13 hours ago
Monday, November 30, 2009
Messy Day
What a messy day. Still building off my primary count (There is No Better Breakfast than Pumpkin Pie and Midnight Black Coffee and follow the links back). Friday and today look very zig-zaggy to me.
Another View of Risk
Like I was mentioning in my last post (A Look at a Few Gold Ratios / A Few Words on Risk), the risk environment is rising.
And this shows up on many other measures besides gold. Look a comparison of the Dow ("safe" blue chips) vs. the Russell 2000 ("risky" small caps), and tell me in a straight face that risk is low and it is safe to be bullish.
Well, I am just going to go ahead and show you.
Keep buying those dips! /**heavy** sarcasm/
And this shows up on many other measures besides gold. Look a comparison of the Dow ("safe" blue chips) vs. the Russell 2000 ("risky" small caps), and tell me in a straight face that risk is low and it is safe to be bullish.
Well, I am just going to go ahead and show you.
Keep buying those dips! /**heavy** sarcasm/
A Look at a Few Gold Ratios / A Few Words on Risk
I have talked about gold ratios and their importance several times in the past (The Gold Blog. Gold/Silver/GSMs (and a little Oil for good measure), Thoughts on the Dow/Gold Ratio, etc.). It is important to look at the performance of asset classes not only in nominal terms (all US assets are bought and paid for in Federal Reserve Notes (aka the US Dollar) and so everything has an exchange rate whether you are consciously aware of it or not. e.g. 1150 FRNs (or $) / Maytag Neptune Front Load Washing Machine (item)) but in terms of other currencies (765 EUR / Maytag Neptune Front Load Washing Machine (item)), most especially gold (1oz Gold / Maytag Neptune Front Load Washing Machine (item)).
If you don't think gold is a currency, then stop wasting your time reading this post.
Gold is a very important unit of monetary measure (I will not go into a big diatribe here. I have covered this many times already as have many other bloggers and writers). Most specifically gold:
1) Is the longest lived currency in history
2) Is a non-inflating currency (new mining supply adds very little to the above ground supply, on the order of 0.5%-1.5% per year)
3) Gold is a safe haven asset. It doesn't pay dividends, it does not multiply. It holds value. It protects wealth. As such when risk is high / confidence in the financials markets is low gold historically outperforms
And guess what gold is doing right now :
Yep, you bet. It is outperforming.
What does this say for the risk of most asset classes right now? Gold stars to everyone who said that risk is high.
And this shows up on many other measures besides gold. Look a comparison of the Dow ("safe" blue chips) vs. the Russell 2000 ("risky" small caps), and tell me in a straight face that risk is low and it is safe to be bullish.
Have fun.
If you don't think gold is a currency, then stop wasting your time reading this post.
Gold is a very important unit of monetary measure (I will not go into a big diatribe here. I have covered this many times already as have many other bloggers and writers). Most specifically gold:
1) Is the longest lived currency in history
2) Is a non-inflating currency (new mining supply adds very little to the above ground supply, on the order of 0.5%-1.5% per year)
3) Gold is a safe haven asset. It doesn't pay dividends, it does not multiply. It holds value. It protects wealth. As such when risk is high / confidence in the financials markets is low gold historically outperforms
And guess what gold is doing right now :
Yep, you bet. It is outperforming.
What does this say for the risk of most asset classes right now? Gold stars to everyone who said that risk is high.
And this shows up on many other measures besides gold. Look a comparison of the Dow ("safe" blue chips) vs. the Russell 2000 ("risky" small caps), and tell me in a straight face that risk is low and it is safe to be bullish.
Have fun.
Another Weird Start
Much like what happened a few weeks ago (see this post Count-o-rama) the Russell and Financials are headed in completely opposite directions. This time for 20 minutes.
... Things are starting to break down unexpectedly again
... Things are starting to break down unexpectedly again
Sunday, November 29, 2009
If I had a NIKKel for ....
Wow binv, those are some really bad puns you are coming up with.
I showed my long term NIKKEI count back in September (Long Term Count of NIKKEI), and last week I showed a chart update on several Asian indices (Another Look at a Few Asian Markets).
I want to continue this train of thought with the NIKKEI. Here, first is the long term chart for reference, with the accompanying notes from my last Asian post:
Next is the old NIKKEI. Ouch. The long term chart tells the story of this Blue Supergiant, which burned so hot and so bright for decades, and is continuing to implode after fusing all that hydrogen into helium.
It has been leading down recently. And I think a lot of this has to do with the "carry trade" baton being handed from the Yen to the Dollar. So a fair question is, what happens to US markets when the carry trade gets handed off to somebody else? (Treasury Bond rates are a balloon being held underwater, but I certainly don't argue that rising rates will make the Dollar healthier. Far from it. Just more expensive. Riddle: Is a more expensive worthless dollar still worthless?")
So lets zoom into the daily chart. Just as the indicators were signaling a bottom back in 2008/early 2009, they look to me like they have been signaling a top as well. The NIKKEI has not made a higher high since August.
The long term count above shows a 5-wave move down with the NIKKEI starting its 5th wave. Since August the move does does not look like, nor does it count like a clean impulse. But you can see on the notes below, it does look and count like a leading diagonal feeding into a larger leading diagonal.
Columbia has been doing some *excellent* work in comparing leading / lagging major indices and has been using the NIKKEI has a leading indicator. This is well worth checking out: Follow the Leader?
The big question is, how does it handle the large support area it finds itself on right now? I don't have an answer to that question. But I see 2 main possibilities
1) It ignores it and breaks down definitively. This means the second leading diagonal doesn't really exist. However, if you look at the indicators, they are already oversold. So a breakdown here will get a bit of a run, but I doubt it will be a "crash"
2) It respects the support and bounces up. However this would be a classic technical bounce to burn off oversold. The bearish implications in this scenario are much more severe. The indicators have already shown significant bearish divergence earlier this year and I am showing below a potential Head and Shoulders setup of massive proportions. This would be a very big deal
So either way, other than for *very short term trades* the NIKKEI chart looks very bearish to me.
I showed my long term NIKKEI count back in September (Long Term Count of NIKKEI), and last week I showed a chart update on several Asian indices (Another Look at a Few Asian Markets).
I want to continue this train of thought with the NIKKEI. Here, first is the long term chart for reference, with the accompanying notes from my last Asian post:
Next is the old NIKKEI. Ouch. The long term chart tells the story of this Blue Supergiant, which burned so hot and so bright for decades, and is continuing to implode after fusing all that hydrogen into helium.
It has been leading down recently. And I think a lot of this has to do with the "carry trade" baton being handed from the Yen to the Dollar. So a fair question is, what happens to US markets when the carry trade gets handed off to somebody else? (Treasury Bond rates are a balloon being held underwater, but I certainly don't argue that rising rates will make the Dollar healthier. Far from it. Just more expensive. Riddle: Is a more expensive worthless dollar still worthless?")
So lets zoom into the daily chart. Just as the indicators were signaling a bottom back in 2008/early 2009, they look to me like they have been signaling a top as well. The NIKKEI has not made a higher high since August.
The long term count above shows a 5-wave move down with the NIKKEI starting its 5th wave. Since August the move does does not look like, nor does it count like a clean impulse. But you can see on the notes below, it does look and count like a leading diagonal feeding into a larger leading diagonal.
Columbia has been doing some *excellent* work in comparing leading / lagging major indices and has been using the NIKKEI has a leading indicator. This is well worth checking out: Follow the Leader?
The big question is, how does it handle the large support area it finds itself on right now? I don't have an answer to that question. But I see 2 main possibilities
1) It ignores it and breaks down definitively. This means the second leading diagonal doesn't really exist. However, if you look at the indicators, they are already oversold. So a breakdown here will get a bit of a run, but I doubt it will be a "crash"
2) It respects the support and bounces up. However this would be a classic technical bounce to burn off oversold. The bearish implications in this scenario are much more severe. The indicators have already shown significant bearish divergence earlier this year and I am showing below a potential Head and Shoulders setup of massive proportions. This would be a very big deal
So either way, other than for *very short term trades* the NIKKEI chart looks very bearish to me.
Subscribe to:
Posts (Atom)
