Graham Summers’ Weekly Market Forecast (Currency Pairs Edition)

Phoenix Capital Research's picture Submitted by Phoenix Capital Research on 10/11/2010 11:08 -0500

Over thelast two weeks, I’ve called for a reversal in stocks. It seems I’ve completelyunderestimated the ability of the Federal Reserve and its Primary Dealers toramp the market higher on next to no volume.

 

Indeed,stocks have soared in the last six weeks, posting their best Septemberperformance in 71 years and rising roughly 12% from trough to peak. Thissurpasses even July’s monster rally of 11.1% from trough to peak, stands as themost aggressive rally since the April 2010 top.

 

 

However,beneath the surface of this massive move, the stock market shows the clearimprint of intervention and manipulation. Indeed, we have seen no fewer thansix gaps up during this rally. Gaps up are NOT a sign of a healthy robustmarket; they are sign of “behind the scenes” manipulation taking place in thefutures night session when market volume is low:

 

 

Aside fromthe gaps up, we also have the Federal Reserve’s Permanent Open MarketOperations (POMO), also know as its “QE lite” program. Rather than dress thisnonsense up in clever terminology, let’s just say it consists of the Feddishing billions of US Dollars to Wall Street banks, which subsequently rampthe stock market higher. The end result is that stocks have exploded higherwhile the US Dollar has collapsed:

 

Seeing allof this, my previous two weekly forecasts have called for a reversal in stocks.Suffice to say I’ve been wrong both weeks. The Fed has clearly gone “all in” onits “maintain stock levels at whatever cost” policy. And while stocks havebroken their trend line, they continue to rally in stair step fashion:

 

 

As I writethis on Sunday evening, the S&P 500 futures are rallying, signaling thatwe’ve likely got more of this madness coming this week. Indeed, until theEuro/US Dollar and Australian Dollar/ US Dollar pairs (which have become thetwo carry trades of choice for the markets) break their upward tradingchannels, the madness will likely continue:

 

The Euro/ USDollar pair:

 

 

TheAustralian Dollar/ US Dollar (pair):

 

 

With that inmind, keep your eyes on both of these pairs for signs of when the inevitablecollapse will begin for stocks. In the meantime, this week we’re likely to seea continuation of the same action we’ve seen in the last two weeks: stocksgradually rallying higher in stair step fashion with “the invisible hand”stepping in to prop the market up anytime we come close to a breakdown. Theonly thing that will change this is if the brutal economic realities choose toassert themselves globally. The European banking crisis continues to spreadwhile millions of European citizens have taken to the streets in protest of thevarious austerity measures being imposed.

 

On this sideof the pond, some 43 million Americans (13% of the total population) areofficially living in poverty. The jobs numbers are a joke and all talk ofrecovery has been manufactured via accounting gimmicks or full-scale fraud. I’mdetailing more of this in tomorrow’s article, but for the sake of this week’sforecast, I’m simply trying to point out that the US economy is on the brink offull-scale disaster and at some point (possibly this week) this reality couldhit the stock market.

 

In themeantime, having cleared 1,150 with conviction, the May high (1173) and then1200 are the next lines of resistance on the S&P 500. Support is at 1,150,1,140, and 1,120.

 

 

Good Investing!

 

GrahamSummers

 

PS. Ifyou’re worried about the future of the stock market and have yet to take stepsto prepare for the Second Round of the Financial Crisis… I highly suggest youdownload my FREE Special Report specifying exactly how to prepare for what’s tocome.

 

I call it The Financial Crisis “Round Two” SurvivalKit. And its 17 pages contain a wealth of information about portfolioprotection, which investments to own and how to take out Catastrophe Insuranceon the stock market (this “insurance” paid out triple digit gains in the Autumnof 2008).

 

Again, thisis all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.comand click on FREE REPORTS.

 

 

 

 

0 Your rating: None
» Share/Save Login or register to post commentsPrinter-friendly versionSend to friend

Search Search this site: Latest News From RAN Squawk 10-11 11:17: Resistance seen in CAD/JPY at 81.00, trades 80.99 last 10-11 11:03: Italy Treasury says to issue up to EUR 5.5bln of BTPS at mid month auction 10-11 10:53: Greece’s National Bank says EUR 1.8bln rights issue oversubscribed about 1.7 times – source 10-11 10:50: Stocks approaching 52-week highs during today’s session: 10-11 10:42: RANsquawk ‘US afternoon briefing’: Video uploaded to http://www.youtube.com 10-11 10:34: Chance tropical depression could form in Caribbean up to 80% from 60%, according to the National Hurricane Centre 10-11 10:33: European equity close (Preliminary): FTSE +0.19%, DAX +0.24% , CAC +0.13% , Eurostoxx +0.11% 10-11 10:33: AT&T (T) executive says sees explosion of tablets on market first half of 2011, says AT&T will offer choice of tablets The Zero Hedge Team

Tyler Durden – Founder

Marla Singer – Foil

Travis – Author

Cornelius – Author

Sacrilege – Senior Researcher

 

tips [ at ] zerohedge [ dot ] com – Our Reader Tips Mailbox

Make sure to read our “How To [Read/Tip Off] Zero Hedge Without Attracting The Interest Of [Human Resources/The Treasury/Black Helicopters]” Guide

ads [ at ] zerohedge [ dot ] com – Advertising Inquiries.

abuse [ at ] zerohedge [ dot ] com – Abuse / Infringement Issues

 

It would be very wise of you to study our disclaimer, our privacy policy and our (non)policy on conflicts / full disclosure.

 

Zero Hedge Offices:

United States:
888.qui.zero (888.784.9376)

Zurich:
+41 43 501 6717

London:
+44 20 3318 4753

copyright ©2009, 2010 zero hedge – limited reproduction (with attribution) permitted by request

zero hedge’s redundancy powered by:

Powered by Ubercart

View the Original article

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s