Weekly Wrap

ANNOUNCEMENT

In conjunction with my book publishers, we have launched my Tramline Trading Alert service.  This service will highlight promising trade setups such as those I have featured in my Weekly Wraps – but before they happen.  The Alerts will not give specific trade orders, but will focus on the setups that may develop into great trades.

I will send the Alerts as and when I see a good setup forming and I expect to send on average about 6 – 10 per month.

The Alerts will contain references to the relevant chart setups in my book Tramline Trading and will be invaluable if you wish to delve more deeply into my trading methodology.  Most will reference my five top chart patterns that I outline in my book.

You can get full details here.

This means that the format of my Weekly Wraps will change.  I will keep focused on market commentary, but will have few trade setups – those will be reserved for the Alert service, which will become much more valuable since they will highlight potential great trades before they happen, not after.

Market Commentary

I guess it had to happen.  China had been seeing its economic growth sputter for months and decided to cut interest rates yesterday in a knee-jerk move.  In do doing, it has temporarily saved many zombie companies from actually declaring bankruptcy for while longer, despite the certainty of their eventual demise with global demand in decline.

The Debt Mountain continues to rise and its collapse is only a matter of time.  It is just like the old coal slag heaps that used to be seen outside our UK coal mines.  Pile them too high and they collapse under their own weight, sometimes destroying people’s homes and lives. They were dangerous things.

So now most of Asia is feverishly engaged in desperate stimulus measures with Japan having fired its Abe rocket two weeks ago.

We’ve had the Abe Rocket and now the Chinese Cracker – are there any more fireworks from central banks to come?  How about the EZ?  Soon, they will be running out of large central banks to juice asset markets.

That means bad news is now good again – for a while.  Yesterday, stocks roared further into the exoshphere and are now in danger of flying off into space – untethered by the normal constraints imposed by the real economy’s lacklustre performance.  Maybe they will meet up with Rosetta at the comet on Christmas Day to celebrate the almighty Santa Rally.

Despite a whole host of signs that investors are maxing out on risk (see my MW Trader piece yesterday where I cover junk bonds), the Duracell stock markets just keep on going.  At least for now.

Are we seeing  an exponential blow-off in the Dow – a melt-up that many are talking about?  As I gaze at the charts, and as I noted in my Trader email, the Dow has had only four small down days out of twenty-seven off the October low.  That is almost unprecedented.  In a healthy two-way market, you should expect a more even distribution of ups and downs.  It certainly smells fishy to me – and suggests central banks are hard at work in the stock markets, with the Fed having ceased bond buying.

I must admit the Dip Buyers are still kings of the heap.  But interestingly, Treasuries barely budged all week, and have been in a tight range all month.With the Fed now out of the market and all investment funds seemingly going into shares, I would have expected Treasuries to decline – after all, they are yielding so very little – and inflation is falling, despite efforts of central banks to talk it up to their entirely arbitrary magical 2% level  I guess something else is going on which I do not understand yet.  That is why I am glad to have taken profits on my short Treasuries and I am now flat that market.

DOW

Yesterday, it reached the upper line of my giant wedge:

 This is a six-year old pattern and my upper line has several accurate touch points.  There is some fudge factor necessarily involved on this large a scale, but we are just about there.

We could see a further push up over 17,900 in the next week or so  and if so, bullish consensus should push up even further off the scale. That indeed would be a very suitable end to the Great Asset Mania that has been building for many many decades.

Financial assets as well as real estate have been seen as no-brainers in the desire to accumulate wealth.  Building savings from salaries and wages has been seen as a mug’s game – especially now that ZIRP rules. Here in the UK, a house is now seen primarily as an investment.  In Germany, until recently, houses were places to live and prices have not been caught up in the investment mania.

All of my indicators are now in place for a massive reversal.

GOLD

The market continues to edge higher towards my first target at $1220 area and our long positions near $1150 are fine:

 Near term, momentum is overbought and the market may pause around here, but my EW analysis – if correct – points to much higher prices.

The Swiss referendum on 30 November still looms ever larger on the scene and latest polls suggest defeat for the proposal for the central bank to hold more gold.  So that negative result is baked into the market and any ‘surprise’ should give market a lift.

Remember, you can get my Trade Alerts for the moves before they happen with my new service.

Check out my TTAlert service here.

Have a great weekend!