Dumb And Dumber

Tyler Durden's picture

From Nic Lenoir of ICAP

As the competition as to who will print the most money & debt to manufacture artificial growth rage, the US and the UK seem to be our two finalists. China was disqualified as the lack of transparency makes it difficult to quantify how much public spending is done in order to pump GDP numbers, though we do not doubt they try thir very best.

All jokes aside, that's why the USD and the GBP have been generally the butt of the FX markets. Whether these currencies continue to weaken against the rest of the space, especially in the case of the USD, relies on what gives first: money creation or capital markets. As long as the markets don't force governments to stop, or a catalyst triggers a return to risk aversion, the ramp up will continue in equities as liquidity keeps pouring into the markets courtesy of the governments until the bubble levels become unreachable. Personally I would prefer the bubble to burst before it's too damaging but it's probably wishful thinking.

For those however who don't really want to call the end of the bubble and get too direcional, you can try investing in relative value between the two biggest printers of cash: the US and the UK. On the daily chart we see bearish divergence in RSI, but the RSI has actually retraced considerably from the highs, and at this point it could be a breather before a run up in GBPUSD. The 50 day moving average which has been a fitting envelop of recent moves has caught up with prices and we are currently consolidating before a break-out either way. There is a very clear H&S pattern with the neckline coming in at 1.6150 which we failed to break yesterday. Zooming, we see that we have a morning star pattern on the daily candlesticks right on the neckline of the H&S. Taking a step back and looking at weekly chart, we see that we are getting close to a strong resistance in RSI though. Elements are conflicting which shows that the market is having a hard time picking the worst horse to bet on. Given the stron H&S signal we would think short term GBPUSD should rally to maybe retets the intermediate resistance at 1.6740/1.6750, but bigger picture we conserve for now a bearish preference.

Good luck trading,

Nic

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pigpen's picture

Any ideas who will speak the the US dollar funeral?

Will there be a wake? What should we send to taxpayers in lieu of flowers?

When does this become political and all eyes even eyes of idiots glance over at the FED and US Treasury?

So many question.

TD or Robot, will you guys give an eulogy for my beloved national currency?

Or maybe this is a job for Ben Dover? Maybe we can have wallstreetpro2 do some sort of audio visual performance art piece.

Any suggestions will be welcomed.

Stevm30's picture

Part of that eulogy should be "Let the death of the dollar be a symbol to future generations: When your politicians say 'I am not a crook'; they are lying."

Anonymous's picture

As a short term trade isn't this bullish for the dollar espically as the dxy hasent cracked 76 yet and looks like it may have a final bounce up before it goes through it on to 71

Steak's picture

Which country would consider it a delicious irony to send a couple cruise missiles to the dollar's funeral...

Anonymous's picture

Won't the dollar take a clue from the breathtaking
Financial rally since March 2009?

Anonymous's picture

Anyone been following Timmay's headline pronouncements
todday re the Good Fed Track Record and not banning
naked credit default swaps?

Priceless.

Things might be getting desperate in DC...

Hephasteus's picture

The ponzi is dead. Long live the new ponzi.

pigpen's picture

We imperialistic, leveraged to crony finance, well-armed anglo saxons are not long for this world.

par068's picture

That's it,

Green Shoots = New Ponzi

Miles Kendig's picture

In a race to the bottom who has the most juice?

chumbawamba's picture

It's too quiet.  Something is imminent.  I can taste it.

I am Chumbawamba.

Anonymous's picture

Look at the chart of USD:GOLD which shows a double bottom in 2008 and 2009:

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493

TwoJacks's picture

Bernie Madoff has got to be crying in his rack right now, and blubbering, "...and they put me in jail for what I did?"

Bam_Man's picture

And I'm sure Bernie is also saying to himself:

"Sonofabitch! If I'd only been able to hang in there for a couple of more months, this new equity bubble would have kept the whole thing going..."

deadhead's picture

Sonofabitch! If I'd only been able to hang in there for a couple of more months, this new equity bubble would have kept the whole thing going..."

This!!!!!  It must be driving Madoff nuts right now because it is oh so true.

Great comment, one of the best I have seen this week so far.

Anonymous's picture

Bernie couldn't any careless he never traded anyway. That was the whole idea

mickey the piker's picture

"Bernie couldn't any careless he never traded anyway. That was the whole idea"

If you believe that Bernie didn't trade, then I have a prime first lien mortgage to sell you...


Anonymous's picture

If you believe he's in prison, I have a CDO to sell you.

Anonymous's picture

Isn't this bullish for the dollar as it can blow through 76 on the dyx on its way to 71 then to ....well who knows after that.

Dixie Normous's picture

Nice analysis, especially interesting going into Fed Speak.

Holy shit though if your bearish analysis is wrong and this breaks out of the 160-170 channel to the upside.

Anonymous's picture

Why the fuck does the credible (one would like to hope) ZeroHedge relate bullshit like "technical analysis"?

Do ZeroHedge also believe in the astrological signs and horoscopes? What about Santa Claus and his elves?

"very clear H&S pattern" and "morning star pattern"?? (Yes, I actually know what H&S means - that's not the problem here)

Can ZeroHedge please relate WHY astrology-level research like this should be taken seriously? Have ZeroHedge or anyone done any half-serious testing, checking out the predictions against the actual outcome?

Tyler Durden's picture

Zero Hedge presents all information that could be considered relevant by our readers. While we may or may not agree with Nic's thesis, one could easily make the argument that we have gotten to a point where fundamental analysis is the equivalent of horse manure or coffee bean readings in the current market.

Raymond Shaw's picture

Technical analysis does have its place.  I have been touting Sterling shorts for quite a while.  Fundamental data not so hot right now with the outright manipulation of statistics (redundant, I know).  Anyway, 'nuff said.

Missing_Link's picture

Agreed.  Not all technical analysis is bogus.  Some of it is, but not all of it.

TumblingDice's picture

I think patterns are the most legit part of TA, but not all patterns have to be technical.

texpat's picture

Here's an improving fundie. Check the latest week against the trailing average...

http://railfax.transmatch.com/

Tripps's picture

tyler just NAILED it! What a QUOTE to be remembered!

 

"we have gotten to a point where fundamental analysis is the equivalent of horse manure or coffee bean readings in the current market"

 

the market is so WAY off the fundamentals that everything is backwards. So everyone HAS been following T/A for months now and lo and behold we 20% UP above the nearest respected moving average and all of a sudden T/A doesn't matter, there will be no big pullback, etc. All these PMS, analysts, talking heads, kudlow show wanna-be hosts who show up and PUMP PUMP PUMP their book even though they never even SAW the recession! these people should be BAnned FROM TV....AND YET THERE THEY ARE ON NIGHTLY

Anonymous's picture

Greater fool theory always takes over at tops...

Anonymous's picture

(me again, thanks for replying)

But I have to disagree: You obviously don't present all information that could be considered relevant - you pass the heap of thoughts out there through your personal subjective sieve, and then we get the result. Which is that the world is at the end of a cliff, and there's an abyss in front of us.

There's one thing I would like you to do some serious, ongoing commenting on - I would seriously appreciate it, as would probably other readers of your blog.

= Why do (some) people disagree with you? :-)

And no, I'm not talking about the HFT algos and quants (although I would love to see any quantification of how right you are on these assumptions).

I'm talking about e.g. the apparent perma-bulls over at Bespoke Investment Group (http://bespokeinvest.typepad.com/) and their like minded.

What would be enlightening to us mere mortals in this game, is a thorough analysis of their arguments and why they are flawed, and why you are right. (Granted, Bespoke are TA folks or whatever. But I guess you get my point).

The other way around would also do very good - that the Bespoke-guys took all your doom and gloom and tore it to pieces.

This would be good in several senses, as both the other-sided arguments would be studied harder by folks in the know, but also a sort of competition in the real backing up of ones own arguments would probably ensue.

So here goes, Tyler: You start - tell me why Bespoke (or any other bullish entity) is completely off their heads!

THE REASON for this longing, is that SO FAR, you seems to have the best and most thorough arguments - but Bespoke has been right.

Thurgy's picture

@Anonymous #76798 : Is that you Kneale?

long-shorty's picture

Anonymous,

Would you prefer ZH limit itself to articles about Vanguard and DFA? i can't figure out why i keep making so much money on breakouts when technical analysis doesn't work and stock prices demonstrate a random normal or log-normal pattern of return. oh wait... THEY DON'T!

Nothing wrong with technical analysis, though one thing wrong with this article is that the right shoulder in a H&S should not be taller than the left shoulder. The big picture pattern I see here is a cup and handle, which is likely to resolve itself by moving to the upside.

The vast majority of research, either technical or fundamental, that is of predictive value, is not going to be on ZH, CNBC, or elsewhere, because it's proprietary. If you have something and you believe it works, you don't talk about it or you say just enough to get client $, you don't go and publish in a journal.

 

Anonymous's picture

(me again!) (not Kneale!) Your last paragraph is obviously something to keep in mind, always. I've always wondered about the whole concept and system of investment banks, -research, -advisors and the like: If they have something that really works; why not instead take their own money and put in it, obviously leveraged oo:1, SINCE IT WORKS??

Are they altruistic? Just being nice?

The only way to resolve this sanely, is to boil it down to the actual argument: "Heads I win, Tails you loose": you take the risk - we share the reward. Thus, an advisor can give as shit advice, or risky advice, as he wants (or can pass through the law): He sits risk free.

But, long-shorty, you obviously sit on some gold knowledge: Care to share a little? :-)

Anonymous's picture

Then consider the COTs which are up to
68.4% long and 29.7% short the dollar open interest...

Gordon_Gekko's picture

Ummm...what happened to the thesis of "the dollar is immediately going to reverse and become the king of all toilet papers"?

"you can try investing in relative value between the two biggest printers of cash: the US and the UK"

No thank you. I'd rather invest in the ultimate hard currency of Gold rather than any toilet-paper currency.

Hephasteus's picture

Oh come on don't get all fussy about the love between continents and islands. You  might like it. This is what they listen to when they do the carry trades at night. It's hot libor love. Do me in the accounts payable or recievable or wherever. LOL

http://www.youtube.com/watch?v=-zHVW7Zy_vg&feature=related

Anonymous's picture

If I were you I would seriously bail out. September comes and the balloon crew pulls another miracle rabbit out of their magic hat.

Pull the fire alarm if you must cause a distraction but bail out of the longs.

--Driefontein

Gordon_Gekko's picture

I am only long Gold right now. Zero longs in everything else, but not short either.

Anonymous's picture

And what happens if the Chinese are running their printing presses 24/7?

Thurgy's picture

I deduce they will run of out ink which will temporarily force a correction in the copper market because the pig farmers have no additional buying power.

SWRichmond's picture

http://www.guardian.co.uk/world/2008/jul/23/zimbabwe

Soldiers await pay as Zimbabwe runs out of paper to print money
Thurgy's picture

The next problem Zimbabwe will have is converting to scientific notation on their bills.

aldousd's picture

They actually cranked it back 10 digits all at once, and did a reverse split. of 10^10 to 1. Fancy that, and they were back where they started 6 months later.( I don't know the exact time frame, don't quote me on the 6 months.)

Hephasteus's picture

LOL they have to pay software licenses to print the bank notes. OMG what a world.

TumblingDice's picture

That is when you know: Zimbabwe can't print more money because they can't pay the German printing press to come out with a design for a higher denomination with the money they have printed previously.

MinnesotaNice's picture

"Zimbabweans were limited to withdrawing just $100bn a day from their bank accounts, enough to buy less than half a loaf of bread, although the government had just increased the allowance to $1.5tn a day for members of the military."  Wow is all I can say! 

TumblingDice's picture

You can also say that the smart Zimbabwean government officials have read their history books: it goes guns and butter not butter and guns. You've got to work your way up the curve.

MinnesotaNice's picture

Its just amazing Tumbling Dice to think how devalued their currency is... yet there remains a Zimbabwean government...

TumblingDice's picture

Someone has to hold on to the AKs...plus I think that the people might even realize that the true source of oppression is the IMF and the Fed and not the government. In their case the government is simply incompetent, and not completely evil. They just printed money without creating debt and thats a big no-no for the "market".

Then again it most likely has to do with the fact that the effective range that the 9mm pistol the farmer has is about 5 times less than the AKs the uniformed dudes are holding, and theres more of them and they get paid about 15 times more than the farmer so theyre more nourished since they're the ones that buy up the farmer's food.