Thursday, April 18, 2013

History Tells Us That A Gold Crash + An Oil Crash = Guaranteed Recession

Is the United States about to experience another major economic downturn?  Unfortunately, the pattern that is emerging right now is exactly the kind of pattern that you would expect to see just before a major stock market crash and a deep recession.  History tells us that when the price of gold crashes, a recession almost always follows.  History also tells us that when the price of oil crashes, a recession almost always follows.  When both of those things happen, a significant economic downturn is virtually guaranteed.  Just remember what happened back in 2008.  Gold and oil both started falling rapidly in July, and in the fall we experienced the worst financial crisis that the U.S. had seen since the days of the Great Depression.  Well, a similar pattern seems to be happening again.  The price of gold has already crashed, and the price of a barrel of WTI crude oil has dropped to $86.37 as I write this.  If the price of oil dips below $80 a barrel and stays there, that will be a major red flag.  Meanwhile, we have just seen volatility return to the financial markets in a big way.  When volatility starts to spike, that is usually a clear sign that stocks are about to go down substantially.  So buckle your seatbelts – it looks like things are about to get very, very interesting.Posted below is a chart that shows what has happened to the price of gold since the late 1960s.  As you will notice, whenever the price of gold rises dramatically and then crashes, a recession usually follows.  It happened in 1980, it happened in 2008, and it is happening again…
The Price Of Gold
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Is Australia Next in Competitive Currency Debasement?

by Mike Shedlock
MISH’S Global Economic Trend Analysis

Japan, the US, the UK, Switzerland, China, and even the EU with the LTRO (and upcoming hinted at rate cuts) are all in on competitive currency debasement.
The question at hand is “who is next?” How about Australia?
The Sydney Morning Herald reports RBA May Have to Cap Australian Dollar
Ross Garnaut, one of the authors of the float of the Australian dollar 30 years ago, warns that the Reserve Bank might have to consider intervening to push the currency down to minimise the recession he sees coming as the mining boom goes bust.
Professor Garnaut, of the University of Melbourne, says he would rather see the Reserve cushion the economy’s looming fall and bring down the overvalued dollar by cutting interest rates to bring them closer to those of other Western countries.
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McAlvany Weekly Commentary

Record Gold Sell-off, How and Why

-Friday’s sale of 400+ tons in futures contracts.
-How does a Gold(man) sell off work?
-Margin requirement increase adds feedback loop.
- Breaking News Video – Why is Gold and Silver Pulling Back? What’s Next? 
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Phillips 66 (NYSE: PSX)

A head and shoulders (H&S) pattern is a reversal pattern that forms after an uptrend. A textbook H&S pattern starts to form when a stock rallies to a point and then pulls back to a particular level (left shoulder). Next, the stock will rally again, but this time to a higher peak (head) than the previous one. After forming the head, the stock will pull back to the same support area that the first shoulder did. Finally, the stock rallies a 3rd time, but not as high as the head (right shoulder). The level that has been created by all 3 of the pullbacks is simply a support level referred to as the “neckline”. The formation of an H&S pattern warns of a potential reversal of the uptrend into a possible downtrend. A break of the support would be the confirmation of the pattern.
To review a current H&S pattern, please take a look at the 1-year chart of PSX (Phillips 66) below with my added notations:
1-year chart of PSX (Phillips 66) PSX had been on a year-long rally since its bottom in June. Over the last (3) months the stock has created a very important level at $60 (blue), which was also the “neckline” support for the H&S pattern. Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S occurred when PSX broke its $60 “neckline” support. So, the stock should be moving lower overall from here.
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 $60 support level. In short, whether you noticed the pattern or not, the trade would still be the same: On the break below the key $60 level.
The Tale of the Tape: After embarking on a nice uptrend, PSX confirmed a head & shoulders pattern. A short trade could be placed now, or could be entered on any rallies up to or near the $60 level.
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Massive Run On Physical Gold & Silver At UBS & Scotiabank / April 17, 2013
Today a legend in the business told King World News there is a massive run on physical gold and silver at UBS in Switzerland, and Scotiabank in Canada.  Keith Barron, who consults with major gold companies around the world and is responsible for one of the largest gold discoveries in the last quarter century, spoke about this remarkable situation and what it means for investors.  Below is what Barron had to say in part I of this exclusive interview.
Eric King:  “Keith, KWN has been reporting on shortages of bullion that are already developing.  What do you make of the run on physical gold and silver that’s happening here?”
Barron:  “There is absolutely no question that this was an orchestrated takedown in gold and silver the last few days.  We already know that ABM AMRO had gold missing, I believe it was out of allocated accounts, and they wanted to give people cash instead of returning gold bars to them.
At the Bank of Nova Scotia in Toronto the gold window has been absolutely swamped.  I have confirmed there were people lined up in droves recently for multiple-hours at a time to buy gold and silver bars and coins….
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Peter Grandich – Scary Times For Precious Metals Investors

from Financial Survival Network
We caught up with our friend Peter Grandich today. He’s as concerned about the recent precious metals smack-down as you are. He questions the volume and price action that caused these extreme price drops and believes that nothing has really changed. He urges you to keep the faith and understand that this event probably portends another worldwide economic crisis. The monetary system is less stable than ever before and the ability of governments and central banks to control events diminishing by the day. That’s why you need precious metals, to insure your wealth during periods of widespread economic uncertainty.
Click Here to Listen to the Audio
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Can good housing news overpower the breakdown of this bearish pattern?

News came out this morning that Housing starts topped estimates (Housing starts here)    Is this news already built into prices? Can this good news overpower the pattern below?

The DJ Home Construction index declined almost 90% from 2005 to 2008, leading the broad market lower.  Since its 2008 lows it has reflected a ton of relative strength when comparing it to the S&P 500.
The rally off the 2008 lows created a bearish rising wedge, which suggests a decline in prices two-thirds of the time. The index may have double topped at its 38% retracement level at (1) in the chart above. The index has broken support of this bearish rising wedge recently which must be respected.
The rise in this index and housing in general has been of great benefit to the economy and broad markets over the past few years and the news is positive this morning at well.  Are we looking at buy the rumor sell the fact?  Can today’s good housing news over power the pattern that has been created?
Personally I believe the Power of the Pattern, which is a collective picture created by the worlds investors/traders (not me) is the news to pay the most attention too!!!
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