An informal presentation of technical analysis, market ratio analysis, psychology and macro fundamental opinion... along with whatever else is required to stay on the right side of the markets. The premium NFTRH service takes all of these and more to the next level.
This theoretical leading indicator led the downturn out of the Euro hype blow off last summer, bullishly diverged, bounced into a little New Year's party and has been in a 'Handle' or Flag consolidation ever since. We looked at this ratio in NFTRH185 and again in an update earlier today.
I was wondering why my account was so green on a red senior gold miner day. Looking pretty damn good I must say. Steady as she goes.
The yellow shaded area shows important support for the short-term rally case. MACD was on the verge of going positive, RSI has gotten through resistance and will now look for support and STO has inched above 80. The bulls are still on the job until proven otherwise. Edit (11:31) The 'W' pattern targets 1420 or so as long as support holds around 1390.
Per an 'in day' email update that went out to subscribers, things look 'normal' so far. Parameters were set on 'normal' and what would define abnormal.
Curiously, 10 of my 16 precious metals stocks are either green or break even today. I guess I prefer to get these reactions done on a Monday vs. later in the week. Beyond the reaction and its parameter limits, adjustments will be made if or as needed, but not until parameters are violated.
Ya gots ta have discipline in this game.
BTW, a little reminder that today is the last day to lock in current NFTRH pricing just in case you're sitting on the fence out there.
I got to the end of #185 and realized a few things...
I had written the term "Dear (monetary) Leader" probably a few too many times, possibly bordering on the obnoxious.
I enjoyed writing this letter because I found it bringing clarity to my own personal situation as I was writing it.
The case for the gold stock sector was stronger for me upon completion than when the report began, and it had already been strong. More 'inklings' are coming in about probabilities there, although we continue to manage only a 'potential' important bottom. Other than that, week to week review is important with no guru guessing allowed.
Other areas may be presenting opportunity.
NFTRH's original 'i2k12' theme may be back in play, with Goldilocks tied up and thrown back in the closet. 2012 may feature a more honest inflation.
For me personally, 185 was one of the most valuable I have written. I am just a lowly market participant trying to get by just like the next guy, after all.
A well thought out and on point NFTRH185 is out now.
I have seen this Symmetrical Triangle in several places lately. I have avoided micromanaging it here and in the newsletter because I didn't trust it to resolve bullishly. Yesterday USD broke down and today there is follow through.
Kind of fits with a policy making regime desperate to sacrifice the currency in the name of inflation. Uncle Buck's worst problem may be how well contained the effects of inflation (like commodities) are to this point.
In Wonderland, lower prices are good for inflation because lower prices bring out inflationary policy. You see?
The Doctor did this yesterday and he is up again today. The bear case on equities is further threatened. Could Ben Bernanke's sweet talk have been all that was needed? A market built on inflationary policy is now acting as if it is a done deal unsurprisingly here in this election year.
SLV continues to reside below the EMA 50 (shaded area) as well as longer and shorter term moving averages. Not trying to rain on the precious metals mini parade, but Ag really needs to think about getting above these MA's.
Thanks to a subscriber who forwarded this to me. While Jeffrey Grunlach calls rising prices 'inflation' (they are the symptom) this is a worthwhile video. Of course, it is the structure of the yield curves we are most interested in, but it's a good basic lesson on interest rates and the mess the Fed is in, which is of course the mess the Fed itself mostly created over time.
Edit (7:21) Here is another video, with James Grant discussing manipulation of interest rates by "our masters".
IAMGOLD Corp. has a lot of cash, no debt and a strategic plan to acquire cheap ounces in an epic and sold out environment for the sector. In other words, IAG is thinking like a predator or a capitalist in exactly the same fashion NFTRH has been throughout this process.
As a side note, I want anyone who is experiencing pain now due to the sector wide mini depression to please recall all sources that were pumping you in the opposite direction (that would be up) during the intense hype of last summer and compare that to what they may be saying now.
Disclosure: I had a ridiculous (??) target of HUI 888+, but that was a technical measurement and was pending a breakout and hold above a certain level. Short of that, all due risk management came into play every step of the way. It's the only way you survive.
Additional disclosure: I am so bullish now (unlike last September) I can taste it.
Anyway, this gold company now looks interesting, technically. It is in a weekly Falling Wedge (more significant than a short term daily one), just above long term support and is in the grip of more negative momentum than in 2008, by MACD. There is also a measurement to 11... former trading range high of 23 - trading range low around 17 = 6. 17-6 = 11. Simple.
While it may be a buy here and now, 10 to 11 bucks would be a no brainer from a technical standpoint.
Yet another disclosure: I don't own IAG, but may soon.
The MSM comes up with some funny ones, but this one is right up there.
The statement leaves one believing that for the Fed, “the economy isn’t
improving fast enough to warrant a shift in policy while the Fed
continues to caveat observed improvements,” said Dan Greenhaus, chief
global strategist at BTIG. “This recipe is one that leaves the Fed in a
‘Goldilocks holding pattern;’ Not hot enough to tighten, not cool enough
Meanwhile the markets cheered because Dear (monetary) Leader said the Fed would be prepared to do more to support growth. You see, we are in a bizarre world where Goldilocks is now considered a mere impediment to the inflationary policy that needs to be injected at some point to keep the construct going. Wonderland is what it is. If it were something normal and organically functional, Goldilocks would be the best of all worlds. How transparent.
Blah blah blah... we are going to do what we have to do to manipulate the curve and keep Goldilocks in play... blah blah blah.
"The Committee also decided to continue its program to extend the average
maturity of its holdings of securities as announced in September. The
Committee is maintaining its existing policies of reinvesting principal
payments from its holdings of agency debt and agency mortgage-backed
securities in agency mortgage-backed securities and of rolling over
maturing Treasury securities at auction. The Committee will regularly
review the size and composition of its securities holdings and is
prepared to adjust those holdings as appropriate to promote a stronger
economic recovery in a context of price stability."
Here on FOMC day I thought it would be appropriate since the Fed has the power to kick it into gear by pretending to be the guardians of sound financial policy for just one more meeting.
This could eventually drop markets to technical levels where the plan is activated for both my 'bottom feeder' preferred gold stock sector and for the broad markets.
Alternatively, if they go 'weak' today on top of the 'Apple relief' pump, you will know their level of desperation or intolerance of anything resembling a bear phase here in this US election year. In that case, bullish potentials could be activated sooner rather than later. The Fed is well aware of how tenuous the recovery born of inflation and credit really is.
I 'think' they are not going to blink today, but then again what do I know? Ben Bernanke is the academic genius with all the answers. His esoteric formulas on gauging the deflation threat may be telling him something different. Today should be interesting.
This chart shows the Au-SPX ratio, declining within a Wedge to support. Regardless of whether or not stock bulls have one more pump left in them, this is a bullish setup for a pro-gold stance, at least in relation to the stock market.
This is another sign that the macro growth spurt that coincided with ongoing government welfare directed toward the biggest banks (in the form of ZIRP and privileged first mover knowledge of coming Treasury yield policy moves) is setting up to fail. And when a Ponzied up construct fails, it can fail miserably.
As compared to last summer’s momentum and the high-risk atmosphere it fomented, it is time now to be a gold bull and though the technicals remain unclear in the near term, a gold stock bull as well. Being a bull does not yet mean being ‘all in’ and gung ho committed. It just means for me personally, that I do not need to feel a little dirty being a gold bull as was the case last summer when you just knew the dumbest [money] on the planet were long gold right along with the rest of us who are committed to its big picture secular bull for all the reasons carried forward this last decade or so.
When those reasons change, so too will the orientation. But all we see now is a racket in Treasury bonds being played out to keep up an appearance of a sound economic backdrop with little inflationary concern as the Fed buys the long-term T bond market and sells the short-term one. This promotes the illusion that bond vigilantes are driving prudent policy on the short end with rising rates (Fed states intention of selling these bonds) and inflation concerns are contained on the long end (Fed commits to buying these bonds).
It’s manipulation and I do not wear any kind of metallic hat when I write that. It is what it is and what the Fed itself has stated it would do; manipulate of the Treasury market.
How shallow. And yet asset management robots seem to buy it hook, line and sinker. “Don’t fight the Fed” is their automatic reply. Well here at NFTRH we are going to use that mantra, because I don’t intend to fight the Fed. I intend to have the analysis remain in line with the Fed. The analysis states that the rigging of yields is a temporary thing designed to get everybody over to the right side of the boat before the next inflationary operation. We are now seeing signs that it is time to begin preparing for what comes next.
This is the current plan on what may be coming next:
Markets continue downward to a degree sufficient to put pressure on the Fed to ease (i.e. inflate, monetize in a supposedly ‘sanitized’ manner, debase the currency, flat out QE… what’s the buzz phrase du jour?) in this election year. We note that this may not require too much downside market pressure since inflationary signals are already so well contained due to all the sanitizing done on yield curves to date.
During the process, gold out performs all the positively correlated stuff (rising RPG) like stock markets and commodities. This could entail gold declining less than the other things, so do not focus solely on the nominal price. The process of a rising RPG feeds the bottom line fundamentals of at least decently run gold mining operations. This is because their product is outperforming cost drivers like energy commodities, as well as the stock market, which makes gold stocks more palatable to the investing public.
In this election year it would probably be unwise to start to think ‘Armageddon 08’ because with sentiment so well contained in precious metals and commodities, and inflation fears so well muted (again, masterful job working the yield curve by Ben and Co.) the play would be to pull out an epic inflationary macro ‘kick save’ (it is the NHL playoffs after all – let’s go RANGERS!) that could eventually drive markets back up to at least test the March highs.
The ‘inflation hounds’, i.e. the gold stocks should be watched closely. We precious metals players are at Ground Zero to what lies ahead, so if all goes well, NFTRH will not only be positioned properly in that sector, but also have a signal to cast out into commodities, emerging and even developed markets before the general stock bulls momo their way in.
This is just a sketch! If you have been with NFTRH for a while you know that I operate to sketches or plans, and that the only reasonable tack for long-term success is to be open to the possibility of being wrong and having to adjust. There are no real all-seers or gurus. We want to proceed in a lower profile manner, investigating the markets every step of the way to stay on the right side of things.
But I think I am right with the plan (1-4) above. :-)
Au-GYX has been in consolidation, but is looking to turn back up. That is another positive sign for things that do well on the economic counter cycle. Things like Uncle Buck and then eventually, the gold miners for example.
Attached is a daily chart showing what I think could be a Bear Flag on the SPX
in the lower panel and a corresponding one on the HUI in the upper
There has also been some pretty distinct inverse correlation in
the two indexes, but these flags have the potential to trigger new declines in
the SPX and the relatively weak HUI.
Please do not mistake the fact that
NFTRH remains bullish and is getting more so in every way other than the
technicals (theoretical HUI measured target is 315 until/unless 475 is
I believe the gold stocks and commodities have been first
movers to a coming market correction and this would align with the view that
gold stocks could remain under pressure even as their fundamental backdrop
continues to improve with a rising RPG (commodity adjusted 'real' price of
I don't think much more needs to be said. The SPX is vulnerable
under the noted resistance and a decline in this index would start the clock
ticking on the end game that would see a lock and load for opportunity in the
coming weeks or months. NFTRH184 will of course have more on this
correspondence, please use email@example.com as this will get
mail to me sooner.
You were after all, elected to bring hope and change. Well, a nice change would have been to officially recognize the first genocide of the 20th century as the Christian Armenians were slaughtered for nothing more than their religion and their industrious and hard working habits. It is now nearly 4 years (and counting) as yet another president remains mute in the face of Turkish pressure.
Just game planning... always game planning on the macro. ;-)
A reminder that the monthly price is going to bump from $26 to $29 with the annual option increasing a milder $288 to $310. Current pricing is going to remain in effect for existing subscribers and anyone who subscribes prior to May 1 for as long as the subscription remains active.
Still whipsawing around beneath resistance but beginning to remind me of a 60 min. version of the daily Bear Flag that formed on the HUI in January-March that ultimately flopped into some pretty significant downside.
Still on message here because I tend to get hung up on macro themes staring me in the face and compelling me toward conclusions. Hey, ya want stock picks? There are other blogs out there doing that. You want fancy trading signals? They got those too.
Here we'll manage a little phase of declining interest rates (red, purple and pink lines) across the board. Ah, but the yield curves (the area behind the nominal yields shows the 30/5 spread) are still bumping up even with nominal yields falling. Gold likes a rising curve and as was shown a couple days ago, nasty economic stuff tends to follow a rising curve.
Interest rates are declining (giving policy heroes would-be cover) and yet a gold positive, economy destructive signal is playing out in the spreads. What do you think will be the macro play upcoming, eh Beuller?
60 minute chart updated showing a drop back below the 60 period EMA. A break through resistance targets above 1410, but for now at least the bulls don't look quite so brave as a couple days ago. The market is whipsawing around in preparation for a move that in my opinion will lock and load some pretty pertinent tactical objectivess.
This is a short post. Subscribers got a long one in pre-market. The market's short term direction has a big hand in the events expected to play out over the next few months.
There is no way to put lipstick on the pig that is the fact of HUI's failure below important support at the 475-500 zone. But the fact is that the HUI has benefited from a rising yield curve (panel 2) and a declining long term yield (panel 3, AKA our biggest picture of an ongoing deflationary need to correct or 'the Continuum', which is periodically met by policy makers' inflationary actions).
Here are some other facts...
The RPG (real price of gold) benefits from economic contractions as gold outpaces base metals, crude oil, stock markets, etc.
The 30/2 year yield curve is in a big picture UP trend.
The gold miners logically declined as yields rose recently with short term yields rising faster than long term ones. This is a non favored condition for gold and the gold sector.
The yield curve remains in a consolidation (at worst) as of this writing, though it is potentially making an upward break of this consolidation (we'll have to wait it out and see). A rising spread is generally bullish for gold.
Strong up moves in the yield curve have signaled oncoming economic contraction or worse, broken systems.
The RPG, which benefits from economic contraction in turn benefits bottom line fundamentals in the gold mining sector.
If that is a break of the yield spread consolidation, HUI may well prove to be on a false technical breakdown. What we do know is that true believers (and holders) in this sector are long past hope with many so far underwater they have stopped looking at their accounts. Sentiment is epic bearish or even beyond that; it is mired in utter despair and hopelessness with many gurus playing smart guy now, having moved on to recommending other areas that are working, i.e. they are trend following.
For those of us that are bottom feeders and value seekers this is not easy, but it is why survival (i.e. risk management) is job #1. Because people who survive can take advantage of a situation where fundamentals (for quality operations only) are good and getting better with respect to the RPG and the big daddy macro indicators are at least at a point where they could begin the process of turning for the sector's better. The yield curve is now in a posture where it is a candidate for reversal, which is different than saying it is ready to reverse tomorrow.
Meanwhile, nominal HUI targets a measured 315. Those are the black and white technicals. But the macro is its own animal and it could obsolete that target at any point. And if the low 300's does come about and the macro stays on point, the opportunity is going to be epic.
But for now, ignominy is carrying the day and a process that is taking longer than I would have thought, is playing out on its own schedule. It's why we manage risk every step of the way.
I know the stuff I put up here can be really confusing on a quick look, but it is absolutely critical to have tools that work - no matter how weird - to keep you intact for the day that opportunity eventually does arrive. I am not making this stuff up; it is a visual representation of data reflecting real relationships that imply particular outcomes.
If the macro fundamentals change, I sure do not need to be harping on the gold sector's fundamental picture. But I don't care if I am the last guy in the room, I am not going to turn out the lights and leave as long as my signposts say 'epic contrarian opportunity up ahead.
It is not Treasury bonds that gold aligns with. Sometimes it goes up and down with bonds and sometimes it goes opposite. What gold generally stays in alignment with however, is the relationship between long term and short term bonds. Here's the updated status, with the weekly view of the nominal 30 year yield and gold in the upper panel and yield spread in the lower panel.
It's the thing in the lower panel that should be watched closely from this point forward.
Falling and Rising Wedges are the most over hyped patterns in TA, both in their bullish/bearish directional signals and in their bullish/bearish intensity when they do manifest.
That said, RGLD is in a 'falling' one, which is thought of as a bullish pattern. Adding in some bullish divergence, one might think the short term downside is limited to 58, with the potential for a rally to the mid 60's and the 50 day moving averages.
A weekly chart however, shows much stronger support in the mid-low 50's which I think could be a more solid buy if it registers.
Bulls are on the verge of breaking the bear case over the very short term. Target is 1411 (or a test of the highs) on the SPX if they succeed. This does nothing to invalidate the premise of the previous post, however. Nothing whatsoever.
The 30 year / 2 year Treasury yield curve has been on a steady march higher since 2007. This makes sense since that was the year things started falling apart in inflated, debt saturated developed global economies, led by the nation that showed 'em how it's done when it comes to economic management by inflation; the US.
When long term yields are rising faster than short term yields, it is a sign of stress building toward either a breakout in inflation expectations or, as has been the case thus far since 2007 (and really, since the age of Inflation onDemand began in 2001), impending reversal of the excesses. Unfortunately, in an age where economies are managed by inflation (by monetization of Treasury/Sovereign debt in service to increasing money supplies) these reversals tend to be shall we say, violent.
Without conjuring too much theory about the Treasury bond market's yield relationships, let's just say that a rising curve (top panel) has accompanied ever higher moral hazards being baked into the macro cake. As shown, the monetary value anchor, gold, has moved up right along with the curve. But like the curve itself since the Euro ignited blow off in 2011, Au has been mired in an intermediate down trend. It all makes sense, at least when comparing the yield curve with the monetary relic which has not yet by the way, broken down from what still qualifies as a Symmetrical Triangle, which is usually a bullish pattern.
But enough on gold, it will go up or it will go down in the short term. What we are interested in today is what the yield curve in the top panel may be indicating for the nominal 30 year yield in the lower panel and from there, what the nominal yield may forecast.
Very clearly, when the curve has increased and then played out a consolidation/correction (red dotted lines) as it is now doing, a decline in nominal 30 year yields and a deflationary and/or crisis episode has played out each time within a few months. The 2008 decline in the curve forecast 'Armageddon 08', centered in the US (this was the 'lever' to QE1), the 2010 decline forecast the 'Flash Crash' and associated liquidity problems (this was the 'lever' to QE2) and the decline in 2011 forecast the phase where Europe's sovereign debt structure began to come apart at the seams (this was the lever to the ECB's version of QE as its balance sheet was expanded to deal with the crisis, while the US financial media got to pretend it was Europe's problem and if not for that all would be fine).
Well, the yield curve has been in decline since the acute phase of the Euro crisis and its correction has been exacerbated by the Fed's stated intention of selling short term T bonds and buying up long ones. This has painted 'Goldilocks' into the picture, pressured the precious metals and commodities, and given the stock market a reason to bull without those nasty inflation concerns that tend to make the Fed's policy makers sensitive to criticism.
But we have another red dotted line indicating a correction/consolidation on the chart. Is it different this time or is the curve again forecasting that a deflationary 'issue' will be cropping up later in 2012? Taking it further, would it not be a convenient excuse for Dear (monetary) Leader to come to the rescue once again?
NFTRH has been following the RPG (real price of gold) and other macro 'tools' closely and they have not yet given a signal as to sufficient pressure for coming QE-style inflationary policy. But the picture above says that in this election year, it could be coming soon if previous relationships prove valid in the current situation. Considering how low nominal yields are already, what kind of policy response would you think might meet a deflationary episode? I think it could be a decisive one.
Yields are declining and this is perfectly to plan because short term yields are declining faster than long term yields. In other words, Goldilocks' grip on the yield curve continues to well... yield. The curve is rising and that's very different than the situation that was painted into the macro by the Fed's stated intention to buy long bonds and sell short ones. The stock market is no longer cuddled nice and comfy in Uncle Benny's loving arms.
The last week has given the analysis a firm foothold as questions are being answered and plans locked in. It's all we can ask for from the markets... direction.
Today I'll let Derek, a new subscriber who is busily reading NFTRH's entire archive (he's up to NFTRH30) back to September of 2008, provide the promo.
Personally, I cringe at the thought of this because I know the letter was not then what it is today stylistically or format-wise. I also know I have screwed up a few times along the way. :-(
But I also feel this thing is the best damned financial market newsletter out there. But then, I have to feel that way or else why do it? On to the pertinent points from the email exchange...
Derek: "Was just reading the October 2008 NFTRH editions. Wow! Such great calls on the price targets for the HUI and AU."
Gary: "Of course you just know I need to request to use your words for a little promo. ;-)"
Derek: "Go ahead and use my utter gob-smacked-ness for a promo." [not sure what gob-smacked-ness is -gt]
Derek: "Do you read FOFOA?"
Gary: "No, but another subscriber says I should. I don't have much room for outside stimulus. I hear good things about it though."
Derek: "I appreciate your personal answers to my messages. Right now I have read up to NFTRH30 and continue to be amazed by your ability to call turns in the markets and give common sense takes (& targets) on what is going on in the world of finance. I turn 50 in June and feel certain I will be shorn of all funds taxed from me via SS and the xxxxxx system (my wife is also a public employee and has for 20+ years contributed to a pension which I think will gladly pay off the boomers just in time to give her worthless FRNs). If you can't tell I'm a believer in the 4th turning/great unravelling theme of our time. I especially liked your message of debt reduction, life enhancement and valuing what is real. Thank you for being there as your POV feels like an anchor for how to proceed with investing in the paper markets (I've been accumulating physical when I can, but I've also been cold-cocked in the miners).
Sorry for the lengthy reply but I noticed in one of the reports you were gratified by feedback reflecting learning. I feel like you've turned on a light of wisdom for me. This is the highest praise I can give. btw: FOFOA is esoteric and I believe will only confirm your current POV, so you miss nothing other than an unusual take on what the post 'now' will be like. He's not unlike Clif High and Half Past Human, only that his bete noir is a world where savers are not gobbled up by debtors in the guise of do-gooderism and that Au is the antidote to stealing from the prudent (very "Mises" so to speak).
Eagerly awaiting my first "fresh" NFTRH."
Me again: The thing he mentions about learning is probably the most important element of this service. I do it commercially, but it is not for robots who want to be told what to do. It is for critical thinking people to get ideas from and if you think I have not benefited from the ideas these people shoot back at me, think again.
Edit (11:30) One more from Derek (I just know he's going to find some clunkers in there sooner or later)...
"At one point you called for 680 Au then realized it should have been 780 and then then Au went to 801 before rebounding...I'm up to #34 now and it's kind of wild to go and check your targets against the weekly charts --as yet you were never "wrong" in the turns which are what I feel are the most important thing because they inform my decision to sell out or wait to buy. These turning points are what was missing for me. The 4-step sketch in in #183 is quite compelling as for once I would like not to be on the stupid side of capital flows...the yield curve analysis is quite an eye opener. Have a great Sunday as now I must go tend my flock. blessings to you, Gary"
I thought gold stocks were a 'buy', at least in relation to broad stocks back when this ratio was around .38; so let's get that clunker out of the way first.
In relation to the SPX they declined further and have already crashed similar to 2008. This has notable analysts calling for buying US stocks above gold and I would assume, gold stocks as well.
They can call for that, but here we will make a different call based on the RPG potentially becoming fundamentally favorable once again and increased pressure on our policy heroes to stop all pretense that they are stewards of the currency and in favor of anything resembling fiscal prudence and austerity.
The most recent shaded yellow box has brought the sentiment backdrop in the gold 'community' to register what I'll call an EPIC reading on my Sentometer.
Here's the updated status of gold in relation to some things of positive economic correlation. The RPG made an impulsive little move earlier in the week, but with policy makers itching to inflate, we must be vigilant against a new phase of speculation until all doubt is cleared.
Gold's real price will rise if the pumpers take some time off.
The memo, direct from Buffett (little value, no utility), Roubini (just because he's an economic rock star who likes to wind up gold bugs on Twitter), Gartman (fretting about lower lows and lower highs, bull over) and Saxena (something about having broken below the 200 day moving average, US stocks a far better place to be) is that you need to go down you ancient relic!
The 200 day moving average thing is debatable. Which MA is he talking about? Must be the SMA (simple) that every charty uses. How about the EMA (exponential)? Au is now above the EMA 200 and has not officially lost the SMA 200. Look how long it was below that one in December before invalidating the breakdown.
As for Buffett, we saw what kind of utility gold had in 2008 and if policy makers will just be brave enough to keep their mouths shut for a few days (ref: today's pump fest) we'd see it again.
Roubini? Please. Gartman... Dennis, there is no lower low and there is no bear market. What there is is a chart still sitting in a potentially bullish pattern, consolidating out of last summer's excess momo. Eventually maybe it will bend to your will, but it may also get to the upside target of 2050 as it remains nestled in this pattern.
I mean people, you can't just will something to be. It will be what it will be and it does not care what you (or I) think. Gold is in a bull market. The reason I get irritated with the people who make predictions and try really hard to convince people of things is that I think real people get hurt by this behavior. Same goes for the 'us against them' tradition of the gold bugs. Real people get caught in the crossfire and that's not nice.
The RPG (real price of gold) as measured in broad commodities has made a break higher. This is just a simple daily view. A long term view is even more compelling as it weaves in all kinds of macro economic stories.
Stock market bulls are out dancing again today as Janet Yellen and Bill Dudley whisper sweet dovish nothings in their ears. Assuming this feel good fest terminates shortly, the RPG would go back about its business of rising. And that is significant for the gold stocks (you know, the sector everyone loves to hate?) one way and all kinds of other things in another.
By way of NFTRH subscriber MetalAugmentor, a reputable and hard working mining stock fundamental research service to which I also subscribe, comes this thread talking about an entity called Turd Ferguson.
Turd is an offshoot of Zero Hedge, is apparently a really popular blogger among gold bugs and is cooking up plans to do battle with the 'cartel'. 'Silverax' also highlights Jim Sinclair and his own Golden Idea on how to break the cartel. When I read something like "what we need is Maximus, the financial gladiator" I just cringe.
Gold is going where it is going, and it is anchoring value in a time of devaluation. There is no need for war mentality. There is only a need to keep perspective through ongoing events and the dynamic cycles in which they play out (I sound like an old fart, I know).
Why do people need to join clubs, be part of armies and do battle? There will be no such talk of financial gladiators during gold's next up cycle. There will be talk of gold going to $5,000 an oz. and beyond. Get on board the golden express elevator while you can still save yourself! There will be talk of the death of the dollar, euro and various other debt paper. There will be fear and greed in the air all at once.
In short, there will be triumphant crowing from the gold 'community' right up until the next top and into an impending cycle of whining, crying and writhing in pain at which point what, the financial gladiator saves them all again? Or maybe Turd and his hedge fund adviser buddy slay the cartel for good?
Why not save the emotional ups and downs, put that energy into day to day life and understand that we are going to get where we are going despite pathetic attempts at manipulation of the macro by the 'cartel'?
Gold is a tool that Central Banks, big financial institutions and various authorities use to temporarily manipulate the macro. Most recently, the actual manipulation was performed on Treasury yield relationships, which in turn hurt gold, which in turn helped alter the macro ("And contrary-wise; what it is it wouldn't be, and what it wouldn't be it would. You see?" --Alice). It's just business, perverted and way out on a limb though it is.
Don't personalize it, or you risk becoming angry and biased. Anger and bias promote wrong decisions. The gold 'community', with its various leaders and caricatures is more like a cult than anything, and this hurts the 'community's' supposed effort to bring the monetary metal into the mainstream.
Looking through old chart lists, I just found this one in NFTRH114's. When it was produced in December of 2010, Cu had not yet surmounted the noted resistance level. That level must be taken once again or broad asset market bulls are in trouble.
This is a really awful looking chart and I am not trying to use hyperbole. We have been following Cu of late in NFTRH to manage the coming of the correction that I believe is now in force. But this 8 year view is just epic and all the more reason that RPG (real price of gold, and yes it's yet another one of the cute little nicknames I give these indicators and market events) is front and center.
The market is displaying some bull relief today, but this 'copper roof' combined with signals from the real, US manufacturing economy I am getting (decelerating, as opposed to perking up as they were coming out of the October low) makes for a nasty picture.
The QE3 cultists will be beating drums soon enough. It remains to be seen when or if those drums will be acknowledged. I have learned not to try to out think policy makers. Just follow the breadcrumbs. They're all over the place.
Okay sorry, a regular TA post got a little weird again.
This was an impulsive break on volume and importantly, in line with signals from leading indicators. The SPX could easily rise and test resistance at 1390 (must clear current resistance first), at which point shorts will be very interested to see how it does.
Folks, all I can tell you about managing the current market is to understand a) what the 'real' price of gold is, b) what its implications are and c) how to prepare for its rise... Au-Industrial Metals Index is making a move.
So, is it a new bear market in gold vs. SPX? Is Puru Saxena correct that US stocks are now the place to be vs. gold? Stay tuned, but my charty eye continues to see little more than a hard post-euro crisis consolidation here; a consolidation that could be ending. Confirmation comes with a rise through noted resistance. Aren't markets amazing in the way they usually end up making sense? You have got to love these markets.
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Here is an email update that went out to subscribers this morning, with my compliments. More and more the service is becoming focused on 'in-week' management updates to go along with a formal letter that ties things together each Sunday.
Yesterday, as you may have noted in a blog post or on your own, the leading indicator JNK-LQD (junk/investment grade bond) ratio (daily chart attached) broke down hard and is currently below both the exponential and simple 200 day moving averages. While still clinging to a support area, this looked like an impulsive little move that you do not want to be taking on risk against.
This is happening at notable long-term resistance on the S&P 500. So the technicals came to a logical point for a top of some kind and the most recent 'jobs' report seems to have been among the fundamental catalysts.
Without getting too wordy this morning, we fine tune our sketch of what could be in play: 1) Precious metals under pressure due in part to FOMC tough guy stance with regard to QE or panicky inflation policy... 2) Gold stocks broke down from the consolidation and gold stock players head toward capitulation... 3) The urge to speculate wanes (as indicated in the JNK-LQD ratio among other things)... 4) Broad market declines from obvious resistance and it potentially does so with some degree of impulsiveness... 5) Fed no longer has the need to pretend to be austere stewards of sound monetary policy and Bernanke has license to come to the rescue since he has proven to be 'in control' (remember the magazine cover with a heroic and triumphant Ben looking down at we little underlings?) and if he chooses to overtly inflate (handily, in an election year) then he must know what he is doing (the 'austerity movement' was so Spring, 2011)... 6) Precious metals pick up on a change in policy maker attitude first and begin to rise (or launch) after having dismissed the latest batch of players who have sworn off this infernal sector for good... 7) Of course, the object of policy maker affection would be broad stocks and I do not expect a repeat of 2008 there. Not yet, anyway.
Reviewing a chart of the SPX, I may have been a little too aggressive talking about 1100-1150 and I wonder if the old major resistance/support level of 1240-1260 might do the trick in getting policy clerks to blink. We'll just manage events as they come rather than trying to predict.
The gold-silver ratio (a market liquidity indicator, weekly chart attached) will be the ultimate map to any coming policy changes. A daily chart continues to show a pattern from which GSR can rise. The attached weekly chart shows an upper resistance level at which policy might be compelled to ease. We will watch the GSR ever more closely now to see if it rises first, and then ever more closely watch to what levels it rises. If silver continues to hang tough against gold, we may have a hint that policy panic is coming sooner than expected and thus, so too would be actionable bullishness in the precious metals first, and potentially commodities and markets next. It's a week to week diagnosis.
The trick will be in avoiding the majority of downside pain, largely sitting this one out if you will... but at some point if this sketch is near the mark, it will be time (for me at least, one bit player with one set of goals and orientations) to start being brave amid the destruction. If the 'real' price of gold (i.e. gold vs. all of the commodities and markets of positive economic correlation) takes a new leg higher, while gold bugs are regurgitating shares at reasonable downside targets, the setup could be epic.
I am already fundamentally bullish quality gold stocks, with a shopping list of items including former portfolio members XXXX, XXX, XXXX and more to add to the mini core already held when the time is right. But the technicals must be right as well. This could come with an upward reversal and break back above the HUI neckline area (475 or so) or more likely in my opinion, at lower levels as the broad markets sort themselves out in the coming weeks.
Patience and a week to week perspective from a position of strength is our key. I think the next 6 months is going to be as interesting as the last 1.5 years was stultifyingly boring in the gold sector. The broad markets and commodities are in for some thrills and spills as well.
We went over this in NFTRH182, along with fellow 'oops' indicator the gold-silver ratio. Well, what was a negative hint over the weekend is now morphing into a full frontal Scooby Doo moment. Appears one early indicator - the gold miners - are leading another early indicator. Now what could this early indicator be leading?
You either believe that gold stocks suck and gold's investment case is under threat or you don't.
If you are among the former, you probably think these charts represent the beginning of a new bear market in gold and especially gold stocks. If you are among the latter, you see these chart patterns as nothing but bullish consolidation that shakes out all the casino patrons, cry babies and whiners who never knew the real case for the barbarous relic to begin with.
Hint: I am a chart guy and I see b) consolidation of the euro crisis momentum.