Fed to fan flames

My sense of where the markets are right now is that when the U.S. Federal Reserve maintains the same language and posture in their meetings and news releases over the next couple days it will have the same effect as pouring raw gasoline on a smouldering fire.

Silver does have that gap to fill up above here. And the gold stocks are set to rally since everyone is sure they are a thing of the past.....

Watching and waiting.....

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EEM

Emerging markets look ready to emerge from the funk they have been in lately.

Much of this probably has to do with Europe getting going again. And interest rates held low by Japan and the U.S.

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Addendum:

The Exchange Traded Fund shown above correlates almost perfectly with the DFA Emerging markets fund that goes by the ticker DFEMX. Some people have this choice in their 401k's and 403b's.

;)

Basic materials.

Is there a rotation into the basic materials? Is the inflation trade just in the very early stages?
Maybe.

All of the talk is about the disappointments in the economic growth.

"Gold is predicting deflation"

"Look at iron and steel"  Down.

China is slowing......

But it may be that the end to the safety/deflation/austerity trade is coming to an end.

The recent flip-flop by Goldman Sucks may be just the type of misdirection that is a tip-off to the change in outlook of the big players. And they may be late to the game.

I think I see a rotation into the metals, mining, and basic cyclical stocks that signals the start of a real inflation trade.

Time will tell of course. But we have had a long decline in the basic materials on the slowing of Europe, China, and the "emerging markets".
With the recent collapse in the gold price there may be that capitulation that is necessary for the really large players to change their stance.

It seems that the volume in some of the markets is indicative of a bottom....
Here are some charts with notations...
Any decisions you make are your own!

Dr. Copper.

And gold and oil.

It is early. And I may be the victim of wishful thinking/trading.....'
But it seems to be the start of something.

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Molybdenum

Is that how you spell that???


Here is a true bottom picking exercise.

For some reason I see MCP coming back to life. Part of a general reflation and possibly more economic conflict with China. I don't know.

But I see this thing rising...

Control your risk.
NEVER add to a loser.
Average in on the way up.

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Rotation

I don't know how to say this in a catchy or sly way.

There is a rotation going on between tech and basic materials. From AAPL to BHP.
Out with the "safe havens", sell the PG's and buy the GG's.

There is fresh buying in the silver miners. CDE... SSRI.
\
GG.

MCP is sleeping. Dead.  Ready to rally.

Cliff may even rally as the inevitable shorts cover.

How can there be a recovery in the U.S. economy without a recovery in copper, steel, and of course inflation as the dam breaks on all of that money the banks have in reserve.......

And housing has a long way to go.....HOV ,   MTH

The shift is on....
The indexes may go sideways as this occurs..
They are averages after all....

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Pennies from heaven

Nice day in the stock markets, so far...

I keep hearing the talking heads talk about a possible easing of interest rates or monetary policy from the European Central Bank. Recent comments from Ms. Lagarde HERE.

This would round out the whole world in an easy money posture. Europe, and specifically the Germans had been the holdouts for "austerity".

It is hard to see how precious metals won't benefit from such policies.

And now, after only a few days Goldman has changed their recommendations on gold speculation. I sure hope it was a profitable trade for them. (See my recent post, "Stratton".)

Article HERE.

AND while you are reading....

Control your risk,
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Gold speculators

I found this over at Bloomberg. I should be careful about finding articles that support my view, but.

Hedge funds buy

Reading carefully I notice that the change in net long positions in the gold market is due to a reduction in the shorts positions on the recent decline......

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Stratton

In Reminiscences of a Stock Operator, the bible of stock trading, Larry Livingston, the pseudonym for Jesse Livermore, the greatest stock trader of all time describes a situation where a fellow called Stratton has a corner in corn. Livingston is short corn and wheat. Wheat shows a handsome profit, but corn is a problem. Livingston wants to close out his corn shorts but knows that if he trys to close out such a large position, Stratton, as "squeezer in chief" will cost him a lot of money. So he comes up with a solution to his problem.  Livermore, knowing that the markets are correlated and move together, puts in an order to sell a large amount of oats. The orders cause a selloff in oats, as well as corn, and Livermore covers his shorts on the volume created. His problem is solved.

I have an aversion to conspiracy theories. But in this instance I feel that Goldman Sachs is part of a conspiracy to artificially cause a selloff in gold and silver that will not be sustainable. And that makes it easy to buy large amounts of gold, silver and basic commodities stocks at a low price.

I presume Goldman is short gold as they suggested in their news release a few days ago when they suggested shorting gold. I suspect they are covering their shorts.

Many of the basic materials have been declining for some time. They look to be bottoming. The U.S. economy, despite the most recent data is probably on the mend.

And the U.S. Dollar is weak by historical standards.

I think this lates downdraft in the equity markets and in the precious metals markets is a "headfake".

I think this is where the inflation really starts.

I will manage my positions so as not to take any large losses, but will position myself for inflation.


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Bottom? Or falling Knife.

In any timeframe, this is what I look for in spotting bottoms in price.

Don't bet the ranch, tho...

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Rally today?

The market feels like it is time for a small rally today....
Short covering probably.

And if the gold and silver declines are the result of ETF's and the ease of trading then buying and squeezing the shorts can be just as easy....

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Stocks under heavy pressure

Stocks are being sold heavily this morning. The price action brings to mind the heavy and persistent selling/buying that happens at the start of a longer term move.
The traders and bottom pickers are just smothered. There seems to be no attempt to sell the rallies, just sell.....

There will be a rally. When... And for how long?

For now.

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Why is DB weak?

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Gold vs. US$

Gold is quoted in US Dollars.
The US Dollar is weak. See chart:

And the US Dollar looks to get weaker. If the past is ANY indication....

Gold is weak. To say the least! Many reasons are given for the selloff in gold. From paper gold getting sold, to the expectation of no inflation, to the desire to own dividend paying stocks. And there are purely technical factors; panic and a desire to avoid more losses.

But, to me, gold is all about a safe haven from inflation. Yes, inflation is tame. Unless you consider the stock market as an inflated asset. Is the recent action in gold prescient of a decline in equities?

Is this mostly technical selling? Is inflation really dead? Especially considering that the US equities market has been pricing in an economic recovery.

And what about the US Dollar index as an indicator of the relative strength of the USD. A move to the lows of the USD MUST be inflationary.

If the USD continues down it seems hard for this amateur to understand how gold can stay down for long.......

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Bombs in Boston run

Two bombs have went off at the finish of the Boston Marathon.

The news causing further impact in the weak financial markets today.

My former humor seems incongruous and insensitive.

The Boston story here.

Closed out my short positions.

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Maria giggled

As I've said before, CNBC is on my television as I sit at the computer and trade. It is not so much what is said as the tone of the program as things get said. It provides me a general indication of the sentiment of the market and the tone of the participants is an indicator of the stress they may be under from their own positions in the market.

Another thing I've noticed over the years. When the market has been trending up eventually Maria Bartiromo, who does the "Closing Bell" hour, giggles. That is often the top of the move. It is uncanny.

Here is a copy of the email I sent to CNBC when she giggled last Friday:

That’s it! At 1536 on Friday Maria giggled. This IS the top! 

Sell’em boys.

 

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RCL to announce!

The CEO of Royal Carribean Cruise Lines on CNBC this morning promises an upcoming announcement of a new entertainment for vacationers on the cruise line.

I was wondering what it might be, considering the possibilites in light of recent cruise line developments and I am quite sure I know what the new entertainment will be! 

KEEL HAULING!

A new adventure in the leisure cruise.

There is plenty of room on the upper deck for travelers to gather with their KH tickets, (available in the onboard box office). And I have good news for gold investors! They will be admitted to the Keel Haul ride FREE!

Some of them are taking the ride NOW.


Doncha just love that Google image search.....

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How many dips can a dipstick buy?

Browsing my favorite blogs and sites tonight I came across this interesting read by John P. Hussman, Ph.D.  while visiting Mauldin.


A brief excerpt:

"Another pattern that we’ve trained ourselves to identify, with some concern, is an emerging tendency toward increasingly immediate attempts by investors to buy every dip in the market. This tendency reflects a broadening consensus among investors that there is no direction other than up, and that any correction, however small, is a buying opportunity. As investors clamor to buy ever smaller dips at increasing frequency, the slope of the market’s advance becomes diagonal or parabolic. This is one of the warning signs of a bubble. It does not require much of a "catalyst" for these bubbles to burst, other than the retreat of some investors from the unanimous consensus that buying every dip is an act of genius."

and another:

"One type of illusory yield is the earnings yield on stocks, where profit margins are presently 70% above historical norms, and where we’ve demonstrated both by accounting identity and with nearly 70 years of hard data (accurate even to the most recent 4-year period), that the primary source of this corporate surplus is a mirror image deficit in the combined savings of government and households (see Two Myths and a Legend and Taking Distortion at Face Value). Stocks are not a claim on next year’s earnings. They are a claim on a very, very long-term stream of future cash flows that will actually be delivered into the hands of investors over time. At present, the “forward earnings yield” on stocks is a terribly elevated and misleading representative of those cash flows, and investors are likely to find themselves disappointed if they use forward earnings as a “sufficient statistic” for long-term profitability. The other type of illusory yield is on junk debt, where yields have fallen to the lowest levels in history, and where the majority – perhaps more than all – of the perceived “yield” is actually a default premium based on the likely frequency of future default. "

the full article here:
Hussman

Next week may be an interesting time in the U.S. and world markets.....

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How is the Dr. doing?

Much has been said about the predictiveness of copper prices for the outlook on the global economy and industrial activity. There is no doubt that the price of copper is dependent on supply and demand forces in the long term even as there has been increased speculation in copper as in everything else over the last several years. (At least, maybe decades..)

I notice a similarity in the trend of the price of gold as in the price of copper. Just as "everybody" can't believe the U.S. stock story, and that is used as a contrary rationale for the continued ascent of the indexes (the "wall of worry" etc.), why isn't the outlook for copper on the upswing as well? Could it be that the general pessimism regarding the stock market is deeper that just the speculative exuberance that characterized the markets of the early and mid 2000's? Are the rank and file of the world concerned over more mundane things like food, shelter and saving for the future?

And "everybody" thinks we are in for an inflationary trend as well. Myself included. But it doesn't seem to be happening, except in the paper asset markets. Will everybody be wrong? Everybody is usually wrong before they are right!

I just notice a weakness in the copper market that may be more than just speculative excess unwinding.

macro thinking,
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U.S. $

The recent rally in the US Dollar index/UUP etf may have been covering by dollar shorts as well as selling by Yen holders in anticipation of the devaluation of the yen. Now those US dollars are being used to buy U.S. goods. Mostly financial goods. Stocks and bonds. Hence the rise in the stock market and the continued strength in the bond markets; from government to junk bonds.
But as those U.S. dollars are invested in this country then they are here and will start to circulate. This is the endgame that Bernanke and the interest rate doves and stimulus crowd were after. To get some of the U.S. dollars in the world to come home to roost.
Now the U.S. dollar should start the decline as those dollars are worked into circulation in this country.
"Inflation is always and everywhere an monetary phenomenon". as Mr. Freidman famously said.

I wonder if this might be what Goldman sees coming.....

Perhaps i am too brash.

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On debt

 

 

I found this to be an interesting article by M. Hudson

 

 

 

 

Government Debt and Deficits Are Not the Problem. Private Debt Is.

 

 

March 12, 2013

By Michael

There are two quite different perspectives in the set of speeches at this conference. Many on our morning panels – Steve Keen, William Greider, and earlier Yves Smith and Robert Kuttner – have warned about the economy being strapped by debt. The debt we are talking about is private-sector debt. But most officials this afternoon focus on government debt and budget deficits as the problem – especially social spending such as Social Security, not bailouts to the banks and Federal Reserve credit to re-inflate prices for real estate, stocks and bonds.

CNBC as a contrary indicator

I always have CNBC on when I'm sitting in front of the trading screen. Over the years I have noticed that, like most news services, they are not timely. By the time they are reporting a move the move is over or nearly over. And if they say it is time to buy it is probably time to sell.

Today the talk is of the gold market. Goldman Sachs came out with a "Sell" on gold. (Why would GS tell us to sell gold short? A: because they have their short positions in place.) As CNBC is talking about gold, GLD sells off. In the past when I see a market move as it is being talked about I know the CNBC watchers are making their move.  And those who trade on the news are usually wrong.

On the weekly chart gold is sitting on a floor. If the floor breaks the price could fall. BUT, how far. With Goldman short?I wonder when they will cover.

CNBC is a contrary indicator. Time will tell if that indicator has worth this time....

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Decline and Fall?

Will the US dollar continue the weakness that has been the trend over the last several years?
And what will the price of gold and silver do if the downtrend in the reserve currency of the world continues?
Japan is intent on the devaluation of THEIR currency. It seems that the US Federal Reserve is intent on the same thing. Japan got the short end of the stick over the last two decades as the rest of asia devalued and took marketshare from Japan. Ditto for this sleeping country. (U.S.)

Now we seem to be in the currency war. The race to the bottom is underway in earnest. What will happen to the fiat currencies? Is there an "adult" in the world to oversee the relative value of each currency. Where is the bond market? Answer: it has been taken over by the same central banks!

No one is driving the bus.....

I get the feeling we are on the cusp of a good old fashioned inflationary rally in commodities and PM's.

Wishful thinking? Maybe. Timing is everything. It is not a question of IF, but WHEN....

The chart of UUP, the US dollar index shows a very long term downtrend. It also shows a proclivity for rounding tops. We appear to be in a rounding top now. It remains to be seen if the long term downtrend continues.

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new breakout/ GMED

Here is a good looking chart.

Globus Medical making recent new highs today as it breaks out on what looks to be increased volume.

So far, so good....

the chart:

Control your risk,
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Weak stocks

The unemployment numbers dissappointed this morning:Bummer!

And the latest out of Japan, who have been struggling for 20 years to gain some inflation.

Soros on Japan

The Japan story has the potential to cause huge disruption is it goes awry. Stay tuned.....


Meanwhile things look rather bearish all of a sudden.... Who will buy this dip?

Not me.

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Case in point

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Stocks weak

It has been quite a while since I've seen a good looking trading chart.

The stock market is getting aimless and there seems to be some distribution going on.

It is always difficult to tell when the indexes will top out, and for how long.

But, I think I hear Wynona.....

Waiting for the next shoe.....

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