Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Wednesday, the 28th of September.
What does the word austerity mean to you?
"Austerity: noun, the trait of great self denial, especially refraining from worldly pleasures, strict economy."
It would seem that the meaning of the word "austerity" has been lost in translation in Europe. How can you expand and grow an economy when the very meaning of austerity is the opposite of expansion? There is no way Greece or any country can grow their economy in an austerity program. They won't be able to pay back the massive amount of money they owe everyone.
What we are seeing now is pure political theater. Everyone talks a good game, but unfortunately there are no easy answers or solutions to a problem that took years to grow into a global problem.
We are just two days short of the end of Q3 and the end of the month. How are these markets going to close for the quarter and for the week? Depending on which markets you are looking at, most markets are lower for the month, with the exception of the dollar index. The dollar index could possibly close at a seven-month high on the monthly charts.
One thing is for certain, Europe is not the United States of America. In Europe there are too many areas of national pride for each individual country. I always believed this national trait would act as the Achilles' heel in a euro zone economy. My view has not changed.
Can the banks be saved? We will let the markets answer that question for us.
Now let's go to the 6 major markets we track and update every trading day and see how we can create and maintain your wealth in 2011.
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S&P 500 INDEX
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 85
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It would appear this market has run its course on the upside. The highs that we witnessed yesterday around the 1195 area should hold any further upside rallies. We would view a close today below 1163 as a very negative sign. While this index is higher for the week so far, it is lower for the month and for the quarter. A close around current levels will be the lowest quarterly close in over four quarters. Overall this market is trapped in a trading range bound by 1120 on the downside and 1220 on the upside. We are looking for this market to break down and be on the defensive for the next several weeks. Intermediate and Long-term traders should continue to be short this index.
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Suggested S&P 500 Trading Instruments:
Non Leveraged ETF's: (Long SPY) (Short SH)
2 x Leveraged ETF's: (Long SSO)(Short SDS)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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SILVER (SPOT)
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trend = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 100
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The silver market is in a bear trend, based on our Trade Triangle technology. That is not to say we won't see rallies, but rather these rallies will probably go nowhere. I think the public purchased silver thinking that it was cheap in comparison to gold. As noted before, silver has this Jekyll and Hyde personality, sometimes it's considered a precious metal and other times it's considered an industrial metal. Right now with the economy still teetering, it is reflecting more of an industrial metal. This is why we like to trade markets based on technical indicators like our Trade Triangle technology, as it removes any biases we would have as a trader. Traders who are following our Trade Triangle Technology should be short this market with appropriate stops.
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Suggested SILVER Trading Instruments:
Non Leveraged ETF's: (Long SLV) (Short the ETF SLV)
Leveraged ETF's: (Long AGQ) (Short ZSL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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GOLD (SPOT)
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 70
For the better part of this week, gold has been trying to stabilize the big loss that it suffered in the month of September. What can keep hope alive for the Bulls in gold is the fact that our monthly Trade Triangle is in a positive position. We would prefer to let this market settle down as we do have a mixed picture at the moment. Our Chart Analysis Score for gold is -60 indicating a near-term trading range. This range is pretty broad-based with support at $1550 on the downside and resistance at $1750 on the upside. I think most traders would be better off watching from the sidelines as the volatility continues to contract. Only long-term traders should maintain long positions with the appropriate money management stops in place.
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Suggested GOLD Trading Instruments:
Non Leveraged ETF's: (Long GLD) (Short the ETF GLD)
Leveraged ETF's:(Long UGL) (Short GLL)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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CRUDE OIL (NOVEMBER)
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Positive
Combined Strength of Trend Score = - 85
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We have been saying that the crude oil market is tied with the equity markets. As the equity markets go, so does crude oil. The November contract appears to be having some problems with an area of resistance at the $84.50 level. With both our long-term monthly and intermediate term Trade Triangles negative, we expect this market to have another push down to test the $80 level and possibly the $78 a barrel level. While this market is presently higher for the week, it is lower for the month and the quarter. Intermediate and Long-term traders should continue to be short the crude oil market.
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Suggested Trading Instruments:
Non Leveraged ETF's: (Long USO) (Short the ETF USO)
Leveraged ETF's: (Long UCO) (Short DTO)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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DOLLAR INDEX
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Monthly Trade Triangles for Long-Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = + 85
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The dollar index happens to be lower for the week as of this writing, however it is higher for the month and also the quarter. In fact, a close around current levels would represent the best close in three quarters for this index. We continue to be long this market based on both weekly and monthly Trade Triangles. However, we would like to see this market begin to gain some upside traction soon, otherwise it is in danger of rolling over and negating the powerful energy field that's below this market. Let's just be patient, and see how this market plays out on Thursday and Friday. This index is coming from a large energy field that is capable of carrying it much higher, possibly up to the 80.00 - 81-00 area. Intermediate and Long-Term traders should maintain long positions with the appropriate money management stops in place.
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Suggested DOLLAR INDEX Trading Instruments:
Non Leveraged ETF's: (Long UUP) (Short UDN)
Leveraged ETF's: (Long) (Short)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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REUTERS/JEFFERIES CRB COMMODITY INDEX
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Monthly Trade Triangles for Long-Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short-Term Trends = Negative
Combined Strength of Trend Score = - 100
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With all three of our Trade Triangles negative, we would not be surprised to see this index pushed down once again and testing the 300 level. It is also possible for this Index to reach our ultimate target zone of 294.47, which represents a 61.8% Fibonacci retracement. The measurement came from the highs that were seen around April 29th and the lows that came in around August 25th of 2010. We are going to rely on our Trade Triangles, as the trend is clearly down in this market. This index is closing down for the month and the quarter. Remember the trend is your friend, and we expect the trend to continue until our Trade Triangles inform us that the trend has changed. Short, Intermediate and Long-Term traders should maintain short positions with the appropriate money management stops in place.
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Suggested REUTERS/JEFFERIES CRB COMMODITY INDEX Trading Instruments:
Non Leveraged ETF's: (Long CRBQ) (Short the ETF CRBQ)
Leveraged ETF's: (Long UCO) (Short CMD)
Futures: Contracts are available to trade this market. Contact your broker
Options: Options Contracts are available to trade this market.Contact your broker
WARNING: Liquidity is some ETFs is very thin. Contact your broker for more information.
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HERE'S THE FASTEST, EASIEST WAY TO IMPROVE YOUR TRADING
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Give us a call today at 877–219–1482 for a free consultation and see if personal coaching is right for you.
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This is Adam Hewison for MarketClub and I'll see you tomorrow, right here with my mid-day update. Have a great trading day.
All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub
But, but, but....Adam, austerity to me means the government is reining in spending so that they can get it in line with revenue. When the government (US) is borrowing 40% of what it spends, that's a recipe for disaster (as it would be for any individual or business). Dems want to increase taxes to pump up revenue to meet spending. Obviously, that's the wrong thing to do. Taxes are regressive. The revenue part of the equation is getting people back to work and get businesses selling more goods and services. That means buying demand must increase. If taxes are raised, it will tamp down demand even more. The US needs to find ways to get money back in the hands of consumers. In Greece, lax public policy (e.g. lax tax revenue collection, sweetheart government pensions at age 50) has caught up with them. Good economies that go through modest recessions cover a lot of the crap. This recession has exposed it. If they don't get religion and soon (e.g. austerity), then it will be a domino effect. They (Germany, et al) are trying to firebreak it now so that only Greece (and Ireland and Portugal) won't take down everybody. I think that's going to be the only thing they can do. But, the US had better get its head on straight and stop wasteful government spending. All I keep reading about is how much money the government keeps wasting. There are absolutely no controls. What do they care? It's not THEIR money (well, some of it is, but once it hits government coffers, it's nameless and faceless). There is absolutely no accountability. I just read where the benefits of one government pensioner who died in 1971 were paid for another 37 years after his death and was only discovered after his son died in 2008. Total cost $ 515,000. That's just ONE case of the government screwing up and wasting our money. There are thousands more that stretch into the billions.
Hi Adam,
I count myself lucky to have found this site (don't quite remember how though). This is by far the best gathering of very informed traders i have come across in recent times as both the analysis and the comments suggest. Problem is i started studying and trading the forex market about a year ago. And can really do with all i can lay hands on. Where is the the column for forex currency pair analysis (my current interest now; one thing at a time)can't seem to find anywhere here, i sincerely hope you also have as in-depth analysis for the forex market.
Kindly point me in the right direction, can't wait to dig in
At the moment Gold is not regarded as a necessary vault of wealth as inflation is not yet heavy. In certain aggravating areas like food prices there is inflation. Nonetheless the future of printed money and debt payable is not good. Both parties have spent the country into a hole. OTOH, there is not enough domestic business left to produce tax revenue as (a) they moved to Mexico or China and (b) they are just plain gone. The latter was caused in part by government social and economic advocacy in concert with envious Marxist union pressure for endlessly expanded wages and benefits. Marxist twits who took their 19th century labor theory too far in practice were whining in recent years about raising the minimum wage or getting a "working wage" or "fair wage". That was Chicago where the Fidelista front trotted out behind Mayor Daley to present idiotic demands for money and where the local Negro overseers demanded reparations from all companies which were old enough to have dealt with slave holders as their insurers.
Imagine this behavior and worse on a political and moral level as applied to all things relating to money, investment, freedom, and property ownership. We are a nation degenerating into slavery where there is a small difference between political whores and some of the people managing money in the markets. Vaultmaster Madoff is small change compared to any Democrat House or Senate spending policy. As odd readings in various columns indicate we are heading for a chasm. The issue is when. What will happen to existing companies' values and dividends? And in a "Get out of Town Fast" Scenario where does gold and silver fit in? And of what percentage of surviving wealth?
SILVER: I am in ZSL (double short silver) at $18.08. I did not close out at $17.20 today, cause I have faith in your information. However, watching silver go up each night in the 24-hour spot market does cause me some stress. 🙂
save it in the bank
You can see that after 25 years of hopeless inflation peddling after Volcker, the FED is totally bankrupt. It is leveraged 60-1 against its own capital which is why it is by now reduced to shuffling its portfolio around between long and short. Given its hopeless situation I believe it will be seized and nationalized in the next quarters.
Saved from what? Decreasing incentive to borrow in the face of falling prices?
Seems like a totally hopeless proposition. We should leave markets alone to work out their problems.
You ask, "Can the banks be saved?" Maybe a better question to ask is "Should the banks be saved?"
The stock market - the most important forward looking economic indicator - has crashed twice by 50% in the last decade and seems headed straight into yet another fiasco along the same lines.
At this rate crashes of this magnitude could become an annual event in the near future. But of course, if left in peace and given time to find equilibrium, the market will sort out its dysfunctions.
It´s a hopeless task to peddle shortages and inflation in a rising tsunami of technological advances and productivity increases. It has been totally hopeless for the last 25 years at least but still followers of archaic economy theory have done their best to keep the old myths alive, thereby ensuring maximum pain as the inevitable correction hits.
I think the 4th quarter will be very tough for holders of assets other than cash. Main St. always knows best in the end. They are on to the inflationary scam. They are busy paying off debt and hoarding cash in anticipation of falling prices.
Best of luck, g.
Here´s an interesting economic indicator:
"...down in Florida hundreds of people have been selling off their burial plots in an attempt to raise cash."
http://theeconomiccollapseblog.com/archives/17-facts-that-prove-that-the-average-american-family-is-getting-absolutely-pulverized-by-this-economy#ixzz1ZH7uEqUx
Hi Adam, as ussual great updates. Thank you. To trade the CRB Index I was told the GCC ETF tracks the CRB Index pretty closely. Is there an inverse ETF as well that tracks the inverse of the CRB Index. I normally trade in the IRA account and do not have the ability to trade shorts. Please let me know. Thanks.