EWT For The Week Of June 29th, 2009

As mentioned in my previous post, the $10.15 gap proved as a good area of resistance as after the gap-up on the 24th, EWT bumped into that area (high of $10.19) and couldn't proceed any further.

Chart below:



Once again, the tell for EWT will be the TAIEX open which is a day before the US markets open. I did manage to enter into more of the Sept 09 Puts, $10 strike, at $0.70. Ideally, I am looking for $8.30-$8.80 to take profits on these puts. Prices for short entries remain the same (see previous post linked above).

Also, I should mention I will be gone for about about 10 days give or take, traveling around Taiwan. Will have limited internet access, so no updates likely for a week or two. Will chime in with small edits if I see something in EWT charts. Let's just hope we can get some more bear market action so that I don't even have to pay attention to the market for this mini-vacation of mine!

TAIEX Up 4% Currently

A glance at the TAIEX is showing a gain of 4.71%, as of 12:09PM, Taiwan-time.

That would give EWT an estimated boost in price of around a similar percentage (if these ETFs actually work like they should). Here's my road map for tomorrow on EWT:



With a TAIEX close of anywhere around 5% up on the day, that would put EWT very very close to the $10.15 gap fill created last Monday. EWT will gap up tomorrow, and what I will be watching for is how it responds to the gap fill level. Although unlikely, if it can take that out and proceed higher to the second gap (at $10.37), that's where I would look to start adding to my EWT puts. A $10.48 level also represents a 50% short ambush from the recent lows to the highs off of June 1, 2009. The $10.37 and $10.48 levels will be hard to reach tomorrow, but if the U.S. markets sustain a larger rally, it could boost EWT as well. In any case, watch for these levels.

As I predicted, Ma Ying Jeou's ratings have dropped, in-line with the stock market.

More Support From U.S.

Congressman Robert Andrews from New Jersey has sent a letter to President Obama, asking for his assistance in urging Ma Ying Jeou from intervening in the Taiwan Foundation for Democracy.

Robert Andrews, a Democrat from New Jersey, said in a letter to the White House that the TFD’s existence and present general policy directions were very much in line with the “fundamental values of democracy and human rights which Taiwan shares with the US.”

It goes on to ask Obama to “urge” President Ma Ying-jeou (馬英九) and his administration to “let the TFD do its useful work the way it had done over the past six years.”

This should be a good test of character, in a way, to see who the man behind the "Harvard Law name," is really. For the most part, I believe President Ma is not scared of the Taiwanese people. What he may be scared of is the international community paying attention to what Ma is doing in Taiwan.

For obvious reasons, Ma Ying Jeou should not be meddling with removing and replacing the people inside TFD. It should be easy to see that this is just another step in the KMT's silent (apparent) goal of dismantling democracy quietly. All you need to control a country is to suppress dissent and opposing political views- once you shut that out, the people have nothing else to listen to except the one-party government. When you add all these small/large events together from DPP politicians being jailed (not just CSB), to political activists being fined and charged with violating the Parade and Assemblies Act even though Ma claims to uphold the U.N. Rights Convenants.

We need all the support that Taiwan can get. If you are living in the state of New Jersey, it would be nice for you to send a thank you letter to your congressman, Robert Andrews.

Channeling EWT

EWT happens to be channeling an approximate $0.30 range, starting this Monday, all through OpEx Friday expiration. Upper range of $9.83, lower range of $9.51. It would be wise to stay out of entering positions until we break out of this narrow range. The open on Monday in Taiwan should be indicative of where EWT will open in the U.S. markets.

The chart:

Arms Sales On Deck?

Washington sources say that Wang Yi (王毅), director of China’s Taiwan Affairs Office, will be in the US next week for talks with the US State Department about potential future arms sales to Taiwan.

Is there any reason for this? An obvious break from one of Reagan's Six Assurances, which stipulates that there will be no prior consultations with the PRC about arms sales to Taiwan. Likely as a result of this, the article states that the US State Department is unwilling to confirm this, as well as all parties involved are being vague as to whether a meeting is actually happening or not. But:

a source with close ties to the State Department and Taiwan said that Wang would visit and that the weapons sales would be high on his agenda.

The irony I find in all of this, putting aside the consultation with China issue, is that at first glance, it would seem that Ma Ying Jeou was actually putting Taiwan's interest in the forefront. After all, Taiwan as a whole, regardless of party, has pretty much always been for the acquisition of arms (esp. the F-16s) for quite some time, dating back to the CSB era. Now with the "warming" of ties, and general support for the sale in the US congress, we might just see that.

But, I beg to say that this acquisition of the F-16s may actually be harmful to the U.S. in the long run. One of the main reasons in the past for the U.S. having reservations about selling advanced weapons and fighters to Taiwan was the fear of a possible annexation of Taiwan by China. This would indeed let China acquire U.S. weapons technology that would definitely not be beneficial to the U.S. and the world. What we do not need is a bigger China with a bigger stick, on par with the U.S.

Perhaps this is just another bargaining chip that Ma is willing to use to curry favor with China in order to receive more "goodwill." That is, the annexation of Taiwan will be accompanied with weapons technology.

EWT Update

Still studying for my last final, just a chart and a few words:



From my previous post, I mentioned:

... although I do see a bounce coming on EWT as it is quite oversold now. Signs of weakness in EWT (places to consider going short if it acts as resistance) are at $9.84, a short ambush from the gap high, ...

And sure enough, the next day we got the bounce at the open, and hit $9.83 as the high of the day, off by 1 cent (I highlighted the area with the box). That would have been a great short entry there. The Sept 10 puts remain at $1.00/$1.15 bid/ask. Also notice that it has creeped back into the channel drawn, and so for future short entries, I would once again look at $9.84, and then $9.95. Caution on entries though, as this is OpEx week, and we might get some large whips to the upside or downside. Although EWT is not heavily traded compared to others, we might get a pin close to $10 for Friday.

Iran Elections - A Warning to the People of Taiwan

As I'm frantically studying for my last finals of my undergraduate, this is going to be short, but I hope to cover this more in-depth later.

As you may or may not know, Iranian elections on June 12, 2009 have been the news of this week on CNN.com, mainly due to the allegations that the elections were rigged or votes mishandled, or purposely mishandled. Here's one of many stories covering it, from Bloomberg.com.

Pictures and Videos here (may be graphic).

Also, a better in-depth look at the elections and the time leading up to it by a former correspondent for TIME. In the last paragraph, the author notes:

I am not ashamed of having voted in Iranian elections past, but I have a fresh appreciation for the wisdom of Shirin Ebadi, who from long experience battling the Iranian regime had accurately recognized her foe. And I am still not certain that I will boycott elections in the future. If people had not voted in Iran on such a grand scale, the world would have assumed once again that people had chosen Ahmadinejad as their President. Now Iranians have made their discontent clear, and though their votes have been discounted, their voices have been heard. Ahmadinejad may remain President of Iran, but his legitimacy has been shaken to its core, not just before his nation but before the world. Iranians managed that by voting, and it is a powerful accomplishment indeed.

This is what I want all you who are Taiwanese to take notice. Do not ever take for granted your right to vote and choose. Even if it is rigged, the strength in numbers of the outpouring of anger against the Iranian elections is at least a glimmer of hope that they can grasp onto.

So in the upcoming DPP referendum as to whether or not to put the ECFA to a vote, I urge you to urge others, to urge their parents and friends to vote on the issue. Regardless of if you are for or against it, vote on it. Because when enough people get mad enough and upset enough, there will be real change. Not the Obama change that was based on good feelings and social popularity (how many Obama voters did you know were actually really mad and upset, and I mean really mad, to the point where they would protest on the streets? I can think of, exactly none of my friends). So the DPP has an advantage already, because we know, and the DPP knows that there is already a decent amount of Taiwanese in Taiwan that are upset with the current Ma administration, so much as to take to the streets on 5/17.

Nothing truly has come out of that rally, but little by little, support is gathered. Do not stand by and wait for what is happening in Iran to happen in Taiwan. Do you really want to see millions of Taiwanese, once again in the streets with blood flowing and police fighting you and your family?

Also, for the Americans, a look at the Iran elections and how we, as Americans, are failing Iran and the world, by Karl Denninger.

Finally, latest news says 7 killed in attack in Tehran (albeit it is reported that the killed were attacking a military post). Is this just the beginning? Best case, this is it, and maybe the demonstrations are put down peacefully. Worst case? This becomes the Tianamen Massacre of Iran's history.