Yves on Drag Racing to the Top

Yves will be on Bloomberg radio Thursday 30th at 4:00 discussing the next coming deflation cycle.  Enjoy his latest guestblog:

 

There is no doubt that investors are feeling quite exhilarated from the recent wave up. The 1966 cartoon titled “Out and Out Rout” featuring none other than Wile E. Coyote and the Roadrunner comes to mind when comparing the recent drag racing to the top. Investors (gamblers) are chasing the absolute dream of higher returns in the same way that the coyote is addicted to catching the bird. 

Fast market action stimulates quick decisions. Are they well planned or is risk thrown at the wind?

Take a step back and study the recent evolution of markets.  It becomes clear that a combined bond +currency +commodity +stock index has peaked since early June.  The fundamental weakness is appearing under the surface for those who only watch the major stock indices.  Stocks will always be the last segment to follow.  Bonds and currency markets  are a lot more sensitive to change.  We see contraction in broad monetary aggregates after a few months of bouncing around.

Banks have cut back on their loan book in the second quarter.  Bank credit is contracting even more for the third quarter as shown in weekly data. Transportation indices such as the American Trucking Association, Baltic dry etc are also pointing south again.  Consumer surveys show the general anxiety of employment losses and tight credit.

In his pursuit of the Roadrunner, the obsessed coyote is at the wheel of a dragster.  After a  few passes on the desert roads, they venture up a mountain.  Drag racing to the top, the smart bird stops and let the roaring Wile E continue on a rocket launch off the top of the mountain and into free space.

Laws of gravity still applies, don’t be a Wile E. Coyote. ...

Yves Lamoureux, Investment Advisor, Blackmont Capital

The opinions contained in this report are those of the author and are not necessarily those of Blackmont Capital Inc. Every effort has been made to ensure that the contents of this document have been compiled or derived from sources believed to be reliable and contains information and opinions which are accurate and complete. However, neither the author nor BCI makes any representation or warranty, expressed or implied, in respect thereof, or takes any responsibility for any errors or omissions which may be contained herein or accepts any liability whatsoever for any loss arising from any use of or reliance on this report or its contents. BCI is an independently owned subsidiary of CI Financial. CI Financial is a Canadian owned diversified wealth management firm, publicly traded on the TSX under the symbol CIX. Blackmont Capital Inc. is a member of CIPF and IIROC.

 

 

 

Comments

[Mike McQuaid]

Bogus, Yves. Read the story, forget the story, read the chart , trade the chart. SPX is relentlessly pushing higher. The March to June rally only pulled back 25% and quickly reversed into a steep slope rally. Three hanging men in a row on the daily chart, the market is not showing signs of going down. The index gapped up on July 15 and just blew past the notion of answering the gap. The index is pausing at 127% of the June to July high/low. Forget the SPX, check the technicals on the NDX, bullish. Money is cheap, natural gas is give-away priced, oil is affordable. Corporate managers are trimming costs and showing earnings. The stock indexes should go higher, much higher.

[Mamma Boom Boom]

Most of my stuff is now pointing down.

[Dog Whisperer]

money is cheap, natural gas, managers, blah blah blah

fundamentals are worthless

read the chart, trade the chart

and track sentiment with cellular automata while you're at it

we will be drooping in the summer and dropping hard in the fall, unfortunately this time I'm not sure I want to try to trade it. I think counterparty risk is going to really screw over a lot of people.

Treasury Direct... Own physical gold... own shares in mining companies... food processors...

[Taz]

Mike

I disagree. The NDX overbalnced itself on the recent decline suggesting that the current rally is terminal in nature rather than the initiation of a new upleg. My volume stats support that thesis.

[DG]

I think counterparty risk is going to really screw over a lot of people.

I have wondered about this too. The options exchanges require almost up-to-the-minute collateralization of all liabilities, according to what I've read and I'm pretty sure the other exchanges do too. You're right, though, that it would suck to hit the jackpot and then have to wait years for lawyers to sort it out in bankruptcy court because your counterparty went bust.

I think it's important to be familiar with the counterparty risks involved in whatever instrument you are trading.

[Yves]

Taz, Lowry research shows the buying power going under the March low already.
Never since the 1930's has the buying power gone under the ultimate bottom in the market.It simply suggest that March is not the final low.Their research supports your volume work.
Good job .

Yves

[Hank Wernicki]

The Wednesday 7/22 3:00 pm ( 30m ) Child Fractal for the DOW has completed a Parent Iteration at the close.

It was confirmed by a double bottom , this would be the stop to go Long near 9020.

The same fractal appears within the SPX but there was a small throw over and then it rallied.

On Thursday 7/23 the markets exploded to the upside.

I believe tomorrow is Thursday.

Hank

[Mike McQuaid]

Your volume stats are doubtful, Taz. Lay them out.

[Ned's Alter Ego]

>>>Most of my stuff is now pointing down.

Ned: You should try some Viagra then...oh man I couldn't resist...

[Taz]

Thx Yves

That is definetly an ominious devlopment that bears watching.

Taz

[Mike McQuaid]

A prudent strategy for current positions that respond to the major stock indexes is to hold open positions with a reasonable trailing stop loss order and just let the market take you out. Everything else is just so much debate.

[da bear]

gold hit $960 twice and fell back. so i think we could get a cyclical correction into the August through November time frame. after that it is GAME OVER for the paper ponzi casino in the sky...

da bear

[tally ho]

Not dogging anyone here, but I am always reminded of something. I am a scientist and sometimes in science the scientist who believes in an outcome will do everything to explain adverse outcomes and how other data support something that is not there. It is a belief that they can eventually get the outcome you want, not what is there. I not saying Yves is wrong, but we all semi-want the bear market to come back soon. We'll see, but this market is moving strong to the upside and it seems like it will take some pretty poor economic news to end this wave up. Personally I can't imagine what that would be since everyone is cheer leading for companies with poor top line growth but good cost cutting measures. Q3 will be interesting...

[vipul garg]

interesting tally ho.
till the last move up to 950 , loads of traders, retail were long.a lot of investors, who had bought at lower levels,and had profit, sold at lower levels and at every rise.
almost no one i know is materially long now.(even anon says he is short!)
at every step, i am looking at patterns that will signal the end/a top rather than participate in this rally.
no bigger cardinal sin than fighting a trend.

[Mike McQuaid]

XLF gapped up and has gotten past June resistance and within pennys of May resistance. XLF has been a bit of a laggard vs other indexes so the close and the next few days should be telling.

[Hank Wernicki]

11:27 am

This may be the last surge for the markets in general.

7/23 1:30 pm SPX generator Top 10m <<< Child Fractal ( Surrogate Fractal )

The last 3 weeks yearly / daily chart for the SPX << parent fractal / copy fractal

I would be taking profits here ....

[Mamma Boom Boom]

Hank, it certainly is running on fumes.

[da bear]

ok. the S&P declined to 666. The high for the day was 996. a 50% move of the low to match the DOW's 50% run into the spring of 1930 would put the S&P 500 at 999.

somebody pointed out that the rally in terms of days is almost exactly the same as the 1930 corrective rally.

looks like stocks are weakening into the close.

WATCH OUT FOLKS.

da bear

[MS]

Mike McQuaid,

What's your explanation for massive selling at the close?

[Dog Whisperer]

MS--

There was just as much selling as buying at the close.

"Buying and selling go together like a horse and carriage... Dad was told by mother... You can't have one without the other!"

Best,

[Francis Schutte]

1. Deflation ALWAYS comes after HYPERINFLATION and both are monetary happenings.
2. We have a paradigm shift. Markets will behave differently then in the past.
3. Rising interest rates and rising stock markets sometimes happen at the same time. They did so in Zimbabwe during the last couple of years and in Germany during the Weimar hyperinflation.
4. Most stock markets show bullish reversal patterns (a lot of reversed Head and Shouders, hanging man in a row and bullish cross-overs of the Moving averages).
5. Authorities cannot and will not allow another down leg. It would not only ruin the financial sector but also be a political suicide.
6. Authorities can by hitting ENTER create 'all the money' they need to ensure Stock markets don't come down.
7. Stock markets always climb a wall of worry.
8. Stock markets fall only when expressed in Real Money or Gold.
...more on www.goldonomic.com

[MS]

Dog Whisperer,

Second-quarter GDP figures tomorrow.

You should have better explanation than just normal buying and selling...

[Gates]

>5. Authorities cannot and will not allow another down leg. It would not only ruin the financial sector but also be a political suicide.

When did any authorities successfully control stock markets for 3-4 years (before the next election)?

[da bear]

P.S. Go to the bank and take some money out in pennies, nickels, dimes, and quarters (i.e., Fiat Metals).
inflation play. deflation play. any questions?

da bear

[TD]

Happy one year anniversary.

http://yelnick.typepad.com/yelnick/2008/07/yves-says-are-y.html

[tony123]

Bears raped - go http://thinkingtrades.com

[legal]

>>Bears raped - go http://thinkingtrades.com

Is it legal under his model portfolio?

[psycho]

da bear,
"P.S. Go to the bank and take some money out in pennies, nickels, dimes, and quarters (i.e., Fiat Metals).
inflation play. deflation play. any questions?"

I have a question, why would you do that?

[Mike McQuaid]

MS, profit-taking.

[MS]

Mike McQuaid,
You did not say anything.
Sell Off = profit taking

What will be signal that trend is ending to you?

[Mike McQuaid]

NDX showed a star today, a hint of a top, a swing trade top.
XLF action should be telling given it's relative laggard status vs other indexes since early May. Todays gap may become a swing trade exhaustion gap, yet it may test May resistance and show a topping candle in the same stroke in the next few days.

[Mike McQuaid]

MS the answers you ask for are already baked into my comments. I don't offer comprehensive comments on a free blog, just a few points here & there. Thanks for asking.

[Mike McQuaid]

$TRAN is going to play prominently in forecasting market action in, say, the next 6 months. January resistance is overlaying the variation on Gartley butterfly fib extension that stretches across the June high to July low. Then further back to Nov '08 and further up the fib scale, another hit. The natural rhythm of action is in play and discernable.

[Mike McQuaid]

Bears, MCD is showing a bearish formation on the weekly candle chart.

[da bear]

legal,

you get fiat metals for the same reason that you invest in precious metals -- because you think that paper money will lose value over time. The best thing about fiat metals is that it is always worth face value. the upside is unlimited, based on the inherent value of the underlying metal. it is a good inflation and deflation play. besides you make your bank teller sweat. lol

if anyone can come up with a good reason as to why one SHOULD NOT have fiat metals please let me know.

da bear

[legal]

da bear

It was "psycho", not "legal" who asked the question.

But it is like Jimmy Rogers joking people to buy sugars from supermarket. You are not going make big money by doing so.

[da bear]

legal,

but you won't lose money in fiat metals.

da bear

[Chris]

Yves has been a contrary indicator for the last year.

[da bear]

Chris,

EWI is short-term bullish per their August Financial Forecast. could be a contrary indicator. lol

da bear