With the markets generally accepted as being overvalued and the economy widely accepted as being in the toilet, it’s hard to feel too bullish about price action going into the last week of the month.

What topics and themes are likely to emerge?  Let’s work backwards from next week.  Next week will end with the G20 meetings kicking off, unemployment rate / non-farm payroll, AND and FOMC statement…. not to mention some manufacturing numbers and some pending home sale data.  So, next week is a rocking news week in the financial markets.  We are about to commence “the week before next week.”  This week includes:

• Tuesday’s Consumer Confidence report
• Wednesday’s New Home Sales and Durable Goods Orders
• Also noteworthy on Wednesday is New Zealand’s rate statement

In term’s of the general market outlooks… my bias’ going into the start of the week are:

Favorite set-ups on the horizon:

• Very interested in an opportunity to short metals on the immediate horizon
• Possibility of a short Aussie near-term
• longer term horizon looking at a possibility to short some sugar next month
• An opportunity to buy some indices next month

General observation about markets, cycles, and timing:

As bleak as the current state of the economy and globe may be: as bad as housing may be, as bad as emerging markets may be, as bad as finance industry may be, and as bad as things may be for the US consumer, I would not be shocked if price bubbles continue to melt up significantly before they prices are annihilated again.  It’s well past time many traders expected prices to be heading south.  But, as markets tend to humble their participants, it would not surprise me if they have a few more surprises in store.  I’m just not seeing the technical signs in the market that things are too overdone.  But, the very first technical sign of systemic imbalance is in place: grossly correlated overvaluation across a broad set of asset classes.  But, that’s about it… some meltdown’s come unannounced, but, most don’t.  So, as always, precede with extreme caution.  Keep your powder dry.  Only fire when you must.  And, all the traders I have the pleasure of knowing good trading this week.

At the top of my list…

• consider being short JY
• GC rolling over…
• long DX…
• KC and CT are getting up there…
• EU may be ready to roll
• what’s up with NG… sure would be nice to be in that long

NOTE: Questions on gold… who is in this?  Records show it’s all the small players.  So, does that mean it’s time to get out?  Very curious isn’t it.

There is significant evidence that at this point in time the equities markets are overvalued. Now I’m saying this on very little authority and a lot of opinion. Perhaps someone more gifted at traditional valuation can shed some light on the topic? But, with my focus on market psychology, market timing, market cycles, quantitative characteristics of markets, trader sentiment, and market history, I’d say this goose is cooked.

I don’t believe there has been much improvement in the system. I do believe things were oversold. But, they have over-recovered.

What can you do? Let’s start with what you can’t do. You can’t change your mind every session. It’s an expensive habit. I’ve tried it before. I’m in these positions based on principle. Those principles are rooted in a plan of action. I will follow the plan to it’s very likely somewhat painful outcome. So be it. If the markets have taught me one thing, they’ve taught me not to spend too much time trying to monkey around. If you have a call, make it, and follow it to it’s end.

It’s great to really get into the markets, into a particular opportunity. You get to know a particular indicator inside and out. You know every major wiggle or waggle of an oscillator and how the market is likely to respond under such a circumstance. But, if you are not feeling profoundly connected with a serious exit strategy at hand, you best run for cover or just stay the course.

On another subject, here is an shot of an interesting market:

Copper has had a tremendous recovery. (Much like sugar.) I don’t think copper is over. But, this is one I have my eye on going into the fall. If you don’t see what I see, I’m looking for opportunities on the short side for this one.

Decisive takeout of 997.25 and I think a tradeable pullback to the shortside is the next angle of interest.

On the flip side…

If the market can take out 1058.75, then it’s a long towards 1124.