Technically Precious With Merv

For week ending 8 May 2009

Gold seems to want to move but is having a rough time of it. The strength behind the recent advance seems to be somewhat pathetic. Let's go to the charts and indicators.

GOLD

LONG TERM

Despite the slightly higher weekly close the long term P&F chart of gold has not changed. We are still under the last signal, which was a bear signal, with a $705 projection. To reverse back to a bull market we need gold to hit $930 for an initial projection to $1050.

As for the normal indicators, they are all unchanged from last week. After bouncing off its long term moving average line gold remains above the line and the line continues to point higher. The long term momentum indicator remains in its positive zone and above a positive trigger line. The indicator seems to be in no mood to go anyplace and is tracking more of a lateral path than a positive one. The volume indicator is also not all that great and tracking a lateral path. It remains below its negative sloping trigger line for a negative reading. However, putting it all together I still get a BULLISH rating for the long term. (more)

Natural Gas Is The Mania De Jour

By: CAPTAINHOOK

-- Posted Monday, 11 May 2009

Many are wondering what the heck is going on in the natural gas (NG) market, because if it’s suppose to be such an essential commodity, why does the price keep crashing, especially with stability found in the larger equity complex? To answer this question properly, we must first set the stage with the appropriate background understandings, where because of the extremes in pricing we are seeing here, previous efforts in this regard now appear insufficient. In the first place, in order to fully understand what is occurring here, one must realize that the NG market is now showing all the signs of an extreme manic blow-off, only instead of an upside exhaustion, we are witnessing a ‘selling panic’. In this regard then, the important thing to realize is extremes in speculation and emotion are now in control of this market, not the fundamentals, making it the ‘mania de jour’.

When I say fundamentals, what I am referring to here is not the mechanical futures related trading constraints that characterize our faulty and fraudulent pricing mechanisms, with Nymex being central in this regard. No, that is largely how we got into this mess, where I say ‘mess’ because the longer wrong-headed speculators and faulty pricing mechanisms keep prices down, the more long lasting the damage will be, which will eventually cause an equally manic reaction higher in price. And this will likely occur just when we do not need it, where we could stand to see the extreme sell-off correct right now to avoid such price swings in the future. Be that as it may however, and for whatever reason you wish to discuss, with the propaganda machine widely discussing the expectation of increasing inventories through summer due to expected cooler than usual temperatures now, prices continue to fall, with no end in sight being the central perception at present. (more)

The Korelin Economics Report

Audio featuring Bob Moriarty, David Morgan, Peter Grandich, David Zgodzinski.

Click here

Peter Grandich, Don’t Look a Gift Horse in the Mouth

May 9th, 2009

There was a time in my life when I would visit a craps table or two. Based on the money the house had on their side of the table versus mine, I should have chances were they wouldn’t be renaming the casino after me by the time I was done. But I did pick up valuable information that has benefited me in the investment world.

The first thing I learned was despite the game basically offering almost the same odds whether you bet on the shooter or against them, the vast majority of players bet with the shooter. Why? Because our nature is to be part of a crowd rooting for the same thing versus betting against the crowd. Just stand by a craps table and you will see not only how camaraderie develops among those betting on the shooter, especially as he or she makes passes and numbers, but how that crowd reacts to anyone who happens to be betting against the shooter. Another factor that usually develops is as those betting on the shooter win more, they not only tend to bet more, but also make certain types of bets they otherwise wouldn’t if the shooter wasn’t “hot”. Yet another factor is the small minority of players who bet against the shooter, tend not to pile on when they’re winning like those who bet on the shooter. They also seemingly stop making their bets far more often after a few losses than those betting on the shooter.

So what does this have to do with the markets? The vast majority of individuals and professionals go long. The 1990s gave stock market players an unrealistic belief that being long or wrong was the way to play the stock market. That “fable” has since been destroyed or has it? After two months of a virtual straight up move, the “Don’t Worry, Be Happy” crowd has managed to gain the ear of the market by playing the announcers voice at the end of the U.S. versus Russia 1980 Olympic hockey game who said “Do you believe in miracles”? This has rallied the troops after 18 months of near full retreat and given them an air of confidence not seen in quite some time. (more)

White House: Budget deficit to top $1.8 trillion

White House: Budget deficit to top $1.8 trillion, 4 times 2008's record

WASHINGTON (AP) -- With the economy performing worse than hoped, revised White House figures point to deepening budget deficits, with the government borrowing almost 50 cents for every dollar it spends this year.

The deficit for the current budget year will rise by $89 billion to above $1.8 trillion -- about four times the record set just last year. The unprecedented red ink flows from the deep recession, the Wall Street bailout, the cost of President Barack Obama's economic stimulus bill, as well as a structural imbalance between what the government spends and what it takes in.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration's plan. In one of the few positive signs, the actual 2009 deficit is likely to be $250 billion less than predicted because Congress is unlikely to provide another $250 billion in financial bailout money. (more)