Trading Could we cheer for the relief and hopes as a turning point?

Markets globally turn to be quite relieved and hopes for EU and US become obvious just in a few days.

How could we keep our independent minds with vision, prudence, and room for the possible turning point or have better position ahead when EU looks for the place on the rock bottom for its feet and prepare the buffer if China really tip off? It doesn't work for any market players who just act as boom tellers or gloom predictors. The history tell us anytime when anyone tried to do so, it would force him to act as warriors to be consumed by the war.

We all need to learn lessons rather than just work as the wind predictors. The wind could change its course at anytime since most of crowd just could do is cheer or cry for wind directions and its strength. Inverting means when the market turns better we need to think what if we are wrong and prepare for the possible wrong matters for no losses or making the losses affordable.

Seriously saying since April every time when I followed the crowd I made more mistakes but sometimes the crowd could be right and conventional logic would get all of conditions to be prevail. We need to be organized for the turning point and hard works for possible longer time for bad things to become worse.

We all hope we could take the trains just before it leaves away for better place if not heaven. So when should we take the ticket is very important. We could say you could not win by timing the market but it could be fatal to take the ticket around the lowest points at the bottoms if you are bargain hunters. Too late you would miss the train and too early you would struggle for your blood, cash in the ruins.

Do you have some trustful monitors for the signals for the inevitable turning points? How could you be confident the signals would not be buried in the random noises? Of course, everything from different angles could show different images, which we could not say the images are wrong but some images could be those to decide the market prices in next few months or years. We need to decipher them which are challenges for our own!

 

Views of XAO and RBA

XAO and RBA are both linked to the Australia economies tightly. Sometimes they have the similar views about the future but sometimes they could have very different views. When they take the same or similar views, the market would crash or boom significantly.

Often than not the problem would happen for a market player when they have different views of the economies, one is decisive and another just could not make its mind, or both of them are confused by what happen in home and somewhere else around the world. XAO tends to react but RBA tends to get the data, ponder, and make response. Due to RBA's responsibility, it tends to cool XAO when all of us feel great and to put the fuels into economies to get XAO from its freezer with some words to show the agreement for the voting in XAO.

So in the bad time, if RBA agrees with the voting about economies but could not put the fuels into the economies, something could be very serious and hard to make decision. Shorters in XAO could cheer for Australian house market crash but RBA would not happy or feel desperate if it turns true. Reading from Soros, I agree the reflexive relationship among XAO, RBA, and economies but I just could not be good enough for the quantitative analysis, which need experiences and knowledge.

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RBA is in paradox now gain! Market sentiment is very bad, which has been spread into every homes in Australia. All of people now know Stockmarket is a very risky place and everyone seems the gambler in it. RBA has to ponder whether to take its foot off the policy brakes at a time when most of its rich-world peers are desperately trying to find an accelerator for their sputtering economies.

1. RBA has kept rates at 4.75 per cent for almost a year, a level it terms "tighter than normal". This rate does scare a lot of people and wonder what if all of the world tip off.
2. The investment cycle are so different from market sentimental cycle. No one dare to say where Aussie economies would go.
3. US got into big trouble in 2008; EU got into big trouble in 2009; China got trouble in 2010, which could be quite big and possible to trigger Australia house crash onto ground let alone what if North Korea just put a atomic bomb onto the reactors in Japan.

You could not say it is not a bad world for the market players.

1. But a darker economic outlook abroad and downward revisions to core inflation at home have led the RBA to flag the prospect of a cut in rates.
2. It is not so much a question of whether the economy requires stimulus but whether it still needs to be restrained for RBA even XAO just moved up in last few days.
3. RBA must be wondering whether policy needs to be on the tight side of neutral given everything that's happening globally.

So what would happen if RBA cut or keep no change of the rate? I never question like this before since I do ignore it since I know I am ignorant for the answer!

Logically if it cuts rate too much it would confirm XAO was right to put its toes in the GFCII's water; if it doesn't cut it would disappoint XAO in weeks if not months. RBA just worries about bubble economies more than bust prospective. If we could see the sign it run for bust it should be taken very seriously! More and more economists and shorters would be more confident XAO would fall down onto the ground for GFCII.

If the central hub of Aussie economies fail the faith, what would do the crowd? Doomsters and gloomers would cheerfully say "I told you so!"

 

Pot hole and small open economy

Aussie economies is a small open economy. Slower world growth is a potential pot hole to it since it relies heavily on exports of commodities. Big trouble no one sends ships to the ports even it would make a lot of green feel great since no more digging out for holes in this lovely land.

However reality is always the first thing to deal with. The threat of slowing global economies has already been enough to trigger an outbreak of easing in emerging nations.

1. Indonesia surprised everyone last week by cutting rates
2. It was followed by Brazil and Israel.
3. Israel was the first central bank to tighten after GFC, narrowly ahead of the RBA.

Why? it was because the threat of slower global growth and get some buffer first better than desperately reaction. RBA last week forcast global growth had been cut back to no better than average.

The most Australian character of mortgage loans is 95% of them are variable. So that 4.75% seems big enough to take the heat out of the mortgage market. This makes monetary policy a very powerful tool:

1. For an average mortgage of $300,000, a hike of 25 basis points equals an extra cost of $600 a year.
2. Since over a third of Australia's 8.5 million households have a mortgage, even a modest tightening in policy represents a large drag on incomes.
3. Equally, that means even a modest cut in rates would give a sizable boost to incomes and provide a direct and rapid stimulus to the economy.

The above are the features which are envied by the US, Japan, UK and even China! All of Aussies work hard by the command rob of RBA and no revolts and protection at all!

One thing is important to remember: RBA worries about inflation rate much moire than anything else. No losing-control inflation, things could be managed in RBA's view.

News said some of the protesters of the Wall-Street-Occupying type in Sydney have returned to work. That is good sign for Australia economies in my views!

 

After crying and relief, dumb is the choice only!

It is a interested reaction for retail market players to be dumb after see the signs of reliefs and hopes.

They could not believe XAO could go up rather than drop down into the hell. Why not GFCII now? Why could just the words from EU policy makers and G20 let shorters in XAO to buy rather than short anymore? Could another V-shape recover be in horizon? Nothing is certain but seems all of the big boys change mind so certainly?

Did global economies just come back in the last few days? Will China be landed softly 100% sure? After consolidation of 28 months and crash of 2 and half months, it seems nothing is about fundamentals or technical matters but crowd psychological ones.

GFCII need EU default, US crash, China tip off, and some disasters such as another great floods or reactors leakage or wars in somewhere to scare all to store the breads and water in home.

Nothing happens which could trigger GFCII! Most of retail market players have been in sideline since GFCI and logically they miss the V-shape recovery. Most of bargain hunters dare to jump into the market in consolidation have been hurt enough and are sucking their bloods.

After you burnt the money on fire the reliefs and hopes are just some salts on the cuts while the dim light could let them see a little bit clear about future. What could they say? They could not say anything really useful and helpful. Buying? No gut any more! Selling? Nothing could be sold!

It is a typical time for the warriors to be depressed enough. They need more relief and hopes. Could you image sometime later they would be regret to see the train left without them? Mr. Market is canny and tricky. He would not reward the crowd since it costs too much resources.

Foolishest warriors are taken away. The better warriors would see the train left without them. History shows it always. Old warriors gone and new warriors comes in! Bye bye, the old warriors who were born in IT booming. Your duty to fight for the war is at end. You have to be dumb since losers have not right to say anything after the wars get into their end!

 

Absolutely no excuse for failure: Impossible!

Wayne Swan hoped ''absolutely no excuse for failure'' for EURO debt crisis and "a bold and credible plan" on 23 October since "the outcome was important for Australia."

1. Australia was not immune from Europe's troubles.
2. ''In spite of our strong fundamentals and tiny exposures to European banks," Aussie economy have already being hit by what's happening there
3. It can be hit harder.

Just see some impacts Swan could see:
1. The target of surplus by 2012-13 is more difficult to achieve
2. The impact on confidence alone has had consequences for our own growth and budget revenue, and there is every prospect this could get worse
3. The extreme volatility of recent months is likely to continue for some time yet.''

More problems Swan could see:
1. Traditional policy arsenals were depleted
2. Political divisions mired efforts to overcome problems on both sides of the Atlantic.

Just hope since Australia cannot do too much:
1. European finance ministers understood the seriousness of the threat?
2. Could they work together for political unity?
3. Could they make more progress on Europe's bailout fund, tackle debt levels and develop a plan to recapitalize the banking system?

We know but EU or Germany Politicians don't know?
1. We know what is happening?
2. We know what needs to be done?
3. We have a good understanding of the consequences if only half-measures are applied?
4. We know that Europe needs to regain the confidence of markets?

No finger-pointing? If no option!
1. get its house in order?
2. do this now by setting out credible plans for fiscal consolidation?
3. The time for half-measures, the time for finger-pointing has long passed?

The world can afford further hits to confidence? Who care about in Europe?

Millions of people ''depend on European leaders getting their skates on" said Swan. Do you agree?

Don't react too quickly but ponder what forced Swan so provoked in G20 for EU crisis. What scenarios could be ahead? Today it seems all hopes and reliefs are destroyed by a Germany politician. The market is very timid and sensitive now between

1. Turn down to the hell
or
2. U turn for better future

Which way? Prepare for both ways! But it seems no one want GFCII. But it seems we have chances to get into GFCII. But the odds to GFCII has been reduced somewhat. BUT the most risky matter is the train leaves away without you! BUT your train could be in the hell already! BUT my heart is shedding the blood due to the stampede of the crowd in depression! Not NO or YES make your future it is BUT and preparedness for BUT make you a good market players!

Yes, you can stop losses but you could not use it everyday! Yes, you can have a system and you just take ease to buy and sell with some signals but what if the system wrong? Yes, you can buy and hold but what if in a decade you still lose your shirts?

Do remember it takes time to grow the relief and hopes after nearly all of retail warriors have been hurt and being sucked their cuts and the self-interests of German and France cause the rescue action indecisive:

"There will likely be
1. a bank recapitalization plan,
2. the Greek [haircuts are] expected to be renegotiated, and
3. the use of EFSF financing will probably be made ‘more efficient.’"

But the market may get less than hoped for on all these elements:

1. as either national interests are diverging or
2. implementation hurdles are plentiful

The market turned sour for the remarks as shown above. But it should be logical expectation. Why do you worry? Making troubles are easy but fixing trouble with sound solutions are not easy and need the time. Market in desperation or euphoria tend to overdo. Market expects Yes/No but reality always gives out Yes/But or No/But. All of us know that but if the politicians tell the truth it would scare the market. Why? Crowd has not brains!

So it seems the U-turn in a week is impossible but GFCII would not be a immediate threat too! The market then would yo-yo for weeks if not months. No one would feel ease in this political economy. Politicians can play the games since they still could think but market can not feel good for the answer with Yes/But. "Yes" makes it happy. "But" makes it nervous. Nerves make it stupid. Stupidity is the cause to lose! Remember "But" is a necessary transition stage from No to Yes, Yes to No, No to No, or Yes to Yes. Four scenarios for a simple set, YES, BUT, and NO.

Traders have to flee away again since they care about days for YES or NO only. BUT to them is too complicated to understand. They would be consumed in contrition. The longer the contrition, the more will they be hurt.