Thursday, June 20, 2013

Turk – Global Markets & Banking System Face Major Collapse

from King World News
With the Fed kicking off its two-day meeting, today James Turk warned King World News that investors need to be prepared for global markets and the banking system to “literally collapse.” Turk also spoke about what Western central planners face going forward and the accompanying market risks and dangers.
Turk: “One of the most basic principles on which the Federal Reserve under Ben Bernanke has been operating is going to be severely tested tomorrow, Eric, when we get the Fed’s announcement after this current FOMC meeting concludes.
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Cree, Inc. (NASDAQ: CREE)

Cree, Inc. develops and manufactures lighting-class light emitting diode (LED) products, lighting products, and semiconductor products for power and radio-frequency (RF) applications. Its LED products include blue and green LED chips that are used in various applications, including video screens, gaming displays, function indicator lights, and automotive backlighting; LED components comprising lighting class packaged LED products for lighting applications, and surface mount and through-hole packaged LED products for video, signage, general illumination, transportation, gaming, and specialty lighting applications. The company also offers LED and traditional lighting systems for indoor and outdoor applications. Its power and radio frequency (RF) products include SiC-based power products comprising Schottky diodes, as well as SiC metal semiconductor field-effect transistors that are used in power factor correction circuits for power supplies in computer servers, solar inverters, and other applications; and RF devices, including a range of GaN high electron mobility transistors and monolithic microwave integrated circuits (MMICs) for military or commercial applications.
To review Cree's stock, please take a look at the 1-year chart of CREE (Cree, Inc.) below with my added notations:
1-year chart of CREE (Cree, Inc.) Notice the rising wedge I have outlined on the chart of CREE. A rising wedge price pattern is essentially a type of triangle formation in which the stock (CREE) has formed an up trending resistance line (red) and an up-trending support level (blue). These two trend lines converging on one another combine to form a rising wedge, which is a terminal pattern.
Confirmation of this pattern would occur if the stock broke the uptrending support. Any break out of the bottom of this wedge would also coincide with a break of the short-term support at $60.
The Tale of the Tape: CREE has created a rising wedge pattern, which should lead to a break lower. A short trade could be entered on a break out of the bottom of the wedge, which should be on a move below the $60 level. If a trader believes the stock has higher prices in it's future, a long play could be made near $60 with a stop placed below that level.
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Whenever Margin Debt Goes Over 2.25% Of GDP The Stock Market Always Crashes

Bubble - Photo by Jeff KubinaWhat do 1929, 2000 and 2007 all have in common?  Those were all years in which we saw a dramatic spike in margin debt.  In all three instances, investors became highly leveraged in order to "take advantage" of a soaring stock market.  But of course we all know what happened each time.  The spike in margin debt was rapidly followed by a horrifying stock market crash.  Well guess what?  It is happening again.  In April (the last month we have a number for), margin debt rose to an all-time high of more than 384 billion dollars.  The previous high was 381 billion dollars which occurred back in July 2007.  Margin debt is about 29 percent higher than it was a year ago, and the S&P 500 has risen by more than 20 percent since last fall.  The stock market just continues to rise even though the underlying economic fundamentals continue to get worse.  So should we be alarmed?  Is the stock market bubble going to burst at some point?  Well, if history is any indication we are in big trouble.  In the past, whenever margin debt has gone over 2.25% of GDP the stock market has crashed.  That certainly does not mean that the market is going to crash this week, but it is a major red flag.

The funny thing is that the fact that investors are so highly leveraged is being seen as a positive thing by many in the financial world.  Some believe that a high level of margin debt is a sign that "investor confidence" is high and that the rally will continue.  The following is from a recent article in the Wall Street Journal...(more)
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Stay Short Gold, Go Long Crude: Krinsky

After a nine-month slump and a 25% haircut, investors who are hungry for a bargain might be tantalized by the chance to buy gold (GLD) for $400 an ounce less than its recent peak in October.

But according to Jonathan Krinsky, chief technical market analyst at Miller Tabak + Co., you might want to wait a bit before dropping that ticket, because his work shows that gold is still vulnerable.
"All the major moving averages are still above [the current] price and declining," he says in the attached video. "Momentum is mediocre at best and, to me, that suggests that there really could be another leg down here."

As much as there have been — and will be — instances of fear gripping the markets and bolstering the case for gold, Krinsky says part of his bearish call is based on the fact that so far any such rallies have quickly faded or proven to be unsustainable. "You still see those very short-term spikes, but they're much smaller than they had been and are immediately followed by a give back."

But as much as gold looks weak here, Krinsky says crude oil (CLX13.NYM) looks very strong at current levels, having gained about 7% so far in June.  (more)

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McAlvany Weekly Commentary

Dollar Deterioration Sets Stage for $5,000 Gold

About this week’s show:
-Emerging markets triggering next global recession
-Trade surplus countries are inflation factories
-Gold charts firming, FED dictates short course
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Real Estate 101: Housing price conundrum (part 2)

part 3  

Part 4

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