Tuesday, October 6, 2009


Clearly we have a rather vertical, though surprisingly weak thus far, short squeeze in progress.

No change to the overall outlook. As I said when I identified 9918 as the probable Wave C top, in real time, the proper short entry is on a larger fractal retrace, which is in progress. At least, at a higher degree than the "embryo." The question is, is it big enough to move with leverage. The answer to that, I think is no, the best option is to continue with a sell and hold strategy. That is, dollar cost averaging to the downside, or selling short incrementally and at each lower peak. Since this happened rather quickly, I think we are likely to have a larger scale version of the same thing within months after we fall short of 9918 from here.

If 9918 is breached, then you'll see a real short squeeze on even less volume than we see now, which is minuscule. Based on the plunge in volume we see now, a total lack of people buying at these price levels (S&P = 150 P/E) , I give that less than a 5% chance.

Quick update on gold:

I am considering moving most of my working portfolio to pile on gold shorts at the top of this raging B wave. During the actual gold bull market (which I rode hard and put up wet), one of the best gold minor analysts (pun is ok, as they are also miners) and raging gold bull, Peter Grandich, once said - when CNBC puts their girl in the gold pit, it's over. Guess what happened today?

As B waves go, there is no technical limit to the upside, though usually its within 10% of the previous top if that top is exceeded. There is such a mania at this point, (every commercial break in most popular financial shows now runs a "please buy my gold" commercial) that the safe way to apply leverage is to wait for the reversal. The more profitable way is to short and capture the crazy premiums while the final vertical ascent runs out of gas. I am going to do some both. More later.

Update on the dollar:

Yes, it remains in a massive strengthening trend since April 2008. No change to that, as bank stress is through the roof.

It does appear that the Fed has embarked on some new strategies to maintain the appearance of $ weakening, given that the market has pinned them against a 0% bound from a lack of economic activity. Clearly they are going to request that other central bank mobsters raise rates relative to our 0%. The problem is that decoupling is a myth, so that will only tube those private bankers profits even more. It won't last much beyond the desperately needed soundbyte.

Australia is apparently the only willing accomplice, and that makes sense since they fractionally (which is better than no backing) back their currency with gold. Yes, as readers of this blog know, gold is money, because it is valued and it can't be printed. That doesn't make gold more special than any other form of money; all forms of money will fall in price as the mega depression bonfire continues to ravage the global paper boom. So Australia's marginally backed paper is harder to burn. As a result they'll probably crash less than say, the UK or EU which are in the most trouble from their insane practice of using 100% toxic ARMs to underpin leveraged home prices (if you think the USA is in decline, just watch the UK and EU go KABOOM!).

Once again, private central bankers have blown up their own scheme with unsupportable expectations of limitless cash flow from a golden goose that they've killed and are now forced to eat.

U.S. Dollar vs the (it's just a flesh wound) Euro:


  1. FDR- how do you determine dollar strength? If assets are moving higher in price, thus it takes more dollars to buy those assets than last month, how is that considered dollar strength?

  2. FDR,

    Great analysis.

  3. Since august, the S&P is forming a broadening ascending wedge. I expect the S&P to go to 1100 first.

  4. A chicken and egg question if I might FDR.

    Which comes first: Dollar as instigator or responder to equity roll-over?

    Also what to make of all of the EW disclosure in the public domain being used by the programmers of Wall Street difference engines to run stops and (temporarily) disrupt, demoralize and impoverish the short side. When I read what is available for popular consumption it seems like handing over intelligence (or at least strategy) to the other side. Lines in sand drawn for everyone to see with pronouncements to cover if exceeded have fueled this rally since the summer.

    The other thing I've noticed is the petty squabbling in the bear camp eg. the kerfuffle over proprietorship of charting and of course the absurd ongoing inflation/deflation debate distraction. Then we have the appearance of the taunting bull to incite further angst and disharmony.

    I will be very interested to see if highs are taken out this week. I think it will require monumental effort but denial and delusion are running strong in the herd.

  5. i assume you've seen this: http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html?

  6. "i assume you've seen this: http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html"

    This was my favorite part:

    "Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars."

    Not very secret after all, I guess.

    Seriously, all the world's private profiteering central banks have been and always will be owned by the the same people playing both sides of every piece of paper they can print.

  7. Is this wave 4 from the top in 2000? If so, how high can it go before that is not valid?

  8. I know compliments are cheap, but as a newbie I simply have to say that I am truly humbled and astounded by the intellect of the founder and contributors to this blog.
    May you all grow and prosper!


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