they say “This time is Different”. No wonder France have had sovereign default (9) Nine times in history VS. (3) Three of Germany. Even those three defaults came because of the world wars, in which Germany lost. If I have to put my money somewhere in the World I would chose Canada and Germany. Switzerland or Singapore is too small to withstand global economic shock.  Or even buy income bearing real estate, which will generate income and most likely get back to the original valuation in 5 years time. Everything else will result in loss of capital.

Coming back to short term market movement, Crude is another possible short candidate when it reaches around $ 86.50 or $ 87 level. Chris Kimble has this nice chart to share.

Last but not the least, few days back when GS recommended taking a short position, I wrote that we may be due for a bounce. Today GS closed its short position after hitting 1365. So now it may be safe to short. And it nicely lines up with my earlier call of 1365 by the 1st week of July and a potential top. Is it a coincidence? Possible but more likely, we are getting the manipulation pattern right. Just to be on the safe side, I would like to see 1380 please. Please ?

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