THE YEAR OF THE CAT

This is the Year of the Cat.  

No, I'm not talking about the mysterious cat in the Vietnamese zodiac.  And I'm not talking about the excruciating 1970s album which gave Al Stewart his one and (thankfully) only hit.  I'm talking about a strange creature which stalks the corridors of science simultaneously dead and alive, a feline paradox known in the world of physics as Shrodinger's Cat.  

BULLSEYE - NOW WHAT?

How ONTHEMONEY called the essential turning points, 
in posts and tweets, since our latest crisis began

On October 4th, as stock markets across the world appeared headed for the abyss, as headline writers were dipping their quills deep in red ink and investors were pricing in a Greek vision of financial armaggeddon, I begat a tweet:  

RECESSION 2011

The Economic Cycle Research Institute has, over many years, earned a reputation as the world's most reliable forecasting organization.  Its array of 'black box' leading indicators take the pulse of economies across the globe, with the aim of alerting investors and decision makers to major turning points accurately and presciently.  

GREECE: THE FAT LADY AIN'T SUNG YET

One of the most revered investment gurus of the 1970s and 80s was Bob Farrell, who, as as chief stock market analyst at Merrill Lynch, enjoyed a front row seat during some of the biggest booms and busts of the 20th century.

HOW NOW, DOWN DOW?

So it's a little red box on a stick...
what's the big deal?

Amidst the recent slew of disorientating market swings, I've been keeping a steady eye on some key technical indicators, waiting for a signal to buy for what I suspect could be a multi-month bounce.

TOO EARLY TO BUY, TOO LATE TO SELL

Armageddon headlines are suddenly back in vogue.
Not a single positive story to be found on the Marketwatch front page,
and some of the TV media coverage is becoming hysterical.  

At last!

We began to see signs of true panic today, with a major spike in both the $VIX volatility index and the Equity Put/Call ratio.  This bodes well for a sharp rebound in coming days, which I fully expect to be met with more selling in the weeks to come.

THIS IS JUST THE BEGINNING

FTSE 100 August 4th 2011

ishares Emerging Markets ETF August 4th 2011

Brazil ishares ETF August 4th 2011

France CAC40 index August 4th 2011

Germany DAX index August 4th 2011

US S&P500 index August 4th 2011

Hear that strange sucking sound?  Is it the sound of stock prices swirling down the plughole?  Is it the sound of traders' sphincters suddenly tightening en mass?  Or is it the sound of millions of snoring investors across the world suddenly waking up?

RISK RISES DRAMATICALLY

The third 'Head-and-Shoulders' pattern in three years.
In contrast to June 2010 when I posted a similar chart, mainstream financial media 
don't seem to have made much of it:
if this is an indication of trader complacency, we're in trouble.

Just a couple of days after I posted warning of an on-coming economic train, the world's stock market investors have begun sending out signals of distress like they're tied to the tracks.

EUROPE, CHINA, USA: ON-COMING TRAIN

Sean Egan is a credit analyst who boasts one of (if not the) most impressive records in the business.  




Back in '07 and '08 his boutique credit ratings agency Egan-Jones correctly warned its clients of the impending insolvency of a slew of large institutions, months before their more famous rivals S&P and Moody's and long before 99% of economists and so-called expert analysts grasped the scale of the crisis.

THE CURSE OF THE DOMED HOUSE II (Revenge of the Red Dragon)

The Fire Dragon dance, Hong Kong mid-autumn Festival.
But it may be China bulls getting a roasting in the Hong Kong stock market
this autumn...

In April I introduced my reader to the possibility that stock markets across the world were set for a major top, after discovering a venerable technical pattern in the charts going by the peculiar name of Three Peaks and a Domed House. 

DEJA VU ALL OVER AGAIN...AGAIN.

Source: Market Anthropology

S&P500 hourly, summer 2007 (red) / summer 2011.  

This analog suggests a modest bounce here, then a shocking drop to new lows 
leading to a significant turnaround and major rally.

(Position as of 27th June 2011)

With cries of alarm over Greece now ululating across the financial airwaves, there's a sense of deja vu among some who recall the wild summer market of 2007.

DEAD CAT ON A WILD RIDE

(Flash Player required)

Lakshman Achuthan from the Economic Cycle Research Institute (the world's most reliable forecasting organization) sees an imminent global slowdown

It's been an unusually long time since I posted.  Between travelling, writing and work commitments I've frequently been tempted to 'put my oar in' but, frankly, I don't know that anything I might have said would have added much to the message I've been spouting in these columns for what seems like far, far too long.  

THE CURSE OF THE DOMED HOUSE

It sounds like classic Hollywood B-movie shlock.  




But as world stock markets storm back towards their highs in the wake of the March 2011 'nuclear correction', history may be about to inflict its equivalent of a mushroom cloud on this herd of raging bulls; because while they are busy making projections to sunnier uplands on the Dow, a number of important markets now appear to be forming a major top, in the image of a pattern known to technicians as 'Three Peaks and a Domed House'.

DEJA VU ALL OVER AGAIN

Remember this chart?

I unveiled it in December of last year to warn of a degree of buying pressure which, over the past 15 years, had invariably flagged up an on-coming market correction.

DISASTER, OPPORTUNITY

Japan's Nikkei 225 March 15th 2011:
a two day drop of almost 20%, the biggest since the crash of 1987

On a day when Japan's technicians are risking their lives fighting to prevent a Chernobyl-style nuclear meltdown and the country continues to count its dead, discussions about the stock market fallout inevitably sound misplaced.  

THE COMPLEAT INVESTOR: Part 3

Welcome to the climactic episode of our slow-burning financial thriller: an investment rookie's guide to the simplest, soundest, most consistently successful long term wealth-building strategy any rookie could ever hope to find.  

If you've not yet read Parts One and Two please do so now (this part won't make sense without them) because, if you're thinking seriously about taking the plunge into long term investing but have been uncertain how to go about it, or if you have been scared - or scarred - by the market implosions of the past decade, I can promise that by the time you've finished reading Part Three you're going to be in a position to move ahead and take that step with confidence.

EGYPT'S DEMOGRAPHIC VOLCANO

Source: US Census Bureau                Vertical axis = age; Horizontal axis = population in millions

DANGER: Active Volcano!

STATUES OUT OF SNOW

We build statues out of snow 

and weep to see them melt.

Sir Walter Scott

Yesterday the Office for National Statistics reported that the UK economy shrank by -0.5% in the last quarter of 2010.  The news shocked economists, a consensus of whom had expected UK plc to grow by 0.5%.  Three more months of contraction and the economy will have officially entered another recession...