HUI looks strong - Following S&P 500 Higher

The mining shares are seeing some very good inflows of speculative money. The result has been an advance for 8 out of the last 9 weeks. The chart shows the index blowing through resistance levels with relative ease with the next Fibonacci retracement level within striking distance.

As the trend is higher, we would expect dips in price to be bought. Initial support for the index is down near the 50% retracement level that comes in near the 505 region. AT some point longs will decide to take some money off the table after a run of this nature but as to where and when this will occur, we will need to watch the price action to get a clue.

If the index were to somehow close a week above the 555 level, it is very likely that we would see the index scoot rather quickly to 600.

Global markets are all being jammed higher as Central Banks are orchestrating a tidal wave of liquidity. The reality is that none of this will do a single thing towards dealing with the ROOT CAUSES of the problem but that is what Central Bankers do in response to any financial or economic crisis - they ramp up the money supply in the hope that it will spur borrowing and lending.

I maintain that it will not  - not without an environment in which jobs are being created and borrowers feel somewhat confident that they can actually afford to make those loan payments. I have said all along, that if the Central Bankers are intent on providing funding for the banks in the hopes that they will loan the money, they are mistaken. Heck, if the feds are hell bent on printing money, instead of basically getting it into the hands of the banks, why not just send a check to each taxpaying household instead! If you are going to deliberately debase the currency, at least have the decency to give some of it to the people whom you are counting on spending it!

Let's call this the Trader Dan stimulus plan. I think that they should start with a government check in the amount of $10,000. I could use some new tractor accessories.

Gold running into Resistance at $1780; Silver at $35

Same comments this AM as last evening. Both metals are being capped by those respective resistance levels.

The New Style of Warfare - Bloodless but Extremely Devastating

Take a look at the following article and you will see that the Biblical concept of "the borrower becomes the lender's slave" is once again proving itself to be true in any age at any time.

Beijing hints at bond attack on Japan

A senior advisor to the Chinese government has called for an attack on the Japanese bond market to precipitate a funding crisis and bring the country to its knees, unless Tokyo reverses its decision to nationalise the disputed Senkaku/Diaoyu islands in the East China Sea.

http://www.telegraph.co.uk/finance/china-business/9551727/Beijing-hints-at-bond-attack-on-Japan.html

And one wonders why so many of us in the gold community are becoming increasingly shrill in our denunciation of the US government's reckless borrowing binge, particularly under the current Administration, which has to take the grand price for the most inept, reckless and profligate one in our entire history as a nation.

China is now the US' largest creditor. Take a guess at what will happen should the Chinese get it into their head one day to go and reclaim Taiwan, over any US objection. 

This is also a reason that I despise beyond the words to convey, the Federal Reserve's asinine decision to print into existence another $40 BILLION each and every month as far as the eye can see in order to buy more US agency debt to further increase the size of its balance sheet. A policy that by design deliberately debauches the US Dollar coupled with a federal government that is now more than $16 TRILLION in debt. Where exactly does that leave the US as far as any bargaining power???

When the hell will the American people wake up and realize what is happening to their country?

Incidentally, silver is having a bit of a struggle clearing the $35 level as it pauses to decide its next move. If it can push past this strong resistance level, especially if it can clear $35.50, it should be able to easily put on another $2.00 before encountering technical chart resistance. Downside support for silver is at the round number of $34 followed by $33 and then $32.50.

Gold needs to close strongly through $1780 to make a good run at $1800 again.

Hedge Fund Silver Positions

Here is the latest breakdown of the hedge fund positions in the Silver market at the Comex based on Friday's COT data.

Speculative money flows continue into Silver as hedge fund managers position themselves further on the long side of the market and continue reducing their short side exposure.

Bonds Might Have Topped Out, for Good

Today's price action in the long bond is highly suggesting that the multi-decade bull market in US bonds is over. The inflationary impact off three successive experiments in Quantitative Easing has seemed to have finally gotten the attention of that endangered species once known as the bond vigilante. Remember, this latest round of QE is not targetting US Treasuries but rather agency debt. That removes a major source of demand.

With the US Dollar falling apart thanks to a deliberate attempt by the Fed to debauch it, buyers, particularly foreign buyers, are going to demand higher rates to compensate them for the currency risk.

either way, today is shaping up to be a big day for the future of long term interest rates.

Commodity Sector Looks Set to Leg Higher

The long term monthly chart provides an excellent perspective of the hard asset sector. Note how back in 2008 when the credit crisis first erupted and a deflationary mindset took over, that the sector crashed to earth in a brutal fashion. It took two doses of QE to jam it north, the first ending before the second round was announced. Of course, the second round of QE provided the fuel to send the index soaring to a new record high.

Once again deflationary expectations took over due to the European Sovereign debt crisis, a slowing Chinese economy and of course, a US economy in the toilet. Down goes the commodity index once again in a big way.

All that did was to pave the way for yet another round of stimulus, one from the ECB, another from the Chinese authorities who are doing a government works project and now today's QE 3, courtesy of the scam artists at the Fed.

Any guess where this index is now going to go? If the chart is accurate, it should make a push towards 600 where it fill face a big test. If it plows through the 600 level, heaven help us all because the odds will then increase of it pushing back towards 650 and higher.

HUI Technical Chart

The HUI is closing in on a KEY technical resistance level on its weekly chart at the 50% Fibonacci Retracement level of its last year summer high and this years trough. That level is basically right at the high made in today's session as it comes in beginning at the 504 level. If the HUI closes the week through this level on a good strong note, look for the index to move towards the 540 level. Note that all of the major moving averages, whether the shorter term 10 and 20 week or the 50 week moving average are either turning higher or flattening out and beginning to turn.

Stock Market Rally nothing but Rampant Paper Asset Inflation

Well, the Fed wants the stock market higher in time for the election (it seems Mr. Bernanke wants to retain his position as head of the Fed) and they got it.

Take a look at the following charts of both the Dow and the S&P 500, each of which is setting at more than 4 1/2 year highs based on what???

Impressive rally isn't it considering it has all been orchestrated by Fed QE programs. The problem is revealed however when viewing the following charts.

Thirteen years ago, it took a bit more than 42 ounces of gold to buy the DOW. In the year 2007, when the DOW made a brand new all time high in nominal terms, it took half the amount of gold to buy that same Dow, namely a bit more than 20 ounces. Today, as the DOW is once again flirting with moving back towards the all time high in 2007, it takes an astonishing LESS THAN 8 OUNCES of GOLD to buy that same DOW!

Are you getting the point of all this? All that the elitist monetary masters are creating in their alchemy laboratories is a RAMPANT case of paper asset inflation of the stock market. Stocks are losing value against gold and have been so doing since 1999. The more QE the Fed wants to spit out, the further this ratio is going to collapse until at some point it will probably end up with 3-4 ounces of gold being able to purchase the DOW.

Another way of stating this is: Do not be hoodwinked by the claptrap coming from the mouth of the monetary elites at the FOMC that inflation is tame and that expectations are subdued. We are witnessing one of the single greatest instances of inflation in the stock market in our domestic history!