What Do You Make Of This?

228
Wed, Oct 12, 2011 - 3:47pm

As you know, pattern recognition is one of the main practices that we preach here. It's one of the primary reasons I've had some success with my technical analysis over the years. Well, do I ever have a doozy for you this time.

My buddy, Trader Dan, (https://traderdannorcini.blogspot.com/) has some fancy-schmancy TA tools. He uses those applications to draw some of the coolest charts you'll ever see. Every once in a while, he'll post one that I'll save for posterity, with the idea that it may be a useful tool to refer back to in the future. One such chart was a daily chart of the Continuous Commodity Index (CCI) that he posted on September 6. The chart had the appearance of something that could go up OR down and so I saved it to my hard drive. Here it is:

Note that, after a steep selloff, the CCI had been essentially range-bound for a while. Sure, it looked like there was resistance around 663 but it didn't necessarily look like the bottom was about to drop out, either.

With this buried in the deep recesses of my turd-like brain, I stumbled upon this daily chart of the ES ( the mini S&P futures contract) earlier today. Take a good, long look:

Note here that, with the addition of trendlines similar to the lines Dan added to his CCI chart, we get an S&P chart that looks startlingly familiar.

"Well, that's interesting", you say. "So what"? I'll tell you what...Trader Dan posted yesterday an updated CCI chart that shows the action since 9/6. Take a deep breath and look below:

YIKES! Let's just say that you've been officially warned.

Now, does past performance ever equal future results? Of course not. However, if a lack of current QE and a global economic slowdown can be blamed for the current plunge in the CCI, why wouldn't those same fundamentals eventually have an identical effect on the equity market?

This is definitely something to watch as we move through this month. TF

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  228 Comments

LongGoldLongSilver
Oct 12, 2011 - 3:50pm
LongGoldLongSilver
Oct 12, 2011 - 4:01pm

A Lot of Silver Charts

The short covering has continued and you really have to wonder just how much can be sold by the speculators. They are holding close to unprecedented small net long positions and the overall picture has a bullish shine to it, not seen since 2003. And as far as I'm concerned you have trillions of more reasons to own silver today than eight years ago.

I'm not gonna be annoying and post the other five charts here, but similar COT levels have always spotted the bottoms the past 10 years. Check them out: https://bit.ly/oriInP

Silver really is awesome! I'm even drinking it when sick. It works!

Odin
Oct 12, 2011 - 4:02pm

Crash

Could be next week, could be next month, regardless my shorts are set and ready for lift off...

ivars
Oct 12, 2011 - 4:05pm

Patterns rulez- another short term prediction true-EUR jumps

Interestingly, in this recent USD per EUR post and very long term graph (2012-2017) :

https://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&start=600#p34394

I have made also a correct short term ( 1 week) prediction about sharp increase in USD per EUR after October 5th, whose consequences I would like to expand upon. The area of correct short term ( 2 weeks ) prediction is encircled to make it visible in the long term graph.



So what I have predicted on October 5th is , that USD per EUR will go up from 1,325 to 1,40-1,425-1,45 till the end of the year 2011. We see the first week of this movement already (of course, it will not move up in straight line, with hiccups, the line is to thick, but the general trend is clear):



Now, where is the logic? Eurozone debt crisis comes to its conclusion, Greece will default in November, that has negative impact on banks which has negative impact on stocks worldwide which has negative impact on business confidence and growth , leading to inflationary recession in Eurozone in q1 2012, and deflationary in the USA in q1 2012.

Why would anyone now buy EURos or Stocks?

I think here we have clear case of psychological denial of what pain is coming so soon, and irrational exuberance of short lived and temporary type impacting the investor behavior. If nothing can be done why not have some fun ( with irrational expectation that somehow things will turn out well).

I think one name for such behavior is (coming from Russian): "Feast in Time of Plague". There must be English saying with similar message.

Looking in the charts, what will happen next:

Greece will default, and from January 2012 there are less and less USD per EUR. As USDx grows, and so does quite a few PM/commodity vs USD, EURozone after dismissing Greece and who else will get inflationary, and in recession. Stocks (DJIA) will fall sharply after this last hiccup, and USA will enter recession in q1 2012, deflationary, with increasing dollar index.

1) For those with EUR, this period Oct-Dec 2011 may be the last one at least for 4-5 years either to buy USD or invest directly into PM, other commodities at good price levels given high USD per EUR ratio ( 1,38-1,45 is as high as it will go).
2) For people with investment in stock indexes, especially in USD, this is the last time to get out into cash at decent levels ( DJIA 11600 is not as good as 12800 but its only 10% below post Lehman USA stock market peak);
3) Once in USD cash, there is still time to buy Silver around 33 till April 2012;
4) For gold , there will be another opportunity window in late January 2012 for about a month to buy it at 1580-1620 USD again.That corresponds with the next dip in USD per EUR in early 2012 to 1,325.

Shill
Oct 12, 2011 - 4:07pm

As long as TPTB keep moving

As long as TPTB keep moving the goalposts, nobody will notice we've run out of field.

cpnscarlet
Oct 12, 2011 - 4:09pm

Celente on KWN ... Again (Repost)

For the second time in as many weeks, Celente is on KWN. Don't bother - same old poop from him. Not that he's wrong, but his blabber is completely void of anything in terms of hard data to act on. If he does this to entice me to subscribe to his newsletter, it ain't working. Nice Bear Ear-Candy, but it's all said here with more flair and some interesting analysis to boot. Feed The Turd.

Oct 12, 2011 - 4:09pm

Gold and Oil, Oil and Gold

It has been observed many times that gold and oil often tend to trade together- favorable conditions for a rise in one tend to spur a rise in the other, and vice-versa.

So here is something I have been pondering the last few days... what are we to make of the fact that WTI crude is up 14% over the last week, while gold is up just 3%? I get that Iran may or may not have secretely tried to assassinate the Saudi ambassador to the US in order to stir up an international incident:

https://www.washingtonpost.com/world/national-security/alleged-plot-is-uncharacteristically-bold/2011/10/11/gIQA7vzpdL_story.html

And that reasonable people may see this action (or this false flag, take your pick) and its potential consequences and may think oil was a bargain at 75-77$ a barrel. Fine. But an 11% price disconnect between gold and oil in one weeks trading? Very, very strange.

Something is afoot, here...

tyberious Odin
Oct 12, 2011 - 4:09pm

DOW, S&P?

Odin,

Are you shorting equities, indexes, miners? Tell me whatca got! I looking at SDS calls or UPRO or SSO puts!

redwood
Oct 12, 2011 - 4:10pm

Ivars

Would you include mining stocks when you last time to get out into cash?

cpnscarlet
Oct 12, 2011 - 4:12pm

Co-inky-dink?

Again seeking to get a cash position before the weekend, I sold most of my MOO which was the least red of my current holdings. This was just a few hours ago before Turd posted the above charts. Omen? Confirmation? Dumb Luck?

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