DIB.v

The world of small exploration stocks is not for everybody. But for those of us who understand and can take the risk, they sure are worthwhile. Take my friend Dibby here... 190% profit was just taken today.

I had bought this months ago on the speculative say-so of my friend Otto. It was so speculative I had not even mentioned it in my newsletter. Last week Otto came out with analysis in his IKN Weekly making the case as to why this little feller is now less speculative. I was planning to mention it (and perhaps chart a pullback buy level) as a holding in tomorrow's NFTRH and then BANG... bottle rocket. Sold. But I want to publicly thank Mr. Rock because without him, this long and wonderful swing trade would never have happened.

Gold stocks

I guess this is sort of a promo but then, it's a small price for readers to pay for a free blog. The two charts are 60 min. charts of the HUI that were sent out as part of email updates to subscribers on Monday and Wednesday, along with comprehensive analysis (and target) in the weekly time frame and general broad market analysis.

Huey has certainly held the lower support level has he not? Now, we did not only depend on a 60 minute chart, the weekly provided the stronger support platform with a moving average I have been watching for many weeks now. It kept NFTRH strong as was appropriate during this week's corrective activity. Now, what comes next? Plenty more tools and measurements to try to gain a leg up on that.

Where we have been

Let's take a stroll down memory lane via a busy chart of the S&P 500 created by some maniac who is feeling nostalgic.

Well, not really. I actually feel like putting out some perspective in service to the idea that patience and an ongoing and revisable game plan work best in trying to make sense of and navigate the markets. That and the idea that the markets ultimately move in beautiful rhythms with the best part being that these rhythms are designed to fool the maximum amount of people to the benefit of the relative few who can keep perspective. It's just the way it is.

NFTRH has been providing a road map every step of the way. The current plan has been in effect since the bottom pattern was established in the spring with an interruption to scope out what could have been a very bullish scenario off of a decline from the recent minor H&S. Not to be. The market has chosen the LESS bullish intermediate scenario and we are back to original targets.

It is a great thing to receive comments that I am wrong from a deflationist on SeekingAlpha after I post something bullish on oil when it is near its lows and forming a beautiful bottom pattern. It is a doubly great thing to be taken to school (using professorial economic language I could barely understand) by a bull who fancies himself a contrarian, at this advanced stage of the rally.

All I know is that NFTRH's original minimum, and favored rally target has still not been reached, although it is very close. The progression illustrated in this messy chart has helped tune out the noise every step of the way and aided in the effort to remain patient.

Speaking of gold...

You know, I always seek to tune out the noise when 'Mr. Gold' is putting inflammatory battle cries in my inbox, the CoT speculators are rampaging, the irrepressible silver bugs are making their case about silver's value compared to gold, and when a spammy email blurb shows up (courtesy of my friend Otto) with a picture of a noted commodity and resource guru sipping a cocktail, smoking a stogie and expounding upon the government's unbridled inflationary policies.

I especially find the need for calm in the face of the Seattle Times indicator while the dollar - being micromanaged lower by the entire world that would seek to feel good about its demise - remains above the support level I have seen as critical.

It is actually a good time for me. I am saving money and stress by not trading much and thus not churning commissions. Meanwhile, the inverted H&S that was dreamed up on the weekly gold chart has yet to either express itself or be proved a sucker's play. But its promoters have quieted down, which is not bearish.

Anyway, here is a busy monthly chart showing mixed signals but overall an asset - the asset really in a world where almost everything is someone else's liability - that is going to make a lot of people happy one day. They will be doubly happy because they will have survived some terrible actions along the way, all the while standing firm in their beliefs about what is and what is not money. It is the players and sheep, with no core understanding that it is important to get contrary to the still ongoing racket we call a modern financial system, that will be victimized. The goldbugs will be right one day. They are right now. But many also tend to be strident and angry, and the goal is to get where we are going without embedded anger and long term mental injuries like post-traumatic stress.

Goldbugs use the word 'sheeple' a lot. Don't be a sheeple. Realize that coordinated government actions have solved nothing. Sure, it is possible they can engineer a cyclical bull market that the mainstream financial media can celebrate, but they have fixed nothing, only done more of what has been causing and growing the problem for decades. Except each time the policy is put on stronger and stronger steroids. Anybody see the movie The Wrestler? That poor Randy the Ram kept bulling his way forward until... well, I don't want to give it away for anyone who plans to see it. But our financial system is doing what the Ram did, only in much less lovable fashion.

Okay, I simply wanted to update the big picture chart of gold and what ends up happening? Out comes the tin foil hat and stream of consciousness ensues.

It is halloween for gold bugs

This should scare the hell out of the silver and gold bugs. But really, the momentum in the sector is driven by people who really believe the system is going to fall apart in an inflationary explosion any minute now. Problem is that minute has stretched out to 30 years and counting. Most of 'em love to see this kind of hysteria. But it never seems to work out.

It is a sad reality that gold is going to probably make its mega move when many of its currently most ardent promoters are in a defensive mode, scared of deflation and the famous (at this blog anyway) 'most frightening gold chart in the world' makes its reappearance.

This image is of a full page ad in the Seattle Times sent to me by subscriber Peter B, an economist and smart guy on the lookout for contrary indicators. I'd say this fits the bill.

Why does this kind of thing always come about as the dollar noise is at its loudest and risk of reversal at its highest?

Thanks Peter.

Quick note to NFTRH subscribers...

First off, thank you for the feedback on this morning's email update. I thought it was pretty useful too. ;-) I think focus on the email updates was one of the good things that came out of the recent feedback exercise.

Secondly, as you know, I maintain a subscription to stockcharts.com to gain full access to their capabilities (as opposed to cheaping out with their still very worthwhile free tools) as well as one to Decisionpoint.com, which compiles lots of charts and data on sentiment that I find useful. I remain on the lookout for select services that can help me provide the top notch service that is NFTRH's imperative, although I need to guard against information overload as well.

But as a SeekingAlpha contributor I was offered a free 1 year premium subscription to Zach's Investment Research per the blurb below. Now, being a non-mainstream guy I am not sure how this will play out or if there will be any benefit/effect on NFTRH. But as they say, it can't hurt.

According to SeekingAlpha:

There are two aspects of the premium service that many of you will find particularly valuable. The first is the stock and industry screening tool. Users can utilize pre-made screens or customize their own by adjusting up to 150 attributes. Additionally, users can screen by the Zacks Rank for both stocks and industries. The Zacks Rank, driven by earnings estimate revisions, is assigned to a stock or industry based on a quantitative model that accounts for the direction and degree of change in earnings estimates.

The second aspect, full access to Zacks Equity Research, is the fundamental research needed to round out the insight provided by the Zacks Rank. Zacks Equity Research provides users with research reports produced by Zacks' 50 independent and unbiased analysts who follow small, medium, and large cap stocks.

We are pleased to provide you with this quality service completely free. At Seeking Alpha, we always strive to provide our authors with the best tools available to ensure you have the strongest and most informed voice in the blogsphere.

Accounts are good for one year and will be automatically renewed at no charge for active SA contributors.

Here is a hint...

Investor 'jitters' about the economy (Financial media's reason for today's selling) aid in driving gold stocks down hard? This is likely born of wrong-headed 'price' inflation based decision making. It all ties in to the fact that the miners should NOT be going with the broad market if the intermediate term move is healthy, and that the inflationistas are on full tout, led by the silver bugz. This dynamic will ultimately hurt those who blindly follow the loudest blow horns.

Homies? LEN says 'hell yeh!'

The home builders have been beaten down like a red headed step child. Everybody knows they are dead in the water. Who would want to invest in US housing after all? This sector helped lead the crash and expose the US financial system for the Ponzi scheme it was/is.

Well, that is all well and good. But any chart geek taking a look at this - at least any bottom feeder chart geek - is going to get pretty excited over the weekly structure of LEN, which is the first and only chart I pulled up on the sector. This bottom formation looks a lot like the one I followed to ultimate upside expression in NFTRH on my favorite gold mining exploration company, FRG. Yeh, totally different sectors but same charts.

NFTRH will have to think about following this sector and looking at other home builders, along with other interesting sectors as we work our way through the low volume summer dream to decision time - real or Memorex? You know, charts like this tell me 'hey, it could be real'. Stay tuned. Of course the caveat is that the weekly candle still has 4 more sessions to go for a breakout close.

Here's how I spent my Saturday...

NFTRH43 in the can by noon, it was then time to grab my stuff and get to this party where our band, Dogfist (hey, I didn't name it) made its debut. The wildman on the mic at the right in photo 1 was the host of the party and took a vocal turn on the Animals' We Gotta Get Out of This Place. Fun had by all.

Aside from everything else going on in the markets and in life, we had to cram arrangements to 11 cover songs along with our 7 (and counting) originals to cobble together a set list for this gig.

It was a blast. I think we rock. I also think we need to keep practicing! :-)

Uneasy time for bulls and bears

Stockcharts.com has a little feature on their homepage called 'Currently popular @ stockcharts' that shows the most popular symbols in something close to real time. One thing I have been noticing each day is the presence of things like short etf's SDS, SRS, QLD, QID along with the ususal bull symbols.

Every day there are traders attempting to micromanage a top along with those attempting to ride the momentum higher. A process like this can take an agonizingly long time to play out with every dip in the market bringing a hoped for top by the bears. Upside targets still remain open. That tunes down the noise for now. Patience.

Groundhog Day

Bonds, tech stocks, credit, housing, commodities... a would-be bubble in everything. Marc Faber, by way of Michael Panzner illustrates just how removed from any kind of sound economic foundation we became (Will They Ever Grasp the Simple Truths?) by the time the rolling bubbles of the 2003-2007 time frame had hit full throttle around mid-decade.

You've seen the movie Groundhog Day, with events repeating over and over in a maddeningly similar pattern? Our policy makers have been schooled in a system that has proved itself to be unsound or worse, disastrous and yet in their densely myopic fashion, these bureaucratic stooges move forward pumping the same old policy as heroin into the [debt] junkie as the first and most privileged abusers, the big banks, laugh all the way to the... bank. That would be our children's piggy banks. We have eaten their future, and it is criminal.

Making matters worse, this is cultural. It is not the fault of Republicans or Democrats. To be sure, their respective policies have corroded the moral underpinnings of a great country that in turn has led much of the rest of the connected world right into the abyss of moral hazard. I read a statement somewhere recently to the effect that as long as the average American has a color TV, they won't make any trouble. The average American has been bred - like cattle - to remain docile and accepting of fate. It took Republicans, Democrats and the average American to get this done; to get us to a stage of moral hazard whereby the only perceived solution is to administer more of the poison that keeps killing us. Well, it takes those three groups in concert with the guidance of the troubadours on Wall Street and financial television.

The preceding paragraphs sound a lot like the articles I used to write in 2004-2007 before Biiwii.com went commercial with its newsletter. NFTRH must tone down its indignation over the inequity and ultimate tragedy of what the macro crooks are doing and remain focused on its theme of getting the intermediate swings right; of surviving and thriving in the wake of wrong headed and immoral policy. The most macro theme is of course that deflation is merely a lever. It is a lever that gets pulled again and again (until the handle breaks off) in service to inflationary policy. The key is in understanding that money is created out of thin air by various methods of mad genius, comes from no productive origins, and flows toward things of real value. But there are a lot of traps along this progression.

Currently, we are dealing with the aftermath of the mother of all deflation scares and are riding hope in what I believe is the 'false dawn', with certain leading indicators improving and policy makers looking more and more in control.

I clearly remember when, in 2003, I had to swallow my gall and admit that the cyclical bear was over. That is where the 'is what it is' theme for the website came from. It couldn't be a bull market, could it? But look at the economy, look at the war on terrorism and its sub-themees of smallpox, nuclear instability, invasion, etc.

No! Look at the little bespectacled man behind the curtain, pulling policy levers like crazy, look at the cozy macro-vendor financing relationship the US and China have cooked up and most importantly, look at the charts! It is a source of satisfaction for me that despite my views that the bull from 2003 was the result of cooked macro books, I was able to outperform the broad market bulls year in, year out, by more than 100% during the cyclical bull market.

Well, there were signals in the charts and they first said 'stop being bearish' and then eventually said, 'yes Gary, the policy is perverted and immoral... keep your financial ethics and beliefs but get the hell out of way, and get LONG or at least trade long'.

Today the S&P 500 is thus far just obediently following our game plan, with a minor hitch along the way that seemingly negated NFTRH's most bullish potential outcome as it failed to decline toward 800 recently in what would have been a potentially solid right side shoulder to a major inverted head & shoulders formation. That thing we have now is not well formed, and it does not pack the power (of negative sentiment) that the pain of an interim, fear stoked decline to 800 would have.

No, this market has places to go and people to see. It is bolstered by more and more analysts turning less cautious to all out bullish. The public should soon follow with the upward thrusting price restoring their confidence. Now again, the dream machine may once again kick in as we suspend financial reality one more time, and if the signals are given, I will have to adjust. NFTRH made its explosive gains in the gold mining stocks off of the historic opportunity presented in October and November of last year. They say you really only need one great trade a year. For me, that was it. Now I trade in patience, and let events play out.

Everybody is taking note of the mighty S&P rally and there is a lot of micromanaging going on about it. All I can tell you is that NFTRH's minimum upside target has not yet been reached, and I am currently a bear due to the untenable risk/reward ratio this market presents. Get that? A bear whose upside targets have not been reached. A bear who was more bullish than many of the newly brave months ago.

So yes, there could be a bull signal up ahead and a corresponding adjustment in my market view. But as was shown in NFTRH43 this week, there is a big picture signal for the S&P that must be triggered for me to even think of abandoning the stance that holds that this is nothing but a suck-in of the (not so) innocents. The signal would be very similar to what happened in 2003 when it was time to deal in market reality. Right now, those declaring 'new bull market' now that it appears safe to do so are kidding themselves.

In short, Hope '09 is doing its job. If however this becomes a legitimate illegitimate (think about it) bull market, it will feel like Groundhog Day in a different way, hearkening back to the early months of 2003.

Bullish? NFTRH43 out now

As I relax with my morning coffee, I like to skim a few financial sites to see what's up. This morning I visited GoldSeek and found a piece by Puru Saxena called Ignore the 'Noise'. I thought it was an interesting title, so I checked it out. Now, the last thing I had read from Mr. Saxena was pretty bearish and he was advocating patience, so I figured that he is currently maintaining that stance. Not so.

Mr. Saxena is now full bullish and talking of a 2-3 year cyclical bull market in stocks already being underway, while advocating investors tune out the bearish 'noise'. He has Asia in a secular bull and commodities headed for a bubble. Now, he could be right but all I can tell you is this: The patient plan NFTRH is operating to has not yet seen even our most modest upside targets hit and the plan always did include formerly bearish or cautious analysts turning bullish.

NFTRH43 uses a monthly chart to tune out the noise and set a very clear parameter as to when we will become bullish. There is a lot of other information packed into #43 as well, including a look at some of the most important 'signposts' or technamentals as I call them, that help to... Beuller? Yes Beuller... tune out the noise. Correct.

Slope of Hope

Well, it turns out this fellow named Tim Knight was all over the 'hope' theme before I ever conjured up 'Hope 09'. It's in the title of his blog! Tim seems to be something a bear's bear and he is having some of the same issues I mentioned yesterday. Namely smarty pants bulls doing some chest thumping. Except with me, it does no good. I was short term bearish, that was wrong and I aborted with little harm done when the limits were hit (not stops, target levels).

I will consider this dood a soul brother because well, he is a chart geek after all and he understands what the crooks are up to. There is a reason I call the stock market a ship of fools, and right now dat boat be loadin' up.

Rut Roh... Big Chinese bank to cap lending

http://english.caijing.com.cn/2009-07-24/110213733.html

"ICBC, one of China's four biggest commercial banks, has set a ceiling for the bank's annual new lending, a sign that the end of runaway credit is in sight."

Please trading godz, let my favored China ETF take just one more pump up to target against this bearish fundamental signal... please. Oh and while you're at it, let's get one final dump in its inverse ETF.

Edit (11:57) I just noticed that the gentleman in the picture looks kind of like a cow at a feeding trough. Sort of how the plucky American consumer of yesteryear used to look. Just grazing and grazing without a care in the world. 'Mmmm, credit good.'

Uncle Buck... you dead yet?

Attn: Subscriber Mark F!!!

Hi Mark, would you please contact me ASAP @ gt @ biiwii.com? Emails to your 'sphereinet' account are getting bounced back as undeliverable. Thank you.

Response from Mark (they say never to miss a promo opportunity):

Hey Gary,

Not only do you run a very informative, insightful market analysis news letter, but you also remind me to pay my domain name registration bills (my mail server is in my basement)! What more could anyone ask for? Keep up the great work.

Thanks for the heads up on Friday.

Mark

Speaking of depression...

I note a lot of bullish contrarians coming out of the woodwork. It is getting pretty cool to be bullish in a 'look at me, I am brave while others are fearful' sort of way. Funny how this comes after 2500 Dow points in some cases. I guess that kind of padding can make one real brave and get one's lips flapping a bit.

I think it is funny that I pissed off some bears when I said 'oil, copper and stock market higher' months ago and now there are bulls taking me to school (in one case using terminology my simple brain can barely even understand, let alone process) about why bears like me are missing the boat.

I guess some people can't understand the concept of risk and capital preservation. But then again, they were not there making profits (to preserve) when it was appropriate to be bullish. That said, it appears our pig has designs on higher levels to finish the suck in. At least if 1929/30 is any guide. And with the FDR style policies now in effect, I think it is. I just have no need personally to chase this dream. I'll hold what I hold and preserve what I preserve. But that's just me...

Stuck in the middle with you

Sit back, make yourself comfortable and try to relax. Find yourself coming to a deep state of calm where your thoughts can flow freely. Now stay calm, and without getting angry, picture all those road construction projects that have popped up on every highway and every other side road in your city or town. Now, stay relaxed! Just breathe... I know it is a stressful thought. I had to turn around and change a plan to go to the gym yesterday myself, but they are doing this for you. After all, it is 'your stimulus money at work' in a 1930's era make-work campaign destined to prolong the contraction and deliver boondoggled bounty to non-productive ends. But they are doing this to... I mean FOR you!

Now that you are relaxed and reassured let your mind drift to Goldman Sachs and the mega banks. This will really calm your soul in the knowledge that Mr. Paulson really did know what was right to you. Maybe Matt Taibbi is over reacting. Goldman is prepping some pretty big bonuses and I have no doubt there will be a few toasts in your honor in the Hamptons this holiday season. You will not be forgotten! In fact, if you survive the ensuing depression rest easy in the idea that something will eventually trickle down. If you don't believe that will happen, go join a union now and get a piece of that action.

So, over here we have the big banks bailed out, churning profit and cheering bonus season. Over there we have huge sums of money earmarked to the unions and in a third direction (we'll just have to call this the Devil's Triangle -- I think a new biiwii-ism just got created) we have an ever growing government. Or does that come under the heading of unions, or do unions come under government? Whatever, we'll call it a Dev-Tri and realize that the special interest group known as free people are stuck in the middle of it.

This theme to be continued as the rich pageant life in of post-crash America moves onward.

Note to subscribers... and to blog readers

Subscribers: A quick follow up on this morning's email update to clarify something. The last line of the update states that upon achieving the noted upside target for HUI "...we will be right back in a high risk situation that could lead to a real opportunity in the gold sector."

To be clear, the possible opportunity (for buying) is to the downside targets (after any coming highs) noted in the update and is theoretical, based on the scenario I consider fairly likely for the broad markets. But first, the near term upside target is in play if we break the daily resistance level, again noted in the update.

Blog readers: Understand that the subscribers need to come first. While I believe this will always be a blog that will be helpful and relevant to important macro-market events, their needs must come first, for obvious reasons. The blog will be used on occasion as a sort of bulletin board for their needs. Also understand that, while I am geek enough to want to cover everything here for everybody, I must withhold a significant amount of information, especially in the gold sector forecasting area, which is my primary personal investment focus. Hope you understand.

Hong Kong - A leader

The Hong Kong HSI index led the festivities of hope off the unsustainable lows of last winter. It has now retraced 38% of the decline, a minimum Fib level. It will be interesting to see whether MACD can give a monthly signal. If so, we tune in a big picture view that must allow for the bullish case. And this being a leader, we also wonder whether this has supportive implications for the rest of world, including the late, great USA.

Monthly signals however, can be slow in coming. I just thought this chart was interesting.

STOP right there! Before you subscribe to NFTRH

Well, this is no way to sell a newsletter. But then again, this post is going up and will be linked near the 'subscribe' buttons going forward as a sort of check list to be reviewed by people interested, before actually subscribing. If after reading this you have any doubts whatsoever about the letter's nature but still wish to subscribe, I recommend the monthly subscription, which can be canceled at any time, as the yearly is not refundable.

I have just had a few days of intensive feedback from current NFTRH subscribers after soliciting same in NFTRH42 and in an email update this morning. While I have to say the nature of the input was very pleasing to me, there were a few issues. Most of the issues center around the following areas.

Statements in [ ] represent my effort to distill the varied comments:

• [I like your letter and am trying to learn, but can you please write more clearly?] The way I write can be difficult to understand for some people as it can be fairly technical. Now, the pros and TA geeks tend not to want me to change at all. But there are lots of people who do not fall into those categories and they should be spoken to as well. I agree, but NFTRH also must remain what it is in essence. I will make every effort to make my writing accessible (the blog is representative of my style although the letter tones down some of the silly stuff), but this is a serious letter and there is terminology in play. If you subscribe, do not ever hesitate to contact me for any clarifications you may need.
  

• [I would like more frequent email updates] There is also the issue of what to provide in email updates during the week, and what their frequency should be. Email updates will come out before or after market hours as events dictate. I feel strongly that the service not get into the areas of buy and sell signals on a daily basis because if I am doing my job (and managing my own portfolios) correctly, this would not be needed, and I will not subject subscribers to daily whipsaws. That said, every effort will be made to keep a finger on the pulse of the macro markets, which is NFTRH's charter.
  

• [Your stock picks suck!] :-) This is not a stock pick letter. I manage my own portfolios and illustrate each week what I am doing and why. Individual equities are shown as is the all important cash level, which is a reflection of my 'risk management' stance at any given time. But I by no means tell subscribers what to buy. If NFTRH is getting the macro right, chances are we are all going to make money with sound 'stock picks', wherever we may find them. Please do not expect me to be your stock picker or stock signal giver! I can think of nothing less desirable to be. NFTRH currently holds several highly successful positions and has done its fair share of trading/profit taking. I also trade sometimes on a whim and because I enjoy it. There have of course been losers. It happens. I am a trader after all, as is any good portfolio manager. But I do not tout stocks. I amplify what I believe to be the best macro signposts in order to put us in a position to select the right stocks in the right sectors. In short, I show my stock holdings because people originally asked for portfolios. But I reserve the right to trade as frequently or infrequently as I wish without feeling the need to update these moves as they happen (you'll see them updated each week in the letter and in interim email updates as applicable). These are my real funds and I cannot upset the delicate zen of my trading style :-) by feeling the need to explain every micro move. I am not flexible on this.
  

Nobody mentioned it, but soon all the previous NFTRH will be available online (password protected) so that new subscribers will have access to the complete history of the letter's progression. Also, I will remind that sample issues are posted here for the express reason that they be reviewed thoroughly by prospective subscribers. It is your money and you need a service that is right for you. NFTRH is not for everybody.

I am asking subscribers to have a level of sophistication and to understand this is something different. If you want a stock picker or a trading guide, this is not the letter for you. If you want sincere communication from a market watcher who doesn't b/s himself, you might wish to check it out. But please consider the above before subscribing.

Now for the positive. The vast majority of subscribers who noted the above points also say they value the letter for what they do get out of it. Along with the critiques, there were many other satisfied subscribers along the lines of this gentleman. It is no coincidence that he understands the concept of personal responsibility.

Gary,

'MR' here, one of your Canadian subscribers! In short your letter is just great and provides the best market insight I have seen in many years of trying to make sense of the markets. I recall last year being on holiday and totally consumed in what the market was doing to my portfolio and future... Then I found you and you have given me the ability to make money with peace of mind. I remember you wrote something (and it changed my financial attitude) to the effect that there is a financial war out there and it is up to each of us to take ownership of our finances - more or less and you probably said it much better.

Thank you to everybody who responded and helped NFTRH's quality control department. I will continue to tweak and improve and make NFTRH a letter worthy of you.

Edit (7/22 @ 8:50) Below is the comment to subscribers included in an email update, summarizing the above. Prospective subscribers please review:

Well, my head is spinning...

Actually, after yesterday's prompt I received so much feedback that it was a bit daunting. So I went out and played some loud rock music with the band and now I feel like it is all processed. I will keep this brief:

* There will be no major changes to the letter or the service. If I think too much about what to change I will mess with the reasons most of you are here. One of the most frequent comments I get is that the letter is 'refreshing'. That is because it is me sincerely doing what I do and saying what I think. Simple.

* Still, some things can be improved, and by remaining sensitive to ALL of your feedback, I think I can incorporate improvements on the fly. Let's see how it shakes out.

* A reminder: I show my stock holdings and note my trades because I was asked to early on. You should subscribe to NFTRH for the technical macro view and for the biggest picture macro-fundamental view. Not for the picks. As I mentioned to a subscriber this morning, "if I get the [in this case, gold] sector right, we can all buy GDX and be happy". Fundamental stock guy Otto and I trade newsletters, so you know I have access to some good information. I may also consider subscribing to another fundamental research service but really, a basket of GG, AUY, GDX, AEM, KGC, etc... is not that hard to cobble together when I feel the time is right. Again, let's see how things develop going forward.

* Understand that this exercise was initiated in an effort to make sure NFTRH is improving and growing in line with the majority of subscribers' wishes. It is. Thank you again for helping.

M3 False Signal

Steve Saville has a very nice piece this morning on the M3 money supply and its 'false signal' juxtaposed against the story being told by the more accurate True Money Supply (TMS). The chart at the left (courtesy of nowandfutures.com) shows the alarming drop off in year over year M3. Can you say 'deflation scare here we come'?

"M3 and TMS usually trend in the same direction, but on those occasions when they diverge in a big way -- as they did during 2006-2008 and also during the early 1990s -- we can safely assume that TMS is providing the more correct information about what's happening on the monetary inflation front. The reason is that M3 contains Money Market Funds (MMFs) and Time Deposits (TDs), neither of which are money*.

We are re-visiting this issue now because another big divergence between M3 and TMS is currently brewing, but whereas last year's divergence encompassed rapid M3 growth in parallel with slow TMS growth the latest divergence encompasses the opposite."

Key word: Scare. Now of course, first we will need to work our way through the summer party and some of the targets that have been dialed in (by NFTRH at least) since April or so. Yes, I have had to abandon the bullish view of a short term decline to a major inverted head & shoulders on the SPX (and its ultimate target above 1200) in favor of something more dangerous, a bull party summer blow off.

But there is a good chance that people taking the market higher now care not a whit about M3, TMS or anything other than a good play in which to offload the latest trade. I notice an increasing volume of come-lately contrarians out there now, bullish now that the market has given them permission to take such a daring stance, nearly 300 SPX points higher than when it was appropriate.

The world keeps turning, herds become compelled to look that way (M3) when they should be looking this way (TMS) and the few will profit from this through clarity and patience. It's the way markets work.

Separately, Saville also states the following about Japan's 'bridges to nowhere' policies that the US is now following. As I have been saying, massive spending into non-productive ends will only prolong the problems. Sad but true. Beyond Japan, take a look at our own sad history of the 1930's.

"Rather than attempting to 'solve' its problems by promoting rapid monetary inflation, Japan's Government has relentlessly tried to generate sustainable growth via massive debt-financed spending on public works. This strategy has drained much-needed capital from the private sector and consumed it in non-productive ways, such as in the building of bridges to nowhere. As a consequence, what would probably have been a severe 2-3 year contraction has been transformed into a seemingly endless slump that is now into its 19th year."

Excerpted from NFTRH13

I have been doing a lot of maintenance on the main website the last couple days, and as part of that I needed to review the Q4 2008 ending NFTRH (#13 dated 12/27/08) for some reference. I found the following in lucky #13 and thought I would reproduce it here for perspective.

SPX 1200 may now be overly optimistic, now that greed has won the day short term and invalidated the inverted H&S. But this is a bear market and when the day comes that the public cannot take it anymore, and jumps back in while the media are on full recovery tout, just be cautious is all I'm saying. It's noisy out there. Oh, and do yourselves a favor and watch the gold-silver ratio. Da mahkits is dancin' to a beat.

It is advisable to tune out hyperbole (bullish and bearish), look at convention with distrust (and really, has conventional thought not been the undoing of the vast herds of followers, including most financial professionals?) and to have your own plan, subject to ongoing revision through rational thought. At this point, my personal plan holds that a bear market rally is beginning as the markets grind out a bottom. The rough target for the S&P500 is in the 1200 area. The plan holds that the gold miners have begun a new bull market; one that may eventually make heads spin. But be aware, the plan also holds a contingency that if our broad market ‘next leg down’ is as severe as I suspect it could be, some serious profit taking may come into play in the gold miners as well. After the recent panic, we know all too well what can happen in emotionally charged markets despite fundamentals. Markets are now functioning ‘normally’ and the major media, always a day late and a dollar short, continue to beat the dead economic horse. The new US administration will continue a rich history of inflationary policy that has been the product of the most myopic academic minds on the planet; a Keynesian nirvana, which is actually the worst nightmare of honest economists, the likes of whom come from the Austrian school of von Mises and Rothbard.

IYR & its evil twin SRS

The breakout in the ultrashort RE etf SRS lasted all of a day. As did the break down in the long RE etf IYR. Shows ya a glimpse of what can happen when a bunch of us TA geeks all start seeing the same pattern (Head & Shoulders in this case). Kaput.

Still, one thing I do note is that the double inverse etf's have not resumed their tendencies toward disproportionate declines vs. their happy long counterparts. Something to keep an eye on.

'Hope 09' - a plucky little bugger

You have got to hand it to the masses who collectively make up the vast conventional financial apparatus. After becoming way too hysterical in their negative sentiment into March, they have got a really good story going now. 'Hope 09' in fact, lives on - perhaps to target (SPX 1010) or maybe even beyond target.

"Smaller job losses, rising stock prices and stabilization in homebuilding and manufacturing are evidence that government efforts to stem the financial crisis and lower borrowing costs may pay off." says Bloomberg (full article).

Still, it cannot be argued that some tepid improvement has been registered. Now, I was not originally sure if the recovery in sentiment would coincide with actual improvement in economic fundamentals when I coined 'Hope 09', but now we know that to some degree, the vast inflation panicked into the system, force fed by crooked (or maybe just stupid) policy makers to bail out corporate criminals, is having some short term effect, at least.

"About 76 percent of companies in the S&P 500 Index that have reported earnings since July 8 beat analysts’ estimates. Tata Consultancy Services Ltd., India’s largest software exporter, climbed 16 percent after its earnings topped estimates. Stocks also gained on optimism lender CIT Group Inc. will get emergency loans from creditors to avert bankruptcy.

"'Corporate profits are beating expectations by their widest margins in a year, pushing most equity markets within a whisker of new year-to-date highs and the dollar toward its 2009 lows,”' John Normand, head of global currency strategy at JPMorgan Chase & Co. in London, wrote in a research note." --Bloomberg (full article).

But let me ask you, what is going to happen if/when this two-pronged welfare program (golden parachutes for corporate criminals not named Bernie Madoff and vast infrastructure 'make work' aimed at the unions) falls flat of its own bloated, non-productive weight? Hmmm? What, more printing? More inflation? Is it that simple?

You know, many people have been managing the price of gold lately, but if these creeps are able to engineer a real end to the recession, gold is likely to under perform things like oil and the materials of infrastructure, not to mention other bubble areas in waiting like alternative energy. Oh, but let them fail and watch gold's assault on resistance and watch the gold mining sector's bottom lines gain in leaps and bounds.

The activity in interest rates recently tells us that policy makers no longer have full freedom and mandate to inflate against the dreaded deflationary beast (aka the lever of inflationary policy). If this mess starts rolling over into a new round of agony, they will be inflating and devaluing in the light of day the next time and the dollar will be front and center.

Oh but wait, maybe Mr. Bernanke can cook up a plan to manage that dynamic:

“Bernanke needs to explain that the Fed has the tools to do the job and that it intends to use them forcefully when it has to,” said Lyle Gramley, senior economic adviser with New York-based Soleil Securities Corp. and a former central bank governor. “That would help hold down inflation expectations and give the Fed the opportunity to stay easier for longer.”--Bloomberg (full article).

Maybe this is how they will do it... click the heels of their pretty ruby slippers and maybe they can have it both ways. This had better be a real recovery. But it is overwhelmingly likely that it is not. It is a false dawn. Beware of strangers (financial services industry that got it wrong last time) bearing gifts (little bon mots about the end of the 'recession').

Here is the 'tell' on this racket: With the improvement in corporate 'earnings' and the 'hope' for an economic recovery that is based in anything real, should not the dollar be benefiting as pressure is put on treasury yields to the upside? No, the story remains the same here in Biiwii land; we are attempting to pump life into the corpse of what was, a bloated, greedy system that will no longer function effectively or sensibly and the US dollar remains the barometer in this effort. 78 has long term significance. Let's watch the drama unfold.

Gold price micromanagement

I suppose I do not manage the price of nominal gold as much as some readers may like, but here in this Ino.com video, Adam does a great job of it. Really. I receive a commish from Ino on any sign ups, but that is not why I am posting this.

You see the inverted H&S out there along with Merv Burak and Gary Biiwii's negation of same. You see Gary's symmetrical triangle and/or ascending triangle which are bullish, but caution downside potential on the way to a very bullish outcome. One thing I will say is that the more times something pounds a resistance area, the more likely it is to give way. Adam shows the resistance line and as I said, does a good job of laying out parameters, especially on the weekly time frame, which happens to be the time frame I do not like the looks of.

Check it out. It's just a video. It won't bite. You don't have to buy or sign up for anything.

NFTRH42 Out now

Actually, yesterday. NFTRH42 starts off with a message from the customer service and quality control departments ;-) as it is probably time to make sure the letter remains on track and up to the standards I expect for it and more importantly, those of subscribers.

The previous post provides a hint at why I wanted to do this now that we are nearly 10 months in. The letter keeps improving in my opinion and in that of several of the subscribers who have responded to #42's request for feedback. But... not to sound too corporate here, quality and improvement are a continuous thing and one thing I will never do is sit back on my duff and think I have got it knocked and am on easy street.

The broad stock markets appear to be picking their direction by invalidating the minor H&S top in the SPX, and while there is still some debate about whether the bullish intermediate term is out the window, the short term certainly looks bullish. I am seeing a lot of analysis now swinging to longer term bullish but of course dear readers, that is what a good suck-in rally would want. People are going to be thinking about how in 2003 the sure thing bear market became anything but. A lot of work needs to be done going forward to remain on the right side of this, but the first step in clearing the picture was taken last week.

Commodities? Yup, oil and copper are looked at. Precious metals? Why, of course. A Wrap Up and Portfolio Notes finish out #42.

Ending the week on a positive note...

Below is an email I just received from NFTRH subscriber Steve Dore, a man who I consider a friend even though we have not met - yet. I first came upon his work at Financial Sense and thought 'who is this musician - way ahead of his time - singing about gold, silver, inflation and the Fed?'. This was long before the Ron Paul phenomenon kicked in. Steve, in his way was a kindred spirit of mine in that we were using different media to put out a similar message.

Yeh, he is crazy. Just like me. Just like all the crazies out there that nobody wanted to listen to when things appeared okay, conventional or dare I say, normal. We have come a long way indeed. One of the real crazies, Peter Schiff, is exploring a run against Chris Dodd for a Connecticut US Senate seat. A disciple of Austrian economics in the US Senate? Another (Dr. Paul) in Congress? What's this country coming to?! :-) I talked to Schiff on the phone once and I will tell you I got an ear full in just 2 minutes. That guy can TALK... and argue. The time is now for a new debate. But as often happens, I digress.

Here is the mail from Steve. I asked him if I could use it to promote my newsletter and he gave a big thumbs up. This is the kind of thing that makes me proud because this is a guy with integrity who is on his own journey toward truth. You know, the financial markets work better for you when you don't bullshit yourself. So yeh, the truth works and that is what NFTRH seeks to flesh out, week after week after week.

I had to give up Russell a while back and it's been very hard on the every day level. Fortunately there is relief in that you are on the scene, or that I have discovered the depth of your blog. I want more of it. I think you could do as well as Russell frankly. You really talk right to people like he does his previous generation.

The beginnings of NFTRH put you on a one of a kind ground. Russell may have had more attention in his early call that got him notoriety, but yours is coming. I see you replacing his daily service, 'cause that wise old bird won't be on it forever. The daily is what I need to shed these vestigal sheep brain cells! :-) I wonder if a daily would be more appealing than the weekly and make you in a league of your own. [I will consider it or at least consider increasing the volume of email updates although at this time I do not want to become a trading robot for subscribers]

There's probably others, but I don't know of them. You already have both! People have got to learn about you, that's all there is to it. How many subscribers has Russell? 10,000 or more? at $350 or so a year... No wonder he has a bought and paid for palace on the coast in So. CA.

Like hearing the good news on the band. There is nothing that feels as good. I play with great players here, truly world class, but there is no togetherness, no sense of common growth or whatever that magic thing is. Looks like you got it good. I am striving for that place again.

Thank you Steve.

Mega fun

Hey, it is Friday and I am going to unwind a bit and lighten up. No more posts from the droll side until next week. In fact, this may be the last chart before I get to work on NFTRH42. It throws the old reverse symmetrical triangle pattern into the mix for the SPY.

Now, a sym-tri is... Beuller? A continuation pattern, right. A reverse sym-tri is a... REVERSAL pattern. Comes after a rise, the reversal is down. Comes after a decline, da opposite. Let's see how these babies develop.

'...is what it is'

It is imperative that we deal in what is, not what we think or wish would be. Did I have designs on things going differently then they did this week? Well yeh, to the tune of about 60% - 40% as follows:

• 60% probability that the market declines short term (to 800 +/-), scaring out a lot of chickens before forming the major right side shoulder of an interted H&S bottom with very bullish intermediate term implications. The plan was to be short selected areas to guard against bullish precious metals (mostly gold) positions, and then cover as SPX neared 800. Sounded like a plan but...

• There was the pesky 40% potential for the bulls to put their greed on full display, blow out the shorts and party on, led by Paulson's Plunderers (NYSE: PP). The inverted H&S scenario is now negated and this market is now in the realm of traders and pros who know what they are doing and can be nimble.

In my view, the odds are now 90% that this is ultimately going to be a tragic suck-in. The last leg that pulls in the remaining stout holdouts who sold in March in order to wait for the worst to be over.

NFTRH goes back to its original targets for the S&P 500 and for Hope '09, but first there is strong resistance right here that the market needs to overcome. I believe it will eventually do so and that the summer will ultimately prove mostly bullish. With the impulsiveness of the bull fest this week, while a decline from immediate resistance is likely, eventual upside is implied.

This all brings back into play the potential for the classic Fall agony. Potential mind you... but if we had gotten a strong decline here and now into a right side shoulder, things would have looked really good through the end of the year.

Alas, it is not meant to be. It is what it is. We'll deal with it. On the plus side, as a newsletter writer, this week was great for me. Finally, directions are being chosen and mapped out. This is the official end of the summer doldrums, at least for me.

The Versatility of the Wave Principle

I am not a wave guy, but this is quite interesting. Even to me, a guy who will probably never use E-waves in his work but realizes there are other ways to skin a cat. Check it out.

The Versatility of The Wave Principle In this classic Elliott Wave International educational video, Chief Commodity Analyst Jeffrey Kennedy demonstrates the versatility of The Wave Principle by showing you how to identify high-probability trade set-ups at-a-glance, and in any market. Watch the video and then find out how to access Jeff's current high-probability commodity forecasts FREE during EWI's FreeWeek - but only until July 22. The Versatility of The Wave Principle Get the best daily commodity picks FREE, but only until July 22!

Gold-Silver Ratio

Gee, do you suppose the drop in the overly frothy GSR has any correlation to the market's pop of the last few days?

If GSR holds support, get ready for a bear fest coming soon.

BKX comes to target

NFTRH has targeted the SMA 200 on the Bank Index since Hope '09 was in its early, angst ridden days.

Now we have a world full of players hopping aboard the sunny story. After the index failed to hit the 200 in May, NFTRH stated that perhaps it would do so at a lower level at a later date.

Bingo. This is one big asterisk out of the way in the path to the end of the rally and with it, hope in '09.

Flying in your face... Goldman

I showed the daily target of Goldman the other day based on a 'what if' breakout from a short term pattern. That target was 165 and it looks locked and loaded now. The weekly chart shows a retrace potential to above 170 into a thick resistance cluster. 'C' leg here we come.

But does any of it really matter? I don't think so when you consider that the stock price of these Satanists is flying in the face of you (assuming you are not from the dark side) and anyone else not on the inside of the deal with the devil that sprung GS' rally.

Sure, we are going to bite our lip and make money by understanding what is happening here and in 1000 other gyrations going on in the financial markets, global economy and global fiat monetary system. We are going to bite our lip and make money and/or preserve capital. We are also going to have our minds as open as possible with regard to what is and is not money, what is and is not the basic essence of our society. In short, we are going to move forward given the cards they deal but on our own terms as long as we are free people.

But these cards, dealt by Hank Paulson, George Bush and now Mr. Obama, Timmy Geithner and Lyin' Larry Summers are being flung from the bottom of the deck. Since I began writing about this mess in 2004, I have had a tone about 'the people' being to blame as much as the actual mega wealthy evil-doers. That is because the public felt it more important to watch its new plasma TV with which to root on multi-millionaires (in my case the Pats, Red Sox and Rangers - hey, even overly sober bloggers need an escapist avenue too... no plasma TV however) or keep up with every mean but funny critique by the British guy on American Idol.

Biiwii.com has a page that auto-feeds content from LewRockwell.com and the DailyPaul.com and this morning I stopped in to check out the Daily Paul feed. One item was this audio of Glenn Beck interviewing Patrick Byrne and Ron Paul. Think what you will of Glenn Beck (I actually don't think much about him because I am not often tuned in with the major media) but what I have heard of his show has been more sober than the usual cartoons I flip through on CNN, MSNBC and FOX.

The theme is Goldman, the Fed, Wall Street's control of our government and the idea that we are headed for unimaginable inflation and perhaps a new currency down the road. Ron Paul soldiers on with his message and more and more people wake up every day.

What more do people need to wake up than the 'play' that has been put on them by the powerful entities that crashed their economy, lost their jobs or put them in peril, got them stuck in traffic every half mile (don't know about you but here in my state they are putting my tax dollars to work on every highway and an increasing number of side roads); the 'play' that sees Goldman Sachs, poster boy for the beneficiaries of Paulson's supposed panic, flying right in their faces?

What are we going to have, ever-strengthening financial behemoths and ever strengthening unions? Mmmm, now that's a society that sounds like a lot of fun. Thus ends another hybrid TA/stream of consciousness piece.

Have a good day.

C leg in progress...

Bull

They will tell you that the market is celebrating the Intel results, the Goldman results... the man on the moon. Whatever investors want to lap up.

What the market is celebrating is a global economy, led by the United States, willing to eat its seed corn to keep the illusion of growth and prosperity alive. In short, we are celebrating denial. The true measure of our celebration should be honestly defined as our ability to devalue the currency.

Tell me, with these great results and economic indicators, why is Uncle Buck not rising? Why?

Why? Because inflation is baked into this cake as far as the eye can see. A while back, with long term interest rates threatening a secular break to the upside I showed a compelling chart, the underlying message of which was that policy makers needed a bout of deflation fear to reload their inflationary guns. If this is all we are going to get for a deflation impulse - and surely you know that is far from a given - then it is look out below for the dollar and Bananaville here we come.

Oh, by the way, I have covered the shorts (at a manageable loss - you don't fight these guys as a hero) and just enjoy the proceedings as a gold stock bull for now. It looks like 'C' leg here we come. A time to short once again may yet present itself.

Micromanaging the gold price

From last weekend's NFTRH41:

"Anecdotally, I see a gold sector that has quieted down considerably. That is good. Things now seem to be in the realm of chartists micromanaging the decline, looking for trend lines and projecting downside targets, support, etc. With each passing week, we hear less and less about the vaunted Inverted Head & Shoulders pattern that was imagined in gold in response to immense inflationary policy by our friends in government. These are all bullish proceedings, but you must have patience and keep in mind that, as galling as it will feel to inflation believers, there is downside potential prior to the real bullish price objectives, the next of which is 1300."

I spoke too soon. The pattern is gaining some attention this week. But this time, the attention includes some of the negating kind, for the reasons I illustrated two months ago; drum roll please... no prior downtrend. This from an NFTRH subscriber:

"Hi Gary: For the longest time, you were the only person that I saw who was claiming that gold's weekly intermediate term chart was NOT an inverse H & S. And believe me, I read tons of articles with corresponding TA calling the pattern an inverse H & S, and this has been going on for months. I never saw anyone else who was thinking along your lines in that regard until now. Don't know if you saw it but Merv Burak, a certified market technician (CMT) wrote an article yesterday and the particular points he made were as follows:

'As for the intermediate term pattern, the left and right shoulders can be seen on the right side of the chart with the reverse head in the middle. Unfortunately, I DO NOT subscribe to these being reverse head and shoulder patterns. They are more legitimately potential double top patterns which I had talked about previously.

Head and shoulder patterns are trend reversal patterns and therefore for a reverse head and shoulder to be present (suggesting an upside break) you would have had to have had a bear market move leading into the pattern. For a normal head and shoulder the lead in trend would have been a bull market trend. In neither of these cases do we have a bear market leading into the formation of the pattern and therefore we DO NOT have a reverse head and shoulder pattern.'

The full article can be found here. Regards, Bruce"

I have given up trying to figure out why the gold price is so intensively micromanaged by people who would claim it is the only real money on earth. If it is real money, then it is not just another FOREX play to be paired off with other plays and charted into oblivion. As I have always written, and as was taught to me by a real gold guru, 'gold is not about price... gold is about value.'

Obviously Mr. Burak is looking at it from a technical perspective and is telling it like he sees it. I have not read his material in several years but from what I recall, he is not afraid to put forth his unbiased technical view, whether right or wrong. That is what TA is all about. It must stand separate from fundamental views. Insofar as one needs to manage the price of gold for trading and working a world full of 'plays' out there, then this is the way to go about it. With deeply held beliefs firmly in check while TA and sentiment analysis guide the way.

Well, it has been a while so I guess I will do a little micromanagement of the gold price myself. Actually, nothing has changed whatsoever, but this can serve as a review. Here we see the weekly chart of gold. Months ago I published this post negating the inverted H&S but showing another bullish potential, an ascending triangle with its ultimately bullish objective of 1300. This level has been our target in NFTRH all along, but... and in this case the 'but' is crucial to players and casino patrons far and wide... the lower uptrend line needs another successful bump for the pattern to be actualized. Failing that, I have noted a support level at or just below 700 that should be bought like mad by anyone who needs exposure but loves a bargain. Then again, when you are talking about value in a monetary world gone mad, I would think that the need for exposure surmounts the desire to get a steal.

A somewhat uneven symmetrical triangle has been added to the mix, but there is really no functional difference between the two patterns. They both need a test of the lower line and they both ultimately target the 1300 area. Bullish objectives could still be many months out. The weekly MACD is not pretty and implies room to drop to the lower uptrend line.

Now, having had the 'gold is not about price, gold is about value' mantra hammered home to me several years ago when I was but a fledgling gold market player, I have truly found this simple concept invaluable in managing my tack with regard to the various market plays. That is because even though gold may (emphasis on may because there will likely come a day when the metal surprises everybody and tells we TA geeks to go jump in lake) decline in the near term, its ratios to the various assets of hope and positive correlation are what count (or should count) for gold stock traders and for macro market forecasters.

I am bullish on gold. I am certainly not telling readers to be bearish on it. I am simply asking you to be aware of the potentials for its price, both to the upside and the downside and of the timeframes that are likely. It is a good bet that when gold finally does launch for real, it will do so without some of its most would-be ardent believers aboard. It will launch amid fear and agony. That's the way this market works.

Revisiting IYR

Here are 60 minute and daily charts showing the situation in the real estate ETF. I want to remind readers that I do not play with fire and hence the SRS and other short positions I still hold are simply dragging at the performance the gold stocks are showing the last couple days.

Still, I will have to think about aborting the shorts if things go past the limits that are nearing, like the one shown on the daily chart here.

Goldman Sachs

Here is the poster boy for an industry that took the public's money in order to save itself from its own toxic excesses, with Goldman's former CEO front and center in the coercion campaign no less. We could get bitter, but it is what it is as the cliche goes.

If the market decides that 'C' leg up is the short term option of choice, GS will probably head toward 165. I just thought I would post this thing in celebration of its status as Wall Street beacon of hope.

Edit (2:40) Leave it to Jim Kunstler to use the crooks at Goldman as a starting point for another of his far-reaching sociopolitical riffs: Wobble Time

S&P 500 - choose your pattern

Here is a chart that went along with a detailed email update to subscribers this morning. Without reproducing all of the 'what ifs' and eventualities, I thought I would put the chart up with its self-explanatory aspects illustrated for your review.

NFTRH has been operating in a somewhat frustrating mode whereby the broad market has very different potential outcomes for the near and intermediate term (while the long term remains a bear market). It is ironic that the most bullish short term is not what is best for the bulls in the intermediate term, and visa versa.

Here is the chart. Daily down trends are intact, therefore the intermediate bullish inverted H&S scenario is intact, but weekly uptrend keeps a 'C' leg flame out in play. Short term, is the fix in?

Goldman Sachs will post the largest profit since a record set in 2007 when it reports second-quarter earnings today, according to analysts’ estimates compiled by Bloomberg.

Dat all ya got Bully?

I probably should not taunt these creeps because hope and hype can go a long way in the short term. Rather than contemplate covering anything, I added back starter positions in a couple favored gold stocks (sold on the unsustainable rise to HUI 400) because as noted in NFTRH41, the gold-silver ratio has come to a point where markets (including silver and gold stocks) can get a bounce.

Will it be a one day wonder or something more? I don't know. But the state of the various market technicals say hold short against long gold positions. So, if this mess drops as expected and takes gold miners lower, at least they have investment merit and the shorts will come back to life.

Failing that, if the market turns and burns higher here, mentally stopping out my short positions, it may invalidate what I have been following as a very bullish intermediate term potential as most recently discussed in #41. This is counter intuitive I know. But this is the markets.

To subscribers: Today's activity will probably be a good lead in to an email status update tomorrow morning.

Edit (2:51) Here is the operative clip from NFTRH41:

The GSR [gold-silver ratio] has chosen its path and broken to the upside of the wedge we have been watching. This signals bearish tidings for the hopeful trade in stocks and commodities. If the GSR hits some turbulence at the SMA 200, markets could get a brief reprieve from recent bearishness. This would include gold and silver stocks of course.

Again, if stocks remain on a higher course short term, a very bullish intermediate pattern will be all but invalidated. A drop to the low 800's by the SPX would be best for the bulls. The problem is nobody bothered to tell the bulls what is best for them beyond their short term impulses.

Edit (5:07) Adding the chart of the gold-silver ratio (GSR), the likes of which showed up in this weekend's newsletter along with gold's ratio to oil, industrial metals and S&P 500. This adds a visual to the above in showing that indicators can become 'over bought' as well. Was it a logical point for a reaction with stressed MACD & RSI as the ratio hit its SMA 200? Well obviously, yeh.

















Meanwhile, we prepare to adjust if the market demands adjustment and unfortunately for the bulls, that adjustment will likely mean removing our intermediate term bullish scenario. At this point however, no adjustment. Just aggravation. :-( Ah what the heck, turn that frown upside down! :-) Thus ends today's micromanagement exercise. I am going to go spend some quiet time with my wife while kiddos are at soccer camp.

Dow 60 minute

Dohh, I guess this is why bears tend to get pretty angry.

NEW YORK (Reuters) – Stocks rose on Monday, sending the Dow Jones industrial average up 1 percent, as bank shares advanced following an upgrade of Goldman Sachs Group (GS.N). and bullish comments from an influential analyst.

Speaking of back tests...

...here is the Dow doing all it can to make you believe.

Well, I will think about believing when the neck line and moving average cluster are surmounted in conjunction with RSI resistance being taken out and the bearish MACD signal being negated.

Until then, sorry Mr. Dow. No can do.

SRS (RE Short) - Back test in process

I will probably never be known as a perma-bear, and if I have identified one weakness in my financial market makeup it is that I tend to get a bit emotional when short the markets. I think I know why that is too. It is because, just like the gold bugs who are sometimes criticized here, I think I know the truth about how what I consider an illegitimate financial system runs. When I take morally superior positions against that system it really pisses me off when it flies in my face.

I am just telling the truth. I tend to get a lot of things right in the markets and usually net out very nicely in my trading and investments. But this is a weakness.

All that said, I continue to hold several short positions including the ultrashort real estate etf, SRS shown here. They are back testing the breakout this morning but I don't buy it. Thus far my shorts (China, real estate, financials, euro and oil which has been closed out) have been an easier hold than normal I guess for two main reasons; 1) They are just acting normal, which I can deal with chart wise and 2) My macro research points toward events in line with a short term bearish stance.

Anyway, here's the chart showing the back test.

NFTRH41 Out now

NFTRH41 overcompensates for the abbreviated 5 page NFTRH40 published mid-week and goes on for 14 pages with lots of technical analysis and commentary in what I think of as a continuum moving forward. In other words, a cohesive narrative carried forward through the dog days of summer and into what I believe will be make or break decision time in the next few months.

To be sure there are very different possibilities on the horizon and not having a crystal ball, all I can do is analyze and adjust as needed. Thus far, things are going to plan and I have not had to make many adjustments at all.

My commitment is that NFTRH subscribers will be ready for whatever lay ahead. I feel I have done a good job of continuing with that commitment today in NFTRH41.

NFTRH41 out now.

Have a great weekend!

Speaking of shorts...

Why do I continue to hold the majority of my ultra short ETFs? Because they are no longer acting like basket cases. In fact, most of them are forming beautiful looking bottoms and the charty geek in me cannot resist bottoms like this, especially when they are doing a good job of protecting my bullish positions in some of the smaller gold stocks.

Here is SRS, the ultra short real estate ETF acting nicely inverse to the IYR chart shown yesterday and trying to confirm a breakout.

IEF treasury bond fund - target reached

Yes, I grew uncomfortable owning the longer term debt of the chronic inflator, so I took my 1.50% plus dividend and moved along, preferring to short the market for my deflationary kicks. But since the trade was opened here on the blog, I thought I would close it out for you.

IEF has hit target.

Gold Ratios - Time to Pay Attention

Ever since the sentimentally unsustainable negative events of Q4, 2008, when gold simply exploded higher in ratio to over-played assets far and wide in a panicked rush for safety, the ancient monetary metal has been consolidating its relative gains. As noted at the time in NFTRH, this excessive reaction had to be worked off. Now, unfortunately for the unprepared and hopeful, it has been worked off. Forewarned is forearmed.

Dialing forward to today, we find a tired rally in nominal stock, commodity and low quality debt prices. We see a rising Gold-Silver ratio (GSR) and a US dollar not far above our 'do or die' support level of 78. See the free, albeit abbreviated issue of NFTRH for the monthly view of USD.

NFTRH held and added gold miners strongly throughout the process of gold's impulsive rise in ratio to the things that are positively correlated to economies and rising human spirits. This even as nominal gold stock prices imploded. Positions were added 'all in and around' a historic bottom and this trade has paid off quite well.

Okay, that is history. Now what?

We have been watching the GSR (among other indicators) tirelessly and its message for the markets has been actively bearish for about a month now. To review, when silver is rising relative to gold it indicates a willingness on the part of market participants to accept risk, to 'play'. The GSR has been working like a more sensitive version of the VIX in recent years. Ah, but there is literally a world of ratios that can be used to advantage when attempting to gauge the winds of the markets.

In the chart included today we see gold in ratio to the Reuters CRB commodity index ($CCI). Even as many people micromanage nominal prices of asset markets, gold's ratio to commodities tells a story of a bottom in the making, which of course tells a story of a top in the making in what NFTRH called 'Hope 09'.

Sure, I would like you to join my newsletter. With its early identification of the various rallies off of unsustainably bad sentiment, it has acted as an early warning system for those looking for opportunities to make money. Most recently however, NFTRH has acted as an early warning system in service to preservation of capital gains with an eye toward coming opportunities.

Regardless, let this short article serve as notice that gold's consolidation vs. the assets of hope looks to be in its final stages. This is a bullish chart, and in this weekend's NFTRH41, we will look at gold's ratio to several other assets and markets. It is time to pay attention and it is time to get it right.

Markets travel in roundabout directions and cycles - both short and long term - must be endured. It is technical, sentiment and market ratio analysis that guides us through these cycles and keeps us on the right track. Please heed the above chart and consider what will happen when gold finishes consolidating the explosive ratio gains of 2008.

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http://www.biiwii.blogspot.com
Notes From the Rabbit Hole

IYR - Real estate iShares

This etf is looking pretty toppy and if the neck line is broken it will look to the 25 area as a measured target.

This economy is not going as policy makers would hope, which is no surprise because the only real effects I see from the 'make work' stimulus package come in the form of things like signs telling me 'your stimulus money at work' while I sit in traffic jams on the highway.

But I digress. Here is the RE etf threatening its neck line.

Bully tries late theatrics

But as yet the market has proved nothing. Noted resistance and neck line reside above, per the 60 minute chart. If Bully gets above those levels, then we can talk bull.

Separately, here is today's abbreviated edition of NFTRH (NFTRH40) for your review. It is about half of the normal length but covers some important topics. If you like it or think that it hints at providing value for you going forward, feel free to do what many folks have already done; sign up for the monthly or yearly subscription.

NFTRH is delivered to your inbox weekly with interim email updates.

Check up on SKF (financials short position)

I will be the first to admit that I neither know nor care how these things work, these high octane ultrashort ETF's. A subscriber who is an economist by training sent me a mathematical breakdown of the dynamics in play on vehicles like this but I could not understand it. I am a psychology and sentiment guy after all, not a numbers guy. :-)

So, while it is advised to use these things as no more than day trading vehicles, I find myself watching SKF and the other ultrashorts daily and seeing charts that look to be making nice bottoms. Here is SKF hinting toward a breakout that would target the 55 area at which point I "think" I will sell it, subject to ongoing review of course.

An abbreviated version of NFTRH (#40) just went out to subscribers and I am thinking of making it available for free on the blog after the market closes. If so, it will be linked here with no need to email me.

Euro vs. USD

Ino.com builds a good case here for a stronger euro vs. the US dollar which is contrary to my current positions in euro ultrashort EUO.

Now, I am not necessarily bullish the dollar nor bearish the euro. But I am attempting to use this short as a hedge against dollar strength and short term weakness in the gold market, where most of my positions are.

We shall see. But I thought it was an interesting little video.

HUI not looking so swell either

Not to be outdone, Huey sports a daily down trend and potential for the SMA 200 to be seen near term.

But in a high risk (of a dollar upturn) environment and considering the gold miners' volatility, there is lower potential as well, including a compelling buy point that NFTRH has been following for months now.

It was not too long ago that many people were salivating at the thought of paying HUI 400 to get aboard. I have got to believe we are in the midst of getting some nice work done on that toxic sentiment.

As yet however, HUI has not broken and risk in owning quality gold stocks is so much less now than it was in May.

Oil - We got our breakdown

...and oil could have further to drop, but I think I am going to take the profit on this short trade (SCO) today, given the erratic nature of these ultrashort ETF's and my spotty record in the oil market. Profit is currently a bit over 16% and in a market like this, that is worth taking.

Edit (9:35) There, done... profit of 17.7% taken. After allowing no more than a small loss in NatGas last week (per the parameters in previous post) we exit the energy patch feeling good in that while 17% may not be a home run, profit is always a good thing in difficult markets.

A look at the Dow's status

You have no doubt seen this little potential head & shoulders elsewhere, so there is no new ground being broken here. But here is its current status showing a little hammer of hope trying to get the heck over the neck (blue) line.

This market has been flashing warnings for a long while, both in the rounding look of the nominal indexes and associated momentum indicators and especially in our vital indicators like the Gold-Silver ratio, which is up again this morning.

Here is the Dow showing downside support as well as a measured target for the H&S in the event it becomes actualized. Risk vs. reward in being bullish much of anything right now stinks. I continue to protect certain gold positions with well chosen (I hope) short positions. This is not a drill people, this is war; financial war. Be ready for anything.

Risk/reward sucks...

...or have I mentioned that before. :-)

Of course, the multitudes are going by generic signposts erected by established and sanctioned experts. No wonder they were selling in March and agonizing whether to buy in June as hope drags its tired ass on and on, seemingly interminably.

Yes, this blog began posting 'risk is rising' and risk is high while the party was in full swing. We (or at least NFTRH) were in full rally mode way earlier, when risk was acceptable. The risk/reward has not been acceptable for some time now. About as long as it has taken for that gross toppy-looking rounded thing to form on the broad markets.

The GSR shown here has been front and center and it appears to have made its move. Now we may look forward to hope revivals in spurts here and there, but this is not a good looking market. Ah, but will it just be all bear all the time upon confirmation of the next significant correction? No, it's not that easy. There are sub-scenarios at work and now the fun starts.

Those who trust and want conventional expert analysis will seek it out. Those who want to preserve or just maybe grow capital will seek out their own answers by asking the difficult questions that do not have ready-made answers.

This stream of consciousness is inspired by some of the emails I receive from NFTRH subscribers that tell me the exact people who I want to find and make use of my newsletter are doing so. It is a feeling beyond description, at least as far as the financial world goes.

Have a great 4th you Americans and have a great weekend all.

Shorts

Now I remember why I am short these and several other markets. As aggravating as it has been holding short through bull denial, I have kept in mind days like this and the idea that risk is untenable in the markets right now.

Watch the dollar folks. It's all about Uncle Buck right now.

Edit (10:15) A reminder to subscribers: The URL noted in NFTRH39 for this week's updates was updated yesterday.

UNG - NatGas

The trade in UNG is on its last legs. With Natty now at 3.82, there are precious few ticks left to the downside before I will call this a failed trade. This may not be updated again on the blog so consider these the parameters I am working with.

This is the problem with buying charts while having no fundamental attachment. Ya can't, by definition, be a strong holder.

HUI did not like previous post

And I am glad I was wrong (well, with this kind of whipsaw, I think I was wrong).

However, the discipline of 'buy the downside only and do not chase' is still in force. Luckily, today one of NFTRH's favored exploration companies - sold on hype fueled upside - is now getting blown up back to buy levels. Adding that one and remaining patient elsewhere.

I have been buying all through the current correction, on down days. Seems like a plan.