Monday, April 11, 2011

Technically Precious with Merv

Into new high ground and no resistance ahead. The only two things to keep an eye on are the global upheavals and the U.S. $. The upheavals are unpredictable but the U.S. $ seems to have only one long term direction, lower. So, the worst long term scenario for gold is a 50/50 upside potential.


Most of the time when I show a long term P&F chart it’s a $15 unit by 2 unit reversal chart (that may be modified as the price continues higher). Even these “long term” charts could change their message on a monthly basis depending upon the gold price action. For a longer term point of view here we have my very long term P&F chart using $50 units with a 2 unit reversal. As you can see we have over 30 years of gold activity condensed into a very simple chart. I’m not sure who would benefit from a very long term P&F chart but here it is for your info.

The only thing of note that I would caution about is that the recent action has reached the upper resistance trend line and a reaction from around these levels (or slightly higher as we have seen a few years back) is highly possible.

As for the normal long term prognosis, well as one would imagine everything looks quite positive, maybe too positive. However, there are a couple of warning signs to keep track of. They are not yet of a serious nature but could turn so with some negative gold action. The price of gold continues to track well above its positive sloping long term moving average line. There is no sign of danger from this indicator, which is the more important indicator towards my rating system. The long term momentum indicator is in its positive zone and moving higher above its positive trigger line. However, here the indicator is still below its earlier October level but is now above its recent early March level. Underperforming but still moving in an upward direction. The volume indicator is also positive and above its long term positive trigger line. But here too the indicator has not yet breached above its level of a couple of weeks back. The bullish surge to new highs by the price has not yet been confirmed by this volume indicator. In any case putting all the indicators together we are still get a rating of BULLISH for the long term.


The intermediate term view is not much different from the long term view. Gold continues to trade well above its positive sloping intermediate term moving average line. The momentum indicator continues to move higher in its positive zone and above its positive trigger line. It has just moved above its early March highs but remains below its previous highs reached in early October, similar to that of the long term momentum. As for the volume indicator, it has been oscillating above and below its trigger line recently. At the Friday close this indicator is once more above its trigger line with the trigger remaining in a slight upward slope. For the intermediate term the rating remains BULLISH.


Well, it was up, up all week long for the price of gold but the volume seems to imply that speculators are not all that keen at this time. The daily volume during the climb has been below its 15 day average volume which is usually not all that encouraging for the move longevity. However, having provided that cautionary note everything is still looking roses at the Friday close.

The price of gold is in a rip roaring bull move. Well, so much for the rip roaring great news. The short term momentum indicator IS in its positive zone above its positive trigger line but unfortunately, under performing versus its performance just a month back. As already mentioned, the daily volume action is very low for an upward move in price and consistently remains below its 15 day average volume. Something’s gotta give. Either the volume and momentum perk up or the price will have to react. For now, i.e. the Friday close, everything is still okay and the short term rating remainsBULLISH.

As for the immediate direction of least resistance, well things from the price and Stochastic Oscillator point of view are just too good. Neither is expected to continue higher forever. The Stochastic Oscillator is suggesting that it might be in a turning process but is still in an upward slope. I expect that slope to change very shortly. However, I do not yet see in the indicators a major drop in price. Most likely the price, once topped out, will move lower slightly but end in some sort of lateral move. I’m going with a lateral trend for the next few days but it’s anyone’s guess based upon global events.


To be consistent with gold I thought I’d show my very long term P&F chart for silver. I call it “my” chart as different technicians may use different unit and unit reversal criteria for their charts and one can visualize many different versions of the P&F chart that one might call very long term. The price trend here seems to be over extending itself so we will have to wait and see what next. There is no early problem of a very long term reversal ahead but looking at other charts we could be in for some volatility on the down side very soon.

Looking at a daily chart of silver we get a somewhat better picture of a bull move than we get from the gold charts. Here, silver is into new bull market highs with the volume indicator confirming the move by moving into its new all time highs. The intermediate term momentum indicator is just about to enter its overbought zone and is just a hair from exceeding its previous peak from the November period. One can say the strength behind this move is equal to the strength behind the move back in Nov, when silver was at the $25 level. So, one might assume that there is still much more room on the up side for silver although nothing goes up forever and we should expect some sort of rest or even a mild correction ahead. For now all indicators are positive for all time periods. The ratings are therefore all BULLISH at this time.


It’s been a terrific week for the precious metal stocks, so much so that one is just worried that it can’t last. Almost all of the gold and silver Indices have moved into new high ground with the one noticeable laggard, the Merv’s Penny Arcade Index. Although up on the week it has under performed the other Indices and is still below its previous highs. One would not throw in the towel yet but one would be cautious about jumping in and gambling at this time. It just may be a better bet to go with the upper level speculative stocks. Unfortunately, once these penny stocks start to move they move fast and one could lose a lot of potential profits if one is not into them at the right time. With a weekly review a lot can happen here, % wise, before the next review. What should a speculator or gambler do at the present time?

My answer to that question is always, speculate. But what does one mean by speculating? There are different answers to that question depending upon one’s mindset towards the markets. My personal view as to what speculation is could be emphasized as “intelligent speculation”. This is going with the more speculative or even penny stocks but not blindly. Using the technical discipline one can speculate or gamble intelligently without incurring great risks or loss of capital. The technical discipline gets you into stocks as they are moving, thereby lowering the risk of making an error in judgment. However, nothing is perfect so the technical discipline also gets you out early at minimal loss should you have erred or should the move have ended. The pure speculator buys hoping for moves to happen while the gambler just throws darts at a wall of names and buys what comes up. Neither one has any concept of when an error of judgment has been made and to protect capital.

A quick additional note about gold and silver stocks. Although most Indices have moved into new all time high territory the long term momentum indicators for these Indices is not performing as well. They are, at the present time, still some distance from their previous peaks from late last year. This may result in a dangerous negative divergence if the Indices should turn lower without these indicators making new highs.


Well, that’s it for this week. Comments are always welcome and should be addressed to

By Merv Burak, CMT

The Inflation Will Explode - Bob Chapman

Doug Casey : USA will breakup into different entities

Doug Casey : I think it is possible over a next X years that the USA is going to start flying apart into different entities actually

Doug Casey : ...may at this point there are groups of people in the Arab world that start thing that this whole idea of having a nation state is a bad idea , take Libya for example : it's not a country I mean these people share a language Arabic , but they are all members of different tribes and this idea of Libya as a completely artificial construct and this is true of most of the nation states of the world frankly , and I wonder if The US , the idea of a government in Washington DC is not going to start to be delegitimized in other words I can't feature a young Hispanic male in California wanting to pay up half of his income to subsidize some old Anglo white in Massachusetts he is not going to like do it , and I think it is possible over a next X years that the USA is going to start flying apart into different entities actually....

Embry - I’m Amazed Hedge Funds are Short Mining Shares!

With gold at new all-time highs and silver at multi-decade highs, today King World News interviewed John Embry, Chief Investment Strategist at Sprott Asset Management. John Hathaway commented in his KWN interview, “I think these hedged funds (which are short mining shares) are going to get roasted.” When asked about Hathaway’s comments Embry replied, “I’m amazed that these guys would be short. I think these guys are bright guys, but I don’t know what they’re looking at. Why anyone would be short gold shares in the current environment is beyond my comprehension.”
April 7, 2011

When asked about his thoughts on the breakout in gold Embry remarked, “Well I’m thrilled actually, I mean we’ve been waiting for it for a long time. Since the beginning of the year the gold price has been aggressively controlled on either side of $1,400. I felt that we needed to get above $1,447 to see the next leg up which will take us through $1,500.

We got that action yesterday and today and it seems to be following through, so far so good. Chart looks great, now $1,440 is going to be support.”

When asked if this gold move will be significant to the upside Embry replied, “Well it’s going to be interesting because there are still a lot of people on the wrong side of the market. I mean at some point I think those that realize what’s going on are going to have to reverse these positions.

If you pile on short covering on top of more long buying, yeah I think this move could be big. I’ve seen targets of $1,650 on this leg. I think there will be a fight at $1,500. There always seems to be (a fight) at round numbers, but no I am very encouraged with where this is headed. I’m still a $2,000 (gold) guy by the end of the year so we’ve got lots of room.”

When asked if he thought John Hathaway was correct in predicting a quick move of a couple of hundred dollars to the upside now that gold has broken out Embry stated, “Absolutely, I totally agree with John Hathaway. I’ve enjoyed his work for the last ten, eleven years on the subject (gold), and in this instance I totally agree with his timing.”

When asked about silver specifically Embry remarked, “Well people still don’t get it, I see negative comments constantly, bubbles, you know the thing is extended, it’s going to get killed. Basically the supply demand for physical silver is so heavily in favor of higher prices that if it weren’t for the paper market, silver would probably be through $50 now.

You see the transactions on eBay for silver eagles, people are paying up to $50 or more per ounce for silver eagles on eBay. In reality this might be the real price for silver instead of this price that’s being manufactured on the Comex with all of the short selling that we’ve discussed. I think $50 on the official market, the Comex market, is probably coming up reasonably shortly.”

As the hedge funds move to cover their shorts in the mining shares, some of the moves will be breathtaking as many of these smaller quality producers and explorers go from dramatic undervaluation to overvaluation. This is all just part of a cycle. Definitely look for the mining shares to outperform the metals as this hedge is unwound.

The KWN interview with John Embry will be released shortly and you can listen to it by CLICKING HERE.

Smart Money - May 2011

Smart Money - May 2011
English | 96 pages | HQ PDF | 63.90 Mb

SmartMoney comes to you straight from the editors of the Wall Street Journal, the best financial reporters in the business. Every issue brings you the information you need to know to deal with markets and protecting your wealth. Turn to SmartMoney for no-nonsense advice you can put into action.

The Last Bargains Left in the Oil Sector: MRO, IYE, IEO, IEZ

Oil futures hit a two-and-a-half-year high Friday, with the price of crude topping $112 per barrel.

Despite what you may have heard about peak oil theory, there is no shortage of crude oil in the world. OPEC stressed that they would boost crude production to make up for any shortfalls, which is good news. The bad news is that Goldman Sachs (NYSE: GS) warned that OPEC’s spare capacity likely dropped below 2 million barrels per day, which is not very reassuring when Libya was producing approximately 1.6 million barrels per day before the country’s civil war broke out.

We’ll have to watch this situation play out to know who is right, but what you really need to focus on in this situation are neighboring Middle East nations, because the next potential dominos in the chain are Bahrain and Saudi Arabia. Saudi Arabia is the world’s largest oil producer, and disruptions to oil productions there would be significant to global output and would put firm upward pressure on oil prices.

While it’s too early to know if this will happen, it does appear that we are in an environment that will support higher oil prices in the near to medium term. And the best way for investors to capitalize on this trend is with three oil ETFs and one top crude stock pick.

Marathon Oil Stock Going the Distance

What is keeping us from increasing our exposure to the sector is that there aren’t a lot of good oil companies to buy. Between low natural gas prices and idle drilling rigs, many U.S. oil companies are not as profitable as you might believe.

The real profits right now are being made in the refinery business, where the spread between heavy and light crude allows refiners like Marathon Oil (NYSE: MRO) to make bigger profits.

The Texas-based company explores for, produces and distributes oil and gas products throughout several countries, including the United States, Canada, Norway and Libya.

In 2009, Marathon reported reserves of 1.7 billion barrels of oil equivalent, including 600 million barrels of synthetic oil from oil sands. The company’s Marathon Petroleum subsidiary operates seven refineries with a total capacity of 1.2 million barrels of crude oil per day.

Marathon Petroleum supplies about 4,600 Marathon gas stations, as well as 1,600 Speedway SuperAmerica gas stations in the United States. Its international exposure and strong U.S. network are what make this the perfect play right now.

In the latest quarter, the company’s sales rose 27% to $20.2 billion. During the same period, Marathon’s earnings rose 98% to $709 million, or 99 cents per share, compared with $355 million, or 50 cents per share. The analyst community is now expecting first-quarter sales growth of 25% and earnings growth of 166%.

This oil stock will put you in an excellent position to profit from the rise in oil prices. Buy MRO below $54.

3 Oil ETFs to Buy

On the exchange-traded fund (ETF) front, I like a trio of funds that gives us exposure to a number of different points of strength that are emerging in the oil sector.

First off, we have the explorer. The iShares Dow Jones U.S. Oil & Gas Exploration Index (NYSE: IEO) consists of companies that actually go out, find and drill for crude oil and natural gas. The fund’s major holdings include big names in the oil industry such as Occidental Petroleum (NYSE: OXY) andApache (NYSE: APA).

Once crude resources are found, they must be refined and turned into gasoline and other products for consumer consumption. That brings us to our next oil ETF. The iShares Dow Jones U.S. Energy Fund (NYSE: IYE) profits from the big companies that manage this process.

Holdings like Halliburton (NYSE: HAL) and Marathon Oil take crude oil, clean it and help turn it into the everyday products that we use. This oil ETF also contains Exxon Mobil (NYSE: XOM) andChevron (NYSE: CVX), which not only provide refining and other services, but also sell products directly through their own gas-station chains.

Before any of the companies in the first two oil ETFs can get anything done, they must rely on the resources provided by the companies in our third ETF pick, the iShares Dow Jones U.S. Oil Equipment Index (NYSE: IEZ). The companies in this oil ETF supply the machinery and tools necessary to drill for and process oil.

IEZ includes 44 holdings, with major interest in big names such as Schlumberger (NYSE: SLB) andNational Oilwell Varco (NYSE: NOV). I like this fund because its equipment-related companies don’t feel the impact of fluctuating oil prices as directly as companies in other funds do.

Euro to Benefit on Expectations of Rising Rates

Expectations interest-rate differentials will widen further in Europe's favor should buoy the euro against the dollar this week, while investors will closely watch U.S. inflation data that could help shape Federal Reserve monetary policy.

The euro rose to a 15-month peak versus the dollar Friday, on pace for a gain of 1.7 percent this week. The prospect of a U.S. government shutdown, which would idle about 800,000 federal government workers and put a crimp in the economic recovery, weighed on the dollar.

The European Central Bank raised rates by 25 basis points Thursday, its first hike since the 2008 financial crisis, and signaled it's ready to tighten further if needed. Expectations of higher rates boosted the euro even as Portugal became the third euro zone country to request a bailout.

"The market is ignoring all of Europe's fiscal and banking troubles and trading off a single indicator -- interest differentials," said Avery Shenfeld, chief economist at CIBC World Markets in Toronto.

The euro was last up 1.1 percent at $1.4459, climbing to a session high of $1.4465 on Reuters data after taking out reported option barriers at $1.4450. The level also marks the 61.8 percent retracement of the move from the euro's record high above $1.6000 hit in 2008 to the 2010 low of $1.1876.

Traders cited further upside targets of $1.4500 and the January 2010 high around $1.4580.

"At this point, the euro has been on a one-way ticket north and pretty easily could break $1.45 next week," said John Doyle, strategist at Tempus Consulting in Washington.


The dollar was pressured as the White House and Congress worked frantically to break a U.S. budget deadlock by the end of the day in order to avoid a government shutdown.

A shutdown would be far-reaching, since among other actions it would stop payment of government suppliers and possibly close private enterprises reliant on government operations.

The lost wages and spending would ripple through to other areas of the economy at a time of uncertain economic growth, though some analysts noted that any impact would be short-lived and government spending for the year would be the same.

Investors will watch March U.S. retail sales data next week to gauge the strength of consumer spending. A round of inflation readings, including consumer and producer prices, will also be scrutinized and a pick-up in inflationary pressures could see investors bring forward expectations of U.S. rate hikes, which would lift the dollar.

Against the yen, the dollar slipped 0.1 percent to 84.76 , still within striking distance of a six-month high hit this week. Market players said the yen could weaken further on expectations the Bank of Japan will keep monetary policy stimulative for much longer following the country's massive earthquake and nuclear crisis.

Speculators cut bets in favor of the yen this week, going short the Japanese currency by the biggest margin in nearly a year, data showed Friday, and built up a record long position in the Australian dollar.

The data, released by the Commodity and Futures Trading Commission, also showed net short U.S. dollar position fell slightly to $25.18 billion in the week to April 5.

The Australian dollar rose to $1.0552, its highest level versus the greenback since it was floated in December 1983. The aussie has benefited from strong domestic economic growth, staving off the malaise of the rest of the developed world in recent years, fueled in large part by exports of raw materials to China.

Charles Nenner and Gerald Celente : The History Of The Future

Former Goldman Analyst Charles Nenner Charles Nenner is predicting the Dow to Crash to 5,000 , It has already crashed to 5000 in real terms...nominally its 11,000, but priced in Gold it is half that , he also predicts the Euro to Die he also says A "Major War" Is Coming in 2012 pretty much in harmony with what Gerald Celente is predicting the Great war of the 21st Century ,

US Economic Calendar For The Week

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Apr 128:30 AMTrade BalanceFeb--$45.0B-$45.7B-$46.3B-
Apr 128:30 AMExport Prices ex-ag.Mar-NANA0.9%-
Apr 128:30 AMImport Prices ex-oilMar-NANA0.3%-
Apr 122:00 PMTreasury BudgetMar--$189.0B-$189.0B-$65.4B-
Apr 137:00 AMMBA Mortgage Index04/08-NANA-2%-
Apr 138:30 AMRetail SalesMar-0.6%0.5%1.0%-
Apr 138:30 AMRetail Sales ex-autoMar-0.8%0.8%0.7%-
Apr 1310:00 AMBusiness InventoriesFeb-0.8%0.8%0.9%-
Apr 1310:30 AMCrude Inventories04/09-NANA1.952M-
Apr 132:00 PMFed's Beige BookApr-----
Apr 148:30 AMInitial Claims04/09-390K385K382K-
Apr 148:30 AMContinuing Claims04/02-3700K3700K3723K-
Apr 148:30 AMPPIMar-0.8%1.0%1.6%-
Apr 148:30 AMCore PPIMar-0.2%0.2%0.2%-
Apr 158:30 AMCPIMar-0.5%0.5%0.5%-
Apr 158:30 AMCore CPIMar-0.1%0.2%0.2%-
Apr 158:30 AMEmpire ManufacturingApr-
Apr 159:00 AMNet Long-Term TIC FlowsFeb-NANA$51.5B-
Apr 159:15 AMIndustrial ProductionMar-0.3%0.6%0.0%-0.1%
Apr 159:15 AMCapacity UtilizationMar-77.4%77.4%77.0%76.3%
Apr 159:55 AMMich SentimentApr-