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Trading Primary Trends as Good Friends
As long-time readers know, we consider all of this a perfect recipe for deflation, particularly when we perform our Fourth market gedanken:
The Chinese were angry at the USA for continuing to borrow and selling $6.4 Billion of arms to Taiwan. Their response was to sell $34 Billion of US Treasury Bonds and talk about boycotting Boeing.
China also sold bonds and mortgages denominated in other currencies, leading some to wonder if China is planning to let the Yuan rise to reflect their $2.4 Trillion cumulative trade surplus.
This might throw a monkey wrench into a China economy already feeling a drop in exports to America as well as a brake on China credit.
The contrary surprise might be to see the Yuan fall against a rising dollar.
We save that further idea for our subscribers.
Some speculated China might eschew paper assets for commodities like gold, oil, silver and copper.
We remind readers these markets are way too small for $2.4 Trillion to easily enter or exit without destroying these markets.
The same may hold for all JBRICK (Japan, Brazil, Russia, India, China, and Korea) surplus nations.
We still describe the prospect of $1200 to $7000 or $120,000 gold in the near term because of China and India buying gold as closer to fantasy than Big4 TopTen credit collapse reality.
We pray the saving grace of all of this deflation may be the ultimate realization we are all in the same Ark together.
That might save us wasting any more money on perpetual war while being invaded by bionuclear weapons coming to American shores.
In the meantime, we are prepared for much lower prices in most assets, using open Trailing Stop Buy and Sell orders to go where the fewest dare.
Email us to subscribe and learn what we see may be the few profitable exceptions to the rule of deflation as far as they eye can see.
Regards*Rich
February 26th, 2010 at 9:46 am
Aloha All
After posting this, we noticed out of 23 market indices, commodity and industry groups, only two have the 20 day moving average above the 50 day moving average. Curiously, these are the Livestock and US Dollar index.
Despite numerous calls for indices, commodities and industry groups like retail to bottom here with choppy markets, the trend may still be our friend.
Our one year anniversary approaches and we are glad about our longs on equities last March 2009 above Dow 6469, the dollar last November 2009 above 74 and the short sell on gold last December 2009 below $1226 and the short sale on the Dow below 10,729 in January 2010. Subscribers to Big4 and TopTen did better.
Stay tuned. We have a hunch things may be about to get much more interesting, reminding us of the old Chinese Curse: May you live in interesting times.
Mahalo Regards*Rich