Movers Did Not Show Up.

The movers did not show up and the Wall St. is screaming bloody murder. They might as well because the screw is about to get tight for the next four years. These folks have invested millions of dollars on Romney win and Obama is not going to forget that in a hurry. The TBTF banks can expect more lawsuits and regulations going forward.  And this is preciously the reason I was not long and was asking readers not to chase the bus. But it seems that today’s 2.5% sell off is not the biggest. In his 1^st term Obama encouraged a 5% sell off on the day after winning. Some interesting fun facts from Schaeffers:

And as you can see from the table, we cannot make any prediction about the rest of the year based on this statistics. Question is, did Christmas come early for the bears?

I am waiting patiently for shorting the market and so far I think it is still bit early for the party. Apart from cycles, let me show you few other things. Let’s start with VIX. Despite SPX making a lower low, VIX is still in the teens and did not make a new high.

The 2^nd contrarian move is coming from the currencies. AUD did not break down and EURO held 1.27 levels well. Even EURO/YEN cross is holding the crucial 1.02 and the cycles for that cross does not top for another two weeks.  A correlation of SPX with EURO/YEN is as follows:

Going short is the most difficult trade in this day and age of unlimited money printing. You never know when a short squeeze will come because so much free money is floating around. Therefore, as much I want to short the market, I would rather wait to make sure that the ducks are in line. For that if we miss few points at the beginning, it is worth the sacrifice. And when I am very much certain that this is just going to be a correction, in the range of 15% -20% and nothing more, not a repeat of 2008-9.  

What is the trade then I would be looking for? I think I would adopt a long short strategy here. Instead of shorting the market in all asset class, I would rather long some sectors and short some. One sector I am planning to go long is Natural Gas. If you remember, in the past we have discussed that Nat.Gas is going to be the trade of the decade. And it has so far refused to go down below $3.40. So why not start building up a position in Natural Gas futures. I do not want to get into the stocks of companies dealing in Natural gas because those shares will be affected with the general market weakness. The best bet is to concentrate on futures. I found a list of ETFs for Nat.Gas and here is the list.

http://ca.finance.yahoo.com/news/comprehensive-guide-natural-gas-etfs-155852002.html

 May be I would buy BOIL and sell LEAPs covered call to cover any downside risk.

And I would start buying some reverse ETFs after the OPEX.

Once again, there is no rush. If this is the big correction we are looking for there will be plenty of points to run for. But we have to make sure it is not a head fake.

That’s all for tonight. My sincere thanks to those of you who have sent donations. Your help and support is more important than ever. I hope we will be able to make money in the coming days but more important than that, we should not lose money. Stay frosty folks.

Why Obama Matters

Spent nearly the whole day following the US elections, why you might ask. If we were to have a global elections between Obama and Romney, I bet you it would be a landslide favouring Obama. The USA represents democracy for the rest of the world. Most citizens of other countries would watch and hope that the election and political processes in their own country may one day somehow live up to the US standard.

Obama is more than just the leader of the free world. He represents more than that. He made the world less racial. He represents the blurring of how people are treated badly because of the colour of their skin or where they are from. Although far from supporting GLT rights outright, the Democrats is the better of the two. It is a more enveloping and compassionate platform.It embraces.

On the fiscal and economic issues, Obama has done decently after taking over the legacy of issues from the Bush administration. Many things have been done but the real recovery will be slow. You cannot possibly do that overnight, no one can. Hence the re-election is all the more significant in that the economy isn't that well yet.

How will the markets take the Obama win? Markets would have preferred a Romney victory but an Obama victory is also not that bad. The first issue they have to address will be the fiscal cliff coming due in January 2013. It is likely something will be worked out, which will propel markets higher then. There is still tons of liquidity on the sidelines.

To Mitt Romney, who put up a good fight but his platform wasn't that different enough, plus he wasn't clear enough in supporting immigration, illegal aliens, GLT issues and the financial proposals lacked thoroughness and details. Still Mitt, look on the bright side, you could have also been an Astro employee with tons of IPO shares on margin.

Who Will Ruin America.

Tomorrow we will know who will ruin, I mean rule America for next four years.  MSM is speculating the reason for the rise in the stock market today. Each has own spin as to who is going to win and the regular folks are caught up in the heat of the debate. Little do they realize that it does not matter who wins, the kleptocracy always wins. All they are going to get is four more years of bullshit. Even when the bull changes, the bullshit remains the same.

I have been writing for quite a while that we are going for a bounce before we can see any meaningful correction. And I am not sure how many ways I can spin the same story every day, because the theme has not changed, despite all the news and noise. Folks forget that it is the price action which creates the news not the other way around. You can give any reason to the rise in stock prices but irrespective of the reasons, it was to rise anyway.

So no new charts today to show you anything important. I am sure you will be watching the talking heads with their fancy presentations to find out about the winner.  But instead of congratulating him, maybe we should pity him because cycles are saying that he has very rough roads ahead. In comparison, the last 4 years would appear to be walking in the garden. Again, it does not mean the world is going to end tomorrow. Not even in the next few months for that matter.

For me, the most important news of the day is not who wins the election. It actually came from down under. A court in Australian has found S&P guilty of misleading investors. This is a watershed moment folks. There were many parties responsible for the 2008-9 financial meltdowns. No doubt banks were at the front and centre of that fraud but I think it could not have happened without the active participation of the rating agencies. These rating agencies gave AAA ratings to toxic papers and should be held accountable as such. Australia has shown the way and I hope courts in UK and Europe follows through. I do not have much hope that justice will be served here in America but at least somewhere in the world these crooks are being served the punishment. Way to go Australia. You are the last hope of the free world.

Coming back to market, if MR wins, the stock rally will be attributed to that win, however absurd that may be. Give it any name you want but such a rally has been on the cards for a long time and I should short such a rally. If you remember my earlier call, get out of the long position on the coming rip.

Many of you have sent donations at the start of the month and my sincere thanks for each of you. Although I am not very active in the Twitter during the day, the blog has remained focused despite the setback from google and your help and support is more important than ever.

I hope we all will be able to make some money in the coming months. Just shut out the noise and remain patient.

Street Vendors / Local Farmers

This may be a small thing but we should really make it a concious effort on our part. Always try to buy from street vendors and local farmers plying their trade in a stand alone kerb stall. Their margins are low, they are trying to cut out the middleman, they are trying to cut out the wholesalers and distributors. They are trying to mitigate the effects of big bulk discount supermarkets. Of course I am not talking about those Petaling Street stalls that sell fake goods with 500% mark ups and they expect to be bargained down more than 50% anyways.

When you see genuine street vendors "making their own stuff", cooking their own food for sale, or local farmers plying their produce, .... try and buy from them, and try not to bargain. The same ringgit usually means more to someone than to us. Be thankful that we may have a job, a network or an education and work experience that allow us to make money much easier than a lot of other people. Being thankful is one thing, trying to be a good custodian of our good fortune and good things that come to us is another.

Have a good day....

Monday Musings.

Very soon the uncertainty as to who will guide America to bankruptcy will be over.  Some pundits are calling for a win for Romney and in the support of their prediction, they are showing the strength of the sectors which are supposed to be Republican friendly.  I suppose there is confirmation bias everywhere. I am sure Democrats are seeing signs of their victory as well. Irrespective of whoever wins, the market’s path has already been defined. If I may draw your attention to the fact that despite the sell- off of last Friday, the lows of September 26^th is still intact. SPX cash is grinding up and will most likely continue to grind up for till Op.Ex.

While we have an initial sell signal (not confirmed) the indices are oversold on s short term basis and odds are high that we will see a bounce.  We do not have a negative divergence yet for calling the top but we are coming close. The following chart shows the SPX position short term.

(H/T Lance Roberts).

Another 50-60 points melt up in the next 7-10 trading sessions are quite likely and possible but I am not risking my money to chase it.

NYSE Bullish Percent Index is showing a topping pattern.

As you can see, it takes time for this divergence to play out and therefore do not expect indices to roll over tomorrow. But warning signs are there.

While I am expecting a correction, I am not looking for the end of the world here, not yet. I expect a correction in the magnitude of 15%-20% between Mid-November to Mid-December.  If we get that, it will be time to get long again. And I have decided to stay out of Nat.Gas till this big correction plays out. The time to go long commodities will come by end of the year and that includes precious metal as well.

So right now I am in cash and cushy. I am not chasing the upside because I am not sure how far it will go. And it is better to wait out 7-10 trading sessions than to suffer heartburn.  Hope you guys are keeping your powder dry and doing your research.

Thanks for sharing my thoughts. Please remember to disable Ad block. We still have in-line text Ads and of course Amazon link, should you decide to shop Amazon in the coming holiday season.

Masterclass Videos

We have uploaded two previous Masterclass videos for those who are based outside of KL. This will have to do for now till we visit your towns and cities. Keep an eye out on the schedule for Masterclass as we are going to Kuching, Ipoh and Penang sometime in November.


http://www.murasaki.co/

Once you click on the Masterclass videos, you should click on the button that says "9 videos" uploaded to get the full 2 day sessions.

Masterclasses for next 3 sessions filled up quick. We have added new ones at Cheras and Subang, do call to reserve a place.

Events Date Day Time Venue Register Now! Master Class 3rd November 2012 Saturday 12:00 p.m Dr Cafe Coffee Solaris, Mont Kiara 1800 88 3788 Master Class 5th November 2012 Monday 12:30 p.m Starbucks Coffee Cheras Leisure Mall 1800 88 3788 Master Class 6th November 2012 Tuesday 12:30 p.m Starbucks Coffee Empire Shopping Gallery, Subang Jaya 1800 88 3788 Master Class 7th November 2012 Wednesday 12:30 p.m Starbucks Coffee Setia City Mall, Klang 1800 88 3788 Master Class 9th November 2012 Friday 11:00 a.m Starbucks Coffee Cheras Leisure Mall 1800 88 3788 Master Class 9th November 2012 Friday 2:00 p.m Starbucks Coffee Empire Shopping Gallery, Subang Jaya 1800 88 3788 Master Class 10th November 2012 Saturday 12:30 p.m Dr Cafe Coffe Solari, Mont Kiara 1800 88 3788

One Swallow Of Fall.

While it is true that one swallow does not make a summer, we have been calling for this bullish action for quite a while. It will be foolish to say that from now on prices will go up and up but it does look like the making of a short term bottom which the cycles have been calling for. SPX closed above 1425 which earlier was acting as a resistance. Let us see whether it holds tomorrow. Only folks who seem to be unhappy today are from our beloved rant blog. I shudder to think about the plight of anyone who was short after reading / listening to those unending rants. Few more times like these and when the time comes to really short, folks won’t have any money left to trade. Only GS and JPM will be able to short the market then. Brilliant plan indeed!

Tomorrow is a NFP day. Few have any idea if at all about how good or bad it will be but in reality, it does not matter. Most likely, markets will go up anyway to test the highs in the next few days/weeks, with occasional dips in between. So it does not matter if tomorrow is red or range bound, which is very likely, so long the red is not huge red. Only fly in the ointment today was that US$ was higher which resulted in gold and silver selling off from their morning highs.

But the silver miners like SLW and CDE have started to breakout even in this weak market.  I think both gold and silver will also move higher and test their respective high of the year. And all these should happen in the next two weeks. We will have to wait and see if gold is able to break through $ 1800. If not, we will get out of PM sector for a month and re- enter by mid or end December.

The next two weeks will possibly be good for swing traders. So far as investors are concerned, it would be a good idea to reduce the long positions on any strength and reduce the risk. And the risks are real. The fiscal cliff will not be sorted out before next year and there is no clear indication as to who is going to win the election. These are known unknowns and in times like these, cash is king. 

But from the swing trade point of view, I would probably buy out of money November calls for SPX that are cheap and get out by 12^th-14^th November.  But everyone has own style of trading and no one size fits all. So please do your due diligence.

Today QQQ was up almost 1.5% while Apple was up only 0.2%. Yesterday I wrote that Apple most likely has bottomed short term. If that is indeed the case and Apple is to test its 50 DMA it would mean a move of about 7%. That would definitely positively impact the Qs and other indices. The last high was on September 14 which was almost 45 days back and yet we had a tiny 5% correction. So we did not miss much by staying in the sideline. Also in all of those 45 days, we had two up moves and three down moves without any clear direction.  I had suggested not to short and hopefully it would have saved you some money.

Thanks for sharing my thoughts on the market. I have been busy with studies and waiting for the market to show its hand. So far things appear to be on script. I hope it will be interesting going forward and you will be able to make some much needed money.