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Marc Faber, editor and publisher of the Gloom, Boom & Doom Report, shares his market outlook for 2010 with CNBC.

http://tradingsuccess.com/blog/

Thu 30 Jul 2009
The Bubble that is China

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BarroMetrics Views: The Bubble that is China

Which economic theory has a solution to this crisis?

We have two main schools in play at the moment: Neo-Keynesian and the Friedmanites (monetarists). They both believe we can spend our way out of this recession/depression. The former says we’ll solve the problem by spending our way out of it; the latter says we’ll solve by printing (creating) more money.

I am not going to offer a critique of either school here. A far better job has been done that I ever could by W Bonner and A Wiggin in Financial Reckoning Day Fallout. What I will do is draw your attention to a country where the competing theories meet and hopefully resolve the dispute as to which one has the answer – that country is China.

The advantage that the Chinese have over the Western world for this issue is the fact that if the Government says ‘lend’, the banks will lend. Unlike say the USA where the FED can quantitatively ease as much as it likes but this does not mean that the money is hitting Main Street. Right now the deposits at the St. Louis FED Reserve are still near their record highs. What does this mean? It means the trillions of dollars created by the FED is sitting in banks’ deposits and has yet to hit the US economy.

Compare this with China where the banks have lent a reputed 7.4 Trillion yuan – more than the budgeted 5.6 trillion. Austrian economics says that if you inflate the money supply you will have:

1. (By definition) inflation
2. Mal-investment leading to bubbles
3. The inevitable correction (crash).

It seems to be the Shanghai Index can be labeled a bubble.

On Tuesday I read a report that suggested the Chinese government was concerned about the use to which the loans were being applied; on Wednesday, the Shanghai Index dropped 8.1% and the press suggested that rumour was the cause.

If you compare the rise of the Shanghai Index with the S&P, you’ll see the effects of the lending policies:

* The Shanghai Index has rallied 69% to the S&P’s 47%.
* More importantly, while the S&P has stalled in it’s rally (the momentum peaking in May 2009), the Shanghai Index continued unabated until yesterday.

I am watching, with interest, Chinese developments. The next step in the drama should be a rapid rise in the inflation numbers. I like the sentiment in Financial Reckoning: ‘governments and investors don’t get what they expect from the markets; they get what they deserve’.

2009-07-30-si.jpg

FIGURE 1 Shanghai Index and S&Phttp://tradingsuccess.com/blog/

Cross ref from www.anatrader.com:

http://www.anatrader.com/index.php?content=detail&id=241

Rogue oil trades cost London firm $14.5m

LONDON: PVM Oil Futures Limited said yesterday that Mr Steve Perkins, a senior broker based at the firm’s London office, was responsible for unauthorised trades earlier this week which landed the firm with a loss of nearly US$10 million (S$14.5 million).

The London-based brokerage said Mr Perkins had taken the positions in Brent crude futures early on Tuesday.

The heavy buying during the Asian trading day, when volumes tend to be lower, caused global crude prices to spike to their highest level this year. Traders and analysts initially struggled to explain the price spike.

Brent crude was trading at about US$66 a barrel yesterday, down from the high of US$73.50 on Tuesday.

After discovering the trades, PVM said in a statement on Thursday it had closed them out ‘in an orderly fashion”, resulting in losses approaching US$10 million.
More

http://www.anatrader.com/index.php?content=detail&id=241

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USO & Crude Oil On The Move

I don’t often look at ETFs, but I find USO to be very interesting right now. This ETF, United States Oil, closely tracks the price of crude oil in New York.

This market appears to have completed a formation that could have great profit opportunities in the near term.

In my new video, I explain in detail a strategy that I am using to approach this market. As always, our videos are registration free and come with our compliments.

Please feel free to comment on our blog about your experiences and thoughts on USO and the crude oil market.

http://www.ino.com/info/351/CD3131/&dp=0&l=0&campaignid=3

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

British Pound, Making Moves?

I last looked at the British Pound (GBP) on April 8th, and produced a short video explaining why I thought that this market was ready to move.

When I got back from my two week holiday in New Zealand, I thought it was only right to look at the British Pound again.

In this new short video, I will show you the steps I am taking to capitalize on a fairly substantial move I see ahead for this market.

As always the videos are free to watch and there’s no need to register. I would love to get your feedback about this video and your own predictions about this market on our blog.

http://www.ino.com/info/350/CD3131/&dp=0&l=0&campaignid=3

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

Sharing with you this video from INO:

Today we’re going to take a look at the gold market. While many traders have been frustrated with this market for the past several month, it has in fact performed quite well given the generally negative feeling for most markets.

While the printing press is going at full-tilt in the US and the fact that most people are not involved in the gold market at the present time, it occurs to us that this market could indeed be setting itself up for a nice rally.

http://www.ino.com/info/348/CD3131/&dp=0&l=0&campaignid=3

In our new video, I explain in detail some key levels to watch for in the gold market. If these levels are broken then you definitely want to take a position in the direction of the major trend.

As always, this video is available with our compliments and there is no registration required.

http://www.ino.com/info/348/CD3131/&dp=0&l=0&campaignid=3

All the best,

Adam Hewison

President, INO.com
Co-creator, MarketClub

In Inflection Points Fast Approaching, I suggested that the S&P may retrace before going higher. The market has broken to new highs without the retracement. What does this move suggest to me?

Well, as Figure 1 shows, we are unlikely to see a bullish-conviction close above 894: we’d need to see at least 50% of April’s body close above 894 and see a close no lower than 33% of April’s range from the highs. Given the bar’s location at the moment, I deem it  unlikely to form a bullish-conviction close. The door is still open for a downturn in May. If we had seen a bullish-conviction close above 894, this would have created a buy setup.

What is the current evidence and what would I need to see to suggest that downturn may occur?

1. The 13-week corrective swing (quarterly trend) is severely overextended in time and price.
2. The same can be said for the 18-day impulse swing (monthly trend). This does mean that the market will come down; it does mean it is a high-risk buy without a correction.
3. There is seasonal weakness from May to October. Seasonally (MRCI Report), we have two possible highs – in the first and in the second week of May.
4. The ChannelAnalyzer (Hurst Cycles) suggests two dates May 1 +/- one day and May 21 +/- one day.
5. Intraday cycles show that after 1:00 PM EST today to 1:00 PM EST tomorrow is the time period for a likely turn.
6. Figure 2 shows the Normalized Volume for yesterday; we see below average volume coupled with normal range. In Wyckoff terms, this pattern shows that the institutions are selling to ‘Joe Citizen’. While we may see an upmove today, unless the S&P attracts enough volume to form a normal volume and normal range day (35 to 20 points), it is unlikely the rally will continue.

So the conditions for a sell-off by Monday May 4 exist. If the sell-off fails to materialize, we have in place the conditions for a possible 1966 to 1982 range-bound type market.

How would I play the market today?

• If the pre-market prices hold, we should see an open-gap of at least 12 points. Given the position of the intra-day cycles, I would not expect a fill of at least 50% of the open-gap in the first 60-minutes. I’d then expect to see, at or after 1:00 PM EST, a break of the day’s lows. By end of trading today, I’d expect to see a bearish-conviction close (open at least in top third of range, close no higher than in bottom third of range). Ideally I’d see a close below yesterday’s close.
• If that does not occur, the next scenario is for us to see an open-gap and a small range day. In this case, tomorrow, I’d play my variation of an exhaustion gap. This would entail an intraday entry.
• Finally, if we see a bullish conviction close tonight, I’d wait till end of trading tomorrow to formulate a strategy.

Stay tuned.

FIGURE 1 12-month S&P

Figure 2 S&P Normalized Volume

Adam made a follow-up to the S&P video
that’s a must watch:

http://www.ino.com/info/327/CD3131/&dp=0&l=0&campaignid=
Enjoy the article and form your own opinion about

government control of our economy.
http://www.ino.com/insider/?affid=CD3131