UP and UP she goes - where she stops nobody knows

I am becoming more and more convinced that the US Monetary Authorities have engaged in a process which is resulting in the formation of another bubble, this time once again in the US equity markets. Think back over the last decade+ and what we have seen occur in the US financial markets beginning at the height of the stock market bubble that popped in 1999.

From that point on, we have had a real estate market bubble, then a commodity market bubble, then a bond market bubble and now once again we are seeing the formation of a stock market bubble. Think back to that first popping of the equity market bubble in 1999 and to the subsequent popping of each successive bubble that has inevitably followed (as surely as the dusk follows the dawn I might add)
as a result of their short-sighted policies - what has been their response?  More of the same!

Interest rates were successively slashed to insanely low levels with the effect of PILFERING the retirement earnings of our senior citizens and those who are dependent on fixed income investments. An entire segment of the population has been robbed of a decent rate of interest on their life's savings as a result of these vultures masquerading as economic wise men.

The VICTIMS of the official monetary elites ( and yes I use the term 'victim' because that is PRECISELY what they have become in this game of madness) have been forced into scouring the land looking for a place, a sector, somewhere, anywhere - that they can hope to obtain some sort of decent yield from a SAFE, CONSERVATIVE INVESTMENT with which they can fund their last few years on this earth. Instead, many of them have been forced into joining the marauding band of wild-eyed speculators known as the hedge funds which scour the land raping and pillaging various sectors in succession looking for that precious and rare commodity known as 'Yield'.

And what pray tell have we witnessed our monetary lords and barons doing for the last ten years as far as policy? - why nothing else but managing the fallout from the popping of each successive bubble. Bubbles, which I might add, they themselves have created by employing the same prescriptive medicine, ad infinitum, stupidly looking for a different result each time they experiment upon us. One gets the distinct impression that our financial system is becoming a FRANKENSTEIN ECONOMY - the creation of madmen who cannot see what they have loosed upon the world.

The following chart of the S&P 500 tells the story of yet another bubble forming, once again in the world of equities. Yet this is a bubble being DELIBERATELY BLOWN by the Fed in the hopes that this ever-expanding balloon will engender a corresponding increase in consumer confidence in turn inducing an increase in consumer spending in the process - spending which must occur to lift the economy out of its doldrums.

Once upon a time - a long, long time ago -  in an ancient bygone era, during which primitives ruled, men naively believed that a rising stock market was the RESULT of a thriving economy. Nowadays, this is no longer true - instead there is a new religion that has grown to supplant the ancient one. This new religion, complete with its priestcraft of Central Bankers and well connected adherents, has professed a NEW CREED - one designed to drive out any vestiges of the old one. This new creed believes that if the stock market can be MADE TO RISE, the THRIVING ECONOMY will then follow. In other words, cause and effect have been reversed.

What is then required to validate this creed is to induce, cajole, herd, or otherwise force through eliminating alternatives, speculative money flows into the equity markets. Once stocks rise, opinion then turns and with opinion turning, crowd behavior then follows.

With that in mind, observe the latest chart of the S&P 500, a broad representative of the US equity markets. Note how well the speculators are being herded into the equity markets once again seeing that there is no hope of obtaining yield in a near zero interest rate environment - where else is all this money that has been created by the Bank of England, the Bank of Japan, the Fed, the European Central Bank, going to go? Even the PBOC and the Bank of Brazil are getting into the act.

Think back to 1999 and the conditions existing in the economy as far as employment and real estate goes - consider the US budget situation back then and compare that to where it has degraded now. The latest FOMC release informed us that the economy is showing moderate improvement but still faces enough challenges that it requires interest rates to remain near zero for more than a year and a half (late 2014). And yet the S&P 500 is merrily charging higher headed directly in a straight line back to the same level it was prior to the debacles that we have seen first when stocks imploded in 1999 and then again in 2008.

Yes, indeed, stocks have become the only game in town due to the machinations of these plotters and schemers who control monetary policy and attempt to influence crowd behavior. Welcome to the Brave New World of Central Planning.

By the way, does anyone else beside me, see the similarity in the chart patterns of both the Crude Oil market and the S&P 500?

Trader Dan on King World News Weekly Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.

http://tinyurl.com/7z97phv

Trader Dan visits Turdland at the TF Metals Report Site

Yesterday my pal, Turd Ferguson, the owner and proprietor of TF Metals Report site, was gracious enough to do one of his now famous podcast interviews, with yours truly as his latest victim ( excuse me - that was a typo Turd - I was supposed to write 'guest'   :o)  ).

Seriously - the interview was a lot of fun for me personally but more importantly, we both hope it is helpful to those who are perhaps interested in some of the pitfalls that would-be traders face as they attempt to navigate through today's wildly volatile markets.

We covered quite a bit of ground about trading in general as well as sharing some personal thoughts about the problems facing the United States as we move forward into the future.

Stop by Turd's site and check out the interview when you can or click on the following link which will take you directly there.

http://www.tfmetalsreport.com/podcast/3537/tfmr-podcast-15-trader-dan-norcini

Gold holding near $1640

The Yellow Metal attracted some short covering and some buying related to bargain hunting in today's session as apparently buying was of sufficient size to convince some of the shorts that the market was through going down for right now. After a drop of $85 in a few days, some decided that it was time to ring the cash register and grab a few profits.

It looks like a few light stops were run once the market took out $1660 but after those were filled, price retreated a bit lower and is currently below that level.

For me to become convinced that a short term bottom is in this market, we will need to see the price close back through the $1680 level once again. You might remember from yesterday's charts posted over at King World News within my recent interview, the 200 day moving average comes in very near that level.

For the time being I am hesitant to read too much into a single day's action.

The Dollar is moving lower today and I want to see whether or not this is a one day wonder or if it is going to try to mount a push back towards 82 on the USDX.

The S&P 500 continues on its near one-way trek higher scoring another fresh 52 week high in the process. I do not know about you, but I for one am glad that it was so easy to fix everything ailing the US economy by keeping interest rates near zero. I am waiting for the day when the Fed announces it is going to distribute checks to all taxpaying citizens in the amount of $10,000 each as part of its efforts to combat deflationary pressures.

The HUI continues getting beaten up as it is lower on the day even while the rest of the equity market leaves it in the dust. The sector is so undervalued against the broader market that it screams for someone to buy it but the discouragement is so strong that hardly any want to touch the miners for fear of further losses. The ratio of the HUI to the S&P 500 touched a nearly three year low today!

Silver

Bond Collapse Continues

Much to the chagrin of the Federal Reserve, bond traders are taking that FOMC statement from yesterday and taking no prisoners as they literally hammer the long bond into submission. I find it a bit ironic (to be honest I am gleeful about it) that the Fed, which continues its attempts to manipulate hedge fund behavior by herding them into the equity markets, has opened an enormous can of worms and awakened the heretofore comatose bond vigilantes as an undesirable chain reaction to their "peachy" statement about the state of the US economy.

Bond traders are already moving the Fed Funds Futures to indicate interest rate hikes in early 2014, and not the latter part of 2014 as those minutes revealed yesterday. Worse, the yield on the Ten Year has spiked. It started off the week at 2.04% and ended today at 2.27%. As for the long bond, forgettaboutit; it was absolutely pummelled today now having dropped over 3 1/2 points the last two days.

What has happened is very simple - the happy talk about the US economy coming out of the FOMC minutes has traders jettisoning safe haven trades and even short term Treasuries in favor of the bull train leaving the station in the US equity markets. The problem? The last thing that the Fed and the US government needs or wants is a rising interest rate environment.

Oh sure, they can stand a bit of a move higher, but if any of this begins filtering into the mortgage market and the cost of home mortgages, autos, etc. begins moving higher, it will nip whatever nascent recovery there might be in the bud. And don't forget - there is that pesky "LITTLE" issue of the US national debt which will cost more federal tax revenue to service in a rising interest rate environment. Remember, even with its more upbeat assessment of the US economy yesterday, the FOMC certainly did not suggest that the recovery was robust or was it healthy. What they basically said, if I might paraphrase, was that it was showing modest improvement but was not out of the woods.

Doesn't matter - the bond market is focused on the "modest improvement" part and is interpreting that, either rightly or wrongly, that the Fed is not going to be doing any QE in the immediate future. After all, if things are supposedly so firmly on the right track, why the heck does anyone want to be in a "SAFE HAVEN" Treasury when everything is peachy keen, particularly if those paper IOU's are paying out squat.

The Fed has basically undercut it own low interest rate policy by giving investors the greenlight to sell bonds in order to deploy those funds into the equity markets. See what happens when you engineer a stock market rally?

I suspect that the Fed is going to be getting increasingly nervous if this sell off in the bonds, particularly the long end, continues unabated. Let's see how far the bond bears will push them.

By the way, I am not posting any gold or silver charts today as Eric King over at King World News, was gracious enough to interview me on both markets today asking about the technicals on the metals. You can find charts there with my usual annotations where support and resistance can be located. Here is the link to that particular interview:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/14_Norcini_-_Rough_Day_for_Gold_%26_Silver,_But_Heres_Good_News.html

Platinum regains its premium to Gold

For the last six months or so, platinum has been trading at a discount to gold. This is a rare occurrence as one can see from a glance at the monthly chart going back to 1990. Only in 1991 did platinum trade at a discount to the price of gold. Late last year and early into this year, an ounce of the white metal was over $200 cheaper than an ounce of gold!

This came about due to fears that the global economy would slow down as European sovereign debt woes sent out a type of contagion rippling across the planet. Auto sales especially would be hit and since platinum is heavily used in catalytic converters, ideas spread that demand for the metal would falter.

If you notice however, platinum has been steadily gaining ground against gold as investors began anticipating Central Bank liquidity injections to deal with the pesky debt issues plaguing Europe, not to mention an ultra low interest rate environment which was intended to spur both borrowing and lending and by consequence, growth.

It also did not hurt that a major strike in an important platinum mine popped up cutting off supply from the world market.

This is another one of those combination indicators that can be used to gauge investor sentiment towards the global economy in general. As long as traders feel that there is little to fear as impediements to growth, they will bid this spread higher in favor of platinum.

Complacency Index hits 45 month low in today's trade

I like to term the VIX or the CBOE Volatility Index, the Complacency Index, because it is an excellent gauge of whether or not traders are complacent or fearful. The higher the reading, the more fearful or worried they have become. The lower this index reads, the more complacent or careless they generally are.

One has to go back a period of 45 MONTHS (June 2007) to find investor psychology at these levels of complacency in regards to the broad stock market as indicated by the S&P 500. I should point out that this was one year prior to the credit meltdown of the summer of 2008. It would currently seem that hardly anyone on the planet is the least bit concerned about the level of the US equity markets due to the enormous amounts of Central Bank supplied liquidity.

I intend to keep posting this index at regular periods to keep an eye on this as I believe investors are growing very careless in regards to the potential for an apple cart upsetting event.

Something about this just does not "feel" right to me. While one cannot argue with the tape, or in this case, the charts, the fact that all of the woes tied to the enormous amounts of indebtedness in the West have essentially been papered over, is extremely disconcerting.

Gold crashes through support at $1680

With the mass exodus out of safe haven trades today and into stocks, gold is being sold off with the idea of taking those funds and plowing them into the equity markets to catch the rising tide.

The result of this long liquidation has been a breach of a very important downside support level near $1680 on the charts. The market is holding within the support zone noted that extends down past this level but it will be critical to the metal to hold today's low and last week's low if it is to prevent a further bout of long liquidation that could very quickly take it down to $1620 or even lower.

Keep in mind that the short term oriented traders are now looking at getting long the broader equity markets, particularly tech, and are thus reducing exposure to gold. It is going to be a challenge for the metal to maintain its footing as long as the "GET LONG EQUITIES" mentality is in vogue.

The Dollar is a bit higher today but that is not the main driver for gold in this session; rather it is the theme of getting long equities that is dominating. The Fed has been successful, FINALLY, in herding the hedge funds and other large institutions into equities and they are going to ride this bull as long as they possibly can. Those fearing contagion effects from European Sovereign Debt woes have been overrun by the sheer amounts of liquidity being provided.

As it stands now, even the massive build in overall US indebtedness is no where remotely near the forefront of traders' minds.