Dear CIGAs,

CIGA Marc, with tongue in cheek, says "According to MOPE GDP will continue its rapid rate of climb until its growing at 20%!"

CIGA Marc,

Remember what was said by the Western talking heads publicly when China started to show monthly consistent gains? They said you cannot trust China’s economic figures.

That is why I read www.shadowstats.com

Regards,
Jim

COT and U.S. Dollar
CIGA Eric

The U.S. dollar had retraced approximately 38% of the first leg of 2005 to 2008 decline by October 2006. The below chart shows how commercial traders increased their short positions as price rallied.

The U.S. dollar has nearly completed a similar retracement in 2010. The only difference is that the size of the short position is much greater than 2006.

When the time window closes, this is going to move. Stay tuned.

U.S. Dollar Index and the Commercial Traders COT Futures and Options Short As A % of Open Interest:

More…

COT and U.S. Dollar
CIGA Eric

The U.S. dollar had retraced approximately 38% of the first leg of 2005 to 2008 decline by October 2006. The below chart shows how commercial traders increased their short positions as price rallied.

The U.S. dollar has nearly completed a similar retracement in 2010. The only difference is that the size of the short position is much greater than 2006.

When the time window closes, this is going to move. Stay tuned.

U.S. Dollar Index and the Commercial Traders COT Futures and Options Short As A % of Open Interest:

More…

Dear Jim,

"Charts give you guidance according to the definition of what time scale charts you are looking at. Short-term developments cannot be equated to long-term predictions."

Absolutely. This biggest mistake I see from chartists is the conversion of short-term action into long-term predictions. This myopic perspective always gets burned. Long-term cycles, basically time and magnitude, are more important in establishing the trend, which includes the short-term, then simply reviewing chart.

I see this mistake in equities, gold, and credit markets all the time.  Armstrong remains one of the few that understand the importance of long-term social and economic cycles in establishing the trend.  While you, Jim, have not written much on the subject, I sense that you also understand due to your ability to select proper historical comparisons for today’s trading actions.  I have found few people that can accurately do that.

It is the short-term view that has everyone scared in equities right now.  The threat of another waterfall decline is also helping to fuel the dollar rally.  What is the probability of a back-to-back waterfall decline?  A review of cycles within previous depressions suggest it is very low.  When they do happen, the spacing tends to be far greater than 10 months.  Hell, anything is possibly, if enough people believe.  Still, too much interpretation comes from the short-term.  This is why MOPE works so well.

CIGA Eric

Dear Eric,

I live by very-very long term charts, the longest that can be found (the Chart Store).

I live by economic laws that have been in place since the beginning of written history claimed to be invented by many writers over time.

I trade by short term components.

Yes, to your assumptions.

Regards,
Jim

Jim,

Regarding "Paulson Says Russia Urged China to Dump Fannie, Freddie Bonds"

I have come to the conclusion, after 20+ years of study, that Russia represents an all-purpose bogey man for the Western, and especially, English-speaking world. This can easily be gleaned from a perusal of the UK and American press.

Russia is routinely considered as "evil" and "corrupt" by the English speaking world, and by the Germanic/Scandinavian world as "sub-human" The only time Russia is not considered in such glowing terms in when they are doing what they are supposed to be doing: namely, handing over their natural resources to their superior brethren. When this is not done, they are considered "untrustworthy" and then labelled "mysterious" and "enigmatic" on the way to that time-honoured adage, "inscrutable" (which I’m sure you have encountered re: China).

Let us not forget it is not even 100 years since "someone" occupied Russia on two fronts.

It is therefore not surprising that Russia is invoked to deflect criticism and inquiry into indefensible actions. It happens regularly. It is usually a sign of desperation, when that trump card is pulled out. Now, we can see, that the bailouts really were, at heart, all the fault of the Russians.

Best,
CIGA Pedro