Tuesday, April 26, 2011

4/26 Daily Commentary

Bought short ETFs into today's rally.  Currently 6% SDS, 4% TWM, 1% SOPIX, 1% UCPIX, 1% ZSL and I'm short 1% silver futures.
The market was bid up expecting something from FOMC.  This appears as a setup with smart guys early, dumb guys late.  Ben's press conference was another bid-up for distribution.  The FOMC is in a box.  Production raw materials are skyrocketing and the anti-Fed gold at 1500.  Yet, they have kept expanding the monetary base like good students plying a teacher's formula in hopes of getting an A.  The Fed has had one governor resign in response to Ben's play book.  Everything from grease to hides to metals has been rising to 100% over 2 years and 21% quarterly rates.  JOC Industrials quarterly rate of change:
The markets predict earnings 6 months out so industrial commodities hitting margins starting in the 3rd quarter will be baked into the cake.  But back on topic, what can the Fed do?  Ben won't end QE2 early so that's reason to rally?  The statement will contain a more tempered outlook for monetary policy in order to soothe irate trading partners doubly penalized by exported inflation and progressive trade disadvantage.  We export food and services and, while our crazy cost structure does not allow manufacturing to exist for export except for very high-margin products, our stature is steadily eroding into that of a society of cheats.
SP and ND futures tested their Feb highs and fell back.  Does this mean it's over?  With I1 peaking here it could very well be.  Stock futures fell after the close.  ND futures > 2409 and SP futures > 1247.50 would cause me to trim back.
I know shorting silver and shorting stocks today seemed crazy given the "news", but the news exists to part people with their money.  I follow I1 and PM1.  I1 30-day has a 3-day flat top starting today with tomorrow's value just a tiny bit higher.  Raw I1 peaked 4/19 and, with a 4-day trading session lead, calls today as peak day.  More importantly, I1 fell below +7 today and will continue falling over the next week through 5/5.  +7 is a very important level and rallies stay in motion until it is breached to the downside.  This is a big reason for shorting to the highs today.  I challenge every reader to review the I1 charts at this link to validate that declines only start when I1 declines below +7.  The rule set in this link includes the following:
2) Shorting signal rules:

a) As long as next I1 trough < 3.25 sell the peak, exit low prior to rally above +3. If the peak is >+7 then wait and sell the peak prior to a decline below +7 as well as the crossover of +7.
So I shorted the past I1 peak because it was the peak prior to a decline below +7.  Today I shorted the crossover.
Here is raw I1:
20110411 71.74323

20110412 72.75928

20110413 73.53452

20110414 74.50368

20110415 75.42561

20110418 75.75021

20110419 75.82787

20110420 74.98482

20110421 73.93522

20110422 72.83012

20110425 70.41042

20110426 69.04103

20110427 67.59607

20110428 66.00279

20110429 64.49185

20110502 63.22179

20110503 62.82848

20110504 62.18758

20110505 62.08893

20110506 62.9663

20110509 63.92375

20110510 64.97942

20110511 65.74902

20110512 67.37486

20110513 68.54961

20110516 68.66193

20110517 68.03191

20110518 66.38432

20110519 64.59079

20110520 61.87192

20110523 59.01003

20110524 56.79882

20110525 54.87997

20110526 53.32354

20110527 51.72803

20110530 51.71783

20110531 51.27849

20110601 51.09029

20110602 50.50946

20110603 50.20442

1 comment:

  1. Thanks for the update Steve and great line by the way "I know shorting silver and shorting stocks today seemed crazy given the "news", but the news exists to part people with their money" as a novice investor, I've had to learn this the hard way and it definitely rings true to me. Let's see what tomorrows press conference brings, they should have made it a pay-per-view event and used the money to buy more bonds.