Bulls still have the initiative

Toward the end of today's session, I probed a little on the short side again. If tonight's futures are to be believed, I believe I'll be stopped out in the morning. I'm playing with the idea of going long in fact. But these trades are on short (15-min) time frames with tight stops.

In general I think this advance is rather narrow and targeted mostly by broad index buying through futures by program traders. Volume both up and down is poor this week, and the assholes are running the show. That said, I believe this market remains one where it is the bulls have something to prove, and it is currently "their" market to lose. While the bears have a growing stack of news stories about the spread of subprime contagion into the banking industry and the broader market, the bulls have one thing: a Fed that wants the market to go up. The Fed has been repo-ing, meanwhile printing money like there is no tomorrow...all highly inflationary stuff, by the way. I've talked about this many times, before, but I'll say it again: the Fed is in danger of causing a serious dislocation of the US dollar, which will send ripples through the worldwide markets at some point...when, I don't know.

Ladies and gentlemen: here is a monthly chart of the US dollar Index. Enjoy!



The US dollar is enemy #1 to the Bush Administration. Forget Al Queda...that's just for show. A strong dollar is the enemy. I think that it very rich that we criticize China for artificially weakening their currency, yet we have been doing the very same thing to Europe and the rest of the world for six long years! When our dollars are worth less, it eases deficit problems and interest rate payments, essentially making it harder to own treasuries. But treasuries are still moving up due to flight to quality trades out of stocks...but at some point, I do not know when, treasuries are going to need to do more to attract buyers than just be these crappy yielding debt instruments that we can muscle our allies into buying off of us. It is sort of a global ponzi scheme at the moment and I will be watching when it starts to unravel.

I suppose the root of these bond market pressures is the US government's completely reckless fiscal policies. These SOB's don't know how to spend less; only know how to spend more than they have. I can understand the notion of a nation carrying a certain degree of debt for long periods, but for God's sake, there has got to be a tipping point somewhere along the line. Even Keynes realized that unlimited government spending cannot produce prosperity.

Anyway I can't change the dumb decisions of a dumb government while I sit here late at night. But I can say that I am planning some long side probing tomorrow morning, with an eye to taking profits when it all goes to hell, as I think it will eventually.