Sunday, January 26, 2014

2014 China-Year of the Swan

It is so gratifying when the market actually goes off of auto pilot, as stock signals begin to work again.  The Central bankers from around the world have once again taken the markets to the wall, and in China's case the Great Wall, and are forced to back off.

 Japan cried uncle as their Yen selling only is producing the worst kind of inflation, higher food and energy prices.  I mean come on, Central Banking 101 tells you you cannot devalue if you must import your energy and food.  I see a long ride higher in the Yen, and ergo gold.  As that appears to have been the funding mechanism for gold selling.

China is a train wreck, and with 22 Trillion in credit on a 7 Trillion economy, most of which is either misallocated in real estate or other Potemkin projects or stolen. Nothing good is coming from the middle Kingdom.  In fact Astrophysicists will be able to observe a black hole up close this year as Chinese citizens and local governments will default, en mass.

For next week, gold, silver and the miners all hit resistance and I see some pullback as the gold contract rolls.  I see SPY / ES testing support on the 200 or the December low, and whether we bounce or not depends on how the Fed votes on Wednesday.  My guess is stay the course, and give Yellen free rein to modify policy at her first meeting.  We are getting pretty oversold on the daily and now weekly, and I see December low holding, then we form a right shoulder into March, then adios down to the 200 week.

I am not planning any changes to the portfolio this week, but will reduce long exposure on any strength and reduce short metal/miner exposure on weakness.  Good trading all.

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