Sandy's Painful Parable

By: Erik Swarts | Sun, Nov 4, 2012
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"Man masters nature not by force but by understanding. This is why science has succeeded where magic failed: because it has looked for no spell to cast over nature." - Jacob Bronowski

Sandy Strikes

As many of us in the Tri-state area attempt to emerge from what was left behind in Sandy's wake, the glaring truth of our own fragile subjugation to the unbridled command of nature is painfully evident. We are at her mercy. Certainly, best practices - both of engineering and prudence should be employed and bolstered from her latest example of dominance. But make no mistake about it - she will always romp where she pleases.

I suppose the same could be said of markets and the pixie dust of quantitative easing - an argument that I have made in various comparative charts over the last several months. We may for a spell have the perception of control and influence, but like water searching for the path of least resistance - it will find its way - QE or not.

Anatomy of a Low 1996 USD versus 2012 USD
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The US dollar looks to extend its breakout from last week - still closely following the structure and momentum profile of the last secular low.

Anatomy of a Low 1994-1997 USD versus 2010-2013 USD
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Despite the interventive hand of QE3 in September, the Nasdaq continues to trace out the structure of a top - remarkably following the price profile of the S&P 500 in late 2007. In 2007, the SPX had completed a complete retracement of the bear market from 2000-2002. This year, the Nasdaq had completed a 50% retracement of the same bear market.

Both moves exhibited similar throw-over bull-traps of the retracments - and were also completed in the face of our monetary handlers extreme efforts to restore market psychology.

Top Spotting 2007 SPX versus 2012 NDX
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As expected, the dollar has found traction - and the euphoria of QE3 is now just an ephemeral afterthough in the commodity markets rear view mirror. Similar to the 91' Nikkei comparative introduced this summer - I expect silver to lead the way to new lows in both the precious metals and the CRB in the coming months.

Denial 1991 Nikkei versus 2012 Silver
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In order of price action: So goes silver - so goes the euro - so goes Spain's bear market rally.

Denial 1991 Nikkei versus 2012 Spain
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Denial 1991 Nikkei versus 2012 Silver and Spain
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"He always thought of the sea as 'la mar' which is what people call her in Spanish when they love her. Sometimes those who love her say bad things of her but they are always said as though she were a woman. Some of the younger fishermen, those who used buoys as floats for their lines and had motorboats, bought when the shark livers had brought much money, spoke of her as 'el mar' which is masculine. They spoke of her as a contestant or a place or even an enemy. But the old man always thought of her as feminine and as something that gave or withheld great favours, and if she did wild or wicked things it was because she could not help them. The moon affects her as it does a woman, he thought." - Ernest Hemingway, The Old Man and the Sea

As always - Stay Frosty & Humbled.


Red Cross

If possible, please help the victims of Sandy by donating. You can go to www.redcross.org, or mail a check to: the American Red Cross, P.O. Box 37243, Washington, D.C., 20013. To donate by phone, call 1-800-RED-CROSS or give up to $10 by texting the word "REDCROSS" to 90999.

 


 

Erik Swarts

Author: Erik Swarts

Erik Swarts
Market Anthropology

Although I am an active trader, I have always taken a broad perspective when approaching the markets. I respect the Big Picture and attempt to place each piece of information within its appropriate context and timeframe. I have found that without this approach, there is very little understanding of ones expectations in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes. I want to know which way the prevailing wind is blowing, where the doldrums can be expected and where the shoals will likely rise. I will not claim to know which vessel is the fastest or most comfortable for passage - but I can read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances should any content be used or interpreted as a recommendation for any investment, trade or approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational and informational purposes only. All opinions expressed by Mr. Swarts are subject to change without notice, and the reader should always obtain current information and perform their own due diligence before making any investment or trading decision.

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