Monday, February 8, 2016

Feb 8 - Still very bearish but short term very oversold

Good chance of at least some kind of bounce tomorrow.  Whether it is faded or holds is questionable.  Based on today's $CPC spike, we will probably have at least a 1 day bounce tomorrow.  Other than that, things long term look ugly.  Strange things happening in the banking world with notables such as Deutsche Bank and Credit Suisse.  Euro bond yields shot way up today.

CPC pointing towards a bounce.  How much, will wait and see what happens on open tomorrow.

Further confirmation of Friday's sell signal

Courtesy of Ibankcoin
http://ibankcoin.com/flyblog/2016/02/08/uh-oh-european-sovereign-bond-yields-diverge-pigs-get-slaughtered/

Flight to safety in Germany bonds
 Flight from safety in Spanish bonds

5 comments:

Doug said...

With a potential financial crisis brewing in Europe and almost certainly in China, it's not looking good for markets. Zero interest rates in Japan and Europe are a massive disaster by deranged central bankers. I have a feeling that equity bounces will be very brief. I'm waiting for one myself. Good luck.

Doug said...

Tomorrow, I'm going to buy some gold coins starting with about 4% allocation.

Greenlander said...

Yeh man we are screwed. US started a dangerous path of meddling in the markets and now the whole world is stuck in this weird potential for stagflation. There is a beneficial effect of recessions and downturns. They weed out businesses and practices that shouldn't exist so the economy can grow on more sound footing. With corporate debt, there are some really strange signals coming out of the banking sector.

Greenlander said...

If we have a big gap up like 1%+, I will probably reload shorts and add if an early squeeze doesn't materialize.

Doug said...

Sounds good. There will be major bounces at some point. They should be playable on the long side if there is a sign of a capitulation "washout."

As far as recessions weeding out weak businesses, the "gov't" including the Fed Reserve, have been intervening in markets and economy trying to "tame" the business cycle for a long time. What your "gov't" wants is basically like the "no burn" policy in the National Parks. For about 60 years, the Park employees were told to suppress any/all fires. Eventually tinder built up on the forest floor. Then, like all govt action & intervention, they lurched from "no burn" to let it burn. About a 1/3rd of Yellowstone burnt in 1988. I happened to be there that year! I met a bunch of friends for a 12 day hike in Yellowstone but, needless to say, it didn't go according to plan.

There's a lesson in that example. The "gov't" has, even tho trying to tame the business cycle, instead has caused 2 financial crises in the past 15 years, with another one starting now. (The housing bubble was obviously caused by about 8 administrations "pushing" housing on increasingly unqualified buyers and incentivizing such with favorable tax policy and low rates.) This next crash probably will be the mother of all crashes. You see, with all this zero interest rates and now negative interest rates are going to create another enormous disaster (look at Japan overnight). Can you imagine being an Insurance company or any enterprise offering a pension?? Like the analogy above, maybe the thing to expect is some abrupt policy reversal, and bonds crash this time (taking stocks down with it). Can you imagine the carnage? Stocks AND bonds crashing with no place to hide. Probably Gold will crash too. Everyone will lose. Winners will be the people who lose the least.

OK, I'm rambling with thought experiments.