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jarek
Rep: 94
Posts: 3,474
Christmas is a good time for sharing memories and here is my story.

I come from a country which was a part of the former Soviet bloc where socialism and central planning were the name of the game. It was meant to be a system with happy people across the board as opposed to capitalism with its exploitation, unemployment and constant boom and bust cycles. Central planners needed to take care of it and they did. Certainly they had to make sure that things are affordable for everybody. It was not an easy task at times when my father who was a finance director in a factory with 5000 employees was making an equivalent to $10 a month (this is not a mistake: one hundred and twenty US dollars per year). You can only imagine how cheap things needed to be in order to make everybody happy. And they were cheap but naturally very difficult to get. I recall times when every day after school I was spending an hour in a line for food, then my mother was taking over from me and after another hour spent in a line she was able to buy food for that day. But it was affordable so we ought not to complain…

For big ticket items they wanted to avoid lines lasting months so they came up with an idea of issuing coupons giving right to purchase certain item at certain time. Underground market immediately developed where for example a new car bought with the coupon could be sold for 4 times as much to somebody who didn’t have a coupon. It was funny to watch 5 years old used cars being sold for more than the new one in the dealership (if you had a coupon…)

When a really big economic crisis hit shortly before the martial law was introduced we had nothing in shops but vinegar. Can you imagine a supermarket with all shelves empty but a few with hundreds of bottles of vinegar? If not here is the picture of the result of central planning:

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Many were wondering why everything was sold out but vinegar. In my opinion it was simply a mistake in planning – somebody took thousands for millions and there were 1000 times more bottles produced than needed…

Central planners of course didn’t give up and after announcing that the shortages were the result of excessive speculation they introduced ration stamps for almost everything. First meat, then sugar, butter, rice, soap, alcohol, cigarettes – you name it. The shops were again full of products at affordable prices but nobody could buy as much as they were willing to. So another underground market developed – this time a market for ration stamps. I don’t need so much alcohol but would like to have more chocolate for my kids than one bar a month so why not find somebody with exactly opposite needs? And so on and so on …

All this stupidity ended only after introducing the free market by first non-communist government in early 90s. It took a lot of sacrifices and hard work along the way but 20 years later our economy is the only one in EU zone that is not contracting this year and we are considered to be the new European tiger...

What are the morals of this story?

Lesson 1

Regardless of how clever and how smart those in power are, central planning always creates imbalances which later need to be corrected by free market.

Lesson 2

Regardless of how incompetent those in power are if People are willing to sacrifice and work hard they can find the way out from no matter how big hole.
JA
jarek
Rep: 94
Posts: 3,474
Why did I tell the story above? Because I think that the time is coming when Bernanke & Co will learn the Lesson 1 hard way. The current chart of 10Y Notes leaves little or no doubt about the current direction of the trend:

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After a perfect Kane ABCD we had a perfect first thrust up and perfect Wave 2 retracement. Now the price displays behavior typical for a Wave 3 acceleration – it jumped over 2 MLs, came back to retest them and now is most probably headed to those upper MLs. If indeed then a long term inverted Head and Shoulders pattern will also be triggered:

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In such case we could expect a long bond yield in the 6-7% area.

We all should realize what that would mean for a nation which is in debt up to eyeballs. And definitely traits from Lesson 2 above and a lot of time will be needed in order to get out of this mess...
JI
jimkane
Rep: 3,058
Posts: 33,089
I think that's a great story, jarek, and just the kind of thing I like to see in this forum. Some deep thinking, and thought provoking ideas. However this thing unfolds, I suspect it is going to be ugly, and the lessons mentioned will be learned, eventually. Of course by then the United States as we know it will be long gone, I believe. But, this all has to run its course, as the lessons to be learned will only be learned the hard way, given human nature being what it is. They'll never do the 'right' thing when they should.
JI
jimkane
Rep: 3,058
Posts: 33,089
Okay, futures started down, and I said to myself 'Hmmm, another bargain price to get some futures on the cheap'. Now we sit at yet another new high for the entire 'bull'. I make no predictions, but let me 'guess' at what I think is the highest probability scenario for this week.

Monday: up
Tuesday: up
Wednesday: up
Thursday half day: up

It will be fun to see if they gun it up as I suspect. There are various technical factors that point to at least some kind of a drop in here, and jarek and I have looked at some of these, and he has some great layouts. I think any of these scenarios would be technically very attractive (and preferable). But I think manipulation is going to trump all technicals here and we are going to explode to the upside. Let's see what happens. Maybe we won't go up, but if we don't, I'm going to be really, really surprised.
JI
jimkane
Rep: 3,058
Posts: 33,089
1125 and still rising, 7.50 off the low. Look out above...
JI
jimkane
Rep: 3,058
Posts: 33,089
Another nominal new high at 1126.25, but otherwise, no volume today at all. I can see why I am the only one hanging around. I should take the rest of the week off, this is ridiculous. But oil and gold are not too bad, so I'm going to stick it out for awhile.

Anyway, I wanted to clarify my 'guess' for this week. I didn't mean each day will necessarily finish 'up', but that the market will hit another new high for the 'bull' each day. But they are really starting to sell this here now, so who knows for tomorrow. When it's this illiquid anything can happen. I'm just surprised they aren't gunning it up like crazy to increase their bonuses for next to no 'investment'. And besides, it's the gov's money they'd be 'investing' anyway, IMO, so why not.
JI
jimkane
Rep: 3,058
Posts: 33,089
I don't want it to sound like I'm 'hedging' my 'guess' here, only that I think they want to gun the stops and set new highs each day, and that's what I was thinking when I posted that. Once I saw the sellers coming in after the new high I realized I wasn't clear on what I thought would still be within the parameters of what I was watching for. If that makes any sense...
JI
jimkane
Rep: 3,058
Posts: 33,089
Here they come, to save the day :-)
JA
jarek
Rep: 94
Posts: 3,474
I wonder if the rise in the last 2 hours could not have been Wave 2 from the top:

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JA
jarek
Rep: 94
Posts: 3,474
Especially that we may have a bigger Roofer's The Trade setup:


Click image for original size
JI
jimkane
Rep: 3,058
Posts: 33,089
jarek! You're in today!

Boy, it's tough to get any of you guys to see the bullish side, huh? :-)
JI
jimkane
Rep: 3,058
Posts: 33,089
Originally posted by roofer

from first to last...its all just geometry... the geometry of this forum....
Ex-aaacccctttt-ly.