Dow - Tug of War

Courtesy of Ron Leishman

Dow has been moving side way in the last 10 trading sessions with 5 red candlesticks and 5 green candlesticks. The closing prices fluctuated within a 200 points range. A tug of war between the bull and the bear.

Watch out for a drop below 12,000 level, which may lead to a free fall.



If the bull can bounce back strongly at the 12,000 level, Dow may be able to last for a few more months as shown below but the risk can be very high.




My father used to tell me, during the period of Japanese Occupation (1941 - 1945 WWII), the Japanese had printed so much 'banana money' that in 1945


one needed to carry a gunny sack of banana money to buy a kati (0.6kg) of sugar or flour.


The US is talking about the necessity of QE III in view of the recent development in North Africa and Middle East. More US $ will be printed. The only difference between the WW II Japan and the US now is that US can legally print US$ as long as it is "the world's Reserve Currency". US can simply print money to pay for its debts as long as the rest of the world need to have US$ to trade, to buy oil, wheat, timber ....... No country can use British Pound, German Marks or Japanese Yen to buy oil, other countries have to earn enough US$ to buy oil. Theoretically US should not worry even when oil hits $200, they can just print.

But if US keeps on printing for QE III, IV, V ...... creating so much liquidity, what will the bankers do? Buy more stocks? buy more commodity? One day one may need to have a gunny sack of US$ to buy 1 oz of gold.