- Current weekly chart formation is a replay of Jul07-Jan08 = SHS top. Back then, the trade worked beautifully. After the neckline break there was a pullback all the way towards 1440 for the perfect trade setup, for a subsequent 10-month bear that took us all the way down to 667.
- The equivalent chart-point this time is at 1265.
- Yes, the original SHS top objective this time round at 1146 has been met and exceeded. But for the new short trade, I am looking at a new downtrend, as opposed to just a short term top to be followed by uptrend resumption.
- Too early to discuss downside objective. Immediate priority is timing and pyramiding correctly into a short position in a low risk high reward location.
- This represents a major shift in my thinking that is going to affect my stance on all the other markets too.
2 comments:
From Jeremy Grantham's Aug11 quarterly :=
"As mentioned in previous quarterlies, the main long-term risk is that after two massive bubbles and two equally massive resurrection programs, the Fed may be out of ammunition. Should more building blocks fall (government bond downgrade and further market declines have missed my deadline) and a serious global double-dip develop, then the pattern of market behavior this time may be more historically typical. That is, instead of quickly recovering, markets will become cheap and stay below long-term averages for several years as was the case
pre-Greenspan. Twenty years is a long time, so most investors think that dipping to fair value for a minute and bouncing is normal. It is, in fact, highly aberrant historically. Markets staying down and washing away a whole
generation’s false expectations, high animal spirits, and excessive risk-taking – that would be normal. In the long run, a prolonged period of lower priced assets would lead to a much-improved, less risky, and less bubble-prone environment. In short, a more manageable world. It would also mean much higher returns from investing at lower prices. Long-term benefits from short-term pain. Just the kind of trade-off that the children in charge now would never make deliberately. But it may well happen anyway."
Its about time to look at short usdcad again. as the usd devaluates, the loonie will rise against it, and now it is at a better rate than past few months.
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