THE DOT - if this turns orange or red be alert

Tuesday, June 10, 2008

There is some trouble ahead

Yesterdays price action confirmed the medium term trends south direction. Especially the financials are in deep trouble since Bernanke created another problem for the balance sheets of banks with his declaration to fight inflation after creating it. Banks will hesitate to lend money with the prospect of rising interest rate and their existing bond books will be hit by dropping values of longer term bonds they hold. The BKX confirmed the breakout to the downside yesterday and we are now on the way to 60/1 and the XBD on the left hand chart has to make the 150 level pretty soon but 135/40 is a highly probable target medium term. The Spx stayed below 1368/70 and is on its way down to 1310. Even examining Asian charts there is no doubt prices have to go lower. Around expiration it may get a bit tricky though with higher Vol. next week a counter move can be expected with the BKX being one of the upside drivers once it bottoms out short term which will be towards end of this week with a daily combo 13 due around in the low 60s.

Volatility is heading for the 30 level again around early July. The whole down-move should last another 3-5 weeks to test the 13/1310 level or even the lows around 1260 mainly dragged down by financials. Rising interest rates would also put another negative spin on the housing market and increase foreclosure rates. 'No way out' a good movie with k. Costner seems to be the situation of the FED but they have produced this situation. I was astonished by the tone Mr. Geithner used yesterday - I think the guys should be much more humble considering the damage they have produced. Probably his shark side smells blood and he is working on a coming vacancy - I am afraid Mr. Bernanke will not make it to the end of his term. Since 3 new FED governors have to be appointed by the new administration. The Saturn/Uranus opposition is in rectangular angle to Bernanke's sun thats around election time this year and is a messenger of surprising trouble in his life with structural changes very likely.

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I am a professional independent trader