Good morning

Soaring oil prices were mostly to blame for the past week’s stock market sell-off, but renewed concerns about US economic growth, corporate earnings and mounting angst about inflation pressures also featured prominently in determining the market's fate.

Read all about this in my weekly blog post, highlighting some thought-provoking news items and quotes from market commentators during the past week.

Here is the link to the “Words from the Wise”: http://tinyurl.com/57fvr3

Enjoy the read.

Instincts - 2nd_ave, VadymGraifer, Cyderman, and Craig. Interesting comments and viewpoints - thanks. Every understood comment widens or supports our individual universe, and this site continually widens mine.

Somehow, in reading your comments, I was struck by the ease (at least it seems to me) with which each comment could be fitted into a Freudian structure – no, no, bear with me here and no negatives intended nor implied.

I think most people remember the structural overlay of the “id, ego, super-ego. From Wikipedia comes the following:

“According to this model, the uncoordinated instinctual trends are the "id;" the organised (sic) realistic part of the psyche is the "ego," and the critical and moralizing function the "super-ego."
http://tinyurl.com/oapry

I leave it to others to fit each comment, mine included, into the appropriate appellation for that comment - each of our psyches has all three components ( id, ego, super-ego ) in our makeup; so, one comment is not indicative of anything other than for that comment.

As to which component is correct for trading - mine, of course! 8<) .

i cant help but feel like the recent run in gold has been a weak one, w/ no confirmation by the miners, in fact the canadian shares are falling today while gold is somewhat positive,

the only bright spot for the gold area i see is the strong performance of the CDNX as of late, though this is tied to some jr. energy shares no doubt.

it seems to me that people believe gold will fall should oil fall, even though gold didnt rise much when oil made its most recent thrust, and all the talk about high energy prices hurting the miner's costs, yet low oil makes both fall. seems like a double negative for gold mining companies, and my skepticism regarding a return of relative outperformance of the shares over the metal is growin with each new low in the shares/gold ratio.

the only thing making me keep the faith is jim sinclairs declarations that the shares will return to their long held dominance soon enough.
but its been such a trying few quarters, i may as well continue to be patient lest i be on the wrong side of a longer term winner.

but i cant help but thing the odds are stacked against the gold miners who seem to find any reason to go down but little reason to go up. mabey if a paper ETF goes under people will reaffirm the tangible quality of mining companies over paper gold-based ETF's. though i dont wish anyone holding such a vehicle that kind of fate, hopefully everyone holding PM's will enjoy the day things start to really improve across the board.

Steve_C

Friday on May 23, 2008 7:58 PM you posted your take on the market going bearish with an explanation of why. I am a neophyte and learn a lot from your brief post. Please consider more future posts of your comments and why, becasue I too am in complete agreement with your last paragraph of that May 23rd post.

Thanks.

Last year at this time uranium was around $135 a pound; now at $60.

http://tinyurl.com/5h4tu3

Let’s see. Oil hit $135 last week. By this time next year, no. No. I don’t see it going to $60 but stranger things have happened. If I had to guess, barring an unforeseen crisis, expecting a pullback just below 110, but who knows? Think it’s a matter of when, not if.

As Collin Twiggs says reference oil: “the market tends to overreact in both directions, but may be some weeks away” before reversing.

http://tinyurl.com/54qccl

I learn this week that DUG is not inverse of USO
USO follows oil price while DUG does not
It is possible for USO and DUG goes up at same time
DUG is inverse of stock like Exxon etc
Please le me know if I am wrong

Spot...I like it. We are born with instinct (it is genetically determined as is our personality and temperament) and it can be increased/built/improved upon with practice.
A great example would be kittens and puppies that use play hunting to improve on an inherent instinct. We can do that too, but we tend to "think" too much and sometimes we don't recognize instinct within ourselves. Perhaps this is human nature to want to hold ourselves above our fellow animals, but we are animals none the less.
So our instincts may be more or less coordinated depending on our parents input and their temperament/personality and then on how we "play" (we call it learning). In humans, as an example, we see some people are chance takers and seem to cope with fear better than others who may not have the ability (yet) to control their fear. All of us here know we may not eliminate the fear, but we can learn to control it. Thus we use the learned organization (ego)and critical thinking (cognitive thought/super ego) in combination with instinct (evolved to the past) to navigate our reality.

And we wonder why we have a hard time figuring this out? LOL!

http://tinyurl.com/6juw4t

Rhyme Without Reason: Do You Believe in Magic?

Greenspan's text (page 102) gives us a distant replay.

Who lurks behind the digital gold sites? - criminals and terrorists, LOL, or so warns the Canadian gov't:

http://tinyurl.com/476w7w

"If OPEC decides to raise production ... these hikes will not really lower the price," said Khelil, who is also the Algerian energy minister." OPEC Chief.

Hummm, if oil prices continue to rise, and you produce more of it, your profits would be even higher no?

craig - ok by me, but I think that there may be a bunch of readers looking at all this and saying to themselves that these guys aren't putting any "rubber to the road" for what to do in the Markets tomorrow. The business side of me says that we need to do some chart analysis.

My weekly charts for VIX and Put/Call are telling me that we either are going to have evidence this week of a "bear trap" or of a continued move downward. I will be lining up shorts but with memory stops for each planned trade.

Example: MZZ, ultra short the MidCap400, looks MAYBE to have bounced off (for the 4th time) a support area and possibly a bounce up from a downward trending channel. My oscillators say a definite maybe but not yet. Possibly a good trade with stops in place, but events, monkeys on tv, and/or PPT can change all that. IJH would possibly be the opposite trade.

My instincts tell me: either way - I don't care so long as it is profitable, but do your own diligence and decisions is the rule.

========================
vinod - You are correct in your thinking that DUG is for the Dow Jones US Oil & Gas Index (of stocks) so the price of crude is only one factor of influence on its moves.

Am I missing something or can we not search previous posts more than a month back?
I see the archives end at Sept. of 2007., why is that?
I think it would help your credibility more Bill if people were able to see all of your posts during this downturn. It just seems a little suspect that the month before the peak in the market you stop archiving your posts. I've been reading you for a while now and for the most part you've been spot on with your commentary, why not continue to keep a record of this?
But hey, maybe I'm missing something and all these posts are available to us to read and I just can't find them.

ScottyLand
Simply enter a date on the search function for this site and you will find all that you need. Cheers

Yaba,

Where is the search function?
Thanks

Found it, never mind. I had thought it would be under the menus.
Thanks

ScottyLand.
The page with the 122 Quotations that I think you are looking for is on the
Daily Report for Sat, Apr 12, 2008

Bill.

What do you think will be the impact on equities, currencies, oil & PM if there is any military action by the US or Israel against Iran?

The drums are beating louder (if you can speak German, see http://tinyurl.com/4zgnfc . Also of interest is http://tinyurl.com/5cnbdo ) and a prudent investor cannot ignore it!

Alrighty then spot...I sold my long trades on Monday....on instinct I guess as it was just before my charts all turned south...but macd was about to cross I'll give you that. I've been watching the interplay between bonds, the indices, oil and metals and all seemed to roll over and at 13400 something DJIA and 1430 something S&P I hit the sell button as my screen was looking like an overlit XMAS tree and my cooling fan was wheezing like a asthmatic. It was either instinct or my processor getting hot. Maybe I was feeling a little piggish after a couple weeks of traders nirvana.

I got into SKF at 98 and rode it to Friday's close at 112.90. I think we get opportunities for SKF, FXP, TBT and short the DJIA and S&P in the vehicle of your choice. I'll leave the Q's to themselves unless we get a really good downward confirmation.

I see a few areas of resistance on the way down and we may get the usual oversold rallies along the way, but the calls for 11700-11000 don't seem out of line.

One last thing.... Barton Biggs came on around January/February and said we were going to see a 1000 point bounce and I poo pooed him. Boy was I full of it. Now he's calling for quite the opposite. See Prieur's blog for the exact quote. I'm going to pay attention this time.

I think oil corrects and it brings on a world wide market correction, the indices, oil, gold, and so on, but it's right back on for commodities like energy and food long term due to inflation.

I'm looking for chances to get short on any bounces, I think the upside is limited for now.

Zeto: you can contact SteveC on Skype..he posts quite frequently at the stockclub.

Spot: might want to compare how far each of the indices have retraced, MDY, Qs and IWM have not retraced as much as the SPY and the DIA.

Some in the stockclub have been testing mechanical trading systems...thought I will share one here on CAF, 3-4 day swing trade...chart and backtested results. a nice heads up for impending reversals...still have some filters to work out for trending and tradng range conditions.

2X ETFs next project..FXI and XLF.)

http://screencast.com/t/13OdRLcy

results:

http://screencast.com/t/oBtTrDzwEl

Spot: I don't think graphs for tomorrow will help, unless the market is allow to be natural. Even then if allowed to be natural it will continue to fall within correction. However, I don't think is the market is not natural right now. Even though this appears to be the start of the bigger correction Bill predicts.

So the big question in my mind is

1) What style of manipulation will we see this week within Oil? Will it be pushed higher or will it be allowed to correct?

If I were to bet I would initially bet against my instinct since instinct would like to follow the natural market, which would be for correction downwards.

I think we will see a downward pressure down for a few days and then manipulation to cause everything to go sideways again. I don't think the powers to be want too big correction yet. I think the current equity correction is some steam being released.

but that is me following my gut feelings right now.

I do not know the author but I agree with what he says. Cheers
http://news.goldseek.com/GoldSeek/1211819717.php

The Asian Dragon Cometh...
Posted Monday, 26 May 2008 Source: GoldSeek.com
By: Malcolm Bucholtz

This past week-end I had a most unique experience when I had the chance to meet a visiting delegation of Chinese investors who had come to the Province of Saskatchewan in Canada to seek out resource based acquisitions.

One question I levelled at this group had to do with the China-US trade deficit. I pointed out that up until recently, China had been a big buyer of US Treasuries which had the effect of keeping interest rates down in the US. But, this only exacerbated the trade deficit situation. I inquired whether China would consider "dumping" its US Dollars in favor of Gold, Euros or other currencies. The answer shocked me. Without batting an eyelash, the spokesman for the group told me that China intends to use its stash of US Dollars to buy up hard, physical resources in North America so as to ensure that China has a good supply of commodity resources to last well into the future. I think we are about to witness the biggest transfer of wealth in the past 100 years. We are all going to wake up one day in the not so distant future and find that we do not own any of our own resources. We will come to this reality as we drink our morning coffee brewed from beans grown in a Chinese owned coffee plantation in Brazil, get dressed in our suit made in China and get into our Chinese made car to drive to our place of work now owned by a Chinese firm....

EEMTRADER
Thanks for the info but I am not set up for Skype. But if you run into SteveC at the stockclub have him swing by and post.

Also you have made a lot of good posts here in the past. I'm sure the new traders here benefited from them also. Possible you and Steve can start posting here again?

This just in:
Oil speculators attack a Nigerian oil pipeline.

This, after a viloent gang of oil speculators (in khaki pants, blue brooks brothers dress shirts and close cropped, balding haircuts, no doubt) earlier this year blew up another oil pipeline, reducing output by hundreds of thousands of barrels per day.

In other news, oil speculators refused to consider increasing their oil production before their meeting in September.

Meanwhile, the oil speculator index dipped back below 72 today.

A question for those experienced in buying/selling silver bars:

I'm looking to start purchasing 100 oz silver bars. What is the best way to do this? I'm looking at boston bullion quotes and they seem
outrageous 0.5% to 3% brokerage fees and bids that are going out way above spot? Am I being delusional about the premium I'm going to have to
pay to acquire the physical?

Thanks in Advance for your help.

RE; composition of DUG--vinod, you may want to review
tradermike.com recent post which does a very nice, but brief review of the composition of DUG. I am sure many traders are somewhat perplexed by their attempts to hedge with this etf.
Good trading!

vinod- if you take a look at the top ten holdings for DIG, you'll get an idea of what you're shorting with DUG...

be careful with DUG...i perceive high risk in the market right now (long or short), and personally, happy to be in 100% cash and fence-sitting...sometimes not trading is the smart trade, right?

good luck..

re DUG- should say "what you're TRYING to short"- what you're holding, of course, are derviatives...(and you already know about the daily resets)...

Thanks for the comments on my mention of a possible trade on MZZ this week if I see some further indication of follow through for MZZ continuing to move upward.

I’m beat up after trying (unsuccessfully) all day to install a replacement kitchen sink faucet, but just so you all can see some more from a chart, not instinct, why I consider making this businesslike move 8<)), here is my weekly chart on MDY, a popular, long version for what MZZ is 2xShort. I see 6 clues that the short side might be the way to go (see chart).

Of course, nothing is a sure thing, and all trades other than my own are the responsibility of the trader. Someone else can easily, I’m sure, find an equal number of reasons for trading long on MDY, and that’s ok too.

http://tinyurl.com/5fu5yx

spot- interesting comment, and understood it's all in fun...as an aside, i would have to say that IMHO the 'science' and practice of psychology is nowhere near the level of, say, neurology...conceptually viewing the mind in terms of an id/ego/superego is a slick intellectual exercise, but i'm left wondering how many patients have actually been helped by psychoanalysis...it's easy to fall into the trap of viewing current theories and practice as state-of-the-art and therefore the final word, but human knowledge continually expands, and 'science' in turn evolves-> bloodletting was well-regarded in medical circles for centuries, right...somehow (the little i've read of) freud's writing doesn't resonate with me, and my bet is in another generation or two $150/hour psychoanalysis will end up little more than a paragraph in the historical perspectives chapter of textbooks...

2nd
I do believe that oil will go down
And was looking short ETF to buy
I might buy USO Jan 110 put
Also will buy CAF under 41 and IBN under 40
Last few week I was hoping for market to go up so I can buy oex put and
It did work out for me. got in lots of oex 640/650/660 put on last Monday but sold them
Early. Would have made more if kept them until Friday
Now will wait and if Dow goes down to around 11800 will load up oex call

2nd
Busy at work and I do not have any position right now
befor I buy anything I paln how much I wants to lose. and I get out fast.

btw...thanks for bringing MZZ to my(our) attention..

last post was addressed to spot...

spot- should also make it clear that i have nothing AGAINST technical analysis...i don't view it as a competing system-> i'm as happy playing next to someone who reads music as i am to someone who doesn't...right now, i'm doing fine without it, but given the time, i'm actually quite interested in learning all i can...my defense (if that's how it needs to be viewed) of trading on instinct (and i guess we all know by now there's probably a better word for it) is simply to point out that it works for many traders-> can't really explain it, but of course being unable to explain something has nothing to do with how well something works...

ALOHA !!

I pay particular attention to what Elias Canetti has to say about "degradation". He is dead on in terms of how financial reality impacts social reality and our much admired American values.

It is the same as Orwell's book SHOOTING AN ELEPHANT, where the moral values of Empire are lost in desperate efforts to appear more superior than those we conquer. The lessons of Empire resides in the reality that the more we conquer the less free we become. We, in the end, imprison ourselves, all the while draping ourselves in the lust for the anesthesia of Empire. Thats the complete opposite of what our Founding Fathers fought for. They gave their blood for small government and large freedoms! What America is now is a slap in the face to our ancestors and all they ever worked for and cherished.

We gave it all up for DEBT ... Just so we could feel the fleeting euphoria of living beyond our means.

READ ON:
Monday, May 26, 2008

"A Kind Of Anesthesia"

Mainstream political leaders (Hillary and Huckabee) and media figures (be sure to watch this video clip) now allude to assassination or openly joke about it in the context of the person most likely to become the nation's next president. And aside from those who follow the campaign season's daily drama, there's not a whole lot of concern about it. What's going on here? Just some loose, careless talk, nothing more than a set of coincidences? Or an unsurprising next step in which the system begins to feed on itself? Regular readers know my thesis that we're in an overarching period of consequences during which "things fall apart." Sebastian Haffner on how war, economic decay, and the failure of the political class produce a sort of trauma cocktail that can numb a nation and, in his words, make it "ready for anything":

Everything takes place under a kind of anesthesia. Objectively dreadful deeds produce a thin, puny emotional response. Murders are committed like schoolboy pranks. Humiliation and moral decay are accepted like minor incidents. Even death under torture only produces the response 'Bad luck'... Just a little pact with the devil -- and you were no longer one of the captured quarry. Instead you were one of the victorious hunters.

In "Crowds and Power", Elias Canetti tied the debasement of a nation's basic unit of measurement (currently the public's number one concern) to the degradation of the individual and the rise of extreme and previously taboo types of political and social discourse:

"A man who has been accustomed to rely on it [the value of the currency] cannot help feeling its degradation as his own. He has identified himself with it for too long and his confidence in it has been like his confidence in himself. Not only is everything visibly shaken during an inflation, nothing remaining certain or unchanged even for an hour, but also each man, as a person, becomes less."

Thomas Mann, in a 1942 lecture at Princeton, noted how easily the outrageous becomes the ordinary under those circumstances:

The market woman who demanded in a dry tone "one hundred billion" mark for a single egg had lost during inflation her ability to be amazed at anything anymore. Since that time nothing was so mad or so atrocious that it could have caused any awe in people anymore...They learned to look on life as a wild adventure, the outcome of which depended not on their own effort but on sinister, mysterious forces.

And from one of Milton Mayer's interviewees, who probably wouldn't have been surprised by the rise of the assassination meme:

The world you live in -- your nation, your people -- is not the world you were born in at all. The forms are all there, all untouched, all reassuring, the houses, the shops, the jobs, the mealtimes, the visits, the concerts, the cinema, the holidays. But the spirit, which you never noticed because you made the lifelong mistake of identifying it with the forms, is changed. Now you live in a world of hate and fear, and the people who hate and fear do not even know it themselves; when everyone is transformed, no one is transformed.

All against the backdrop of the Dolchstoss dynamic:

Every state must have its enemies. Great powers must have especially monstrous foes. Above all, these foes must arise from within, for national pride does not admit that a great nation can be defeated by any outside force.

posted by The Cunning Realist

2nd_ave - Understood. Holidays are made for "mind-drift".
--------------------------

For any "newbies" who saw my chart for MZZ, just remember that it was a WEEKLY chart. Day to day zigs and zags are still possible and should be considered in any shorter term trade decisions.

Does anyone follow Fortis??

Newfoundland!

Fortis Eyeing U.S.
May 27, 2008

Fortis Inc of St. John's is eyeing the United States. The company is already Canada's largest investor-owned distribution utility. Fortis Inc has enjoyed seven consecutive years of record earnings and now they are looking at opportunities to expand their operations into the United States. President Stan Marshall says Fortis has smaller operations in the U.S., but they are seriously looking at possible acquisitions in that country. Marshall says Fortis has earned a reputation for being able to acquire companies and operate them successfully. The company’s total assets exceed 10-billion dollars and they have capital investment this year of over 4-billion dollars.

Good morning.

There are NO Cara 100 ratings Changes to report at this time.

____________________________________________________

Note to Craig: Did you notice that CNSL got the Outperform call from Credit Suisse?

Have a great day, everyone.

Thanks BH! I hope it works as well for you as it does for me! I've been adding lately on this pullback. It's my blind squirrel routine.....

RIP: Sydney Pollack. You're film, "Out of Africa" is one of the greatest movies ever made.
A fine legacy.

Sydney Pollack gone? Nutz ... he was one of the best.

Looks like gold is coming to us again....
Nasty pullback, good opportunity.