Woman: I'm not a witch! I'm not a witch!
Vladimir: ehh… but you are dressed like one.
W: They dressed me up like this!
All: naah no we didn't… no.
W: And this isn't my nose, it's a false one.
(V lifts up carrot)
V: Well?
Peasant: Well we did do the nose
V: The nose?
P1: …And the hat, but she is a witch!
Carrot noses and pointy hats do not a witch make.
Low volumes and false promises do not a rally make either. But how can we tell a real rally from a false one? Clearly the answer is "a duck" but, if you are not a Monty Python fan, then perhaps you would prefer something a little more technical. We had a nice, technical discussion in our early morning Member Chat at PSW (tweeted out as well!) and our morning trade idea to short the Nikkei Futures (/NKD) at 16,000 is already up $125 per contract and looking good with the Dollar testing 81, Oil (/CLG4) Futures once again made a good short at $99 and those are already up $300 per contract at $98.70 and that's "Mission Accomplished" as we made our Egg McMuffin money and now we wait for the early morning pump job to short it again.
As my Members know, my retirement plan is to move to Europe so I can have a nice breakfast, read my paper, make a couple of Futures trades and be done for the day before lunch. It does, however, take a lot of practice to learn to trade the Futures and we had a great discussion about it in yesterday's Member Chat and it was a topic at our Las Vegas Conference in November and it will be again in Atlantic City this April. Meanwhile, get yourself a paper-trading account and practice, Practice, PRACTICE!
Meanwhile, I wasn't going to talk about the news because we are trying to get more bullish (though not until these levels prove out, of course) and we do have tons of bullish trades (see Wednesday's Free Webcast if you are not a subscriber to our Members Only posts) and we'll be happy to execute them in January – AFTER we clear the holiday hurdle.
Tuesday's DDM trade, which I mentioned again in yesterday's post was still just $1.15 at Wednesday's close, is already at net $1.50, up another 30% as the CAT came back and up 50% from Tuesday's entry. That's merely "on track" for a trade that can make up to 400% by April.
So we're certainly not worried about finding things to trade if we're going to gain another 27% on the Dow next year and that means our current, conservative strategy for preserving wealth into the Holiday uncertainty is a good one and, as Dave Fry notes, the bulls SEEM to have things under control at the moment. Not only are we still in CASH!!! but we are still short in our Short-Term Porfolio and we got even shorter yesterday – still waiting for that healthy correction to kick in. And still waiting…. Any time now…
Meanwhile, this frowny face is a great illustration of WHY it's so hard for us to enthusiastic about the economy:
As we know, the "Gigantic 35-Year Frowny Face" pattern is a very serious technical indicator, which Japanese Candlestic Experts call a Fu K'd pattern. It's often an idication of a pending recession – like the one we had in the 70s, before the previous frown turned upside down. The previous frown was known as Nixon's Fault while the current patten is called Bush's Fault – how they come up with these names is a mystery to me. 
The Fed's own Office of Financial Research Analysis does a nice job of summing up the macro risk factors in this chart (thanks ZeroHedge) and they sum up the state of overall economy with this nifty one, that shows us where things have moved since 2012, which can clearly be summed up by a drastic drop in Global Yield and a boom in Euro Stoxx while the Dollar fell off a cliff, but it was a much smaller cliff than the one the Yen jumped off!
Normally, people whose currency is performing like this (note frowny face bounce) would be taking some pretty fancy measures to prop it up. Not so the BOJ, who are celebrating Japan's 12% increase in exports – despite the fact that those exports are measured in Yen, which have dropped 21% against the Dollar and Euro since January alone (for net -9% in constant currency) and off 30% from it's July 2012 highs.
NOT the BOJ, however, they are, in fact, passing laws to enable and ENCOURAGE the Nation's $1.2Tn Pension fund (no one raided their lock box – yet) to play the markets – kind of like what Bush proposed in 2007 – right before the market collapsed. Meanwhile, Japanese Corporations, who hold $2.15Tn (a Bazillion Yen) in CASH!!! are being given tax breaks and no incentive whatsoever to put their money to work.
That's because Japanese Corporations, like their American cousins, are the true rulers of their country. The BOJ today maintained its unprecedented easing while signaling progress in its fight against deflation, targeting an annual expansion of 60 trillion to 70 trillion yen ($670 billion) in the monetary base. That is MORE than 10% of Japan's $5.96Tn GDP but still way shy (in Dollar terms) of our own Fed's $900Bn course (AFTER cutting $120Bn from last year's giveaway.
So, we can't fight the Feds and THAT is the ENTIRETY of our bullish premise. As you can see from the chart on the left, the Fed celebrated their 4th Tillion Dollar level on their balance sheet, less than one year after they celebrated their 3rd. Even JP Morgan himself would be shocked at what this "Creature from Jekyll Island" has accomlished, or he would if his Chief Currency Dealer wasn't the alleged head of the Forex Manipulation Cartel that makes all this possible.
Fu K'd indeed! But only if you are in the bottom 90%, those of us on top can, on the other hand, use all this lovely, lovely FREE MONEY to leverage this kind of market to make some truly stunning returns while our fellow countrymen get relatively poorer by the quarter – Go Capitalism!
Have a great weekend,
– Phil
