Monday, September 26, 2011
WARNINGS or PREDICTIONS ?
Warnings keep you on your toes for possible changes ahead, predictions have a nasty habit of lulling one to sleep while one focuses on the prediction. Pay attention to warnings, do not focus on predictions.
Warnings imply POTENTIAL changes of direction ahead, to the up side or the down side. Predictions imply knowledge of the future, which I try to leave up to the fortune tellers.
In these commentaries I try to keep to the warnings but I’m human and the ego sometimes gets the better of me so you might find some predictions occasionally within the commentary. Stay focused on the warnings and treat the predictions as fortune telling. Sometimes the predictions come true and there lies the real problem. When one starts to think one can actually predict the future that’s when things can end in disaster.
Warnings do not mean certainty. One should, however, always keep them in mind when trading or investing and to be prepared for the occasion when they may come true.
Well, things are looking a little more difficult for the long term BUT the action of last week still did not change things from this time period standpoint. Those who focus on the long term and ignore the short or intermediate term fluctuations still do not have anything to worry about. Of course, by time the long term trend has changed the price of gold will almost by definition be a lot lower. The long term investor usually gets in late and gets out late (if at all).
Trend: Gold closed on Friday still comfortably above its positive sloping long term moving average line. By comfortably I am referring to normal trading days, not like days such as Friday. One more of those days and gold will be below the moving average line. Gold also is still above that long term FAN trend line shown last week. As mentioned last week I do expect gold to remain within the confines of that long term FAN line and the intermediate term FAN line.
Strength: The long term momentum has been seriously weakened during the week but it had been weakening for a few weeks now. However, the indicator still remains comfortably in its positive zone although it is way below its negative trigger line.
Volume: As with everything else the volume indicator has now turned to the down side. It has broken below an up trend line that has kept the indicator positive since the beginning of the year. It has also moved below its long term trigger line although the trigger remains in a positive slope.
All in all, despite the week’s activities the long term rating remains BULLISH at the Friday close.
Things got nasty very fast on the intermediate term.
Trend: The previous week gold broke below that second FAN trend line and moved into the zone between the first and second FAN lines. At the time I thought gold will remain within this zone for some time and that is what seems to be happening, at least for the time being. As can be expected gold moved below its intermediate term moving average line and the line slope is now to the down side.
With this week’s plunge gold has now confirmed the development of a double top by moving below the low point between the two tops. As predictions go a confirmation of the double top would suggest a move to the $1490 level or the lateral area previously formed by the May/June activity (see chart in the next section).
Strength: Friday’s action has taken the intermediate term momentum indicator below its neutral line into the negative zone. It is also well below its negative sloping intermediate term trigger line.
Volume: The volume indicator has now moved further below its intermediate term trigger line and the trigger has now turned to the down side.
Nothing good here, at the Friday close the intermediate term rating is now a full BEARISH rating. However, this is not yet confirmed by the short term moving average line. Although the short term line is moving lower quite fast it still closed on Friday above the intermediate term moving average therefore not yet confirming the bear.
The short term bear was there last week and it remains. At this point the short term bear is so severe that one might just be looking for a bounce of some sort.
Shown on the chart is the double top box mentioned in the intermediate term comments. Too often analysts jump the gun and declare this a double top as soon as the second top has developed but I prefer to wait for confirmation by the breaking of that in-between tops low. This occurred on Friday.
Trend: As you can well imagine, the short term trend is now well established. Gold is way below its short term negative sloping moving average line. It is so far from the line that a
bounce of some sort almost becomes a serious 90% prediction (leaving at least 10% for further possible confusion).
Strength: After toying with its neutral line the short term momentum indicator has now moved decisively into its negative zone and below its negative trigger line. One can see this coming after the weakness it had shown during the second top activity in early Sept.
Volume: The daily volume is most definitely on the negative side. The plunge in the gold price on Thursday and Friday was on increasing volume action. One slight positive is that although this volume was increasing it was still not at the negative value that we had during the two top areas.
At the Friday close the short term rating can only be BEARISH. This is confirmed by the very short term moving average line moving ever lower below the short term line.
As for the immediate direction of least resistance, one should be looking at the down side but I think that the down side has been overdone for now. Other than the Stochastic Oscillator entering its oversold zone (but not yet reversing) there is no real evidence of a reversal but I’ll go with the up side, either Monday or Tuesday.
WOW! While gold looks to have had a somewhat controlled drop silver on the other hand just looks like it fell off the cliff.
My usual long term P&F chart often shown in this space now shows that the drop in the price of silver has broken below two separate support levels, one projecting a move to the $28 level (where it is almost at) and the other projecting to the $13 level where it was in 2009. The first looks very reasonable while the second looks to be a long shot, but there you are.
Unlike gold, silver long term indicators have now been badly breached.
Trend: Silver has broken below a several month support and has moved below its long term moving average line. The line has also turned to the down side.
Strength: The long term momentum indicator has now moved into its negative zone for the first time since Feb of 2009 when the silver price was $15. The indicator is also well below its negative sloping trigger line.
Volume: The volume indicator is starting to move lower and has moved below its long term trigger line although the trigger is still in an upward slope.
At the Friday close the long term rating has now shifted to a full BEARISH rating.
A lot of damage has been done as far as the intermediate term is concerned and it might take some doing to get back on track.
Trend: On Thursday silver broke below an intermediate term support (on Friday it broke below the long term one). It is also below its intermediate term negative sloping moving average line.
Strength: The intermediate term momentum indicator has decisively moved into its negative zone and below its negative sloping trigger line.
Volume: The volume indicator has now moved below its intermediate term trigger line and the trigger has also turned to the down side.
On the intermediate term the rating at the Friday close is BEARISH. This is confirmed by the short term moving average line moving ever lower below the intermediate term line.
As the chart shows, Thursday and Friday were a disaster for silver. It will take some time to recover. That does not mean there might not be some up days along the way.
Trend: The disaster has taken silver well below its short term moving average line with the line sloping downward.
Strength: The short term momentum is at its lowest level since Sept of 2008. One should expect a bounce anytime from these momentum levels although the indicator has not yet shown any hint of turning around. It remains deep in its negative zone below its negative sloping trigger line.
Volume: The daily volume action is somewhat positive. That sounds strange seeing as how the price has dropped off a cliff. However, the recent volume pales in comparison to the volume in the past. In the April/May period we had very high daily volume action, which was typical for end of trend volume action at the end of a long advance. At the end of Aug the volume was higher than this week although that still has a chance of changing. For now it looks like speculators are not rushing out to sell silver, they are just not rushing in to buy.
On the short term, at the Friday close, the rating is BEARISH. This is confirmed by the very short term moving average line moving lower below the short term line.
As for the immediate direction of least resistance, to assume the up side would only be a guess but that seems to be the more logical direction after a plunge of the past couple of days.
Merv’s Precious Metals Indices Table
Well, that’s it for this week. Comments are always welcome and should be addressed to firstname.lastname@example.org.By Merv Burak, CMT
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- Gold futures dropped 5.8% Friday, the biggest one-day loss in five years, as investors rushed to cash out of some of their most profitable investments in the hopes of making up for losses elsewhere. The decline capped gold's worst week since 1983.
- Silver was even harder hit, plunging 18% for its largest single-day decline since 1987.
- Investors have grown increasingly skeptical of policy makers' ability to revive the global economy, and of their willingness to bring about a resolution to the European debt crisis. The broader rout has left many investors with unexpected losses, driving some to part with some of their better performing investments, among them gold and silver.
- The declines are a turnabout for gold, in particular, which has recently found strong demand in good times and bad. It has enjoyed a special status as a safe haven from financial crisis and political turmoil, as well as a hedge against inflation. Gold has risen six-fold in the past decade, including a 15% gain this year..
- Some hedge funds were selling to raise cash to meet margin calls from lenders. Other investors were using proceeds of silver and gold sales to replenish other parts of their portfolios, which had fallen in value in recent sessions, said George Gero, precious metals strategist at RBC Global Futures.
- In addition, it appeared that European banks were selling gold, possibly in order to raise cash and shore up their balance sheets, Mr. Gero said. This selling was then magnified by so-called momentum traders whose strategy is to piggyback on moves up or down in price.
- Silver faces the added woe of being widely used in industry, and therefore vulnerable to fears that weak economies will consume less. Moreover, the Shanghai Gold Exchange said Friday that it will expand the upper and lower trading limits for its silver contract.
- The fact that gold is falling along with other assets complicates life for those who bought gold because they thought it would rise or fall independently. "There is nowhere really to hide at the moment," said Fredrik Nerbrand, global head of asset allocation at HSBC. (well technically that's incorrect - U.S. Treasuries have been having a ball)
The NYT also chimes in with - A Gold Rush Wanes as Hedge
- Some traders said that hedge funds were beginning to unwind, or close out, what has been a very popular and profitable trade for the last 18 months as they bet the dollar would fall and that gold would rise. In the last month alone, the euro has fallen nearly 4 percent against the dollar amid worries about the European debt crisis.
marketparticipants said hedge funds were selling their positions in gold to raise cash to meet increased capital demands for their borrowings from Wall Street banks as the assets they have put up as collateral, like other commodities or stocks, have declined sharply in value.
- Others say some hedge funds may be selling to meet redemption requests from investors who have been spooked by the recent market volatility and fear a repeat of the problems of late 2008. “The tendency for individual hedge funds or anybody is to sell winners before they sell losers. What’s been one of the few winners this year? It’s been gold,” Mr. Gayed added.
"Some people think the Federal Reserve Banks are the United States government's institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign swindlers" - - Congressional Record 12595-12603 — Louis T. McFadden, Chairman of the Committee on Banking and Currency (12 years) June 10, 1932
"The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers” - - Congressman Louis T. McFadden (Rep. Pa)
"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it".- - Congressman Louis T. McFadden in 1932 (Rep. Pa)
"The financial system has been turned over to the Federal Reserve Board. That Board as ministers the finance system by authority of a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money"-- Charles A. Lindbergh Sr., 1923 "The Federal Reserve bank buys government bonds without one penny..." - - Congressman Wright Patman, Congressional Record, Sept 30, 1941
"The [Federal Reserve Act] as it stands seems to me to open the way to a vast inflation of the currency... I do not like to think that any law can be passed that will make it possible to submerge the gold standard in a flood of irredeemable paper currency." -- Henry Cabot Lodge Sr., 1913
“I believe that banking institutions are more dangerous to our liberties than standing armies.” --Thomas Jefferson, U.S. President.
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance.” -- James Madison
The Russell 2000 is doing the leading down and the likelihood for a test of 593 over the coming weeks looks very high.
Large Caps suffered a similar fate to Small Caps, but Large Caps have underpeformed throughout 2011. Large Caps will be the last to turn - be it higher or lower - so look elsewhere for leads. The downside target for the Dow is 9,641.
In contrast, the Nasdaq hasn't dropped out of its 'bear flag' consolidation. It also enjoys the benefit of an uptick in stochastics (momentum). While it may eventually suffer the same fate as Large and Small Caps it's likely to be the first one to recover.
Several articles have appeared in the mainstream press over the past several months discussing some alternative to the U.S. dollar as the reserve currency of the world. Special Drawing Rights (SDR) sponsored by the International Monetary Fund (IMF) has been mentioned. Some time ago, an article on Reuters indicated a United Nations panel has decided much of the world would like to move away from the American currency as the world's reserve currency. This panel wanted to look into a "basket of currencies" or perhaps another entirely different, new currency to replace the U.S. dollar. Additionally, both the Russians and Chinese have indicated similar concerns.
Action has been taken to move in this direction, for example Russia and China have agreed to do some trading using each others respective currencies bypassing the need to move into U.S. dollars. There have been rumors over the years that some of the North African nations, and Middle Eastern nations were wishing to settle the oil trade in Euro's rather than dollars.
These events and postulates don't surprise me in the least. If we go back a few years, it was only the Austrian school thinkers that stepped forward and said the U.S. dollar, or any fiat currency, was eventually doomed. Now other nations and the U.N. are saying they really don't trust the U.S. dollar, which is what this amounts to. I wrote about something similar happening many times and one currency that I spoke about years ago was the golden Yuan (renminbi). There was a meeting in Southeast Asia years ago, about a gold-backed Yuan. I believe any basket of currencies may be tried it will most likely fail, because none of these currencies are tied to real value.
At some point the world monetary system will probably go back to some sort of a gold standard, but in my view it will not be a true gold standard but some kind of pseudo gold standard. No one really knows the future, and I'll be the first to admit it, but what we are seeing now is what we see at the end of all great inflations and that's a distrust of the fiat money system and/or a distrust of the leading currency. Russia and many nation states are raising their hand and asking, "Why should anyone trust the U.S. to get it financial house in order?"
There are so many U.S. dollars in the financial system. In my view it is collapsing, and it may never collapse to absolute zero but as things unwind further it is almost certain that the monetary authorities will provide "solutions" to the problem. Right now the velocity of money is low even though a great deal of stimulus has been forced into the system via QE1 and QE2 not to mention some "off book" digital entries into the banking system globally. Yet is because the U.S.'s trading partners, such as China and Japan, and others are holding on to dollars (low velocity) that we have not seen more inflation. Simply stated they're not putting them into circulation, but once that happens or they get scared or try to exchange too many of those U.S. dollars for real goods or services, it could ignite more than an inflation -- it could start a currency crisis.
Most of us know that there is manipulation going on in currency markets and in the financial system as a whole. The Working Group of Financial Markets (WGFM, also known as the Plunge Protection Team) was established after the crash of 1987 and was developed to prevent another crash. I must say again, "Great job, gentlemen." It does not work on a long-term basis. Just take a look at the stock market averages; the very idea that any group is bigger than the market is ludicrous.
Many have asked where this will lead. If you review history and what happened to the Great British Empire when America started coming to the fore, you get a pretty clear picture of where the U.S. is going to go. The pound sterling was the settlement currency on an international basis. It had all the power, all the financial clout; but then here comes America, the up and comer, and they have CAPITAL - which, in the Austrian school of economic thinking, is the means of production. So when the waning of the United Kingdom was going on and the buildup of America began, it was a transition, meaning it was harsh but it was achievable.
That same scenario is taking place right now, except it's the U.S. dollar that isn't being trusted instead of the pound sterling, and Asia is the "capitalistic" society because they have a great deal of the means of production. The Asian countries are producing almost everything. And I think you're going to see them continue to produce over the next decade or so, and you'll see a continual decline of the U.S. Empire. It doesn't mean America is going away but it certainly is not going to be the number one productive nation in the world. It's going to be the Asian countries, primarily China.
Yes, China has problems and in my view primarily because they have too many make work projects and built many massive cities that are empty. There are issues all over China and look for some short term slow down in Asia overall.
However, I'm still bullish on America in some aspects. One is food; the U.S. can certainly get high yields out of the farmland it farms, although nutritional value is another matter and outside this discussion. Second is ingenuity; I think it's almost built in to the gene pool that the American spirit is pretty much entrepreneurial. They are out looking for good ideas. How to build a better mousetrap, think outside the box, etc. And the third is education; when you look at it objectively, China is sending all their best students to American universities and there's a reason for that. They still get the best education in math/engineering and science in the USA. America has a poor record during the mid to high school ages, but from the university level on up, America probably still has one of the best educational systems around.
Most Americans have gotten politically lazy and they're going to pay for that in the future. They don't read enough, they're undereducated, and they refuse to get involved in the political system. They basically don't have the American spirit that once prevailed. They've just become dulled down, but I believe -- because of this economic "rearrangement," if you will -- that is going to reverse. So I'm very positive in the longer run that the American populace is not only going to wake up but shape up and move forward. It will be a leaner, meaner, and much more aware American in the next five years. And it's going to be a tough transition for some and almost impossible for others.
Do gold and silver fit into this picture? Yes! To make the transition as painless as possible, everyone needs some gold and silver. The precious metals can be traded for any currency anywhere on the planet. Regardless of hearing more deflation talk in the news or inflation around the corner, the metals are a crisis hedge, a sure thing in a world of growing uncertainty.
the FEDS ,banks, white house and the large corporations ie:( military hardware manufacturers), they all share same bed, it is the job of the treasury to create money, now the FED controls the printing of America’s money, the FED IS nothing than a private owned scam organization that create money from fresh air ,then they loan it to Government with interest. Then the Government taxes you to pay for it.
|Date||Time (ET)||Statistic||For||Actual||Briefing Forecast||Market Expects||Prior||Revised From|
|Sep 26||10:00 AM||New Home Sales||Aug||-||290K||293K||298K||-|
|Sep 27||9:00 AM||Case-Shiller 20-city Index||Jul||-||-4.5%||4.5%||-4.52%||-|
|Sep 27||10:00 AM||Consumer Confidence||Sep||-||45.0||46.7||44.5||-|
|Sep 28||7:00 AM||MBA Mortgage Index||09/24||-||NA||NA||0.6%||-|
|Sep 28||8:30 AM||Durable Orders||Aug||-||0.5%||0.0%||4.1%||4.0%|
|Sep 28||8:30 AM||Durable Ordes ex Transportation||Aug||-||-0.5%||-0.2%||0.8%||0.7%|
|Sep 28||10:30 AM||Crude Inventories||09/24||-||NA||NA||-7.336M||-|
|Sep 29||8:30 AM||Initial Claims||09/24||-||415K||420K||423K||-|
|Sep 29||8:30 AM||Continuing Claims||09/17||-||3700K||3713K||3727K||-|
|Sep 29||8:30 AM||GDP - Third Estimate||Q2||-||1.2%||1.2%||1.0%||-|
|Sep 29||8:30 AM||GDP Deflator - Third Estimate||Q2||-||2.4%||2.4%||2.4%||-|
|Sep 29||10:00 AM||Pending Home Sales||Jul||-||-1.5%||-1.3%||-1.3%||-|
|Sep 30||8:30 AM||Personal Income||Aug||-||-0.3%||0.0%||0.3%||-|
|Sep 30||8:30 AM||Personal Spending||Aug||-||-0.2%||0.2%||0.8%||-|
|Sep 30||8:30 AM||PCE Prices - Core||Aug||-||0.2%||0.2%||0.2%||-|
|Sep 30||9:45 AM||Chicago PMI||Sep||-||53.0||54.0||56.5||-|
|Sep 30||9:55 AM||Michigan Sentiment - Final||Sep||-||57.0||57.6||57.8||-|