NFTRH35 out now

NFTRH35 was sent out yesterday to subscribers and it gets right into the sector with the superior fundamentals that we have been tuned in to for many months now. The precious metals and in particular, gold. The report starts off with 6 pages of in-depth analysis and while you could call me a gold and gold stock bull (I was never so bullish as in Q4, 2008), the risks are mounting. So what I try to do is present a big picture and more immediate picture.

In the big picture, the fundamentals stand to continue their upward trajectory, but in the short term market psychology is heavily in play. NFTRH35 begins the process of getting into the mechanics of the gold sector going forward, with the idea that an inflection point may be approaching. Inflection implies change. But again, this is not due to the sector's fundamentals, which will ironically benefit once again by the general market changes on the horizon.

We look at gold, silver, the gold CoT, gold miners and the silver-gold ratio. Things continue to make sense and while no one can control the market's near term, a general script that is in tune with the proceedings is all one can ask, don't you think?

The broad market and its relationship with the leading $BKX (bank index) are discussed with regards to the nature and progress of the rally. Oil, a commodity that we caught the bottom on (and failed to take advantage of :-)) is hitting some very interesting upside levels.

The US dollar is looked at in a daily format in relation to the monthly chart shown on the blog in the previous post. An inflection point draws near. Either that or 'it is now' and Jim Sinclair is finally not just scaring us to death, but right.

Finally, the real drama is going on in the treasury market, as some benefit from what I would call criminal manipulation while others hold the bag. The inflection point here corresponds roughly with the USD and various other things trying to go back to bull heaven. Treasuries inspire a sad commentary on how this machine runs and another reason people should re-look at who they trust with their monetary affairs (certainly not people who listen to and believe Lyin' Larry). In asymmetrical times like now, you are told to look one way while they hide the cheese in the other direction. If I were to give one piece of advice it would be 'do not trust the conventions built up over the last few decades when paper of any kind could be sliced up and peddled as investment.

As usual, portfolio structure and cash percentage are discussed and then a final word on the struggle between deflation and inflation, or at least the dueling fears involved with each.

NFTRH35 out now. Have a good remainder of your weekend.

USD

The dollar is now in our target zone of the high 70's. If we are to get a desperately needed (by policy makers) 2nd deflationary dunk, it should come before the dollar loses the noted monthly support. It would be a profound thing if this were lost here and now. It would be the gateway to Bananaville USA and who knows what with regard to China's reactions, given its huge foreign reserves.

So the question remains, is this the big hyper-inflationary blow off, or is that pushed into the future? This line in the sand drawn on USD will help indicate.

Another day...

...another round of profit taking. These are momo's and they are desperate for our shares. They can have them. Well, except for the favored exploration positions. This is why we endure the negative reinforcement of buying bottoms and downside reactions; so that one day the momo's will show up and do what they always do.

Separately, I did add to my MTO.v positions since it is just sitting there looking like a non-starter but with a chart I like. The elephants made some tracks and then sneaked away. Will they return to finish the job?

Psyched

This is all psychology, and it is hard watching the various rallies when you are not aboard them. But that is the rally's job... to make onlookers feel bad. So bad in fact that the pain can only be cured by buying in. That is how hope and greed work.

It is the reverse of the pain and fear that made many gold stock holders barf up their shares during a historic buying opportunity, just to make the pain go away. It is hard, but important to keep perspective during emotional flash points. October of 2008 was surely one of them, then again for the broad markets in March.

This week is one of them for many people, on the flip side. There are legions of people the world over, sitting out general stocks as the pig floats the hope balloon. Sitting out the star of the stock universe, the gold sector. Sitting there trying to remain disciplined in the face of immense emotional pressure.

All I can tell you is that I do not like this psychological set up one bit, which is why I am a seller and a holder, and certainly not a buyer. I haven't really been a strong buyer since the 260's and 270's. Today, I am fearful. That is how I am trained. In the last 3 months of 2008 I was buying this stuff without really even thinking about it. There is a reason I am a bottom feeder and that is because I want to know that I am getting the best deal and playing sucker to no one.

There's the weekly HUI chart above showing what should be strong resistance under that crown of overhead resistance. Where this impulsiveness will actually end, I do not know. But when it ends, we will look for general buying opportunities, and not until.

Lil' fellers showing life

You know, experienced gold stock traders know that when the little guys start popping, it can be a sign that a rally is in the latter stages. I have shown NFTRH favorite FRG a few times but here are the varying states of some of the other current exploration holdings, most of which have been held or traded since the bottom in October. And no, I do not recommend blog readers even think about chasing. This is just fun time for those that didn't get the memo that the world was ending and bought the ridiculous downside.

Daylight come and me wanna go home

The US is on the verge of becoming 'the world's largest exporter of plastic decorative bananas' to clip a phrase from this morning's email update to subscribers.

Well, Larry Summers certainly did his part to get a lot of people fretting that possibility right now after just weeks ago sooth-saying the masses into the toxic dump of broken promises known as long term US Treasuries. Those who bought the deflation impulse with these instruments stand right in the cross hairs of the inflate-or-die mandate coming out of government.

But I suppose Larry had more important people (or sovereign creditors) to look out for than the average schmuck just trying to survive the results of the government's moral hazard disguised as policy, now decades along.

NFTRH's primary holdings are well into launch mode and I am distributing some slowly, but you will not find boasting here and you will not find me trying to capitalize on the excitement by touting (well, maybe just a little). Instead, we will remain focused on the mechanics of what is going on with the idea that Jim Sinclair's 'this is it, it is now' is in play.

I don't think this is it and I don't think it is now as far as hyperinflation goes. But you know, these crooks really do need a deflation-like event, and they need it soon. Otherwise, we may be looking at the final bubble and dat bubble be da precious metals. We are in the target zone on Huey and we will watch the long term downtrend on the 30 year's yield. We will watch the dollar. We will watch da experts and we will have the most fun imaginable playing the swings in these pathetic times of agony and official moral hazard.

Jeff nails NFTRH

In response to the previous post comes this from subscriber Jeff.

Gary, Your comments today about the subscriber cancellation were quite refreshing. They also reinforced my reasons for subscribing to the letter. It is not that you are a better technician than I am. Nor that you are a better observer of the "human condition" (so important to trading successfully). Rather, it is your ability to distill everything you see- and feel- into concise, powerful statements. These statements force me to question my own strategy, forcing me to be a better trader. You provide a dose of reality which, I fear, I need more of each day.

Best regards, Jeff

That's exactly it. I am a human distillery. If you met me in real life you would not think 'man, am I in awe of this guy'. Quite the contrary. But my skill is to be able to handle many things all in motion at once, resist over-intellectualizing them (I am not capable), distill them and then tell the story. And when comfortable, express it verbally, although in that medium I tend to get way too many uncomfortably diverted eyes. :-).

My wife calls me an idiot savant. I laugh. Then think to myself 'am I?'

While the newsletter has exceeded my expectations for subscribership levels, I think it will be a nice, slow and steady process of a voice finding its audience going forward. An audience with no preconceived agenda other than to get it right. When I fell down that rabbit hole in 2003, I was forced to deal in what is as opposed to what I wished would be. You know, the whole B.I.I.W.I.I. thing and all?

Okay, enough about me. What about you?

X-Ray Specs

The (not so) Permanent Portfolio Fund (PRPFX) has been in the NFTRH 'Capital Preservation' account since the financial world began falling apart (at least so far as the experts could see) in Q4, 2008). Yesterday it was sold for a 12% gain, which is not bad for a mutual fund held for about 7 months.

I thought long and hard before releasing PRPFX and do consider it a good investment. But right now, I am all about protecting the vast majority of well earned gains off of October. Both the 'preservation' and 'speculation' accounts are above their pre-disaster levels and 21% and 130% respectively above their Armageddon '08 lows.

My personal situation and ability to usually anticipate general turns in the markets has me in full preservation mode in that so designated portfolio now that everybody seems to be getting brave. Why, this morning I even heard a radio report that a survey of 'financial experts' predicts that the 'recession' is nearing an end. Recession? Don't make me laugh. Experts? HA HA HA... would those be the same experts that have expertly dissected the minutia of this mess since it unwound for all to see in Q4 but never saw a thing leading in? Those guys?

Consumer confidence is pumping up. Experts are predicting an end to the 'recession'. Bernanke is babbling about green shoots. The stock market continues to pump against its waning momentum... What is actually happening is that sentiment is doing its job and getting as many off sides as possible. The familiar actors are assuming all their familiar roles. These things take time, and it is that time that helps cement perceptions.

This is no slight to the fellow, because he is smart and quite thoughtful, but I had a recent subscriber cancellation after the tone of several emails seemed to implore me to say more positive things about commodities. No can do. Risk is high. I don't recall too many people bullish on copper when NFTRH was (as documented right here on the blog). Now the resource pumpers are out in full force, demanding that your only protection against hyperinflation is 'gold, silver and resource stocks'.

What I think now is that Team Herd is finally leaving the bearish (defensive) side of the field and piling on in the offensive (bullish) zone. This includes the precious metals complex. We speculate, we take profits, we invest, we sit sidelines or we do some combination according to personal situations and orientations. But what NFTRH will also do is continue to act as a barometer. I can't tell readers what they may want to hear and still do my job.

If I perceive the risk environment to be high right now (I do), I say so. I also say that I am bullish the gold miners, but they will probably get whacked too (commonly referred to as a buying op) at some point in alignment with targets that have been laid out. So I manage risk and let readers know what I am doing and why, which is different from telling them what to do.

If you pull up a chart of the HUI, you see massive gains since 150. The risk profile is much different now. That must be reconciled by investors and either acted upon or not, in whatever proportions suit the individual. Okay, I am droning now. I do that sometimes. I guess it is because I want readers of this blog and especially those of my newsletter to be able to fit on a pair of X Ray Specs and not only see the anatomy of their own hands, but what is really going on out there in the markets. As the gold bugs (ironically, one of the most ardent herds around) say, 'don't be a sheeple'.

Edit (1:19) Here is one tool that can be used if you are a high wire act looking to bleed every last cent out of the rally. The DBC commodity ETF has not come to target yet off of the nice bottom pattern. There's the target. Me? I'll sit this one out, do some more profit taking and then get ready for a nice, relaxing (relatively speaking) summer awaiting the future opportunities that are likely to arise in abundance.

A B C... Always Be Capitulating

This time it looks like folks are capitulating to the upside: Stocks jump over 2% on confidence data, Apple.

"Today the market is celebrating the return of some sign of consumer confidence," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. "It was so strong, even the dismal housing numbers couldn't hurt the market."

If this stuff were not so predictable and if it didn't stand to hurt so many sheep, it would be hilarious. I wonder if goo goo eyes over there to the left plans to sell or buy?

Edit (a few minutes later) Reuters edited out the garbage quote above for some reason. But it was there a few minutes ago, honest. Sheesh, now they changed the title. How's a blogger supposed to send them up if they keep shuffling things around?

A B C, Always Be...

This post is triggered by a phone call I just got (but did not take). The bullion dealers are hitting the phones again. Over the years I have noted increased activity from these guys shortly before tops (of varying magnitude). Always mentioned is the state of the US dollar. It is like boiler plate.

The dollar is tanking hard, but it is only at the top edge of the target NFTRH laid out a couple weeks ago after it came to our long standing initial target of the SMA 200.

Go take a look at the CoT graphs over there in the links section to the right. Go look at all the bullish analysis in the precious metals sector, complete with bogus inverted H&S showing up everywhere, as if for justification.

I would advise people take on a different ABC attitude, Always Be Cautious when the pump machine is red lining. Now, I am more bullish than most of the pumpers, but risk is high in the short term... for lot's of stuff.

NXG - Another NFTRH favorite steams toward target

Here is the latest view of NXG's thrust toward the long standing NFTRH target of 2.50 and with it, over bought status. Now, neither 'over bought' nor 'target' mean anything more than what they say. I may or may not decide to sell some or all of this stock although I am leaning toward maybe trading out partial positions once again and holding the remainder, as I have done all the way up off of Armageddon '08.

Meanwhile, today's activity in the broad markets is giving a hint toward one of the scenarios laid out in NFTRH34 (it would be more potentially bullish for a decline to happen now), and this meshes well with a view of the gold miners. Markets do not do what we may want them to do, but it really is great when they make sense, which is really all we can ask. Let's see how this week finishes up and see if we can't fine tune some things in preparation for coming events.

Testing 123, MTO.v

Testing out iMac for file management using an off the beaten path gold stock, MTO.v

One day soon I expect to emerge out the other end of this software ordeal. In the meantime, it has taken some unexpected and pretty hairy turns. I hope it will be worth it to get out from under Microsoft.

Separately, thank you to all the awesome subscribers taking this all in stride and offering encouragement, support and resources.

This has really fried my weekend which kinda bums me out, as it was supposed to be a family thing. Got to make it up to those kiddies! I did get them out to the softball field today. My 10 year old has a sweet swing. She's making good contact and clubbing that thing.

NFTRH subscribers

Well, my worst fears have come true. Glitches are popping up relating to the change over to Mac. I am using Windows through a Virtual Machine and am now losing internet connectivity with regularity. Also, it appears that for some reason the NFTRH34 email ended up in some people's spam folders, so make sure gt @ biiwii.com is able to pass through your filters.

In the worst case, I am going to use my laptop for next week's NFTRH and any updates that may happen this week. Send me an email if you did not receive NFTRH34 and I will attach.

Thank you for bearing with me while I get this sorted out. It is very troubling, especially on a holiday weekend. But that's life I guess. We'll get there.

NFTRH34 Out now

NFTRH34 out now.  Actually, out yesterday.  It was a grind given the holiday weekend, but it delivered the goods to the best of my ability during these extremely critical times when the markets will choose between three potential scenarios, each with different implications.  Some of which could be profound.

Enjoy your weekend!

Huey into the target zone

Huey takes a breather at our short term resistance @ 360, then shreds it on the way to a panic fueled rise to the intermediate target. What next? Beats me, but in this weekend's letter I am going to lay out possibilities for re-entry points for anyone trading out, or just plain entry points for people who want to be aboard but (rightly) refuse to chase.

This is the kind of power the gold stocks showed back in the bear market (2000-2002) that was merely a warm up for today's big, ugly and angry grizzly. This bear market is gold Jerry, gold! For the gold sector's fundamentals that is.

I am seeing the first signs of acute 'death of the dollar' hype again. The dollar is nearly to downside target. Whatever lay directly ahead, it is going to be interesting. If you love the markets as I do, that is good news.

Dow - Pig not fully cooked just yet

This hog is losing momentum, yes. Indicators are rolling and degrading. Bears are licking their chops for a pig roast (BKX/financials in this bear's case).

But the Dow is now sitting at the top of a support zone that extends down through the SMA 50. In fact, the heretofore supportive EMA 20 has not even been lost.

The market's technicals are slipping little by little but the sentiment rally trudges onward until it eventually just falls down, rolls over, crushes its vital internal organs and dies.

Another NFTRH favorite approaching target

I have owned NGD in one form or another since the old Metallica (MRB) days around a buck. Up we went with MRB to around 6, sold a bunch and rode the rest into the New Gold merger and down to the ridiculous undervaluation below a buck. This was of course a gift from the market and it was taken full advantage of not only with NGD, but also with then independent WGW (now merged with NGD) at some crazy price like .35, MFN under 3, JAG under 2 and so on. Crazy.

What percentage of people were buying the gold stocks then vs. now? I wonder. Just as it was gut wrenching to buy then, it is agonizing to sell these beloved darlings now. I have done some selling and in fact sold some NGD at 2.20, buying back at 2.10 - yeh, brilliant, I know. But the tenor of the sector changed and I do trade. Sometimes taking great profits and sometimes undoing mistakes - quickly, which is what I did here.

Anyway, here is NGD, fanning its way up to target. I am not sure what I will do with it once it gets there because I can now afford to ride some of this stuff. I will review the goldies thoroughly in NFTRH34.

Separately, just to reaffirm that it is not all genius all the time here, the SYMX trade is looking rather lame. I have not as yet dumped, but that may happen shortly. I suppose I can afford to take a little while to evaluate. Tough market out there folks. Risk and all...

Gold - Enough w/ the Inverted H&S already

I saw it pop up with a guy looking to make the chart mesh with an always bullish view. I saw it again with another on a gold site as part of a 'hyper' bullish stance. I now see it in the work of a savvy trader, who will dump out the second his stops are triggered and finally, at a respected technical analysis site.

I am now seeing the inverted Head & Shoulders (AKA H&S bottom) on the weekly chart of gold all over the place. I am also seeing bullishness return as the USD goes in the tank (predictably, but perhaps not fatally). In short, I see all the familiar herds assuming all the familiar positions as the spin cycle kicks in.

That is not an inverted H&S on the weekly. It can't be because there is no prior weekly down trend for the H&S to reverse from and the H&S is nothing if not a reversal pattern. Now, whatever this pattern is, it is not at all bearish in and of itself and if we get a MACD trigger up on the weekly, gold will perhaps be in some big time upside business. The target, upon a break of the illusionary inverted H&S' would be neck line, is 1300, which I have had loaded for months now. BUT... that could still be many more months off.

So for now, to paraphrase Babu: Where is prior down trend, Jerry? SHOW me prior down trend!

Larry!! WTF???

Headline: 30 Year Treasury Yield rockets back to long term trend, screws multitudes of believers in Larry and Ben.

FRG - NFTRH favorite pops its lid to target

How Gold Mining Works

When you consider what really goes on with a gold mining company, a blogger tweaking charts and talking about how these companies' product, gold bullion, fits into the macroeconomic landscape can be viewed as an abstraction by an experienced and grizzled member of the mining industry.

In truth, I really don't care how they get the stuff extracted and refined into that beautiful and storied metal of .9999 fine quality. Just as long as they do so with increasing profit margins and without destroying parts of the earth beyond the immediate confines of their mine - this is a nasty business that uses nasty things like cyanide and has to deal with nasty tailings waste.

I make fun of the 'go green' maniacs, but aside from the terrible images (in my head anyway) of happy automatons all marching in the same direction, this push toward stewardship of the earth is a very good thing. I just can't stand seeing human beings acting herd-like. I have no choice but to attempt to profit from it.

But back to the subject at hand. This is a very nice primer on gold mining from Hard Assets Investor: How Gold Mining Works

GO GREEN!! Everybody's doin' it!

You see, this is what happens when usually sober newsletter writers decide to let their hair down (as it were). A kindly blog reader brought this stock to my attention after seeing the FTEK post. Seeing the cup & handle on the chart and this story stock's cash position triple its market cap I said, well, maybe the public will finally start to bite on all this 'go green' hysteria the government is trying to whip up.

I have upside targets for the markets, especially the BKX bank index and some important commodities and the S&P 500. It looks more and more like the rally will end only when these targets are attained while the public, that capitulated and swore off Wall Street forever, at least begins to buy back in as they just can't stand watching it rise anymore.

Junk like this (sorry Tom, just a descriptor of anything I know next to nothing about that is likely to get a hype boost) may just get the spec pump. My positions are fairly small and this is not a reco. It may be the greatest company in the world, but I have not done sufficient DD (as in almost none) to comment. Just biding time as a trader until the real anticipated turns play out.

Edit (2:57) Let me be clear about one thing from the sober side. This is still the same blog that declares risk is rising. At such time as this chart may choose to explode and the markets finally hit targets, the case for reward vs. risk will be untenable. In my opinion, this is a time for traders who can be nimble to do their thing and others to remain patient. If there is a real bull market brewing here - no way says I - then it will provide plenty of chances for entry. The players are much more likely going to offload the trade to top-buying bag holders. Just as we buy 'all in and around bottoms' because they can take so long to form, so it goes with tops, only from a seller's perspective.

Clean coal - FTEK

Well, one of the biggest sources of hype for any market is our friends in government. The Department of Energy has announced 2.4 Billion in funding for 'clean coal' and 'carbon capture' among other things.

Given that the markets are fulfilling NFTRH33's claim that "The S&P 500 has incurred absolutely no major technical damage whatsoever. None." I thought I would hop aboard the green energy hype train for a trade in my dear old friend FTEK, buying above noted support for a would-be short trade to around the converging moving averages.

This is done while awaiting the real plays for hopefully bigger bucks that lay ahead.

NFTRH33 out now

NFTRH33 begins with a review of what subscribers and prospective subscribers can expect the letter to be, and not to be. This segment is reproduced below.

We then proceed to a technical view of the broad stock market and a look at some indexes that led the rally off of poor and unsustainable sentiment. The commodity picture meshes well with that for broad markets and the gold sector, keeper of the best fundamentals I can find, is looked at as usual in detail from short term to intermediate term perspectives.

I am also expanding NFTRH a bit now that the crisis of late 2008 and early 2009 is in the rear view mirror and allowing for a little 'fun', whereby aside from the usual ratios and indicators, that sometimes bore even the writer, we will look at individual stocks from a technical standpoint. In that regard, four of NFTRH's gold stocks are reviewed for potential pullback points where new buying might be considered. NFTRH has and will continue to identify good profit taking areas as well for traders so inclined.

The 'Wrap Up' section sees parallels between the status of the USD and the gold-silver ratio and how they may dovetail with possible short term events in global markets. Portfolio composition and risk profiles are then reviewed (the 'capital preservation' portfolio is +10.5% and the 'speculation' portfolio is +41% from respective baselines at the beginning of Q4, 2008).

NFTRH33 continues what I believe is a seamless and ongoing narrative on market events and probabilities in times that I consider among the best in my personal experience with regard to things making sense and moving in concert, which allows rational and revisable planning.

Excerpt: What NFTRH Is, is Not

I think it is time once again to highlight in detail how NFTRH sees itself, its mission and its areas of interest. This review is inspired by a pair of emails received last week, although I think it is a good idea to go over these distinctions once in a while to reinforce the identity of the letter in an effort to give subscribers a solid feel for what it can be depended upon to provide as we move forward through often challenging market and economic environments.

The first email came from a now former subscriber who wrote the following when asked for feedback as to how the letter did not meet his needs:

“Your letter is very well written and eloquently done. However, I felt it did not serve my trading style.”

‘Well written and eloquently done’ mean nothing if I get the mechanics wrong. They mean nothing if I am following the herd and leading the readership over a cliff, like a pied piper only too happy to tell you what you want to hear. That is because I am here to get the mechanics of the intermediate market moves right, no ifs ands or buts.

What I am not here to do however, is to show you what a great trading jock I am or how I can get my subscribers in and out of things based on proprietary short term signals without a care in the world about the big picture, about the macro story that is in play serving as the backdrop to the short and intermediate term swings. In short, NFTRH is very attuned to the macro fundamentals as it attempts to define and tell an ongoing story that makes sense every step of the way. This is a story onto which its investment or trading stance is overlaid at any given time.

This leads me to the second pertinent email, received Friday night from a current subscriber, which took the form of a simple question:

“Is it a good time to take some profits off the table in the gold stock sector?”

I will never be the writer who sees signs of oncoming correction, alerts his subscribers to sell out, and then writes a public article a few weeks later crowing about how ‘our subscribers were safely in cash based on our call’. Some people may want an all-knowing writer to micromanage the markets for them but you, dear NFTRH subscriber are going to get a manager who gets the market’s turns right much more often than not while avoiding the stress that comes with being jerked in and out based on a short term view I receive directly from the trading gods through my mystical crystal ball.

I give you much more credit than that. When I write about increasing risk and when I show likely areas for corrective activity in the HUI gold stock index for example, and when I write things like ‘traders are locking in profits and investors are looking for buying opportunities lower’ I am giving you wiggle room to make decisions. That is because there is no ‘one size fits all’ in trading and portfolio management.

Speaking of portfolio management, long time readers know that I personally see myself as a ‘portfolio tweaker and risk manager’. I am not a pure trader and I am not a buy and hold for the long-term cultist. Since 2002 the speculative portfolio has delivered excellent returns using this strategy, annualizing at approximately 27%. In short, I seek the highest gains possible while keeping the risk profile in a range where it passes the ‘sleep test’.

This involves trading, and I do indeed enjoy a knock out trade as much as the next guy and gal, but it also involves making distinctions and living with those distinctions along with thoughts like ‘dohhh, I saw the correction coming… why didn’t I sell out entirely?’ once in a while. As an example, FRG has finally blasted off but I did not sell any more of it (after trimming the Preservation portfolio position, which was overweight) because that one is an investment. There are also trades in the portfolios along with many positions on which partial profits will be taken.

So, to answer the question posed in the second email, yes, last week was a good time to be taking some profits off the table, if that is your orientation. With the HUI at 320 premarket on Monday, May 4, NFTRH Update sent out a chart showing the short term target of 360. On Tuesday, May 12, NFTRH Update sent out the following during market hours with the HUI up 3.2% at 352.62:

“HUI, as the attached chart shows, has come close to target. I cannot specifically recommend a course of action because everyone's orientation is different, but I will say that this is a logical spot for would-be sellers looking to lock in profits, to do so. I have not sold anything today or yesterday, but am looking things over from that perspective.”

I personally did subsequently do some trimming and trading, thus lowering the risk profile of both portfolios, as you will see at the end of the report. Does that mean I am bearish? No, it means I have taken some profits that were earned by buying recent corrections. A weekly chart of the HUI was sent out shortly after the daily chart, which shows a reasonable chance of gold stock upside to the 375-400 range (pending short term corrective activity at the 360 area), the top of which does look like it holds potential for significant corrective activity. But we will deal with that at the appropriate time.

So as not to turn the segment into a gold stock piece, let’s get back onto the original theme. The miners will of course be looked at later in the report. For now, let’s end this segment with some bullet points clearly stating the NFTRH mission.

NFTRH:

• Is a macroeconomic newsletter that cares deeply about the global market environment and associated psychology/sentiment that serves as the backdrop to any given investment or trading stance.

• Uses in-depth and unique technical analysis to drill down into said environment to gain perspective about potential turns, confirmations and trends. NFTRH is comfortable in positions contrary to convention.

• Is written by a person who considers himself more a portfolio manager than a short term trader and will make distinctions between stock ‘picks’ as to whether they are a short trade, longer term trade or investment.

• Has exceeded subscribership level and retention expectations, now 7-1/2 months in, which, it can only be assumed must be because it is doing something right.

Before proceeding on to this week’s analysis, it does occur to me that NFTRH, having been launched during those historic days of panic in Q4, 2008, has been heavily focused on ‘the indicators’ for the macro markets to the detriment of having enough space for some of the fun stuff, like technical analysis of individual stocks for example.

Yes, sometimes I bore myself with all the ratios and indicators, and yes, I am the same guy who gets a geeky thrill out of finding stocks with certain patterns or set ups that make me think about $$$$. So I will be more open to this going forward as long as the backdrop is stable and I feel it is appropriate. Again, I want NFTRH subscribers to be apart from the great momentum-driven herd. But we are allowed to have fun once in a while too, are we not?

Perspective on sentiment

Check out this NFTRH excerpt from January 5th, Hope Springs Eternal. Check out the chart of TBT (anti-long term treasuries, rising when long term rates rise) from that time, reproduced to the left. Think about how far we have come off the bottom of human spirits. Think about sheep dutifully staying within the herd.

It is spring time, and risk is... Beuller?

Once again, this space is not some perma-bear trying to scare readers into his world view. We made (and are still making) good money off of the rise from terrible and unsustainable sentiment. But it is time to once again look ahead.

Have a good weekend.

Gold... and gold ratios

Here is one of those busy macro charts that help us tune out the noise of the moment and get a look at the interplay between various things. Gold, unique provider of value, insurance and safe liquidity that it is, has been biding its time in consolidation/correction against all the positively correlated stuff.

We do not fret this process, we welcome it. I believe we are in the process of wrapping up what has merely been a predictable resetting of human emotions encompassing fear, greed, regret and hubris.

People are funny animals, and they will come along and fall back in line at their due pace, once again fearful as the pendulum swings the other way. But a chart like this helps us check up on them. Check up on the status of the herd.

When gold under performs over the long term, it means confidence is high and da peeps feel like speculating. In this case however, gold is merely under performing in correction to what was an impulsive and unsustainable launch from September '08 to March '09. Da peeps' confidence is simply in a bear flag, a sucker's play.

BKX - Rally over? Ask da bears

I see more than a few of the usual suspects out there, calling the top of Hope '09. You know who they are, a collection of gold bugs and usually bearish technicians. Hey, I am in risk management mode here and have been writing all those 'risk is rising' warnings... lump me in there too.

But, before real bearishness makes a return, would it not be fitting for the BKX to make a final sentiment fueled burst to the noted resistance zone? Yeh, you know doze bullz got somfin' up der sleeve. Final suck in anyone?

S&P 500 status check

Risk has been rising, yes? Well, that would have been the case especially if the SPX had continued higher, unabated in the first three days of this week. Instead however, we got the anticipated pull back in the markets (with gold stocks finally feeling the drag yesterday as well) and the question becomes, 'is it [the pull back] real or is it Memorex?'

Just as I do not believe this rally is real beyond being an impressive bear market type, I do not necessarily think the rally is over. That is because of the technicals and the technicals only. As you know, this blog space and the newsletter associated with it have called for an impressive rally on hope and sentiment adjustments. That is why I do not give it the benefit of the doubt now that it is in its latter stages (being bullish was relatively easy pickins a couple months ago).

Risk is rising, but many charts (see commodities a few posts ago) including this one of the SPX, show nothing wrong technically and potential for additional upside. It would be best to put the bulls through a correction here, have them come out the other side more confident than ever, and then... well, you know. The other shoe drops some time after a rise above the SMA 200 is trumpeted by the experts. This is a market that is likely to reward (or at least not penalize) patience.

We will be following the broad markets and commodities, along with the fundamentally superior gold sector, each week in NFTRH.

EWI currency strategist micro manages the dollar

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Goodbye Gigi

You pretty pretty thing you. Dare I say I love you for the consistent appreciation you have shown me and your bottom, it still looks so fine. It should be good until you reach 50. That's sayin' something!

But you've come a long way baby and I must move on now. It's not you, it's me. I don't deserve a lady like you. Keeping all those other gold adorned babes on the side and all. I wish you the best of luck and I am sure we will meet again soon.

Yes, I probably do need a vacation.

USD vs. Euro - Weekly views

NFTRH has followed the USD's 'weekly bear flag' in anticipation of a decline to the daily SMA 200 for nearly as many weeks as there are candle sticks in the flag on the weekly chart. That is because we started out following a daily bear flag that got kind of busted up in the second week and immediately morphed into what was then a 'potential' weekly flag. Now it is time to look for what comes next in Uncle Buck. Here is his currency nemesis, the euro as well.

I am not a currency micro manager and have no big interest in the FOREX casino. But in the event you do, EWI is running a free week on FOREX and as you know, I highly recommend all their Free Weeks and the educational, free and non-intrusive Club EWI.

Perhaps if I had been more currency focused, I'd have seen the non confirmation of the USD's marginal higher high by the euro's higher low, which would have added compelling fuel to an already strong argument of the MACD non confirmation.

Commodity check up

Here are a few charts I quickly popped out on a few commodities. What they show, by and large, are the status of various things as the elephants play around and have some fun. The broad market and commodity rallies are getting long in the tooth, but these charts say there is still some good potential upside, or at the least that none of these are as yet broken. Risk is rising, but so is the hopeful sentiment rally, for now and until we get something other than normal tests of support.

NXG - Lock & load

They tell me I should promote more. I am trying to do things like remember to put 'tags' down at the bottom of each post (supposedly they attract more search traffic) and toot NTRH's horn when possible without coming off like an a$$hole.

But in the spirit of promotion, cause everyone loves a good stock pick, here's NXG - not recommended now by any means but NFTRH's last recommended buy was on the March pull back to a buck. It has been featured in NFTRH and traded by me personally since way under a buck back in Q4, 2008.

Anyway, there's the breakout. There's the target. And here's me, considering when to sell. I would hate to sell this one out totally, but if it hits 2.50, that is what is likely to happen. Short of that, I will probably sell partial positions to the elephants.

FRG - Wheee

I will leave out the bottom panel indicators. FRG is getting over bought as she 'splodes higher toward target. I just got a very pleasing email from a subscriber as follows.

Gary, Thanks for your newsletter. I haven't written you before, but have enjoyed your blog and your newsletter since I found your site several months ago. I am loaded to the gills with FRG shares with an average price of $2.05. The action on this in the last few trading days has been awesome! I have followed your charts on this closely. I think I read on your blog you might unload some and keep some for the more long term investment... Are you still planning to unload most of your FRG shares if $3.5 is reached or perhaps some of the shares and let the other ride for a while? Thanks again and keep up the good work!! -Matt

My answer, in none too subtle fashion was YES, if you're overweight TAKE SOME. This is a great company, but profit is always good. One can always tuck some away for the excellent future prospects (no pun intended) not only with their gold in Nevada, but also for when their huge uranium property in Canada comes back online.

Now that the trend is obvious here and the would-be bottom is obviously actualized, we are likely to be treated to many stock pick hero pieces on FRG, as it is now safe to stake such claims (pun intended). NFTRH has owned it since the darkest days this market has seen since the early 20th century. NFTRH plans to retain some shares as investment, despite the newfound wider appeal.

Oh and, lest one think it is all genius, all the time here, go have a look at AAU, one of FRG's NFTRH exploration mates. :-(

NFTRH32 out now

NFTRH has been actively bullish the gold miners since their fundamentals began to change for the better in Q4 2008 and bullish on the broad markets and commodities for a sentiment inspired rebound. Now, regrettably, by my analysis it is time to use caution on the broad market and commodity rally. That is not a popular notion right now but if the analysis is correct, it will become popular - perhaps around the time we will begin to think about getting bullish again. NFTRH will not tell you what you want to hear and it will not follow trends. All I can do is tell it the way I see it.

I see no need just yet to overly micromanage the nature of any coming correction. Only that many signs point to one coming. Hence, the risk is rising message. We have earned good profits off the various market bottoms and call me crazy, but I think it is appropriate to keep some of them. I have however, rarely been so pleased with the markets as they relate to my ongoing game plan. Things are making sense.

Separately however, I got an email from a subscriber with some constructive critisism that maybe I am being too doom & gloom lately, especially with regard to commodities. I hope that because I am honestly trying to highlight the risks in play now I am not getting hit with the ugly stick known as perma-bearishness.

When it was appropriate, NFTRH was bullish. Bullish on copper and base metals, bullish on uranium, bullish certain stock sectors. It is no longer appropriate. I am not here to make you feel good. I am here to try to get this right. So many folks who are bull heroes now were nowhere to be found two months ago. Just think about that. I respect this subscriber feedback and will consider it. But I cannot change what I believe is the correct path to be on at this time.

Anway, NFTRH32 is out now and it fully illustrates the current situation as I see it. I actually think it's pretty good, and has a bit of optimism sprinkled in there if you look hard enough. :-)

FRG - Lock & load the target

Yes, I am the guy talking about risk perhaps more than some readers may want. But I am also the guy with accounts now fully recovered to pre-Q4 2008 levels and a speculative trading account now 39% above the NFTRH 'baseline' (account level at NFTRH1). So this caution is not coming from some corner of cyber space that missed the rally and bitterly sits around micromanaging its demise.

I am the guy with the newsletter that will seek to have its subscribers consider buying things like Fronteer Development Group (FRG) well before the goons and wise guys show up. They are beginning to pile into many NFTRH holdings now, but FRG has been a core holding of NFTRH since the dark days of Armageddon '08. Target is noted. Again, this is not a reco, NFTRH bought much lower. But this chart that has been of interest to this bottom feeder all along, is now getting very interesting.

USD - Don't forget about me!

Among our other caution indicators, let's not leave out dear old Uncle Buck, who we have been following all along in NFTRH. The dollar is following our script so far ('bear flag that breaks down to the SMA 200 then evaluate'). Check on item one. Just about anyway. Now comes the 'evaluate' going forward part, which NFTRH will begin doing now that the target is essentially in.

We will keep foremost in mind that policy makers' perceived ability to usher in the miracle of inflation will depend largely on their ability to devalue the dollar. This is not as sure a thing as the hyperinflationists might believe.

Dare I say that with long term treasury rates broken to the upside (hi Larry!!), policy makers might welcome a bit of errr, deflation impulse here before the sheep in US treasuries begin to think about revolution and before these rates blow the wheels off of the 'economy is recovering' bandwagon?

A class act - Markus Naslund

First, let's get one thing straight. I am NOT a New York fan. I hate the Yankees, okay? I strongly dislike the Mets, Jets and Giants. I can't stand the Islanders. I am from Boston and grew up worshiping the Red Sox (very unhealthy, I know) and have been a die-hard Pats fan from the days they sucked with Jim Plunkett on through the days they sucked with Steve Grogan on through to today.

But somehow, I am a Ranger fan. I think as a young kid I turned on the TV and they were the first hockey team I saw and I liked the uni's. I think it was a simple as that. Anyway, this is a story about something so rare and contrary to what is so accepted in this country nowadays. Markus Naslund knew he was done, and walked away. He left millions behind that he could have easily justifiably claimed, if he chose to sublimate his self-respect, as is the norm.

Arthur Staple, Newsday--

Markus Naslund did something remarkable Monday, something you needed to dig for in our sports section and others.

Past the stuff we take for granted now - a splashy A-Rod book; the Yankees holding their fans hostage through a two-hour rain delay to finish a Monday night game at 1 a.m.; the U.S. Open golf tournament graciously throwing tickets to the public after not being able to sell enough of them to big corporations; the Mets sending Oliver Perez and his $12 million a year, guaranteed, to the bullpen.

Past all that was the story of Naslund, a Ranger for one season, retiring. Not just retiring at age 35, but walking away from at least $2 million, possibly $3 million, because he knew he didn't have it in him to keep playing at a decently high level. Naslund told the Rangers - who are owned by Cablevision, which also owns Newsday - that he was done, and that's it.

The Rangers have a long history of signing past-their-prime free agents and paying them as they decline. Cablevision's other sports team does that, too, and keeps on paying, thanks to the wonderful world of NBA contracts. In the NHL's relatively new cap era, buying out someone like Naslund, with a year left on a contract (two years, $8 million) that's not as laughably bad as some others in the league, would have been an easy move.

But Naslund took the dignified way out after 15 seasons, saving the Rangers $4 million in cap space for next season. There's no telling what Glen Sather will do with that money, but Naslund turned it down because he didn't earn it.

How refreshing. How crazy, even - and even more crazy that we think he's nuts to walk away from a chunk of change most of us will never see.

Greed, of course, is the norm now. Not just in sports, but sports is where it's taken to the most absurd extreme. The Yankees get headlines for making their most unaffordable tickets slightly less unaffordable, and now comes word in a report Tuesday that the team's fan assistance brigade told some fans during Monday night's rain delay that the game wouldn't be played.

So some fans left, heard the game was on, tried to get back into the new stadium and were rebuffed. No re-entry, as it states on those tickets.

Even the simple act of retiring is confused by greed. Compare Naslund with our old pal Brett Favre, who may yet come out of this second, absolutely-I'm-done-no-way-I'm-playing-again retirement to play for the Vikings. Favre is a competitor, everyone says, a guy who can't scratch that itch to play.

Well, no. He's actually a selfish, greedy egomaniac who can't be trusted to tell you the sky is blue. Maybe we'd be inclined to believe all the nonsense about Favre's love for the game if he, say, offered to give a Minnesota charity $10 million so he could join the Vikings.

Crazy, right?

If Favre returns, the back pages will be his.

Markus Naslund walked away Monday, quiet as can be, leaving millions behind.

That deserved more attention than it got.

GSR & VIX: Code Red

I have been sounding this alarm as best I can for the last few days. 'GSR' Code Yellow... 't-bill rates declining relative to long ones'... 'BKX (and thus hope) nearing target'...

Otto and I had an email back and forth about some bull on SeekingAlpha pumping our dear FRG with a target of 4 bucks based on, duh gold is going up, uranium is going up and copper is going up. The guy had an exclamation point in the title of his piece and Otto commented how that is a dead giveaway to a pump piece.

So I am sensitive about trying not to sound like a tin foil hat wearing alarmist here with the code yellow, code red stuff. Indeed, the Dow could digest today's down and roar up 100's of points to above the SMA 200 at any moment. But the risk would still be rising.

The gold-silver ratio has nearly reached target. Same with the VIX. Speaking of risk, I will risk saying this once again in the face of the general financial pumper apparatus that is seeking to make you feel good; Code Red. Consider capital preservation as part of your strategy.

Oh and let's not forget about all the folks who took it on confidence to buy long term treasuries. They may finally get some relief as rates are a major cause for concern now. Where's China? Where's Ben? Where's LARRY?? Hey fellas... where'd everybody go?



Edit (4:18) Here is a quote from a Reuters article hot off the presses:

"The auction is big news because now it shows that maybe the Chinese don't want our bonds..."

Duhhhhh. Why do you follow bloggers that you feel are honest? Why do you subscribe to newsletters that you feel are honest? Because right or wrong you know that honesty is the most vital part of the equation. From NFTRH28:

Short rates are grinding lower, which shows that somebody remains in alert mode. Why do I feel it could be our large foreign creditors seeking relative safety from the US government’s inflationary policies while average folks are encouraged (“Summers is a liar” in the words of an NFTRH subscriber who has all the credentials you could ask for and knows of what he speaks) by the likes of Larry Summers to view US Treasuries as sound investments?

I guess I am a bit cranky today - it comes with being short, as that stance is contrary to my usually sunny nature :-) - but this really pisses me off. Some guy in Reuters land is just figuring out what honest people should have known weeks or months ago?

Edit (4:31) There, I just dumped SKF in after hours for $480 profit on 150 shares and a few hours 'work'. When you're dealing with crooks, you take what you can get and preserve your sunny disposition. ;-) Now if they can come up with some stress test hype maybe I'll re-enter. Otherwise, see ya, it's been fun.

SKF - Don't try this at home

BKX banking index target achieved. I have a game plan that calls this rally nothing but hope (and a whole lot of inflationary policy) so as a matter of principle I choose to step up and short this mess with SKF, the ultra-short financials ETF.

This may prove ill-fated because the position is contrary literally a whole world hopped up on hope, and that is a powerful short term force. So I will be quick to bail on the position if it goes strongly against me out of the gate. But gains in other areas allow me to hang around for a bit and see if we can't just maybe catch this pig for a short.

Again, I have a feeling of dread about this trade, but I am also aware that with a little patience, that might be bullish for SKF. Caveat: I have a proven track record of sucking as a short.

Palladium joins the party...

PAL won me a really cool Wii thing (I think, I never actually opened the box) last year with a stellar 40% gain (along with a 24% short on AMZN) in this financial blogger stock picker contest.

Today we see our old friend benefiting from the continued commodity rotation. There's the target, ripe for the picking.

Now do you see what is going on here? Do you think that these things are catching the bid because of Mr. Obama's new make-work, infrastructure and green energy nirvana, with the idea of improving fundamentals? Or do you believe that players are playing hope for all it is worth, casino style. Wall Street style? CNBC style?

Edit (4:08) And now, evidently MSNBC style as Dylan Ratigan, renowned "high-octane expert on the stock market and Wall Street" he he he, ha ha ha... takes his hard core Wall Street insider persona over to some other semi-useless network. This tells me there is a market for 'Fast Money' style TV. This tells me 'the people' have not learned a thing. This tells me there is money still to made being contrary the conventional.

HUI - Weekly view

We will talk more about HUI this weekend, obviously. There is a lot to like about the current status and it remains to be seen to what degree a bottoming GSR will upset Huey's mood. We are once again dealing with the resistive EMA 75 and things just look really good.

Again, the wild card is, what will be become of the gold stocks, however temporarily, when hopes starts to run out?

Again, risk is... Beuller? Yes Bueller, it is high. In fact, my upside target for the BKX is locked and loaded and I am trying to remain patient on taking some possible short positions. Risk on the markets is high. The contraction condition, if/when it returns, is going to do good things for gold mining bottom lines, just as it did up until March. Now we just need to get that pesky market sentiment sorted out. Both to the euphoric upside and the despairing downside.

Gold-Silver Ratio

Look, I could be like the pumpers, pull out my pom poms and brag about how much money I am making. I could tell you that NFTRH effectively called this hopeful blow off (well, I guess I just did :-) and I could make this blog a feel-good place for us to party while the party is on.

But that is not what happens here, because that is not the way I am wired. The hammered down GSR (GLD-SLV used here as a proxy), while bullish in the very short term is now approaching CODE RED targets. You can watch CNBC and listen to Bernanke if you want. You can get caught up in hope and a feeling that 'yes, together we CAN, especially if we go GREEN', reduce our carbon footprint and hope the wizards can keep manufacturing funny munny to outrun the deflationary beast. You can go with all the old habits... or, you can understand that RISK IS RISING even as euphoria takes a blow off.

Are you a trader or investor? HUI

This goes along with yesterday's NFTRH email update. Folks, we are nearing the target and with risk rising in the broad market, traders should not be looking to hold out for every last percentage point.

Pure investors might look at the next year or two and say 'who cares about corrections, I'm in', and that is the individual's prerogative. For myself, I think I am going to do a bit of selling in and around here, although I have not sold any gold miners recently, just bought the corrections.

The gains, amplified through moderate trading, have been fantastic off the bottom. I see no reason to change now. Lets see what the next day or two brings.

Risk is Rising

Excerpted from the May 2, 2009 edition of Notes From the Rabbit Hole

I always enjoy following the market’s twists, turns, ups and downs. But this is serious business as well, because it is our livelihood, our money and our financial survival that is at stake.

For perspective, let’s look at the striking view provided by the yield curve measuring long term treasuries vs. t-bills. The story of this chart is one of increasing moral hazard, of a game with ever higher stakes for winners and losers and it is a story in which the sustainability of the current system is called into question.

Long term interest rates have risen strongly (weak demand for the government’s long term debt) despite the Fed and Treasury’s best efforts to talk them down and Larry Summers’ red herrings thrown out for public consumption. Short rates, despite the supposed hints at recovery in the system, have been on the decline relative to long term treasuries.
Again, when people (or nations) buy t-bills, they are buying relative safety. Safety from what? That is a key question going forward. When people and/or entities buy t-bills for no return, one must consider the need for capital preservation above all else. There are two scenarios in play that can be driving demand for t-bills.

1) The next phase of contraction is locked and loaded and as was the case in the initial impulse of the oncoming would-be depression, smart money is looking to avoid asset destruction in the next deflationary impulse, or…

2) With long term rates on the rise and world governments (we’ll focus on the US) in ‘inflate or die’ mode, refuge in t-bills provides two benefits; it preserves capital while at the same time it mitigates the effects of inflationary policies now in effect. By ‘mitigates’ I mean t-bills do not help in an inflationary environment, but at least they do not compound the problem of value erosion the way long term treasuries do.

Whatever the motivation, I think it is safe to assume that the smarter money has positioned in t-bills relative to the money that resides in the ‘safety’ of long term treasuries. This latter money obviously believes Mr. Larry Summers. Larry wouldn’t mislead anyone would he?

Lawrence Summers, director of Obama's National Economic Council, said Thursday there have been no indications that investors are growing worried about the size of the deficits. On the contrary, he said yields on Treasury securities have been pushed lower by increased demand from investors seeking to hold Treasury bonds as a safe haven in uncertain economic times. –AP April 11, 2009

Well, how are those ‘investors’ feeling right about now? Risk is rising and I get the feeling that unsophisticated ‘investors’ have been encouraged to take their eyes off the ball at the exact moment when major sovereign counterparties desired to reposition on the curve, to the short end.

Other measures of increasing risk, even as our long awaited hopeful mood intensifies, will be shown later in the report.

Gold

Given today's reversal from a would-be down trend line breakout, let's look at gold and remember that it, like the USD, is weekly MACD trigger down. There is a battle between a little bear flag and larger bullish looking consolidation flag.

Separately, some people might mistake the noted pattern for a bullish inverted head & shoulders. It is not one. It can't be since a valid inverted H&S comes at a bottom, not a top. It could however, be an ultimately bullish ascending triangle targeting 1300 well down the road. But that would entail another hit on the lower line, and how bullish do you think most people would be if that happens?

SLV-SPY Ratio

Let's try something a bit different. Since it looks like silver has whacked gold (in ratio) the play could be on in the positive economic correlation universe for a while longer yet - even as RISK approaches the RED LINE, which we will of course be covering.

So, I thought I would get off the gold ratios for a minute and look at SLV-SPY, or silver proxy-SPX proxy. It looks like silver could be making a bottom in stock market terms without having hit the 62% retrace, which in my opinion would have been a strong bottom candidate for the ratio. But so too could be the current bottom attempt.

This would probably be more bullish for the gold miners than if gold were leading as the HUI tends to follow silver more closely than gold in times when the general commodity bulls are running and there is speculation in the air. Like now, for example.