Ortega y Gasset's Obras Completas condensed to a single comic strip

Bought USD/CHF and USD/CAD

Also added to my positions in USD/NOK (long), AUD/JPY (short) and XAU/USD (short gold).

No stops on any of this stuff, it's a buy and hope, err, hold play. While I can tolerate a moderate drawdown, I'm fairly levered up in the trading account now, so I doubt I'll be taking on any more positions for a while. I'll just be sitting on my hands for an extended period.

GLD -- an unprecedented low-volume and low-volatility rally

Do you smell something?

US Dollar -- Seasonal Index

Here's how the trade-weighted dollar (TWEXM on FRED) has performed over the course of the year (on average) since 1973:



You can see that the value of the currency has a tendency to decline about this time of the year. Personally, seasonality, whether in currencies or anything else, doesn't concern me much, but it's still worth the time to draw up the chart.

EMB -- Emerging Markets Bond ETF

EMB is another key symbol to put on your radar. The chart is currently showing some weakness. Would that be due to the general consolidation in the overall bonds market, or is there something intrinsic to emerging market bonds that is starting to concern investors? It could be something of both, I suppose.

Let's have a look at the performance of EMB relative to U.S. Treasurys. We'll use IEF as our denominator, since the two funds have comparable durations.



You'll notice that this EMB:IEF ratio looks fairly similar to a typical stock market index chart. Much more deterioration in the ratio would be a pretty good clue that the 'risk' trade is back off again.

Here are the top holdings of EMB, by country:

Russian Federation	9.19%
Brazil	8.86%
Turkey	7.94%
Mexico	7.91%
Philippines	7.10%
Indonesia	6.25%
Colombia	4.54%
Venezuela, RB	4.51%
Peru	4.12%
Kazakhstan	3.35%

CHL and VOD

CHL broke a well-defined support level on high volume today, as Vodafone (VOD) said it is selling about $6.6 billion worth of shares of the company.

While I can't blame Vodafone for selling, I think it's crazy that they are going to use the proceeds for a share buyback. Well, 70 per cent of the proceeds, according to the newswires. This is a company that is like $50 billion in debt.

Somebody should look into this Vodafone company. $50 billion in debt, and they're out retiring shares and paying out 7 per cent dividends? I guess I'm old fashioned, but that just doesn't seem right.

$REIT index

For all the negative talk about real estate, REITs have been some of the best performing issues over the past year. However, this chart looks toppy. Nothing for sure, but there is definitely the potential for a reversal soon. We'll keep it on our radar.

Gold CROC (PM Fix)

I've revised the formulation of this indicator yet again, but I'll spare you the boring details. (If you actually want to look at the formula, email me and I'll send you the spreadsheet.)

The point of the above chart is that overall momentum in gold has been decelerating ever since the high in December last year. This persistent deceleration needs to be reversed before I can really change my overall outlook. Oh, and a PM Fix above 1262 would help too.

Below is a longer-term chart of the gold CROC.

Dollar index (equal weight)

The chart below shows the performance of the US dollar versus an equally weighted basket of six other major currencies. 100 = January 1999.



I've posted similar charts before, but this one shows more history than the others. I still want to be positive on the dollar, but I'm getting kind of irritated at this point. The dollar (basis this index) absolutely has to hold these most recent lows and turn higher in the very near future. Looks doable, but it's time to see some action.

It didn't bother me that the yen was outperforming the dollar, hitting all them new highs and all. I've actually been bullish on the nippy for a while now, and have enjoyed its appreciation versus some of the other currencies. But now the Swiss franc is the new nippy? Gimmie a break. Yeah, I get the logic of the situation, but still, seems kinda fishy to me.

S&P 500 relative to money supply (M2)

This is just a different way of looking at the big picture. From the '60s to 1982 the ratio dropped (secular bear market) while from '82 to 2000 the ratio climbed (secular bull market). And of course there is the decline from 2000 to last year.

These days the ratio is right around the 50 year average (600 month geomean). Roughly, the stock market would have to fall by about half, or the money supply double, or some combination of the two, to move the ratio back down to the lows of the early '80s.

500 year cycle -- search of the day

Some joker at "Sempra Energy Trading" arrived at Trend & Value today by searching for:

500 year cycle

Is this a joke? And how does one even make a joke when entering a search query?

Anyway, guess what post the googler landed on?

http://trendandvalue.blogspot.com/2008/11/666-s-500-and-13-year-cycle.html

S&P 500 -- daily chart

Reviewing the alchemical* composition of the stock market, I see a fair chance of a top next week at around 1115 to 1118 on the SPX.




*The first few lines of an unfinished poem inspired by The Diamond Age:

To seek the Alchemist

His mind alone conceives the bond

Enchanted keys to lands beyond

Update: I adjusted the speedline to the equivolume and that's kind of indicating a push as high as 1130...



I'm not sure how to interpret this. Certainly anything above 1130, particularly on a closing basis, would be a good indication that the market is prepared to rally longer than I currently have in mind.

Dollar Sentiment ($USD:$GOLD)

The ratio still hasn't hit a new low, but I have to say the chart looks fairly crappy these days. It's one of those patterns that could turn the other way on a dime, but will it? Maybe I should just go back to being my old gold-bug self again. Seems easier, and besides, everybody's doing it. I'll give it some consideration. (If I could just figure out how to fade myself...)

"an inflation rider"

6 Ways Retirees Can Beat Inflation

That's the headline of a Forbes article featured on Yahoo. Where are the articles urging retirees to protect against deflation, I wonder? Inflation sells, I guess.


(Get it? Inflation sells!)

TLT, TLH, IEF -- Treasury Trend Channels

So far bonds and notes are still within the main uptrend. Drops below the trendlines on these ETFs would be a good set up for a buying opportunity, but so far no one's changed the channel.





update (3 p.m.): Below is is a little different version of the trend channel idea, based on an equivolume chart of TBT:

What happened to platinum?

I've never noticed this metal trend sideways for such a time. Over three months now. Probably see some action here soon, I'd think.



Trade the breakout, or breakdown. Whatever comes along. (Not that helpful, I know. But seriously, if you need help on this one, then really, you might need more help than you realize.)