Friday, October 12, 2012

This could be the most powerful "global sell signal" in a generation

I realize that I’ve been obnoxiously bullish throughout the summer (almost to a fault). But I won’t apologize for my sarcasm and belittling of the public perception on the market. Someone had to say it (see here, here, here, here and here). I just couldn’t find any reason to be out of stocks. All that fiscal cliff nonsense and Europe crap was just noise. Remember the media can’t sell advertisements if no one watches/reads. And no one likes to hear good things. Ever wonder why 90% of the 11 o’clock news is horrifying? The headlines need to scare the hell out of you. Otherwise you won’t turn it on, or buy the paper, or subscribe to the magazine, etc.
Price is the only thing in the market that will pay us. Nothing else. Why doesn’t matter. Why has never paid anyone. Ever. Literally, ever. The questions to ask are What and When. The rest is bullshit.
Now, I’m not in the ‘end of the world’ camp. Far from it. But my friend and excellent technician Richard Ross put out a note Friday that brought up some interesting points. (Click Charts to Embiggen)
Ross thinks that a Euro breakdown here could, “Generate the most powerful ‘Global Sell Signal’ of our generation” (speaking of scaring the hell out of people).
We still don’t know that the Euro will complete the potential head & shoulders top formation. But we do know that this currency is a majority component of the US Dollar Index. We also know that the Dollar and Stocks have been mostly negatively correlated for years. But can the correlation change? Sure. Can the Euro hold that support and make this conversation meaningless? Sure. Is it important to recognize the possibilities and potential consequences of a breakdown in the Euro? You betcha. And this is regardless of how high you think $AAPL goes or how great that drug might be for your biotech stock.  (more)

The $2 Trillion European Bailout Package Is Coming / October 11, 2012
Today Jeffrey Saut spoke with King World News about gold, a $2 trillion bailout in Europe, and what investors should expect going forward.  Saut, who is Chief Investment Strategist for $360 billion Raymond James, had this to say about discussion of a $2 trillion European bailout:  “I had mentioned that in the past, and that’s the kind of bazooka you need to pull to try to at least get over the short-to-intermediate-term funding problems.”
Here is what Saut had this to say:  “I have said it, politicians, bureaucrats, and bankers are the same in Europe as they are here.  They do not want to lose their power, and if the EU implodes, they all lose their power.  So I think they are going to continue papering over the situation, and try to buy more time, just like we did here in our ’07/’08 financial fiasco.”
Jeffrey Saut continues:
“Whether it’s going to be successful in the long-term is a very good question that I don’t have the answer to.  The major problem is you can’t have 17 countries with a common currency, without having a common fiscal policy.  They never got that, so you have this complete misallocation of capital into the Mediterranean countries that left them totally uncompetitive with the Germany’s of the world…..

The Collapse Continues: Greek Unemployment Rises For 35th Consecutive Month, Passes 25%

from Zero Hedge
When we reported on the 34th consecutive month of Greek unemployment increases, following the June number hitting a record high 24.4%, the only good news was that the May number had been revised higher from 23.1% to 23.5%, making the monthly jump seem just under 1%. Well, that revision was re-revised, with Greek Statistic Service ELSTAT reporting that the original 24.4% number has now been revised to 24.8%, meaning in June unemployment rose officially by 1.3%. That’s in one month! ELSTAT also reported the July number, and at 25.1% (pre-revision higher next month), it just hit a new all time high, increasing for the 35th month in a row. More than one quarter of those eligible for work in Greece (not many), are working. THis means labor related taxes are now being levied on a record low percentage of the population. Indicatively, Greek unemployment at the end of 2011 was “only” 21.2%. It also means that in order to restore even a tiny iota of confidence, the Greek labor department needs to hire a BLS consultant or two, or least license an old version of the ARIMA goalseek software, to find a seasonally adjusted decimal comma in there somewhere, and report that the jobless rate is really only 2.5%, which would be on par in credibility with everything else out of Europe these days. Finally, our question is at what point does anyone finally admit the Greek situation is not only a depression but outright economic death and the merciful thing to do at this point is to just pull the plug?
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Nick Barisheff – Gold & Silver Getting Ready For The Next Breakout

from FinancialSurvivalNet
Our friend Nick Barisheff squeezed in an interview between a couple of meetings. We trust Nick’s impressions because he has so many years of experience in finance but especially in precious metals investing. It’s unusual today to find people who lived through the last PM bull and bear markets. The experience gained from watching gold go from $850 to $250 is extremely valuable. These market gyrations teach us more than all the Ivy League MBA programs combined. Especially because there’s virtually no courses on economic history other than at And education in the final analysis is the only way to understand exactly what is going on in the world economy today.
Click Here to Listen to the Audio

Agricultural Commodity Prices Set to Increase Before the South American Harvest Next Spring

by Sober Look
The drought of 2012 has pushed agricultural commodity prices to new highs. In spite if these price increases, demand has remained strong, putting pressure on inventories. Now the focus will be on the harvest progress in South America, as the planting season approaches. With prices remaining at lofty levels, Brazil, Argentina, and others are preparing to plant record harvests, which should ease the supply disruption in late spring of next year. Until then prices will stay elevated and could spike further, particularly if the weather does not cooperate. In fact according to Goldman, prices are going to rise on tight supplies alone, but the path will clearly depend on the weather.
GS: – The current spike has come in response to the summer drought in the US Midwest, which was one of the worst in the past century. In addition, a wide set of agricultural commodity producing countries have experienced adverse weather conditions (such as Brazil and Argentina in the past winter, and Russia, Ukraine, Kazakhstan and India). Damien Courvalin from our Commodities Strategy Team points out that these disruptions have caused substantial losses in global food supply.

Despite the resulting 40% spike in the S&P GSCI® Agricultural Index between mid-June and mid-July, demand for agricultural commodities has remained robust. The net result has been a decline in inventories, with the USDA’s September 1 stocks of corn and wheat well below expectations…
Our Commodities Strategy team expect demand to remain resilient and supply to remain binding, leading soybean and corn prices to new highs in the coming months. Higher prices will eventually be followed by a supply response, and if weather returns to normal, we should expect a large crop in South America (harvested next spring) and in the US (harvested next autumn). In the interim, prices are likely to remain high.
However, there is a clear weather dependency to this assessment; further weather adversity is likely to pose further upside risks to food prices.

Source: GS
This projection suggests that we may not have seen the highs for the year in agricultural commodities. Prices could rise further before the South American crops bring much needed relief.

3D Systems Corporation (NYSE: DDD)

Today we will be analyzing another head and shoulders patter (H&S). For a review of the definition of a head and shoulders patter, please feel free to take a look at yesterday's article on AAPL.

3D Systems Corporation engages in the design, development, manufacture, marketing, and servicing of 3D printers and related products, print materials, and services. The company's principle print engines comprise stereolithography, selective laser sintering, multi-jet modeling, film transfer imaging, selective laser melting, and plastic jet printers. Its 3D printers convert data input from computer-aided design software or 3D scanning and sculpting devices to produce physical objects from engineered plastic, metal, and composite print materials. In addition, it provides custom parts services, such as precision plastic and metal parts service and assembly capabilities. The company markets its stereolithography materials under the Accura and RenShape; laser sintering materials under the DuraForm, CastForm, and LaserForm; and materials for professional printers under the VisiJet brands. It primarily serves manufacturers of automotive, aerospace, computer, electronic, defense, education, consumer, energy and healthcare products, as well as original equipment manufacturers, government agencies, universities, and independent service bureaus.

To review the H&S pattern that has formed on 3D's stock, please take a look at the 1-year chart of DDD (3D Systems Corporation) below with my added notations:

1-year chart of DDD (3D Systems Corporation)

DDD has been on a nice rally since December of last year. Over the last (3) months though, the stock has created a very important level at $32.50 (blue), which would also be the "neckline" support for DDD's possible H&S pattern. Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S would occur if the stock broke below its $32.50 "neckline". If DDD breaks that level, the stock should move lower from there.

Keep in mind that simple is usually better. Had I never pointed out this H&S pattern, one would still think this stock is moving lower simply if it broke below the $32.50 support level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break below the key $32.50 level.

Food Inflation To Surge, Goldman Warns

from Zero Hedge
We have been very active in our discussions of the impact of the pending rise in food prices around the world (from central bank largesse to weather-related chaos). As Goldman notes, food inflation has been one of the most significant sources of headline inflation variation in emerging markets (EM) over the past few years. Since June, international prices for agricultural commodities have risen almost 30%, increasing the risk of fresh, food-related increases to EM headline inflation. We, like Goldman, expect EM headline inflation to start to reflect the relevant pressures more broadly in the October prints at the latest. While the effects, for now, are expected to be less extreme than the 2010-2011 episode, the timing as the US enters its fiscal-cliff-prone malaise, could mean a further round of easing will reignite this critical inflationary concern.
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