Market Forces

Remember the chart I put up that showed we were heading for a 2000 point gain in the DOW (DIA)? And remember the direction change caused by the structural movement of the unified central banks?

That shows the importance of structurals. Anybody trying to time the cycles or count inflection points will be unable to rely on the periodicity of the structural inputs from governments (eg “thou shalt take a bond haircut”) and central banks (eg LTRO’s, TARPs, simultaneous announcements), and the market direction caused by them. That’s why DeMark blew his prediction.

Remember, it’s hard to short a market where the structurals keep popping it higher. That may also be why we see substantially lower volumes, with no one shorting and covering because the overwhelming structural pressure is up.

I decided to look at the SPY from this viewpoint. Here it is:


It’s hard to see, but there’s a black line centered in the ranges, and vertical on a pop to the new range.

As you can see, we operate in a range for a number of days, then Pop to a new range. For the last month or so, we’ve operated in 3 ranges, of 11 days, 9 days and (so far) 6 days. So it appears as though we’re nearing the end of this day-cycle. Looks like a couple more days in this range before we get a pop. Let’s see, what’s happening in a couple of days in the Structurals? Why, the next LTRO, of course.

And we all know why this is happening, right? It’s simply a move by the financial community to take a more firm hold over the actions and direction of governments. Look at Greece: they are ceding their sovereignty in return for money to keep their government jobs. This is an interesting trend. Future governmental financial policy will be contractionary. How will the financial community best make money in that environment? Answer this question correctly, and you will make a lot of money.

So how will I trade this market? Well, as I said, the financial community wants the Bucky to devalue, so I moved a lot of money into the RMB. It’s made me quite a lot since I started this activity. But what about risk assets? As I said above, the market pressure is up. So I will buy dips and sell blips.

But also, I want to look at the depressed sectors. Here are a few charts (weekly) of my herds list that are depressed: Now, I’m not saying these are good investments, and will likely rise. I think we have to answer the above question: how will the financial sector make money in a governmental contractionary environment?

I removed the charts. If anybody wants them back, let me know.

But here's a chart. It's the one I referred to in the top paragraph. It's amazing, we're absolutely on-track.