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Weekly Updates & Forecasts - March 2008
Gold:Gold stabilized this week as predicted, and finished it higher even though gold gave up some of its gains late in the week. However, we did not yet see the further correction back down to $850, which is still very possible, so caution is warranted. On the other hand, if gold continues its recovery from here on and climbs back above $1000, it will be an indication that the correction is over, although confirmation of that will not come until it closes well above the $1,032 reached on "Black Sunday" in Asia. In spite of all that has taken place, gold is still well within its nine-month uptrend since late August last year. Nothing to sneeze at.
Further, gold is now sitting right atop its February '08 Support line and it has bounced off the lower uptrend line of its move from August. At the same time, the Fed's move from two weeks ago has pushed it into near oversold territory. All in all, not a bad position to be in. Silver:Silver has of course come down from its recent ballistic move out of the August 2007 uptrend, but remains near its upper trend line marked out since then.
The mini-megaphone observed in the March 6, 2008 Update has obviously made itself heard since then. Yet, the extreme overbought position accumulated back then had already worked itself off when the Fed's Black Sunday action pushed it down far more than it would have gone otherwise. The important thing to see now is what portion of recent silver demand was investment rather than industrial demand. Industrial demand in silver is much higher than in gold, so a US slow-down will have more impact there. At this time, it is impossible to predict to what degree investment demand will be able to counterbalance that weakness and even turn it into strength. We'll have to wait and see. The Dollar:The dollar has not shown much strength since the Fed's one-arm lifting job on Black Sunday. Since Thursday, it had a decidedly "neutral bias" to say it with Alan Greenspan.
Since Black Sunday (3/17/08), it bounced, came right back down again, and is now floundering near the bottom established just before that Sunday. If it rises from here, a weak double bottom may form, but I don't expect that to hold. Gold Stocks:Gold stocks continue to show their by now almost traditional weakness. In the HUI's triple megaphone pattern pointed out in Gold Stocks - Boom or Bust? they have now decisively broken below the bottom line of the most recent mini-megaphone, and they are now below their November '08 high.
If gold gets "hit" again, the HUI can easily break back down to the 400 level again. The up-move early last week was tempting, but it is advisable to stay on the sidelines until the TNX at least recovers and stay above the 3.80 level. Above 4.00 would be even better. The Dow:The March 17 and 18th bounce of the Dow was perfectly timed to take advantage of a strong technical and psychological support level - the January 2000 high at 11,750. This was done to give the bounce some technical credibility, but it is shamefully obvious where the Dow would have gone without the Fed's Black Sunday action: South!
Already, the cooked-up enthusiasm has waned and the rally has petered out. There isn't any life in this deadest of all dead-cat bounces I have ever witnessed. We will soon probe that support level again, and this time, barring further Fed-delays, it will break. See you on Sunday.
Dear Monitor Subscriber: The current president has just initiated a complete takeover of the entire US financial services industry by the unelected, unaccountable, and unconstitutional Federal Reserve. His first coup d'etat was a civilian one whereby a small minority of the Republican party, now knows as the neo-conservative wing of the party, took control of this country's civilian and military establishments and wrested them away from all control by the US Constitution. Now he has prostrated himself further before his financial handlers, viz, the federal reserve and its owner banks, to institute a corporate coup d'etat. Here is a quote of the type of power from an Associated Press article published only hours ago: "The proposal would allow the Fed, in its new role as "market stability regulator," to dispatch examiners to check the books not just of commercial banks but of all segments of the financial services industry." Here is the NWT version of the deal: The Treasury plan would let Fed officials examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that MIGHT pose a risk to the overall financial system. How will the Fed interpret "financial services industry"? What power will it have beyond "checking the books"? If the Fed examiners find something they don’t like, what will they be allowed to do about it? If you run a blog that frequently comments about the state of our economy, will you be regarded as a "financial services entity"? What is an "institution"? Who determines which "institution" "might" pose a risk to the "overall financial system"? Am I an "institution" that fits under the rubric "any other institution"? Are my comments in my articles, Monitor issues, updates, and blog entries considered activities that "might pose a risk to the overall financial system" because I warn people of the inherent instability and unreliability of this financial system and advise them to get their assets out of paper and into gold? Bush wants to move the "discussion" over the long term toward embrace an "optimum regulatory environment." In Bush-speak, that means total control of all financial activities by the unelected federal reserve. Federal reserve bank branches already have armed "federal reserve police officers". What new powers will these "police" forces get? Since when do private institutions get to have their own law enforcement officers? Congress has to vote on these proposals. Big consolation that is! Congress is now controlled by Democrats, and many of them - like "Chuckie Doll" Schumer and Barney Crank - are already complaining that Bush's proposals "don't go far enough." This plan involves complete federal integration of all financial supervisory organs now in existence. It will be a new financial "Homeland Security Department" that will have complete control over your personal bank accounts and financial activities. Just like 9-11 was used by Bush and his neocons to co-opt the entire military and make it do the bidding of the US oil powers in the middle east, so is the current financial crisis being used to co-opt and install complete control over all citizens' financial activities. Free speech concerning issues connected to the Iraq war effort has already been abrogated by Bush's executive order from July 17, 2007. You can have all of your property "blocked" by the Secretary of the Treasury if he thinks that you might be thinking about committing a violent act that would interfere with the administration's "war effort." Soon, you will no longer have the right to openly criticize government or federal reserve policy actions based on the same shoddy "emergency powers" claims. This is no time for running and hiding. The United States is the last country on earth where real freedom is even possible under the actually existing legal structure and political system (although that is no longer the case with the counterfeit, substituted poor excuse of a system that has been twisted and contorted out of any semblance with its original purpose and design). This is the time for fighting. Do NOT submit! DO NOT allow them to cow you into silence. I will continue what I have been doing, saying, and writing. I will not be silenced. I am perfectly ready to face the consequences of my refusal. I have an absolute right to speak my mind on public financial and political issues - and so do you! These attempts at taking that right away from you are illegitimate, and wholly outside any constitutional power grant. It is this cabal of fascist controllers that acts outside the law they were given by pretending to pass these laws intending to limit our personal and financial freedom. If every American citizen and stands tall in the face of this continued assault on everything this country stands for, these people are powerless. Of course, nobody is going to =get arrested right now, or anytime soon - but the new 'regulatory" powers will be on the books. Their passing without public uproar will set a precedent for further power grabs. This process will not stop because it has never stopped previously. It has been in motion for a long time, and we didn't stop it. Neocolonized American minds will say: "what's so bad about it. They are only trying to protect me from losing my retirement portfolio. Of course, sacrifices have to be made." But, who is making the sacrifices? Why does it have to be you, again, instead of those who got us into this mess? It was the FED's very existence and its structure that got us into this mess by creating a pure fiat system and then lowering interest rates far below what the markets alone would have sustained. That created the bubbles and their eventual busts. That created the current downturn. Yet, it is that precise organization that is now being put in complete charge of the hen house by its traitorous lackeys, the neo-Con and neo-Dem political power establishment. On a more sober note, Bloomerg confirms that the process I predicted (collapsing treasuries) has begun: "Treasuries declined this week even as reports indicated the economy is losing momentum. Two-year notes posted back-to-back weekly losses for the first time since December." Headline: "Treasury Bill Rates Rise Most Since '82 on Fed Liquidity Steps" Ten-year rates are currently only at 3.44%. Once they go back to 3.80% or higher and stay there for longer than a week they will have been to have broken out of their recent sharp downtrend. Once they go past 5% to 6 or higher, a super-rapid explosion will be very likely. It can of course happen even before then.
The remainder of this week's update will be published by midnight, Sunday. See you then.
What a week! While the press is fulfilling its ministry of propaganda function, the financial world continues to teeter on the brink. Rising stock markets and falling gold and silver prices are seen as proof that the ueber-manipulators' shenanigans have worked - but things just aren't as rosy as they want us to believe. My last article shows what hasn't changed, really - namely everything that really matters. This one from the London Telegraph shows that not all is well in fairyland. The big, bad, "nothing" is coming to take the world away, and Bernie-Atreyu, the hero of the story is ill equipped to do anything about it. (If you don't know what I mean by this, watch th movie "The Never-Ending Story.") Gold:Gold is still going down. It will likely go all the way to $850 or so. Important to remember is the fact that gold initially held up quite well under this coordinated onslaught, until two days AFTER the Fed intervention.
By the time gold started its descent on Wednesday, the dollar had already begun its bounce, oil, silver, and other commodities had slumped already. Because of that, there is built-in resilience in gold and once it hits major support at $850, it will likely bounce back up fairly quickly. All it takes is some more bad news on the financial quagmire front, and we're back up to $1,000 and beyond. Gold Shares:Gold shares continue to make my case for me. Little upside and huge downside at the slightest provocation. No wonder. They are all derivatives in the most basic sense of the word. Their dollar-price is derived from gold, but is not "as good as gold" by far. Their old leverage to gold will take some time before it comes back. The Dollar:The financial press is celebrating the dollar's "strength" since the Fed intervention. Kinda early for that type of euphoria. The greenback has just barely dug itself out of its grave.
The Regular Stock Markets:Want proof that this whole thing is engineered for public perception, only? Compare the "advances" of the Dow with what happened in the real stock markets - you know, the ones that don't count as much because they don;t have the same hold on the imaginations of the masses? Here is the Dow:
And here are the Nasdaq and the NYSE:
Pretty lame for Bloomberg's headline of Thursday, "Stocks Vindicate Bernanke" - right? Apparently, it's only the PPT that vindicated him. Oh well, at least something did. I have a feeling gold will find support and solidify before the coming week is out. We will see. Until then, ...
I just forwarded my new article to my list of publishers, titled "Gold and the PPT's Virtual Garden" The illusion is complete, now. Monday was "just a bad dream." It is safe to go back to sleep, now. That is the message the PPT and the financial powers are trying to convey. Unfortunately, the problems they papered over did not go away. before too long, they will surface again - and again, and again. By now, you should all have exited any gold stock positions you may have retained. Keeping the gold is easy and painless in these types of hyper-engineered downturns, but hanging on to losses in gold derivatives called "gold stocks" that only inch up but go down faster and harder than gold itself, is hard - by multiples. The previously observed megaphone pattern of the HUI has now traced out a picture perfect example of same.
Personally, I am not at all disturbed by this drop. I still have my gold. They didn't come and get it yet. What the markets say it is worth is of little concern to me - except for one: if I buy some now, I get more for my money. This is far from being "the top" for gold." Seeing how gullible the masses seem to be, it is hard to say how long it will be to get back above the $1000 mark, but all it takes is another emergency cut and bailout (or hand-over) and we're back there and beyond. It will be hilarious to watch the lemmings jump back off their stock-market cliff again and again. They are already piling back into the Dow in record numbers. See you Sunday - or earlier, if need be.
in spite of all the turmoil today, the dollar managed to rebound as commodities took a huge hit. Only gold was little affected, having come down only from a large bump up to $1,033 in Asian trading back to pretty much where it was before. The currency news outlets have little to say about why the dollar rebounded. Although the data aren't out yet to support this, it its very possible that the dollar bounced because of sudden, knee-jerk foreign demand for US treasuries, which bounced big time today, pushing yields for the 10-year note down to almost the level of the January 23rd low.
The PPT (plunge protection team) could be seen in full action today, "rescuing" the Dow from yet another step loss - for now. The Nasdaq and S&P both tanked, but the Dow ended up marginally higher, staving off a wider panic. But that doesn't mean people now feel safe. In the eurozone, inflation is on a rampage. Up to 3.35 percent as of late, almost double the pre-set limit of 2 percent, giving Trichet good ammunition for leaving the repo rate at 4 percent. He probably won;t raise it, but he sure as hell won't drop it, anytime soon. Silver and Platinum tanked along with the other commodities. More proof that gold stands alone when it comes to rock-solid stability in the face of such upheaval. It is the monetary metal, par excellence, more so than silver ever will be. Why? It is far less responsive to industrial demand. What will the dollar do tomorrow after the Fed cut is announced? Could go either way, in this crazy market. Mainstream and institutional investor's frames of reference are stretched to their limits and beyond. Nobody knows how to act in this debacle. My guess is that, before long, it will fall again. For now, the stampede seems to have been stalled - but the cattle are still on edge. A butterfly's wing-flapping can send them running again, at a moment's notice. Better to keep your powder dry and your cash in hand - rather than on a failing bank's fragile balance sheet. More tomorrow.
US Banks Are Folding, Fed to Follow!We are in the middle of an existential crisis for the US Fed and its misbegotten banking system. It is hard to imagine, but the very worst is possible under these circumstances. If you have any kind of cash balance in any US bank, I strongly suggest taking it out until you know where all of this is going - and before the bank runs begin. Only last evening, the Fed made another emergency rate cut, this time of the discount rate (not the usual federal funds rate) - overnight, AND ON A SUNDAY!! The press now reports that the futures markets predict a full one-point rate cut at tomorrow's FOMC meeting. I have never seen anything of the sort happen. Also overnight, the price of gold jumped in Asian trading from just over $1000 to over $1020 per ounce, then stabilized in Europe where US bankers' efforts at containment apparently carry more weight.
The Fed has now depleted a full quarter of its US treasuries holdings by substituting impossible to sell US mortgage debt for $200 billion worth of treasuries, infecting its own accounts as a result of its latest Term Securities Lending Facility, or what I call the "Slime for Prime Swap". All in all, it has now depleted a full 1/3 of its entire balance sheet if you count the previous TAF auctions. Bear Stearns had to be bought up by JP Morgan. Other banks will follow Bear Stearns. Who will buy them? In essence, JPM has taken poisoned Bear Stearns assets onto its own balance sheet, just like the Fed has taken US mortgage slime onto its, in return for nominally pristine treasuries. From Treasuries to 'Trashuries':If the current trend continues - and all indications are that it will - even US treasuries will become as toxic as US mortgages, and whoever owns them will want to dump them ASAP. That, as you know, will drive US mortgage rates and other long term lending rates and bond yields sky-high, making 1980 look like an unwanted stepchild in the annals of interest-rate explosions. As the Fed continues to bail out its member banks, thereby taking on massive amounts of water itself, US short rates will go to near zero, Japanese-like, levels while long rates will explode skyward. This will eventually force the Fed to raise the short end of the interest rate spectrum as well, as Paul Volcker did in the days of yore - but it won't work. Why? Because the Fed can only influence the federal funds rate by buying and selling "securities". Guess what securities we are talking about? US trashuries, of course. The Fed lowers the rate by buying treasuries in the open market (called OMO or "open market operations") with its freshly "printed" electronic dollar-credits. To inject liquidity into the markets (i.e., to lower rates), it buys treasuries. To mop up liquidity and thus raise rates, it sells them. Question: When the Fed tries to sell them this time around, who will buy them?? In 1980, the dollar was under pressure by rising gold prices, but the banks were sound as sound could be, and foreign countries weren't nearly as overstocked on treasuries as they are now. This time around, nearly all US banks are in trouble and China and Japan alone hold more than $1.8 TRILLION in soon-to-be-trash US long term treasuries. When they sell - who will be crazy enough to buy? If the Fed is trying to sell its shorter term trash at the same time, who will buy it? This could lead to the utter collapse of the entire federal reserve system in the US. We might actually be rid of the Fed completely, even without formally abolishing the Federal Reserve Act. The Fed will simply go broke. Ha! Congress may have to nationalize most banks and start issuing money itself, as the Constitution demands. Who would have thought? This insanity is going so far as some incognito Wall Street Journal blog readers commenting to suggest that the Fed start BORROWING TREASURIES from the US Treasury itself! (Read the comments below the blog entry) How is that for a total turning upside down of the intended state of affairs? The entire idea is for Congress to be able to borrow "money" (fiat) from the Fed and issuing US treasuries to the Fed as IOUs. Now these guys suggest the Fed should borrow the very IOUs Congress uses to collateralise repayment of its debt to the Fed??! That would mean the erstwhile top creditor of the US government, the lender of last resort, would become the debtor of the government, borrowing debt. That's what happens in an insane world where debt is legislatively passed off as "money." In other words, it would mean the Fed would no longer be able to loan money to the US government as it would now be borrowing from the government, just to be able to stay afloat. Imagine that. Proof that all of this is in the works is the fact that last week's 10-year treasury note auction was hopelessly unsuccessful. Foreigners bought only 5.8 percent of the offer, compared ot the usual 25 percent. (I feel like putting an exclamation mark behind every paragraph). This lack of demand has not shown itself in the prices yet. Why not? The Fed is buying long terms US government debt. There can be no doubt about that. Either that, or they are using unknown types of pressure to force their banking and broker buddies on Wall Street to buy 10-year notes en masse in spite of the obvious foreign flight, which buying makes no sense whatsoever. The fund managers buying this stuff must be suicidal. Any investor with any sort of common sense would flee the US government debt markets under these conditions - but we are told by the pathetic US press that there is another "flight to quality" gong on. WHAT quality, I ask?? As a result, the ten-year yield has dropped to 3.35 at the time of this writing. We are very near the predicted double-bottom in US long term yields and a double-top in prices. This is simply insane. Any private investor who has any kind of retirement money invested in mutual funds whose managers are buying US debt should immediately exit and put their money into American Eagles-funded, self-directed IRA's to avoid the tax-hicky of early withdrawal. Only a Ron Paul presidency can avert a total collapse of the US economy. The banking system itself is beyond repair. The economy can only be saved by giving consumers an alternative medium of exchange - gold and silver. He is the only one willing to do that. I will keep Monitor Members updated on developments throughout this week. They will occur in rapid-fire fashion. I will have to publish portions of what I wrote here to warn as many Americans as possible. This is the most dangerous crisis I have witnessed in my lifetime. It is more dangerous than the 1928 stock market collapse and ensuing depression. Far more dangerous. See you soon. 03-09-08 Update:(Not much has changed, chart-wise, since the late update last Thursday, so this update will have very little charts to accompany it.) Gold & Silver:Gold and silver have both stalled as expected. While gold hardly touched its oversold levels and therefore had little to work off, silver has completely worked off its tremendously oversold RSI and is now almost ready for a further push into the northern reaches of its chart. Both metals have some further consolidating to do, though, but that may reverse by the end of the week. As I said before, I would actually like to see a consolidation of silver down to about 16-17 dollars per ounce, but that may not happen. The economic news overall are so dire and keep getting worse. Charts are not the thing to rely on in these times as news can overwhelm them all the time. Gold Stocks:The HUI and XAU have both met the enemy at 500 (HUI) and just above 200 (XAU) and didn't like what they were seeing, so they retreated. This week will likely see further "consolidation" (as if they weren't consolidated enough already!) Still bearish on metals stocks, as you can see. There is no reason to be in them at this point. US Dollar:The dollar got a little bounce on Friday because traders foolishly saw Friday's Fed move to further boost liquidity as a positive influence on the greenback. Today, Trichet managed to simply soothsay the euro into a downward correction by merely indicating that he was "worried" about excessive exchange rate moves. Not even a hint of a rate cut by the ECB - and the market's response tells him he will not have do make one, anytime soon. The US Fed, on the other hand, is seen as likely to be making another "emergency rate cut", even before the already quickly approaching date of its next FOMC meeting on March 18th! I am more and more convinced that the dollar is simply being destroyed on purpose. it will resume its downward spiral before the week is up. Bonds & Rates:Long rates are falling again.
Bond traders must be really confused, right now. The poor chaps don't know which way to turn because of their internal bias against gold. That will change. Silver:Although silver went over $20 this week from an already overbought position, it continues to look toppy, and will very likely correct very soon.
It seems to be building a mini-megaphone pattern, especially with today's action trending downward so far. When silver does break down for a bit, I fully expect it to take gold down with itself. Gold:Gold's 6-month chart shows it near the top of a long, unbroken uptrend channel,
and the 3-month chart traces out a similar megaphone pattern to silver and the HUI (see further below).
So, since everything looks so toppy, it's probably a good time to take some money out if you are trading. I wouldn't want to be in stocks for anything right now. All of these chart patterns can easily be toppled by some crazy catastrophic news item, of course, at least in the short run, but eventually the two metals will have to correct. I think the sooner the better. The higher it ll goes from here before correcting, the deeper the correction will be.
Going down, down, down. Us monetary authorities seem to be engaged in a downright war on the dollar, helping the euro in the process. A new precipitous drop can easily spark a renewed PM rally, from here, but again, it won't keep the metals from having their correction eventually.
There isn't much else to be said about the buck. Its short, medium, and long term direction is rather clear.
The long bond (USB) and the 10-year had their bounce but are now looking like they will continue their respective downtrends from the January peaks. It is hard to figure out what caused this recent mini-spike back up from where they had dropped before. Possibly just a remaining knee-jerk reaction to "flee" into the supposed safety of bonds when the dollar crashed again Even supposedly sophisticaed bond investors can be stupid, I guess.
For a while there it looked like treasuries would rally all the way back up to the top represented by the lone floating black bar that looks like Criss Angle hanging in mid-air - but I guess not. The only issue is whether long treasuries will decline rapidly of slowly, but decline they will. Oil:Oil received a huge bump yesterday, up past 104 per barrel, when the government suddenly discovered its oil reserves were a bit low. How does that work anyway? Don't they keep a running tab on their supplies? How can they be "surprised" when there is less oil than they "thought"? Is somebody stealing from them? DId demand spike? What is it? Anyway, I still don't think 100-plus oil will last very long. My rough guess is a week or two, maybe. The demand to support this price level just isn't there. The oil sheiks seem to agree, claiming that their refusal to increase production is a hedge against the expected fall in demand resulting from the mounting economic slowdown. See you Sunday. |
