Dow Jones to Gold Ratio

The fourth consolidation pattern within the secular down trend of the Dow Jones Industrials to Gold ratio is nearing a technical break down. A decisive break suggests at least a retest of the 2009 lows. A falling ratio represents the out performance of gold relative to stocks.

Dow Jones Industrials to Gold Ratio:


Dow Jones Industrial to Gold Ratio Fourth Consolidation Zoom:

Down with 'Too Big to Fail': Angry Americans march on Wall Street

Wasn't hard to anticipate the inevitability of such events.



Source: youtube.com

Consumer rebound gives economy solid boost in Q1

MOPE always has an interesting choice of words - heals. When the cause, excessive consumption, is positioned as the solution, it illustrates that very little has changed.

The Commerce Department's initial estimate of the economy's performance in the January-to-March quarter, released Friday, provided more evidence that the economy is strengthening. It marked the third straight quarterly gain as the United States heals from the longest and deepest recession since the 1930s. Still, growth was weaker than in the fourth quarter of last year, when the economy grew at 5.6 percent.

The Era of consumption that has depleted American savings and fueled the culture of excessive debt remains in tact. Personal consumption expenditures as a % GDP is 71%. This is only a tick below the all-time high of 71.1% in 2009.

Personal Consumption Expenditures (PCE) As A %GDP and Personal Consumption Expenditures As A %GDP Average from 1947:


Savings (SAV) As A %GDP and Savings (SAV) As A %GDP Average from 1947:


Gross Domestic Private Investment, or money used to increase tomorrow's standard of livings, continues to drop. This is the American conundrum - Is the illusion more important the tomorrow's standard of living? These trends suggest that it is.

Gross Domestic Private Investment (GDPI) As A %GDP and Gross Domestic Private Investment (GDPI) As A %GDP Average from 1947:


The up trend in big government remains in tact.

Government Consumption Expenditures and Gross Investment (GCEI) As A %GDP and Government Consumption Expenditures and Gross Investment (GCEI) As A %GDP Average from 1947:


When causes of the problem as spun as solutions, it suggests that nothing has changed. Once the current liquidity phase ends, another painful hemorrhage phase will emerge. Let's not hide behind the illusion. It is the hemorrhage phases that are polarizing this nation.

Source: yahoo.com

US Long Bonds

The gap formed on 4/27 was filled on shrinking volume. This is a bullish setup. The overhead gap resistance is pulling on price. Today's COT release will indicate if leverage money flows continue to fade price direction. For example, the decline into critical neckline support several weeks ago was supported by massive inflows. Will this rally be met with outflows?

US Long Bonds ETF (TLT)

Ravitch: New York Deficit Could Swell to $15 Billion Next Year

33 States of the USA are headed for Bankruptcy.

Jim

Speaking to a midtown audience of real estate developers, Ravitch said he does not expect the state to reach a budget deal any time soon, despite the state's desperate fiscal situation. The budget is nearly one month late and Ravitch says there are no external triggers forcing lawmakers and the governor to act.

"States can’t go into bankruptcy. They are not included in the bankruptcy code," he says.

Source: wnyc.orga

Gulf Coast oil spill could eclipse Exxon Valdez

What is certain to be an ecological disaster could have far reaching economic and political consequences. Be certain the markets are watching this one closely.

An oil spill that threatened to eclipse even the Exxon Valdez disaster spread out of control and drifted inexorably toward the Gulf Coast on Thursday as fishermen rushed to scoop up shrimp and crews spread floating barriers around marshes.

Source: news.yahoo.com

Credit-rating agencies under fire in Europe crisis

The market rather rating agencies discount risk. It was the market that attacked the weak positions in Europe. They will soon do the same in the United States. Forget about the rating agencies. They are already too political to be preemptive.

Germany's foreign minister went so far Thursday as to suggest that the European Union should create its own rating agency. He spoke after downgrades of Greece and Portugal roiled financial markets and stoked fears that Europe's debt crisis was spreading.

Source: finance.yahoo.com

Israel warns against giving Iran too much time

The United States is "doing the right thing" by pursuing a diplomatic solution to the threat that Iran may soon gain a nuclear weapon, but the world cannot afford to wait too long, Israel's defense minister said Tuesday.

Source: washingtonpost.com

Wisconsin pension funding for teachers falls $10.9 billion short, report says

This problem is not limited to Wisconsin. This supports not only the continuation of infinite QE policies but also more cutbacks for public employees.

Wisconsin's statewide pension system for public employees may not be as well-funded as the state reports, with a new study estimating it could be as much as $10.9 billion short in meeting its obligations just to teachers.

While the state estimates that the Wisconsin Retirement System is nearly 100% funded, the report by the conservative Manhattan Institute and Foundation for Educational Choice warns that the amount could be far less.

Source: http://jsonline.com

7-Year Auction Results

The 7-Year Note auction results follow the lead of yesterday's 5-Year Note auction. Direct and Indirect participation rates continue to increase. Primary Dealers participation rates continue to decline.

7-Year Note Trends:


Source: treasurydirect.gov

Euro Gold

The perception of currency strength in the fiat world is relative. Currency A is rising against currency B, thus, A is stronger than B. This logic, however, can be misleading if both A and B are declining relative to stable reference such gold.

The recent acceleration of the Euro price of gold illustrates how the Europeans are currently leading in the "race to the fiat bottom." Rest assured that this leadership will change frequently over the coming years as long as devaluatoin remains a politically viable option.

Euro Gold:

Harrisburg, Pennsylvania, Council Told to Consider Bankruptcy

America has it's own PIIGs but its hardly front page news.

Harrisburg, Pennsylvania, which has missed $6 million in debt payments since Jan. 1, should consider seeking Chapter 9 bankruptcy protection, City Controller Dan Miller told a three-hour special committee hearing.

Source: bloomberg.com

Agnico Eagle (AEM)

Anico Eagle (AEM):

Honeybee-Colony Losses Widened Last Winter, USDA Says (Update2)

Dwindling phosphorus supply, and important component of fertilizers, and decline bee populations suggest higher food prices.

Managed colonies lost to all causes reached 33.8 of the total, compared with 29 percent a year earlier and 35.8 percent during the winter of 2007-2008, the U.S. Department of Agriculture said today. About 28 percent of surveyed beekeepers reported losing hives without any evidence of dead bees, a sign of Colony Collapse Disorder, compared with 26 percent the previous year and 32 percent the year before that.

Bees are essential for the health of pollinator-dependent crops such as almonds and blueberries.

Source: bloomberg.com

‘Strategic’ Mortgage Defaults Reach 12%, Morgan Stanley Says

Decisions by homeowners to walk away from mortgages they can afford are accounting for more defaults, according to Morgan Stanley.

About 12 percent of all mortgage defaults in February were “strategic,” up from about 4 percent in the middle of 2007, New York-based Morgan Stanley analysts led by Vishwanath Tirupattur wrote in a report today.

Goldman set to settle SEC fraud case soon: report

Pay the fine and admit no guilt.

Goldman Sachs may soon settle its fraud case with the U.S. regulator, the New York Post reported on Thursday, opting to end a legal fight rather than endure a repeat of the public flogging it received this week.

Source: finance.yahoo.com

Stocks climb on earnings, drop in jobless claims

A weak underlying economic backdrop, similar to 1932-1937, still exists. Do not confuse the manifestation of global capital flows (infinite QE), rising equity prices, as a reflection of underlying economic strength. In other words, a change in the global capital flows will change the trend(s) regardless of the economic backdrop.

Signs of an improving domestic economy are helping send stocks higher for the second straight day. Major indexes all rose in early trading Thursday.

U.S. Large Cap Total Return Index (LCSTRI); S&P 500 Total Return Index:


Average Weekly Initial Claims State Unemployment (AWIC) And YOY Change:

Senators give penny some thought

Gresham's law is commonly stated: Bad money drives out good, but more accurately stated: "Bad money drives out good under legal tender laws".

Other countries, including Britain, Australia, New Zealand, Israel, Sweden, Norway and Denmark, have gotten rid of their lowest currency denomination.

Why?

“In fact, a penny cannot even buy a penny anymore. It costs far more than a cent to produce and distribute each penny.”

This is a symptom of devaluation

Source: ctv.ca

EU: Euro-Zone States Decided Member Default Isn't An Option

Statement out of EU today!
QE to Infinity

Jim

"According to a European Commission spokesman, the 16 countries that use the euro decided not to allow any euro-zone nation to default on its debt, refuting growing speculation that Greece might default."

Source: online.wsj.com

5-Year Treasury Auction Results

Today's auction shows the highest participation rate for direct bidders since January 2009, and second lowest participation rate for primary dealers. See the red circles in the table below.

Do not think for a moment that EU member States are the only ones having problems finding buyers for their debt. The big difference is coverage. One is front page news while the other is embedded within the footnotes of government releases.

5-Year Note Auction Results:


Source: treasurydirect.gov

S&P Downgrades Spain to ’AA’; Outlook Negative

Who's next?

Spain’s credit rating was cut to AA from AA+ by Standard & Poor’s Ratings Services. The outlook is negative, S&P said.

Source: bloomberg.com

Gold Stocks relative to Stocks

Perception must not blind you from the truth. Many investors have the perception that gold stocks have and will continue to under perform the stock market. While gold stocks have been grinding higher since 2003, they will soon accelerate relative to stocks. This will be illustrated by a sharp downward push in the U.S. Large Cap Stocks Capital Appreciation Index to S&P Gold Ratio. The downward push will resemble those of 1929-1932, 1932-1938, 1970-1974, 1976-1980, and 2000-2003.

U.S. Large Cap Stocks Capital Appreciation Index (LCSCAI); S&P 500 to S&P Gold Ratio (GPM)*:* S&P Gold from 1945, Barron's Gold Stock Index from 1939-1945, Homestake Mining

RBS Says Impairments Likely to Remain High in 2010

The headline should read that when the British stop giving away low cost money that can be utilized at higher returns, the core business is in the crapper.
Then the problem starts.

Jim

“RBS has begun its transition from problem to opportunity - an opportunity for the U.K. government, without whose decisive support we would not be here today,” RBS Chairman Philip Hampton said in a statement released before today’s annual shareholder meeting in Edinburgh.

Unfortunately the carry trade, as it did from 2003-2007, will do little to foster the investment necessary to create long-term job growth.

Source: bloomberg.com

Greek Junk Contagion Presses EU to Broaden Bailout (Update2)

Germany delays, the crisis continues to spread, and there's little that can be done other than provide the perception of control. This problem is not limited to Greece or the European Union. The budgetary and funding crisis is spreading within the States of the American Union.

Europe’s worsening debt crisis is intensifying pressure on policy makers to widen a bailout package beyond Greece after a cut in the nation’s rating to junk drove up borrowing costs from Italy to Portugal and Ireland.

Source: bloomberg.com

Meat Prices Beefing Up

Good thing the CPI's substitution method minimizes the impact of such rising costs. Unfortunately, BBQ'ing pine cones doesn't taste as good and won't bring in a lot of friends.

Prices on beef, port and chicken have already gone up, and the U.S. Department of Agriculture said on Tuesday that they could continue to rise, 10TV's Jeff Hogan reported.

Beef and pork prices have jumped more than 20 percent recently and chicken prices have also increased.

Source: 10tv.com

US Long Bonds

March gap was filled and breached on a sign of strength yesterday. The gap formed as it "jumped the creek" should provide support.

US Long Bonds ETF (TLT):

Greek Regulator Bans Stock Short Selling From Today (Update1)

Where have we seen this its the short sellers fault logic before? Some may remember that shorting financials was banned in the USA shortly after the collapse of Lehman.

Greece’s securities regulator banned short selling on the Athens stock exchange for two months from today as stocks around the world continued to fall after Greece’s credit rating was cut to junk.

Source: bloomberg.com

World markets tumble as euro debt crisis escalates

World markets tumbled Wednesday amid acute fears that Greece's debt crisis would spread like wildfire through Europe after a leading credit ratings agency downgraded the country's debt to junk status and cut Portugal's rating as well.

The fourth consolidation pattern within the downtrend since 1999 will fail eventually. The longer price struggles with the 1992-1994 resistance, the more difficult it will be to overcome.

NYSE Composite to Gold Ratio:


Source: finance.yahoo.com

States Bristle as Investors Make Wagers on Defaults

Mark my words.
This is the beginning of the end.

Jim

As U.S. cities and towns wrestle with financial problems, investors are finding a new way to profit on their misery: by buying derivatives that essentially bet municipalities will default.

Distract and delay is the best they can do. Maintain the illusion until the mid-term elections.

Source: online.wsj.com

Bernanke: Cut Deficit Or Do 'Great Damage' To Economy

Setting up Plausible Denial for failure of stimulus both monetary and fiscal to reverse the negative economic trends camouflaged within skewed statistics.

Failing to curb federal budget deficits would do "great damage" to the U.S. economy in the long run, Federal Reserve Chairman Ben Bernanke warned Tuesday.

Source: huffingtonpost.com

Dollar Index Gold Price

Green circles mark the turn from negative to positive momentum after the D-waves.

Dollar Index Gold Price:

Mailbox

Thought for the day:

A problem anywhere is now being reflated in the physical gold market that seems to have gained power over the paper gold market. This development make certain a new high in the price of gold.

Jim

Wall Street tumbles as Greece, Portugal downgraded

U.S. stocks tumbled on high volume on Tuesday as investors shunned risk after the credit ratings for both Greece and Portugal were downgraded.

Notice today's strength in gold despite the fact investors shunned risk? Either the grip on gold is loosening a bit, and/or the tumble doesn't have legs.

Source: finance.yahoo.com

The national debt and Washington's deficit of will

The debt grows because there is not will to fight the deficit.

"In order to pay the interest and the bill when it comes due, we'll simply have to issue more IOUs. That, to me, is Ponzi-like," Gross said. "It's a game that can never be finished."

And, so the game will never be finished. Who said that there was ever an intention to repay?

Source: washingtonpost.com

US Long Bonds - Midday

TLT has already breached both the swing high and 3/24 overhead gap on expanding volume. If these levels can be held to the close, it would be a technical sign of strength (SOS). In this event, the December 2009 overhead gaps would be pulling hard.

U.S. Long Bonds ETF (TLT):


In yesterday's bond market analysis, I suggested a question for readers to ponder,

Now the real question, what would the invisible hand be telling us through a break of resistance in US long bonds?

I asked this question, because the build up of trend energy prior to the break was talking loudly. The messages from the invisible hand are often missed within the daily noise of price.

Pension Pains: States Cut Benefits to Skirt Massive Funding Shortfall

Never disturb the Social Order is the basis of MOPE.
There are going to be some very disturbed people here.
Pension plans are Wall Street so far very quiet and deeply injured dumping ground.
Lets hear it for our social minded OTC derivative manufacturers and distributors.

Jim

Dan Montgomery doesn't have many kind words for his elected officials. The high school English teacher from Skokie says Illinois politicians spent years neglecting their obligations to the state's public pension funds and now want workers to foot the bill.

Source: abcnews.go.com

Man finds gold coins worth $20,000

$20,000 worth of coins found hidden in the floor boards. Did I read this right, this stroke of exceptional luck is quickly converted into new counter tops?

"We lifted that board up and the coins were in a little sack... My wife is dreaming of her new countertop and I think she very much deserves it so that's where the money's going to go, into our new kitchen," said Carter.

Source: woodtv.com

A contrarian makes another call – this time, natural gas

Natural Gas, the commodity proclaimed dead by many, has recently seen positive chatter from notables such as Pickens and Groppe. These gentlemen which I have no affiliation cite bullish fundamentals.

In a recent Globe and Mail article, Groppe suggested the following:

“ We think that we're now having a continuous, rapid decline of gas in storage. By summer, it could get to be alarming.” “We would expect gas prices to get above $8 in the August-September range.”

I have watching positive inflows into Natural Gas for weeks/months. It wasn't until recently that these inflows created bullish setups.

Quiet, heavy buying from Commercial traders is very positive.

Natural Gas ETF and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Retail money hates Natural Gas. Retail money is often on the wrong side of the trade at turning points.

Natural Gas ETF and the Nonreportable Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Source: theglobeandmail.com

GM ads and the underlying truth

Here's the MOPE

“A lot of Canadians didn’t agree with giving GM a second chance. Quite frankly, I can respect that,” he says. “We want to make this a company all Canadians can be proud of again. That’s why I’m here to announce we have repaid our government loans, in full, with interest – five years ahead of the original schedule.” (The American version of the ad is nearly identical.)

Truth of the matter is,

When the governments of the United States, Canada and Ontario decided to pump more than $60-billion into GM last year to keep it from sinking, they agreed to convert the vast majority of the cash into shares, so as to not saddle the business with too much debt. A sliver of the money – about $8.4-billion (U.S.) – remained as loans, and that’s what has been repaid. Big shareholders, the taxpayers remain.

Derek DeCloet says it best,

Had he said those words, quite frankly, I could have respected that. It would have made GM a company I can be proud of again. It would also have been better than trying to fool the stupid into believing GM had just accomplished the impossible – the complete payback of $60-billion in less than a year.

A full read of the article is recommended for those not adverse to skepticism.

Source: theglobeandmail.com

US Long Bonds

Technical analysis, similar to that of geology, is the study of time and pressure. While price struggles with the March overhead gap, it hides the growing energy of the trend as illustrated by REV(E). The growing buying pressure is indicated by REV(E) approaching levels not seen since December 2009.

Price is also finding support at the 4/21 gap. A contraction of volume at support would be a bullish setup.

Now the real question, what would the invisible hand be telling us through a break of resistance in US long bonds?

US Long Bonds ETF (TLT)

Economists: The stimulus didn't help

Someone will go to MOPE hell for this.

The recovery is picking up steam as employers boost payrolls, but economists think the government's stimulus package and jobs bill had little to do with the rebound, according to a survey released Monday.

Jim,

What is also interesting is that this outcome is surprising to anyone.

Eric

The "First New Deal" (March 8, 1933) dealt with groups; from banking and railroads to industry and farming.

The first stimulus was so successful at creating jobs that a "Second New Deal" was created in 1934-35.

A "Second New Deal" in 1934-35 included the Wagner Act to promote labor unions, the Works Progress Administration (WPA) relief program, the Social Security Act, and new programs to aid tenant farmers and migrant workers.

Source: money.cnn.com
Source: en.wikipedia.org

Deal Near on Derivatives

Don't expect the opaque nature of derivatives to come into the light any time soon.

Jim suggests two good points,

Two points:

1. Amazing that the evil of derivatives is just coming from people who have deal significantly in OTC derivative.
2. There is no cure to 90% of enormous amount of outstanding OTC derivatives because they have NO standards.

No standards means no fix possible. That is ABSOLUTE fact!

Among the considerations still in the balance: A big provision being sought by Warren Buffett in recent weeks. A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett's Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say.

Source: online.wsj.com

Germany refuses to help Greece unless it agrees to tougher terms

It appears so.

Are we going to have to watch this tragic comedy of MOPE over the balance of the financially weak EU states?.

Mr Schauble said no decision had yet been taken by Berlin or the European Union and that the outcome may yet be "negative". "It depends entirely on whether Greece goes through with the strict austerity in coming years," he told Bild Zeitung.

Source: telegraph.co.uk

The Bears are Wrong: "The Consumer Is RE-leveraging," Jon Markman Says

He's right about one thing, the consumer are gearing-up again. This only suggests that more consumers will be extented at the wrong time as the economic cycle lows of 2016 approach.

Breakdown of total bank credit:

Retailers are enjoying this return to form. "Retailers are already well on their way to their next bull market," says Markman, noting several retail indexes and ETFs have returned to 2007 highs.

Source: finance.yahoo.com

Rogoff Says Greece May Not Be Europe’s Last Bailout (Update1)

Focus on the PIIGs while ignoring similar risks in other larger nations.

It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.”

Source: bloomberg.com

TA - Royal Gold (RGLD)

Trend energy is increasing (see chart below). This often foreshadows a step into a higher trading range.

Royal Gold (RGLD):

S+P Could Hit 3000 by 2020! Bull Market Far from Over, Jon Markman Says

Highs in movable assets as far as the eyes can see?

He's partially right in that the cyclical bull market is not over, but such conclusions can be misleading. The comparison is not with the 1990's but rather 1930's. Devaluation and capital flows drove the market higher into 1937, but the economy still remained weak. After 1937, the economy rolled over, "dipped again" into the depressionary bottom of 1942. A similar pattern show develop in the cycle low of 2016.

Reflecting on financial history and last round of massive government stimulus in the early 1990s, after which the S&P rose five-fold, Markman says the S&P could hit 3000 by the end of the decade. Recalling "Something along those lines could happen again," he says.

Large Cap Stocks Capital Appreciation Index (LCSCAI):


Source: finance.yahoo.com

IMF Speeds Up Greece Efforts

Everyone is too big to fail. Now the IMF, US controlled and funded, has become the central banker of central bankers.

This is Chump Change compared to the Wall Street philanthropic contribution called bailout.

The International Monetary Fund is speeding up efforts to deliver funding help to Greece, IMF Managing Director Dominique Strauss-Kahn said Sunday, following a meeting with Greece's finance minister.

The Greek government on Friday formally asked euro-zone countries and the IMF for help. Euro-zone states have pledged to loan Greece up to €30 billion in the first year of any aid program, while the IMF is expected to provide a further €15 billion.

Torpedo blast likely sank warship: SKorea minister

An explosion caused by a torpedo likely tore apart and sank a South Korean warship near the North Korean border, Seoul's defense minister said Sunday, while declining to assign blame for the blast as suspicion increasingly falls on Pyongyang.

Source: news.yahoo.com

TA - Agnico Eagle Mines (AEM)

Past review of Agnico Eagle Mines 01/07/10: AEM

The overhead gaps were created on heavy volume, so it will take a fair amount of upside energy and/or time to chew through them.

A study of the REV(E) illustrates how the trend stored enough energy by early April to finally breach the overhead gap. Once the swing high around 62 is decisively broken, AEM will quickly run to the next resistance zone.

Agnico Eagle Mines (AEM):

A look at the VIX

Don't follow the talk, follow the money. When fear builds within connected money into a rising market (such as 2008), it's time to be cautious.

Still no bullish setup in the VIX.

COT Volatility Index Flows:


Volatility Index (VIX):


Definition of the VIX

Mailbox

This is important despite the fact that few care.

Just in the nic of time.
If you are in a gold or silver EFT for your sake read the prospectus so you are truly informed what you own.

Source: lexology.com

CFTC proposes to exempt certain physical gold and silver options and futures contracts and to impose large trader reporting requirements

View original document
USA
April 19 2010
On April 15th, the CFTC published for public comment a proposal to exempt from the Commodity Exchange Act the trading and clearing of certain options and security futures contracts on each of ETFS Physical Swiss Gold Shares and ETFS Physical Silver Shares, which would be traded on national securities exchanges and designated contract markets registered with the SEC as limited purpose national securities exchanges and cleared through the Options Clearing Corporation. The CFTC also is requesting comment on whether it should amend all orders issuedexempting the trading and clearing of options and futures on gold and silver products from CEA provisions and CFTC regulations, to impose market and large trader reporting requirements. Comments should be submitted on or before May 17, 2010. 75 FR 19619.

Mailbox

Wake Up.
This weekly parade or fiduciary financial failure is HORRIBLE.
The MOPE is to release in groups under 10 to keep the social order.
Gold under your control is the only safe bank today.
The price of gold will eclipse my target of $1650.

Source: fdic.gov

Bank Closing Information - April 23, 2010
These links contain useful information for the customers and vendors of these closed banks.

Wheatland Bank, Naperville, IL
Peotone Bank and Trust Company, Peotone, IL
Lincoln Park Savings Bank, Chicago, IL
New Century Bank, Chicago, IL
Citizens Bank&Trust Company of Chicago, Chicago, IL
Broadway Bank, Chicago, IL
Amcore Bank, N.A., Rockford, IL

Enforcement which are extremely unsettling this week.

Source: federalreserve.gov

Enforcement Actions
Legal actions by the Board and written agreements approved by the Federal Reserve Banks

 April 22, 2010
Written agreement with The Bank of Currituck
 April 22, 2010
Cease and desist order against PB Financial Group and Premier Bank
 April 21, 2010
Termination of enforcement action against Heritage Bank
 April 20, 2010
Written agreement with Ameri-National Corporation
 April 19, 2010
Written agreement with First National Financial Services

COT Money Flows & Charts of Interest

COT Money Flows

Upper Table:


Lower Table:


Charts of Interest

Japense Yen ETF (FXY):


US Long Bonds ETF (TLT)

Junior Gold Stocks

Observations:
(1) Price is poking its head above critical resistance, but volume remains a bit light. We need a clean and decisive SOS (sign of strength).
(2) Breaks of critical zones are usually accomplished in threes. This still looks like a second attempt.

This is action can only be described as presistent. While there's no technical pattern, cycle, or relation to dissipation of energy that describes presistence, it is something not to be ignored.

Junior Gold Stocks ETF (GDXJ)

Mailbox

Dave,

I am not a big believer in the rigged market capitalism theory. Capital flows, the true drivers of markets under the fiat system, cannot be influenced much beyond the short-term by any intervening entity. The rigged market theory perpetuates largely because many market participants adhere to a static perspective. It is and will always be this way. Form this viewpoint, when the markets behave contrary to expectations, the deviation must be manipulation.

The world and the capital flows within is a dynamic animal. Those that cite manipulation often have trouble adapting. Success can only be achieved through transcending the static perspective.

RY,
Eric

Springfield pro-tax rally

Marching in support of higher taxes? Seriously? Anyone that wants to run with this one is welcome.

Thousands march around the State Capitol Wednesday in Springfield, Ill., where protestors were urging state lawmakers to raising the income tax to avoid more budget cuts. State officials were bracing for a potential shutdown of the building, but the protestors were outside listening to speeches.

Source: chicagotribune.com

Producer Prices in U.S. Rise 0.7%; Core Rate Up 0.1% (Update1)

Static observations, like inflation remains subdued right now, is like forecasting weather by looking outside the window. While some forecasts will be right, many others will look bad without knowledge of present and past trends.

“Inflation remains subdued,” said Joseph Brusuelas, president of Brusuelas Analytics in Stamford, Connecticut. Limited price pressure “provides an extraordinary amount of comfort to Fed policy makers. They can stay on hold well into 2011.”

Today's "subdued" action looks similar to the big commodity run from 1938 to 1951.

16-Raw Industrial Spot Price (1935-1947);
Great Britain Wholesale Price of All Commodities (1885-1935):


Despite the constant disparagement, gold continues outperform as expected.

Spot Commodity Price Index (CRBSPOT) to Gold Ratio:


Source: bloomberg.com

New home sales jump from record low

Key word here is government incentives boosted sales.

Sales of new homes surged 27 percent last month, bouncing off the previous month's record low and blowing past expectations as better weather and government incentives boosted sales.

Aggressive optimism or pessimism is often misplaced. While the real estate market, supported by government incentives and bailouts, has improved, it remains firmly contained within a down cycle. Only after years of working off the excesses of the previous expansion will the down cycle end.

New Home Sales And Change YOY, SA:


Months Supply And Change YOY:


Building Permits And Change YOY:


Source: finance.yahoo.com

US Long Bonds

The upper gap has been tested on shrinking volume. This implies weaker energy during its formation. This is bearish. Cumulative tape energy, however, is increasing. As a result, I would not be surprised so more than one attempt to break the gap.

Money flows in the bond market, released later today, will provide more information.

US Long Bonds (ETF):

Greece asks for EU-IMF bailout

What many fail to realize or acknowledge is that the US, with its controlling interests of the IMF, will be sharing the burden of the Greece bailout. The bailout of one weak EU nation implies that others will soon follow. As long as the State, or combination of States (EU/IMF) can issue debt, no one will be allowed to fail. Cascading State failures were common in early 1930’s, but few are drawing these comparisons today.

Greek Prime Minister George Papandreou called for the activation of a joint eurozone-International Monetary Fund financial rescue to pull his country out of a major debt crisis.

Source: finance.yahoo.com

Crisis entering a new phase

The 1930's depression, debt crisis, was shorted through devaluation of the dollar, or revaluation of gold from $20/oz to $35/oz. Those countries that abandoned the gold standard and devalued were the first to emerge from the depression. Basically, the strategy was devalue or face the wrath of civil distress that ensued from debt default. Obviously, the political choice was and will always be the path of least resistance - devaluation.

Devaluation, referred to as quantitative easing, is not a problem without gold standard constraint. Unfortunately, the margin of safety in terms of the confidence in the dollar is much smaller today than pervious depression. Unlike the 1930's, America has turned from a net creditor to debtor nation. Invisible hand reflects this transition by pushing up stocks, gold, and interest rates despite conventional wisdom that suggests the opposite (falling interest rates). The reason rates rise has to do with confidence (or lack there of) that the debts will be repaid. In other words, rising interest rates reflect the market discounting the risk of sovereign debt default.

Many have observed that the money supply, now buried by the Fed, has been steady contracting since 2009. The continuation of M3, a broad money supply measure, indicates a negative year-over-year contraction. Many observers cite these trends as a precondition of deflation. Quite the contrary, this could be a precondition of aggressive inflation as keenly described in The Mystery of Banking.

When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels.

It the Fed's response to the contraction, likely print money money, that will affect confidence in the dollar.

Money Supply with SGS Continuation:


Source: shadowstats.com
Source: mises.org, The Mystery of Banking, p 71

Confessions of a Former Mortgage Broker: What We Did Was Criminal

While the big fish will likely evade scrutiny through readily accessible escape hatches, it is doubtful that less important players will be allow to find them.

With stated-income loans, the banks did not ask for supporting documents like W2 forms and pay checks. They did not verify statements about income against what was reported to the IRS. Yet the first job of a bank in lending is to check the supporting documents.

Following civil charges being filed against Goldman Sachs, what is clear now is that the crime of stated-income mortgages deserves to be explored fully by criminal prosecutors.

Source: finance.yahoo.com

U.S. Dollar Index: Another Three Drives to a Top

Connected money flows have faded the rally in the dollar since early 2010. A trend change is usually a matter of technical deterioration once the money flows have setup.

Technical deterioration, however, is usually more reflective of a process than an event. In other words, it usually takes time and energy dissipation. A common heuristic that measures this process is three drives to a top.

The previous three drives to a top trend change occurred in early 2009. This “formation” or mapping of energy dissipation is illustrated below. This time measurement is characterized by the following: (1) An initial up trend line break, (2) a retest or slightly higher highs, and (3) another, weaker up thrust that fails.

The recent gap break of the up trend line on 4/12 suggests that one of the three drives has occurred.

U.S. Dollar Index:

Increasing leverage towards oil

Follow the money. The break of the MOVB implies future strength in the oil service to airline ration (OSXXALR). A trend change in the OSXXALR would reflect an increase of leverage towards the rising price of oil. Further technical confirmation would provide recognition and would reflect an acceleration of the trends.

Oil Service to Airline Index Ratio:

Home sales rise more than expected

Careful. Foreclosure sales are boosting this number.

Home sales rose more than expected in March, reversing three months of declines, as government incentives drew in buyers and kicked off what's expected to be a strong spring selling season.

Source: finance.yahoo.com

Mailbox

Eric,

One of my services for you is to note those who are doing excellent work in the real estate sector for those CIGAs who may have been victimized by financial scum so prevalent today.

As always I have no financial relationship with Marie McDonnell directly or tangentially.

Jim


Marie McDonnell, CFE
Truth In Lending Audit & Recovery Services, LLC
Mortgage Fraud and Forensic Analyst
Certified Fraud Examiner
MARIE.MCDONNELL@TRUTHINLENDING.NET

How Goldman Sachs Screwed Ghana

Gold hedges are death to gold mining companies in a rising gold environment. Screwed or exploitation in the difference of knowledge? If you call on Money (Wall Street or like) for a rescue, its best to understand the secular trends that directly impact the business.

In 1998, Ashanti Gold was the 3rd largest Gold Mining company in the world. The first "black" company on the London Stock Exchange, Ashanti had just purchased the Geita mine in Tanzania, positioning Ashanti to become even larger. But in May 1999, the Treasury of the United Kingdom decided to sell off 415 tons of its gold reserves. With all that gold flooding the world market, the price of gold began to decline. By August 1999, the price of gold had fallen to $252/ounce, the lowest it had been in 20 years.

Ashanti turned to its Financial Advisors - Goldman Sachs - for advice. Goldman Sachs recommeded that Ashanti purchase enormous hedge contracts - "bets" on the price of gold. Simplifying this somewhat, it was similar to when a homeowner 'locks in' a price for heating oil months in advance. Goldman recommeded that Ashanti enter agreements to sell gold at a 'locked-in' price, and suggested that the price of gold would continue to fall.

Source: ghanaweb.com

Obama suggests value-added tax may be an option

The surest way to further reduce standard of livings for all is to reallocate capital from the private to public sector. It is also political death. Still, what seems unlikely and unproductive now, could be unexpectedly embraced in the troughs of desperation.

President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days.

Source: news.yahoo.com

US, China announce anti-dumping steps

Any meaningful follow through on tarriffs, duties, or sanction will have similar consequences to Smoot-Hawley or Tarriff Act of 1930. This rhetoric bears close attention as many remain blind to the lessons of history.

The United States and China have announced new anti-dumping steps against each other over aluminum, nylon and optical fiber, possibly reviving strains over trade and currency that had eased in recent weeks.

Source: finance.yahoo.com

Greek budget deficit 13.6 percent of GDP in 2009

The US budget deficit as a percentage of GDP is nearly 10%. Who says Greece or any other country intends to pay? Eventually, all countries reach a point of debt lethality. In other words, they reach a point in which marginal growth is unable to service the existing debt. Either debt is monetized or new debt is issued to meet debt service payments.

Eric,

When you consider the funds Greece requires compared to what was funneled into US financial entities it is a joke.
Greece is a side show being treated like a main event in order to keep attention off the problems of the US & GB.
There is a limit in time to which a lie can carry the day.

Jim

The European Union's statistics office Eurostat said that Greece's budget deficit in 2009, as a percentage of economic output, was 13.6 percent. That's up from the previous estimate of 12.9 percent and nearly double the 7.7 percent recorded in 2008.

Greece's total government debt as a proportion of GDP stands at a massive 115.1 percent, a burden so large that some analysts think it will have trouble paying it over coming years even if a bailout saves Athens from default this year.

Source: finance.yahoo.com

US Car news

Good thing that these two news items are not related and purely coincidental. MOPE at its finest.

As we are relieved of the burden of unnecessary critical thinking, it frees more time for more productive activities such as watching more reality TV.

Gas in the tank: GM repays $8.1B in gov't loans

The Obama administration crowed about the "turnaround" at GM and fellow bailout recipient Chrysler LLC, saying the government's unpopular rescue of Detroit's automakers is paying off.

AP-GfK Poll: Americans shifting to US cars

Toyota's safety problems and a buffed-up lineup of offerings from Detroit's Big 3 are rubbing the tarnish off car buyers' perceptions of U.S. models. An Associated Press-GfK Poll shows that 38 percent favor U.S. vehicles while 33 percent prefer Asian brands, a significant improvement for U.S. automakers compared to four years ago.

Peak Phosphorus

The dwindling supply of mined phosphorus could affect the quality and price of agriculture goods in the coming century.

Our dwindling supply of phosphorus, a primary component underlying the growth of global agricultural production, threatens to disrupt food security across the planet during the coming century. This is the gravest natural resource shortage you've never heard of.

The geographic concentration of phosphate mines also threatens to usher in an era of intense resource competition. Nearly 90 percent of the world's estimated phosphorus reserves are found in five countries: Morocco, China, South Africa, Jordan, and the United States. In comparison, the 12 countries that make up the OPEC cartel control only 75 percent of the world's oil reserves.

Source: foreignpolicy.com

Senate panel approves tougher derivatives rules

As long as there's a market for these products and profit to be made, this legislation will only serve to push these transactions overseas. This is indeed strange logic for a country in which paper shuffling activities, both design and execution, are a big source of tax revenue.

A Senate panel approved legislation Wednesday that would limit the ability of Wall Street banks to trade complex financial tools called derivatives.

Source: finance.yahoo.com

Government goes high-tech to redesign $100 bills

But he has been joined by a disappearing Liberty Bell...

For a second there I thought they were going to write disappearing confidence.

If a fraction of the attention paid to security, details, and education for the notes was transferred to sound money management behind them, there would be little need for liquidity to drive the economy. Private savings (capital), rather than public sponsored-liquidity, would flow into the private sector. This would raise the standard of living for all and create numerous private sector jobs.

The folks who print America's money have designed a high-tech makeover of the $100 bill. It's part of an effort to stay ahead of counterfeiters as technology becomes more sophisticated and more dollars flow overseas, Federal Reserve Chairman Ben Bernanke says.

Benjamin Franklin is still on the C-note. But he has been joined by a disappearing Liberty Bell in an inkwell and a bright blue security ribbon composed of thousands of tiny lenses that magnify objects in mysterious ways. Move the bill, and the objects move in a different direction.

Source: google.com

Commodity Online Poll: 93% Investors Believe Gold will Fall

There's no mention of duration or magnitude of this expected decline. Are we talking a week, month, years? As a rule, when nearly all investors seek the same side of the trading bus, I will step to the other side. By the fall of 2010, 93% of these respondents will be pissed off that stocks, interest rates, and gold can move in the same direction as confidence in the senior currency falters.

In an online poll of a sample size of 21,600 respondents selected from across the globe, 93% or 20,100 of the total sample size had opined that there would be a fall in gold prices due to a recent upbeat mood in the global equity markets, while only 1,400 respondents contradicted the stand, 0.46% did not comment on either side. This showed that most of the respondents believed that there would be a fall in gold prices in the near future due to a recovery in global equity markets.

Source: kitco.com

US Long Bonds - Early trading look

While price remains sandwiched between the gaps, it is currently probing the overhead gap. If price is to overcome the gap, it must do so with energy that matches or exceeds its formation. The 3/24 gap was formed on 8 million shares traded, so this will be no easy feat. A bullish outcome will be generated through a jump of the gap on a sign of strength (volume spike) or through attrition.

The REV indicator already shows a build up of tape energy beyond the previous swing high. This previous swing marks the formation of the overhead gap, so this development is bullish. This could very well be a hint of things to come, but I wouldn't get too excited yet. The overhead gap has yet to be cleared, and leveraged money flows need to confirm.

Bear in mind, this is all short-term noise within a deteriorating fundamental trend.

US Long Bonds ETF (TLT)

Open your wallets for plastic cash

Loonies, dollars, and gold are nothing more than mediums of exchange. It is the productive and intellectual capacity of a nation that is money. This is what people will barter for. Although cheaper and better works, it does little to address the confidence needed to create stable demand. If confidence in those maintaining the currency declines, the currency will always falter regards of the composition, cost, or security. This is why gold has functioned as a medium exchange, i.e. money, across nations and cultures for so long.

Starting in late 2011, Ottawa will replace Canada’s paper-cotton bank notes – prone to wear and tear – with synthetic ones that last two to three times longer.

Source: theglobeandmail.com

Long-term Capital Flows

Long term capital flows reflect the invisible hand of the market. They are the collective decision making of the preservation and accumulation of capital.

As centralize decision making continues to support and push debt as a solution, long-term capital flows have adjusted to the ever increasing probability of default. This is why, contrary to popular theory and understanding, stocks, interest rates, and gold have and will continue to move higher together. The invisible hand, the collective decision making of capital, is moving to protect itself against the devaluation or inflationary policies of centralized government. This is not the first time it has done so.

It is also why classical stock market valuation metrics such as PE & DY must be disregarded right now. Today's price-to-earnings (PE) and dividend yield (DY) scream overvalued in comparison to history. The stock market has figuratively given these metrics the middle finger by staging an impressive rally. The fear of centralize mismanagement is greater than the fear of paying too much. In other words, the game of confidence favors the hedges over centralized management. This will last until the next hemorrhage or crisis phase (which is coming).

Dividend Yield vs S&P 500:


S&P 500 Price-to-Earnings Ratio

Low inventory and volcano trip up US manufacturers

The economic consequences of the ash cloud could mount over time.

Now that a giant ash cloud from a volcano in Iceland is disrupting global air freight, some manufacturers are finding that this strategy is backfiring. Nissan suspended production at two Japanese auto assembly plants Tuesday and BMW was forced to idle three plants in Germany because of shortages of critical parts. Computer maker Dell is experiencing delays in getting notebook computers to European customers.

Source: finance.yahoo.com

SEC is looking into accounting at 19 biggest banks

Accounting tricks led to its collapse? Excessive leverage, loss of confidence in its ability to service its debts, and realization that many of the firm's assets were deemed toxic led to the collapse. Accounting "flexibility" is still being used today.

The Securities and Exchange Commission is examining whether any of the 19 largest U.S. banks are using an accounting trick that a bankruptcy examiner has said led to the collapse of Lehman Brothers, SEC Chairman Mary Schapiro said Tuesday.

Source: finance.yahoo.com

Depressionary Boxes: Hemorrhage and Injection Phases Defined

Depressionary boxes are characterized by hemorrhage and injection phases; The F-TV description is carry trade off (stocks go down) and carry trade on (stocks go up). The TIP (Treasury Inflation Protected) to Nominal Treasury ratio provides a good distinction between these phases.

The last hemorrhage phase was foreshadowed by technical weakness in 2007. The ratio bottomed in 2008; Stocks turned in early 2009. The rising wedge pattern illustrates another liquidity phase. Technical deterioration within this pattern will foreshadow the onset of yet another “crisis” to be named later.

TIPS to Nominal 7-10 Ratio:

HDFC Bank to sell silver bars from May - exec

HDFC Bank will sell silver bars during a May local festival for precious metals purchases, the first time ever by a bank, as demand picks up, a top executive of the bank said on Monday.

Silver is a small, tight market. Any marginal increase in physical demand (foreign or domestic) will pressure the paper markers (futures, ETFs, etc). It is the paper markers that control the market.

Silver continues to represent the consequences of the actions taken to prevent a debt collapse after the latest hemorrhage phase. The chop under $25 will eventually give way to the upside.

Silver, London P.M. Fixed:


Source: in.reuters.com

Big Banks Mask Risk Levels

Jim,

Why not do away with inconvenient, revealing accounting standards altogether?

Eric

FASB's reprehensible capitulation has allowed banks to overstate their assets by increasing the value declared on crap OTC derivatives.
NOW the banks, according to this article, are hiding their debt size too.
Now if you overstate your assets and understate your debt you used to go to the clink.
However now it is called a Jobless Recovery.

Source: online.wsj.com

Review of Bank Closings

Please review

Review of Bank Closings

Dear Jim,

After taking a break over the Easter holidays, the FDIC got busy again, closing nine banks between 4/9/10 and 4/16/10. Eight of the nine were closed this week.

Collectively, these nine banks had reported assets of about $6.84 billion and deposits of about $5.7 billion. The FDIC estimates the cost of the closings will be about $1.12 billion, about 19% of deposits. Based on that estimate, the bank’s assets are really only worth about $4.59 billion and had been over-stated by 49%.

The FDIC also had to enter into loss-share agreements with respect to $4.06 billion of assets taken over by the acquiring banks. That indicates its eventual losses could greatly exceed present estimates. Since the beginning of this crisis, the FDIC has entered into loss share agreements with respect to about $141.3 billion in assets.

As has often been the case in recent closings, the larger banks were the worst offenders in terms of over-valuation. City Bank of Lynnwood, Washington, had reported assets of $1.13 billion that, based on the FDIC’s loss estimate, are really only worth about $697 million. Bank management had over-valued them by about 62%.

Tamalpais Bank of San Rafael, California, had reported assets of $628.9 million that, by the FDIC’s loss estimate, are really only worth about $406.5 million. They had been over-valued by about 55%.

The largest of the banks closed, Riverside Bank of Florida, Fort Pierce, Florida, had reported assets of $3.42 billion. Based on the FDIC’s loss estimate, they are really only worth about $2.27 billion and had been over-valued by about 51%.

In each of these cases, a look at the bank’s balance sheet would have suggested it was very well capitalized. In reality, each was insolvent and had to be closed at a great cost to the FDIC.

Respectfully yours,
CIGA Richard B.

Source: fdic.gov

Goldman earns $3.3B in 1Q as fraud case looms

Goldman sachs, Citi, JPMorgan, anyone using market-to-model accounting saw its trading business produce unexpected gains. Does any of this matter? That's for the investor to judge. It will reemerge as problem during the next financial crisis that no amount of window dressing style reforms will prevent.

Goldman Sachs Group Inc. said Tuesday its first-quarter earnings almost doubled to $3.3 billion as its trading business again surpassed the rest of the financial industry. It was a bit of good news for the bank as it faces a government civil fraud charge.

Source: finance.yahoo.com

Furniture makers weigh raising prices

Blame the symptoms and ignore the cause.

Furniture makers are blaming higher labor and material costs for producing in Asia as well as trans-Pacific shipping fees. Industry insiders expect more news of price hikes after buyers and producers gather in High Point for the world's biggest furniture trade fair that began Saturday.

Source: msnbc.msn.com

Poll: 4 out of 5 Americans don't trust Washington

The government tends to say what need to be heard rather than said. Until the citizens demand the reverse, expect more of the same.

America's "Great Compromiser" Henry Clay called government "the great trust," but most Americans today have little faith in Washington's ability to deal with the nation's problems.

Source: news.yahoo.com

Fed paper looks at ways to detect risks

An early warning system to detect financial problems before they reach crisis proportions must allow policymakers to better pinpoint areas of excessive risk-taking, according to a new Federal Reserve paper released Monday.

Here's a start,

"A Cancer That Spread": Bring Derivatives Out of the Shadows, Former Fed Bank Examiner Says

"What we did know from the financial crisis is that credit default swaps were a cancer that spread throughout our economy and caused, in part, the credit crisis. So we need to put those on exchanges," says our guest Mark T. Williams, a former Fed examiner and author of a new book,

If we did that financials such as JPMorgan, Citi, as well as others wouldn't be able to post both impressive and unexpected trading results.

Source: finance.yahoo.com

Goldman Worries Weigh on Gold Price

Goldman worries should displace confidence in USA, Inc. To prevent investors from reaching this conclusion, it's easier shove the dollar, in hopes that the trend line break on 4/12 doesn't create follow through, and pressure gold on the news. Market action creates market commentary over the short-term. Any longer-term conclusions cannot be supported by the markets.

The Securities and Exchange Commission Friday charged Goldman Sachs with fraud which dragged down gold. Prices have been looking to make a move past the $1,160 area to $1,175 an ounce as momentum buying increased gold's appeal as an alternative asset. However, after fraud charges were brought against Goldman, investors lost their risk appetite and dumped all commodities in favor of the U.S. dollar.

Source: finance.yahoo.com

Economic blow to airlines could surpass Sept. 11: EU

Slow and steady, months or years of eruption, will be far more damaging in terms of economic consequences than one-time catastrophic events.

The volcanic ash cloud that has grounded many flights could deal a bigger economic blow to the airline industry than the attacks on the United States on September 11, 2001, the EU's transport commissioner said Monday.

Source: finance.yahoo.com

Signs of life in zombie housing market?

Economic data has been so upbeat in the last few days that economists are pondering an almost-unthinkable question: Could there even be signs of life in the zombie housing sector?

In this business anything is possibly over the short-term. However, almost all spin/MOPE fades without the support of money.

Money continues to fade or bet against a housing market. As the price of lumber has risen, commercial traders have aggressively shorted it across multiple time frames. Such actions could be interpreted as supply/demand related activities, but it's persistence over time weakens that interpretation .

COT Money Flow Lower Table:


Lumber Futures Continuous Contract and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Source: marketwatch.com

Argentina seizes pension funds to pay debts.

It is a foretaste of what may happen across the world as governments discover that tax revenue, and discover that the bond markets are unwilling to plug the gap. The G7 states are already acquiring an unhealthy taste for the arbitrary seizure of private property, I notice.

What caught my eye was the warning sign that could very well be exhibited in other countries.

President Kirchner has been eyeing the pension pool for some time. Last year she pushed through new rules forcing them to invest more money inside the country – always a warning signal.

Source: blogs.telegraph.co.uk

Stocks, Interest Rates, and Gold can rise together

This is exactly what we are seeing (up stocks, up gold, and rising interest rates - the last piece) as the 17.2 year cycle of 2016 approaches.

Welcome to the Decline and Fall of America where stocks, interest rates, and gold can rise together.

Source: martinarmstrong.org

Chavez: China to devote $20B to Venezuela projects

A pipeline to the pacific would be necessary for China to tap Venezuela's heavy crude.

President Hugo Chavez has announced an agreement with China that would have the Asian economic giant devote $20 billion to financing long-term development projects in Venezuela.

Source: finance.yahoo.com

Stand Strong with Gold - Transition from D-wave to A-wave

In my Consolidation breakout study of gold on 12/19, I illustrated the potential of the 2009 breakout. I published this study, because the D-wave decline, characterized by orchestrated headline-induced fear, was coming.

This commentary was followed by Stand Strong with Gold on 1/06/10. This commentary discussed the long-term potential for gold and was intended to bolster resolve and discipline during the D-wave (Down).

As of April 2010, money flow and time analysis, point to a transition from D-wave (Down) to A-wave (Up). Remember that transitions are processes rather than static points. If investment success depends on a static entry point - single purchase point, the transition process will test patience. Gold is all about control, and control is defined by time (delay of the inevitable).

Within the context of the transition from down to up, please review and updated Consolidation Breakout Study Chart with the following comments:

Force of the breakout is a function of time and range (or volatility) within the consolidation. The force of the breakout (percentage gain from the breakout point), increases as the time and volatility of the consolidation increases.

The 2008-2009 consolidation was nearly the longest and most volatile. This should give it great force to the upside. To suggest that it has topped out after 7-months and 8.5% rally from the breakout ignores the massive energy stored within the previous consolidation.

Gold Consolidation Breakout Study Chart:


Notice how REV(E), yellow indicator, made a new high in 2009. The energy of the tape is increasing.