Should have added, in that same moment I realized the SNB were on a lost cause, many years ago a Central Bank tried to fight the market, history says…
The market won.
One little last thing on the thoughts about interest rates, this is an old post, almost 2 years old, sorry about the adverts, but it is relevant today.
Hi Guys,
wow I never thought that a simple quesiton might start such a great discussion and involve so many of you in the end. I see the experienced forces started to line up in discussing the issue.
IMO I tend to go to Philips direction here. I do believe we can get ready for a crash. Philip said a possibility and made nice analysis. So I do not know how it would work in a crash but looks logical. Maybe Philip can check it on past data right before the crashes.
And I do believe if Livermore got the 1907 and 1929 crashes right then he could predict them. And if he could predict them I do not see a single reason why we would not be able to do the same. It is not easy that is why I asked the question.
And here I see a contradiction in the post of my admired Peter. I would lose my post if I clicked to check your earlier post but I think you wrote you do not believe we can get ready for it. Some posts later you said yourself how you got ready for CHF action. The best and most recent crash. I cannot even imagine how I forgot that one… I wish you said your worries real time to me. So, Philip can maybe check some technicals on that, but the problem CHF is not stocks. Maybe we could do it on some Swiss stocks instead of currencies. Last but not least you also said that commercials positioned themselves before the SNB action. Hmmmm this makes me think that they also smelled it. I cannot believe it is only and purely inside information. They had to see something I did not. So I have to get better in it and also see it. I rather want to be on the right side.
But Peter, what I am interested is the stock sectors. Maybe some change there or the small caps do have the power to give clues.
And Peter, please don´t post about Soros. He is I guess the most known Hungarian but not a loved one in Hungary. Maybe he could not break the Bank of England but he definitely had some success with HUF. Update: After reading the report I actually see that Soros won the battle and made some nice gains on the transaction in my interpreting their action does count of beating the market.
Great posts, I will look what D-pip recommended,
FE
Of course it works! why would I share it if it didn’t 
Let’s cut to the chase; In 2007, the treasury yield curve was declining. You had higher short-term interest rate than the long term interest rate. This meant Fed didn’t want us to borrow now, but they knew they will want us to do so in the future…trouble was ahead.
On the chart, price found support at the 33.3 level in 2003. It crossed through the 2003 pivot point. But it didn’t cross through the 2004 pivot point. At the time the treasury curve we still pointing upward so we were expecting a correction. Price goes through the 2005 pivot point but it failed to touch the 2006 point. In 2006 the treasury curve was flat, So I marked the two untouched pivot points with a horizontal line.
In the first month of 2007, price found resistance at the 80 level. The treasury curve was also declining for the first time, a crash was definitely coming. The target would be all the previous untouched pivots. Now all we had to find is a divergence, and we had one where I marked with the pink line. The crash was the next day really. It worked out nicely on this one and we crashed through all the levels.
Notice how the 2008 pivot (1468) was untouched as well. Now we did not pick put the bottom (although may be the daily would have.) We came back and touched it five years later in 2013
FE, I absolutely believe that it’s possible to get a feel for a reversal ahead, but the most important tool is context. Livermore liked to use divergence as a contextual tool, however he admits he got his timing wrong in 1929 and lost over a qtr of a million dollars on shorting “motors” before finding the correct “reversal pivotal point” for the “rest of the leaders as they rolled over and tumbled headlong”.
Divergence in the stock market is contextual, e.g. at the weekend I noticed that the Dax had refused to follow the S&P down on Friday - and no surprise then today on the S&P.
Philip’s post on the concept of inverted yield curve is important. Many analysts view such a scenario as a prelude to a stock market reversal.
Officially, if the 2 year rate is greater than the 10 year then you have an inverted yield curve. This was the scenario before the recessions of 1970, 1974,1980,1982, and 1990. (thks to John Murphy for that info).
"That situation usually arises after a round of FED tightening (resulting from the rising price of oil and other commodities) and has been an early warning of a stock market top and economic weakness.
The danger point for the economy (and the stock market) occurs when the Fed pushes short term rates over long term rates. That danger point was reached at the start of 2000".
- John Murphy.
So check out WTI and the CRB …and see the dilemma.
Hi d-pip,
very nice video, enjoyed it a lot! Thanks for sharing.
Hi Peter and Philip,
maybe we can look a bit more often into the yield curve, I am interested to learn about it. What does it tell you guys now?
Good night,
FE
It is still pointing upwards. I shared a link to it at an earlier post.
Peterma on the quote you shared…Murphy said that rising oil prices lead to Fed tightening. Isn’t that the opposite of what we have now?
Hey Team.
Monday’s results.
EUR: +584///+4.98
GBP: +649///+3.48
NZD: +186///+3.06
AUD: -168///-.51
USD: -153///-1.64
CAD: -300///-2.06
JPY : -353///-2.83
CHF: -455///-4.48
Comms up by such a little +.49%
0025
Hey guys…I’m really interested in the yield curve also.
I did read up on that some time ago, but forgot much about it.
I’ll do some research in the a.m.
Mike
Good morning Team :44: aahhhhh
Well, I did some digging, on the yield curve. Learned some good stuff.
This should get you up to speed on the explanation of it. Yield Curve Definition | Investopedia
Then I came across something very very cool. You HAVE to check this out. Hit the animate button. (I watched it over and over) This puts it all into perspective. You can see how the curve was during the last 2 crashes.
StockCharts.com - Free Charts - Dynamic Yield Curve
Let me know what you think!
Mike
Mindblowing and super research Mike! I have to say I like visual explanation and this really has great value. I watched it more times. I think it really helps to understand where we stand. Based on this I am more comfortable to confirm what Peter always says that 2015 can be a good year for stocks 
Thanks a lot for sharing,
FE
Hi Team,
wanted to share a bit about my trading as we never write updates. I am involved in NZDCHF still in the long-term so from this point on I do not even mention this trade as I plan to hold it very long. Look really nice at this point.
My S&P long is open, this will be decided in mostly 2-3 days. SL is above BE, TP at 2100. I am not sure if that is a right TP but would make me a nice gain and as Peter always says (and as I read more books I understand this wisdom more and more): we have to take sometime profit even if we leave a lot in the market because if we do not take profits we can never cash in our trades!
What is more interesting for me to discuss is Gold. That is why I write. I like to share with you guys me findings before I enter the trades. I made up actually my mind already to buy Gold so as it is decided now I can ask your opinion on it. I do not want to catch the bottom, but no matter what I am looking at, it looks to me gold is hitting a bottom. No idea if it is a retracement or reversal, I do not even care about it. I only think that it will be surely good for a swing trade. I am not sure when the signal comes, I think maybe not this week. I am ready though for it. And do not ask what indicators I look at. For me all of them I checked on a daily chart shows that we are hitting a bottom and there is a problem to go further down.
So technical department?
Have a nice day,
FE
Yeah I actually like it. It’s always difficult to trade an anticipated move, I prefer to trade a move as it happens.
I can make a case however 1151 for a bounce to 1183. But I wouldn’t take that trade because we have a market-defining moment later today. What the FED will say today will decide the direction of the market for the coming quarter at least.
Yep, and on the commodities in general.
In Murphy’s piece, note how the Fed raising was the pre-cursor to the inverted yield which in turn has signalled recession. The Fed’s yardstick for tightening has been a perceived threat of increasing inflation, usually resulting from commodities’ prices rising and pressure from employment/wages growth.
Nothing like a mild downturn to halt inflation in it’s tracks - problem currently is that we are just emerging from recession, the recovery is still weak and as you point out the threat from commodities is extremely low - that only leaves the second part of the Fed yardstick - jobs.
The Fed had to bring the short term rates down to their present level, it was drastic measures for drastic situation. That situation is easing, the Fed need to recover their prized interest rate tool, but their dilemma is when. Too soon and a second recession could be worse than the first (the feared double dip).
The Fed usually controls the short term but can manipulate the long end of the curve, most recently by “operation twist”, but again desperate measures for desperate times.
I have said that I expect 2015 as a good year for stocks, if the Fed raise in June then I may well have to eat those words, I hope they wait.
Just spotted this post dated yesterday - I agree completely with the sentiment.
(Btw the Maginot line was a state of the art defensive line believed to be impenetrable by it’s designers but easily bypassed when tested)
Beware of The Inverted Yield Curve! :: The Market Oracle ::
Happy St Patrick’s Day to all
Hey Team.
Tuesday’s results.
EUR: +375///+3.13
CHF: +272///+2.8
JPY : +160///+1.42
USD: +116///+1.21
CAD: +78////+.52
AUD: -24////-.54
GBP: -373///-2.71
NZD: -604///-5.83
They’re a little bit early, from the end of day 00GMT, by about half hour or so.
Oh, and did you guys see the GDT number? Wow. -8.8%
What’s happening to the Commodities lately?
10 minutes till the end of day shot.
Ok guys got to run.
Mike
Hi Team,
does anyone know why is the very significant GBP fall today?
Don´t forget: FOMC Statement comes within an hour!
FE
Hi Team,
I did not watch FOMC but for sure it was bearish as my S&P almost has blown up to my direction. I will take profit when it hits however the question will be if after a small retracement I will open a long position once more. Don´t be shy guys, I would like to have activity here again.
Peter, what is your take?
FE
Hi Team once more,
something very important. I read an article today in the afternoon but forgot to share it with you. It is about long-term stock trends, Mr. Murphy and Mr. Peter both discussed it already, once in the Intermarket book and once in this thread. I find it important as if the change is happening now and we find logic in it, then I might change my strategy and trade rather DAX or FTSE instead of S&P.
Here is the link:
Everyone Hates U.S. Stocks - Bloomberg Business
FE
It wasn’t bearish that’s the ting. It was in line with the expectation. Isn’t that funny?
I am greatly relieved, there is a sense that the Fed will wait a while - good news, not only for US but for world economies, yes they are still focussed on jobs but now they are saying all other data is important.
The Maginot line thing I thought was so apt, in my mind I likened it to the feeling that USD longs had right up to yesterday - then it was so easily bypassed when tested.
FE, the S&P will make that new high, remember it had to dip a little first, I went long last week and just stayed there.
FE, found the post - that was last Thurs evening, it did dip down next day and then just continued on up … now sitting around that 2100 - so maybe a little down again and then on for that elusive new high