“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput






Wednesday, August 21, 2013

FOMC - More uncertainty

The way I am reading today's release of the FOMC statement is more of the same - some on the FOMC are ready for tapering; some are not. Translation - we are back to watching the economic data releases and attempting to ferret out what is in the mind of these monetary masters from which the markets are begging their crumbs.

I still think that when it comes down to brass tacks, the key data is going to be the payrolls numbers. As far as the Fed is concerned, inflation is non-existent and thus there is no need, as of now, for them to cut back on the bond buying. What will tip the FOMC in favor of tapering sooner rather than later is strength in the jobs market and there is not a lot of that which I can see.

Part of the reason is this damnable Obama-care. It is a job killer and everyone in Washington, including the administration, which rammed it down our throats, knows it. That is the reason they gave the exemption or delay to corporate America in implementing this disaster.

Until this albatross is taken off the necks of the US job creation machine, I do not see any SHARP increases in hiring. Instead, I think we will see more of the same - mediocre increases in hiring which a large percentage of that in the form of part time jobs.

The bond market however seems very concerned that those who favor the early tapering are going to win out and thus we are watching interest rates on the long end of the curve continuing to rise. The yield on the Ten Year just missed 2.9% today!  Methinks that those in the FOMC who are watching these long term rates rising are getting more than a bit concerned about that.

Gold is trading in the same confused manner as some of the other markets with it bouncing higher, dropping lower, bouncing back up again and then moving lower. It is readily apparent to me that there is simply not much in the way of very strong conviction when it comes to gold right now. The bulls have brought prices a long way from off the lows under $1200 but the bears seem fairly resolute in selling shy of $1400. We need to see that handle change from "13" to "14" to spark another strong wave of hedge fund short covering and bring in some more hot money.

That being said, thus far the metal is holding above the major moving averages with the 50 day down close to $1298 and rising. There looks to be a pretty good zone of support between $1344 and $1324 on the chart with resistance just above $1380 and then again just shy of $1400.

Silver is being buffeted by the same winds that are blowing through the rest of our markets but has been able to maintain its footing above $22 with buyers emerging down near $22.50, a former resistance level now turned chart support.

The mining shares as evidenced by the HUI were spanked fairly hard today closing down 4.60%, which is fairly dramatic. The chart shows hefty resistance at 280 with good support near 255 and again near 237 or so. The 50 day moving average is moving higher with the market trading above that level so the bulls currently have the advantage.

It is a damned shame that our once proud system of financial markets, the envy of the civilized world, has been reduced to a quivering blob of Jello, sitting at the feet of the FOMC like some sort of lap dog begging for scraps of food from its master. I for one wonder how historians are going to record this period and whether or not they will chronicle this as just one more step down the path towards mediocrity and decline in our nation. Personally, as someone who loves the markets and the study of fundamentals upon which solid investment decisions were once made, it disgusts me to witness this unseemly beggary and sycophantic attitude.

Since when did the well being of our markets become so utterly dependent on the vicissitudes of 12 men and women sitting on a committee? This is not the capitalism that made our nation the marvel of the world.

51 comments:

  1. Its self evident Dan that Progressives are the destroyers of freedoms, destroyers of Cities and Towns, and Above all, destroyers of Markets.

    What is refreshing is the Low information types are finally seeing this and realizing its all a big lie.

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  2. Dan; Damn good letter; have you read Stockman's book Great Deformation? Real good. Do you read MISH daily? Very bright guy also. Mkts are broken and that is a real shame. steve in sparks

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    1. steve;

      Thanks! Who is Mish?

      Dan

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    2. Mike 'Mish' Shedlock deflationist of note.

      http://wiki.mises.org/wiki/Mike_Shedlock

      http://globaleconomicanalysis.blogspot.ca/

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  3. "Since when did the well being of our markets become so utterly dependent on the vicissitudes of 12 men and women sitting on a committee?" Since you asked the question I feel compelled to respond. If there had NOT been profligate spending "on the credit card" by the Bush Admin the enormous and growing debt would have never existed at its current level and required the "vicissitudes" of 12 men and women. Forget not the two wars, tax cuts, and prescription benefits that were all done on credit. Recognizing causes is not the same as pointing a damning finger. It is an essential part of learning.

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    1. Jimster;

      I am a conservative and not a Republican. Both Bush and the current inept, bumbling spendthrift in Chief have spent the US into the toilet.

      We now have a federal debt over $17 TRILLION and counting. This has nothing to do with the Fed policy which was designed to deal with the foolish interest rate policy of Greenspan and the various bubbles it produced since the first stock market bubble burst in 2000. Since then it has all been about bubble management - first in stocks, then in housing, then in commodities, then in bonds, and now back in stocks.

      By the way, I am a firm believer in across the board tax cuts. the problem is not that the government here takes in insufficient revenues - the problem is that it spends too damn much money and quite frankly I don't give a damn which political party is doing the spending - it needs to stop because it is destroying my country, and my children's birthright.

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  4. Monitoring the inventory/sales of the Physical Silver 100 ounce bars here in Singapore at one of the better known dealers, the demand is no where near as strong as back in April 2013.
    (*Just info for anyone interested)

    Thanks!

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  5. Hilarious how Bernanke now has the world by the nose, and he can steer multi-trillion financial markets with ease by mere "words", as billions of traders wait with baited breath staring bug-eyed at their computer screens wondering what he's going to say next.

    Sheesh, all he has to say is that he will not start tapering right away due to uncertainties surrounding the Middle East, upcoming Obamacare, etc. and IMMEDIATELY following that statement or suggestion will be a Doug Noland-style "Rip Your Face of Rally".

    Same with commodities. Steered with ease via Pie-Holing.

    What about bonds? Maybe he's just waiting for Gross, El-Erian, Gundlach, etc. to start screaming bloody murder when the 10-yr. passes 3.5% later this fall, and then he'll unleash the surprise on the bond shorts.

    Who knows?

    All I can say is that Central Banking has never been easier. Bernanke sits in the king's chair at the Coliseum watching the Wall St. traders massacre each other in the ring, then he'll pick one side or another with a thumbs up or thumbs down.

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    1. Mark,
      You have it wrong, Goldman Sachs and Jaime Dimon have Ben on speed dial. At any given time GS knows what is happening before it ever happens. There are a handful of people at GS who have worked with former GS employees at the Fed who coordinate the actions you jokingly talk about.

      If you think the ten year at 3.5 won't be a huge problem for this crawling economy you are sorely mistaken. Bernanke as Dan says is worried.

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  6. I should be more specific the damage control that Obama was forced to play once he got in office gives him some cover. I do not mean to excuse his performance in the aftermath of all this. His use of all his political capital on healthcare was a enormous misstep and has sunk his administration.

    His ownership by Wall Street just like Bush and Clinton before him has also enormously hindered the integrity of his Presidency. All in all we can argue who was worse but my vote goes to Bush.

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    1. Bush was awful, but Obama doubled down on every bad Bush policy. Ideologically, Obama is hostile to the American values of freedom and individualism in a way that Bush never was. All-in-all, Obama is much worse.

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  7. Dan, he is globaleconomicanalysis.blogspot.com/ Check him out and see what you think; steve in sparks

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    1. Thanks for the link, steve.

      The struggle for growth same applies to nearly every country on the planet for a multitude of reasons

      •Excess debt
      •Poor demographics
      •Tapering
      •Unwinding of leverage
      •Unwinding of carry trades
      •Higher interest rates
      •Reversion to the mean on corporate profits

      I would add : * depletion of most main resources of the planet --> see Chris Martenson's blog for example for more detailed anaysis about our planet being plundered at an unsustainable rate.

      He also talks about the devastating effect of unwinding of carry trades. Sure right. I remember the polish zloty a few years ago, and we are talking about a country about to join the euro currency (at that time)...plumetted from 3.20 to 4.80 and then there was government intervention (the drop of the zloty was a catastrophy as many polish people contracted large debts by buying real estate and borrowing in other major currencies (swiss francs) with lower but variable rates, so suddenly, they couldn't pay back the banks anymore...reminds you something?).

      As Marc Faber mentionned : more liquidity creates MORE VOLATILITY in those bloody markets worldwide.
      How does one protect himself in a more volatile and unpredictable environment? imho, by diversifying.
      Saw last jsmineset comment? 30% gold diversification. Not 100%. Nothing is for sure anymore.
      Play fast. Play small. Diversify. Buy real assets here and there. And pray a lot, too...

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    2. Hubert,

      What is the chartology telling us now. Your thoughts would be greatly appreciated.

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    3. Apologies White Wolf,

      I can't post on a regular intra-day basis to update with my trading positions :)
      So I won't describe very short-term signals.
      But overall, on a daily time unit, nothing has changed since my last comments : we are in a strong uptrend defined by the upwards pitchfork, so as long as the mlh inf of the pitchfork is holding, I'm staying in the train, as my target is around 1470 area, because of a cup and handle on a daily basis (1180-1340 neckline), plus next fibo retracement, etc...all this around 1480. Of course there are resistance on the way up, as Dan mentionned.
      1400, 1420, I also watch closely the Sup Bollinger Band on a weekly time unit which is litterally diving down to the prices, so careful if we meet it, it would also nice area for correction.
      I sold 50% yesterday briefly because I was unsure short term at 1365, but soon after bought it back at 1367 (downwards pitchfork didn't happen on an hourly basis).
      Conclusion : I stay in my long position as long as the upwards pitchfork holds. I'm also watching 1350 as an alert for the bulls. Up, I don't know what will happen, I'm just waiting and hoping we will reach 1450. If so, I'll probably start selling some of my position.
      Sorry, no time to post a chart

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    4. Thank you Hubert. It appears that the 1380 was providing some resistance as well? Your thoughts? Yesterday prior to the larger pullback after market I was tempted and went with my temptation. At 2 AM, I thought the 1360 would give and in a big way. I am glad it did not. Lets hope and pray a bit for the next 1400? ADX was weakening a bit, and RSI on HUI still not very strong.

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    5. All I can say now is that we are in a short-term range between 1355 and 1380+
      I don't mind, as long as it holds and the mlh inf of the daily upwards pitchfork comes up towards up. We can see a horizontal consolidation in this range for another 2-3 days, especially it's holidays now, and so we could have a few nasty headfakes both ways.
      Most important for me is to see what happens if prices remain in the range and the mlh inf meets prices : will it act as a support, or will it break?
      Meawhile, I'm simply waiting and relaxing :)
      I may also sell a bit if we break 1350, but that's because I reinforced my long position at 1345, so let's just say I don't like to be in a losing position and I prefer to save my capital first, then only make money if possible.

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    6. I am thinking the same thing. Larger volume to come in after the Labor Day holiday. May see if I can squeak out a bit today then pull some out and wait a bit. Thanks Hubert. Bonjour.

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    7. White wolf, a way to relax if you are trading is to get into the market with a stop loss, then if prices go the way you want and near your first target, put your stop loss at the price you entered, plus get out of say 1/3 of your winning position. Let the remaining of the position go where it wants until you have a real alert telling you to get out. That way you won't have to pray too much nor eat your fingernails in front of your screen. Once you got into the market with target and stop loss, if it's short term, don't think about it all the time which is the best way to change your mind 10 times and make mistakes such as get out too early, etc... just forget it and once more...relax.
      Trading is a game of patience. Most of the time you'll be out of the market watching for the opportunity. That's when you have the right to monitor crazy and eat your fingernails. Once you are in the market, forget your screen, go relax, leave your flat / house for a nice walk, and come back when it's over ;)

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  8. It should be remembered that a President ie. Executive Branch cannot spend anything. It is the legislative branch that does *ALL* of the spending (and borrowing). The executive branch, by law, is required to disburse the money that Congress has allocated (or not). Further, the debt ceiling "debate" is particularly odious because it designed to mislead John Q. Public. The services/goods are ALREADY on the "National Credit Card" and the pols want to debate whether to pay the bills come due! It is a disgusting charade. The US is the only "modern" nation that runs up bills and then publicly "debates" whether to fork over the dough for the debt incurred AS IF it were new spending. If it were not so pathetic it would be laughable.

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  9. As long as we have such a system where they grow Government, lie through manipulated statistics, steal everyones savings because of their dishonesty, it will go straight over the cliff. When US defaults on our debts that is when the game is over. The bond market is now telling on the liars. I wonder just how long it can hang in before we become the only buyer of our debt. When that happens Weimar is here.

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  10. looks like gold going to knock knock 1400 and blast through it....maybe next stop 1420?? (but then again, what would I know haha)

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  11. I am not a "hater" but when does MW Money site start publishing articles about pro Wikepedia take on Chelsea vs. MR. Manning. This is what kills me about our media. Always pushing agendas.

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  12. Anybody? Crashed recently and can not seem to find 200 dma site for pm's. thanks, steve in sparks

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    1. Steve - I have the 200 DMA for gold near 1515 and the 200 day for silver near 26.50

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  13. thank you Dan, but I have forgotten where to reference it daily? September can be a brutal topping month for metals and grains, so we should take care. Also it is worst month for stocks, followed by Oct. Energies also look tired and topping to me also; thanks, steve in sparks

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    1. Steve;

      I get those numbers off of my TA Software. I am not sure where you could get it off the web. If you have access the actual closing numbers, I would import that data into Excel and use that to generate a 200 day moving average.

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  14. Dan; Nikkei and Yen I believe are just about ready to break out of 3 month weekly continuation patterns; Bass is bearish both, whereas Rogers and Faber think Nikkei has made generational bottom; think that these are important mkts; steve in sparks

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    1. Steve - I am leaving the Yen alone for a while as it has been whipsawing me too much of late. I think its long term trend is lower but don't like the wild and unpredictable swings it has been generating. there is a lot of confusion in the forex markets of late and I am plowing different ground until I feel more comfortable in there.

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  15. Dan; You are a smarter guy than me; I am adding on another break tomorrow on weak close; as for the claim that a lot of $ bears claim that the Japanese will dump our treasuries, I just laugh; are they going to buy more jgb's if Abe is successful and inflation rises while Yen dumps? I do not think so; swb, in sparks

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  16. China and Japan have (wisely) dumped Treasuries for 3 consecutive months big-time... 3 months makes a trend, likely to continue.

    But dumping treasuries does NOT necessarily mean the dollar will fall. Not so simple cause-and-effect

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  17. Elliot wave counts have the A-B-C corrective wave (in wave 4, or perhaps impulse wave 1 if 1179 was the absolute bottom) ending soon... Then the big major Wave 5 down to new lows (or major 2 which will retrace most of the run up from 1179).

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    1. Hey J August; Have you ever known anyone that made any $ with Elliot? steve in sparks

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    2. Yes, I know some young pro's who swear by EW and do consistently well in trading. Quit their day jobs and living the dream life.

      Do not disparage techniques because of lousy practitioners. The charts are never wrong, the chart-reader is often wrong!

      I'm no EW guru, but I am competent and self-supporting. I look at a range of TA and also follow fundies. You know anyone that consistently makes good $$ with just fundies?...Nope!

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    3. Excellent counterpoints.

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  18. Santelli: Gobbledygook

    gob·ble·dy·gook
    ˈgäbəldēˌgo͝ok-ˌgo͞okSubmit
    nouninformal
    1.
    language that is meaningless or is made unintelligible by excessive use of abstruse technical terms; nonsense.
    synonyms: gibberish, claptrap, nonsense, rubbish, balderdash, blather, garbage

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  19. Dan, maybe I am way off base, but the way I look at charts, the Cable and Euro have to be sold into > this 2 month rally; you know my long standing bearish view on the Yen, and as for the Colombia, Argentina, Brazil, Canuck Buck, Aussie, Viet, Indian currencies, well when they begin denying that they have problems, that is the only confirmation you need, as in India with capital controls now; shucks, even in the better restaurants in Saigon a couple years ago they had plastic sticker prices on the menus, for you know why. So when will the $ bears look around and see things for what they really are? Labor Day is right around the corner and we all know how dramatic short holiday weeks can be and my bias for most mkts is to the downside; that is all; steve in sparks

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  20. Dear all,

    Here is my updated view for gold in dollars.
    I like to use simple figures, elements, and decision criteria. Personally I'm not fond of complex TA systems.

    http://s16.postimg.org/oz6v19x2t/gld.jpg

    So the pitchfork is here and as a bull, I like it, because it gives me a support going up, which is very comfortable to manage bullish positions with a stop loss.

    I also drew another channel in green, because :
    - it obviously joins the two last bottoms of gold, but also :
    - it is parallel to the ma20
    - the ma20 has been straight for more than a month now

    In these kinf of specific configurations, one often sees this green axis as a support zone, should prices drop.
    As the pitchfork's trend is going quite a lot up, I expect that prices will sooner or later break its mlh inf. When it happens, and if the ma20 is still following the same straight line, I'll probably put a strong buy order in the area of the green axis support, as from my own experience, many times, it generates at least a short-term bounce.

    Have a nice day :)



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    1. I forgot a bit of my T.A.
      Look at this second pitchfork below.
      You wanted a resistance capping the recent price action, you found it :)
      As a result, if we can't get beyond this resistance, it is quite possible that prices will correct down towards 1315 $ area within a few days, meeting the median of the fork and the green axis.
      So...bullish position must be traded dynamically.
      Personally, I applied my suggestion of yesterday : sold 25% of my long position at 1380, I keep the rest of it, but with a stop loss for half of it under the current range, and a big buy order at 1315 $.

      http://s24.postimg.org/p9oagq1qd/gld.jpg

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    2. One thing I want to emphasize, always speaking Under Dan's control, is that I'm not trying to guess where the market is going.
      I'm trying to manage my position so that I protect my capital quickly, and give myself a large potential of gains, no matter what the market will decide to do, by identifying potential entry / get out points thanks to supports / résistances on my charts.

      I think it's less risky that way, because it's not a matter of being right or wrong about the market direction anymore. It's a matter of probabilities / esperance of gain, whatever the market does next.

      So clearly, I bought at 1345 and that's why now I'm covering a part of this purchase with a stop loss already above that price, yet under the range.
      I see that there is a resistance at 1380 which coincides with the mlh sup of the fork.
      I mean, it's not me who tells the market, it's the market who shows me that there is a resistance here, and that's why I can draw this blue fork. As a consequence, I'm out 25% of my position, securing a small profit.
      Now, no matter what the market will do next, I don't care already!
      If it goes down, I'll be stopped and try to get back in around 1320.
      If it keeps going up, hourrah!, and I'll keep the position for more gains.
      In that way, imho, trading and investing in gold are very, very different activities with very different time horizons.

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  21. "I will let you know if there are any big changes in COMEX inventory. But as I said, if a problem occurs it will not show up here first, since the COMEX has become largely a paper market."

    Jesse's Cafe Americain

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  22. spiking up!! who's feeling some excitement? I know Hubert Du Haut will be one of them :-)

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    1. hehe :) see you around 1500 $? :) For once that it's the bears who are frustrated...cheers!

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  23. hey J August; Did you get up on the wrong side of the bed? I simply asked you a question and you defensively claim that the EW technique is being disparaged? steve in sparks

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  24. Dan,

    It appears from a chart perspective that the HUI is very close to a bust back to 335. Spot driving 10 higher, 50 a distant memory and not a lot of headwinds above the 260 area. Looks like Blue Sky, nothing but Blue sky above. Your thoughts.

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    1. White Wolf; I think u r right; even energies look to break out upside; maybe the 60 year Gann Cycle Guys r right; Dan, notice the early muted response in FX? Tells u all the garbage fiats r no good; I always hated the stupid $ Index contract --- it should go the way of potatoes, iced broilers, turkeys, onions, propane, bellies,etc, etc, steve in sparks

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    2. The DXY is indeed outdated. Try the FXCM Dollar index instead, I think it is much more representative of the Dollar's standing (contains many more currencies in the basket, reflecting today's world reality).

      By the way, on the EW charts, I've had the dollar index strong and it still is notwithstanding today's setback.

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  25. its so frustrating that the 1400 level cannot be penetrated yet but you can see the higher highs testing it...its just the sellers at 1400 are strong and on the last test they made a lower low , bit annoying, i hope later today we can breach it..im just wondering how the chinese will react to this come monday...housing is the main engine and the fed is the main player in the us economy so i think todays news should provide the catalyst to breach 1400...anyhow im very much content with this move...high weekly close...and with all the other bullish gold news (i dont know any bearish gold news really)..i expect a nice future for gold bulls......

    p.s....one questions...;what is the significance of a gap higher/lower during trading...i get it before the trading day starts but is it of any relevance during the day?

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    1. it's not annoying. Gold is already going up quite rapidly. Wishing a vertical rally is the best way to see it collapse. Much better that way, with small periods of consolidation while prices globally go up...

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