We've seen this before

After all these big moves we've had in equities, did anybody realize that we really haven't gone anywhere?!

First take a look at the post I wrote back in the middle of May and notice the chart. Now take a look at the chart below...looks awfully similar, doesn't it:

One other thing...I don't really see any news coming up that could move the markets any more then the news we've had in the past couple of weeks. So that, in conjunction with the same charts three weeks apart, would suggest to me one direction...down.

As much as equities have had this big run up, the Dollar has had a big run down.

Just be careful...keep a wary eye, that's all

Let nobody forget the Eliot Wave daily charts that Jamie Saettele drew at the end of April of the S+P (and the Euro/US.) I have been saying for weeks that this is a market that has to correct a little...and the numbers don't seem as great as we might want to believe, despite what Larry Kudlow says.

And here is what Claus Vogt wrote this morning:

The stock market has been jumping for joy over the last few days. Yet I can't see exactly what investors are cheering about. Heck, two of America's most prominent companies, GM and Chrysler, just declared bankruptcy!

It seems as though everyone is so wrapped up in the sighting of supposed "green shoots" that they're willing to ignore even the most calamitous events.

Yet I see a very strong reason to believe that the U.S. is not yet on a solid road to recovery, despite what some of the data might say. That's because ...

Major Recessions in the Past Have Been Interrupted by Small Upticks in Growth

The Conference Board's Index of Leading Economic Indicators (LEI) is one of the best tools to forecast recessions. As such it plays a major role in my macroeconomic analysis tool box. It has called every recession since 1960, the current one included. And I also use it to decide just when a given recession might finally be coming to an end.

So what is the LEI saying now?

In April, the LEI's year-over-year change was minus 3 percent. That's definitely better than March and February when the reading was minus 3.9 percent after downward revisions.

And even though a negative reading still clearly signals "recession," many hope that the low point of this indicator and of the recession might be behind us.

But take a look at the following chart of the LEI for 1960-2009 ...

With just a little hook to the upside you can see that it's very early in the game of predicting the next recovery. If this is truly the beginning of a recovery, that little hook should very soon be followed by a sharp rise and possibly positive readings.

Moreover, do you see that other little hook at the beginning of 2007? That was when most economists and central bankers were chatting about a soft landing and just a minor stall in growth!

You see, false recovery signals are nothing new ...

In 1980-82, the LEI even experienced a real whipsaw as did the economy. Shortly after the all-clear signal was given, the indicator turned down again as did the recession. And a much more severe second part of that double-dip recession took place.

And Even If the LEI Has Hit a Cyclical Low, That Doesn't Mean the Recession Is Over!

History shows that the time between the LEI's low and the beginning of the economic recovery can be as much as four quarters apart!

If the economy were to suffer another three or four quarters of recession, a host of additional problems, such as skyrocketing unemployment, could emerge. Some even jeopardizing the very recovery everybody is hoping for.

Patience is imperative for long-term, successful investors.

However, Wall Street does not want you to be patient. They want you to act: To buy, buy, buy. Last year demonstrated how bad this advice can be.

So for now, I strongly suggest you consider staying the course and expecting a return of the bear market.

US/CAD

The fundamental side of the two US/CAD trades that I made (from Kathy Lien):

Despite weaker economic data and a warning about the damaging impact of Canadian dollar strength, the loonie has recovered nearly 50 percent of its losses against the U.S. dollar. The strength of CAD is due to the combination of U.S. dollar weakness and oil prices, which soared to a 7 month high today. The Bank of Canada kept interest rates unchanged at 0.25 percent and made no comment about their Quantitative Easing program. However they did say that "If the unprecedentedly rapid rise in the Canadian dollar (which reflects a combination of higher commodity prices and generalized weakness in the U.S. currency) proves persistent, it could fully offset these positive factors." The BoC is growing increasingly concerned about the outlook for the CAD and if the currency continues to rise, they could decide to initiate Quantitative Easing. Meanwhile IVEY dipped back into contractionary territory while building permits fell 5.4 percent. Interestingly enough the employment component of IVEY PMI increased which suggests that tomorrowbs employment report could beat expectations.

Two lucrative trades

Just closed out 1 long lot US/CAD...after closing out the same trade, with the same swing trade parameters as the other day. (Combined accounts up +90%.)

Also, you may notice some bigger profits. This account has done considerably well...but I could have done so much better because I got out of many trades too quickly.

How has this improvement come about? One of the sources I use for my trading, a little company called FXmembership.com. If you watch CNBC, you may see Bob Iaccino being interviewed sometimes. This is his site. I'm pretty sure that the $67 a month I am paying for this is not going to last, because I have learned so many new technical trading ideas, and Bob Iaccino has it down...it's a little uncanny.

As all of you know, I love trying to incorporate fundamental with technical, and he does a live seminar every morning doing just that. The bonus being that he shows you exactly what his trades are going to be for that day (if there are any) and how he sets his limit orders for (1 to 2 day) swing trades.

It's a terrific way of learning to buy on dips (or shorting on spikes or short covering.) The two US/CAD trades you see in the statement were trades his trading group made, and I was privy to them.

New account high

Out of Ster/US with a $1400 profit...account is at a new high. Combined with the other accounts, we are +90% since January.

more trades

Officially in the USD/CAD trade...1 lot. I am also short 1 lot the Sterling/US.

Gold again

I learned a couple of months ago that it is extremely difficult to trade Gold.

When my position in Gold was up $4000 the other day, I said that I wouldn't sell it because I am more then a little worried that it will be needed as a hedge against some unknown event.

Now, this amazingly volatile instrument is only up 1/4 of that today. I do think this is profit taking though, as opposed to deflation fears. I think it's been well-established that all commodities are going to be increasing in value because of demand from countries coming out of recession.

Account Update

I am short GBP/USD after taking a profit in the same pair. Account, again, is at an all-time high since January.

I may make a USD/CAD trade in my intermediate account...waiting for present 4H bar to close (13:00 e.s.t.)

Is this it?

I am going to guess that this is the start of the correction I have been saying will occur for a while. Although I have been flexible enough to trade successfully with the uptrend lately...this could be it. Let's see. Crazy, because I thought the trend up was going to continue.

Trade updates

Made a couple of trades and had to reverse course pretty quick! See updated account.

I think there's more to go

Trend is still up folks...equities AND the EUR/USD. So I am going to do a swing trade and look to go long at 1.4248 which would be a 38% retracement from it's most recent high of 1.4330. RSI is high on the 4H and daily charts, so this trade should be successful.

On May 28, look what happened the last time we had a 38% Fibonacci retracement from that particular low (clicking on the chart gives you a clearer view):

When you look at your hourly chart, you will notice that 1.4248 is also where the 21 day EMA is.

UPDATE

I think I am going to wait until the ADP report tomorrow to decide what to do here. Thanks to Gold, my account is 'screaming' here, even though I will not sell it. It's there for protection, and Geithner said the other day that the risk of deflation is going down (of course, all we have to do is look at the price boards outside our local gas stations!) Account is at an all time high.

I was right about the charts showing the strength that we saw yesterday, but we are still below that 945 level we have been discussing for weeks...so let's see.