Month: January 2014

Binary options trading is an exciting new type of investing. Instead of purchasing an asset itself, investors (i.e. traders) can speculate on the direction in which the rate of the asset will move.

What Is Binary Options Trading

When the trader has bought a certain asset as a binary option, the trader has created a contract which gives the him/her the right to buy this underlying asset at the fixed price, within the specified time frame, from the binary options trading brokers. Whatever the binary options are called: digital options, fixed return options, exotic options, each name means the 0-1 nature of the options. Because there are only two possible outcomes in binary options. Both of the outcomes are understood by the trader before making the purchase of an options. A trade on the binary options trading system may look like this: A trader purchases a GOOGLE binary option for $100, with the option that at the end of the day the GOOGLE shares will be higher than they currently stand.. If the prediction is correct, then the trader’s position ended in the money and the profit will be cashed out. Profits range from 85% for standard binary options to 1250% with the GOptions Ladder Options tool. So, if the trader was right, he/she will be paid the $100 + 85% = $185 If the trader was wrong, he/she will get $0. But there are always possibilities such as the round-up, double up, stop-loss and more safeties in binary options trading.

Binary Options Trading vs. Regular Options Trading

There are three major differences between binary options trading and regular options trading (vanilla options). The figure below will explain the differences. These differences have several consequences:

1. The short-term investments have multiple expiry times and are therefore more flexible than the regular options.
2. In binary options both the amount and the expiry time are set from the start. In vanilla options the trader pays per contract and will only profit or lose the amount depending on the number of point difference between the expiry level and the strike price.
3. Binary options trading means that the trader must keep the option upon expiring. Care must be taken when opening a position.However, a lot of binary options trading brokers nowadays are offering the stop-loss function to sell the option back to broker before expiring. GOptions and 24Option offer this.

Binary options trading is a novel and interesting method of investing in the financial markets. Despite being more flexible than traditional (vanilla) options, planning ahead is an important part of succeeding. Another brand new feature with binary options trading are the risk free trades. These are offered to customers of GOptions and the amount of free trades depends on the deposit you make. Read our extended review of GOptions who we believe are the best binary options trading broker at this very moment!

About Jan de Wit

Jan de Wit is your forex and binary options blogger, bringing the best free tips, tools, ebook and more to his subscribers at his site.

By MoneyMorning.com.au

If you want to make a name for yourself in the financial markets, pick a crash.

If you want to build lasting and long-term wealth, pick a bull market and invest in stocks to take advantage of it as it rises.

OK, it’s not that simple or clear cut.

Many people have built a fortune from predicting a stock market bust – Jim Rogers, Dr Marc Faber, John Paulson…er, there are probably a few more.

While that’s an impressive (but short) list, there are two simple reasons why the list isn’t longer. It’s hard to predict a stock market crash, and it’s less lucrative.

That’s why we prefer to invest on the long side. Historically, stocks tend to rise more than they fall, and more importantly, you can make more money from buying stocks than short-selling them…

If you look at the market over the past 40 years it’s easy to come to a simple conclusion: over the long term stock markets go up. We can show you a chart to ‘prove’ it.

This is a chart of the US S&P 500 since 1974:

Source: Google Finance
Click to enlarge

Case proven, right? Not quite. For a start, 40 years doesn’t cover the complete history of stock markets. And second, 1974 roughly coincides with the beginning of the greatest asset bubble in living memory – the end of the Gold Standard and the start of the ‘paper money’ experiment.

So, those are legitimate reasons for caution. There’s no guarantee that this enormous rally will go on forever. But what if the greatest asset bubble in living memory has barely begun? What if this asset bubble plays out for another 10, 20 or 50 years?

It seems unthinkable. And yet, it’s entirely possible…

It’s Hard to Pick These Violent Market Moves

But before we explain why this asset bubble could last many more years, we’ll quickly go over what we mean about predicting crashes and why they’re less lucrative than betting on a bull market.

Predicting a crash is a great way to get people to notice you. Getting it right is an even better way to get people to notice you. There’s no argument that the big names who predict a market crash get more fame than those who predict a bull market.

Why is that?

First of all, it’s hard to predict a crash. An overvalued market can easily become more overvalued. Valuations can keep rising as investors believe earnings will catch up with prices. This can keep going until the valuations become so stretched they become impossible to sustain.

The second reason is that crashes happen quickly and violently. You can see that on the chart above. A crash from beginning to end may only last a few weeks or perhaps a few months.

If you can predict that move and tell everyone about it, it’s fresh in their mind as it’s happening. On the other side, a bull market for stocks can take years, sometimes more than a decade to play out. By the time it’s proven that they’re right everyone has forgotten about it.

There’s something ironic about that, because as rich as you can become from short-selling the market and profiting from a crash, short-selling actually involves investors taking on big risks in order to make finite returns.

From a risk/reward perspective it’s something we’ve always found hard to justify as a long-term investment strategy. Here’s why…

Weigh Up the Risk and Reward

When you short sell a stock the most you can make is a 100% return on your money (assuming you don’t use any leverage). If you short sell $1,000-worth of stock and the share price goes to zero, your maximum profit is $1,000.

Assuming you didn’t use leverage on the trade, you would have deposited $1,000 in your brokerage account as ‘margin’ for the trade. That means you would have made a $1,000 profit on your $1,000 stake – a 100% gain.

If you want to increase the percentage returns, then you can leverage the position. But the maximum dollar gain is still the same.

On the other hand, if the share price goes up rather than down, you potentially face unlimited losses. You could lose two, three or four times your initial investment. That’s a big risk.

That’s why we prefer the long side. To begin with, there are no limits to your gains. If you back the right stock at the right time you can make unleveraged gains of two, three, five, 10 or more times your initial stake.

Now, those gains won’t necessarily happen overnight. As we mentioned before, stock market gains can take years, or even a decade or more to compound into big profits.

But on a risk/reward basis the numbers certainly stack up better than being short.

Don’t Sit Around Losing Money

That’s not to say we object to short selling or think that you shouldn’t do it. If you’re after short-term gains then short selling should be part of your investing toolkit. After all, on any given day there’s a 50/50 chance of a stock rising or falling.

If you’re not short-selling you’re missing out on half the market action. The problem with many short sellers is that they tend to sit around doing nothing or losing money when the market is going up.

So we don’t see betting on falling markets as a way to build long-term wealth. Just look at the Bloomberg Billionaires list. How many of the top 100 wealthiest people have built a fortune by short-selling stocks or businesses?

We can’t see a single name on the Billionaires list of someone who has built wealth that way. That’s not to say no-one has ever done it. But if you’re playing the numbers game, the odds suggest that if you want to get rich (or just build a decent nest egg) your best bet is to invest in good companies and watch your wealth grow as those companies grow revenues and profits.

We won’t pretend it’s without risk, because there are plenty of things that can go wrong. But if we’re right…if stocks continue to benefit from cheap money, and if the cheap money and low interest rate era has further to go, then now remains a great time to buy stocks.

Cheers,
Kris

Special Report: Five Fatal Stocks

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By MoneyMorning.com.au

By MoneyMorning.com.au

Casey Snook’s parents were mad – and understandably so.

The 14-year-old Briton was on a five-day vacation in New York with her mom this summer, snapping pictures of the Big Apple to share with her friends on Facebook. None of that is particularly remarkable, though. The trouble came later, when Casey’s dad got the cellphone bill…

The teenager had racked up $6,000 in data roaming charges, a pretty hefty price tag just for posting some pictures to Facebook.

Casey’s story isn’t an anomaly.

Last year, an 11-year-old Canadian boy rang the register for $22,000 after three days of video streaming on his dad’s cellphone during a family vacation to Mexico. And in 2011, T-Mobile billed a Florida woman $201,000 after her brothers went to town with data usage on a two-week trip to Canada.

These stories seem unthinkable in today’s superconnected world. But the reality is that getting an internet connection while travelling is still the Wild West of the telecom world. That’s why tiny wireless carriers looking to change that could potentially make you a fortune in the process.

Why is the wireless business such a slam-dunk?

Click to enlarge

We have become ravenous consumers of digital information. For the five-year span between 2012-17, mobile data traffic is estimated to increase 13 times, to more than 11.2 exabytes per month. That’s enough bandwidth to transfer a copy of all the content in every academic research library in the United States…2,000 times.

But it’s not just that data consumption is through the roof – people also expect to be able to access that data from anywhere, anytime. That’s why wireless carriers are seeing such a surge in the data volumes that pass through their networks.

The Big Opportunity

There are some real problems with wireless data roaming. For starters, it’s incredibly expensive; while technological advances have lowered costs for most of the technological services we consume, wireless data costs have actually gone up, not down.

Major carriers like AT&T and Verizon have locked down their unlimited data plans, instead charging subscribers for limited amounts of bandwidth per month. If you go over, you pay more.

Cellular data coverage can also be spotty. While the latest LTE towers can now match the broadband download speeds you get from a fixed line, buildings can block signals or make them unusable.

Device availability is another big problem. Select few laptops come with built-in cellular antennas, and even most tablets today aren’t cellular-enabled. At last count, around 90% of all iPads sold are Wi-Fi only.

For travelers – particularly business travelers – those factors present a big problem. When you’re away from the office, especially overseas, turning your email off isn’t always an option.

Wi-Fi solves some of the problem. It’s far cheaper to connect your laptop or smartphone to a hotel’s Wi-Fi network than to connect to cellular data. But Wi-Fi has plenty of detractors of its own – the biggest is that there’s no unified Wi-Fi carrier. Instead, users have to connect to a patchwork of free or paid wireless networks, each with varying degrees of security, speed and availability. It’s not as simple as turning on your phone and hitting the Web.

What we need is a solution that combines the simplicity of an always-on cellular network with the cost and connection strength of Wi-Fi.

Keep your eye on this space!

Regards,
Jonas Elmerraji,
Contributing Editor, Money Morning

Ed Note: The Tech Trend That’s NOT Your Friend…Yet was originally published in The Daily Reckoning America.

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By MoneyMorning.com.au

GOLD: While our immediate bias on GOLD remains higher on correction, the commodity will have to take out the 1,267.75 level, its Dec 10’2013 high to convince the market of price extension. However, as long as the mentioned level continues to hold as resistance the risk remains lower despite the mentioned recovery. On the upside, resistance resides at the 1,267.75 level, its Dec 10 2013 high. A cut through here will create scope for a move higher towards the 1,300.00 level where a violation if seen will turn focus to the 1,350.00 level. Conversely, support stands at the 1,218.35 level, representing its Jan 08’2014 low. This level must hold to prevent a return to the 1,182.33 level, its Dec 31’2013 low from occurring. However, if this is violated it will aim at the 1,150.00 level followed by the 1,100.00 level with a turn below the latter shifting attention to the 1,050 level.. All in all, GOLD remains biased to the downside in the medium term.

Article by fxtechstrategy.com

Article by Investazor.com

The kiwi struggled and managed to gain during the first two days of this week. The price of NZDUSD hit a high at 0.8431 but this gain was quickly erased until the ending of 14^th of January. Even though the NZIER Business Confidence rose to 52, all the way from 38, it wasn’t enough to maintain a higher NZD. Next week’s main important release would be the CPI. Continue reading to see what is expected for the inflation in New Zealand, what are the other economic releases and what are the technical perspective.

Economic Calendar

REINZ HPI m/m – Monday (no hour scheduled). This is the indicator that shows the changes in the selling price of all homes. In November it rose with 1.6% and in December rose with 1.2%.

CPI q/q – Monday (21:45 GMT). In October the quarterly inflation rate was up with 0.9%, with 0.1% above analysts estimations. After the last quarter it is expected to be unchanged (0.0%). A bigger number could trigger attention for the investors the kiwi could gain back some terrain.

Business NZ Manufacturing Index – Wednesday (21:30 GMT). This is the level of a diffusion based on surveyed manufacturers. The December value was 56.7. This is usually a medium impact indicator.

Technical View

NZDUD, Daily

Support: 0.8235, 0.8100;

Resistance: 0.8400, 0.8543.

On the daily chart we can see that the downside move, started on 15^th of this month, was actually signaled by the Shooting Star that made a false breakout above the 0.8400 resistance line. Currently the price got to a daily support level at 0.8235. A close on this time frame under this level could trigger a fall to the next Daily Key Support at 0.8100.

NZDUSD, H1

Support: 0.8235, 0.8200;

Resistance: 0.8300, 0.8310.

On the H1 interval it is pretty clear that the NZDUSD is in a downtrend. The last move down has the 14 periods RSI in the oversold area. This could be a bullish signal for the beginning of next week. A break through 0.8260 would confirm a short term reversal that could target the 0.8300 area. The drop could continue but is important to be careful not to be caught in a throw back.

Bullish or Bearish

The investors’ sentiment and the US economic releases could be of help in deciding whether   bullish or bearish than the economic releases for the New Zealand. But if we stick to the technical analysis after a retrace I would look for strong bearish signals to enter short. This direction is sustained also by the huge Shooting Star drawn on the weekly chart of NZDUSD, as you can see in the image on the right.

The post NZD/USD Forecast January 20-24 appeared first on investazor.com.

Article by Investazor.com

The European single currency struggled to gain terrain last week in front of the US dollar. It managed to hit the high of the week on Tuesday, when the Industrial Production for the Euro Area was posted 1.8%, 0.2% above analysts’ estimation. It was actually the only economic data posted above the forecasts. The rest of the releases were in line or under the forecasts. The CPI was 0.8%, in line with the estimates, but well under the ECB’s target of 2%. The Core CPI rose with only 0.7%. These will, for sure, put pressure on the ECB.

The US dollar was aggressively bought on Friday even though the economic data released for the United States was under estimates. The EUR/USD currency lost almost 1.0% and confirmed the downtrend on the short term time interval. Continue reading this article to see what are the economic expectations for this week and what does the technical analysis says for the short and medium term.

Latest EURUSD posts on Fundamental Analysis:

15 January Wrap Up – Why Did The Market Rally?

EUR/USD – 14 January Morning Overview

Economic Calendar

German PPI – Monday (7:00 GMT). Although expected to rise with 0.1% in November, the actual post was a drop of 0.2%. In December it wasn’t expected any change, but it actually dropped with 0.1%. This month the German Producer Price Index is expected to rise with 0.2%. Another disappointing release might discourage investors in buying the Euro.

German Buba Monthly Report – Monday (11:00 GMT). It would be very interesting to read especially if the report reveals viewpoints which crash with the ECB’s stance.

German Constitutional Court Ruling – Tuesday (doesn’t have a specific hour). The German Federal Constitutional Court is due to announce a ruling regarding the constitutionality of the ECB’s Outright Monetary Transactions policy (OMT), in Karlsruhe.

German ZEW Economic Sentiment – Tuesday (10:00 GMT).  From August 2013 the German Zew has surprised the market with better than expected releases. In November the actual was in line with the 54.6 estimates. This even did not repeat itself in December when the actual release was of 62.0, with 4.7 points above the analysts’ forecast. On Tuesday it is expected to be around 63.4. If the actual release will be in line or above this forecast, the Euro might get some fundamental support. On the other hand, a drop in this indicator could mean another hit for the Euro Area, especially for Germany.

ZEW Economic Sentiment – Tuesday (10:00 GMT). The Euro Area ZEW didn’t have a smooth road like the German ZEW. In October the indicator was in line with the estimates, disappointed in November, but In December was with 7.4 points above the forecast. This month is estimated to rise at 70.2

Flash Manufacturing PMI – On Thursday at 08:00 GMT will be published the French PMI. From August last year each release was under the analysts’ estimates. December’s release was of 47.1, which was under the 49.1 estimated, revised this month to 47.0. This month it is expected to be 47.6, but it will not be any surprise for us if it will disappoint again. At 08.30 GMT the German Flash Manufacturing will be released. After it had October and November in line with the estimates, last month surprised with a 1.1 points higher value, at 54.2. For this week it is expected to be somewhere around 54.7. The Euro Area Flash Manufacturing it is expected to be published at 09:00 GMT. This one had a similar evolution like the German one. It was in line with the forecasts in October and November and exceeded them in December. This month it is expected around 53.2.

Flash Services PMIs – They are noted to have a less impact on the market, but if the differences between the forecasts and the actual releases are big, then they could raise the volatility of the EURUSD pretty fast. The French Services PMI is expected to be released Thursday at 08:00 GMT around the 48.2 value. The German Services PMI was lower than estimates in December, with a 54.0 release. This month was revised at 53.5 and the forecast is of 54.1. The Euro Area Services PMI is programmed at 09:00 and is expected to be around 51.5.

Current Account – Thursday (09:00 GMT). The Euro Area Current Account it is expected to be this month around 19.2B after in December was recorded a value of 21.8B.

These are the most important releases for the Euro Zone next month. We would like to highlight the German ZEW Economic Sentiment and the Flash PMIs to be more important. But as we look at the EURUSD pair and not the Euro alone, we should see what economic releases are scheduled for the United States.

On Monday it will be a Bank Holiday for the United States, on Tuesday, Wednesday and Friday it seems that nothing important is scheduled. Thursday will be the most crowded day as for the Economic releases for the United States and the USD: Unemployment Claims – Exp. 331K; Flash Manufacturing PMI – Exp. 55.2; HPI – Exp. 0.4%; Existing Home Sales – Exp. 4.99M.

Technical View

EURUSD, Daily

Support: 1.3400, 1.3150;

Resistance: 13800, 1.4000;

The price has continued the down move after the Euro tried to comeback in the beginning of this week. The pressure coming from the US buyers was too big to handle. EURUSD dropped around 1% and seem to have drawn a Falling Wedge. This pattern in the current conditions is bullish as long as the lower line will not be broken in the upcoming week. Of course traders will also need a strong bullish confirmation to get in long positions.

EURUSD, H1

Support: 1.3515, 1.3500, 1.3450;

Resistance: 1.3580, 1.3640.

On the lower, H1, time frame we can see that the rally of the US dollar from Friday triggered a bullish signal. The 24 periods RSI went in the oversold area and came back after the price has broken the rejection line of the down trend channel. In this case we could expect a retrace back in the 1.3560/80 area. If the price will break 1.3500 this week then we can expect for the downtrend to continue to 1.3450 or why not, even lower.

Latest EURUSD posts on Technical Analysis:

EURUSD – Short Term Rectangle Pattern

 Bullish or Bearish

My stance would be bullish for the US dollar on the medium term. Even though there will be more economic releases for the Euro Area this week, the tendency could remain bearish. As long as no clear bearish signals will appear it would be pretty hard to change this view.

The post EUR/USD Forecast January 20-24 appeared first on investazor.com.

Excerpted from Elliott Wave International’s market analysis

By Elliott Wave International

On December 23, the U.S. Federal Reserve celebrated its 100th birthday. When legislation creating its existence was signed on December 23, 1913 (in a sneaky move during a holiday week), Congress granted the Fed a monopoly on creating dollars backed by debt.

The ongoing QE program is an unprecedented use of that power. This chart of the Fed’s stated capital of $55 billion compared to its total assets of $4 trillion shows the extent to which the Fed is the focal point of dollar creation and therefore credit creation.

As John Hussman at HussmanFunds.com points out, this ratio puts the Fed’s leverage at a mind-boggling 73-to-1, making the average hedge fund manager (at 2.48-to-1, according to BofA Merrill Lynch’s November survey) look like a conservatively invested widow by comparison.

Only the end of a century-long rise in social mood can explain how exposed to decline the Fed will be in the next phase of the credit crisis. Instead of the stabilizing hand envisioned by its founders, the Fed, by its own machinations, will be the center of instability in an accelerating debt-default spiral. Don’t forget that leverage works both ways, so even a modest further rise in interest rates will sharply deflate the value of the Fed’s asset stockpile.

Despite the Fed’s stated goal in December 2012 to keep long-term rates low via quantitative easing, the yield on 10-year U.S. Treasury notes jumped by more than 70% in 2013. Thus, the Fed faces the possibility of massive losses in the value of its portfolio. The ultimate financial irony is that the lender of last resort has become the borrower of last resort.

In other countries, different entities have emerged to serve the same purpose. In China, domestic credit since 2008 is up 2.5 times, from $9 trillion to $23 trillion now. In a New York Times op-ed column, “Stumbling Toward the Next Crash,” Gordon Brown, the United Kingdom’s former prime minister, points out that this amount is more than the entire commercial banking sector of the U.S.

“China’s growth of credit is now faster than Japan’s before 1990 and America’s before 2008, with half that growth in the shadow-banking sector.” What’s the shadow-banking sector? Basically, it’s loan sharking. “I am a loan shark but a legal one,” explains one “shadow banker” who charges rates of up to 50% a year to “debt-hungry businesses and households” whose borrowing otherwise has been reined in by new government restrictions. With past-due loans at 9.1% and the real estate market cooling, the banker reports that he “is expanding his microfinance business” with loans for weddings, car purchases, small businesses and down payments on apartments.

The base of the debt pyramid continues to expand, but its stagnant core and the impossible demands it is placing on increasingly implausible borrowers reveal that it cannot do so for long.

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Article by Investazor.com

This week Japan posted mixed data on the economic calendar. Monday was bank holiday, but from Tuesday the publishing started. The Current Account, Bank Lending, 30-y Bond Auction, Prelim Machine Tool Orders came in line with the expectations. While the Economy Watchers Sentiment, Core Machinery Orders and CGPI came above analysts’ expectations, the M2 Money Stock, Tertiary Industry Activity and the Consumer confidence disappointed the markets with lower readings than analyst forecasted for this month.

In the beginning of the week the Japanese yen gained some terrain but the appreciation did not last too much because the dollar fought back and closed the week on positive ground. Investors have favored the US dollar even though the economic data posted for the United States this week were not surprisingly good. Most of them were in line with expectations and bellow.

Continue reading this article to find out more about what are the expectations from the macro economic releases and the technical analysis for next week.

Revised Industrial production – Monday (4:30 GMT). This is the change in total inflation adjusted value of output produced by manufacturers, mine and utilities. In December it had 1.0% gain and for next week it is expected to rise with 0.1%. This is usually a low impact indicator, which might not influence to much the USD/JPY currency pair.

Monetary Policy Statement – Wednesday (it is not set an hour). This along with the BOJ press conference will be the highlight of the week. The Japanese Central Bank remained dovish and in their last policy meetings said about the same thing. If nothing will change in their monetary policy then we could expect for the Japanese yen to continue its drop at the same speed or even faster.

All Industries Activity – Wednesday (4:30 GMT). Published -0.2% in December, this week the expectations are of 0.4% growth. Known as a low impact indicator, if the actual reading will be a big surprise, the market might become volatile.

WEF Annual Meetings – Start on Wednesday, end Friday. It contains the statistical data that the BOJ Policy Board members evaluated when making the latest interest rate decision, and provides detailed analysis of current and future economic conditions from the bank’s viewpoint.

Technical View

USDJPY, Daily

Support: 103.82, 103.00, 102.00;

Resistance: 105.41, 106.00, 107.00;

Last week the price of USD/JPY has hit the 103.00 round number level and bounced back to hit a high for the week at 104.91. At this point we can see that lower lows and lower highs were drawn on the chart. Taking this into consideration we can assume that a down trend is in place. But I believe that the dollar could get stronger during next weeks and might even break the current high, 105.41.

USDJPY, H1

Support: 104.14, 103.80;

Resistance: 104.44, 104.90, 105.41;

As we thought and stated in our last forecast of USD/JPY, the price bounced right over 102.85 and retested the ex-support 100 pips higher at 103.80. It didn’t stop there because the US dollar continued its rally all the way to 104.90. In the last trading hours the price of this pair has consolidated between the 104.41 local support level and 104.44 local resistance. A drop below the support could trigger a low term move to 104.14, while a breakout above the resistance could trigger a rally which will retest the 104.90, last week’s high.

Bullish or Bearish

On medium term, I would remain bullish on the US dollar and bearish Japanese yen. A daily close above last week’s high cu trigger a rally to 105.40 or even higher. On the short term, I would wait for the Monday open to see which local support/resistance level will fell first and then select a direction.

Sideways moves are always helpful, but don’t forget to keep an eye open for false breakouts!

The post USD/JPY Forecast For January 20-24 appeared first on investazor.com.

Weekend Update www.thepracticalinvestor.com

January 17, 2014

— VIX has been challenging the lower trendline of its Triangle Formation after making a Primary Wave [5] low on December 26.  Preliminary evidence of a reversal may come with a breakout above its January 2 high at 14.59.  Confirmation of a change in trend lies at 16.06 to 16.75.

SPX bounces above its Ending Diagonal.

— SPX bounced from the upper trendline of its Ending Diagonal, making a new high.  However, it closed beneath its weekly Cycle Top resistance at 1843.40.  The Orthodox Broadening Top, otherwise known as a “Megaphone” pattern, is still the key formation at this juncture.  A decline from this peak through the bottom trendline of the Broadening Top completes the formation and sets up the initial downside target, yet to be determined.

(ZeroHedge) US equity investors have not been this “euphoric” since the peak of the US equity market in 2000. As Citi’s Tobias Levkovich notes, while he is longer-term a believer is the secular bull, one has to remember that there can be a secular run with substantive bumps along the way. No one questions the 1982-2000 equity bull market but there were some awful moments in that 18-year period including the stock market crash of 1987 and the sharp pullback in 1990 as well as in 1998.

NDX closes the week above its trendline.

— NDX closed the week above the upper trendline of its Ending Diagonal formation while making a new high this week.   The 4.8 year rally may now be finished.  Initial confirmation of a reversal would come with a decline beneath the trendline followed by a further decline below the Cycle Top line at 3481.57.

(ZeroHedge)  Following December’s biggest-surge-in-4-years for UMich consumer confidence (though a miss), UMich data has fallen back to 80.4 – missing expectations by the biggest margin in 8 years. This is the 4th miss in the last 5 months as hope for moar multiple expansion begins to fade. Both current conditions and the outlook indices fell (for the first time since October). As UPS would say, confidence dropped because there was too much confidence…

The Euro slides through weekly supports.

.  

           — The Euro declined through its weekly Intermediate-term support at 136.04, closing beneath critical support for the first time this year.  It may be ready to resume its decline this week.   Final support is at 133.19 and 130.92, beneath which the Euro decline may accelerate.

(TheGuardian)  The backdrop was familiar to students of British politics in the 1970s: rising unemployment, weak growth, a disaffected business community, low productivity and high taxes. Hollande did not use the phrase but everybody knew the subtext of his address: France is now seen as the sick man of Europe.

The Yen challenges its Head & Shoulders neckline.

–The Yen challenged the Head & Shoulders neckline at 95.50, but closed beneath it for a third week.  The breakdown to a new low and the inability to close above the neckline suggests a continuation of a Primary Wave [5] in a very strong decline that may last through mid-February.

(Bloomberg)  Japanese companies will brave the yen’s drop to a five-year low against the dollar and invest in foreign businesses to seek growth overseas, said a former top currency official.

The dollar around 100 yen isn’t expensive for Japanese businesses that need to make overseas acquisitions as they seek to expand in foreign markets and diversify their operations, Hiroshi Watanabe, governor of Japan Bank for International Cooperation, said in a Jan. 15 interview.

The US Dollar closed above mid-Cycle support.

— USD closed above its weekly mid-Cycle support/resistance at 80.99, making a new high in the process.  The dollar’s position in the Cycle may now be considered bullish.  The Cycle Model suggests the next phase of the rally may last through late January (possibly longer) that may bring the USD above its inverted Head & shoulders pattern shown in the chart.  Surprised Dollar bears may help make this rally a memorable one.

(Reuters) – Currency speculators increased bets in favor of the U.S. dollar in the latest week to their largest in more than five months, according to data from the Commodity Futures Trading Commission released on Friday.

The value of the dollar’s net long position rose to $22.66 billion in the week ended Jan. 14, from $21.11 billion the previous week. This week’s long dollar position was the highest since July 30 last year, despite a much weaker-than-expected U.S. non-farm payrolls report released on Jan. 10.

Gold closed above weekly Short-term support/resistance.

— Gold closed above Short-term resistance at 1240.53 this week.  Indications are that gold may test the upper trendline of its trading channel and weekly Intermediate-term resistance at 1270.51 before turning back down.  A bearish Cup with Handle formation may be triggered beneath the Lip at 1181.40, so be prepared for that eventuality once gold turns back down.   There are simply too many goldbugs who have called for a bottom to be a valid one.

(ZeroHedge)  Germany’s blowback against gold manipulation is accelerating. Following yesterday’s report that Bafin took a hard line against precious metals manipulation, after its president Eike Koenig said possible manipulation of precious metals “is worse than the Libor-rigging scandal”, today the response has trickled down to Germany and Europe’s largest bank, Deutsche Bank, which announced that it would withdraw from the appropriately named gold and silver price “fixing”, as European regulators investigate suspected manipulation of precious metals prices by banks.

Treasuries retest the Broadening Wedge and Trading Channel tendline.

— USB is at the juncture of its Broadening Wedge trendline (red) and Trading Channel top trendline.  A potential reversal may be in order.  The Broadening Wedge suggests a probable 20% loss beneath this resistance level.  More importantly, the loss of a long term uptrend is in jeopardy, should it decline beneath 127.35.

(ZeroHedge)  Yesterday, when the Treasury released its TIC data early by mistake, the update that China’s holdings rose to a record $1.317 trillion caused a stir. This was confusing, since while China, which as we reported yesterday, now has a record $3.8 trillion in reserves having grown by $500 billion in 2013, has barely invested in US paper, and in fact going back to 2010, its holdings were a solid $1.2 trillion.

Is this the final bounce before the plunge?

— Crude bounced from the neckline of its Head & Shoulders formation this week and appears to be running out of steam beneath Short-term resistance at 95.60.  It appears that the bounce may be over and a stunning decline may be in order.

(Investing.com)   Better-than-expected data on U.S. housing starts sent oil prices gaining on Friday after investors viewed the numbers as another indication of a more robust U.S. economy, one that will demand more fuel and energy going forward. On the New York Mercantile Exchange, West Texas Intermediate crude for delivery in March traded at USD94.65 a barrel during U.S. trading, up 0.58%. New York-traded oil futures hit a session low of USD94.07 a barrel and a high of USD95.06 a barrel.

China approaches its Cycle Bottom.

–The Shanghai Index consolidated just above its Weekly Cycle Bottom support at 1966.79.  There may still be a bounce next week back to the Model resistance cluster at 2126.39 before resuming its downtrend.  Once the bounce is complete, it has a high probability of making new lows.  The duration of this decline may not be finished until late February to mid-March..

(TheGuardian)  Xi Jinping has been installed as head of the Chinese Communist party’s seven-member Politburo standing committee, which makes him the country’s new leader, replacing Hu Jintao. Here are all the members constituting China’s most powerful group of politicians: (see hyperlink)

The India Nifty bounces from Intermediate-term support.

— The India Nifty may have completed its retracement after bouncing from Intermediate-term support at 6147.48 last week.  The decline may now resume and continue through mid-February.  This decline may be deflationary to an extreme, since equities have become thoroughly saturated with liquidity from India’s central bank and simply cannot absorb any more.  Indian investors are leveraged to the hilt.  The potential for a panic decline to the weekly Cycle bottom (4778.21) is very high.

The Bank Index reverses from its weekly Cycle Top.

— BKX  has challenged its weekly Cycle Top resistance at 71.38 on Wednesday before retreating.  The 50% Fibonacci retracement of its 2007 to 2009 decline is at 69.46 and the current Cycle is nearing completion.  The resumption of the secular bear market may be most spectacular in BKX.

(ZeroHedge)  While manufacturing and services PMIs disappointed, the big problem in big China remains that of an out-of-control credit creation process that is blowing up. As we previously noted, instead of crushing credit creation, the PBOC’s liquidity rationing has forced distressed companies into high-interest-cost products in the shadow-banking world. Investors on the other side of “troubled shadow banking products” had assumed that ‘someone’ would bail them out but this evening Reuters reports that ICBC has confirmed that it will not rescue holders of the “Credit Equals Gold #1 Collective Trust Product”, due to mature Jan 31st with $492 million outstanding.

(ZeroHedge)  …one thing that can be quantified (Bernanke’s legacy) and that few are talking about is the unprecedented, and record, amount of “deposits” held at US commercial banks over loans.

Naturally, these are not deposits in the conventional sense, but merely the balance sheet liability manifestation of the Fed’s excess reserves parked at banks. And as our readers know well by now (here and here) it is these “excess deposits” that the Banks have used to run up risk in various permutations, most notably as the JPM CIO demonstrated, by attempting to corner various markets and other still unknown pathways, using the Fed’s excess liquidity as a source of initial and maintenance margin on synthetic positions.

(ZeroHedge)  First the Volcker Rule was defanged when last night the requirement to offload TruPS CDOs was eliminated, and now here comes Europe where the ECB just lowered the capital requirement for its “stringent” bank stress test (the one where Bankia and Dexia won’t pass with flying colors we assume) by 25%. From the wires:

• ECB SAID TO FAVOR 6% CAPITAL REQUIREMENT IN BANK STRESS TEST

• ECB SAYS DECISION ON CAPITAL REQUIREMENT NOT YET FORMALLY MADE

• MAJORITY OF POLICYMAKERS AND TECHNICALS OFFICIALS HAVE REACHED CONSENSUS ON THE BENCHMARK

(ZeroHedge)  With Greek Prime Minister Antonis Samaras settling into his role as EU President, UKIP’s Nigel Farage stunned the “Goldman Sachs puppet” with a 150-second tirade of truthiness he has likely never experienced. Farage sarcastically remarks how Greeks “will be dancing in the streets” at Samaras’ ‘successful’ negotiation on MiFiD reminding him that “60% of youth are unemployed and the neo-nazi party are on the march.” Europe is now run by “big business, big banks, and big bureaucrats,” Farage goes on, suggesting the smarmy-looking Samaras should “rename his party from New Democracy to No Democracy.”

Regards,

Tony

Anthony M. Cherniawski

The Practical Investor, LLC

P.O. Box 129, Holt, MI 48842

www.thepracticalinvestor.com

Office: (517) 699.1554

Fax: (517) 699.1558

Disclaimer: Nothing in this email should be construed as a personal recommendation to buy, hold or sell short any security.  The Practical Investor, LLC (TPI) may provide a status report of certain indexes or their proxies using a proprietary model.  At no time shall a reader be justified in inferring that personal investment advice is intended.  Investing carries certain risks of losses and leveraged products and futures may be especially volatile.  Information provided by TPI is expressed in good faith, but is not guaranteed.  A perfect market service does not exist.  Long-term success in the market demands recognition that error and uncertainty are a part of any effort to assess the probable outcome of any given investment.  Please consult your financial advisor to explain all risks before making any investment decision.  It is not possible to invest in any index.

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By Jeff Thomas, International Man – A Glimpse into the Coming Collapse

Beginning in 1999, we predicted a systemic economic collapse that would take place in the First World and would impact all other economies. We began to list some of the “dominoes” that would fall as the collapse evolved and described that the “Great Unravelling,” as we termed it, would take roughly ten years. At that time, we guesstimated that the first two of the dominoes, a real estate crash and subsequent stock market crash in the US, would begin in about 2005.

We were premature in this prediction, as the first of the crashes did not occur until 2007. And, truth be told, we have frequently been incorrect in the timing of the other dominoes. Whilst the actual events have been predicted correctly, our timing has often been incorrect. In every such case, the prediction has been premature.

Sadly, however, the prediction of the events of the collapse have been almost entirely correct.

We also predicted that, just as a ball of string speeds up its rotation as it rolls along unravelling, so, too, the events of the Great Unravelling would occur more quickly as the situation worsened. Additionally, the severity of the events would increase concurrently with the increase in velocity.

However, none of the above was the result of gypsy fortune-telling, nor did it require the brightest of minds to work out. It is mostly based on the simple assumption that history repeats itself—that the world’s leaders make the same mistakes in every era, because human nature never changes. Anyone who is willing to expend the effort to study history diligently and to be prepared to think in contrarian terms, may develop a meaningful insight into the events of the future.

Back in 1999, of course, the very idea that the world was headed for serious economic calamity was considered ridiculous by most. The unfortunate fact is, most people do truly deal in the present, rarely questioning the future beyond what they consider to be the very next event. The truth of this statement is borne out by the fact that the great majority of people, who have already seen the first half of the Great Unravelling come to pass, still somehow cannot imagine the second half—the more disastrous half—as being in any way possible. Surely, somehow, the governments of the world will fix things.

However, the number of people whose eyes have been opened seems to be growing, and many of them are asking what the collapse will look like as it unfolds. What will the symptoms be?

Well, the primary events are fairly predictable: they would include major collapses in the bond and stock markets and possible sudden deflation (primarily of assets), followed by dramatic inflation, if not hyperinflation (primarily of commodities), followed by a crash of several major currencies, particularly the euro and the US dollar.

The secondary events will be less certain, but likely: increased unemployment, currency controls, protective tariffs, severe depression, etc.

But, along the way, there will be numerous surprises—actions taken by governments that may be as unprecedented as they would be unlawful. Why? Because, again, such actions are the norm when a government finds itself losing its grip over the people it perceives as its minions. Here are a few:

• Travel Restrictions. This will begin with restrictions on foreign travel, including suspension/removal of passports. (This has begun in a small way in both the EU and US.) Later, travel restrictions will be extended within the boundaries of countries (highway checkpoints, etc.)

• Confiscation of wealth. The EU has instituted the confiscation of bank accounts, which can be expected to become an international form of governmental theft. This does not automatically mean that other assets, such as precious metals and real estate will also be confiscated, but it does mean that the barrier for confiscation has been eliminated. There is therefore no reason to assume that any asset is safe from any government that approves theft through bail-ins.

• Food Shortages. The food industry operates on very small profit margins and survives only as a result of quick payment of invoices. With dramatic inflation, marginal businesses (suppliers, wholesalers, and retailers) will fall by the wayside. The percentage of failing businesses will be dependent upon the duration and severity of the inflationary trend.

• Squatters Rebellions. A dramatic increase in the number of home and business foreclosures will result in homelessness for anyone whose debt exceeds his ability to pay—even those who presently appear to be well-off. As numbers rise significantly, a new homeless class will be created amongst the former middle class. As they become more numerous, large scale ownership of property may give way to large scale “possession” of property.

• Riots. These will likely happen spontaneously due to the above conditions, but if not, governments will create them to justify their desire for greater control of the masses.

• Martial Law. The US has already prepared for this, with the passing of the 2012 National Defense Authorization Act (NDAA), which many interpret as declaring the US to be a “battlefield.” The NDAA allows the suspension of habeas corpus, indefinite detention, and the assumption that any resident may be considered an enemy combatant. Similar legislation may be expected in other countries that perceive martial law as a solution to civil unrest.

The above list is purposely brief—a sampling of eventualities that, should they occur, will almost definitely come unannounced. As the decline unfolds, they will surely happen with greater frequency.

But the value in projecting what the collapsing governments may do to their citizens is not merely an exercise in speculation. By anticipating the likelihood of any of the above, the individual may find that it would be prudent to turn off the game on television tonight and spend his time musing on the possibility of what he would do if any of the above events were to take place. (And, again, these projections are not mere fancy; they are actions typically taken by governments as their declines play out.)

Most importantly, if the reader concludes that there is a significant percentage of likelihood that any of the above are coming his way, he would be well-advised to assess whether they are developments that he feels he could live with. If not, he might wish to assess how much time he has before these events become a reality and what he may do to sidestep their impact on him.

Whilst, throughout the First World, the comment, “The whole world is going to Hell,” is becoming common, in fact, this is not the case. Although some countries are in decline, others are on the rise. It is left to the reader to decide whether he will fall victim to coming events, or will use them as an opportunity to internationalise himself.

Editor’s Note: You can find Casey Research’s A-Z guide on internationalization here.