Monday, June 8, 2009

IMMRED POST

I view this along with Palmerjoe as a critical issue that will determine the commodity play.....if you have the answer ....it will determine your play......

I am still in slight disagreement with Dan over when P2 of this first wave ends. It still has to be a point of disbelief my guess is around DOW 10,000+ and around the SPX trendline from Oct07-May08. The reason for P3 to commence may take one of two forms, either pure exhaustion then everything (equity, commodities, interest rates) drops like a rock after some distribution OR an event/realization that forces a flight from US equities, US debt and US dollar where US interest rates continue to climb along with key commodities energy, gold, and food also rising in US dollar pricing.The trading strategy is almost completely opposite for commodities depending on if P3 starts by fear of deflation or stagflation. Same goes for banks and cre at the onset, though it may seem counter intuitive. Deflation means short anything of leveraged value, however stagflation may see all hard assets bidded up initially including cre and banks as their hard asset holdings are perceived to increase in relative value against the US dollar.Just a word of caution to observe the why before betting the farm on 3x short ETF across all sectors. During the trough of P3 of this engineered wave 1 ,which should last about 8+ months, you may see strange things like YHOO at $5 and XOM at $150 or $50. If you want to play P3, don't try and guess the top wait until the short period of distribution at the top which could be 2 weeks to a month to assess what will be forcing the flight from most equities.

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