“Easing” Hopes & Expectations bound to disappoint Bonds ... · only Diag IIs to the upside in...
Transcript of “Easing” Hopes & Expectations bound to disappoint Bonds ... · only Diag IIs to the upside in...
Oct 16, 2010
Prelude to the Crash
“Easing” Hopes & Expectations bound to disappoint
Bonds, Commodities & Gold – Bubble Triplets
The Age of Uncertainty
A nation of destitute retirees
The essential is found from here to Bond Bubble, and again with the charts at the end.
You may skip the rest if you are not interested the news items that affect our portfolio.
Prelude to the Crash
The minimum upside has been met in a colossal Supercycle (a)-(b) transition and a
smaller step-down a-b transition to the downside is in process. There should be no
more upside, and the dramatic, violent reversal should shortly get under way. The entire
move down from the 2007 peak to the April high has been of cycle degree, while this
colossal (a)-(b) transition indicates Supercycle degree waves will follow, where the next
Supercycle wave will be comparable in magnitude to at least 10 waves of cycle degree, to
which we’ve become accustomed. This is the prelude to the Crash.
While bonds will also plunge hard in this Crash, initially they should rally in a knee-jerk
reaction - flight to safety, climbing to at least 107, but no more than 109, in wave ii of a
5-wave decline to complete wave C, beyond the limits of the chart below. Notice the
Diag II in wave i, which indicates the beginning of a long move down, must be retraced
to fill the uppermost gap in the chart at the dashed green line. Notice also that we have
matched the previous low in the RSI at the beginning of April, shown by the dashed blue
line at the bottom.
Meanwhile the VIX has also completed the minimum downside and is itself transitioning
to the upside after completing a Diag II, notice that instead of Diag >s, we now have
only Diag IIs to the upside in the inverse funds, and Diag II to the downside in bonds,
and likely the S&P. Wave (3) in the VIX should easily exceed the top of wave (1) which
peaked in October 2008 in the aftermath of Lehman’s collapse, in the identical pattern,
tracing out a Diag > next and likely peaking 62% higher at ~145. The VIX volatility index
will Spike up next, above the previous high, indicating a far more severe meltdown than
occurred in 2008-2009.
In aggregate, these three charts provide conclusive evidence of the CRASH just ahead.
With the next cycle turn occurring on October 20th ± 1 day, we are likely just a week
away from the Mother of all Crashes.
The dollar about to surge in contrast to expectations
On the same theme, a record dollar short position in anticipation of QE2 is precisely the
wrong bet. In the last week of September, hedge funds increased their bets against the
dollar $10bn, bringing short dollar positions to a frothy $26.1bn. While last week in dollar
shorts ballooned further to $30bn, the highest level since mid-2008. Of course, that’s
just when the last meltdown accelerated in earnest. We are shortly coming to the same
juncture, once again. What’s more dollar shorts are a crowded trade, meaning little
profit if they were right, and big losses when proven wrong.
In the Dollar chart below you see the wave b and its a-b transition are likely complete,
while the RSI at the bottom indicates it’s oversold. The Diag > at the beginning of the b
wave indicates this is a terminal move, with a dramatic reversal ahead. The minimum
upside is 88, to complete wave 2 and overlap the Diag II which began the entire move,
indicating a long way down still ahead. However one month is the likely minimum time
frame, given that wave 1 took two months to travel 2/3 this distance. In effect the dollar
will plunge, but only after rallying back near the top, reversing completely its recent
drop. Note that on Friday the reversal become clear with the hollow black candle.
Technically, our charts show the dollar will soon surge intermediate-term while virtually
everything else, aside from inverse funds, collapse. All this should occur long before the
Fed’s Open Market Committee meets on Nov 3.
Notice in the Ultra-short Euro, EUO below, has the identical pattern as the US$ index
which is overlain in gray dots, meaning the EUO will move up ~ 35%, before reversing
again.
Bond Bubble
Last week Warren Buffet remarked “he could not imagine the rationale” behind buying
bonds at these prices, ergo, he reasoned that stocks were much cheaper. While bonds
are indeed dear, the prospects for stocks of perhaps a 3% gain pitted against a 90%
loss, (identical to the drop from the 1930 peak to the 1932 trough) stocks are not a good
deal, even on Buffet’s extended time horizon. Obviously Microsoft and IBM agree that
bonds are dear and stocks cheap, since they recently sold 3-year bonds at record low
yields of 1% and 0.875%, which they are using to buy back their own stock yielding 2.6
and 1.9% respectively. By midyear, these two biggest buyers had already spent $14bn
combined in stock buy-back programs. In retrospect, these buy-back programs will turn
out to have been some of the most poorly timed corporate decisions of the century. If
they were to just wait out the crash, they could likely by 9-10 times as much stock, and
make a real difference to stockholder wealth, when needed the most.
At the other extreme, is the revival of 100-year bonds issued by the likes of the Mexican
Government and the Dutch AAA-rated Rabobank. Once again, we see the human
tendency to project the recent past into the infinite future. If we discount Dutch inflation
for the last 100 years of 3.2% on average, bonds still have a real yield of 2.6%. After all,
the Rabobank bonds yielding 5.8% would make investors whole in just 17 years x-
inflation. However, unlike the short-dated bonds issued by IBM and Microsoft, which
bear little risk to maturity, in 100-year bonds you are exposed to tremendous volatility,
without the prospects of capital appreciation commensurate with probable inflation, nor
the dividend increases which might be expected of stocks. With the issue of only
$350m, these 100-year bonds are bound to trade “by appointment” with considerable
spreads between the bid and ask and subsequently a substantial loss if sold prior to
maturity. What’s more, given the Great Bear Market in progress, the next hundred
years will likely be a major departure from the previous hundred.
Doesn’t it seem like the Fed is insulting our intelligence by targeting higher inflation,
while leading us to believe that it will buy Treasuries to lower nominal bond yields?
Even a slight uptick in inflation turns bonds with already ultra-low yields, into
certificates of guaranteed confiscation. This is the logic of a mad man.
Just look at what has happened to inflation-protected US bonds, just six months ago
you could earn 1.5% above inflation by locking your money away for ten years. On
Friday, the real return had dropped to 0.4 points, the smallest ever! Short-dated
Treasury inflation-protected securities (Tips) have deeply negative yields meaning a
loss of 0.5% per year after accounting for inflation. Who in his right mind is going to buy
US Treasuries with the Fed conspiring to strip away the real yield?
The current bond bubble is highly reminiscent of the stock bubble a decade ago, with its
irrational optimism and like it, the product of the Fed’s unbridled credit expansion. Yet
stocks are not cheap by any means, at the 2000 top some utility and tobacco stocks
had higher yields than earnings multiples. That is certainly not true today. And with 90%
of the S&P trading above its 50-day moving average, the chances of these valuations
continuing are slim and none.
Inflation is totally inconsistent with 10% unemployment. By its very nature unemploy-
ment pushes down the prices of everything, which in turn perpetuates a deflationary
spiral. That’s why this is a Deflationary Depression long in the making, and there is
nothing the world’s central bankers, or Bernanke, can possibly do to change that. Yet
they continue to make matters worse, creating bubble after bubble, leading to mal-
investments and miss-allocation of precious capital, only end in misery and tears.
Bernanke has the consciousness of a Goebbels, Hitler’s propaganda minister, who
Bernanke frequently models in his shady tactics. He cannot be trusted, no wonder he
continues to insist on the secrecy and unaccountability of the Fed, he has enough
skeletons in his closet to be tried and convicted for Crimes against Humanity.
Warren Buffet, who honed his money management skills during the Great Bull Market,
has made no attempts to adapt his ways to the Bear Market. Both he and Berkshire
Hathaway face monumental reversals of fortune, even more extreme than their rise to
prominence and celebrity. For one, Berkshire Hathaway’s sale of over $5bn in long-term
“naked” put options was pure hubris; these alone could lead to Lehman-style collapse
of Berkshire Hathaway in the highly probable 90% market collapse.
Gold
In the meantime, gold and silver prices have shot up to the moon. Like bonds, gold and
silver are in a Fed-created bubble, as inflation “expectations” overpower common
sense. Investors fear the creation of even more money and the apparent debasement of
the currency. However a crash will wipe out those fears; when trillions of dollars vanish
into thin air, a credit crisis results, a sharply diminished supply of dollars, given rising
demand means the dollar must strengthen at least intermediate-term. Since the purpose
of gold is a hedge against inflation, as the dollar strengthens, and underlying deflation
comes back with a vengeance, gold is due to plunge hard. In times of deflation gold
becomes a losing investment. In the Global Gold index below you see 5 was the
orthodox top in gold coincided with the short-term market bottom in March 2008. From
then on we transitioned to the downside and completed a large Diag II, indicating the
beginning of a major decline. However the transition from the Diag II which began in
February 2009 has only peaked in the final Diag > this week. From here gold collapses,
violently.
Commodities in a Bubble
Like gold and bonds, an enormous amount of investment has gone into commodities of
late, deemed the new asset class. Talk of a super-cycle in base metals is fiction created
by the metals industry, expectations for the presumed multi-decade boom will soon
fade. Yet this too is a self-perpetuating expectation of the Fed’s making, as commodities
are viewed as a hedge against inflation and the declining dollar. What inflation? What’s
more, hedge funds and ETFs, backed by physical commodities, stockpile them in
warehouses, creating false shortages by hoarding, which artificially push up prices.
Some metals are back to, or above their bubble peaks of 2008. Once again this is the
“detour to deflation”, when reality dawns that the Fed is merely pulling at straws, the
market can only react violently, as each investor attempts to save his own skin. What’s
more commodities markets are much more emotional that equity markets, once they
Spike up, they invariably come crashing down. Unlike stocks, commodities return to the
same baseline “degree of trend”, rather than building on the previous boom.
In a world of ambulance-chasing trend followers, the more a price goes up the more
they buy. Yet copper prices, which hit new highs last week on the spot market, are 20%
cheaper in futures market 5 years from now, without any warehousing costs. Should not
the “supply” should be scarcer still in 5 years, and “demand” even higher, according to
the current line of reasoning. Like talk of oil running out in the past has always been
resolved through technology, such as the fuel injector, which replaced the carburetor to
used far less for fuel, greatly increasing miles per gallon. High prices and the profit
motive are what create incentives to bring about innovation and viable substitutes.
Dollar-denominated commodities have surged in expectations of a dollar debasement;
the effect has been “temporary” inflation, better described as illusionary inflation, as
price-sensitive buyers cut back or resort to substitutes, thereby permanently reducing
demand. These misconceptions will be reversed in short order, as what is currently
expected is precisely the opposite of what will most likely occur.
My godfather told me a story related to commodities when I was much younger, which I
think will drive home the point. In the aftermath of the 1929 Crash, commodities went
into a tailspin, sugar which had previously sold for $0.60 a pound dropped to $0.02 a
pound - 1/30 the previous price literally overnight. Since this was far less than it cost to
harvest, even before cost of refining, tons the sugar cane were simply left to rot in the
fields.
Effects of QE2
Recent research by the IMF shows that monetary easing by the G4 has in the past been
almost entirely transferred to the emerging economies; likewise monetary policy in Asia
has been almost entirely determined by the G4, led by the Fed. This time the Fed’s
easing must take the form of liquidity injections, since reductions in short-term interest
rates are currently unfeasible. In the past, a weaker dollar was the channel by which
monetary easing was transferred to the emerging economies, leading to higher stock
prices in Asia and Latin America. But this time, with the dollar in the process of
strengthening, an excessive drop, rather than a rise, in emerging market interest rates is
probable, again precisely the inverse of expectations. What’s more, as in 2007-2008,
the sharp downturn in the US and other developed nations will be transferred to
emerging equities and their currencies, along with deflation and much slower growth.
We can expect the brief “out of phase” period in emerging markets, mistaken for de-
coupling, will soon come to an end.
Markets are governed by Nature’s Laws
Let’s face it, another round of the Fed’s monetary experiments, are unlikely to dig the US
economy out of its current hole, any more than an appreciating Renminbi, and are as
irresponsible policies as the Chinese currency manipulation. The economy is not being
held back by high interest rates. Ultra-loose monetary policy, coupled with extremely
high fiscal deficits is NOT a reasonable response to high unemployment and depressed
production. Like the seasons and the tides, Bear Markets and Depressions are
governed by the intractable Laws of Nature, and must be endured. Attempts to keep the
boom going by artificial means are delusional and exorbitant delays to the day of
reckoning, bearing monumental, long-term social, psychological and economic costs.
Deflation
In Japan, where deflation has been around for over a decade, more Japanese feel
deflation is positive, rather than negative. In a survey last year by the Bank of Japan
44% of Japanese find deflation favorable, 35% are neutral, and only 20.7% described it
as unfavorable. While the Fed abhors inflation, it only makes sense since it renders its
policies ineffective. When the velocity of money collapses as in Japan, it is hard to spark
price rises. Peter Fisher, head of fixed income at BlackRock, points out: “Inflation is a
three-variable, not a two-variable equation. It is not just about the quantity of money and the
output gap; it requires a chasing behavior to close the output gap and drive prices higher.”
With the current pessimistic mindset, it is unlikely that the Fed can induce households
and businesses to chase goods and investment through a stock market “wealth effect”
alone, since everyone who owns a home has lost 1/3 of its value to date. By pumping
money into the system, the Fed could be actually discouraging this chasing behavior
and instead stimulate higher savings as the Chinese are culturally prone to do. (this is
the fundamental point that westerners miss when viewing China through the eyes of
western consumerism)
The market is a self-correcting mechanism, with a life cycle of 60-70 years, after which it
must go through Depression to be reborn as a new Bull Market. That’s how the
excesses (and inefficiencies) of the past are wrung out of the economy. An analogy can
be drawn to pruning back an old fruit tree ,which has been long neglected, and begins
to bear few fruit. Once pruned, new growth revives the tree to bloom and bear
abundant fruit once more. If you have ever noticed, every commercial orchard and
vineyard gets pruned yearly to maximize its yield.
For the identical reason, Bear Markets renew and recycle previous inefficient
investments, thus freeing up capital for higher value projects. This renews the economy,
so that it can continue growing and expanding. Contrary to pruning back the dry and
weak branches, the Fed seeks bring back the fruit yield by over-fertilizing (stimulus),
while ignoring its structural weaknesses. Without the necessary pruning the new growth
resulting from excess fertilizer is unhealthy and structurally defective, branches tend to
break-off of their own weight. What’s more, if the over-fertilization continues, the tree
becomes poisoned from fertilizer salts, both the leaves and the flowers turn yellow and
fall off, never progressing to fruit. Without leaves to trap the sun’s energy the tree
begins to starve. Meanwhile, the tree still strains to support half-dead weak, old
branches that have long lost their ability to efficiently carry nutrients from the roots to the
leaves and nor the photosynthesized energy back to the roots. Soon the over-fertilized
tree begins to die, now much more of the previously healthy branches must be pruned
back in order to save the tree. So instead of bouncing back the following season with
abundant fruit, it now takes several seasons of low-yield before the tree comes finally
comes back, and even more to get back to the previous level of high fruit-yield. Likewise
the dead, sickly branches of this economy must still be pruned, while Fed’s constant
stimulus now means the tree has been “stimulus-poisoned” and must now be severely
cut back – this is accomplished by a market Crash - commensurate with the amount of
stimulus that must be cut away before the economy can begin to recover.
Age of Uncertainty
As we know from the work of Carmen Reinhart and Kenneth Rogoff, spelled out in This
Time is Different, (a phrase invariably heard from irrationally exuberant investors headed for a
fall) once a nation’s debt increases to 90% of GNP, economic growth begins to be
choked off. When debt reaches 100% of GNP, default is virtually assured. According the
Organization for Economic Co-operation and Development (OECD) as the result of
liabilities driven by the Financial Crisis, including Fiscal stimulus, compounded by
declining tax base, general government debt is estimated to increase to 96% of GDP
this year, and 100% next year. Concurrent sovereign debt default by several, if not most
of the 33 OECD countries, will usher in an “Age of Uncertainty”.
As you see in the below, in the two previous instances that deficits climbed this high,
were in times of war, indicating a temporary increase in government spending, which
was immediately reversed with the end of the war. Meanwhile, tax receipts would surge
as the nation sought to replenish an inventory of consumer goods unavailable or in
short supply during the war, creating near full-employment. Our current deficits do not
have an end date, and as they begin to grow faster than GNP, the ability to service
ever-ballooning interest payments makes the probability of default foremost in lenders
minds.
For clarification, deficit is the yearly amount spent in excess of tax revenues, while the
total deficit accumulated equals the national debt.
In sharp contrast to the US, which so gallantly spends wads on direct foreign aid, and is
waging two “no win” wars simultaneously, while footing the Lion’s share of the bill for the
IMF, the United Nations the World Bank along with a host of other International
Organizations, China with its huge reserve surplus, and zero deficits, wages no wars,
and only provides easy credit to support expanded exports and win international
contracts. It doesn’t take a rocket scientist to deduce why China as the next world
super-power will dwarf the US. From the looks of the way China has been acting, most
recently with respect to detained Fisherman by Japan, China is bound to become an
oppressive bully.
The developed countries are essentially in the same predicament as Greece was last
year, the only difference is we are getting by on a “reputation” for being financially
secure, rather than the current reality of “banana republic” finances. The market is
bound to suddenly perceive the debt of some sovereigns, like the US, as risky. By
triggering escalating interest rates, default becomes self-fulfilling, as debt spirals out of
control, compounding at ever higher rates, so that principle can never be legitimately
repaid.
Rather than slow growth - Severe Economic Contraction
As opposed the current expectations of slow, steady growth, this year will likely end in
severe economic contraction. While linear projections are all that are currently
envisioned, markets react in non-linear fashion, approximating cliff-effects, where the
US dollars is a “safe haven” repository one day, and falls off a cliff the next. Due to
expectations of rapid losses in purchasing power, no one will want to hold dollars and
so mark the end of its safe haven status. As we learned from supposedly AAA-rated
MBOs, (Mortgage-Backed Obligations) market signals in the form of interest rates,
credit default swap spreads and credit ratings can be erroneous and highly deceiving.
In fact, since we are unlikely to go back to the gold standard unless and until the Fed is
abolished, there has never been a more propitious time to unload the gold in Fort Knox.
The government has been sitting on 261m ounces of gold since the Great Depression.
At $1300 per ounce, that’s worth $340bn, which used to reduce the national debt by
2.5%, would trim the budget deficit by $15bn annually, from a reduction in interest
payments. Actually not selling that gold would be a major blunder, the IMF has already
completed selling three-quarters of its 403 metric tons of gold. It only makes sense to
follow their lead. With the proceeds of a sale today, the US could buy back likely ten times as
much gold at the trough, and enable the US to go back on the gold standard.
Just because the market believes the Fed has things under control, does not mean that
it does. On the contrary, guided by a megalomaniac, most of the time the Fed is
operating in uncharted territory, based on nebulous Keynesian-Utopian assumptions
that have been proven wrong time and again. The notion that “Bernanke knows better”
is as delusional as “this time is different”.
Obviously, inflation expectations are being manipulated by the Fed. “Hope” of QE2 has
moved the focus away from fear of a double-dip recession and deflation, to encouraging
the risk trade once again. Central bankers, working in concert, cannot put the broken
world economy back together again, anymore than if it were Humpty Dumpty after his
great fall, these central bankers are merely hoping and praying for a miracle. Highly
indebted corporations and households are not as easily swayed as traders, to go back
to their previous spend-thrift habits, instead they continue prudent paths of deleveraging
in the case of households, while corporations are holding on to their cash in anticipation
of needing it. In essence, these false expectations are transitory at best and due to be
dramatically and violently reversed.
Pension’s security - a thing of the past
According to a recent study by the Northwestern University’s Kellogg School of
Management and the University of Rochester, recession–related years of falling tax
revenues in big US Cities and counties have resulted in a $574bn pension funding gap,
in addition to $3,000bn of unfunded pension liabilities at the municipal level. Given that
bondholders would be competing against pension beneficiaries for scarce government
resources, the combination has raised serious concerns of defaults in the municipal
bond market. At current asset levels, Philadelphia can only pay promised pension
benefits until 2015, while Boston and Chicago would deplete their existing funds by
2019. According to the study, every household owes an average of $14,165 to current
and former municipal employees in the 50 cities and counties covered by the study. In
New York City, San Francisco and Boston the totals are more than $30,000 per
household and the list tops out at $40,000 in Chicago.
What this all means is that public pension security is a thing of the past, as the market
drops 90% and bonds lose most of their value, private retirement plans will be hit just as
hard. There can be no recovery for pensions, and a nation of pension-less retirees,
dependent on an already bankrupt social security system, becomes a tragedy. Only
when you begin to imagine a nation with 25-30% unemployment and another 30%
impoverished retired, can you begin to fathom the severity of the second Great
Depression.
Foreclosure Moratoriums
Foreclosure moratoriums are no more than a last ditch attempt to win votes, as we draw
nearer the November elections. Currently about 8% of all loans or 4.2m are three
months overdue, or in foreclosure, and about 1/3 of existing home sales are those
recently foreclosed. Until this overhang in the market is cleared, there can be no hope of
even modest, sustainable prices increases. In the meantime, banks’ willingness to
underwrite mortgages is certainly being tested, if not permanently diminished by
litigation, carrying and opportunity costs on these delayed foreclosures. While these
people in foreclosure are temporarily getting free rent, it is highly unlikely that they will
be able to come up with the money to remain in these homes once the moratorium is
lifted. In the meantime, banks are losing money and so are real estate agents, lawyers
and title insurers who could be selling these homes. The Austrian School would
certainly side against such distortion of free markets, warning that such meddling, like
the Fed’s, only lengthens the road to housing and overall recovery.
Industrials Export Earnings
Due to their export-focused exposure and the 7% weaker dollar, industrials have had
the strongest gains to 3rd Q earnings “expectations” of any sector. According to
estimates compiled by Thomson Reuters, an average of 10% increase in sales are
expected by companies with more than 50% of revenues derived from overseas, versus
a 4% increase in groups with mostly domestic revenues. Compared with optimistic US
growth prospects of 2.6%, the IMF estimates emerging markets growth of 10.5 % for
China, 9.7% for India, and 4.1% for the Middle East & North Africa. What’s more, in the
BRICs there’s a tremendous population shift out of poverty into the middle class
occurring, which drives demand for construction, transportation, consumer durables and
packaging. Of course here’s another example of linear projections in a cyclical world.
With the dollar surging those 3rd Q gains will likely be totally reversed in the 4th Q after
currency translation.
Technical Notes: The rest of our charts
In the SPXU, the inverse S&P, the directional change should begin with a Diag II, to
indicate a big upside ahead, which applies to all our inverse funds in all our inverse
funds.
Above you see the a-b transition in detail needing perhaps an hour on Monday to
complete, before reversing. Notice the first of likely several Diag IIs in inverse funds
indicating a long move up.
Levered bonds, TMF, have the identical chart as the unlevered shown above. The Diag
II means a long way down after the upside to complete wave 2 at the 54, marked by the
green dashed line, to close the uppermost gap in the chart. The dashed blue line in the
RSI, indicates the low on Friday was equal to the previous RSI low in April so it will
likely hold. ( you will notice I use the word “likely” allot, since forecasting is all about
probabilities, picking the most likely outcome is the winning strategy)
FAZ, inverse financials, is not so easy to make out from the daily chart below, where a
Diag II appears to be in process, but the subsequent count is not clear. However in the
15-min chart below…
We see that a Diag > must be followed by an a-b, so 5 waves up are still ahead. A gap
up at the opening could easily take us to fill the highest gap at 13.8, or 13.75 to make
sure we sell it. Afterwards, the min downside to complete the Diag II is 12.1, so at 13.75
traders sell all, pension sell half of (2/3) = 1/3, since there may be less than the min 3
days settlement before we bounce back up. (13.8-12.1)/13.8 = 12.3% is the opportunity
gained by trade. At 12.1 we also want to increase our allocation to FAZ with the
proceeds from rebalancing, after eliminating TYP and SCO.
In DRV above, the inverse Real Estate, wave (iii) of a Diag II should reach 28 to overlap
the first touch point of the Diag > on the upper left, to which we must swiftly retrace, this
coincides with the uppermost gap in the chart to the same level. We know it will be a
Diag II since wave ii dropped below the origin of wave i at 21.3, which can only happen
in a Diagonal, since it breaks Elliott’s rule. As you see from here on out we will have a
preponderance of Diag IIs in inverse funds to indicate the beginning of a big upside
ahead. As in FAZ once we reach 28, we likely drop back to 23.3 to complete the Diag II
before continuing higher to wave 1. The opportunity gain of this trade is 16.8% for
traders, 5.6% for pension.
EDZ inverse Emerging Markets, although a smaller Diag II has occurred in wave i,
another larger one is highly likely where wave (iii) reaches 26.9, where we sell, and buy
back at 23.03, where wave (i) of the Diag II overlaps. As this structure reveals itself we
may decide to sell all at 26.9 for traders.
TZA has the upside targets indicated by the green dashed lines, we have sell limits of
26.5 and 29.3, which we may adjust if necessary.
In SCO we will close out positions in SCO at 14.1 our final exit. Since SCO is slightly
out of phase with the other ETFs often by several days, it is better to buy the new
allocation at the low than to attempt to top tick this one.
We will sell all TYP limit 35.4, the likely wave (iii) high of the Diag II, before it drops back
near the low, and employ the proceeds opportunistically elsewhere.
Best regards,
Eduardo Mirahyes
Exceptional Bear