HUI - Quite bullish but toppy in the very short term

Here is a daily chart of Huey showing a nice breakout but with some potential for a pullback AKA buying opportunity for those that would like to be aboard but are currently under-exposed. Edit (1:52) Jeez, Huey qualifies for a short term correction (price-wise) in one morning. If that is all there was it is a bullish sign of a market that can't wait to get higher and leave folks behind. Let's see how it continues to unfold.

Next leg of contraction upon us?

By now most people realize that the yield curve going from inverted to rising is not good for the economy. Sure, Wall Street troubadours can trumpet that banks are able to borrow short and lend long but right now many are trying to remain solvent with no thought of playing the yield differential game with the always consumption-willing American public. Like Marc Faber, I would be very cautious on commodities - including oil - here as a rising yield curve signals the next phase of economic crisis. The curve looks to have turned back up, needing only a rise above 20 on the STO by this chart to confirm the next leg. The Dollar is not broken and there is a chance it will NOT break lower from here as has been written in stone by virtually everyone. That could be a bear flag however and another leg lower would mean shear destruction of the American economy as inflation fears spin way out of control. No, best that Uncle Buck pulls the contrary move of all time here and heads up toward some of his resistance zones to relieve the pressure. Conveniently, many people are feeling the pressure to 'get to cash'. Go figure. ;-)

Still laughing boyz?

Fast Money Has a Laugh at Gold

Here's what makes it worth it boys & girls...

Hi Gary,

I am always impressed when commentators tell us exactly what they are doing with their own money. anyone can talk economics, not many can push the trade button and make money.

thanks to yourself, FSense, Mauldin, Hussman et al, i have been on the case with this market for two years now. Personally, i thought the whole kaboudle would hold together until after the Olympics, so it came a little earlier than i was anticipating, but i had already sold most of my property, and got the last one away sharpish after the credit crunch revealed itself.

it amazed me how many financial wizards i spoke to didn't realise that this was the big one.

anyway, i am 46 sitting on a pile of cash, in Northern Rock, a 100% UK government protected bank, earning more interest than i was getting with HSBC (figure that one out?)

been selling the nasdaq, and whilst i have been very disappointed that due to moving, operations, and a whole bunch of other lame excuses, i haven't made a fortune, i haven't done too badly either. i still don't think most people have any idea what is actually happening, and that so much more pain is yet to come.

these are indeed historic times, and i just hope i can make the most of them. never had a job in my life, but am now retired, so long as i don't live like a pre-crunch american!

I am a silver bull, but scared that deflation will deflate even that, so not quite sure what my next smart move is, loading up on treasuries, i think, ready for when everyone starts eating reality soup.

keep up the good work, i have tried on many occasions to thank various individuals on FS, but emails just bounce right back

best wishes and good luck, if gold gets to 800, i may well participate, but on the other side of the mine in silver! --JB

Is Your Bank Safe? This is not a drill.

This is not an ad I am putting up to scare people or make money from. In 2002 friends, family and neighbors looked on in amusement as yours truly went around eastern Massachusetts in search of a 'safe' bank. Why? Because I read Prechter's Conquer the Crash. I ended up settling on a US Treasury money market fund (also per Prechter) for convenience sake and only keep a checking account at a bank however. Short of cash stuffed in a mattress or gold bullion buried out by the old oak tree I recommend Treasury bills or the safest banks per Prechter and BullionVault (Zürich Vault) for convenience in owning real gold. Anything that is considered excess - and expendable - go ahead and speculate with. This is exactly my philosophy and I have been employing it consistently since I began public financial writing in 2004. So with that said, I highly recommend you click this banner, sign up for Club EWI and get the list of safest banks in each state if indeed you use banks in the US. But the information is valuable for international readers as well. The report includes:

• Five incredibly risky banking conditions.
• How even the FDIC can't really guarantee your money.
• The Top 100 Safest U.S. banks (two for each state)
• How you can choose a safe bank.
• Tips on international safe banking.

Some favored precious metals stocks

That is enough fooling around with the bulls on this blog for a while. Whether or not stock bulls capitulate and present a buying opportunity, it is a bear market and it would thus be a bear market bounce (BTW, the Trannies are finally breaking down from the megaphone I showed a while back - not good). I will chronicle their fate but am unlikely to join them any time soon in any way but trading - which I won't mention here.

I had been getting beaten like a red headed step child on my (mostly smaller) gold stocks for so long that it seems like I lost energy on posting about them. I held them and added the washouts, but really didn't watch them too closely, having made my decision to bag hold rather than trade at a certain point. It is funny how you can see a correction coming (all that Dow-Gold ratio reset/recalibrate stuff I wrote) and still get mentally fatigued by it.

But yesterday shouted WAKE UP! In that light I present below charts of some of the precious metals stocks I favor. I own several of them as they are among those about which I said "nuh uh, not selling" when I was preparing for the oncoming correction with HUI over 500 back in March. These are stocks, yeh? Well, shortly I'll be back to posting about what I think is really important like the Gold-Oil ratio (Otto's all over it too), Gold-Silver, Dow-Gold, etc. But for today given that a lot of people are trying to make up their minds about whether to take a poke at the sector again, we got stock charts.

What a day

I was out for the last few hours of trading and certainly found my screen interesting when I returned. My the bulls are in trouble. To be honest with you I really did not think the Fed was going to just roll over and play dead like they did yesterday. In fact, I had that old familiar feeling that there was a target on my back with a little yellow brick shaped object in the bull's eye. But instead the Fed is my friend and I think the markets are figuring out that something is really wrong; as in the kind of wrong I have been preaching about for 4 years running. Wrong as in something really big being insolvent. The United States of America is really big. You, me and many others have known this is a pyramid scheme of epic proportions but the timing - ah the timing - is always an issue. I think we are there.

The Dow is terminal here if this breakdown below 2008 lows and the 1999 highs is not reversed pronto. However the NDX is merely doing what I mentioned it would do weeks ago as it lost the rising wedge amid bearish divergence; it is filling gaps.

As for the precious metals let me just say EFFIN' BOOOYAAA YOU DOPEY CNBC BULLS!! Err, excuse me but I have been bleeding day after monotonous day as the jawbones and blow horns attempted to suck in a gullible public and whether or not this starts a trend - I think it will be at least a healthy rally - it was great to come back and see Huey up 23 points with conviction, all due to the Fed's lack of same. The above was very real emotion and you will not see it often because it is hazardous to your health as an investor or trader. Anyway, the charts...

$HSI - Looking closer at the Hong Kong Trade

Just because I am a financial blogger and website owner does not mean I have the answers. I have the answers that work for me and I hope some of the ideas I put out there have helped you as well. But I am just a lowly market participant - just like you - trying to make my way. Why the preamble and why the Hong Kong theme follow up? Because of this mail received from a reader:

Gary: Your EWH chart scared me, as I'm short the Hang Seng...but then I looked at the actual $HSI chart of the underlying index, and the technical pattern you see on the etf EWH just ain't there on the $HSI. The EWH is in USDs, and is distorted by currency fluctuations. It's the underlying index chart that tells the real tale, and as far as I can see, it looks fairly bearish, and did not just bounce off any long term support trend line today! If you draw an equivalent long term trend line on $HSI as you show on EWH, joining weekly lows from '06 and '07. That line got violated in March on $HSI , recovered, and broke below it again this Monday. The $HSI today remains below that equivalent trend line, not above as in the EWH! I'd rather bet on the index's indicators, not the USD-distorted etf's! --Bob

Now, I went in to the EWH trade without the feeling of "Dood, you got a no brainer here if you stick with it" that I like to have going in. It was more of a "let's take a stab at this POS and see if we can't ride along as a bull for a bit". It is a small position in relation to my overall stance and I am by no means a 'China, India, LatAm (BRIC), commodity mania, everything's gonna sky here!' bull. But nor am I a deflationist as you may know. I think all this stuff is going to take a righteous drubbing before any coming deflation scare ends. But with the US market sentiment in the toilet and touching the highs of last real bull market, and with the $HSI still not breaking major trends, I take a stab and control downside risk. I want to thank Bob for his views because they caused me to think really hard about this before I even finished my first cup of coffee. Edit (10:26) Way to go Bob! I am going to set a stop here that will likely be triggered shortly. Edit (11:02) And there ya go; 3% loss booked.

iShares Hong Kong

This is against my better judgment but I have been watching the major trend line in EWH for a few weeks now and bought it for a trade today @ 17.50 and the leash on this thing will be very short. A break of the trend and that will be all she wrote.

Beyond Free Week

EWI's Free Week will end soon. But in my inbox today I got a message from Elliott Wave International. In it, they deliver an update on FreeWeek they’re running for U.S. Stocks, Bonds, Gold, Silver and more (there’s still time to take part: click here).

But what really caught my attention was the great offer they presented for their most popular U.S. analysis package, the Financial Forecast Service, which combines Bob Prechter’s famous Elliott Wave Theorist with two other short- and intermediate-term U.S.-focused publications.

In the email was a forecast that was delivered by the EWI back in July 2005:

"This time, there’s no mistaking who the Enrons of the bust phase will be. They will be the firms now peddling adjustable-rate, no interest/nothing down and assorted other types of subprime mortgages."

– The Elliott Wave Financial Forecast, July 2005

With the downfall of some of the biggest investment companies (i.e. Bear Sterns) and departure of dozens of CEOs fresh in the public consciousness – and in the news headlines – I appreciate this forecast. It was delivered when the consensus among mainstream investors was that real estate was the ultimate capital-growth investment. Of course, we now know that real estate was peaking at that very moment.

There’s still time for you to read what Elliott Wave International sometimes calls “tomorrow’s news today” right now during their FreeWeek (click here). If time is an issue for you, you can even print out the publications before FreeWeek ends and read them at your leisure.

But, in trademark FreeWeek fashion, EWI has released a special offer that’s only available to those willing to act now. It’s an incredible 58% discount off the individual value of their flagship forecasting and analysis service, the Financial Forecast Service.

Click Here for the Exclusive Offer

Hmmm, if I were paranoid...

I would think that maybe da boyz is tryin' to paint gold stocks higher. I say "paint" because man, it sure ain't my miners that are green today because I own several smaller ones not named Goldcorp and I am getting creamed.

Where did I hear the theory that 'they' are pumping oil higher only to crash it but good? Was that the Kirby article? It makes sense though. I even ran across some publication that highlighted a large gold fund manager talking about gold to $5000 per oz. The big firms on Wall Street freely talking about $150-$200 oil? I smell a rat boys and girls and that rat may have an outright noxious stench come next week's Fed meeting. This is serious as commodities and inflation expectations have broken down the door and gotten out of the barn. In my opinion everything is on the table. Desperation will do that.

I don't want to scare readers unnecessarily but something is wrong and me bones tell me something is going to be attempted shortly. The Dow is in spitting distance of new bear market lows, inflation remains a huge issue and the Fed is losing credibility.

Edit (4:40) Very interesting end of day activity in some of the gold producing miners I either own or follow. Nah, this couldn't have been the work of shorts could it? Maybe Mr. Sinclair has got a point in his call to action against the shorts. 5 minute charts added for emphasis. Not that they all went up large, but there was some buying pressure end of day in a lot of these things.

Dow-Gold Ratio (DGR): Daily

In the last Biiwii.com Letter (which I should update but like the COW seems to be suffering from the ease with which blogging allows me to present ideas) I showed a monthly DGR chart and the down-gap in investors' spirits that needed to be corrected. We have not quite hit the monthly targets for bullish upside but the daily chart is now arguing that the resumption of the crushing of paper bulls could resume at any moment at least in comparison to a real asset like gold. Recall the next downside target upon resumption of the true big picture trend is a DGR of around 10. That is simply the next target. I expect much lower in the coming years.

In the shorter term bullish sentiment in gold needed to be worked off, no matter how much 'us against them' warfare some prominent gold bugs trumpet. It is interesting to note that even some 7+ years into a relentless bull market in gold (and bear market in DGR) how the mainstream clings to the truths of the previous secular stock bull market (gold bear). Despite short term misgivings by naughty casino patrons who know somewhere deep in their souls something is wrong, they cling to convention just as their training dictates - which is just the way Wall Street likes it. It is a hallmark of a solid bull market with plenty of upside ahead of it that the masses will not acknowledge it until much higher prices prove to them that it is 'okay' to join in. We will no doubt one day be treated to some real good sounding intellectualization about why gold is a bargain at $2000 or $3000 or $5000 per ounce, thus giving us the affirmation lacking since 2002 (in my case). I like it just fine that this affirmation is lacking by the public. Charts and fundamental realities tell a different story.

Rob Kirby on the mark

Rob Kirby, writing over at Financial Sense has written a great article entitled Something[s] That Need to be Said. An acquaintance in my personal life emailed me yesterday about the Ambrose Evans-Pritchard doom article and asked [quote] "Do you think it is alarmism, pretty close or just too late to move into cash?" Read Kirby's missive, then think. FWIW, here was my response to my friend's mail:

Ron, the article's premise, that 'debt deflation' will cure high prices is wrong. When the deflation in asset prices comes it is going to create a whopper of a continued inflation problem because inflation is now and always a matter of official and wrong headed munny policy and if oil, grains etc. do decline the Fed will inflate to beat the band with funny munny printed out thin air to fight the dreaded deflation.

But until we get there, yes, I suppose we are screwed. The Fed can't inflate while everybody is screaming about inflation. So this whole mess could bring about its own demise.

All that said, I think the article is alarmist and just the sort of media stuff that makes people make emotional decisions.

S&P 500: Big picture

I actually thought I might try to catch a bounce somewhere in here. I considered putting on a contrarian cap for the US market given the daily expressions of public fear and angst. But this big picture of the SPX, aided by my old friend the Andrews Fork, said "err, Gary... you sure you wanna do that?" Best to just keep cash at decent levels and await opportunities in areas that really matter to you." On the plus side, a rebound toward the broken lower tine of the fork would feel mighty good to relieved bulls. But the risk is just too high here in my opinion to be fooling around with this. Maybe a Hong Kong trade (China has not broken trends) or something like that will present itself but for the moment I am avoiding this mess.

EWI - Free Week

I have used Prechter & Co. for years as a balance to my perceived view of markets. In other words, if I am able to digest Prechter and his well thought out analysis and still remain contrary to some of his views, it has made me a stronger investor/trader. You know what I am talking about; precious metals. They have been flat out wrong here since 2001... but the depth of research that they are right about is substantial and I always want to know how Prechter & Hochberg are viewing things. In that regard I am looking forward to reviewing each and every day of FreeWeek and if you would like to as well, here is how to do it.

AIG - Not good

Isn't this the 2nd CEO they've canned in the last couple years? Billions in losses and an SEC investigation... and most damning of all, this chart. I did this chart as part of a personal project as I have policies with this company. AIG had a monthly close below the last vestige of what could be called major support. That resistance zone will not be overcome any time soon. This is a scary chart that tells us the 'credit crisis' - as the media likes to call it - is far from over.

Gold stuff and a look at SPX & USD

I am committed. During this correction I have been adding to my core gold miners with the idea that conditions will again turn in gold's favor. Those conditions would be a resumption of obvious credit and financial problems, a top in oil and commodities (vs. gold at the least), economic contraction again trumping inflation fears (and resulting re-steepening of yield curves) and a short term decline in interest rates but again, let's stress that it is the yield curve that really matters more than whether rates are rising or falling. The CoT data appear to be slowly improving and the public is not buying gold bullion (this is the longest stretch I have ever seen that nobody bought from BullionVault through my website or blog - a good indicator. So yeah, I am still hanging around waiting for the gold stocks to either finish correcting (per parameters shown previously) or prove me wrong, which I think is unlikely.

Anyway, what I am watching now is the broad US market, global markets (China/Asia in particular) and the Dollar. Here are a couple charts showing the S&P in what could be a bear flag and the USD still looking good but forming something of a rising wedge. On the front of the website I put up an SPX chart showing a rebound possibility, but it could have one more down leg before that gets underway. As it looks now the USD's risk vs. reward has become much less favorable in the 74's vs the 71's. Let me rephrase that. The USD's risk/reward has been garbage for years now because it denominates a country that has led the world in losing its way; losing its moral compass, economically and otherwise. But big picture is one thing and short term FOREX is another.

A couple items to highlight

1) Adrian Ash, the head of research at BullionVault, is one of my favorite financial writers. Not only is the dood smart, but he writes well and doesn't beat around the bush. In this short note he emphasizes what inflation is and what inflation is not: Inflation & Prices. It is imperative to understand the difference if you want to be successful in a big picture where monetary wankers are continually screwing up (read: G8).

2) You have no doubt seen the promos for INO.com's MarketClub and associated educational material over on the main website. MarketClub is basically a comprehensive trading service with all these features. I personally trade on my own gut, charts and instincts but I have looked into the MarketClub 'Trade the Triangles' system and think it has real merit, especially for people who cannot afford to watch the market all day or who would like an emotion-reducing, effective way to complete more winning trades and reduce losses. The 2 week free trial which started yesterday is recommended for folks who are looking for an edge in effective trading and discipline. Unlike some 'free' offers, there is no payment info required. Just a request that you give MarketClub your attention for the 2 weeks. Edit (1:20) A reader advises that giving your information to INO may invite spam if you are not careful. I suggest reading INO's privacy policy first and using only 'personal' information (email, phone, etc...) that you don't mind having exposed. Or alternatively, avoiding the deal altogether if privacy from marketers is a priority. <--- a great sales pitch isn't it? Edit (6:53) Now that I've blown it as a sales guy, here is the scoop. Apparently what you don't want to do is opt in to any requests for other 3rd party services. The MarketClub trial should be okay though from what I gather. Anyway, I just feel it is important to not be a pitch man and honestly tell you what I know. I don't exist to sell services anyway, although the BullionVault service is one I totally believe in :-) and I think INO is a good trading service. Okay, done with this now and back to market stuff.

G8 - Predictable hilarity

From the NY Times:

Surging Oil and Food Prices Threaten the World Economy, Finance Ministers Warn

By MARTIN FACKLER

Published: June 15, 2008

OSAKA, Japan — The global economy faces a one-two punch from slowing growth and soaring fuel and food prices, finance ministers from the world’s richest nations warned Saturday, though they stopped short of offering concrete solutions.

Duh...

Finance ministers from the Group of 8 industrialized nations wrapped up a two-day meeting in Japan that was dominated by talk of rising petroleum prices, which have set off street protests across the world. In a statement, the ministers said higher prices of oil and other commodities threatened the world economy at a time when it was still reeling from the collapse of the housing market in the United States.

Blah blah blah...

The ministers urged oil-rich nations to increase production to help reverse a trend that has pushed up oil prices to nearly $140 a barrel, a record. The ministers also warned that the rising cost of oil and other commodities could spur broader increases of prices and wages.

Let's make the producing countries pay and remember to continue scapegoating those greedy oil CEOs and 'speculators'.

The specter of fighting inflation as the ministers try to revive their flagging economies would “make our policy choices more complicated,” the statement said. The combination of inflation and low growth, known as stagflation, is difficult to escape because steps to spur economic activity, like lowering interest rates, can also lead to price increases.

Please Mr. Market, give us a break here. We can't inflate as usual because the last round of inflationary panic policy has not err, been digested so well by the commodity complex.

“For a long time, the world economy enjoyed a combination of robust growth and low inflation, but it now faces headwinds,” the statement said. “Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide.”

Chickens home to roost as they say. Monetary chickens... they're all over our doorsteps! How do we get rid of these damned chickens!?

The Group of 8 nations — Britain, Canada, France, Germany, Italy, Japan, Russia and the United States — are many of the world’s largest consumers of oil. But most have little say over production, and over drivers of oil prices like rising demand from China and India.

...and increasingly diluted paper.

The ministers also failed to find common ground on whether to take action to curb speculation in oil futures markets, which some have blamed for exacerbating price increases. While Italy called for measures like making futures trading more expensive, this was resisted by the United States and Britain, where big futures markets operate.

G8 as politburo? When in doubt, obfuscate and regulate!

“It is sometimes difficult to distinguish between an airline that may hedge its fuel price, which is perfectly sensible planning, and someone who is speculating or even gambling on the price of oil,” said Alistair Darling, Britain’s chancellor of the Exchequer.

It's a free market. Of course the airline has a right to hedge just as the spec has a right to make or lose money. Hands off commie.

The American Treasury secretary, Henry M. Paulson Jr., attributed higher oil prices to changes in supply and demand and a failure by oil-rich nations to build enough wells and refineries.

Zzzzzzz... always a handy excuse that will never go anything like this: Greenspan flooded the system with credit to end the cyclical bear market in 2002. That credit found its way into assets of all kinds, first and foremost housing. That game is over and oil is one of the latest. Funny munny traversing the globe in search of a story.

“At its heart, this run-up in price reflects long-term trends in global supply and demand and strong economic growth coinciding with a period of minimal investment in oil production,” Mr. Paulson told reporters. “This is not something that lends itself to short-term solutions.”

Unlike your healthy long term monetary policies, eh?

As a compromise, the ministers asked the International Monetary Fund to look into what was driving the recent surge in oil prices. The ministers also called for aid to help developing nations in Africa and elsewhere deal with higher prices of commodities, particularly food ingredients.

Look in da mirror boyz.

The ministers met to help work out the agenda for next month’s summit meeting of Group of 8 heads of state in northern Japan. Speaking to reporters after the meeting, they said they also discussed steps to soothe financial markets and help developing nations fight global warming.

The global warming craze will seem like child's play if these creeps lose control of the financial system. Stick to screwing up what you know how to screw up.

One item not discussed, despite wide expectations that it would be, was currencies, and particularly the possibility of intervention to prop up the slumping United States dollar. Japan’s finance minister, Fukushiro Nukaga, the host of the meeting, said currencies were discussed only on the sidelines.

Ha ha ha... he he he... dat's a good one boyz! :-)

At a news conference, Mr. Paulson brushed aside questions about intervention.

“A strong dollar is in our nation’s interest,” he said, adding that solid fundamentals in the American economy would eventually help the United States currency recover.

Okay, you're killin' me here.

End of Week Status Update

As noted a few posts ago, things are certainly getting interesting lately. Jawbones have been getting a lot of exercise with the Fed, ECB and China falling all over themselves to declare how tough they are on inflation. They are not tough. Jointly, they and other global bankers created this mess. But that is a screed for another time.

For this entry, I am going to keep the charts to a minimum. Just a look at the US Dollar's daily progress because so much of the goings on in global markets revolve around talking up Uncle Buck to quiet the din of a suddenly inflation sensitive American public. Here is the Dollar in a well defined uptrend channel. The channel top will present some resistance which may be good for a trip back down to the channel bottom before another try at the stiff lateral resistance and 200 day moving average. That will not be easily surmounted. But in the meantime the Dollar Heads for Biggest Weekly Gain in Three Years Before G8.

Speaking of the dear old global consumer of last resort, it appears that Americans may be spooked about inflation but that apparently did not inspire them to invest in something tangible and timeless with the government's rebate [alt: bribe, restitution, band aid on an open wound inflicted by a monetary chainsaw] checks sent out in May. No, the public went out and did what they always do; they bought an LCD television to watch the NBA finals with. Wall Street cheered the much higher than expected retail numbers this week without much talk of the reason behind it.

Meanwhile, I continue to hold my gold stocks while being savaged daily. As you know, I saw this correction coming, took risk management action (it never seems like enough though) and have set parameters whereby this correction 'should' end if all is healthy and well. I believe that a short term top in the Dollar will coincide with a rebound in the gold stocks and curiously, the broad stock market as well. Very recently the gold sector and the stock market have been declining together and I expect them to rise together. The question will then become "which is real and which is Memorex?" as the Trannies sport a reverse symmetrical triangle topping pattern and decide whether they will rebuff Dow theorists who began getting excited perhaps a bit prematurely. As for the gold sector, it will be 'Memorex' if one can believe that Paulson and Bernanke are for real as inflation fighting, strong Dollar advocates. Can one believe that? In one's dreams I suppose.

Oil continues to be a bothersome wild card that is really messing up the play in the gold miners as contraction vehicles. But as my friend Otto says, gold is just more of a value for long term thinkers when measured in oil. We really needed Paulson put some lipstick on the Dollar and we really need oil to decline. Meanwhile, yield curves are resetting from panic highs. They did the same thing in 2002 before heading higher. Right now the $TNX-$IRX ratio is between a 38% and 50% Fibonacci retrace. I expect the yield curve to head higher when the Jawbones get a handle on inflation expectations. We should be rooting for the Jawbones in the short term, not against them.

There is much more to come and as they say, "when the going gets tough, the tough get going". It is time to get going with analysis that lands us on the right side of the markets no matter what may lay ahead and I am again getting interested in the Asian and other global markets and select US stocks/sectors. But for now I am going to get going (sloppy word play, I know) and bid you a great weekend. The weather is amazing in the Northeastern US lately.

http://www.biiwi.com
http://www.biiwii.blogspot.com

Gary

HUI & USD weekly charts

Regardless of fundamental beliefs, I make sure I keep in mind that fundamentals are fundamentals and charts are charts. It is great when they both say the same thing but it's a funny thing about funda's; they tend remain in place while the charts give clues that the they will be changing in the future. If we are to believe Bernanke and global central bankers, a new era of real inflation hawkishness is upon us. I believe Bernanke like I believe in Santa Claus, the tooth fairy or that NHL referees call good games. But policy makers would have us believe things are changing and it is wise to watch the charts closely on the odd chance they might jawbone this thing further than many think.

For HUI the 70 day ema and several other data points show the parameters. The H&S if it is an H&S top, measures to a ridiculous 240. But if somehow we get the kick save of the century by panicked monetary authorities it will not be so ridiculous. Before such an event becomes possible however Huey would have to violate a ton of support as noted on chart.

USD? Well here is its weekly progress. "Ho-hum, so the world hates me" says Uncle Buck on the way to its first real resistance area.

Tranny megaphone intact

Tranny is testing the lower limit of the megaphone top pattern. Bearish divergence argues it will break down. But the uptrend is not lost and this index could certainly sport a hammer that knocks it back to the top of the triangle. Err, I'd say oil is important here.

Are you into it?

This is a time when you either know you are into the markets - for all the ups, downs, twists and turns - or you are not. Either your blood gets pumping or you turn away in disgust. My blood is pumping.

Suddenly, global officialdom is concerned about inflation. After creating the genie through so much bad policy - our US helicopter pilot right up there - central banks are trying to jawbone it back into the bottle. Trichet did so last week and the Dollar tanked vs. the Euro. On this side of the Atlantic, da boyz at da Treas and the Fed did the same. Chinese markets are rolling over because of the Politburo's increased vigilance against inflation. People think these clowns set policy but they are simply reacting to public and market angst about the results of all their previous inflationary policy - and the expectations of same going forward.

The US Fed for example cannot do its job as agent of inflation if everyone is screaming about the declining Dollar while paying up for vital resources like oil... like FOOD. I really believe Bernanke is an academic who actually believes his own b/s and thinks he can play good cop and bad cop alternatively as the situation demands. In Q1 he was required to yank the throttle full force and flood the system with new credit while sweeping all those toxic and deadly vehicles - the likes of which Wall Street had enriched itself with - under the Fed's rug to be repaid by the public at a later date. This was inflation - happening right before your eyes - that will be manifest in one way or another down the road. Credit was being created as needed for banks that by all rights should have died miserable deaths right then and there. Instead they play a game they cannot lose as the Fed, with the public still asleep at the switch, did its thing. The two major candidates for president are clueless about economics. The congress is clueless about economics. The public is clueless. We sit back and watch an academic orchestrate a real time experiment in Ponzi economics and hope he's got it under control. Yep, this is healthy.

Meanwhile, yesterday the markets fell for the bad cop routine. The bond market has told Bernanke that he must act tough, so he did. The question of course is whether he is prepared to follow through. With the world's air supply polluted with trillions of financial toxins and the outward signs of inflation forcing policy makers to go all bad cop on our ass(ets), this should be interesting indeed. Just one domino is all it takes for confidence to be lost in an environment where jawbones and possibly policy, are tightening. Yes, interesting times.

Chart Study - CRDC

While getting pummeled in the gold stocks awaiting resolution to scenarios 1 and 2 in the previous post, I thought I would put up a great chart of this small medical company, Cardica, Inc. It has been speculated that this company, which makes a complimentary minimally invasive product to the Intuitive Surgical (ISRG) DaVinci Robot, could be a buyout target of same. That is just speculation of course and the company should be looked at on its own independent merits, which I am starting to do.

Having intimate knowledge of ISRG (a former customer in my day job) and upon seeing the CRDC chart while rummaging around the internet, I wanted to use it as a chart study. I first saw it this morning before the market open and noticed it sneaking out of the down trend. Sneaky sneaky CRDC. Frustratingly, it is now exploding higher as often happens when enough traders see this event. So I will have to sit on my hands, do some more reading and if I like the company think about a pullback point.

But for now, I think this is a classic example of a grinding consolidation down to strong support with bullish divergence in the indicators. A good chart study indeed. Edit (1:02) ARRRGGGHHH! CRDC up over 20% today and would make a nice counter play to the humiliated gold stocks if only I owned it. Edit (4:35) CRDC ends with a one day gain of 35% after sneaking out of the downtrend. I am doubly bummed out because if I had at least had a couple hours to look into it I would have likely bought. Now I won't touch it. But I sure do wish I had my trading cap on this morning. Would have made the bludgeoning of my core holdings (compliments of Benny's jawbone) easier to take. Momma told me there'd be days like this. I suspect a fair amount of you good readers have had a day or two like this yourselves. ;-) Great chart study though. Pissa.

HUI/Gold Ratio - Favorable

You can look at this chart at least two ways...

1) MACD is coiling for a move (one way or the other), ROC has bullish divergence and the thing has the look of a grinding bullish consolidation. In other words, one can be poised for a bullish break out above the noted downtrend line or

2) We will get another in a line of buying opportunities that this market has been generous enough to present. This would be signaled by an RSI near 30 and if bullish divergence in the indicators were to persist, so much the better. The beauty of corrections, especially in this sector, is that they tend to drain the spirits of the majority at the precise time that they should be getting bullish.

I remain ready for either of these scenarios; a break of the downtrend line to the upside - which would be a big time positive signal - or continued correction, which is becoming less and less likely as the broad market poops itself led by a Banking Index on life support and the Trannies (and all those Dow theory bulls) megaphone. Caveat: There are still some casino patrons carrying on in a bullish manner, notably in the small caps. But even there the RUT & SML action has the look of bearish rising wedges.

Gold-Oil... busted megaphone

Reverse symmetrical triangle failure but it says here (and in the lower panels) that gold is still bottoming vs. oil. Patience.

Gold/Oil - Still in a Sym-Tri

Yesterday's intraday GLD-USO chart showed a break above short term resistance, probably owing to some sort of difference in share or fee structure in the funds. I say that because the $GOLD/$WTIC chart shows Gold-Oil still in the reverse sym-tri bottoming process. Just FYI.

HUI Daily Chart

Last week I posted a weekly chart of HUI showing an apparently routine and a-okay pullback. That remains the case although as written earlier I would have preferred a sharp pullback from 460 to test the April low instead of dealing with the 'potential' right shoulder that is forming now. But whether it is just psychological or not, we have to deal with its 'potential' (measured target of 240) until such time as it goes away. It is not a well formed, rolling shoulder and gold stocks have certainly dealt with would-be H&S's before and negated them, but there is the potential.

Unfortunately, if that potential comes to fruition, it will make me very wrong on my entire investment stance as it will mean gold stocks have entered a cyclical bear market. Now, these kinds of fears are hallmarks of bull markets. The plan here is to remain aboard as long as the weekly chart remains intact and view a pullback to that lateral support zone as an opportunity. A lot will depend on the lower panel indicators. If in conjunction with a sharp decline into support, the indicators reset to buying-op over sold levels... well, we know the drill by heart. Then it will be time to hopefully wave goodbye to the hangers-on and proceed with the bull market. Again, it's either that or I am totally wrong in my entire orientation. We will find out soon.

Trannies shouting through a megaphone

Those living on the sunny side of the street see the Transports flirting with new highs and crude oil finally breaking down and think happy or at least hopeful thoughts. Pardon me, but with momentum indicators rolling over and sporting bearish divergence along with same on ROC (rate of change) and the reverse symmetrical triangle forming on the Trannies, I would not get carried away with the happy talk.

Nominal Gold - Monthly

I know that all the ratio charts I post can bore the heck out of some readers, but they are vital to getting an early read on macroeconomic turns. They even bore me sometimes. In fact, I may start incorporating more charts of individual stocks because after all, that is where the action is if like me, you trade stocks and options as opposed to futures or Forex.

But for now here is a nominal monthly chart of gold. No ratios, no comparisons to anything. Just gold and its progress - in USD terms - bleeding off the excesses of the January spike above 1000. Really, when you think about it, gold at 800? What is wrong with that? I'll tell you what is right with it... what is right with it is that we are getting all those lower panel indicators reset from severely over bought to areas that have provided support throughout this secular bull market. What is also right with it is that we are getting into an area of confluence with the 18 month ema (which has provided support for the entire bull), the green dotted trend line and the 62% retrace level. There is a lot right about this chart and I will tell you, despite the cries of foul by gold bugs against the evil "cabal" there was a lot wrong with the blown off and over bought chart back in January. I feel much better now.

There will come a day when this bull market ends. But for now and the foreseeable future, this blog will continue to be a big picture perma bull on gold and gold stocks. This is not a gold blog and biiwii.com is not a gold website. It's just that this is in my view the most solid bull market on the planet currently so it is the one that gets the most of my attention.

Gold-Oil intraday using GLD-USO proxy

A few days ago I showed a chart and wrote about gold hammering out a bottom vs. oil. Well today, we are getting confirmation. The world is changing and the conventional legions are again lining up to be duped into the all one commodity complex theme. The Banking index is in danger of crashing (new lows going back to 2003 and yet it is all one commodity complex? Give me a break. This is FINANCIAL and financial means money or in the case of modern finance, munny. Very funny munny.

Gold is different. Gold/commodity complex, gold/base metals... they have bottomed and now crude joins the party. Interestingly gold/silver is still just hanging around which is neutral to bullish for the precious metals sector. But it should be noted that gold/silver looks bullish (bearish for just about everything and possibly bearish in the short term for the PM miners as well). The time is at hand. I hope you have carved out a game plan.

5 Keys to Successful Trading

Here is a new Traders' White Board from INO.com that I highly recommend. It is a short, free educational video that covers everything I consider to be vital in trading. Especially #5 Don't let winning trades fool you where Adam says "winning trades and losing trades are all part of trading; you've got to treat them almost impartially". No registration. Nothing. Just a sensible video. Enjoy. Also, for review, all 8 TWB lessons are archived here.