Flash Crash Revisited

The SEC blaming the flash crash on traders being "spooked" by Waddell and Reed Financial Inc.'s over-sized E-mini S&P500 Futures trades (as reported by Bloomberg and pointed out to be total BS by ZeroHedge) seems to lack any credibility.  On the opposite end of the spectrum, Max Keiser, former options trader and banker believes the flash crash was engineered by banksters to extort a favorable outcome on finreg from Congress.  Which version is really true, or does the truth lie somewhere in between these opposite extremes?  Here is Max Keiser's interview with Alex Jones where he expresses his view that the flash crash was "financial terrorism" in his words:

Silver and Gold Suppression is Failing on Options Expiration

Bob Chapman of the popular long running The International Forecaster newsletter says on the Alex Jones radio show on 9/24/2010 (options expiration day is Monday the 27th) that he is surprised that gold has not sold off (temporarily) this week prior to options expiration.  Large commercial banking institutions having large net short positions in gold and silver bullion such as JP Morgan, Goldman Sachs, Deutsche Bank and HSBC have billions to lose if the call options do not expire worthless.  Mr. Chapman has long been an advocate of gold and silver as a store of wealth in uncertain times and predicts longer term the run should continue (silver to $30 "easily").

As the general public starts to wake up and buy in to the gold and silver market, and the big banks are no longer able to keep the price down watch out.

Gold and silver can go up in BOTH a deflation AND inflation

Mike Maloney, author of the popular book Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future says silver rising to $100 per ounce is a "no brainer". He first predicts a deflationary crash (and even $10/barrel crude oil) FIRST based on head and shoulders patterns seen in the S&P 500 and various other world stock market indexes. Finally though, hyperinflation will appear, per Maloney. In either case, Mr. Maloney predicts that gold and silver will both rise regardless.

Resist the Brainwashing, Boom and Bust Cycles are NOT "Normal"

Karl Denninger of Market Ticker fame, has an excellent analysis for what is wrong/broken with debt-based interest bearing, and inflationary, monetary systems in general (such as ours and most of the other countries in the world which have the privately owned central bank model). Per Karl, if you target inflation at a level higher than 0%, you are guaranteed to get the boom/bust roller coaster.  Did you realize that the US Treasury has the power to issue non-debt backed currency?  The Treasury does this in small amounts but the vast majority of money requires a loan to be created in order for there to be money.  For almost every dollar printed is attached an interest payment we the American taxpayer must make to some bankster somewhere!  Why do we purposely pay the interest surcharge on our own money which the Constitution actually allows us to print ourselves other than to enrich the international banksters who set up this self-serving scheme?  An interview of Karl Denninger by Bill Still, award winning historian and documentary filmmaker shows Karl's view on the topic:

Interview with Karl Denninger by Bill Still

The FOMC made an astonishing statement yesterday (9/21/2010) that our inflation was actually too low and therefore they were more concerned about deflation than inflation.  Traders took this to be a signal that it would be full speed ahead with the printing presses and guess what direction the US dollar took in response?  Down.  Does the Federal Reserve really serve we the American people or some other interest/power?  Since the Federal Reserve's inception in 1913 we have had nothing but huge inflation, a devaluation of our dollar by almost 95 percent (per the US inflation Calculator site) and wild boom/bust cycles, not price stability, as is one of the Fed's mandates.  Once the boom cycle is over and the bubble deflates, ordinary middle classed people lose their assets which are bought up by robber barons or banksters for pennies on the dollar.  This is happening right now as it has historically.  Middle classed people are losing their jobs and homes to bank foreclosures and small business entrepreneurs are being forced out of business.   Meanwhile the multinational mega-corporations/monopolies are engaging in an M&A boom and consolidate their assets and power.  Indeed only the big multinationals with their huge cash hordes or international mega-banks can survive Obamanomics.  (Yeah that makes one question too, whose side President Obama on?!)

So how can this be fixed?  Following is an excellent documentary by Bill Still which goes over an entire history of our money system and ends with how we might go about fixing the beast.  The content of this video is better than the dumbed-down history I got in school, which was only comprised of useless dates, names and places and which taught wrote memorization or regurgitation of establishment propaganda only.

The Secret of Oz by Bill Still

Is it really a coincidence that North Dakota, which is the only state in the union to have a state owned bank which serves the interests of the people of that state, rather than serving private and/or shareholder interests as the Federal Reserve does (yes, the Fed was actually put in to place by a handful of powerful bankster families, who originally owned all of the private Federal Reserve shares, in order to get a monopoly on America's money supply, not for our benefit as is pretended) has a 1 billion dollar budget surplus and also has the lowest unemployment rate in the nation of 3.7% as of August 10, 2010?! [1,2,3,4,5]  I think not.  Note that I am not making an endorsement of public versus private ownership in all cases as obviously that is not the way to go but merely pointing out that who controls the money supply and for what purpose is the important thing.

After coming to the realization that we have been deceived and hoodwinked for a hundred years, I think it is still possible for us to save ourselves now if we can get the right people in to office to push forwards good ideas. Click here for how you can help or for more information.


Sources:
_______________________________________________________

1. What is North Dakota Doing Right? Rebecca Reisner, Bloomberg Businessweek
2. Web of Debt Ellen Brown
3. Get of of Pottersville:  The North Dakota Model for Capitalizing Community Banks  Ellen Brown, Huffington Post
4. The Growing Movement for Publicly Owned Banks Ellen Brown, Huffington Post
5. Job Losses in North Dakota?  Not in North Dakota.  A Stimulus Plan that Really Works  Ellen Brown, Huffington Post
6. Towards a Solution to the Debt Crisis in California: The State Could Walk Away and Create Its Own Credit Machine Ellen Brown, Huffington Post
7. The Secret of Oz Bill Still
8. The Still Report Bill Still
9. The Market Ticker Karl Denninger
10. The Market Ticker YouTube Channel Karl Denninger

Federal Reserve Wants to Reflate (Loot Us) Per Peter Schiff

What is the significance of the Federal Reserve's statement today, as it relates to the US dollar?  I can't really say it any better than Peter Schiff:

EUR/USD is 7% Backed by Gold What Backs the US Dollar?

Per Bob Chapman of The International Forecaster in a recent interview with The Gold Report, the EUR/USD was originally backed by 15% gold but that has since dropped down to 7%.  For whatever reason the realization that the Euro actually had some gold backing astonished me.  In fact it is the only fiat currency which is gold backed.  Does this make the Euro more sound structurally than the US dollar?  This made me wonder, what the heck is the US dollar backed by?  Oil, in essence, since oil is forced to be transacted in US dollars.  A deal was concocted in 1973 by which Saudi Arabia, the world's largest oil producer, agreed to trade their oil exclusively in US dollars in exchange for protection from its enemies and the right to purchase US arms.  As a result, OPEC as a whole did the same thing and started trading their oil exclusively in dollar denominated terms.  The phenomenon by which oil dollars are repatriated to the US in the form of investment (often US Treasury Bills) or purchase of goods and services is called petrodollar recycling, which does lend intrinsic value to the dollar.  Many theorize that the attack on Iraq was not only a ploy to gain control over the oil resources in that region but also to protect the reserve currency status of the US dollar, as Saddam Hussein had started trading his oil for Euros in protest of sanctions.  Iran has as of February 2008 opened its own oil exchange (Iranian Oil Bourse) where petrochemical products and crude oil are traded in many different currencies except the US dollar. [2]  Recently there was speculation that Israel (bitter enemies with Iran) might attack Iran before it got its first nuclear power plant online but luckily this did not happen.  In fact a  group of seasoned senior intelligence officers (Veteran Intelligence Professionals for Sanity) anticipated there might be a strike and signed a petition to persuade President Obama to discourage any such action by Israel beforehands. [1]  However, it makes sense from the neoconservative bent of maintaining US hegemony for Iran to be on the hit list for an invasion (both to control its third largest oil reserves in the world and discourage non-dollar based oil trading).  In fact at least one Iranian commander who believes that they are in still in danger of being attacked by the US in the near future. [3]



It occurs to me that as currency traders we can not afford to ignore the implications of unseemly oil related politics.

1. If Iran is attacked for whatever underlying reason, the US dollar will see a massive flight to safety, the stock market will crash and oil will spike up big, as well as gold.
2. If OPEC as a whole, or more and more countries start to trade oil or other commodities in other currencies other than the US dollar, the dollar will sell off.
3. A recent report by a German military think tank leaked to the Internet predicts peak oil in 2010 with the effects to be felt 15 to 30 years later. [4]  Granted, the peak oil predictors in the past have had terrible timing and have not been right yet. The implication is higher oil prices and an economic downturn.

Sources:
_______________________________________________
1. VIPS Sends Memo to Obama Warning that Israel May Bomb Iran "As Early as Next Month" Tyler Durden, ZeroHedge
2. Iranian Oil Bourse Starts Trading, Sans Dollar Contracts The Prudent Investor, SeekingAlpha
3. Iran on Verge of US-Led War PressTV (First Iranian international news network)
4. German Military Braces for Scarcity after 'Peak Oil' John Collins Rudolf, New York Times Green Blog 

Trading Books

Forex, Technical Analysis, Chart Patterns, Harmonic Patterns, Elliott Wave



Automation, C#, .NET, MQL4, Computerized Trading Strategies

$21, $21.37, $22.76, $24 Key Levels for Silver

$21-$21.34 is the obvious area which needs to be overcome for silver to move higher.  My near term targets are $21, $21.37 and $21.76 but I think over the coming years silver can get to triple digits. (Click here for related article).  Bank of America Merrill Lynch has their silver (futures) resistance at $21.50-$22.00, and $24.00 in their latest market analysis report. [1]

Following is an Elliott Wave count I did with monthly/yearly granularity and my measured targets:

The precarious sovereign debt situation and lack of faith in fiat currencies will bolster both silver and gold demand.  With 21% real unemployment we in the US are not going to dig ourselves out of the debt hole anytime soon. Add to that the event risk of the 800 trillion to 1.5 quadrillion worth of derivatives which could explode on us at any time.  Our debt will be monetized and that will debase our currency.  Some precious metals analysts still predict the bull run in gold and silver will continue even at these levels. [2, 3, 4]  Per my analysis in the chart, if this is wave 3 of the Primary Elliott Wave cycle then a continued bull run should last at least several more years (very big speculative guess though).

Sources:
______________________________________________________________________

1. Market Analysis Comment (September 13, 2010), page 5, Bank of America Merrill Lynch
2. Super Bull, James J Puplava CFP
3. Gold Will Outperform Many Fold, Ben Davies, CEO Hinde Capital Management
4. The Battle for $21 Silver Begins, James Turk Free Gold Money Report

Weekly AUD/USD Elliot Wave Counts

Can Aussie hit parity this time?  If white wave (5) is extended it might, otherwise if it ends with turquoise wave 5 that is where there will be a major sell-off.

My strategy is to buy pullbacks until target around .9550 - .9600 is hit, otherwise just wait for those areas.
See related article here.
If you have any insights or suggestions please leave a comment.

Changed my Mind on EUR/USD Long Term Bullish but Can Short Here for Scalp

Longer term, Euro looks much higher, these fractal waves (in white) within the bigger 5-3 Elliot Wave pattern (yellow i,ii,iii,iv,v,a,b,c) give confirmation that the yellow a and b are accurate.  That implies the yellow c wave should at least rally past a.  Even if we only test yellow a that is about 296 pips from current price of 1.3007

Right now however is a bad place to go long since there is a big resistance zone being near a triple 0 (1.3000) and the 61.8 retracement of yellow ac (1.3048).  Also there is a Bearish Gartley developing here on the 4 hour chart so in fact is a short term short signal:

I would be more inclined to buy pullbacks and not trust the short side too much.

US Dollar in Deep Doo-Doo by Elliot Wave Price and Time Symmetry

I did another Frankenstein style analysis where I combined Scott Carney's Harmonic Trader chart patterns with Bob Prechter's Elliot Wave patterns. Historically the huge drop in 2009 of the US dollar index has followed the Elliot Wave 5-3 (12345ABC) model quite nicely as shown in yellow, which includes fractal (sub-waves) development. Also the chart pattern unfolding now in 2010 could also be a Harmonic Trader Bullish Gartley or Bullish Bat formation ([X][A][B][C][D]) which has yet to complete at white point [D]?.

To keep it simple I projected 3 target areas, two based on fibs of [X][A] and an ultimate target which is the symmetric extension of Elliot wave a (small yellow a) where yellow va=bc? (or white [A][B]=[C][D]?
Target 1. .618 [X][A] = 79.73
Target 2. .786 [X][A] = 77.30
Target 3. 1.618 yellow va where va=bc? (or white [A][B]=[C][D]?) = 74.70 by 10/18/2010

Why must yellow wave c terminate ideally at 74.71? Excerpt from Bob Prechter's eBook "How to Call the Market Using Elliot Wave Principle":

AUD/USD Time Symmetry Shows Rally Can Last Until 9/24/2010

AUD/USD appears to be in the last leg (fifth wave) of an Elliot Wave method trading pattern or also the third drive of a Scott Carney Harmonic Trader pattern.  I believe most of the experts would agree both of these systems are mutually inclusive rather than exclusive and hope I have not butchered their stuff here.  What struck me as fitting the model perfectly is that the rallies from AB and CD both last 27 days, perfect time symmetry.  Projecting forwards the patterns should ideally complete on 9/24/2010 having rallied for at least 777 pips from the low point of 4 (assuming that this final wave can go up at least the height of AB).  This leaves 10 more rally days for the Aussie and minimum target of .9550 (or so).

If I screwed up bad please leave a comment :)

AUD/USD Gaps Up 37 Pips in Early Sunday Trading

The initial 37 pip AUD/USD gap up on the open of Sunday forex trading today seems to be in line with bullish Chinese economic data. Some traders are wary though of a possible rate hike to curb inflation. It remains to be seen how policy makers will react, e.g. if they consider the 3.5% CPI (inflation rate) in August to be somewhat of a one-time outlier due to food inflation caused by floods/crop destruction or if they foresee a greater inflationary trend.

Bartering Silver For Food

In the event of a dollar currency crisis (likely), silver will be the perfect substitute/competing currency which can be used to barter for food and other goods as the dollar is no longer able to hold its value.  In fact, there are some stores already which allow trading gold or silver for food and other goods and services.  Many experts advise against numismatic (collector) coins in favor of bullion coins (such as .999% pure silver rounds).  Famous vlogger george4title demonstrates how to use an odd assortment of silver coins to barter for food and supplies in the following video:

Apparently 90% pure silver dimes are a good choice due to their small denomination.

Early Release China Data Favorable to Global Risk Appetite but Traders Might be Cautious of Rate Hike

Overall bullish August Chinese economic figures released after the US market close on Friday (Saturday in China) showed expanding M2 money supply (loan growth) as well as better than expected industrial production and a 3.5% CPI rate (mostly due to food inflation caused by the disrupted shipping and destroyed crops from flooding). [1, 5]  1.7% of the CPI figure results from the food component. [4]

However, the deposit savings rate in banks can not keep up with inflation (the one year deposit rate is 2.25%) so there is a call by some for the government to raise the deposit rate so that savers do not have a negative return.[2, 3]  This might cause traders to be wary of some sort of rate hike announcement next week.

I have therefore switched to a bullish stance on the AUD/USD for now, unless there is some sort of enormous rate hike announcement by the PBOC, which seems unlikely since the August inflation announcement might be considered an outlier due to the floods.

Sources:
_______________________________________________________________
1. UPDATE 2-China economy shows inner strength in buoyant data  
    Zhou Xin and Simon Rabinovitch, Reuters
2. China Should Raise Deposit Rates, Business Journal Cites PBOC Adviser 
    Huang Zhe, Bloomberg
3. China PBOC Mon. Pol. Panel Member Calls For Rate Hike: Press
    iMarketNews.com
4. China Data Wrap: Economy Powers Along, Despite Global Woes
    iMarketNews.com
5. China Aug M2 growth up 19.2 pct y/y, above forecast 
    Eileen Wang and Simon Rabinovitch, Reuters

If China Econ Data Shows Slowdown AUD/USD will Suffer

Traders will be keeping their eyes peeled for the Chinese economic data which will be released Friday evening (tomorrow 9/10/2010), two days earlier than originally scheduled. [1]  If there are any major disappointments or indication of slower growth, risk appetite on a global scale should be adversely affected.   Bloomberg news service sites that there is speculation that the movement of the economic announcement forwards by two days signals that China might tighten deposit rates to "curb inflation of savings by lending". [2] 

The Australian economy is tightly coupled with the #2 ranked Chinese economy and the AUD/USD is poised to take a big hit based on technicals, unless the Chinese economic data remains hot.  If the bear scenario plays out, I am looking for .8790 by 9/25/2010 and .7950 by 10/12/2010 as potential targets.  If point D on this bearish bat formation is invalidated (e.g. if China still shows surprising/impressive figures), a breakout should be able to get to .9400 then possibly .9600.

_____________________________________________________________
Sources:
1. Forex Factory Economic Calendar Forex Factory Web site
2. China Day Ahead: Speculation of Deposit Rate Increase; Tighter Trust Rules Bloomberg News

Robot Trader Short EUR/USD Looking for 1.2440

My EA (expert advisor/trading bot) went short 1.26910, not the best price but I think it can work (this time).  My manual technical analysis based on the 4 hour chart shows projected moves of possibly 1.2440 by 9/14/2010 and 1.2200 by 9/18/2010 if this potential Gartley pattern will complete.

Looking for 10840 on Dow Futures by End of September 2010

If the Dow can hold the 34 period CCI zero line and get above and hold the 10400-10500 area I am looking for point D on this big Gartley to be tested by the end of September (10800-10880).

 When D is hit maybe we will get a that big selloff for the great depression #2

Would you eat Frankenfish (GMO Salmon) Made by ABTX.L?

Although the GMO (Genetically Modified Organism) salmon created by Aqua Bounty Technologies Inc (ABTX.L) which trades on the London Stock Exchange seems like it is more scrumptuous in the following RT News clip when compared to the regular salmon it is placed next to, I do not think I would want to trust my health to genetically modified organisms or the FDA:



On Friday September 3, 2010 Reuters news agency reported that the GMO salmon has been given the thumbs up by the FDA. [1]  The ABTX.L stock not coincidentally proceeded to double the Monday thereafter.  Personally I do not trust the FDA to be unbiased.  The food safety czar after all is former Monsanto lawyer and lobbyist Michael Taylor.  As you may well know, Monsanto is a company known for its GMO crops and bad environmental track record.  Current food is NOT required to even be labeled to show that it contains genetically modified organisms ore require any special testing due to Monsanto's historical undue influence over the FDA. [2]
________________________________________________
Sources:
1.  UPDATE 3-US FDA staff: Biotech salmon safe for eating Lisa Richwine, Reuters
2. You're Appointing Who? Please Obama, Say It's Not So! Jeffrey Smith, Huffington Post

Why Silver Can Explode to $133

The 1980 inflation-adjusted high of silver is $133.61 based on a $50.55 high price and the inflation calculator from the Bureau of Labor Statistics (based on CPI).  I would consider this to be a conservative estimate since the CPI is manipulated downwards by the government to cheap us on social security payouts.  Granted, the all time high price was extreme as it was driven by the Hunt brothers and their friends attempting to corner the silver market.  As is well documented, rule changes by the COMEX/CBOT/CFTC and Paul Volker raising interest rates to curb inflation wiped out the Hunts and crushed the silver price. [1]  Some speculate that the Hunts' punative bailout plan administered under Volker that eventually bankrupted them is the result of the Hunts being on the wrong side of the "Eastern Establishment", e.g. the money power controlled by the Rockefeller family ("arch enemies" of the Hunts per [1]). [2]

I think a similar run-up is possible today due to silver becoming more scarce and the huge short positions against it should fuel a big up move.  JP Morgan is known to have a huge short position on silver and central banks have been known to collude to suppress gold and silver prices for the past 30 years, which has caused an abnormal depletion of the silver supply. [3]  With China encouraging their citizens to buy silver and gold and countries such as India and Russia buying up bullion, there is strong underlying demand for precious metals.

Also, the Fed admittedly is already starting to monetize our debt and will proceed with its QE2 (quantitative easting 2.0) program and investors are seen buying small pullbacks in gold and silver.  It is expected by many that the Fed's policy will necessarily lead to hyper-inflation and that investors will rush in to precious metals to protect their capital.

Traders are looking at approximately $21/ounce on spot silver as a key level for shorts to hold:

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Sources:
1.  "H.L. Hunt's Boys and the Circle K Cowboys" by Larry LaBorde
2.  "MICHAEL GORHAM'S PAPER MONEY MOB!" by Charles Savoie
3.  "Commodities: Hoarding Versus Shorting" by Jeff Nielson