Test Of The High?


Today the indices were up for most of the day but some late selling forced them to close in red.

Was it was a re-test and failure of the last high? I think it is still early to call today's action as failed re-test.

However, SPX is still above 1500 and DOW still above 14000. I would like to see indices making a lower low 1st and then re-test the 1530 level in SPX and fail there. Only time will tell whether the market will actually behave that way.



But what lead to the last hour selling? Was it fear of Sequestration or just regular pump and dump action?



But more than the red indices, I would like to draw your attention to Gold which again closed below $1600. I think the bounce in Gold is over short term and we will see some renewed selling. So those of you thinking about catching the falling knife, better be careful. However when the mood becomes totally negative on gold, that would be the time to go for it. We will have to wait a while longer for that to happen.



Nothing much is happening anywhere else really.



Equities will continue their up and down dance for a while more. Grains are still making a bottom before the rally. No much to do in Oil and Nat. Gas either.



All in all, we are in the waiting mode. Our sell signal has been triggered but something else is holding us back from going short at this point of time. I am expecting some whipsaws in market action and better to avoid emotional and moral hazards.



Folks normally get frustrated when there is not much action. We think we always have to buy or sell but in reality, we don't have to. Sometimes it is better to give up short term gain for longer term opportunities. This is one of those times.



March subscription is still open for two more days, before the next Newsletter comes out on Sunday and if you would like to avoid walking in the dark, you are welcome to join the gang.

Bull vs Bear. Who Is Winning?




Few days back I wrote that the bull may be wounded but not dead.

Today's market action again proved my point. One day SPX down 2% and next day it is up almost another 2%! Go figure.

The fact remains that upside is limited but Ben is not ready to accept defeat so quickly and easily. And as you know, there is no easy trade. When everyone is expecting the "Top", it remains in hiding. The market will kill the early bears and suck in the late bulls. And another new month is coming with new fund allocation. Why give up all the free money?

But why every 10-15 point move up or down make such huge news? For one, the 24/7 news media is hungry for sound bites and dramatizes every small insignificant issues. But the more important thing which was point out by Josh Brown of The Reformed Broker is that, almost everyone has jumped in the options bandwagon and are playing with leverage. A 1% move has multiplier effect when combined with leverage. This is not investing. This is speculating. And speculation is anything but good for long term financial health of an individual investor.

So where do we go from here?

For one, I have avoided the urge / temptation to go short for now and have advised subscribers likewise. I am sure I will lose some of my subscribers with my constant call for caution and not having enough action. But the fact is we are making a top and direction is not clear. We have a sell signal and yet I am hesitant to take action based on the sell signal. And it is my policy that when in doubt, do not trade. I would shoot, only when all the ducks are lined up in a row. Sometimes give up short term opportunity for longer term clarity.

Folks who have been in the market long enough know that we make 80% of the profits from 20% of the trades.

Going back to the question, who is winning the battle of bull vs. bear, look the following picture for an answer:



It is the TBTF Banksters who are winning.

Yesterday Jamie Dimon told an analyst covering the bank to go F**K himself.  The following is from Reuters:



At a J.P. Morgan investor event this week Mike Mayo, an analyst at CLSA, who has been a critic of large banks and, at times, Dimon, asked if J.P. Morgan wasn't at a competitive disadvantage compared to more highly capitalized peers. (Here is a playback via Business Insider: link.reuters.com/fys36t)



Mayo: I think what I hear UBS saying in the presentation is that if I'm an affluent customer I'll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?



Dimon: You would go to UBS and not JPMorgan?



Mayo: I didn't say that. That's their argument.



Dimon: That's why I'm richer than you.



This exchange shows what is wrong in the system and Jamie Dimon personifies the arrogance of the Banksters and how they game everything.



In this environment, it is important that small investors start with "Return of Capital" not "Return on Capital" because the fat cats will steal everything otherwise. Avoid risk and everything else will follow.



That's all for tonight. Good luck trading every one.



March Subscription Is Now Open


It is the Subscription renewal time again.

How quickly a month pass!

It was on 1st of Feb. when SPX reached 1513 and we went out of the market.

Now it is morning of 25th Feb. and SPX is starting the day from 1515.60

Not much has changed in the last 3 weeks and we saved ourselves emotional trauma by waiting in the sideline.

So is $ 49 a month worth for having an action plan in this market?

Many of our readers think so. It is less than a cup of coffee per day from your favourite coffee shop and yet provides you, the reader specific action points on various asset classes with at least two weekly updates, if not more.

Extract of some part of one of our old Newsletter is here for your review:



Equities:

The coming week, we have two indicators for sell signal:


  • SPX closing below XXXX, DOW below XXXXX.


  • VIX closing above XX.



When we see the Indices closing below those levels, we will know that we
have seen the highs. From then on, it is a question of Indices making a
lower high or re-testing the previous high and failing in the process.


....................................................................................................................

I think we have a good opportunity coming up and let us remain focused
on that only, nothing else. We are not economists and at least I do not
understand how it works. Just concentrate on making money with low risk.  




PM Sector:

We have met our downside price target of Gold. Silver still has more to
fall before it can find a bottom. While I am sure about a new all time
high in gold but we may have to wait for 2014 for that to happen. The
idea is to buy it when everyone hates it and I think we are reaching
that point. Many of you may already be thinking that there is no future
for gold. Main Stream Media (MSM) is writing about how Soros sold his
gold. So we are getting there. However, if Gold closes below $1600, we
will have still lower prices and that will remove all weak hands. So for
now, we wait on the sideline with respect to PM.




Only parts of the Newsletter. And the levels keep updating / changing to reflect the dynamics of the market price movement. Apart from Equities and PM, we cover Oil & Nat. Gas, Copper (sometimes), Grains & soft commodities and treasuries.



Are we always right? Nobody is or can be and we are no exception. But we make every effort to reduce risk and shoot only when when we think all the ducks are lined up.  And I try to explain that we do not have to be always invested (Only Wall St. wants you to be 100% invested 100% of the time) and cash is a position. I quote from Josh Brown: "Guys talking about being all-in or all-out can and will change their opinions quickly. This is what they should be doing as professional, full-time speculators. But are you a full-time speculator? If someone can and frequently does go from fully invested to all cash to fully invested over the course of a few days, is there any particular reason that you should be paying attention to them? Will they personally be calling you to give you the second half of their trade? Well, most of you don't realize this so when someone says "ALL IN" or "ALL OUT", it gets you talking, thinking, retweeting, sharing etc.



So if you think caution is your style and you value your savings, want to grow it in a low risk manner, may be you should give it a try. Click on the "Donate" Button above and pay $ 49. In the subject line mention Subscription for "March" and you are all set.



I look forward to hearing from you soon.

The First Warning Shot.


We heard the first boom.

Intra-day, SPX went below 1500 but closed above at the end.

While we saw a breach in the up-trend it will be wrong to say that the bull is dead. Wounded yes, dead? No.

Those who are thinking of shorting the market now, should do well to keep the fate of this guy in mind.







This was the 1st meaningful pull-back in many moons and at this point of time, is just a healthy correction.I think we will see a bounce very soon, may be as soon as tomorrow. Only when it makes lower high, we can think of an intermediate term top. Just like last time.







When the indices made few lower highs and there were reversals of reversals of reversals, we did see meaning-full correction.  It will follow similar path this time around and prudent traders / investors should wait for price confirmation.



Subscribers know the level to watch for and when the sell signal will be triggered. They also get mid-week and end of the week update, which help us to remain on the right side of the market without front running.



Other risk assets are getting slaughtered as well. Oil had a flash crash yesterday but for now I think it has found a bottom. But there is no such respite for precious metals. We have been out of it for a while and waiting in the sideline for the right time to get long. But we may have to wait for a while till everyone gives up on gold and all gold bugs fly away.



Some other interesting trades are developing in the soft commodities/ grains / Nat.Gas and we will have some action there soon.



All in all, end of Feb./ early March promises to be interesting in contrast to the last 3 weeks which has been a boring kind of market.



Hope you all are doing great and wish you all best of luck trading.

Method of Defiance 5th Column

For 75 minutes on Sunday, February 3rd, I felt perceptually positioned at the center of the creative flow of new sonorous environments and dialogues courtesy of  D.J. Krush, Bill Laswell, and Bernie Worrell.






DJ Krush & Bill Laswell








 Bernie Worrell










 Method of Defiance 5th Column


photos by Joel Gilardini








Here's how I got there:





January 31st/February 1st





Rested from 8pm until midnight; finished packing and left at 1:30am for the 3 hour drive to the San Francisco Airport.  Loud music and high quality green tea fuels the driver.





Flying American Airlines, SF to New York to Milan.  I rarely if ever fly American so not used to looking out the terminal window and seeing rows upon rows of giant A As, colorful, luminous branding letters atop the tails of these aeronautical beasts. 





Same seat assignment for 3 of the 4 flights, 23J.  Having the same seat on successive flights, of any number, is a first for me.  Maybe that's how they do it at American. 





Begin reading Thomas Pynchon's Gravity's Rainbow as the plane swings around the Bay and begins its ascent.  The opening "doh" note, a quote by Werner von Braun resonates deeply:





Nature does not know extinction; all it knows is transformation.  Everything science has taught me, and continues to teach me, strengthens my belief in the continuity of our spiritual existence after death.





A disembodied voice informs us that we are flying at an altitude of 37,000 feet.  Have to take their word for it, I left my altimeter in my other suit.  I choose the lasagna for lunch.





February 2nd





"23 minutes until landing" the Captain announces as we descend into Milan.  I'm reminded of the 23 conspiracy. 





The flight arrives early in Milan.  Standing by a pillar outside the arrival doors waiting for my ride,  I patch into an earlier loop of time, ten years or more before, when waiting in this exact same location I see George Clooney arrive looking spiffy and jovial but suprisingly shorter than expected.  A large sign with my name on it pulls me back to the present.





The sky looks cold, dark and grey.  Overcast and drizzling.  Comfortable ride in a black town car to a comfortable hotel in Milano's moda quartiere.  Lunch with Gianni, the colorful promoter I wrote about last year, James - Laswell's stage tech, and Asai - Krush's manager.  Conversation ranges from reports on life in Japan, California and New York to the Japanese influence in Brazil and growing up in pre-civil war Beruit.





4pm rehearsal at a smal studio a few miles away.  Some hard core fans have driven in from Germany to meet us there.  Also some old friends - Eraldo Bernocchi, producer, musician and collaborator, and Giacomo Bruzzo, a self-described "Co-conspirator" at Rare Noise Records ( he runs it).





Krush looks surprisingly fresh considering he played a concert at the Forum in London that went into the early hours then caught a plane in the morning to rehearse this afternoon.  Bernie also looks good for someone hopping around the globe - gigs with Steve Kimock in Northern California and Japan, then back to LA to play with Stevie Wonder at the NAMM show, back to Japan, forward to Italy.  After this show, he'll jet over to Paris to play with Melvin Gibbs, Bernard Fowler, Nona Hendryx and others to perform Pink Floyd's Dark Side of the Moon.





Bill told me about a fairly recent show he did with Lou Reed, Laurie Anderson, and John Zorn that sounded interesting.  I told him about an apocryphal story of Laurie Anderson wanting to turn Gravity's Rainbow into an opera.  She asked Thomas Pynchon for permission and he consented as long as she did everything on one instrument - the banjo.





It takes about 90 minutes for the 5th Column to work out song arrangements for a 75 minute set. 





Krush generates beats, atmospherics, turntable scratching, and some melody figures.  He uses his machines ( two turntables, a small dj mixer, a Macbook, and fx pedals) to undulate forth a series of parallel Universes made up of sound, mood and texture.  I hear crickets, saxophones, drums, wind, noise, rhaitas, female Japanese singing, flugelhorns, basoons, acoustic basses, handclaps, cowbells, goatbells, aardvark bells, church bells, string orchestras, chamber symphonys, locomotive trains, steam whistles, bansuri flute, ocean waves breaking against a coral reef in the South Pacific, and a piano forte a coda among other sounds.  Krush tunes to Bernie.





atonal is ok sometimes ... throw in some dissonance...




Bernie tunes to omnipotens deus and outer space.
 Bill shakes the earth. Solve coagula.



While they are working out the set, I ask Giacomo if Rare Noise Records has a mission statement.  He says it's finding the right thread for things that are not associated, searching for the common language.  The nostalgic fusion of future traditions.  Seems like he's in the right place as that describes MOD 5th Column perfectly as I find out after the concert.



February 3rd



7:30 am lobby call.  It's an unusually early concert, 11am.  Part of a series called Aperitivo (aperitif) in Concerto that runs from the end of October to the beginning of March.  The idea is draw shoppers in from the suburbs with a reasonably priced concert of high quality international musicians.  The show gets out by 1pm giving the concert goers all afternoon to spread economic joy to the area.



8 - 10 am.  Set up and soundcheck go smoothly.  A silver-haired elderly Swiss audio inventor named Corrado Faccioni is in the house.  He has these devices he calls resonators, small steel spiral gizmos that are supposed to smooth out errant harmonics.  They are not powered.  He places them all over the stage, on Krush's mixer, Bernie's keys and a small set that clamp on to Bill's bass headstock.   James later informs me that he even put one on an AC power cable.  How an acoustic resonator can smooth out the harmonics of an electrical current is beyond me.  I don't get a satisfactory explanation as to how they work.  Also, no information exists about them on the web, their site, Cor Fac 2, remains under construction.



Corrado reminds me a bit of the legendary Magic Alex, audio guru to the Beatles, who helped them spend their money on an attempt at a  futuristic recording studio as head of Apple Electronics.   He suprises me by asking if I miss my floatation tank when I travel.  I tell him that I always had wanted to build an orgone box around my tank.  He emphatically replies, "my resonators are much better than an orgone box" which makes me smile.



Corrado also supplied one of the vintage Ampeg SVT bass heads for Bill's backline which he bought from AC/DC in the early '70's.  It reminds me that this concert isn't an isolated event but part of an ongoing, ever-changing living tradition to help nudge humanity along.  AC/DC and MOD have little in common except that both, in  their own ways, strive for music that breaks down barriers, that cracks or shatters the emotional armor that keeps the average person from knowing their true voice.  Music that transcends the flatland view.



The grande signora, chief of the promoters, has a discussion about the volume with me a few minutes before showtime.  She said that last year the volume was too much for the people sitting in the first row in front of the speaker cabinets.  I'm sure it was.  However, I'm here to tell the world, and give everyone permission to alter their own decibel levels if necessary with two simple suggestions. 



1. Don't sit in front of the speakers.  Like the old blues song says: you got to move...



2. If that can't be helped, or if it's too loud for you wherever you are, then use earplugs.  Earplugs are to louder concerts what sunglasses are on a ski slope during a clear day -  sensory attenuators.  Sometimes you have to use them.  If earplugs aren't available, a moist tissue will have a similar effect.  How you postion them in your ears will determine how much sound pressure level they block.





11:15 am - Showtime. The theater is sold-out.  Bernie starts with a solo that seems to reference, recapitulate, and encapsulate the entire history of Western music up to Ray Charles' Georgia.  I don't get the classical music nods, maybe snippets of Bach or Mozart.  The quotes I do recognize besides Georgia are Hark the Herald Angels Sing and Winter Wonderland reminding me more of Illumanti puns than X-mas carols. Krush ambiently lifts off while Bill begins the dialogue with moody melodic phrases and the group voyage has begun. 





 I've been trying to find the words to describe this music for about two weeks and they still remain elusive.  The language of this experimentally expansive music won't reduce to words for me right now.  I have a recording.  I had an experience.  The unique synergy of this triad in the 5th Column methodically defies comparison in any meaningful way.  I can't reduce it.





I resorted to a chance operation to at least find some poetic semblance of a description.  At the Materialized rehearsal last week Dave showed me a copy of Thomas Pynchon's The Crying of Lot 49 which I hadn't read or seen before.  Pynchon, clearly a musically inspired visionary writer, seemed a good possibility for finding those words so I randomly opened the book landing on p. 74 and immediately saw the following sentence:





She looked around spooked at the sunlight pouring in all the windows, as if she had been trapped at the center of some intricate crystal, and said, "My God."





Change the word "trapped" to "positioned" and this description works for me though it hardly encompass the whole experience.  To my observation, the audience seemed as equally enraptured.  Their response indicated close attention.  The space had a glow about it afterwards.





Spent the afternoon banqueting on Italian cuisine and catching up with old friends.  Eraldo brought la bella madonna, his wife, Petulia Mattioli.  Petulia, an incredible visual artist in her own right, had visually produced and choreographed the montage of images that accompanied the Somma (Sacred Order of Music Magic and Art) shows Eraldo and her put together which included Bill, Nils Pettar Molvar, and a gaggle of Tibetan Monks amongst other stellar musicians playing improvised music.  The Somma link goes to a page featuring an audio sample of the track 23 Wheels of Dharma.





I stayed up most of the night writing.





February 4th





Night begins to lift as Bill, James and I board a coach at 7am to go to the airport.  By the time we get there sunlight pours through the windows.  An ambulance with the name Rosa Croix passes without emergency sirens.  It's one of the clearest days I've seen here in all the visits. The Italian Alps look large and closer than ever.





































Risk Reward Ratio


Readers sometimes ask me why am I more in cash and less in the market.

My answer is that it always has to do with the "Risk Reward Ratio".

Take the current situation for e.g. When the media and ZH was screaming danger in last December (ZH is always screaming wolf anyway) I was telling readers to get bullish. We were long for the whole month of January and went to cash when SPX moved close to our price target of 1510. And for the last 3 weeks we have turned patient bear and yet not shorted the market. The reason we are not being long equities here can be explained in the following long term (monthly) SPX chart.









Assuming SPX keeps going up as everyone in Wall St and all talking heads in CNBC are saying, the upside in my view is limited to 1550 which is 2% up from here. It may take another 2 weeks and market does not correct, just to kill all the bears.

But on the other hand, should there be a correction (Not the end of the world, mind you) the long term support is a 1300 level, if 1400 does not hold. At 1400, that is 8% correction and at 1300, that is 15% correction.  So at best we have 8% / 2% = $ 4 risk and at worst 15% /2% = $7.5 risk. In other word, to go long here hoping to make $ 1, we will be risking $ 4 to $ 7.5. Is it worth it?

Just to break even on risk reward ratio, we need another 8% upside from here which is 1641 in SPX. I think that is bit far fetched. And although Ben has promised unlimited money, let us see what happens with the Sequestration thingy coming up in March.



Mind you, I am not suggesting that the world as we know it, is about to end. Simply because I do not know how economy works and what will be the unintended consequences. I just know how not to take unnecessary risk or at least I try not to.





 But I get the feeling that I am in that Jeep and the Volcano has already exploded and all the ash is bearing down. So better run or be in cash to take advantage of a better entry later.

Now you know why I am in Cash.

Teflon Market, Patient Bear.


Or its Deja Vu'



Its 2012 all over again. In the morning, the futures were down and markets opened lower but by mid-day BTFD crowd came in and helped push SPX in tiny green. Most likely tomorrow will be tiny red. Historically, Feb OpEx, which is tomorrow is green. So we will see who wins, red or green. But it does not change anything. And while we are on the sideline, some will short the market out of sheer boredom, only to have emotional trauma and lose money. Some will go long thinking this is the beginning of new bull run and shares will never correct because Ben will have their back. They will also lose big time. Its all about timing.

Timing says, do not front run, shut out the noise and the Zen moment will come. 







I know subscribers are getting impatient for lack of action, but we start with the premise that 1st goal is not to lose money. Rest will follow.



So folks, no new nugget of wisdom or fancy charts to share. Just chill till the appropriate signal comes.

Dairy Of A Reluctant Bear.


It has been a while I posted in the blog. But the fact is, there has not been much to write home about.

We were long for the whole month of January and when SPX started flirting with 1510, we exit all long positions and have been in the sideline since then.

The indices have been chopping and churning and grinding higher very slowly. In the process, killing all bears and convincing everyone else to BTFD



Sentiments are at all time high:



And indices are in the overbought territory.



However, overbought can remain overbought for a long time, till no one is left to sell and everyone is a buyer. When we start hearing about SPX 1600, we will know that the gig is up.



So we are not front running. Subscribers know the levels to watch and when the sell signal will trigger. Knowing those critical levels have helped us to avoid the whipsaws. We are watching VIX very closely and that is another of our indicators.



We have also stayed away from commodities including PMs and while we did not short it, we fully anticipated the sell off in gold and silver. Now we are waiting for the sell signal in oil and Nat. Gas. There is no play in grains or soft commodities either.



All in all, we are practising patience and keeping our emotional health in good shape. Not to mention preserving our capital as well.



Hope you all are having fun in this BTFD market and although I have turned into a reluctant bear, I am now a patient bear waiting for the fish to land in my mouth.



Good luck trading everyone.


Told You So.


I have been out from 5.30 AM in the morning and is back at 11.30 PM at night. Have been busy with multiple meetings throughout the day and have not had a chance to see what is happening in the market.

Now that I see how the market played out during the day, I find that SPX was up 15.58 points.

And I can just laugh , shake my head and say that I told you so.

Let me know how are doing in this backing and filling market.

Good luck trading folks.

In The Chop Zone


Indices sold off today by 1% or more.

Understandably bears are jubilant and bulls are giving it a shrug.



However do keep in mind, in Wall St. there is no bull or bear, only Weasels.



If you have read last few posts, you know that my upside target was 1510 in SPX and while we briefly crossed it last Friday, we have been moving in 10-15 points range. The 15 points sell off has not done any damage yet. The market is still on buy signal. That does not mean we have to buy. That simply means we are not going to short, yet.



The story is same with Gold and Silver. Moving in a range.

Same with Crude.



We went for skiing last weekend and after coming back we see that nothing has changed. So we have decided to wait outside the ring and watch the show.



Subscribers know what level to watch for the sell signal and when not to front run. While we do expect February to be a great month we also know when not to jump and this is one of those times. In all likelihood  those who shorted the market today will be disappointed tomorrow and those who go long tomorrow will be disappointed the day after. There is no play in commodity either.



Therefore , dear reader, let me repeat the old and tired formula: Cash is King





Materializing

Here goes with the wildest, most unbelievable claim ever seen on this blog:

Space Junk, the new release by Materialized persuasively demonstrates the ability to transform Watergate ringleader and former U.S. President, Richard ("I Am Not A Crook") Nixon into a good guy.



Actually, what they did was splice a moment of time into their sonic, organic, electronica funk rock landscape sampling Nixon when he gave it up and did indeed sound like an enlightened leader.  It was the occasion of Man first landing on the surface of the  Earth's Moon.  You'll hear it.



Space Junk is a 4 song EP also available on vinyl.  Materialized simultaneously released another 4 song companion EP called Magneto Delicti also available for download or on vinyl.



They are both available here.  Space Junk can be previewed here. Magneto Delicti here










The title track from Space Junk explicates what's implied when you listen to a good piece of music.  Samples from Mission Control of  a NASA rocket launch alerts the listener right away that they will embark upon a trip into Space.



"We have lift-off, we have cleared the tower."



And we're off ... the surface of the Earth driven by a rocket fuel rhythm section outward bound to territories unknown.  We encounter giant stellar beings with mysterious dispositions and unusual topologies communicating to us through the invention of Mr. Moog and the nervous system of Mighty Dave Pellicciaro with some electron reconfiguration ala Brian Eno or Stockhausen for good measure and accurate reception.



The inner space/outer space dichotomy shown in this song recalls the image of two mirrors facing each other with a lit candle (in this case the listener) in between.



Drummer Dale Fanning somehow channels both John Bonham and Ziggy Modeliste in the third song of this ep, No Inbetween, a funky electroharmonic ode with vocals by bassist Carlitos Del Puerto.



The four tracks structure this release like the four cardinal points on an equal armed Celtic Cross, each one offering a unique vision in a different direction. 



In other Materialized news, San Francisco's annual Cosmic Love Ball is set to take place February 9th at the Fillmore.  From its webspace:



"The Cosmic Love Ball is San Francisco's
annual celebration of life, love and music. This year's futuristic love
circus will feature atmospherically melodic Rubblebucket, perennial Love Ball and genre bending house band Materialized. The North Beach Brass Band will be  kicking the party off with a taste of the Big Easy and the ambassador of east coast disco, DJ Wyllyss will be holding down the decks."




I will materialize there to mix Materialized.