LET THE LIQUIDITY FLOW SAYETH THE FED

WHEN HE COMES OUT FROM UNDER HIS ROCK, PAY ATTENTION
We should have known something was up when Timothy Geithner was making the rounds doing interviews and proclaiming that there would never be another capitalistic banking failure ever (another Lehman event).  At that moment we should have simply went triple long everything as this was the signal that QE III was underway.  Read the following Bloomy article regarding Fed coordination with everyone to save....well everyone.

Call me a little gun shy as I didn't plow everything into longs.  Unfortunately, we all should have seen the signals as big money was buying transports and they were up over 10% in two days....it's such a hard thing to keep a secret.

UP, UP, AND AWAY FOR A WEEK OR TWO
Here is the current view of what I think could happen.  First here is a chart of $SPX where it is really a nice chart.  I think 1230 could be upper resistance, especially since the 50 day SMA is right there.  That might take us a day or a week to get there, but if you really think about it, a week is about how much time we'll need to find out that Greece has spent through its latest allowance and is in need of another infusion of cash!  This is a great pre-boost before the Sept 21st Fed meeting.  This would normally be when I suggest that the Fed is going to move forward with a full court press of official QE III, but today's inflation numbers might make them pause and do a double secret QE III.

The way things have gone lately make me suggest also that a push through 1230 would mean that 1260 could be the next level of resistance.

Let's also not forget our old buddy GLD.  As much as I hate it, the chart says this thing is going to track back to the area I've mentioned before at 162.50.  Gold needs a good riot or two in Europe to resume it's parabolic ascent.

I'll post a bit more later this evening.  Lots of going on.  Don't be confused by my sudden bullishness, we all know that the ECB and FED coordination means nothing, we are just pretending it matters and we are going to let the bots take our stocks higher.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

SOTHEBY'S SAYS WELCOME TO THE NEXT COLLAPSE

DOES THE AUCTION HOUSE SHOW US WHERE THE MARKETS MIGHT GO?
I've followed Sotheby's for a couple of years as it has been said that the stock has marked the tops of markets as it rolls over.

Take a look at this monthly chart for BID and you can see quite clearly that the first peak was March of 1999 which was followed by a drop of about 65% in the stock.  The second top was October of 2007 in the financial crisis which fell by 89%.  April of 2011 was the top of Sotheby's in the latest bull run and if the two previous instances can guide us at all we might see a drop to the 20 level.  We'll dub this latest collapse "THE LEADERSHIP CRISIS".

IS IT TOO LATE?
Now you may say, "Goat, that is great, you put this post up after a 20% drop from the high in the overall markets, how can this help?"  Well, my answer is simply this, that these top marks are confirmation that we need to wait for a bottoming in BID to turn bullish on the market again.

In all of these previous times, BID topped out first and fell hard.  I've used SPY in comparison and we find that each peak to trough was a fall of at least 50%.  If we see that same sort of fall over the next weeks or months or a year, this indicator could have us on the look out for a 680 SPY level as a bottom target (137 was top of this last run for SPY).

Just thought you'd find this interesting.

TRADING
Just an update.  I personally did not add any long positions today related to the post of adding more gold, commodities, or dividend players.  I did try to go long some SPY calls and was immediately stopped out.  Just another reminder not to get too cute when a bear freight train is flying down the tracks.  That small trade cost me little, but reinforced to me how it is not worth trying to catch the exact bottom, patience will be rewarded.  Having said that, the BID chart suggests that the real bottom my be way down the road.

GOATMUG   

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com

BOUNCE COMING? - CPI DATA, EURO RANT AND POWER GRAB

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.  -


TRADING UPATE AND OTHER IDEAS
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.

GOATMUG