Thursday, May 20, 2010


I will be looking for a bounce as the SPY trades down to $106.50 at that line of support.  The fundamental picture is getting pretty nasty, but I believe that area will be defended strongly.  Most traders are looking at the S&P 500 ($SPX) at a level of 1050.  If that area is breached, you better run for cover on everything you own as you could see the markets drop another 10% to 20% from those levels.  Europe and Asia are falling apart quickly.  If this continues, look for the Euro to trade at parity with the dollar.  -

So, having said all of this, let me summarize.  We are getting close to the point where we have wild-eyed fear in the market.  These are the exactly the times when the market catches a bid and moves higher.  So look for opportunities with your dry powder. 

One other note - the CPI has come out again showing no inflation.  This should grab your attention if you are invested in metals, commodities, and oil.  These are all selling off because the inflation trade looks dead about now.  In general I've made money playing those directional trades, but as I mentioned the other day about gold - you might exit now and buy later as the fear continues to wash throughout the world.  There will be an opportunity to buy again.

Sadly, I've been thinking more about the Euro and the trouble that the Eurozone is facing.  I throw about phrases that suggest that the Euro will collapse, but really my thoughts are that the ECB will change the structure of their confederation.  Currently the European Union leadership (ECB) has no real power or autonomy to enact policies without consent and a one by one vote by the individual nations.  Ultimately I believe their will be a consolidation of power by the ECB where they obtain policy making power and power to make taxation and appropriation policies.  In other words, this means that the ECB will take power from the individual nation states of Europe and run the area in a federal manner (like the United States).  This may not sit well with the EU countries citizens, but that is the price you pay to be a WORLD CITIZEN.  What is dangerous in my mind is that the US leadership seems happy to participate in this world management approach and I would look for our leadership to contribute and participate in world taxation schemes ---- like Kyoto or Cap and Trade, which are veiled ways of taking taxes from the citizens of each country and redistributing them to others (and of course skimming off adminstration and trading costs for bankers and the political class) .

Perhaps its time to go to Europe for vacation --- just remember to pack your riot gear.


No comments:

Post a Comment

Thanks for commenting.... if you are leaving spam or any link that is not related to the post, your comment will not be approved.