Has the FIFA affair marked the top in stocks?
Market Commentary
The big event of the week was undoubtedly the FIFA arrests.
What the heck has this to do with the price of fish, you ask. Actually, a lot. When corruption on a gigantic scale – which has been generally known about and tolerated until now – gets investigated by the Feds, you know we are in a bear market.
If this concerned the sport of tiddly-winks, I would not be commenting here, but soccer/football is the world’s most popular sport and where in the UK, players ‘earn’ hundreds of thousands of pounds a week. And transfer fees run into the tens of millions of pounds, while TV rights are up in the stratosphere.
The World Cup is a highly lucrative event (especially for the fixers), so no wonder that where there is big money, big corruption is not far behind. In many parts of the world where football is very big – and a ticket for a poor young lad to make good – corruption is a way of life. Police and customs men are generally poorly paid, so backhanders usually smooth the way – and ease that person’s life.
But when millions change hands, that is in a different league altogether.
I have noted before that in a bull market, everything seems rosy and dodgy behaviour is generally tolerated and excused, especially if the offender is a well-know figure.
But when social mood turns down, the skeletons start coming out of the woodwork and past misdemeanors are punished. We have seen the recent high-profile sex abuse scandals of the church, politicians, celebs and gangs of generally Asian men grooming young white girls come to light. That is just the beginning. During the bull market, these crimes were not investigated. But now the mood has changed.
As the Big Bear rouses from his slumbers, society will become even more vengeful against the wrong-doers. Here in the UK, the new Conservative government have pledged to cut government spending, especially on welfare. Naturally, those that have been sucking on the teat of the state are up in arms. It is like taking candy from a baby – seldom accomplished without tears being shed.
So last week’s FIFA episode could well be a sign that with this downturn in mood, the markets will soon follow.
Is the US economy really being stimulated by the Fed?
Oh – I almost forgot, US GDP shrank in Q1 by 0.7% pa. Naturally, the excuses came in thick and fast – it was the snow. No, it was the strong dollar hurting exports. No, it was smaller build-up in inventories. Whatever.
The sad fact remains that after historic efforts by the Fed to ‘stimulate’ the economy with massive money printing and ZIRP, the US economy remains highly unstimulated. You have to wonder what would have happened if they had left well alone in 2008 and let the economy ride out the depression, which would have been short-lived. By now, we would have been in a roaring expansion based not on funny money and humongous debt loads, but on a sound commercial basis (which prevailed in the 1950s – 1960s).
It is looking very much like the Fed with its QE and ZIRP has been a giant exercise in protecting the asset-rich and doing little if anything for the real economy.
The day of reckoning cannot be delayed for ever. Much of the debt mountain will come crashing down eventually.
DOW
Last week I showed my lovely wedge on the hourly in the process of being broken. It looked ominous for the bulls, especially with the market having just made an all-time high on 19 May at 18,365. So, if my wedge line break was going to be significant, a short trade there – just a handful of pips beneath the all-time high – would have meant that I was in with a short trade just about at the top.
I would love to tell that to my grandchildren: “I shorted the Dow just sixty pips off the all-time high”. That would be a comforting thought when the Dow trades under 2,000!
I am now working an excellent tramline pair off the top:
If the market sells off next week, that would put into question whether we are in a third wave down, or whether we are heading for lower tramline from where a large wave 2 bounce will occur in a wave 2 up. The key will be my upper tramline. If that holds, it should be hard down for the next few days.
USD/JPY
This market is moving according to plan:
As I predicted, the thrust up out of the large wedge has been vigorous and bodes well for my target at 130 being reached. Recall, I changed my stance from bearish (while market was in the wedge) to bullish, and have reaped the rewards of being flexible!
There should be some pull-back, especially if the dollar pulls back here. I have advised VIP Club members to lighten up on long positions (taking over 450 pips profit) leaving part open.
VIP TRADERS CLUB NEWS
See last week’s WW for some of the trades we made the previous week.
Here are the major trades made last week:
Short EUR/USD – profit 460 pips to exit entire position
Long USD/JPY – profit 450 pips
We took some new fx trades which are in profit.
If you would like to receive my trades in real time as I make them, drop me an email at ttburford@gmail.com and I will send you details of membership in my VIP Traders Club.
Have a great weekend!
