August 2013


Is underway and will likely be completed later today.


I took the missus out today [beautiful weather for a change] to look at buying her a bike. A Ducati Monster. As I had the pillion, I had to decline extreme cornering speeds today.




The first chart is from “marketsci” and provides you with a blow-by-blow trading calendar for Septaper based on historical seasonality. As I place/exit trades next month, I’ll keep an eye on this.

cpi historical

The history of CPI inflation. The eventual monopoly control of the money supply would nicely correlate with the expansion of the State and the contraction of your [our] property rights. I’ll try and find some sort of chart that shows and will correlate to the CPI data in the expansion of legislation.

10yr bond historical

Which apart from the anomaly of Volcker, illustrates nicely the monopoly that eventuated over money by the State,



Time for a refill.


Probably the happiest period in life most frequently is in middle age, when the eager passions of youth are cooled, and the infirmities of age not yet begun; as we see that the shadows, which are at morning and evening so large, almost entirely disappear at midday.

Eleanor Roosevelt

The COT index is +0.3%. Last week we had some strength in the COT and the market rose moderately. The COT number is weakening which normally suggests a weaker market. We are currently experiencing a [mild] decline, with a bounce, which was last week.


The 5day down trend has shifted into a bull uptrend. We are however near some short term resistance at $167.5o. The market should move higher initially, which is simply a continuation move continued from last week. The weak COT should make that resistance point one that holds.

The 10day is still firmly in a downtrend. The resistance is at $168.oo. Again, a weak COT number would suggest that this area becomes a resistance point.

The bounce could have been caused by a short covering. New short positions would now look to be established at/around the resistance area for the next leg down. Therefore any profits might want to be locked in or hedged with the momentum that could carry the market higher into the early part of the week.

For what it’s worth Ralph Acampora has turned bear. He was very bullish, but not any more.

Also the S&P500 is higher than the DLI. This divergence can sometimes be important. These are the big international stocks that have earnings all over the world. Having exited earnings, where again revenue growth has been lacklustre.

The technical internals, breadth, new highs, are all falling lower, and therefore they are not confirming the continuation of the bull move.

Throw in the month of September, add to that the Presidential cycle, which is entering the worst period, and the seasonality issues are worth keeping in the back of your mind.


Whenever you talk about bonds you have to talk about the Federal Reserve and Septaper. The Federal Reserve if they instigate a taper will remain in control of the short end of rates. They will in theory let go of the middle and long ends of the rate curve.

This curve however should [and pretty much always does] operate on a spread. Currently assuming that the Fed will let go in September, bonds are giving a historically wide spread that in theory really shouldn’t exist.

The Fed have said that they will continue with a very loose monetary policy for the foreseeable future. The middle and long ends of the spread should come in. For the moment, they are not.

What happens to stocks if the yields continue to rise? About a year ago Dalio identified the rotation, which would allow for higher yields and higher stocks. The smart guys would have taken this trade a year ago when they could have sold their bonds to the Fed and cycled into stocks at lower prices. Is this trade still viable as yields continue to rise? This is one of those trades that we’ll just have to sit back and watch.

This week’s trade is a great trade. It has the potential to really earn big dollars. The trade is a market neutral trade in XXX. It has an 15 month life. It is a credit spread.

Entered Trade

Until next week,
jog on


Order filled for 450 shares of THD.



I could be early, but I think this is close to the bottom. I’m prepared to wait and sit it out, so I’ve placed an order to buy some shares of the ETF THD.



We’ve seen this before with the Asian crisis of 1997. This creates a buying opportunity without a doubt. It is of course all about timing and trying to buy close to the bottom.

The best bet is through an ETF. I’ll have a look at some. There is no real urgency, these things take a little while to play out. Just start a bit of a watch list, and initially, do just that watch.


Looking for an entry point for a trade? This chart would suggest that [i] a long position could work well [ii] purchased on the next move lower beneath yesterday’s low.


Of course that means buying long into Septaper, numerous indications of lower prices, debt ceiling, and potential war.

War [usually] takes us higher, the military-industrial complex, debt ceiling, been there done that, Septaper, interest rates should normalise across the curve once ‘stuff’ settles down, so why not go long.


Well the overall market took a bit of a plunge. Was it due to the Syria issue, viz, chemical weapons and the US response? Or was the market set for a fall anyway?

Would the US after just about exiting Iraq, Afghanistan, want to enter Syria? After the Secretary of State’s speech the other day, that possibility has to be considered.

Stocks have [think first Iraq war and subsequent one] initially fallen, and then rallied on the opening of outright hostilities. So the plunge today, although it may be followed by additional declines, could quickly reverse on any declaration of war. That is assuming that today’s decline is actually related to Syria and not a general decline that was coming anyway.

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