Courtesy of Doug Short.
The media seems to be consumed with the details of “Operation Twist” that was announced this afternoon.
Operation “Old Twist” has been at hand for a good while, and more investors are feeling it in their portfolios. Long-term rising wedges, the majority of the time, send strong portfolio construction messages. When the bottom of the rising wedge breaks, major trend change/reversals will take place and portfolio allocations shifts, should be taken. Often times, when the bottom of the wedge breaks, multiple years’ worth of gains can be erased!
Important note: The above chart is addressing macro decisions/portfolio construction, not short-term trading! The Dollar broke below its rising wedge support line at (1) and what followed? Only a “Multi-Year Bull market in Commodities!” CRB broke support at (2) and what took place? Great Escape Part 1 and only a 60% decline in the CRB! Well that is the past and this time it’s different…right?
Now another rising wedge support line broke at (3). What is taking place of late? How have the majority of “Risk assets” been doing of late? Why did I share the following posts back in May, that all reflected the need to protect Capital? Look-alikes, Dominoes, and Slipper Slides, Great Escape and the Shoe Box indicator? All of these posts were created at the same time the CRB was breaking below its rising wedge support line!
So did the Fed come up with a “New Twist” this afternoon? Did stocks stage a large rally on news of the new plan? Boring ole me is sticking with my “Old Twist”. And what’s that? The “Power of the Pattern” has suggested since May that Capital Protection of assets is the main macro theme to understand at this point in time.
Note from dshort: Chris actually sent me this commentary early this morning, shortly after the market opened and several hours before the FOMC minutes were published. But the original email somehow went missing in Internet limbo. The version posted here is based on Chris’s resend that I received at 3:17 PM, according to the time stamp on the message.
(c) Kimble Charting Solutions
blog.kimblechartingsolutions.com
