It Doesn't Take Much

Beat the grass to startle the snakes. It’s doesn’t take much.

Fear and doubt interspersed with a lot of arm waving will scatter the weak hands faster than a loud knock at the door at an underage party. This is only reinforced by the fact that today’s sell-off was orchestrated on the same day as Fed’s communiqué revealed that QE2 was needed to avert another economic heart attack. May I ask what fundamental factors will be driving the dollar higher other than a mathematical manifestation of the least offensive pile of manure? Correction or time to buy? Those still seeking an answer have no chance of being in the trend towards the end.

Headline: Gold Prices: Correction or Time to Buy?

Gold prices were hammered as early morning profit taking triggered afternoon sell stops, forcing traders to exit positions to lock in gains.

Bargain hunters were then reluctant to try to catch gold's falling knife, choosing instead to wait for prices to bottom out before buying more.

Gold prices breached but then bounced slightly higher from the 50-day moving average of $1,377 an ounce. Typically gold has moved higher from that area of support. If that level is breached, prices will have to look to the 200-day moving average of $1,265 an ounce.

Source: finance.yahoo.com

Headline: Fed minutes: Economy needs bond-buying program

Federal Reserve officials stuck with the pace of their $600 billion Treasury bond-buying program last month because the economy wasn't improving fast enough to make a noticeable dent in unemployment.

Spending by consumers and businesses had improved heading into the final month of 2010, and Congress was on the verge of enacting a tax-cut package that would bolster the economy, Fed officials said. That made them more confident the economic recovery would gain momentum, according to minutes of the Fed's closed door meeting on Dec. 14.

Source: finance.yahoo.com

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The 'Reasons' Are Intended For The Weak Hands

Gold drops on equity rally? More headline fodder designed to misdirect. The headline might as well associate the decline with falling temperatures in January. As I said in previous commentary, here comes the drama on both sides of the trade. As the following note from Jim suggests, it doesn’t take much to support an operation that has been pushing the news flow since late December.

The Goldman / Face book deal yesterday shows what the general public, so called experts and the media feels about what holds value today.

* Significant forecasts of good US biz.

* Bullishness of general equities.

* Next week is the anniversary of the 1980 flop projected from the low in terms of time. The actual date Jan 14th.

* Bank of America capping amount of bad mortgage buy back from Freddie and Fanny considered a template to cap all other mortgage buy backs read positively by general investors

* Shorts taking advantage of the above.

The price can react anytime in gold, but it will trade at $1650 and higher.

Jim

Let’s not forget that dollar strength and gold weakness, whether initiated by the former or latter, provides excellent cover for a maturing Euro operation. Ah, yes, while the Euro has become a bit of old news for the retail speculator, there's still profits to be pulled from the table. The players reposition and profit while the 'experts' discuss the reasons for the weak hands.

When the weak hands finally secure their understanding of the market, they often find that reasons and trend unexpectedly changes. This is why the 'reasons' matter little - follow the money.

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


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


Headline: Gold Drops Most in Seven Weeks on Equity Rally; Silver Falls

Gold fell the most in seven weeks on speculation that a global recovery will curb demand for the metal as a haven asset. Silver plunged.

Equities gained worldwide. The dollar strengthened against the Japanese yen on speculation that the U.S. recovery will gather momentum. Gold posted a 10th straight annual gain in 2010, rising 30 percent and outperforming stocks and bonds. The metal reached a record $1,432.50 an ounce on Dec. 7.

Source: businessweek.com

Private Investing Plans Are Large Pools of Untapped Funds

What the government gives, they can take away. So called carrot on a stick investing plans represent a large pool of funds of untapped funds that have no escaped the vision of cash strapped and spending driven governments around the world. Those that anticipate events for a living can see the writing on the wall already.

Headline: Europe starts confiscating private pension funds

The article goes on to detail other pension grabs in Bulgaria, Poland, France and Ireland. Obviously, this is a cautionary tale for America. If fiscal austerity becomes a real issue in the U.S. the way that it's been reaching critical mass in Europe -- don't think that U.S. lawmakers regard your either your personal wealth or money they might owe you as sacrosanct.

Source: washingtonexaminer.com

From Bob

Connected Money Already Acting (Anticipating)

The following is a note from Jim

Yra Speaks, CIGA Craig reports

Yra on CNBC:

Hi Jim,

I hope this note finds you safe and healthy in Africa.

Your friend, Yra was on CNBC this morning discussing the current selloff in the bond market. As usual, he makes terrific points. Of particular importance are his comments at the very end of the interview. He expects direct Fed intervention on the long end of the curve if price deteriorates much farther. Yippee, more QE!!! To infinity and beyond!

Source: jsmineset.com

Let's just say that connected money is already acting (anticipating).

US TBd (20 Years +) and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


US 10 Year (7-10 Years) and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:

More Reality Defined By Headlines

The real or constant currency oil trend remains down since mid 2009. This means that headline argument of Oil has climbed above $92 on the anticipate of economic growth can only be described as horse hockey analysis.

West Texas Intermediate Crude Oil to Gold Ratio (Oil/Gold):


Headline: Oil climbs above $92, anticipates economic growth

Oil climbed above $92 on Monday to its highest since October 2008, spurred on by expectations economic recovery will boost energy demand and as market bulls set their sights on $100 a barrel.

U.S. crude was 86 cents higher at $92.24 a barrel by 1438 GMT, off a session high of $92.39.

Source: finance.yahoo.com

Food Stamps No Long For Poor and Uneducated

It’s a recession when your neighbor looses his job, but it’s a depression when you lose yours. Gently massaged economic time series and biased expert analysis hide not only a growing number but also changing demographic of welfare recipients. Food stamps are no longer just for the poor and uneducated.

Headline: Number, nature of welfare clients changing at county offices

They are dressed in designer clothes, some in fur coats and shiny jewels, remnants of the money they used to readily spend on appearances. Some even come from Colts Neck, Middletown, Rumson, Sea Girt and other havens for the upper class.

A husband and wife are well educated, but the woman stayed home to raise the children and the man lost a high-paying job when his company went bankrupt. They drained their IRA, 401(k) and bank accounts to pay the mortgage and other expenses, and the unemployment insurance just ran out.

Source: app.com