Tuesday, August 23, 2011

$5,000 Gold and $200 Silver Predicted

Rob McEwen has become a legend in the gold mining industry by skillfully assembling and building mining companies over the past 20 years. In this exclusive Gold Report interview, he explains his rationale for $5,000/oz. gold and $200/oz. silver and how the factors leading to those price levels will affect the industry and the companies exploring for and producing the metals.

The Gold Report: Rob, you've been quite vocal about your belief that gold will reach $5,000/oz. (ounce) and silver $200/oz. for silver. Why and when will that happen?

Rob McEwen: Your readers need to appreciate: Gold is money. It is currency. I think the number of people familiar with gold will grow as people see gold as a currency. China, India, Russia are buying gold to diversify their foreign reserves. To restore the confidence in currencies, I think some central banks, such as the Chinese and possibly the Russian, will increase their gold holdings to the level that the percentage of their total currency will be greater than that of any other currency in the world. At that point, they will assert that their currency should become the reserve currency of the world.

If you look at the last gold run, gold went from $200/oz. in mid-1979 to $800/oz. in early 1980. During the 10-year period of 1970–1980, we saw a 20-fold increase in the price, from $40/oz. to over $800/oz. We also had a 20-year low in 2001 of $250/oz. If you apply that 20-times multiple, you're up to $5,000/oz.

For silver, if you use the historic ratio of an exchange ratio with gold of 16:1, you get to $312, so $200 is conservative. I think we’ll see these numbers within four years' time.

TGR: You are talking about a 15-year bull market for gold and silver, starting in 2001 and ending in 2015 or 2016?

RM: Yes. I don't think prices will necessarily fall dramatically, but gold and silver will reach the zenith of purchasing power relative to other asset classes. When gold peaked in 1980, Volcker was channeling up interest rates. If you had rolled out of bullion into fixed income then, you would have made a tidy gain.

TGR: Are you predicting prices of $5,000/oz. and $200/oz. as spikes, or plateaus that they will reach, stay at and trade around?

RM: I think you'll have a spike at or above $5,000. Credit will become more expensive, and at some point credit will be denied. There'll be a need for liquidity, and the metals address that need.

TGR: When prices reach those levels, any project that smells of gold or silver will become a prospect that people will try to put into production. Will we end up with a glut of gold and silver on the market?

RM: No, but the higher prices will spur more exploration. At the same time, it is getting harder to bring a mine into production. It takes longer and costs more. The regulators have put more rules in place. It is not so much that the rules are wrong, but it's the extended time frames. The risk of putting a property into production has gone up dramatically.

You're starting to see real limits on the amount of growth that can occur. In the 1990s and 2000s, very few people were going through mining schools because there weren't many career opportunities. The people who built the physical plants have scaled back. We are seeing the impact of that lack of investment in education, in the productive capacity of the suppliers and huge jumps in the capital expenditures for various projects. Labor wants a larger piece and you see a lot more labor strikes. Finally, governments are looking at the mining industry as a very easy target to extract more money from because the industry doesn't have a lot of friends.

TGR: There is also a problem finding mining engineers who have track records of putting projects with proven ounces into production. There is a lack of intellectual capital.

RM: You can see that manifesting itself all over the place. Coal mines in Australia are hiring miners from Tennessee. They commute between Tennessee and Australia on a three-week cycle. One headhunter told me he had an assignment to hire 400 people—mining engineers, geologists and related workers—for an iron ore mine. His instructions were to make offers 50% higher than their current salaries.

On top of that, the mines have been mining lower and lower grade, supported by the higher prices. Few high-grade deposits are being found. You have to put more capital in the ground and mine a lower quality or concentration of mineral to stand still.

TGR: Wouldn't that increase the value of mid caps that have experienced personnel on the production, mine building and engineering side? They know how to put projects with tricky deposits and lower grades into production.

RM: You're right. There really is a premium on production and on reserves. As the price of gold moves up, those mid caps will become more desirable to the seniors and attractive to investors. Companies doing exploration have proliferated. That creates confusion in the marketplace. Companies will have to go to greater lengths to differentiate themselves to attract capital. Perhaps that is one of the reasons why the exchange-traded fund (ETF) is so popular.

TGR: Could that explain why the juniors have lagged? Companies have projects that sound like they have great potential, yet the prices of most juniors are going nowhere.

RM: A couple of years ago, gold stocks had greater leverage than bullion; it was said that when bullion moves 1%, gold stocks will move 3%. People bought into that and they haven't seen the performance. Perhaps they were looking initially at the seniors for leadership, but the seniors have been standing still while the price of gold has been running. Some juniors just haven't delivered the performance. With gold, whether you buy physical or an ETF, you don't have any political risk. You don't have taxation issues or labor strikes. You don't have senior management making an investment that you don't agree with. All of those variables conspire to take the enthusiasm out of the buying of the juniors. ETFs are an easy way to get into gold quickly at a lower perceived risk. I prefer to be in the juniors because they have the potential to explode to the upside if they are lucky with a discovery or they are in a right position next to a mine that is growing and the ore body continues onto their property.

TGR: Are there any other topics you've been thinking about that might interests our readers?

RM: Right now we are looking at debt: the U.S. debt ceiling debate and the debt of sovereign states in Europe. I think any correction should be used as a time to accumulate.

The quiet summer is a good time to stake out the juniors and intermediates and take positions. We've seen periods like this where physical gold and the gold shares separate in terms of performance. In September 1979, which was just before the top in the gold price, gold went from $200 to $400/oz. in the space of a little over four months, but the gold stocks didn't follow. It was as if the market didn't believe the price of gold would hold up there. It wasn't until September 1980 that gold stocks reached their highs. I believe that the market had to see the impact of the higher gold price on the cash flow and earnings before they would buy the stocks.

I think we're in that period right now. I would argue that we are starting to see the seniors move. These are incredible cash-flow generators right now. They are going to have to do something with their earnings, dividend them out or up their yields.

They also are going to look for growth. Some companies are diversifying because they see opportunities. The seniors are doing deals to build the size of their companies, and that's positive for the intermediates and the juniors. The seniors have been reaching right over the intermediates into the junior–producer/junior–explorer side. The longer this gap exists, the more attractive the juniors and intermediates will become.

TGR: Here at The Gold Report we've seen our readership increase along with the exponential increase in investor interest in gold and silver. Most U.S. investors don't own mining stocks in their portfolios; do you think they will dip their toe into, if not bullion, then an ETF?

RM: Yes. The ETF has given more people exposure to gold. I liken the ETF to a mutual fund. It was often said that buying a mutual fund was the place to start investing in the stock market. Once investors become comfortable with the concept of being in the market, they start thinking about buying individual stocks because they think they understand how the market works.

I think the same principle applies to the ETF. Once investors are in there, they are going to start looking around and saying, "Well, this gold price is going to do very positive things to these mining stocks at some point. Maybe I'll rotate some of my money out of the ETF or I'll put in some additional money and it will go into individual stocks where I think I can see much larger gains down the road."

TGR: Rob, thank you for your time and insights.

Which Oil E&P Stocks Will Produce? : BHP, QEP, RRC, APC, DVN, HNR, COG

Lazard Capital Markets

Given its close proximity to second-quarter earnings, we did not anticipate any earth shattering revelations at the EnerCom Oil & Gas Conference in Denver this year, but as usual we found it a good gauge of investor sentiment.

The conference was even better attended than last year and investors remain focused on the hot topics of unconventional oil plays, joint ventures, and takeout targets.

Despite the recent pullback in oil and the exploration and production (E&P) sector, we didn't sense anyone had shifted to a more defensive mindset.

In general, investors were of the mindset that growth and resource potential, as reflected in net-asset-value estimates, trump attractive valuations on conventional metrics like debt-adjusted production or cash-flow growth (or simple cash-flow multiples).

As most resource rich companies are considered take-out candidates following the deal between BHP Billiton (BHP) and Petrohawk (of Hong Kong), speculators also hope to capture a takeout premium.

In our view, owning these stocks, which are largely made of Marcellus [located in New York] and Eagle Ford [located in Texas] shale producers, may not offer a good risk and reward as fast money has crowded into them and may exit just as quickly if the "wave of mergers and acquisitions (M&A)" does not arrive.

$100-plus per barrel oil is being taken for granted and possibly more worrisome than the investor viewpoint that E&P has transformed from a cyclical to a secular-growth sector, is the victory of peak-oil thinking.

It seems that both investors and E&P management teams are very confident allocating capital on the belief that longer-term oil prices can only go up.

This has led, in our view, to expanding multiples in the sector as investors view it as a secular play on emerging-market growth. With many new oil plays challenged when oil prices fall below $80 per barrel, this kind of thinking could prove painful, in our opinion.

Mid-Continent oil plays were highlighted, but no big new plays were unveiled in a sign that the unconventional oil mania may be exhausting itself.

QEP Resources (QEP),and Range Resources (RRC) highlighted Mid-Continent oil plays (the Mississippian and Marmaton), but most controlled relatively small acreage positions and indicated these plays are geographically limited in scale.

Results in some of the recently hyped oil plays have proven more variable than anticipated including the Power River Basin Niobrara, [located in Colorado, Kansas, Nebraska and Wyoming] which one producer characterized as a "gravity drainage" versus a typical over pressured reservoir.

We continue to believe that balanced (oil versus gas production mix), large cap E&Ps like Anadarko Petroleum (APC) and Devon Energy (DVN) with significant exploration catalysts in the second half of the year offer the best investment opportunities.

With strong balance sheets they are also well-positioned to capitalize on investment opportunities if crude prices continue to fall, in our opinion.

[We rate Anadarko Petroleum, Devon Energy, Harvest Natural (HNR) and QEP Resources at Buy; we rate Cabot Oil & Gas(COG) at Neutral].

GATA 2011 Special Issue Online Now!

Catch up with the GATA team during their Gold Rush 2011 London Conference. Pics of Andrew Maguire.

click here for the pdf version

Percent of Stocks in S&P 500 Below 50 Day Moving Average Hit 2008 Lows

I like to look at this chart - Percent of S&P 500 stocks below the 50 day moving average - for a feeling of how oversold things are....and it's quite nasty. The reading is actually worse than the low of March 2009 and at lows of fall 2008. Generally once you are below 30% you have a quite oversold condition... 20% even more so, but when you get these 5-10% readings it is usually quite rare.

Getting Libyan oil back to market could take years

It could be a year or more before Libya produces enough oil to start exporting it in large amounts again. But once the oil starts flowing, it should bring the price of gasoline down even further.

International oil prices fell Monday because of the prospect that those shipments will hit the market again.

The shipments stopped six months ago as the rebellion in Libya raged. The conflict damaged pipelines and fields and forced out foreign oil engineers who once helped the nation export 1.5 million barrels of oil every day.

Before the country can begin producing oil in large amounts again, security must be re-established, a new government must be formed, the United Nations must lift international sanctions, and damage to oil fields and pipelines must be repaired.

The prices of crude oil and gasoline were already falling sharply because of concerns that the slowing global economy will slow demand from drivers and businesses.

Gas has fallen 41 cents, to $3.57 a gallon, from its peak this year of $3.98 on May 5. It could fall as low as $3.25 by the middle of September, experts say.

The ouster of Libyan leader Moammar Gadhafi would clear the way for a new government and a return to oil production. But bringing Libyan oil production back to levels that will make a difference will take months if not years, experts say.

"This isn't going to lead to an overnight restart of Libyan oil exports," says Jim Burkhard, managing director for global oil at IHS CERA, an industry research group.

In the meantime, Burkhard says, the world's teetering economy will drive prices.

Since February, the loss of Libyan oil had driven up the price of Brent crude, which is traded in London. Brent crude is used to price much of the oil produced and sold abroad and sold to refineries on the U.S. East Coast.

On Monday, Brent crude fell 26 cents to $108.36 per barrel. It fell much further earlier in the day but rose as it became clear that it would take months for Libya to have an impact.

The price of U.S. benchmark oil, known as West Texas Intermediate, rose $1.86 to $84.12. Traders who play the international oil markets, anticipating that the price of Brent crude would keep falling, wanted more U.S. oil.

West Texas Intermediate is trading at about the same price as when the Libyan uprising began. It rose as high as $113.93 in April and fell as low as $79.30 in August.

Libya sits on the largest oil reserves in Africa. Before the uprising, it was the world's 12th-largest exporter, mostly to Europe. Libyan exports were all but shut off in February as the unrest intensified and international oil companies evacuated workers.

Shokri Ghanem, the former chairman of Libya's National Oil Company, said Libya could start producing oil within three to four months, according to Platts, an energy information service. Ghanem said it could take two years to restore production to pre-uprising levels.

"There is some damage to installations, and there is a problem with some wells that were not closed properly," Ghanem told Platts.

Eni, the largest foreign oil producer in Libya, is not so optimistic. While it has sent some technicians back to the country to restart oil and natural gas operations, a company spokesman said restarting crude production could take a year or more.

Helima Croft, an analyst with Barclays Capital, compares Libya's political situation to that of Iraq in 2003, after Saddam Hussein was toppled by American-led forces.

"Everyone thought that Iraq would be stable overnight, but instead we had an insurgency," Croft says. "The oil was offline for years."

Judith Dwarkin, chief energy economist at ITG Investment Research, expects Libya to return to full production slowly over two years. In the meantime, she expects the price of West Texas crude to stay between $80 and $90 a barrel, barring an unforeseen supply disruption or a global economic collapse.

Besides worries about the world economy, oil prices have fallen recently because Saudi Arabia has produced more oil and developed countries have released oil from strategic reserves to make up for the loss of Libyan crude.

Social Security Disability on Verge of Insolvency

Laid-off workers and aging baby boomers are flooding Social Security's disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency.

Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs and can't find new ones in an economy that has shed nearly 7 million jobs.

The stampede for benefits is adding to a growing backlog of applicants — many wait two years or more before their cases are resolved — and worsening the financial problems of a program that's been running in the red for years.

New congressional estimates say the trust fund that supports Social Security disability will run out of money by 2017, leaving the program unable to pay full benefits, unless Congress acts. About two decades later, Social Security's much larger retirement fund is projected to run dry as well.

Much of the focus in Washington has been on fixing Social Security's retirement system. Proposals range from raising the retirement age to means-testing benefits for wealthy retirees. But the disability system is in much worse shape and its problems defy easy solutions.

The trustees who oversee Social Security are urging Congress to shore up the disability system by reallocating money from the retirement program, just as lawmakers did in 1994. That would provide only short-term relief at the expense of weakening the retirement program. (more)

Where gold's parabolic rise could stop

A few weeks ago the "Power of the Pattern" was suggesting the next key upside price target for Gold was $1,900, per the chart below. (see post here)

At the time of the post, Gold was priced at $1,641. Did $1,900 seem unrealistic less than 3 weesk ago??? Gold has added over $200 per oz since the chart below.


Well as many in the States wake up this morning...We "are pretty much there"... as Gold hit $1,878 in early market hours.


As can been seen in the above chart, during the last 9 years, each time Gold has hit channel resistance, it has backed off for a while, until it found support at the bottom of its rising channel. The largest percentage decline during the last 9 years took place at (2), during the 2008 financial crisis, when the "Great Escape" took place. (see Great Escape here)

I shared back in May that one of the largest risks to investors was the "Great Escape" taking place again! What did the "Great Escape" look like in the past?

Investors just wanted out of everything..... U.S stocks, Global stocks, Grains, Live stock, Silver and even Gold. I'm sure glad nothing like that will ever happen again! ;)

I have received numerous emails asking a great question.... where does the next key resistance for Gold come into play if the 261% Fibonacci level/ channel resistance doesn't hold? If Gold breaks above channel and Fibonacci resistance the next Fibonacci Expansion/Extension level comes in around $1,000 higher. Could Gold reach this target? Sure!!!

Suspect two things.....A break of the $1,900 level would see Gold add another 20% to its price in no time and the world might have a couple of new challenges on its hands!

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More Insights Into Mass Psychology And Canada's Real Estate Obsession

More insights into mass psychology and Canada's real estate obsession:

Perhaps the most defining features of an asset bubble is a marked and persistent deviation from the underlying metrics that once determined fundamental value. We know how real estate in Canada stacks up when compared to GDP, personal disposable income (cities and provinces), rents (cities and provinces), and inflation. It's not pretty. As with any real estate bubble, the overvaluation is most extreme in a handful of cities. The regional data can be seen in the highlighted links. Certainly not all areas of the country have experienced a massive divergence from underlying fundamentals, but it is extensive enough to concern us.

And with the reliance of the Canadian economy on construction and consumer spending to support employment and GDP growth, a housing correction from current levels would almost certainly be associated with a nasty recession complete with anemic economic growth and persistently high unemployment for several years, a topic I addressed yesterday when we looked at some lessons from Texas, and previously when we looked at how housing supports Canadian GDP.

A second key component to the development of any asset bubble is a new and widespread belief about the 'investment worthiness' of a particular asset. It's one of the key ingredients we discussed in an earlier post about the necessary components of an asset bubble. This shift in perception often occurs slowly at first, then builds under its own momentum as increasing participation in the bubble also serves to drive prices higher in a self-fulfilling loop. Yet this change in perception is often very difficult to measure. It's reported that Robert Shiller became convinced of a US real estate bubble after conducting years of surveys examining people perception of housing and watching respondents' perception of real estate become wildly bullish in the years leading up to the crash. I've explained why overwhelming majorities are contrarian indicators in a previous article.

Unfortunately, such data does not exist in pure form here in Canada. We can gather some insight from reports from CAAMP and RBC, both of which publish survey results, but the necessary historical data is not there from which to compare.

I don't think I need to argue too hard to convince most people that there is wide-spread bullish sentiment towards real estate and an equally pervasive view of real estate as inherently 'safe' and the easiest path to prosperity. However, the goal here is to quantify data in a way that avoids these anecdotes.

The best we can do is to explore data that should have a relatively stable long-term trend, and see if it instead shows a marked deviation from that trend around the same time that the bubble begins, which I would put some time around 2003 when prices began to experience a marked deviation from underlying fundamentals.

Today, Stats Canada released data showing investment in new housing construction, which, as Stats Canada indicates, shows "investment in new housing construction represent(ing) the spending value for individuals, enterprises and governments in the construction of new residential dwellings." This does not include construction investment for cottages, mobile homes, conversions, and renovations. If we compare this to a stable metric like GDP, we might expect that during boom times, demand for new housing would increase as participation in any bubble would have to be widespread. So what does it show?

investment in residential real estate canada

Unfortunately, the data only extends back to 1994. Nevertheless, the trend is clear. The implications seem to be that either there are more people per capita building new homes, which seems a fairly sure guess given our rising home ownership rates across all demographics (see below), OR the values of the homes being built is increasing relative to GDP. Neither of these are sustainable, particularly rising values relative to GDP as it implies an erosion in underlying incomes necessary to support house prices and very likely is associated with rising house size and the emergence of housing as a predominant form of conspicuous consumption, a trend I argued would likely reverse course as it has in the US.

We can add this data to several other data sets that also suggest that shifting consumer perceptions and widespread participation seem to be a hallmark of the current real estate market: (more)

5 Signs Of A Credit Crisis

A credit crisis occurs as a result of an unexpected reduction in accessibility to loans or credit and a sharp increase in the price of obtaining these loans. The credit markets are good indicators of the depth of a credit crisis. They can also provide clues as to when that crisis will ease up. To understand how to judge the severity of the crisis, we must be able to look at a number of factors, such as what is happening with U.S. Treasuries, how it is affecting the London Interbank Offered Rate (LIBOR), what effect this has on the TED spread and what all this means for commercial paper and high-yield bonds. In this article, we'll examine how these indicators can be used to determine the severity and overall depth of a credit crisis.

Measuring the Severity of a Credit Crisis
There are several tools that can be used to measure the overall depth of a credit crisis:

U.S Treasuries: U.S. Treasuries are debt obligations issued and backed by the U.S. government. As a credit crisis unfolds, investors take their money out of other assets, such as stocks, bonds, certificates of deposit (CDs) and money markets. This money goes into U.S. Treasuries, which are considered to be one of the safest investments. As the money continues to flow into this area, it forces the yield on short-term treasuries (also known as Treasury bills) down. This lower yield is a sign of high anxiety in the markets as a whole as investors search for safer places to put their money.

LIBOR: LIBOR is the rate that banks charge other banks for short-term loans. These loans can be for one month, three months, six months and one year. When LIBOR rates are high, this is a sign that banks don't trust each other and will result in higher loan rates across the board. This means tighter lending standards and a general unwillingness among banks to take on risk.

TED Spread: This spread represents the change between the three-month LIBOR rate and the three-month rate for U.S. Treasury bills. It is used to measure the amount of pressure on the credit markets. Generally, the spread has stayed under 50 basis points. The bigger the difference between the two, the more worry there is about the credit markets. Economists will look at this to determine how risk-averse banks and investors really are.

Commercial Paper: Commercial papers are unsecured debts used by banks or companies to finance their short-term needs. These needs can range from accounts receivable (AR) to payroll to inventory. Generally, maturities for commercial paper range from overnight to nine months. Higher interest rates make it more difficult for businesses to obtain the money they need to fund their day-to-day operations so that they can continue to expand. These high rates can cause businesses to pay the higher costs or not borrow at all. This creates a situation in which companies look for ways to get the money they need to fund their short-term operations; when more commercial paper is issued, this can be a sign of a tight credit market.

High-Yield Bonds:
High-yield bonds are bonds that do not qualify for investment-grade status. Ratings agencies rate high-yield bonds as those with the greatest chance of default. The higher the yields on these types of bonds, the tighter the credit market is likely to be as this suggests that there are few borrowing opportunities for businesses. Businesses that are unable to get more favorable financing may issue bonds instead.

Using Indicators to Understand a Credit Crisis

Any indicator by itself, while important, will not provide the overall big picture. However, when a combination of indicators consistently points in the same direction, this correlation can point to which direction the credit markets are headed. If the credit markets are headed toward crisis, these indicators can provide insight into how big the credit crisis will be and how afraid banks or investors are to take risk. If the fear is great enough, it can spill over into the general economy, causing recession. Conversely, when indicators are weakening, this suggests that banks and investors are willing to take risk. In this case, borrowing conditions are easy and businesses have access to the capital they need, causing the economy to expand.

There are several tools that can help determine the depth of a credit crisis. By looking at U.S. Treasuries, LIBOR, the TED spread, commercial paper and high-yield bonds, you can get a glimpse into how nervous bank and investors are about assuming risk, which is an important determinant of what the economy will look like going forward. While no single indicator is more important than another, the correlation of all of these will confirm the overall conditions in the credit markets.

Gold and Oil Thoughts and what is Next

The past few weeks have been fast moving with fearful investors clearly in control. As we all know fear is the most powerful force in the financial market and when the hedge funds and the masses get spooked they all dart in one direction like a school of fish. Watching the charts and volume levels it’s clear that money was/is flowing out of stocks and into precious metals as the risk off safe play. This was explained in last week’s report on how the GLD etf can be used as a fear/sentiment indicator (read here).

To make a long story short, I feel as though Euro-Land is going through something similar to what we (the USA) went through in late 2008 and first quarter of 2009. Keeping my analysis simple and to the point it’s very likely that Euro-Land will resolve their financial issues and their stock markets will bottom in the next month or so… If their market bottoms, so will the US market, which will be perfect timing as the market is currently oversold, sentiment is now turning bearish and we have had a sizable pullback in line with normal bull market corrections.

My thinking looking forward 2-6 weeks is that stocks rally, financials rocket higher, bond prices fall, gold falls and oil rises as it will be a risk off trading environment again. Of course all this would happen after Euro-Land resolves some of their key financial issues. I’m being very optimistic here but we could be nearing a major low that could kick start another massive 1 year rally.

Stepping away from that longer term outlook let’s take a peek at the shorter term trends for oil, gold and stocks.

Crude Oil 60 Minute Chart (1 month view)
The recent price action for crude oil remains bearish/neutral in my opinion. We saw a drift higher into resistance with declining volume then a sharp pullback on heavy volume. This tells me oil remains in a down trend. It may be forming a base which would act as a launch pad in the coming weeks for higher prices but only time will tell and I will update as price unfolds.

Gold 4 Hour Chart (One Month View)
Gold has been performing very well for our entry point but the recent price action is starting to look toppy. Gold and many commodities regularly form this pattern of three wave pushes to new highs just before a sizable correction takes place. I am bullish on gold long term and for a few more weeks, but I do feel as though there will be a multi month correction in the price of gold (Read More) soon so be sure to tighten your protective stops as price moves higher.

SPY ETF Weekly Chart (Two Year View)
The stock market has been hit hard and a lot of damage has also been done to the charts on a technical stand point. The amount of damage and fear that has happening generally takes some time to stabilize and heal before another move takes place. Until Euro-Land resolves some of their major issues the US market will be held hostage and under pressure. So I anticipate several weeks of volatility and wild daily price swings similar to what we saw in July of 2010. This type of trading environment can work very well for options traders (Read More).

Weekly Trading Conclusion:
In short, the market price action is favoring very short term traders (day traders). We are seeing complete price swings which can normally be swing traded happen in just hours… Until we get another extreme setup or stabilization (less big headline news) in the market we will be more of a spectator than a trader to preserve capital.