Sunday, May 23, 2010

Calm Before the Storm

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I remain black bile bearish on the stock market to the point where I am more interested in shorting the stock market than anything else in my trading account. Right now, my biggest trading positions are long paper Gold (double bullish UGL ETF) and cash. I also couldn't resist buying a small stake in Yamana Gold (ticker: AUY) when it got back down to $10/share again on Friday for a quick "bounce" trade. But I plan to cough up my paper Gold and Yamana very soon after an anticipated big bounce in the Gold patch that may only last a week or two and I suspect will cause Gold to make new all-time nominal highs in USD terms. What I am anticipating is apparently not a unique thought I found out after I saw Ross Clark's/Bob Hoye's piece published on yesterday (it always feels better when someone smarter than you is seeing the same thing).

We are due for a bounce in the general stock markets and I suspect it already started on Friday. I see ominous things ahead for the stock market and a really juicy shorting opportunity. It is said that in a deflationary bear market, he/she who loses the least wins. I am going to try to make money off this process - a lot of money. I think the so-called "flash crash" was a just a tremor warning us of the major earthquake to come. A quick short squeeze/counter-trend bounce in the stock markets that may last a week or two, then a plunge that may "set your hair on fire" (as Sinclair likes to say) if my crystal ball is accurate.

I previously posted on the broadening top or expanding megaphone pattern in Australia and France. Both broke down as anticipated in fairly dramatic fashion, particularly Australia. Well, here's the New York Stock Exchange ($NYA) showing us the American version of this unstable topping pattern (15 month daily candlestick chart thru Friday's close with my prediction for what comes next):

Perhaps I stole this prediction from somewhere else and it's not so original. Maybe (definitely) I am simply looking for a rhyme of Australia's current chart ($AORD, also a 15 month daily candlestick plot):

Do you think my focus is too narrow? Do you think Australia and France have nothing to do with America? What if I told you that the entire world is in an unstable expanding megaphone at the brink of a MAJOR TOP? Here's the proof (15 month daily chart of the Dow Jones World Stock Index [$DJW]):

I think we may even get a second crash. Everyone says it can't happen. Everyone says it's never happened in the same bear market. But everyone is about to find out that the "traditional" major economies in the world (i.e. U.S., Japan, Europe) are all just like Greece when it comes to debt and inability to pay it off (15 month daily chart of Greek stock market [$ATG]):

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