Friday, February 27, 2009
It became obvious that the precious metals were getting a little too frothy recently but here is a chart showing gold vs. the S&P 500 along with some interesting big picture momentum stuff comparing what happened in 1980 to now. My interpretation? Much higher to go in gold, pending the bearish blow horns, alarmists and guru swami's making the not-so-difficult call that gold needed to correct.
I am looking for a bottom in the stock market. But with the gold-silver ratio doing what it is doing, I am not prepared to say it has arrived yet. The investment and trading landscape is rich with opportunity right now, however.
Edit (11:21) Qualification time... this is big picture. Corrective targets 925, 840 and 650 remain in play, but those targets will only bother uncommitted casino patrons.
Have a great Friday.
Thursday, February 26, 2009
The GSR is an early warning indicator and while nothing is definitive here, it is hinting at a bottom, either now or after a near term decline to new lows and 62% retrace to a pretty clear support shelf.
This fits with the idea that any rally that ignites now is not likely to be sustainable because the GSR among other sentiment indicators is not red lined, not extreme.
In NFTRH21, I outlined two potential scenarios involving the US dollar. One is near term bullish for the dollar and longer term very bearish. The other is near term bearish and longer term bullish (FOREX is a price and confidence game, after all).
One could envision the dollar breaking to the upside now, gold outperforming silver, the TLT rebounding as the next deflationary panic kicks in. This scenario has its own distinct set of implications (and requisite actions by investors).
Then there is the other scenario, which involves a near term declining dollar, a stock market rebound and then holy hell unleashed perhaps within weeks or a very few months. Edit (9:45) and of course the alternate scenario has its own unique set of implications and requisite actions. Edit (12:07) PS, to subscribers... I have covered the silver short by selling the ZSL 200% inverse tool. Now I can be a one way gold bug again, having added to a couple positions on this correction and looking to add more.
Wednesday, February 25, 2009
I try very hard to keep politics out of my financial world view, but sometimes I get Obermann up to here. Same goes for the smarmy woman that follows him on MSNBC, what's her name? Anyway, Mr. Denninger is a voice from the decidedly NON lunatic fringe. Please consider his views.
Tuesday, February 24, 2009
Here is Huey, making a pretense to what I have been cautioning about lately. Subscribers, please use this chart to go with this morning's email update. Parameters are pretty well laid out here. The day is young and thus, we have not even definitively lost the first support around 307. Meanwhile, lower targets are drawn for a correction. It would be ideal for this to arrest at the SMA 50.
Monday, February 23, 2009
But that does not diminish his overall work and again, I count 'Conquer the Crash' as one of my big time motivators toward financial sanity. As you may remember, a 45% 3 month discount to EWI's premium services was offered here on the blog. I for one took advantage (and yes, I had to pay up) because, as I mentioned at the time, these few months looked to be very important in reckoning the life span of the deflation impulse and its transition to a coming inflation problem.
A half hour ago I got the latest EW Theorist, hot off the press. Any readers who are also signed up, you know why I am making a big deal about this. I cannot go into detail because for no other reason, it would be improper for me to divulge information that I pay for and is not freely accessible. I only gave it a fast skim and will read it slowly tonight. But Prechter is bringing the goods and making me proud to display EWI's stuff. The guy is not a contrary indicator, nor will he allow himself to become one. I am also surprised as to how in alignment we are in viewpoints, not that I would compare myself to Prechter. I am just a blogger with a subscription service after all. ;-)
After seeing this Theorist in particular, I am going to come right out and highly recommend EWI, whether it is for just the monthly Theorist, or the bundle along with monthly Financial Forecast and three times weekly Short Term Update. You can click the EWI banner in this post to check out EWI or click the big banner at the top of the page to join Club EWI. If you do sign up for premium services, of which I recommend the Theorist at the least, I think I will make a commission if you use that little text link. I know I will make one if you enter the site through the banner.
Anyway, this is not just a pitch. I really do value the Theorist and increasingly Hochberg's Short Term Update. And I believe Prechter is going to be very right for a long time because he is showing me something here with regard to his thoughts on trading, real money and risk management. This is not some canned ad promo. It just came out of me after seeing the latest Theorist.
There is stress among 401k holders helplessly watching their financial professionals lose them chunks of their future every month. There is stress among gold bugs because well, there just always is. And then there is stress among the people who want to buy gold but are afraid to chase.
To that last group I would say take a look at this chart, analyze what happened at the turn of the century when the buying opportunity of a lifetime presented itself, and realize that things do not happen over night. Stress only gets you unhappiness in your daily life and does not help anything. Otto rags on us chart guys but man, I simply don't know how any investor gets along without them. This one, for example tells the story of how the smart money went about being smart by buying in 2000 and 2001. It watched for things like downside price activity and bullish divergence. Then it waited around and if it had not already done so on the first op, bought on the 'higher low' and 3rd TRIX signal. Stuff like that.
Smart money does not panic and is sure as hell does not get stressed out, because that would be emotional. Smart money is never emotional. It uses logic and tools to make informed decisions with higher probabilities for success.
Saturday, February 21, 2009
The bearish case is outlined for the broad stock market in light of the Dow Theory confirmation now in place. This is not a big deal to me in and of itself, but it is to many traders. The DT signal gives market participants a warning about a half a year too late (all one really had to do was watch the gold-silver ratio) but still, it is what it is. Of more importance are the indicators to watch regarding sentiment, and they are not lined up well for the bulls either. Targets are set on the indicators for when they will be, however.
NFTRH is moving ahead, with its rough plans gaining focus as we navigate through historically complex times, and some possible scenarios coming into view with regard to deflation, inflation and the US Dollar. Of course, the only real bull market, gold is looked at in detail.
I feel the letter is hitting its stride and it is just way more fun to do while showing profits, which are now being guarded through sound risk management as we await the time to again lever up a bit with more exposure to certain sectors, first and foremost, the gold sector.
Okay, so enough of the tickler. Give NFTRH a try if you have a mind to. 26 bucks a month and you can cancel any time if you think I suck. I remain amazed at the percentage of subscribers who have remained aboard month after month.
Friday, February 20, 2009
The monthly chart now comes into play to give us some perspective. It's a ship of fools, yeh, but it may also bring some opportunity. Patience.
Edit (2:03) To be clear, whatever low lay ahead, it will most likely not end the bear market. It will just be a trade. I have a feeling that whatever the ultimate low ends up being, it is a number that right now would sound like it was forecast by a lunatic. Just like most people would have thought a total meltdown of the credit and financial systems leading into socialism was a lunatic forecast a couple years ago.
Not Chris. The guy had a mission and little did I know how far he would take it. I have posted all the chapters of his 'Crash Course' on Biiwii.com and if you have not seen them, use the link above (the one linked to Chris' name) and do so. Whereas someone like me uses intuitive gut instinct to distill the truth, Chris actually confirms it through hard scientific work. He got on a progression and just would not quit until its logical conclusion.
Chris has broken through to a local PBS affiliate and it was a huge success. In his wife Becca's words: Thank you so much for your support during Chris's PBS Crash Course fundraiser on Feb 10. The fundraiser was a huge success and raised over 40% more than their targeted fundraising goal. Go team! People called from all over the country (we had one call from overseas) and the operators were a little confused about how this was all happening, since the show was only broadcast in the Springfield MA viewing area.
If you are so inclined, please contact your local PBS affiliate station and request that they air the Crash Course in your viewing area. Call or email the station, direct them to the link above and express your enthusiasm for the message and that you feel it would be relevant for audiences in your area.
Here’s a link to find a PBS affiliate in your area: http://www.pbs.org/stationfinder/index.html
Our goal is to get the short Crash Course episode showing on PBS stations around the country and to create a real demand that the truth of this message be told.
View the podcast here, mid-way down the page on the WGBY website.
Thursday, February 19, 2009
Under this scenario, the markets find an excuse to bottom (USD topping), hope gains a bid and the dollar corrects to around the SMA 200, bottoms there and rises to the top of the triangle.
At that point we would have two taps of the lower line and three hits on the upper, which is enough to fulfill the ascending triangle, lock and load its target of 98, and piss off the hopers.
If things play out in our little scenario, policy makers and indeed the entire ship of fools will begin sucking on the story, sucking the blood out of the last story available, dollar devaluation. Then the sun will shine once again on the vampires.
The dollar represents liquidity and safety in an intrinsically worthless instrument. Gold represents liquidity and safety in an ancient and enduring hunk of value. It is really not much more complicated than that. The country is like an elderly person slowly succumbing to dementia in the years immediately pre-death. Reality is ever more out of reach with each passing day.
Edit (7:36) Then of course, there is the other scenario, which holds that there will be no new round of deflationary liquidation, we do not pass go, do not collect $200 and proceed directly to hyperinflation. That scenario involves the USD making a higher 'C' leg right now. This seems counter-intuitive, but it would be healthier for the price of USD and the impending (and final) deflationary liquidation story if the dollar reversed lower now.
Wednesday, February 18, 2009
But after reading an interview with a gold stock picker who does not advocate owning bullion but instead owning gold stocks as investments (okay, no comment) I went to the gentleman's website and there was a flashing ad telling about the gains his picks have made recently. I thought 'hey frumpy, don't you think you should put up such ticklers to entice the casual reader who wants to make some money?'
The answer is no. I guess I will go on as is, and when I have something to say I'll say it, like now. And right now I want to say here are a few of the stocks that have been highlighted in NFTRH, all of which I own or trade in one or both featured portfolios (capital preservation or speculation). This is just a partial list of NFTRH's gold stock highlights. With NFTRH you get my technical analysis and some fundamental basics and often a full blown fundamental write up from IKN's super fundamental analyst, 'Otto Rock' (his day job is professionally doing this for fund managers and the like).
Unlike some services that are great at picking these things and telling you where they are going, eventually, I am going to remind you to consider taking profits per technical targets and goldbug sentiment or if you are buy and hold for the big picture, at least you will be prepared for the oncoming corrections.
Anyway, on to da picks... here are some of the charts shown from September 28 (NFTRH1) until today. The downside from the acute panic phase is included and yes I was bullish, buying and then buying again lower. In other words, I did not 'call' the bottom, but was buying the panic much of the way down, including HUI in the 150's. This was not catching a falling knife. This was buying a no brainer in the face of F&F, fear & fundamentals.
I cannot recommend buying any of these now, especially since I see a lot of 'buy junior gold stocks' hysteria whooping up out there about 2 months too late. That is what you will get with NFTRH, my honest assesment, right or wrong. Not a set it and forget it stock picker genius letter.
'Gold may decline in a deflation episode, but it will decline less than all the positively correlated stuff, thereby adding fuel directly to the bottom lines of the counter-cyclical gold miners.' I might add gold will also be seen as money and a store of value and fiscal sanity. So you know, regardless of corrections going forward - and I can see one over there in the distance - dis be da place ta be. It's a bull market you know.
The GSR is in alignment with our gold miner upside targets that we have been following in NFTRH since November so, it's all good. I personally look forward to a real buying opportunity in gold and gold miners as a result of the next liquidation. There is only one bull market out there that I can see.
Anyway, here is the chart of GSR that shows bulls' near term chances to remain on life support in conjunction with gold miner and silver's chances of upside blow offs (while gold merely tests its highs). Ominously, the VIX is creeping out of the wedge (shown last weekend in NFTRH20) and this must be reversed immediately. This is a very difficult time for most people and at some point I expect the gold bugs to get dinged as well. The difference is that gold and gold miners would likely provide a great buying opportunity while the rest of this mess sorely underperforms.
This chart says a lot to me, in light of yesterday's continued strength of the gold stocks. Specifically, as with other conflicting signs I see in the relationship of gold to silver and the relationship of the gold-silver ratio to the broad markets (I know it sounds confusing, but there are indicators or strong hints buried in these ratios, especially when cross referencing them with sentiment indicators like VIX, CPC, etc.) the HGR could be looked at as non-confirming the current gold stock rally as the miners fail to outperform the metal. Is that any wonder, considering the stock market's precarious state?
So yes, we have a non-confirmation of gold stocks to gold. But the pattern or structure of the HGR is still bullish, as per the chart. In an illustration of 'it's what makes a market', there is something for gold stock bulls and bears. This is what makes markets interesting, isn't it? Important supports for the HGR are noted on the chart.
Saturday, February 14, 2009
The opportunities to preserve and grow capital lay before us. But it takes a willingness to get out of the mainstream feedback loop and carry forward a consistent yet revisable plan.
NFTRH20 out now. Edit (2/16 @ 8:35 AM) Here is an excerpt: They Said It
Friday, February 13, 2009
Now, I am playing devil's advocate here and reproducing Mish's charts with a technical read and am depending on you not to get nervous about them. They just are what they are, and what they are are (nice English, eh?) monthly charts, which are notoriously ill suited for short term decision making. In fact, gold has already broken to the UPSIDE, in British Pounds, from a supposed reverse symmetrical triangle (bearish reversal pattern).
So why post these charts? I don't really know. I guess I see chart, I see pattern, I post to blog. Sort of a Pavlovian thing.
A powerfully bullish thought is that gold is now in 'blue sky' territory vs. many currencies and if gold bugs are to finally see their endgame - and I am talking about THE endgame - it will surely take place with gold going parabolic vs. these pieces of paper with broken promises written all over them.
Thursday, February 12, 2009
But I was twittling around with a monthly Gold-Silver ratio (GSR) and there it was; a high and tight BULL flag. The pullback target is noted at which point I plan to buy the 2X short silver ZSL to protect gold miner holdings. May sell a few more things outright as well. I am back in the mode of protecting significant gains off the puke fest in October. Ya gotta be just crazy enough to look for hints as to coming events in charts like this.
Don't know whether or not the broad markets are going to succeed in pumping short term, but I do know I would not be long with my worst enemy's money when that flag turns back up.
Now of course, nothing is settled here. My target for HUI remains 350+/- and HUI-Gold .41 in the near term. But if it were as easy as just looking at a chart for 100% accuracy you would not be coming to this blog, because it would not exist. I would be too busy playing rock music and jetting around the world with my family looking for a nice 2nd home in the likely event the domestic mess comes unglued. No, there is sentiment to consider, and it is being led by the always ready to chomp the bit silver bugs. Then there are the gold bugs beginning to feel that oh so sweet sense of validation again... these are signs of a mature rally which has now been in progress for 3.5 months.
Still, charty say 'stay on track Gary, stay on track NFTRH'. But charty also say keep reminding subscribers that taking profits is always a good idea. You got 'em? You met your goals? Remember that the market will at some point taketh away.
All that said, the HUI-Gold ratio still looks good considering it has not yet gone anywhere. But at such time as it may hit .41, I will not just hint at taking profits or the ZSL silver short for hedging. I will pound the table, at least as much as I ever do. In other words I will simply state that this is what I am doing and why. This is because an HUI-Gold ratio at .41 is very likely to coincide with an upside blowoff of short or more likely, intermediate significance.
Wednesday, February 11, 2009
Tuesday, February 10, 2009
TG: will "cost money, involve risk and take time.”
Me: ...and ultimately fail.
TG: “The financial system is working against recovery, and that’s the dangerous dynamic we need to change,”
Me: The financial system is repudiating the decades of ill-conceived monetary and credit policy that your predecessors have stuffed down its gullet. Do you really think more of the same will work for anything but short term gain, mostly political?
TG: “Without credit, economies cannot grow, and right now, critical parts of our financial system are damaged.”
Me: Keynes' playbook predates West Coast offense. The best players see it coming a mile away.
TG: “It is essential for every American to understand that the battle for economic recovery must be fought on two fronts,” Geithner said in the excerpted remarks. “We have to both jumpstart job creation and private investment, and we must get credit flowing again to businesses and families.”
Me: What I understand is that you guys screwed up my country, which used to depend on things called productivity and value added. What I understand is that recessions were once upon a time very necessary corrective mechanisms for healthy economies that got overheated, but are now, due to economic meddling and remote management and the moral hazards therein, time bombs that we must do "battle" with. You may well engineer a recovery of some sort, but at what cost? Hyperinflation? Great.
TG: “The American people have lost faith in the leaders of our financial institutions”
Me: Yup, and that ain't all they've lost faith in.
TG: “In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them,” Geithner said. “Because this vital source of lending has frozen up, no plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses -- large and small.”
Me: See how complex micro-management can be? Used to be a time company A made widget B and sold it to consumer C who, himself had the money to buy because of his productive job supplying necessary service D to...
Mr. Obama: “We don’t know yet whether we’re going to need additional money or how much additional money we’ll need until we’ve seen how successful we are at restoring a sense of confidence in the marketplace,”
Me: Mr. President, I like you a lot. I really do. You are dignified and charismatic and I have confidence in your ability to discern and delegate in search of the truth. But you are aligning your economic policy with what we call Keynesian economists like Paul Krugman and Robert Reich, and what these people are selling, the financial system is not buying. At least not in the long term. Then again, 'in the long term, we're all dead', right? Good luck Mr. President; to all of us.
Monday, February 9, 2009
I figured I would pop it up on the blog as well for anyone interested.
You may have noticed gold often going in the same direction as the USD recently. That is due to the fact that both markets were the recipients of scared money at varying times throughout Armageddon '08 and when said scared money gets a little braver, it thinks about chasing other stories. So to me, there is no real surprise in the correlation.
The CoTs seem to suggest this as well. All three markets are creeping toward bearish, but silver looks to be in the best shape which is a bullish sign for hope and for markets in the short term. Remember that gold got hugely over bought vs. everything else as the upside blow offs in its ratio charts show. Whether or not gold corrects in nominal terms, it is due to underperform many other things in the short term if we are indeed to have respite from the pain, as the SGR implies.
Sunday, February 8, 2009
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