New Year Outlook
My system is currently at +1050 after peaking at +1200 on Dec. 31st. The contrarian trades for the year should be obvious: Long Yen, Gold, Treasuries and Short Dollar and Equities. The big question is when these contrarian trades trigger. Is it right now or is it six months from now? It will be interesting to see which way stocks head in the new year. If it's lower, then stocks should be sold when we hit 1765 with an 85 point risk at 1850 and a possible move to 1350-1400. However, if we move above 1850 now then over the next two quarters we could see a move to the 2000-2100 area before a drop to 1650-1700. With Gold, you'll either see a panic drop under $1000 before a substantial move higher or you will move now to the $1400-1500 area where there should be sellers. USD/JPY is more obvious to me. It is a sure thing that we are going back under 100 and I have put on a large short position as there is very little doubt in my mind that we are going lower on this pair. If USD/JPY goes higher now, I will continue adding to my short position and am willing to back up the truck to buy Yen as sentiment is as extreme as it gets. I am so certain about this trade that if I am wrong and USD/JPY hits my stop at 120, I will end this blog for good. But don't worry, there is no way that is going to occur. Treasury yields may go slightly higher into this 3-3.50% area but eventually we are going back under 2%.