Black Friday-Misleading Indications

Some news outlets are saying spending rose from a year ago, well so did the amount of shoppers, from 172 million to 195 million producing a YOY gain of .05%, but considering how much was spent per shopper, it came in at a staggering 8% lower YOY. So we'll see which way the market looks at the news, remember, it's all about perceptions, but Monday's are not the best indications of future moves throughout the rest of the week.

More on the US Dollar Carry Trade, the Fed, Bernanke and the Stock Market

I've been saying the US dollar is looking bullish, now we know why. Bernanke came out before the Dubai news and warned the Fed's policy will be strong dollar policy. As I said, this was  warning to those in the US Dollar Carry Trade. Conveniently the news from Dubai came out when the US markets were closed and only open a half day the next day, then 2 more days to settle down. The dollar did not move down on this news and this could very well be the next bubble (Carry Trade bubble) and the second shoe to drop. Dubai defaulting? Not good and this was obviously well orchestrated. Like I said months ago, it doesn't make sense why the dollar looks bullish, but now it does-a MASSIVE SHORT SQUEEZE much like the YEN Dollar carry trade that took a long time to unwind at the leverage these guys are using. The Fed obviously knew about this and so did some very smart money that has been accumulating dollar related assets as well as dollars. Get ready, the second shoe looks like it'll drop soon.

The Dollar Carry Trade-The Next Implosion?

I've been warning for months now that something is not right with the dollar, for the last month I've said keep a close eye on the dollar. Well it is time to put out an explanation. Last week Bernanke commented on his intent to pursue a strong dollar policy which would cause the market to fall is the dollar rises being there's about a 90% inverse correlation between the two. Bernanke's statement wasn't just a policy statement, it was a serious and stern warning to a lot of people out there making a lot of money. Very little money is tied up in the stock market as compared to bond funds. Over 260 Billion is in bond funds while only 2.6 billion is in stock funds. Thus the falling volume in the markets rally.

Investors have found a cheap way to make big bucks on high leverage and the last time we saw it it was called, "The Yen Carry Trade", but now it's called the "Dollar Carry Trade". Because interest rates for banks can be near or even briefly below zero (meaning the banks are paying the Fed to hold their money, what is happening is the dollar is being sold for stronger currencies that are appreciating and assets with higher rates of return are being purchased, like I said, typically on huge leverage (borrowed money).

Bernanke's policy statement was a warning to those engaged in the carry trade on the dollar because if the dollar were to rise, if interest rates were to rise, there would be an implosion in the dollar carry trade and at the leverage these players are dealing in, it would shake the market and send it plummeting most likely to new lows or our double dip recession.

So what I'm saying is this-listen to what the Fed has to say about interest rates and the dollar, watch foreign economies for signs of recoveries as that may force the Fed to raise interest rates to head off inflation and kill the carry trade. Watch the dollar for signs of buying coming back in almost at a panic and the market falling roughly in sync. Right now the stage is set for a huge implosion, the Fed has warned these banks and others engaged in the Dollar Carry Trade. It'll be hard for these investors to walk away from the fortunes they are making and many may not, but when the music stops playing, many will be left without a chair and we'll see the destruction of these investors in short order.

My concerns first started with the dollars relatively bullish stance and strong correlation to the markets, then Bernanke's statement and finally now the Carry trade is under the spot light. I'm glad we've positioned our fund the way we have, it's a patient trade, but a strong trade.

Putting the Stock Market in Perspective-Stock Market Commentary

Someone did a little expiriment with the QQQQ during a bear market. The sample period was only the down-legs of the market and not the entire bear market including rallies. And guess hat his findings where? Most downlegs had 40-45% up days in them, so even though the market was in a clear downtrend, over a 2-week period there would only be a couple more down days than up days and this only in legs down, not including bounces and bear market rallies. So the perception if you watch the trees instead of the forest, may be scewed.

Here's an example, this chart is a weekly chart of the last 3 weeks, the average gain over that period was 1.09%. It may feel like the market is rallying strongly, but over the weeks it gained little more than 1% at the time I took this measurement today? Not so impressive is it.

Here's our next experiment. There's no doubt that a market that rises on rising volume is the most bullish of price volume relationships and a rising market on falling volume is the most bearish of price volume relationships. So I made this indicator using TeleCharts's Custom Indicator Feature and the line goes up +1 for PU/VU and down -1 for PU/VD. Look at the daily chart below, does it tell you anything about this rally?

Not only has the indicator gone negative, it's hitting new lows in an extreme negative divergence. The first signs of trouble here were around late October.

Sometimes you need to step back to see where you really are.

*If you decide to try out TeleChart or StockFinder I'd appreciate you using my links as I'm an affiliate and long time user of both. It wont cost you a penny more. Then email me and I'll share a ton of my custom indicators with you.

We Had a Slight Technical Glitch, But We Are Back!

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Strong Day, but Bernanke and the Dollar May Turn the Tables

Today was an exceptionally strong day in the market in many respects. However, for a few months I've been watching a very bullish pattern emerge in the US dollar. This strength or strong chart implying bullish moves in the near future didn't make a lot of sense considering the spending in Washington.

You may remember that George Bush pursued a weak dollar policy, thus stocks rallied as money came out of CD's and money markets and went into the higher yielding growth of the stock market, oil benefitted as well and oil companies posted record earnings. Today a major event took place and the market will soon digest it's importance, The Fed has announced their intention to pursue a strong dollar policy, thus likely driving the stock market down and commodities in general with it. Why? There could be a lot of reasons, I don't know-maybe China considering how much debt we need to peddle their way and their concerns with the $USD. In any case, this is a major policy shift and one with far reaching effects. Today's strength was something to behold, but the real market moving event was the Fed announcement: http://www.ft.com/cms/s/0/0f70fbfa-d2e0-11de-af63-00144feabdc0.html

I guess we now know what smart money has seemed to know for six months or so. And people still doubt the boy's club of Wall Street still exists. The bullish pattern in the dollar has taken about the same length of time to develop as the bear market rally we've seen since March, giving Wall Street another lifeline allowing them to sell their inventory in a bear market.

WATCH THE DOLLAR-(UUP is my choice)

The Tale of the Tape-Market Breadth is Lacking Again: Stock Market Commentary

Here's the stats-Dow 30 had 19 stocks with Close Up and Volume Down (CU/VD)-nearly 3:1 over Close Down and Volume Down (CD/VD).
The NASDAQ 100 61 stocks CU/VD 4:1 over CU/VU.
S&P-500 299 stocks CU/VD better than 3:1 over CU/VU

All in all, price volume relationships were overwhelmingly bearish.

The Dow-30, QQQQ, IWM, SPY MDY, IJR, and DJ-20 all closed up on lighter volume and none more than 1% averaging a .75% gain on lower volume. Near recovery highs, only 53% of NYSE stocks have managed to stay above their 40 day moving averages as compared to September when more than 80% of stocks were above the same average and price was nearly 40% lower than today's. The NASDAQ Composite's A/D line is below the September lows for the indicator while price is near recovery highs. This is a market with exceptionally thin volume and in some trouble.

The SPY gained nearly 94% from the bear market 2002 lows to the bull market top which took 5 years. In 8 months the SPY has gained nearly 40% from those same lows and more than 60% from this Bear market's lows-all in 8 months with a rally that has seen diminishing volume and rising unemployment numbers-exceptionally high when you get a real count of the unemployed-far above the 10.2% we here about. So what gives?

Watch the $USD. Logically it doesn't make any sense that it should rally, but the charts are very bullish and point to a strong rally, which will sink the stock market. THIS IS STILL A BEAR MARKET RALLY as far as I'm concerned. Be careful!

Morning Market Report-The US Dollar Still Runs the Show

Today we are going to see a higher open and we could see that on the 3C 1 & 5-minute charts from yesterday afternoon, plus the descending wedge apparent in the QQQQ intraday. Will it retrace the base? If so, then the Q's could run to somewhere near yesterday's highs. We'll have to see what 3C does, but all in all, keep watching UUP which trades inversely to the market, a breakout move there should send the market much lower.

If you want to try my 3C custom indicator, click on this link and check out either StockFinder or TeleChart (I'd get the intraday for the best signals) and email me back. Please let them know you heard about them from Trade-Guild.net as I'm an affiliate for Worden products-it won't cost you any more and helps support the free content here.

The Dollar is the Key?

Look at the dollar's decline compared to the market's rally. There's no question that an inverse relationship exists. We saw it Monday on a "risk rally". We have begun trading our system for an eventual fund, oil and gold are two things I've stayed away from for the sole reason of the bullish stance of the US Dollar. It doesn't make a lot of sense at first thought, but in any case, I'm not going against the charts and a strong correlation. Take a look at these charts. Note the last time we saw positive divergences in my indicators-the dollar rallied. We also have a descending wedge which is bullish and a possible double bottom in an area of strong support. Volume has picked up and the Dollar almost gave a buy signal on our trading system recently, I believe it will and what will that mean for stocks? Look at the action between the two.