ARCHIVED COMMENTARY
Sleepwalking
For edition of November 16, 2005
Yesterday’s forecast nailed the exact low in the Yen – 0.8411, basis December – offering us an exhilarating ride and a profitable (i.e., $475 per contract) exit shortly thereafter. The intraday high was 0.8458, but I can’t predict whether there is significantly more upside to come. If so, corresponding weakness in the dollar could be expected to lend buoyancy to gold quotes, which so far have stalled at a 483.10 target broached here a while back. My worst-case scenario calls for a pullback to $451, but we’ve placed a buy-stop at $476.70, lest the December contract lurch higher without first deferring to our laid-back bid at $451.
Meanwhile the S&P futures topped a tick below a hidden-pivot target at 1141.25, but we opted not to short it because it had been such a long time in coming. Ordinarily, I’d have expected the relapse to be nastier. But this is not an ordinary market, and the comatose behavior that has characterized price action in stocks for nearly two years transformed a picture-perfect set-up for a selloff into a creeping descent that could have engaged no one’s interest. How long can this brain-deadening behavior continue? The chart below would seem to offer hope for relief. As you can see, the Dow Industrials are well into the danger zone of a textbook head-and-shoulders top that has been gestating since late 2003. On the other hand, the pattern looks almost too perfect. Knee-jerk contrarians that we are, should we perhaps assume that the next big move will be…up?
(Click on chart to enlarge)
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"Troubled by Bernanke"
(The following jab at Helicopter Ben is from Charlie Miller, who puts out some pretty good technical analysis and commentary each day.)
Today was Ben Bernanke's day in the hot seat, to open up to the Banking Committee, and I'm afraid that Ben scares me. I look at Alan's alley, and hear in his initial comments that the current recession was short and mild, as in "They ain't making recessions the way they used to." And I think, Alan spent 7 of 17 years keeping the country (world?) in recession, and that's a wonderful accomplishment that he wants to maintain?
What else bothered me? Ben thinks that Main St. is in great shape. In several comments, he demonstrated that the screwing of those on Social Security was a good thing, should continue, and should be looked at to make it worse. He lumps it into "Entitlement Programs" in a manner that only a hardened politician or a dolt would do. Doesn't he know that SS is a system set up entirely independent of the Federal Budget? It was NOT, as he suggests, set up to be a budget balancing tax. He was not asked to define "Entitlement Program," but since SS beneficiaries are the most highly taxed (up to 50% bracket), and least "paid back" for their lifetime of supporting the system, which they continue to pay into while receiving their benefits, I can only believe that he has never considered suggesting that welfare queens, children on ADC, etc. begin to pay escalating and eventually confiscatory co-pays. Why doesn't he address public education, one of the greatest entitlement programs of all time?
They had a close up of him looking into the camera as he gave his support to the Cyborgs, calling them a positive influence on the markets. Bringing up LTCM didn't phase him a bit. Scary. My personal opinion is that Ben has spent too much time dealing with politics and grandiose economic concepts, and not enough time looking at the practical side of life that most of Main St. must deal with. Guess that's what qualifies him to run the show. So, we begin to calibrate Ben Bernanke. Not by his decisions and actions, yet, but by what he says in the Senate in the dog and pony show required for advise and consent. Let's hope, as "his own man," that Ben turns out to be a bit more down to earth.
