Media-Driven Hard Sell of The Euro Crisis

Jim,

Any guesses on how the big players were positioned before the media-driven hard sell of the Euro crisis?

If you want to push up the dollar index, thus supporting the gold and silver crush, send the Euro lower. As we have said before, there are no coincidences.

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


Eric

Look at how media is working it.
The USA is fine.
States of the USA are fine.
The euro zone is bad.
Looks like a cover to me.

Jim

Headline: Eurozone facing 'survival crisis'

The European Union is in a "survival crisis" over eurozone debt problems, the EU Council president has warned.

Speaking hours before eurozone ministers meet to address threats to the bloc's economic stability, Herman Van Rompuy said that if the euro failed, so too would the EU.

Members such as the Republic of Ireland and Portugal are under fresh scrutiny.

Questions have been raised over whether they can manage their debt without help from EU funds.

Source: bbc.co.uk

Money Targets Fear-Induced Stupidity of the Herd

Have absolutely no doubt that silver will be pressed until at least the November 5th gap is filled. Why? Connected money is covering. When path of least resistance is down and connected money covers, expert fear to overcome the trading herd.

Paper Silver ETF (SLV):


Well-timed headlines and expert 'commentaries', such as the one below, are targeted specifically to the fear-induced stupidity of herd. These operations are professional on organization and execution.

Headline: Gold Prices Get Slaughtered, Settle Lower

Nadler believes that gold's "parabolic rise" will only balloon into a real deep correction when it comes and that it could be 60% to 80% of current prices. "It will look like a cave in ... the trend change will be something to watch." A 60% correction would leave prices between $800-$900, which is what some analysts believe the real price of gold is if you take speculation out of the market.

Source: finance.yahoo.com

Fear Will Dominate Until Until the Weak Hands Have Been Culled

Technical analysis (TA) is a skill of subjectively. As a result, TA is characterized more as an art form and methodology.

(1) Follow the money

(2) Follow the secular trends


Is the stock market poised for a significant decline, or as you suggest ready to fall off a cliff? Connected money is flowing in equities. The nominal trend, due to currency devaluation, is up regardless of the general economic activity.

From a US Dollar, technical perspective, the market continues to consolidate above the April 2010 downside gap. If past resistance becomes support, the base building process will begin. Also, market internals, such as ADN(E), not only lead the breakout above the April 2010 highs, a positive divergence, but also continue to press to higher highs. ADN(E) as well as other internal measures suggest building trend energy. See charts below:

S&P 500 ETF:


NYSE and Market Internal Measures:


None of this analysis really matters over the short-term. The herd has been spooked by fear. Fear will dominant until TIME is right and the weak hands have been culled.

HI Eric,

In your most recent article just sent, you discuss connected money flowing into equities. The S&P chart looks like it's ready to fall off a cliff, I take you the connected money is shaking out weak hands and they plan to run it up afterwards? Just want to know if my thinking is right here...

Thanks

Amir

Strong Inflows into Gold and Silver

Strong inflows from connected money continue to dominate the gold and silver market. These strong inflows are matched by aggressive outflows from specs (trading funds) and retail money. Aggressive selling by retail traders, notoriously bad market timers, only enhances the strength of the bullish setup.

Unlike previous bullish setups, this has been evolving during a price advance rather than decline. This is extremely unusual for the tightly controlled gold and silver paper markets. A similar setup occurred during the strong advance of 2005-2006.

The setup in the S&P 500 also warrants consideration. The 100%, 100%, 100% reading reflects strength of inflows into equities from connected players. This statistically significant reading reveals the invisible hand repositioning capital amid the noise and confusion of media-driven rhetoric.

COT Table:

Troubled California begins $14bn bond sale

This is going to be quite interesting. I have to wonder if the Fed will be a or the buyer. The rate will tell the story. If it the rate is reasonable then it is illogical. If it is illogical then QE has started to bail out states.

Jim

Exactly. If reward, or the discounting of price, does not reflect the inherent risks, then intervention must be suspected.

California on Monday kicks off about $14bn of debt sales, hoping that investor desire for yield will outweigh concerns over the US state’s fiscal trouble in a weak market for local government debt.

The Golden State is the starkest example of the financial difficulty facing US local governments. Worries are mounting of a possible rise in defaults or a reassessment of risk in the $2,800bn municipal bond market, hitherto perceived as a safe place to invest.

Source: ft.com

An Economic Rebound Won’t Take Place Until the Trend in Real Total Receipts Transitions from Down to Up

The "talk" about an economy on the verge or in the process of rebounding is hype until the trend in real (gold adjusted) total receipts transitions from down to up. There have been three major transitions since 1879 - 1898, 1937, and 1982.

Real or Gold Adjusted Federal Total Receipts 12-Month Moving Average (TR12MA) AND Federal Total Receipts 12-Month Moving Average Year-over-Year Change (TW12MA12LN)


Source: fms.treas.gov

Interesting Observation About 'Reality' From Reader

Lou,

Give you instincts some credit. They're "smart enough" to seek another explanation. There's an old Missouri saying, popularized the movie The Outlaw Josey Wales (1976).

“Don’t piss down my back and call it rain.”

Those that seek an alternate explanation must learn to create their own investment voice. It doesn’t have to be complex or lucrative. Often, nothing more than the ability discriminate the difference between piss and rain is needed.

The ability to remain positive, regardless of your wealth and position, will ensure safe passage through any economic storm.

Sincerely,

Eric

Dear Eric,

I am simply a nobody in the investment world...I have no money...could not give you a dime if I even had one for you (although I believe) you, JS, HS, DN to be my favorite reads, when guys like HS post for free!! Thank GOD on HIGH for you all but I just laugh when people try to even dissect what is going on in the world today! What is there to figure here!? Hasn't the media trashed us all to the point of despair while they keep telling us all is good? Dear GOD! Even the local news is just BS. They are all telling us they are saving lives just for reporting there is a thunderstorm in the area!

I stay UP cuz I see reality...tireless guys like you are my reality. All I have is a big THANK-YOU!! Take care and I hope you make millions!! I am just trying to get to the truth...my family is so important to me and I can't take any chances!

Best,
Lou