Happy Memorial Day

Let's fit in a little memorializing along with the hot dogs and beer.

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NFTRH189 Out Now

25 pages, a lot of charts and a still applicable intermediate viewpoint pending short-term resistance for some markets and potential fresh lows for others.

NFTRH189 out now.

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"I love our balls..." -Tortorella

I could not be prouder of this young team led by blue collar kid Ryan Callahan.  Hockey matters again for me.



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GSR & USD

Uncle Buck (lower panel) has broken above the neckline of a potential Inverted H&S-like pattern that we noted in NFTRH187 a couple weeks ago.  The gold-silver ratio (upper) is still fooling around below strong resistance.

NFTRH has long held that it might take a jab up into this resistance zone by GSR to get Policy Central off its ass to begin massaging the public with propaganda about further debt monetization, i.e. QE, in support of the economy.

For its part, Uncle Buck has already broken upward through resistance and yet the gold miners have begun to recover a bit while this is happening.  But then again, it is the commodity and general 'gold is silver is copper is oil is hogs' inflation touts who fear the US dollar.

It still says here that the very thing - economic contraction - that would drive up the USD temporarily, would also drive up the fundamental backdrop for the gold mining sector as the 'real' (commodity and stock market adjusted) price of gold rises.  The 'RPG' (Biiwii TM... ;-)) remains in consolidation post euro crisis, but should be key to our course going forward. 

On the micro term, USD is very over bought.

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Facebooked

Every time I log on to Fidelity I see a message in red text talking about delays in order processing related to the pile drive into FB last week.  Herds of momo's rushed the stock only to take a gap down the next day in a 'serves ya right' kind of slap upside the head.  Patient trapped momo's may eventually get out whole if they can await a fill of the gap down.

I think FB is the goofiest thing.  Millions of people trying to get you to play stupid games, updating their status and giving you too much information about things you could not care less about.  Yeh, I am on FB and trying to give it a chance, but I am still not sure why.  I am also not sure why FB could be considered a good investment.  Goofy.


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Gold fund GLD daily chart...

A pretty self-explanatory daily chart for you...

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Excerpt clipped from an NFTRH 'Morning Notes' update to subscribers...

Wed. @ 7:16 AM, pre-US open:

"Also attached is the weekly chart of HUI we have used to gauge downside and potential bottoming areas.  Yesterday's reversal was expected and normal http://www.biiwii.blogspot.com/2012/05/hueys-would-be-v-bottom-becoming-over.html

But now Huey wants to find support at or above the 50% 'Fib' level of 394 to keep things normal.  If things become abnormal, the recent low will be threatened and the possibility of the low 300's opens back up.  I do not expect this because we are managing a normal pullback off the initial burst.  But it pays to consider all possibilities."

Okay, so I missed by a point of two.  Low was 392.34, assuming of course the current bullish reversal holds.

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Stock market bottom projection

I thought that the bounce of the last couple days was a little premature.  The chart in this post shows the target for SPX at 1200 to 1280 (best guess 1250).  The 1292 low of last Friday was suspect.  The bullish plan continues however, pending a real bottom.

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Au-Euro Ratio

Andrews Forks can be somewhat subjective, which is why I don't often use this tool.  That said, this one gives a bullish view of gold vs. euro.  The weekly EMA 40 and the top tine of the Fork are very important supports to the bull case.

Weekly MACD shows that the 'knee jerks' that came aboard in the height of the euro panic last summer are but a distant (and destructive) memory.  RSI must get above 50 for an actionable signal.  The other two indicators show gold/euro at its most deeply over sold since 2008.

All in all, I am more comfortable feeling bullish now than during last summer's hysterics.

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Dumb money sold in May and went away

Led by near suicidal sentiment among the gold 'community', the broad markets recently embarked on a southerly course as well, culminating with 'dumb money' sentiment at very bearish levels in technology, energy, financials, industrials and on out to commodities. 

Aggregate 'smart/dumb' confidence courtesy sentimentrader.com

The last time sentiment was in such a compelling (contrarian) bullish structure was after the damage inflicted upon markets by last summer's acute phase of the euro crisis.  Here I will interject that I subscribe to Sentimentrader.com to give NFTRH a real time edge on the market's sentiment structure and highly recommend their service.

It is important to realize that when commodities like crude oil and copper are weak the last thing on the public's collective mind is inflation.  That is just the way that powerful entities - entities that have been roundly criticized for their chronic inflationary policies - want it in order to promote the next inflation.  In other words, the public is finally shutting up about austerity and gas prices.

The red arrow on the monthly chart of the 30 year Treasury yield indicates the last time that the public was highly alarmed about inflation.  The terminal moment was when the 'bond king' himself, Bill Gross, was widely publicized to have gone short the 30 year (or long this yield).  He called the top in interest rates and in inflationary hysterics.

Now, aided by Federal Reserve buying of the bond, we have come to the opposite state, with deflationary fears in the air and anxiety at a maximum.  The stage is set.

It is a US presidential election year after all.  A Democrat reelection year at that.

Here is the seasonal pattern for the S&P 500 during Democrat reelection years courtesy of McClellan Financial, a market intelligence service to which I have recently subscribed to give NFTRH another edge in its own market management.  The graph was generated as the SPX was beginning its hard down of the last week or so. 

If the pattern holds true in 2012, it will blend nicely with NFTRH's ongoing theme of 'i2k12' (inflationary 2012), which would be born of a deflationary phase like the one that threatens to come to the fore today. 

Think about the election year pattern, think about how wildly bearish sentiment has become, think about the market's need to shake out the dumb money prior to rising and most of all think about how policy makers need to be perceived as doers of good; as part of a solution, as opposed to chronic purveyors of an inflationary regime that has been in force most intensely since 2000.

The S&P 500 has not yet declined quite to the level anticipated by this chart from NFTRH, which we have been using to gauge first a loss of important support at 1360 and then, anticipated major support (the black highlighted zone shows the range) that would be the base from which 'i2k12' could get going. 

I am not personally interested in buying  the S&P 500, but am watching emerging markets, emerging market 'income' funds, big US technology and energy for possible positioning now that NFTRH is fully stocked in the gold sector.

There are no guarantees in highly gamed markets dependent upon being spoon fed by policy makers who continually play a game of trying to fool the public.  But if the election year pattern holds true and if the Fed so chooses to exercise a renewed imperative to inflate from a public that no longer sees inflation as its primary fear, the second half of 2012 could be largely bullish... for the markets and for the president's reelection chances.

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