3 mo. discount rate compared with 10 year rates (just another look at the yield spread)

USD

Amid the good times - and this miner rally is impressive - let's not forget about dear old bumbling Uncle Buck.

Gold (GLD)

Meanwhile, in la la land all's well... all's always well

Until one day it isn't. Cubes & SPY remain in bearish reverse sym tri's which of course means NEW HIGHS on the way!

Stripped down XAU chart

This chart shows that despite all the hand wringing (including this blogger's), there is not as yet any damage to the XAU (135 intact as is HUI's corresponding 320). FWIW. Caution but not panic remains the word in this quarter.

Several markets - ONE bearish outlook (with caveat)

Edit (11:28) Per reader email, the "bearish divergence" noted on the HUI chart may actually be a "bullish hidden divergence". My apologies on this brain cramp. Still, overall caution is advised but it is all the more reason to hold those positions you believe in despite difficult short term actions. -End Edit

In light of fundamental changes in the bond market where the yield curve (TNX-IRX ratio) has finally turned up after three years locked in a down trend, one might watch for changes in asset markets that have been on auto-pilot during that same stretch. We are of course talking about the stock market, commodities and even 'counter cyclical' gold which got caught up in the hysteria. If you believe, as I do that a rising yield curve signals that the bond market has done its job and withdrawn liquidity from the real economy (leaving the Yen Carry Trade, which is one sharp Yen rally away from unwinding - as the primary remaining liquidity spigot for the financial economy) then you might also agree that now is a time to remain cautious, as has been advised here on the blog and also here on the website.
Click to expand charts


Risk management strategies should now be implemented. Greed should be under control. I favor the gold miners because gold is 'normally' counter cyclical and due to a bearish view of cyclical commodities which represent a substantial portion of the miners' cost inputs. In this regard there is reassurance that gold does not look as bearish as silver and the gold miners have not participated in the global stock market bubble currently taking place. There is downside, but it could well be limited as a global asset correction takes shape and yet more fundamental dominoes fall in gold's favor. But as is usually the case, these events seem to happen in slow motion, thus obscuring the day to day view. Patience, a grounded game plan and of course charts are necessary going forward. I am mentally prepared for HUI 250, but hold core positions - guarded by USD (RYSBX, SHY & Cash) & Yen (FXY) hedges - into whatever is upcoming in the near term.

With macro fundamentals shifting into gold & its miners' favor, that seems like the prudent stance at this point because when they finally do turn 'n burn, there will be a lot of momo's trying to play catch up. Therefore, the caveat is that while gold and gold miners may have downside risk in the near term, the fundamental backdrop is coming around to a condition that normally favors this asset class.

Equities, Inflation & Gold

Steve Saville provides a study of the critical difference between a bull market in nominal (USD) terms and REAL (Gold) terms. The difference is vital to understand for successful investing.



read more | digg story

Huey - Weekly view

It would be highly desirable for HUI to get back above the major trend line and pronto. The daily chart is over sold per previous post but the bigger picture is not over sold and has downside risk. This blog and the biiwii.com site are about getting it right, not about boosting any particular asset or market at all times. Gold & the miners are obviously favored here, but so is risk management.

Reminder

MarketClub live results on the Traders' Blog @ 4:30. I will be getting a haircut of all things but plan to check in later to see how they did.

Cubes

XAU-GLD ratio

Huey

Edit (12:14) Note the little H&S figure on HUI per the last chart in this previous post. Just an FYI as it targeted the 310 support area down to below 300. Never hurts to be aware of possibilities while being pleasantly surprised if they don't come about.

INO - Live trading results tomorrow

For anyone interested, ino.com will present their bottom line live trading results tomorrow (5/24) @ 4:30 PM, est on the Traders' Blog. Adam Hewison is showing off their new scan technology. Let's see how it works.

Reference Original trades from last week's MarketClub on the line video.

Semi's wobbing

Nikkei vs. Dow... Where's the risk? Where's the potential reward?

It was feeling drafty wearing shorts

The last vestiges of the bearish case are slipping away. Who are we to fight it? A debt-consumption-currency debasement model will one day likely be exposed as unsustainable and end badly. But until then [paraphrased] "markets can remain irrational longer than you can remain solvent". So we step aside from last of bearish positions (QID). Another short loss booked for posterity.

Edit (2:44) How's that for timing? Signed, your friendly contrary indicator. :-) Edit (3:18) Oh, just Greenspan predicting doom in Chinese stocks. Agreed, but the market may well forget Greenie by tomorrow.

JBLU & the airline sector

While suffering the slings and arrows of the PM sector, here is a look at Jet Blue & the airlines. JBLU dealing with resistance around 11.10. $XAL is dealing with similar resistance around 52. This is our anti-oil bottom feeder play, balancing off a pro-energy dividend play PVX.

Gold & the USD

Recall that over the last few weeks, we along with maybe a couple other guys were getting bullish the dollar. Well a few more analysts have joined the chorus as Uncle Buck turns up from bottom line of bullish falling wedge. Whole world still convinced the dollar is a goner however and dat's bullish. As stated many times, we hold 'core' gold miners regardless, but are hedged with a strong dollar fund and Yen etf (not yet working out, but patience may prevail here).

Market Club gains $30.00 / share on AQNT

Brad explains their 'Trade the Triangles' approach and recent trades in AQNT leading up to the Microsoft explosion:

Over $30.00 a share profit in 8 trades

EWI used to call it "all one market"

"All one market" meaning all assets not named Uncle Buck. Well now, even Unc is in on the act and that leaves the Yen.

INO on the line

I like a service that is willing to put its performance where its mouth is... live. It will be interesting to see how it works out.

Market Club on the Line

There are daily claims from trading and investing programs that they are the "only program you'll ever need", blah blah blah...but why don't they ever put their systems on the line?

MarketClub has come out with a new scanning tool that has members cheering, singing the praises of the tech team, and asking that they show others that it REALLY WORKS! In essence they want MarketClub to put themselves "On The Line".

Thats EXACTLY what MarketClub is doing! The video linked above is #1 in a two part series that shows the president picking 2 stocks, 2 futures, and 1 forex, then paper trading them...but he's taking signals that have been generated LIVE and the results are still UP IN THE AIR!

One other guy sees what we see...

Carl Swenlin says the Dollar is trying to turn up. That wedge look familiar? Our positive $ view is for the short to medium term. Mr. Swenlin sees the possibility of LONG TERM positive implications for the buck. Just a possibility at this point.

Dow-NDX ratio and a revision to our bearish stance

Edit 5/21 (12:00) What bearish stance? Market trying to prove that stance wrong. Depending on status near market close, QID (last remaining bearish position) may be closed out.

But will history repeat?

So many macro indicators have been turned upside down and many are rightfully confused. Something fundamental got turned on its ear in 2001 as the US Fed unleashed panic liquidity policy of epic proportions. So when we look at our yield curve, gold-silver ratio, dow-gold ratio, etc. we keep in mind that markets often do not do what they "should". Down is up, inside is out and markets are doing what they do best, confusing the greatest amount of people possible.

Boring old yield curve again

What, you were expecting stock picks? We want to get the big picture right and then the stock picks will take care of themselves.

Dow-Gold & SPX-Gold

Quick check up on day's events

This is the kind of obnoxious activity that makes one ask "are the crooks in control?". It is also part of the makings of potential capitulation to paper's upside, gold's downside and the feeling that "they" are in total control. Really, it's all just excess both to the up and to the down. That knowledge should not inhibit risk management, but it should be in the investor's tool box none the less.

"May you live in interesting times"

Click to enlarge charts

Biiwii.com
Biiwii.blogspot.com

Currency markets, debt markets, stock markets and sentiment indicators all point to now, as in today - yield curve closed UNinverted yesterday for the first time in a year and has turned up from a bottom that looks similar to the one in 2000, an interesting year I think we would all agree - being an interesting time. As markets and trends tend to do, it appears the grand experiment in money creation (with resulting rising asset prices) has created a rock solid mythology that global Central Banks are in "inflate or die" mode and will remain so. This will keep most people on the asset (stocks & commodities) side of the boat. The USD and Yen are largely forgotten. But the charts loudly beg the question "What's the risk? What's the reward?" with respect to positioning from this point forward.

We have "gone bearish" the broad stock market, become focused on the USD & Yen and hold positions in both to partially deflect short term turbulence in our gold stock holdings. Speaking of gold stocks, we have been trading around a core and have been pleased to pick up favored gems as they are regurgitated by those making no differentiation between plays on liquidity and plays on contraction. The Yen Carry Trade is over bought as is the "USD is toast" trade. The chart of HUI shows potential ultimate lows in the near term (off of mini potential H&S noted on chart), but not shown is a long term chart with major support in the 250-270 area to keep in mind in the event that times become very interesting. We have stated that "cash is a position" and that for many, that may well be the place to be. For our purposes however, as stated we will hold our core gold miners and add the mayhem because charts usually don't lie, they just take a while to come to fruition. And the charts say that things are lining up for a contraction (at least before the next inflation fueled expansion) and the one asset class that benefits first and foremost in this environment is the gold stocks, as their product either rises or drops significantly less than their cost inputs.

There is of course more to the story than what is presented in this report. On the blog, indicators such as the gold-silver ratio, the VIX and Vixen and put/call ratio are followed routinely. They presently paint a picture of a crowded sunny side of the boat. Over on the shady port side we see turbulence on the horizon.

Disclosure: Long gold miners such as GG, GFI, MRB, MFN, etc. Long USD via cash, SHY and RYSBX. Long Yen via FXY. Short the stock market via DXD & QID (and looking for more shorts). We also continue to hold minor positions in copper (NOC.TO, CPY.V, MRB) and airlines (JBLU).

Yield Curve (TNX-IRX) still on course

Edit (1:45) TNX intraday high: 46.94, IRX intraday low: 46.80
Edit 5/15 (10:54) RTQ: TNX 47.00, IRX 46.90. Curve officially UNinverted (for the moment at least).

Quick sentiment check up... VIX, Vixen & PCR

Triple C

Cash, Caution & Carry...

We have built up cash & endured red short positions (until today), expressed caution on the US Dollar over and over based on varied technical indicators and a whole world of Dollar haters. We await the unwinding of the Yen Carry Trade and put our money where our mouth is and bought a strengthening dollar fund (RYSBX) two days ago and Yen etf (FXY) near this morning's lows. These hedge against most favored gold miners as noted in published article from May 6. Now we await coming events from a position of preparedness.

Gold-Silver Ratio alive & well

Biiwii.com & Biiwii.blogspot.com
Consequently, caution should be alive and well too. But is it? Chinese are pouring funny munny into their stock market to the tune of a 50+ PE ratio. Hedge funds and possibly YOUR pension/retirement fund are on auto pilot as a global balloon continues to inflate on the back of continually expanding munny. We watch the Yen. We watch the GSR. We watch the yield curve. We trade, manage risk and await the fireworks to come, sooner or later.

Thank you BRL

Bottom feeders that we are, we will say thank you and let momo's, true believers, pension & mutual funds take BRL wherever it is going.

Sticking with the theme of Johnny Yen...

It should be obvious that stocks are now merely the inverse image of the BOJ's basket case. FrankenMunny doing what it does; scattering into what it thinks are safe havens. We have made the bottom feeder bullish case for the Yen, the rest is up to speculators to decide what the implications will be if they agree the Yen has some up in it. Of note is the gold miners' recent move toward decoupling from the inverse Yen trade. Gold miners are a play on DECREASING liquidity, not increasing inflation.

New article

Don't Say You Weren't Warned

HUI, HUI-Gold Ratio & the macro backdrop... all in a couple handy charts!

Biiwii.com
Biiwii.blogspot.com
Click to expand...

BRL

Against our shorts we own some semi's and bottom feeder specials like JBLU & BRL. BRL is a trade on a potential inverted H&S bottom. Emphasis on 'potential' because the would-be neck line has not been broken. After bottom feeding TEVA for someone else and never getting in ourselves, we try to get a little of that mojo w/ Barr. Positives include "defensive" health care sector, stock downgraded by every Wall St. analyst and his brother and technically, bullish divergence and trend. Let's see what happens.

Lazy bulls sleeping soundly & notable bears even leaning bullish - it's the 'can't lose' market. Or is it?