Catching A Falling Knife

Dollar was the highlight of the week. It pretty much destroyed all the bears out there in the market including me!


Time to go back to some charts. Honestly, we have missed out a good three white soldier play. But bear in mind that a potential three line strike might play out next week. There is definitely more of short covering in this week than buying pressure in my opinion. Another thing to take note is the Euro/Dollar is at about $1.50. So don't get caught in the middle or something, wait for more signal.

Oil

Buying oil now is simply the same as catching a falling knife. Because of the uncertainty in the dollar, I think that even at $115, oil is not a good thing to touch on.

Let's see how oil goes, maybe it will go back to $100 and consolidate there.


A mistake to view last week graph as a potential morning star. If you come the latest two weeks graph, we get a complete three black crow as well. Similar position as dollar but I think we are starting on the 50 yard line. Just enjoy the olympics for now and ignore the market. LOL

Lacklustre Gold

I was a gold bull for quite some time. But recently as I began to touch more on macroeconomics stuffs, my faith for gold is not getting any stronger. I see a period of deflation led depression. In the last Great Depression, we saw people hoarding gold but at that point of time, gold was part of the money supply. You can see gold as money. However, is gold going to be treated as money in the future when the next depression comes (take it as one will come, don't flame me for this)? I know Indians love gold. That's 1 billion of people. Alright, I will do some more research and maybe ask some professor that is familar with this.

Anyway...

I read some articles online saying that if gold doesn't oil about $850, we will see $800 or even lower. I think that is very true. It is shocking to me when I look at the charts as well. There is some consolidation at about $780 mark but it is a relatively weak support in my opinion. I believe if gold doesn't hold above $850, we will see gold heading towards $700. If you refer back to the dollar chart, you can't really see any resistance ahead. Index level of 80 is probably the best we can get from the chart (also, it is like 50% tracement from the peak of 87 to 72).

If gold breaks $850, I think you should cover your gold position.

Mr. X

Alright, finally get to talk to Mr. X about some stuffs regarding the economy. He is actually doing some studies on labour economics. Who cares about what he does anyway. He raises a very important issue regarding economy data blindspot.

1. There are not many layoffs in the economy actually.

2. There is an increase in part time jobs.

3. We have a $100billion tax rebate (print some more money please) from the government.

Let's work backwards. The $100 billion tax rebate (a cheque rather) will stimulate some consumer demand. Hope you have some economics background on multiplier effect ( you spend some money, this money goes into the pockets or others, they spend somemore). This $100 billion will generate an aggregate demand of maybe $10000 billion!!! Ok it is just an exaggerated number, but the idea is that because of this potential demand increase, it makes sense to maintain if not increase production level.

Since it is a one time matter (well they can write more cheque isn't it), it makes sense for firms to hire more part time workers than full time workers. The idea of part time workers is that they are easier to fire compare to full time workers who may have some other clauses or compensation or so. But firms don't hire part time workers only. They convert their full time workers into part time. No concrete facts to back this. It sounds logical to me so I just accept it.

This is why the unemployment level never shoots the moon. The $450k jobless claims that we see this week could be a gross underestimate for the no. of jobless people out there actually. Don't be surprised if you see the REAL unemployment level at 7-8%.

Also, because of the huge debt that consumers have, the tax rebate of $100billion may only have the effect of $30billion. If I'm not wrong, retailers aren't doing well actually even with the tax rebate. This can be seen in the July Retail Sales report.

All this is contributed by Mr. X. Very thoughtful and fruitful piece of information actually.


There is no such thing as a paper loss. A paper loss is a very real loss.

Jim Rogers