Saturday, November 17, 2012

Bear Market Rally.

The bear is tired and is going for a short nap.

A quick recap with various asset class follows:


In my last post I said that I am looking for a quick bottom on Friday and a bounce from there. The downside target for this stage has been achieved and I would be very surprised to see any lower low from here. In fact we can expect a fast and furious rally but don’t let that fool you. It is still a bear market rally and don’t let the guard down. I have said before that so far the bears have disappointed us. It has been less than 10% correction spanning over 60 days. All it has done is to create a fear psychosis and the pedlars of gloom and doom have had a good time.

The short term cycles now looking for a bounce and I have some support from the Analog of Eric Stewart. I have said before that I do not trade based on Analogs. There are software available which will show you many matching patterns. But they are fun to watch while they last and sometimes act as an echo chamber, reconfirming what we already believe. So right now I believe that we will have a bounce and therefore I think that this Analog is super:

But I have other reasons to believe that there will be a bounce and not just this Analog. It will be good if it works out this way.

I am not going long because I think the bounce will be temporary. Rather, I would use this opportunity to short the market after the bounce is over. For now, if I would like to play the bounce, I would probably buy some cheap, out of money calls on TQQQ or TNA for December and risk very little capital, if at all.

Precious Metals:

I was looking for a two week bounce in PM sector but so far the price actions do not show any strength. Longer term I do expect Gold to reach $2500 and silver to cross $50. The COT action shows that deep accumulation is going on but the BOYZ want to shake out the weak retail hands. So we might see a quick sell off which may not be very deep but emotionally disturbing. For e.g. if we see gold below $1700, there will be noise in the MSM that gold’s golden days are over. Silver may even test $26-$27, if it closes below $32. A quick trade can be ; buy ZSL if silver closes below $32. It may generate a 40% return in 45 days. If we have a core position, we should not bother much but use the weakness to accumulate more. This is just a trade idea.


The bounce in crude is just that. A bounce. It is following the Euro and nobody believes that the fight between Israel and the terrorist organization Hamas will lead to supply disruption in crude. Crude might stay elevated along with the equities and like equities; it will be a very good shorting opportunity. I may short crude in the coming days and I am very sure that this one is going to be a  low risk winning trade.

Other Stuff:

In other stuff, the dogs of Russia wrote that IDF (Israel Defence Force)Blog has been hacked and is out of commission. This is a big lie. IDF checks its visitors and if they think that the visitor is not harmful, they will allow access. Obviously the Russian Agent was denied access and they twisted it in a different way.  I am trying to stay away from political discussion and stay focused on the market. But this is one exception I am going to make, that is, express my support and solidarity with Israel.

That’s all for this nice weekend. If you have any question, you are free to shoot me an email any-time. Thank you for all your generous donations and once again, I take this opportunity to remind you about the Amazon link for the coming back Friday. Have a great weekend friends.