NFTRH108 Out Now

The snapshot view is self-explanatory as relates to a new theme beginning with NFTRH108.  Simplify where possible, and ADD VALUE where possible.  Aside from that, 108 tries to hit the important points of consideration, zero hour minus 2+ days...

The 'Speculation' portfolio is now +25% for 2010 and the interesting part is that things may just be getting started; so say the charts anyway.

Today

Today I found out someone close to me has passed away and quite frankly, I am in shock.  He was a business associate and he lived on the other side of the country.  But our 'business' conversations, which could have been wrapped up in 10 minutes usually went about a hour and a half.  I feel like I lost a brother.

This abstract mess can wait until next week.  Keep your heads screwed on straight and remember that real life - dangerous cartoons like macro financial policy makers not withstanding - is precious.

Later.

Gold This Morning: Not Tonight Dear --Jon

Modest volumes overnight with a couple of limp probes by both buyers and sellers which quickly detumesced. The facts remain positive  as the GSR is unchanged ~56; relative strength on the DEC chart improved with yesterday's $20 buck pop, but still remains squarely in goldilocks territory. Open interest declined modestly again yesterday, and my recollection is that this is 7 out of the last 8 or do days, whatever, it spells distribution and the consistency over this period should be taken as a positive. Also, there was a clear bias in the pits yesterday to set up hedges that bought volatility; options remain cheap, but fair warning the active DEC contracts expire in a month. Today: Stick with the facts and do not be tranquilized by the babel from the media on next week's events, there will be unintended consequences that none of them dare raise or more so even realize. 

Pertaining to the "there is no USA" theme of a couple posts ago...

How about this puke fest from Zero Hedge?  They are all in folks.  My Treasury bond short has made a nice profit over the last week.  I am going to go book it now.  I hate playing with pigs.

A Paralyzed Fed Defers Decision on Monetary Policy to Primary Dealers in an Act That Can Only Be Classified as Treason

And, incidentally, since the "independent" Treasury will be forced to issue more debt to fill all the demand for $2 trillion over the next 12 months, as there is not enough debt in the pipeline to fill $2TN worth of demand and prevent the entire curve pancaking at zero (i.e., the 30 year yielding precisely 0.001%) it also means that the government will be forced to come up with more deficit programs, which also means that primary dealers will now also determine US fiscal policy.
Which begs the question, why is anyone pretending that the political vote on November 3 matters at all? 

Below are the 18 banks that, in a completely separate vote, will henceforth rule America, regardless of what particular puppets end up in the Congress and Senate:
BNP Paribas Securities Corp.
Banc of America Securities LLC
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
Nomura Securities International, Inc.
RBC Capital Markets Corporation
RBS Securities Inc.
UBS Securities LLC.

Two views that would give me pause if I were shorting the $DJR

For blog commenter Sunnyview... Daily chart Ascending Triangle breakout with target way up there... caveat to bull case:  it's in a rising wedge (not delineated).

Weekly shows current resistance simply must hold or bears are cooked.  Even if it holds, there is potential support at or about the moving average.

Gold (GLD Proxy) Updated

I would love to see a full retrace down to the SMA 50.  There is still time for a nervous world to express its skittishness into the Fed's QE decision, although time is running down.  Come on little sheep, do what you do!

How pathetic it is that millions upon millions worry about the amount of incestuous stimulus that FrankenConomy is going to get as the institution that manages the proceedings gets ready to buy the nation's own legacy debt that cannot be repaid.  And still so many people fret over the 'price' of gold.  There is no 'real' US economy and so by extension there is no USA.  The real USA can only take shape after we have dropped the denial schtick and gotten about the process of rejecting the blood suckers (you know who they are) and our own lifestyle expectations of the last century (go forth and consume, it is your birthright).

But oh yes, this is a TA post.  I never fret the price of a real value instrument, but for anyone interested in micro managing, the 38% Fib and SMA 50 represent a really good pullback and a point from which the next launch would become a high probability.  However, RSI is at support now, MACD has done some good downside work and ya just never know.  Will the lower gap be all we get?

Make preparations to be on the right side.

And, as if his ears were burning, here comes Jon with this morning's gold view (and it is a front row seat):

Gold This Morning: Hit Me With Your Best Shot
Modest overnight turnover by recent standards has prices discreetly better as gritty buyers continue to challenge waves of witless and preposterous pundits providing primacy to the countdown for the dawn of QE2 next week as a measure by which our discredited financial leadership can again provide handouts to make America great...again. If it's come to this than we are clearly out of Red Pills and there's a reason why Aces over Eights is the Dead Man's Hand. The facts: GSR, our measure of liquidity sloshing around the engine room, has eased to ~56; open interest for gold futures on Tuesday eased again, by 4,000 contracts, confirming the distribution profile we raised yesterday; relative strength continues to flirt ~50. No, not quite a launch pad yet but substantively corrected from the overbought atmosphere earlier in October. Today: Do not succumb to the prospects of hopeful prognosis; gold's recent trading range between $1320-50 is still applicable but the facts are compelling and the obsessive media analysis on QE2 has mitigated the mystery...this time we buy the event.

Eerily familiar? DIA

GLD still looking to fill lower gap...

Let's see if the gold bugs retreat back down Hamburger Hill.  Edit (9:53) Adding Jon's tardy but always appreciated view of gold.

Gold This Morning: Late Edition 


Apologies, but just returned from Boston where I attended last night's 'Gold Standard' of basketball, yes that was me you saw sitting 8 seats away from Spike Lee and high fiving Big Pappi. The Celtics methodically picked apart the Heat defense and that is exactly what we expect gold buyers to do as we resolve the current disorderliness of foggy thinkers captivated by undisciplined nostalgia that next week's election and Fed meetings will magically improve the bad hand they have been dealt. The facts today. GSR slightly easier ~56.25, open interest for Monday came in 2,000 contracts on a day that came close to both a higher high and a lower low and that spells d-i-s-t-r-i-b-u-t-i-o-n, and RSI easier at 51 is getting closer to the buying zone. Activity still appears limp in terms of any conviction and I am heartened to read enough pundits now hedging themselves with cautionary soothing so I leave you with words to be well remembered from the great Sam Goldwyn, "NEVER MAKE FORECASTS, ESPECIALLY ABOUT THE FUTURE"

Euro

Euro fixin' for a decline to test the neck line and some moving averages?  Or maybe the 'Golden Cross' (of the MA's) hype will hold sway.  I wouldn't hold my breath.  The Diamond consolidation is neutral, but indicative of a move coming... up or down.  MACD says down, then perhaps up later as the USD eventually seeks out its major downside target.  Edit (7:56)  Short euro as partial hedge toward precious metals long positions.

China & the Anti-Realists --Saville

Go here and pull up the pdf file entitled China & the Anti-Realists by Steve Saville.  It's currently the 8th article down.

Last I heard, the man lives in Shanghai.  You  can't have a better view than that.  As a long-term bull on the global theme, I take note and try to remember that global engine China is over heated and excessive in so many ways as I consider time frames.

"That China's economy continues to maintain the outward appearance of strength, despite a
burgeoning inflation problem and mal-investment on an unprecedented scale, is testament to the
extraordinary degree of control that China's government exerts over the banking system and the
amount of borrowing/lending. Due to this control, insolvent banks continue to lend aggressively to
insolvent State-owned companies, which use the borrowed funds to build impressive factories,
office buildings and shopping centres, many of which are under-utilised and loss-making."

Long bond short still intact

The wizard has not yet made me hate the TBT trade.  In fact, if it gets above resistance I think this may work out - contrary to all the talk of the Fed buying the bond and all.

PM index leader GDXJ fills gap... now what?

Bona Fortuna!

Long time NFTRH core holding Fortuna Silver hits the Cup target originally presented to subscribers many weeks ago based on a subscriber's inquiry about a potential Cup (blue rim).  Well, we be just about there.  If I were a seller - and I'm not - I'd be taking the profit at just below the target as usual.

Funny thing though, a new Cup has presented itself with a target significantly higher, also noted for subscribers recently while the stock was still in the latest consolidation Handle.

I may sound like a foil hat wearing nut (ask the guy that unsubscribed from the blog following this morning's crazy chart post ) but girl, I am serious about making money, preserving capital and getting this right.  So, I trade and invest; yeh, just like a regular person.  

Crazy chart of the day...

Yes, it's another one of those busy charts that thinks it can tell a story. 

The story in this case is one of inflation onDemand, and the disastrous after effects that come from this politically expedient, but economically degrading system of economic management. 

The 20 +/- year bull market in confidence in paper (and paper manipulators) ended in and around 2000.  At that time, the greatest Wizard of the fiat continuum out of the Fed's formation, Alan Greenspan, utters things few people understand and holds down short rates (30 yr/2 yr yield ratio shown) in relation to the 'free' treasury bond market's wishes.  Dat's inflation!  Presto... easy, expedient and hey look, we got economic recovery to boot.

Ah, but what kind of healthy economic recovery sees asset speculation set in motion to the tune of oil and copper - vital materials to any economy - breaking into potential bubbles?  That would be an economy killer.  So it is time to tap on the breaks.

Except that the damned thing that has been set in motion will not stop that easily.  'Screw it!' say policy makers, we simply cannot have $5 copper, $200 oil, $1500 gold and of course treasury bonds must remain within the continuum (100 month EMA) of comfort by which Fed inflates.  Okay, time to raise rates, get out of Dodge and leave the fallout for the next schlep... err, guy.

And fall out it did.  Just as Greenspan had his baptism of fire in 1987, Ben gets his 20 years later and proves a hero in fighting the dreaded deflation that has been trying to happen since 2000, as all kinds of things begin to break.  Only this time the inflationary policies make Greenspan look like child's play.  Bernanke is the right man for the job because Greenspan after all, is a former (and who knows, maybe still current) gold bug and Ayn Rand guy.  Ben has his text books, theories and 'can do' attitude.

The message of the chart is that if something does not break, and if Bernanke keeps the pedal to the metal with QE2 and beyond, you had better be strapped in and geared toward things of value.  First and foremost, money (or monetary anchors) of value, and the things you need for daily life.

As readers know, I held out for a counter trend play with the deflationists potentially being very right for a period of time.  This, until the breakdown in the gold-silver ratio (break UP in the silver-gold ratio shown on the chart) told me that this was not happening.  The Fed knows a lot more than we do and when thinking about Bernanke's full speed ahead view on QE2, despite signs of economic recovery, I have got to think that he understands that 'something' must not be allowed to break.  Because that would end the system.

We are attempting to burn our currency and inflate our way out of something that is beyond normal macro economics.  The most pathetic part of the story is that no matter what, something is going to break, despite the manipulations of these powerful people and entities.  Be prepared.

Gold This Morning: Just the Facts --Jon

Overnight volume is easier and prices are trending similarly. Open interest is virtually unchanged ~614,000 contracts; GSR is unchanged ~56.80; and RSI at 54 remains at the lows of recent trading.shapelessness this morning To complete the desultory shapelessness this morning option vols are in a handle. Clearly yesterday's early euphoria where we came within ticks of $1350 was swamped by a parade of pundits and talking heads spewing undocumented assessments of the fare for a cruise on the QE2...Do I hear 2 trillion?...So today and perhaps for the rest of the week we must once again wait out another denouement, that final clarion call to learn whether we have the D--word or the I-word from our Governors who never had to meet a payroll or a bottom line. So going forward this week let's assume we trade within a well-defined range which seems to have shown serious stopping power between  ~$1320 and ~$1350 while we await election and Fed results to be instantly analyzed next Wednesday.

Aloca... boink

Here is the messy old chart of AA, shown several times over the last few months.  What did we get recently?  Why, we got the upside reaction to the broken neckline and then a decline on cue.  The only thing added to today's chart is the blue dotted projection of the neckline.

So, is the wizard going to QE Alcoa out of this technical situation or is it going to stay loaded for a decline to 8 bucks, along with some substantial deflationary theater?  I don't know, but despite continuing health of my personal positions on balance, I am not pressing anything and I am glad to hold cash.

I think the time to press precious metals will come soon enough, but the crosscurrents may put a bit of a chop in there in the very short term interim.

Gold This Morning: Nobody Listens to Geithner --Jon

Active trade overnight right from the opening (1800 EDT Sunday) when it gapped a couple of bucks higher and then never looked back. GSR has eased back to ~56.70 and our favorite liquidity indicator is also reflected in early prices across the board in the hard and soft commodity space. The COT numbers for last week reflected the frisson of fear that seduced many last Tuesday. The long large specs were healthy sellers which was offset by a similar amount covered by large spec shorts. Commercials to the extent that they reduced shorts (very interesting from this cabal) ran counter to their usual MO. Small specs predictably got shorter. Open interest as of Thursday came in ~9.000 contracts and while still modestly elevated provides a firmer base for new arrivals (welcome!). RSI is modestly higher at ~57 and very supportive even with prices $20 higher this morning. Today: Markets as they should, when not being stroked by certain parties, cut through the odious spin that comes out of colloquia composed of deputations with disparate objectives, and this morning's move is a definitive verdict. From a technical perspective we have repaired the nasty damage from last week and now the hard work will be to chase the perpetrators.

Bernanke Leaps Into a liquidity Trap -- John Hussman

Doc Hussman goes into a lot of hard to read monetary velocity stuff, but you might consider his thoughts on this fine Monday morning, ahead of next week's QE2 announcement.  They are bubble blowing, and bubbles are not sustainable and certainly not helpful to the economy.  At best, we are going to get rampant mis allocation of capital, or panicked strategic allocation of capital.  At worst, total deflationary implosion.  Or perhaps, something in between where frightened capital hordes not only cash, but things of value as well?

Bernanke Leaps Into a Liquidity Trap

"Quantitative easing promises to have little effect except to provoke commodity hoarding, a decline in bond yields to levels that reflect nothing but risk premiums for maturity risk, and an expansion in stock valuations to levels that have rarely been sustained for long (the current Shiller P/E of 22 for the S&P 500 has typically been followed by 5-10 year total returns below 5% annually). The Fed is not helping the economy - it is encouraging a bubble in risky assets, and an increasingly unstable one at that. The Fed has now placed itself in the position where small changes in its announced policy could have disastrous effects on a whole range of financial markets. This is not sound economic thinking but misguided tinkering with the stability of the economy"

NFTRH107 Out Now

Here is a snippet from the 'Wrap Up' section.  NFTRH107 contained much much more and I feel it did a good job of presenting readers with a clear view of some sensible ways to handle decidedly unclear market mechanics, what with the short-term crosscurrents and all.

The G20 has been inserted liberally into the analysis above.  For our purposes, whatever the G20 is in actuality will be defined here as myopic, bureaucratic and powerful would-be managers of a global financial system that see capital threatening a rebellion against their manipulations.  Whether it is G20, Treasury Secretaries, current and/or former Federal Reserve officials or what have you, they are the blow horns and they seek to influence the small investor, AKA financial survivalist.

They come with the territory and they help create crosscurrents.  The various currencies that these powerful people ‘sponsor’ are in conflict as various economies recover out of the 2008 crash that was brought on by the moral hazards created by these same managers.  I have no interest in degrading my life to the degree it would take to try to figure out and interpret all of their machinations.  I just want to continue to read the signs, interpret the meanings and adjust accordingly.

 


With a speculative portfolio now up 21% for 2010 and in risk management mode, NFTRH107 is out now.

GSR - A d Boy's best friend?

The d Boy thinks the US dollar (and all those herds rushing for it) is his friend.  Actually, his friend is the thing that would signal the hints toward a liquidity event that would ultimately send the herds rushing for Uncle Buck's comforting value[less] proposition.

The GSR (GLD-SLV proxy up to the minute) shows a typical failed attempt at upward reversal.  Watch the EMA 10.  Is it notable that MACD has up triggered, RSI has bottomed out and STO has gone 20+?  Hmmmm?

Listen folks, I know a lot of you can handle yourselves quite well around the markets and perhaps do not need a newsletter (and interim email updates) to see yourself through.  In short, there are a lot of pros and a lot of smart people who read this blog.  I know that because if it weren't the case I am sure I'd have pissed you off long ago.

So do a guy a favor and drop a dime in the 'Donate' cup over to the right if you have gained value (and/or capital) by being a reader of this blog.  There is plenty more I do in the newsletter, and to a greater degree of detail.  I don't necessarily come up with the stock picks here but I put a lot of actionable work into this.  Getting the macro markets right is after all, the biggest thing.  So buddy... hey lady... psssst, can ya spare a dime?

I added the button because I work hard and want to keep the blog going at a high level, without the feeling I am just giving away all kinds of stuff that the standard world never even thinks about.

Hey, have a great weekend.

U Bullish?

Me not bullish... me not bearish.  Me down to just 3 positions (LAM.to, MGA.TO, STM.v all met the profit taker's axe) because the inkling came back in July with a break of the fan line, the [inaccurate] derision quickly followed, then resistance breakout, subsequent confirmation and the rest as they say, is history.

I don't care for momo's and their type.

People who use charts cannot always give the whys and what fors and indeed, when they try they often end up sound like lunatic, tin hat wearing crazies and screw up the analysis.  But when the geek is in a zone, contemptuous of all sides and their respective blow horns, good things can happen.

So, is the massive uranium stockpile of Russia and the US drawn down sufficiently to launch a new bull market?  How the hell do I know?  I just made a trade based on what I know best.

By the way, weekly U is still not bearish by any stretch.

Edit (1:39)  Now I've gone and done it.  He's back and twisting things to his version of reality.  Good thing we still love each other, cause this guy can be annoying.

Smart/Dumb confidence...

Among the things we will look at in NFTRH107 is the all important sentiment backdrop, which has been getting unhealthy (dumb money bullishness rising while 'smart' goes the opposite way).  The indicators had not reached extremes as of the plunge earlier in the week, but they were close.

So, was that the kick off to the new down leg or will there be a thrust higher (to targets) that gets the dumb money 'all in' and ready to party?

No definitive answer here.  I will be content to let the indicators decide and the hints amplify as they come in.  My personal stance however is that I earned good returns by being contrary the popular sentiment and I will not let them be vaporized in a final burst of euphoria turned reversal.

These are the markets after all, and there is hard work to be done.  The d Boys are out there and they have a couple really scary indicators on their side stating that they will become very right after they have been summarily punished enough by the greed and euphoria trade.  So again, the question is have they yet been suitably punished?

Gold This Morning: Stay Away From Crowds --Jon

More robust overnight turnover provoked some steady selling around the time that European traders arrive at their financial institutions and receive their breakfast menu; perhaps we should investigate who has the catering contract. Given yesterday, our second trip to the wood shed within 3 days one would expect us to be more chastened, but frankly I am feeling feisty. Overnight I read the mob consensus that we shall again have to test $1300 on the downside, and believe me if we do the nasty hairy-legged buggers on the COMEX floor will make sure all the stops crowding that round number will be spanked...so look out below on that eventuality. This morning we have GSR slightly higher ~57.20; open interest came in by 7,000 contracts and while the absolute number is elevated, it's encouraging to see some net selling; and RSI is now under 50, a location we haven't basked in since late July when DEC was trading ~$1200. Today: It's Friday of a wretched week so a positive day we shall take as a gift for the weekend and if we work our way back to the low $1330s we might just start to unnerve the sellers...again. By the way the Sprott Physical Silver Trust will be publically offered next Wednesday (maybe earlier). They have modestly filed 40 million units. If you hear a much larger number it could goose silver.

Update (8:26) Adding updated GLD chart for a proxy look at gold.  Looks like overnight activity took care of the gap.  I would not be bearish on gold right now... but that's just me, an id Boy.  --Gary

Got your playbook ready?

Because folks, there are a few possible plays in progress with, I think, a primary one that sucks in the d Boys (they're still in the game and they still email me about how wrong I am on bond yields) before some upside targets get hit in various asset markets.

Now, we have hit some solid targets in gold (1,370) and silver (24.50) so people depending on the Fed's ability/will to inflate and QE us to the inflationary heavens must be vigilant about the idea that in the age of 'inflate or die' Prechter could again become very right, seemingly out of nowhere.

Still, my playbook says not so fast Bob.  First we get the more bombastic d Boys giving a few stern lectures only to be summarily lit up... again.

NFTRH does not really care what the play ends up being.  It will do what it always does and interpret/adjust as needed to beat the herds by a country mile.  It's in the indicators, man.

Fun in the bond market

Yesterday I bought TBT to try to will the long bond into a breakdown.  Now, I wonder about possibly hedging this position with TLT after it declines a little more.  Think about it, if I am right and the bond breaks down, TLT will lose money but kick off dividends as rates increase, while TBT's gains roughly outsize the TLT 'price' losses by 2 to 1.

I think that the key to this trade that is currently swirling around in my head is to lag a while and see if we can't get a better entry on TLT.  I don't know, these are the kinds of things you think about while in holding patterns I guess.

Edit (10/22 @ 8:10) Blog reader Michael responds:  Gary-  I like your blog site although I am not a subscriber. I just read you comments on TLT/TBT and wanted to let you know the flaw in your thinking. TBT, is short bonds, as such they pay the coupons of their shorts. So any coupons in tlt are paid for by your tbt holding. The leverage on tbt may actually mean you are net losing the coupon. That being said I think the short play is good, but I still think the long end has one more big run left in it. Just my two cents, keep up the good work.

Which I guess is why I am the chart twittler and indicator nerd.  Don't want to out think my simple self.  Thank you Michael.  As it is, if TLT breaks down from the bear flag it sports and continues to look like doo doo, it will end up a good trade, just being short the bond.

Not so fast fly boy...

Contrary to the bullish 'target' [hey, I don't invent 'em, I just measure 'em], this picture shows the pig diverging from the T bond spread.  So who's right?

Pssst... wanna see something repugnant?

I want to short this pig, but I am not going to.  The chart says "don't do it, not yet..."

URG update from 10/12 - NFTRH Promo :-)

Most recent update sent to subscribers on October 12, after original highlight at .83:

Good morning,

I wanted to update the current status of uranium prospect, and current NFTRH holding UR-Energy (URG/URE.TO) per the attached chart.

Note that the break above initial resistance (now support) targets 1.27 (measured).  If this level is registered, the stock will have, temporarily at least, exceeded the next resistance zone at 1.20.  Success there would load a measured target of 1.67.

I highlight URG today because it was highlighted in NFTRH as a 'bottom feeder' play that looked good for buying in the .80's and traders may be thinking about exit points. 

Thus far I have not sold any shares and frankly have not thought much about it yet as I like the chart, with its positive MACD, and I like the company as part of the NFTRH uranium group, assuming the global growth theme remains intact.  I had added some additional shares on another buying opportunity per an email update and maybe I will think about trimming at some point. 

But again, you are you and I am me.  The stock is +34% from its introduction in NFTRH.  Swing traders, portfolio managers and investors all do what they do as suits their individual needs.

Regards,

Gary


Here is the URG chart as of today:

Gold This Morning --Jon

Modest and directionless overnight turnover imparts that lulling temperament that we could go sideways particularly when you add up the current market facts that the GSR is slightly easier (liquidity +), option vols are unchanged, RSI is up a tick but again well below the overbought range of last week. Well, wake up Little Susie there are a number of swirling eddies and counter currents below the shoals. Open interest after Wednesday's butchering came in ~8,000 contracts clearly a sign of short covering on a day we were down $36 bucks on DEC volume of over 250,000 contracts. My unease is that the shorts are our contrarians and they seem to be less evident lately also within the gold option open interest where this morning various DEC and FEB round number options I checked were heavily skewed to the call side. While we do not typically follow the listed ETFs for precious metals you should know that recent put/call option ratios on these instruments has fallen lately. Of course in a market place where one push of the button can make a meaningful change in direction I don't want to overstate concern but be alert to too many people moving to the same side of the boat as we enter the hopefully festive year-end window.

Gold (GLD proxy)

GLD fills one of the gaps we speculated upon yesterday.  Now the reversal and all's fine in Goldbugville?  Maybe, given that yesterday was triggered by news and a policy maker's b/s, which is typically not sustainable.

But what really made gold decline - along with most everything else is... yes, you got it; the air came out of this mess because unhealthy, soulless players who just could not stand watching the fun anymore have been grudgingly coming back into the markets.  Their punishment was all but assured sooner or later.  Gold has not been special of late, it has been another 'play'.

The momos should not want to see the upside gap filled yet but they are the momos and they will probably cheer this.  So I will not be at all surprised to get the lower gap subsequently filled as well.  Then?  Higher we go sans the momos.

Edit (7:57)  Adding Jon's thoughts...

Gold This Morning: Mama Said There'd Be Days Like This

Active overnight trade has us ~$10 above the early lows as buyers clearly are probing the degree to which we recover from our quick trip to the abattoir yesterday. GSR is ~56.50 and while we bounced around yesterday as hostile clashes were the order of the day, the number remains stubbornly at the liquidity level which clearly should eventually eviscerate those who became so unnerved by China's rate hike...as in oh-oh, how should I react? Of course, sell gold and get liquid...Open interest on Monday was up negligiblely attenuating the early bear bungee jump that day. Option vols came in around a point, so gather thee rosebuds while ye may. While the exaggerated reaction to the dreaded Chinese hike kicked off the gutting of gold, we got a little more assistance from failed asset manager and now Fed Gov, Richard Fisher, who earlier in the afternoon was roundly quoted as stating that the long awaited cruise to nowhere of the QE2 could be on hold, huh? Today, we are clearly in a recovery mode, but do note that yesterday's disembowelment has brought the RSI down to ~57, the level from which we embarked on our recent heady move in early September.

Dear subscribers... and anyone else who cares

After today's cluster of updates, I think I'll just drift back to the blog to close out an interesting day.  Other than PEZ.TO, which is really no longer Pediment Gold but rather, some other entity, the core holds are core holds for a reason.  Therefore, they will be held and I will - as noted earlier in an update - patiently look for upcoming opportunities as applicable.

Anything that is not core is viable for profit taking.  This especially includes the 'global theme' items, which have delivered profits that must not be relinquished.  I may also evaluate other items this week in the effort to be flush with cash while at the same time in possession of things on which I thoroughly understand the value and quality propositions.

Anything else becomes subject to 'sell first, ask questions later' while boosting cash levels back up to my comfort zones.  Rather than shorting markets at this time, I feel it is prudent to simply sell them and lock down profits and then evaluate the bear possibilities.

Edit (3:14)  Cash @ around 48% (closer to my comfort zone) and that does not include the 'hyper cash' vehicle which is the EUO short on the euro that was initiated "just for kicks" but these ain't kicks, these are the markets and I am glad I have this currency hedge.  Tough day but survival is the main thing.  That and protecting what you have earned.  All core items (and then some) sitting nice and comfy for now.  I would note that this is the 'Speculation' portfolio.  The Capital Preservation portfolio is living up to its name as it sees fit.

Pediment Gold - Tale of a bottom feed and buyout momentum regurgitation...

Pediment is in the books for around 100% and we seek out other opportunities.

Bloomberg...

Here is a piece that includes the China move that Jon mentioned. 

US Index Futures Drop, Stocks Erase Gains on Apple Outlook, China Rates

And this from Turbo Timmy, doing a John Snow with a little more bite.  Funny how the fundamentals - even if nothing more than jawboning - marry the technicals with such regularity.  The dollar needed a bounce and voila...

No Devaluation 

“The United States of America and no country around the world can devalue its way to prosperity, to competitiveness,” Geithner said yesterday in a panel discussion in Palo Alto, California. “It is not a viable, feasible strategy and we will not engage in it.” He also said the U.S. will “work very hard to make sure that we preserve confidence in a strong dollar.” 

He is right of course, it's just that I am not sure he actually believes his own bullshit.

Gold This Morning: Have you heard about the Bernanke put? --Jon

Modest overnight volume by recent norms with a trading range of $6 with seemingly no concerted buying or selling probes unlike yesterday morning's bungee jump bear trap. Open interest after Friday's extraordinary volume actually contracted by ~2,000 contracts and patently confirms that shorts continue to cover and that new money is not in the room right now. GSR is ~56.50 and we interrupt this program...since according to my Bloomberg China has raised rates on one-year lending and depos by 25 BP with the knee jerk reaction being an instant ~$8 drop in gold... and since I had already titled this morning's piece with an uncharacteristically veiled suggestion that there just might be a herd (as in 'moo') mentality out there, we now have a real-time moment to observe how the beat goes on. Today: The gold facts remain intact so let's steel ourselves for a contrarian play and see if we can replay yesterday's bounce from around $1352. Use a tight stop.

Edit (8:40)  Adding a picture to Jon's words.  There's the support cluster at 1350, but every so often it is healthy to drop down and test the EMA 20 (this leg has been supported by the extremely momentum driven EMA 10 with occasional plunks of the 20).  Just remember that news does not manufacture important tops.  That said, if gold fails the EMA 10 (currently 1332), the possibility of a decline to major support in the 1260's opens up.  I do not expect this to happen - yet - but these are one patron's interpretation of the technicals.

Interestingly, on a GLD chart what do we find?  A couple gaps that it would be handy to have filled...

Uncle Buck

The measured target is around 71.  The question however, is will Unc find short term support, and from what level?  The dollar is deeply over sold and at support, with more support lower and one wonders about the potential of a retest of the breakdown (red dotted line).  On a weekly time frame the picture is bearish.

Speaking of energy... (ERF)

How is this for a chart?  ERF is something I have held in the past and I think I need to go look at this company again, because this is a good chart.  Canada begins taxing the CanRoys in 2011 btw, so there are complications to the picture.  But this is a great chart that stands on its own, implying technically at least, good potential price appreciation along with whatever income is kicked off.

Uranium

 Why the sudden mini frenzy in U?  I don't know.  The chart of U.TO, shown here often, continues upward into a new uptrend, but they taught me in Bottom Feeder 101 that pigs get slaughtered, so while retaining a few uranium positions, I have unloaded a couple as well, including Laramide Resources (LAM.TO) that was bought down in that trough last summer when everybody hated the sector and it seemed like only me... and the Laramide CEO were buying.

The first chart was drawn in September to attach a target, which I failed to sell.  The second chart is the same chart updated to today.  I did not fail to sell the exceeded target after doing the hard work of buying what people hated last summer.

Gold This Morning: Just the Facts --Jon

Heavy turnover with the overnight highs at last night's opening (1800 EDT) immediately met with sellers, whom on two occasions tripped a fair amount of stops down to a low so far of $1353.20. Friday's COT report had large specs getting unusually net short by ~3750 contracts offset very slightly by indifferent to slightly short commercial activity and more so by atypical significant small spec short covering...so, who made the right call? The smart money or the dumb money? GSR is slightly firmer at ~56.75 and well within recent tolerances. Open interest as of Thursday increased by ~1.75% perhaps a precursor of Friday's mega volume (355,149 contracts!) and so we shall discover presently  the net direction of that activity. Today: The facts do not look particularly combative yet and even RSI slid sharply as the stops were run last night. The charts do not look frightening even if some of the more sanguinary pundits beef about being within 20 bucks of our all-time high, they always do. Listen and look carefully as if you are crossing a busy mid-town street and even wait for the light to turn your way or as our 3rd President so eloquently put it, "Do not bite at the bait of pleasure, till you know there is no hook beneath it."

NFTRH106 Out Now

This week we explore the long bond and a potential event that the herd may not be bargaining on.  All precious metals targets are reviewed.  Gold, silver and gold stocks are reviewed from several different angles from HUI-Gold ratio, to gold vs. currencies, to HUI vs. stock market, to gold vs. gold miner cost driver commodities.

Then other aspects of the 'inflation trade', such as emerging markets, copper and oil are reviewed technically along with a message for bears.  The message is however, potentially mitigated by sentiment readings heading toward unhealthy levels.  Still, these are the markets and the crosswinds are blowing hard.  You have got to either love this or get the hell out of the way.

We look at the charts of four of NFTRH's holdings, three precious metals stocks and a uranium guy.  Portfolio structure is highlighted, featuring a speculative portfolio (my IRA, actually) up 22% for 2010, but standing ready at all times to manage risk.

In its 'Final Thought' section, NFTRH106 closes with a look at some interesting goings on in the most speculative arena I know of,  junk bonds and specifically their relation to more 'sound' bonds.

Have a great week.

Be Afraid Ben... Be Very Afraid

It just so happens that the opening segment of NFTRH106 - written during market hours yesterday as I watched the long bond drop yet again and set a daily downtrend - talks about the possibility of "an equal and opposite" reaction (from that of Q4, 2008) in the treasury bond market, based upon a Federal Reserve Chief talking about raising inflation expectations to prop Ponzi-conomy, while at the same time, asset prices threaten to go orbital.

I tend to beat the mainstream financial media up in a semi-rabid manner, I think.  But here is value courtesy of Bloomberg and Caroline Baum.  The article showed up in my inbox this morning via one of Jim Sinclair's blurbs.  It is not like we non-mainstream kooks are the only ones who know what is going on here; that is what is so scary, crazy, laughable and futile about Ben's last chance power drive (LCPD):

Fed Wants to Hoodwink Public, Only Fools Itself: Caroline Baum


"If I were a central banker, I would be afraid.

If I were a central banker getting ready to embark on another round of quantitative easing, I would be very afraid.

Here’s why. Central bankers in the U.S. are being bombarded with market-based signals suggesting their fears of deflation, or falling economy-wide prices, may be misplaced.

Gold prices continue to set new highs. The U.S. dollar, the global reserve currency, keeps sinking amid expectations the Federal Reserve will dilute the existing stock starting at its Nov. 2 to 3 meeting.

Commodity prices, both industrial and agricultural, are on a tear. The CRB Spot Raw Industrial Price Index, which includes scrap metals, cotton and rubber -- but not oil -- hit an all- time high this week."

From Subscriber Doug...

And no, I don't write these or solicit them.  :-)  I know my newsletter is going to get where it is going over the long haul.  It is just taking some of you a bit longer to come around.  ;-)  Hey, have a great weekend.  Off to do some writing.

Gary,

Just a quick thanks.
Based on your email to subscribers earlier this week I took a position, it is nice to see the upmove with healthy volume on a day like today.

Your blog readers should make note of the additional benefits that come from a NFTRH newsletter subscription.

Doug

Edit (3:50)  I believe this is the one Doug is referencing (there were a couple, both successful thus far):

The update went out Wed. just as THM was attempting to nudge its way to a breakout.

International Tower Hill (THM) was added to the NFTRH portfolios on August 17 at just under 6.20 per share.  The stock came to my attention based on some light research that a friend shared.  I liked the consolidation on the chart and bought.  Since then, pending looking into the stock further (which I still have not done beyond a brief review), it has been tagged as a 'potential core' position in the portfolios.

Today's update has nothing to do with any of this and potential buyers must do their own due diligence, because personally I am content going by charts and light research for extended periods.  But briefly, the company has the asset, the PEA, the logistics, no obvious political issues, as well as a hefty CapEx projection if I recall correctly.  But as with its richly valued brother RBY, it may also have buyout appeal from a bigger fish.

As to the chart however...

Note that THM is on the verge of a breakout after a gentle, rounding consolidation bottom and resides above both the SMA's 50 and 200.  MACD is excellent and RSI is at resistance, which hopefully is made to be broken.  I am going to add a bit of THM today to the existing positions.  Just an fyi.

As the entire PM complex and broad market heads higher, I have held and added to positions selectively.  It is no secret that I am a wall of worry guy which I will define as a jealous guardian of my profits, earned through being a brave buyer when the crowd was upset and nervous.  I would rather be nervous now, albeit tempered by indicators and charts.  But there may come a time when much of the NFTRH portfolios come available for sale.  In other words, if this gets out of hand into a blow off, I will be aware of what kind of company I would have on the long end and I would be weary of it.

Mania brings difficult decisions.  A lot will depend on what I see in the herd and in the indicators.

Regards,

Gary

Why bottom feed?

Because I like getting there before the other guy, that's why.  It's less comfortable buying what people hate, but... trimming half the position.

Gold (GLD proxy)

Well thus far, all we have in this 'over bought' metal is a needed breather as this powerful move has been supported by the EMA 10, as opposed to the usual EMA 20.  That is a sign of power and strength and it would be healthy (for continued short term upside) to get a retrace to either of these MA's over with.

It will also be healthy in a bigger picture to get a retrace to the SMA's 50 and/or 200.  All a matter of perspective.  But gold is on a technical rampage and anyone in disbelief of this is clicking heels as opposed to considering facts.  That is because fundamental facts, some of which are riffed upon in this morning's previous posts, are undeniably bullish.

Let me ask the d Boys this...

How does it make you feel, as a would-be contrarian, that the Fed Chairman is so totally committed to your stance and telling the world about it?

Bernanke Sees Case for 'Further Action' With Too-Low Inflation

Bernanke and his central bank colleagues are considering ways they can stimulate the economy as the unemployment rate holds near 10 percent and inflation falls short of their goals. After lowering interest rates almost to zero and purchasing $1.7 trillion of securities, policy makers are discussing expanding the Fed’s balance sheet by purchasing Treasuries and strategies for raising inflation expectations, according to the minutes of the Federal Open Market Committee’s Sept. 21 meeting.

“At current rates of inflation, the constraint imposed by the zero lower bound on nominal interest rates is too tight” and the “risk of deflation is higher than desirable,” Bernanke said. “High unemployment is currently forecast to persist for some time.”

A reminder folks:  Inflation is not what prices are doing now, it is what will determine general prices as some point in the future.

Thoughts from a reader (and subscriber) that I know others share...

...at least in regards to the guest posts by Jon, direct from Gold Central:

Hey Gary,

I don't know how Jon can compress so much knowledge into a paragraph or two each day.  Experience I suppose.  I can even get a vocabulary lesson most days.  Kudos to you for the ability to get an angle that most of us would never have access to.  You say that your job is to keep us balanced and avoid the extreme emotions that can develop in these waters.  Jon really compliments your fine work.  I cannot begin to tell you how grateful I am that you to share your talent with us.  Thank you and God Bless!

Last Chance Power Drive (LCPD)?

The US Treasury market is filled with broken heroes.

Don't you suppose that officials, likely employing the best and the brightest technical minds, saw the terrible H&S formation that would have put the inflationary kibosh on their ability to continue liquefying an already saturated system?  Do you think it is a freakish coincidence that the Fed has instituted a debt monetization scheme at the same time as asset prices are coming unhinged to the upside?

Desperation is the play.  Welcome to the markets, modern Ponzi management style.  Oh, and a MACD trigger down by weekly chart would not be good for our heroes.

Gold This Morning: Not With a Bang, But a Whimper --Jon

Modest overnight volume within a convictionless $7 trading range contradicts the seeming flocks of camouflaged messages cautioning gold commitments as we tack on new all-time highs. GSR continues easier at ~56.30 this morning and while this level is looked on as overly satyric (as in the devil made me do it) by some who drew a line-in-the-sand when it was in the upper 60s, rest assured it remains the same leading indicator that caused no such consternation when at higher levels it brought smug informed opinions of the pending deflation. Open interest on Wednesday's monumental volume only increased 11,000 contracts (1.7%) hardly the stuff of parabolic tops. Option vols continue to inch up and at-the-monies are now around 20 and still distant from the 30 levels that in the past put hard thinking in a correctable state. Today: Let's wander through Poets' Corner and remind ourselves that life does not imitate art as in the prosaic end-of-the-world and in fact exaggerated market moves always end with a bang...and we are not there yet...even if it's Friday do not be lulled by the lazy sideways move; you are reminded that after early weakness last Friday, we managed to tack on a $25 move.

Buyers not exactly falling all over themselves to buy the bond

10 yr  10/15/10  21b
30 yr  10/15/10  13b

Do rates need to rise?

U3ohhh8: So far so good...

Here is a daily chart of U, with lower panels showing 6 of the 7 U stocks that I own. Stockcharts.com would not let me insert all 7 of them.  The 7th is EFR.to, which is more explosive than any of them. 

I am by no means making any recommendation now, cause I don't make 'em; but also because these were bought when people hated them, not like now.  I would not be buying now. But as with other aspects of the portfolios, I enjoy watching them and thinking about decisions and non-decisions to be made going forward.

Gold This Morning: Volatility Check --Jon

Overnight turnover, currently at 55,000 contracts, is the heaviest I have seen in recent memory with prices trading within a $16 range so far. The liquidity side has the GSR at ~56.50, down over a full handle...open interest came in ~1,000 contracts on Tuesday further evidence that there is still a significant short-covering component; yesterday's immense volume will be reflected in open interest later today and we shall have a sniff of the extent that new money is showing up. In the pits yesterday there were some very large option unwinds early that were actively taken up. Options remain quite cheap on a vol basis and continue to offer attractive gearing on setting up vertical spreads. There was one price swoon this morning that began around 0445ish and which coincided with an IM we received from a European partner about rumors that a floating Yuan was in the offing which would mitigate the Mothership's (think FED) need to steam off into QE oblivion. The immediate $10 drop in gold and the 10 handles coughed up by S&P futures show how nimble one must be in a world where anyone has a button to push. Today: It seems just yesterday that $1300 was a round number and you can be sure that $1400 will receive similar ominous and chilling observations from assorted analysts, pundits, and commentators particularly hammering the overbought thesis which is again an RSI reality. We remain dressed and equipped to climb the wall of worry. The route still seems quite clear.

US Dollar: Drop, bounce & then target?

As USD broke the neck line, it was noted in NFTRH as a bullish market indicator to go along with so many others, and it was noted that prospects for an interim deflation blip were fading fast, if not kaput.  Also, a measured target was loaded down at 71-72, AKA the 2008 lows.

I believe Uncle Buck is going there eventually, but one wonders if we will see an interim bounce - perhaps leading into the next Fed meeting on November 2 & 3?  We have the 3 amigos after all, Huey, Duey and Lewie playing bad cop at the Fed.  Some believe that Bullard, Yellen and Koenig are right minded officials attempting to restore sanity to the policy debate.  I believe they are part of a bureaucratic structure, hell bent on keeping a terminal system alive as long as possible, sent out with marching orders from the Ministry of Expectations Management.

The US Dollar is putting a lie to the magic show going on in the T Bond market and the herds must not be allowed to panic into assets - a slow, steady re-entry is preferable.  But since when does the herd do anything slow and steady?  The wizard meanwhile, believes he can massage the process with the jawbone arm of the Ministry.  We will see.

There's some support for Uncle Buck and there's the ultimate target.  Of particular note: weekly MACD stinks...

SPX 1,250

That would be the general target, which has been loaded since the S&P climbed above noted resistance (now support).  Many people hate charts, but the chart of this market - despite what people think they know - has said "DO NOT BE SHORT THE MARKETS" ever since the resistance was held, tested and transformed to support.  1,250 is the measured target.  Simple.

Still, the majority of people being herding, obedient creatures, they let the more strident deflatonists and bears affect them at crucial times because at those times the perma message resonates especially well.  We all get scared, we all get greedy... we are human.  But certain tools let us take the 'us' out of it and maintain tack.

Now I hear that certain blustering d Boys are writhing and uttering a contrarian's dream in giving in to the almighty forces of the 'evil' manipulators and their asset appreciation/currency depreciation uber alles stance. 

All is good, and all makes sense.  These are the markets.  The turn will come sooner or later I guess; but not it seems while the last bear is standing and the last holdout among the dumb money stands on T Bond road, paved as it is with paper promises and clicks his heels and dreams of home.  If I could dial up rational markets I... well no, I wouldn't because their irrationality gives me an advantage. 

"Misguided Inflationistas"?

Mish had a blog post yesterday in which he referred to "misguided inflationistas".  This is another of the financial geeks that I like, d Boy though he is.  He joins Rick Ackerman, Bob Prechter (uber-D) and others in being okay in my book, even though they lock and load the deflation argument in what is probably an often painful way for many who follow the analysis to the letter of the law.

"I repeated the above headline in bold for the benefit of misguided inflationistas everywhere who confuse rising commodity prices with inflation when there is literally no passthrough to consumer prices."

Inflation has nothing to do with prices - whether of commodities or consumer goods - so I fail to see why this matters.  And I would dispute that many of the more vital consumer goods are 'deflated' anyway.  Food, for example.

And here is Mish, setting this straight:


"If that was not bad enough (and it is), the fact of the matter is inflation is not about prices at all but rather about the expansion of credit.

Small businesses [in] general do not want it or need credit to expand. Indeed, the very last thing on their minds is expansion. The first thing on their minds is lack of customers and inability to pass on costs.

This folks is clearly deflation in action and it is what the Fed is fighting with a misguided Quantitative Easing strategy.

Fighting deflation and winning the battle are two different things!"

Except  that inflation is not solely about the expansion of credit; it is about the creation of money with no backing in productivity or value.  This is the old 'velocity of money' argument that d Boys make and I think that as long as artificially created money is not moving, there will be huge risks of utter meltdowns - or deflationary 'events', but the money (funny munny) is there, it has been created and it will eventually seek out valuable or productive ends.  In short, it will seek to transform itself from paper (and digital entries) willed into existence, to something tangible.  

This, in my opinion is how the creation of false money is helping to finance the global build-out, first in the transitional precious metals and secondarily in valuable resources so vital to growing economies which just happen to have the reserves to spend on said resources.

Along these lines, as you may know, I own a productive business that makes actual things that are used in vital (medical) applications.  We do have pricing power - for the first time ever (in my career) and while the leveraged, valueless things of the previous economy are subject to declining prices, things of value currently are not.  I believe there is a good chance that this is because of changes going on globally as capital flows to the resourceful and productive.  Sitting in T Bonds as an investment - per boilerplate d Boy dogma, could be a real sucker's game.

The post goes on to talk about another of the growing contingent of 'bad cops' at the Fed (joining Bullard and Yellen), Thomas Hoenig and again lectures that deflation and inflation are not declining and rising prices and that these descriptors are defined rather, by whether or not credit is expanding.  Mish is one of the debate's heavyweights and spends much more time on traditional economics than little old me, with a marginally popular blog and a bunch of charts and indicators. 

Being an id Boy, I can take common sense from both camps but really, the compelling arguments launched from each side ultimately sound like mental masturbation because I think that while the two forces battle for the winning ticket in the macro economic guru sweepstakes, the art is found in the vast space in between these ideologies.  Like in the space between the two blue lines for example.

Ben Bernanke loves the ongoing battle between the diametrically opposed financial eggheads.  He and his policy live in that middle ground, and as long as this continuum remains intact - with its implied (real, imagined or compelled) confidence in the long bond - we will have the ongoing debate between the d & i Boys and Girls while the whole time, speculators with a bullshit detector will simply play the spread.

Gold This Morning: Everybody Knows --Jon

Active trading overnight driven by the obvious. It was very interesting to see that Monday's open interest fell by ~16,000 contracts (2.5%) which would be indicative of some fierce short covering on a quasi-holiday. The GSR has eased back the handle it gave up yesterday and is presently ~57.80, no big deal and in-line with early indications for the CRB. RSI is obviously higher but not back to last weeks numbers that brought deafening pundit cries of overbought. Option vols are firm but still cheap. Today: We roll out that old saw that those of us who once had to sit next to legends learned on day #1...'Buy the mystery; sell the history'...Yesterday's FED notes were the official announcement that those of us who recall trans-Atlantic crossings would hear just before casting off...'All ashore, who are going ashore'...The move in gold for two months has anticipated what we have been told we read yesterday and now we must decide if indeed today's price has discounted the 'mystery'. My humble opinion is not at all. Just tick the following boxes among others for openers...is the question of physical gold resolved? Are we in an irresolute currency begger thy neighbor confrontation? So, make up your mind if you plan to be on board as the ship pulls out.

Gold - Euro (GLD-FXE proxy): Risk reduced

Gold-Euro has not come down quite as far as I thought it would, yet gold has worked off its severe over bought condition vs. Uncle Buck's competitive toilet paper.  Downside possibilities remain for our original .85 to .80 target zone, but the rising EMA 75 says damage would be quite limited.

It is quite bullish for gold to see the over bought get worked off through consolidation as opposed to falling out of bed.  It means that holders are strong and buyers are looking for ongoing downside opportunities, that don't always present.

Uranium

Look, I want to be bearish; honestly I do, because I want to book my gains (20% for 2010) but I am using all my discipline to not try to out-think the charts.

In the case of NFTRH uranium holdings (one of which was reviewed technically for subscribers this morning as it is currently up 34% from its initial presentation) I look at the most important chart for the sector - that of Uranium Participation Corp., with its price/NAV sentiment swings - and see additional upside.

I did not know why the chart spoke to me early last summer.  I only know that it did.  I also know that this looks constructive for further upside in this beaten down former bubble.  But hey, I could be wrong.  These are the markets after all.

A Weary Bear Starts to Hallucinate

There is an interesting article at Rick Ackerman's site called A Weary Bear Starts to Hallucinate.  Go check it out here:  http://www.biiwii.com/analysis.htm (2nd one down).

The tone is one of resignation and defeat to powerful market managers (like Bullard & Yellen mentioned in the 'Just the Facts' post).  Except that Bullard and Yellen have evidently been given the high sign to get out there and play bad cop to keep the herd - getting more concerned about inflation as asset prices rise - placated.  

From the article:

"Or is there something much bigger in store: a Megabull market engineered by the Fed and Wall Street that will run for years?"

This is the kind of resignation that the bears are brought to at times of great stress.  It also makes one wonder when the last bear will throw in the towel, because when he does the markets are going to be very dangerous.  I do not believe that the macro managers have the power that many ascribe to them. 

Silver (SLV proxy)

So, is today really a whole lot different than early 2008?  This will be an errr... important question to get right.

No Arguing the Facts - NFTRH105 Excerpt

The first three pages of NFTRH105 were mostly words.  The remainder was a combination of words, charts and graphs, which gave clarity to the writer.  I always like it when I finish writing and get the feeling that I actually learned something.  That is what happens when you tune out the din and just let facts speak for themselves.

We are on a bull party, but there are risks involved.  No matter how much fun it is hanging around the punch bowl, we must be aware of these risks.  No, I do not view the static emanating from Ms. Yellen as a risk.  But at some point, building pressures may abruptly cause a power outage when enough party goers have arrived and partaken. 

No Arguing the Facts

The facts are that the HUI index of major gold stocks closed (by a hair) at new all time high territory on a weekly basis, silver has launched to new highs dating back to the post-Hunt Brothers era, and gold has been flying around in its latest patch of blue sky since early September after being the only asset to repeatedly make new highs over the last decade, as ongoing inflation is promoted against periodic impulses toward deflation.

Gold is rising like a barometer that senses increasing pressures among various nations to competitively weaken their currencies in an effort to goose their economies; none more aggressively or in grander style than the US and its Federal Reserve.  Capital is frightened and it is going global in an effort to find shelter – and some nice returns :-) – from the storm.

Portfolio positions were added in the gold exploration sector as well as the global emerging theme.  While I added a token short position against the euro, the balance of evidence suggests that there is not yet a compelling reason to believe markets will not continue to bull short-term, with the real excitement being in the precious metals and some emerging markets and commodities.

Desperation In Play

Of course, volatility is probably a fact of life now as desperation comes into play; desperation on the part of policy makers to pretend to be fiscally responsible (St. Louis Fed’s James Bullard played bad cop last week in thinking aloud for the media regarding additional stimulus: “maybe we should push it off a meeting or two” pending economic data) while falling all over themselves to promote asset appreciation as a means to economic revival.  Then there is the desperation on the part of market players ever more strident in their attempts to will markets toward their point of view.

In short, crosswinds are blowing all over the place and the monetary metal is right in the middle of the action.  Soros and Buffett blow horns that sound a theme of gold as the “ultimate bubble”, mainstream investment advisers are taking the metal seriously in their asset allocations, and more of the mainstream is starting to think “hmmm, I want to get in on this gold rush before the train leaves the station”.

To this point in the precious metals bull, the sector has been the home of we crackpots, malcontents and weirdos.  Well get ready for company my friends, we are going mainstream.  Faith in policy makers is seemingly being rewarded by asset appreciation and the herd may come to a point where it just can’t stand clinging to intrinsically worthless treasury bonds any longer.  Volatility in many asset markets will almost assuredly accompany this desperation, and risk of reversal will be in play as well.

Transitioning Toward Global Re-Alignment

Beyond the ‘transitional’ asset class – the precious metals – the emerging global theme (that I have been compelled to pull in from ‘long-term’) to which the transition is geared, remains on track technically with many markets continuing their breakouts and is looking for all the world like it will not stop to let wannabe riders aboard.

The US markets meanwhile, continue to respond in their underperforming way to the fact of QE1 and the anticipation of QE2.  Some areas of the economy are responding – particularly in manufacturing thanks to the weak dollar, which would get a lot weaker if policy makers have their way. 

But the leveraged macro barge known as the vaunted US economy at the turn of the 21^st century did not thrive on small potatoes like making things or being productive.  It thrived on creating paper and digital instruments, marking them up and selling them to gullible people and entities in a pyramid scheme of epic proportions.  In short, it thrived on selling garbage that naive buyers believed had value.

So when I tell you that my wife and I just sat with a real estate lawyer to close a refinancing on our small remaining mortgage (4.25%, which I must thank Mr. Bernanke for because there could easily be a ‘1’ in front of that ‘4’ in my opinion) and the lawyer told me business is brisk – with refi’s, although many who want to refi cannot because their existing mortgages are under water – but new buys and new mortgages are virtually dead in the water, you see the major caveat clearly; it is just one unsustainable part of the massive ‘stimulus’ by policy.

It occurs to me that upon completion of the ‘transitional phase’ of the global macroeconomic changes now taking place, US housing will one day be a good investment.  This is one asset class of value however, that probably has much lower to go in the interim because it was a target of the previous bubble in credit and is choked with legacy mal-investment, although general market speculation currently appears rampant. 

Meanwhile, all that stimulus poured into the system by US and developed global policy panic, is currently going into things of value that are not burdened by such mal-investment.  So while authorities may yet get their hoped for asset appreciation, it will manifest first and foremost in the ‘transitional assets’ and vital global resources required to build-out the global re-alignment.

Gold This Morning: Yellen Swoon --Jon

Robust overnight turnover characterized by steady selling which failed to takeout yesterday's $1341.10 low by a couple of ticks. If the pressure continues that number will get a few people's attention. Meanwhile back at the fact farm the GSR firmed slightly to ~58.30 (well within range); open interest rose sharply Friday by 13,000 (2%) contracts, a telling sign of new money for the first time recently and perhaps accountable on a squaring basis for some of this morning's activity; and RSI remains elevated but again eased off on the sharp selling. Turning back the clock ever so slightly: Yesterday's keynote speech by our newly minted Fed Vice-Chairperson (her first in this capacity) at the NABE annual bean-counting fest was rife with Greenspan-isms like, " We need macroprudential policy makers ready to take away the punch bowl when the party is getting out of hand". Just another regulator/policy maker speaking to a cheery audience of like-minded folk of whom I am willing to wager fewer than 5% have ever had to meet a bottom line. Today: Let's make a CNBC bobble-head assumption and assume that Yellen's speech on a newsless holiday got more resonance (I heard it on the BBC) than it deserved and turned her despised punch-bowl world red, so let's be satisfied if we drift at these levels with buyers waiting in the wings to make an appearance.

Gold This Morning: Columbus Day Special --Jon

Modest turnover considering our good brethren of the North are celebrating their version of Thanksgiving and the Fed and other US banks are closed allowing for an ever so brief thought that market manipulations might be muted today. Comex is open as usual at 0820. Open interest as of last Thursday, a day of very high volume and a $40 swoon from opening highs to inter-day lows only contracted by ~1500 contracts manifesting more short covering than selling considering that overall open interest remains at near record highs ~620,000 contracts. COT numbers continue to show increasing net longs from the large specs offset by significant net selling by small specs and modest commercial short covering. GSR at the moment is 2 handles lower at ~57.80 so our leading liquidity indicator says there is plenty of jingle out there so today let us contemplate the words of the rogue generally credited for landing reasonably near our fair shores..."Gold is a treasure, and he who possesses it does all he wishes to in this world..."

NFTRH105 Out Now

Given some head spinning upside targets in gold, and specially silver and the HUI, along with a still-bullish technical view of copper, you would think the writer of NFTRH105 is a perma-bull instead of a brick in the Wall of Worry.  What's more, a look at the CoT structure of the T Bond only supports the potential for asset prices to get out of control to the upside because, while deflationists continue to beat their drum, the long bond looks like a tragic place to be hiding out right now.

If these were the only aspects to the current analysis, I would not be a brick in the wall; I would be relaxed.  But it is not in my nature to be relaxed when attention is demanded.  Potential inflection points abound but to nail down timing, I believe vigilance, focus, balance and patience must be ongoing.

I have to force myself to show the upside potentials in the precious metals because I am coded to minimize hype and amplify caution.  But the charts are the charts and I must present what they say in an unbiased way.  That includes bullish possibilities.  And right now, no matter how much the bears and d Boys click their heels, the balance of the technicals remain bullish.

NFTRH105 out now.

DIAmond

Here is an old chart used as a guide not to be bearish until the Diamond pattern gave a clue.  This consolidation pattern is neither bullish nor bearish, but the direction it breaks out dictates the new trend.  Bullish still.

Gold This Morning: Only the Price Has Changed --Jon

Active overnight volume made an obligatory stab at trying to take out last Tuesday's run for the roses that was triggered when we first poked through $1320 so holding the low at $1325.60 while not exactly pretty did not tarnish the bold move that day. The numbers: GSR rose by a handle to ~59.10 which changes absolutely nothing; Wednesday's open interest was higher by ~4,000 contracts which given overall turnover we can conclude that there is some new money. Option vols have firmly risen for 'at the money' to 18.5 so call spreads written yesterday at higher prices are more or less unchanged this morning...let that sink in. RSI is currently ~71 and has dropped 14 handles from yesterday's highs (silver dropped similarly) which should appropriately put a cork in hysterical cries of 'over-bought'.Today: It's Friday and I apologize for being late with my comments as I just arrived from Washington after an evening observing our global financiers and their acolytes, most of whom have no bottom-line experience, bowing, scrapping and waving little white feathers as they whimpered about the stress of currency wars after years of thinking they could manipulate them. Today may be early to resume the upside, but yesterday's bear trap should get a few sellers squirming before the long weekend begins.

Gold (GLD Proxy)

What did Sinclair say?  Don't get your panties in a bunch?  No bull market goes straight up and certainly not the one in the old, non dividend paying relic of monetary value that sits like a lump in the middle of a raging paper currency war. 

Gold has taken a spotlight of late with everything from news about Gold ATMs being installed in places not called Abu Dhabi; places like oh... the US for instance.  Mainstream investment advisers have climbed aboard, not to a terminal degree - the bull has much longer to go - but to the degree that usually sets up to give newly minted gold bugs a real scare.  CNBC now touts gold from what I understand, and the metal is generally in the process of coming in from the cold (of a 20 year bear market, 10 years into its new bull market, which from here on promises not to be quite so stealth), and gaining acceptance as opposed to derision and laughter.

Technically, the upturned SMA 50 may provide support if not the EMA 20, which has sustained the entire move off the July bottom.  A gap fill and bounce off that MA would fit the bill for a hard, fast corrective enema for the gold bug camp.  

Who am I?

A friend advises that his investment manager is bullish emerging markets, emerging debt, global dividend payers and gold due to the Fed's leadership in what would be developed global currency devaluation.  In short, throw in the need to always maintain a comfortable cash reserve in volatile times and you in essence have me.

Then I get a Jim Sinclair email with which I totally agree:

There are a lot of new and weak hands in gold. THAT MEANS VIOLENCE. We had a high today of $1366 which in my world is a bulls eye for Angel $1369. That means the Angels are functioning like a good Swiss watch. Don't get a knot in your tights. The violence coming in gold has no peer. From high to low you will see multi hundred dollar jumps in both directions before it reaches its fulcrum point. Gold is going to and through $1650. That should be your mantra for financial survival now. Respectfully, Jim

So I ask again, who the hell am I because I sure don't feel like me.  There are not enough contrary indicators out there for my comfort.  Or are there?  Am I one?  Who am I?