Check out my latest CNBC appearance.
Bottom line is that the worst can become first and first can go to worst.
We get right into into it. Check out the page on CNBC here. Bottom line is that we are not out of the woods yet and price momentum means nothing to another half million out of a job. We are entering the ‘dry’ season that goes from May through October. Not a great time to jump in. . . But, Scott was a great analyst to be interviewed with. I disagree with his points, but respect the work he puts into it.
Today on CNBC I was talking about the Euro/Yen relationship. First, I have to give all the credit to Helene Meisler for pointing it out. You see, I worry anytime I have an original thought! It could be a trap my ego set up. So, the currency pair started to make this perfect head and shoulder pattern over the last few weeks, but I needed to be sure it was going to break down. The bottom line is that until you have a chart that is valid, you are on your own. On Monday, the breakout happened and today I took on a position in FXY.
I see the strong Yen as an early sign of weakness in the stock markets. But, I was reminded that it usually takes a few weeks to work into the stock markets. So, instead of using the indicator to short the indexes in general, I just went long Yen. Now, I have also started to short the retail services sector, but that is more of an observation that this group is way overextended. Will the Yen be the tell this time? We will know in about 2-4 weeks.
I still think we will retest the March lows, but it will take some serious damage to get the correction going and we probably will not see a lower low. The bank stress tests are surprising. I am not encouraged when the rooster says there are a few hens missing and needs more capital. Also, we are close to May, which is the start of the ‘dry’ season until November if you are into the Almanac stuff. The FOMC meeting is tomorrow and all I know is that it will bring volatility. A nice change from the last do nothing days.
See Lee Munson discuss his currency strategy, oil, and gold on CNBC.
No, this is not a reference to HBO’s True Blood, a favorite of mine (I can’t believe we have to wait until June for season 2). I am talking about the V formation of most chart patterns including the S+P 500 over the past six weeks. The issue is that V’s are not generally found in nature. Usually, we get a W or something that will either fill in a gap or at least try to retest the bottom of the V. Seven weeks ago I went on CNBC and said to raise some cash because we could see the DJIA get to 6000. Boy was I wrong! I no longer think that will happen, but DJIA 6300-7000 would take very little in this environment. Today we see CAT hit their first loss in 17 years and some M+A activity is heating up. This is good, not bad. Just keep in mind this just means we are starting to get to the bottom of the economy when solid firms go into the red and mergers of equals start popping up. It does not mean it is over, though.
In the end, I would still rather wait to see some consolidation and keep trading short term until we either retrace more than 3-6% or can go sideways for a while. Even if you don’t like the money the government is spending doesn’t mean it won’t work. The problem is that it will debase the currency. So, check out the potential double bottom on the gold charts, remember that people will still need office space in Manhattan, and keep some cash around for a mild to wild pullback. Just don’t be afraid to dip your toe in when it seems the world starts looking like ‘the end’. You generally only get 2-3 times to jump in and after that you are a broken record or a clock that is only right twice a day.
