This week has already been very interesting. We've had the confidence vote for Greece, which means that we'll have more Greek default discussions and posts in the near future. We also had the FOMC meeting and press conference today where Ben Bernanke seemed much less confident. I almost feel like the market is whistling past the graveyard in hopes of not disturbing the situation. Over the last couple of days I've sold many of my shorts and waited for an expected bounce. Now that we've had some of a relief rally, I'm focused on two specific names that seem to have attributes of weakness. Specifically, GS has entered a significant period of decline where the 14 day EMA has crossed over the 40 day EMA. There seems to be some support at $131 for the broker, but it may be worth a shot with the opportunity for a much deeper decline. FXI also is showing the same qualities although it has not officially crossed over (I expect it to be official at the end of this week). The "crossover" usually portends nastier things to come.
From a macro perspective we have two issues that will help these trades. We have the Fed removing stimulus (no better said, not stimulating and that should deprive GS of some trading proceeds at our expense) and also China is slowing and confronting inflation while trying desperately to keep from a hard-landing.
Weekly 14/40 EMA Crossover pending.
FXI (3 Yr Weekly)
GS Weekly View
13/40 EMA Crossover
Goldman Sachs (GS) 10 Year Weekly
The 10 Year view of GS is really interesting. There is an obvious risk that GS could go up to around $165, but with all the uncertainty and misery in global credit markets it may be worth a short shot. I think a move below $131 could take us to the lower portion of the downward channel which is at $115 which just happens to be the level that Warren Buffett got his shares. It would be really interesting to see GS back at those same levels wouldn't it?
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