Sunday, March 16, 2014

Here Comes the Vomit Comet

What a big week ahead for us.

  • The Russian news is old unless Russia tries to up the ante again.  My view is they consolidate Crimea, then in a few weeks agitate for the Odessa region, then Eastern Ukraine.  
  • China is starting to lose control of their credit markets, and soon we will see some wholesale panic, and truly see what a house of cards China really is.
  • Yellen decision, and will in all likelihood continue to taper, and for many reasons; 
    • One is the Treasury does not need the bonds, 
    • Yellen must establish her chops, 
    • It is putting increasing pressure on Russia and China.  Emerging markets are feeling the vice grips from this liquidity drain. 
  • Finally, what's up with that jet?  If terrorists can break confidence in air travel, things can get bad very fast.
All we are missing is a plague, as we already have the weather.

Having said all that, I expect Monday, Tuesday, and Wednesday to be positive in the aggregate, as no one wants to be too short going into the Fed announcement.  After this week however the selloff continues into the June meeting.  That is when they will need to buy bonds again.  I say this as my trade signals on the broad market are pushing against their ready to buy areas, and my gold signal is reaching time to hop off area.  My signals are swing, not macro, so I only look a week out in most cases.  The Fed controls the macro.

Last week, my signals were spot on, and I closed out a nicely profitable DDD short, and VXX long position. Still sitting long gold, and just started trimming size, and still on the lower energy theme.  Going into the week more neutral with XIV, and reduced SPXU and DGP positions.

Have a great trading week.  Click on to enlarge the below charts.

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