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Thursday, August 6, 2009

Market rumblings

The market behaved very....odd today. The indexes where down, slightly. But the banking index was on FIRE. Many banks that are well known to have financial issues went PARABOLIC up today, below are the winners for 1 day gains, with market overall down.

AIG (+62%), Fannie Mae (+29%), Bank of America BAC (+6.5%), JP Morgan (+3.9%), and others.
The US Treasury interest rates rose VERY fast, reaching back near the recent top in the TNX (+2.31% in TNX today alone!)
The value of GOLD was down most of the day, ending basically flat.

The blog rumor via to Karl of the Market Ticker blog is a very large hedge fund that was too heavy short blew up and forced them to close their positions. Makes sense, a very bearish hedge fund would own gold, us treasuries and be short the weak (bankrupt) financial companies. Today may have been an excellent day to get short some of these stocks, but on the other hand perhaps more short hedge funds are going to fall, driving a parabolic blow off. As previously blogged, once the shorts are pinched, the market will fall with velocity.

Also, in the Great Depression, there was two market crashes, one in 1929, and in 1930. The 1930 crash was WORSE than the 1929. Back then, the US government and media said the markets where stabilized, and the markets rallied +50%. The markets crashed after the +50% rally, about 5 months after the low. We are now in the same window to repeat history.

However, there is one VERY disturbing problem, the USD is continue to fall. If the USD hits the recent low, we could see an economic collapse of the USD, which should bring everything to a crash, with possible exception resources. If the USD falls, ironically, its best to be in cash or natural resources, not stocks. A USD collapse is not good for companies, but natural resources (like gold) should hold value.

As of now, its a day by day watching the train wreck unfold.

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