Market Turning Points

Current position of the market
SPX: Long-term trend – In 1932 and 1974, the 40-yr cycle was responsible for protracted market weakness. The current phase is due this year but where is the weakness? Has man (Federal Reserve) finally achieved dominance over universal rhythms or has it simply delayed the inevitable?
Intermediate trend – The correction is over and what is most likely the final phase of the uptrend (before a more serious correction) is underway.
Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of longer market trends.
APPROACHING AN IMPORTANT HIGH?
Market Overview
According to the Trader’s Almanac, September is the weakest month of the year. What better time for the stock market to have a long overdue correction of intermediate scope. I indicated under ‘Long-term trend’ above, that the heretofore predictable 40-year cycle rhythm had sorely disappointed the bears, this time. Will the month of September do likewise? Perhaps not! There are some sound reasons why bearish expectations will be at least partially redeemed in the near future. Let’s examine some of them:
The weekly MACD approaches the beginning of the month in a state of double negative divergence. This reflects price deceleration on an intermediate scale. Of course, this is not a final verdict! The MACD is still in an uptrend and, if it continues to move up, could nullify the divergence. However, the daily MACD also exhibits negative divergence and, judging by its histogram which has started to decline over the past four days, it may also be losing its upside momentum.

This post was published at Gold-Eagle on September 2, 2014.

Jared Bernstein Confirms That Austrians Aren’t Paranoid

For years a growing number of self-identified Austrians have been warning that the USD’s days as the world’s reserve currency are numbered. For example, I myself recently wrote:
I believe that the U. S. dollar, U. S. Treasuries, and the U. S. stock market are all overvalued – in a ‘bubble,’ as they say…
If and when the U. S. dollar bubble bursts, we will see prices rise not just because of what Bernanke (and now Yellen) have pumped in since 2008, but because of the rush of dollars flowing back to the U. S. that have accumulated from years of trade deficits. At that point, the Fed will have to decide: Does it wreck the U. S. financial sector and broader economy in order to save the dollar (comparable to what Volcker did in the late 1970s, only on a much grander scale)? Or will it go the way of several other central banks in history, and run the printing press until the game ends? Either way, it’s going to be ugly.
Often in reaction to such dire predictions we Austrians will hear critics say, ‘Oh give me a break, you guys are paranoid! Gold bugs have been warning about hyperinflation since 1971. What other currency are people going to use? The euro? The ruble? The dollar is here to stay.’

This post was published at Mises Canada on August 31st, 2014.

Options Reveal 7 Ways Stocks Can End 2014

Very few things can be known for sure about the future; and even when something is known for sure, the word sure is open to interpretation. Certainly, one can be reasonably sure that the sun will rise tomorrow, though technically even that it is not 100% certain.
It is possible to be sure about the future of the stock market – perhaps not quite as sure as tomorrow’s sunrise – but sure nonetheless. As the Lobour Day holiday is upon us, and with the final trading months of the year now approaching, we may find it helpful to take some time to consider what we actually know for sure about the stock market, inasmuch as we can be sure of anything.
To determine what we know for sure regarding the final months of 2014 for the stock market, we must make a prediction. In order for that prediction – or any prediction – to have value, the accuracy of the prediction must be properly disclosed.
For example, based on centuries of historical data one can predict with nearly 100% accuracy that the sun will rise tomorrow. However, to simply state ‘The sun will rise tomorrow’, without citing a historiucal basis for the claim, and without interpreting those historical results to disclose the expected accuracy of the prediction, the statement is worthless. Anyone who has ever had to reassure a toddler that the sun will rise again knows the importance of providing a basis for the claim.
Baseless predictions about the future of the stock market are no better than baseless predictions regarding the sunrise. On the other hand, any prediction that has an edge, even if it is a small edge (for example, a 51% likelihood of being correct) can be valuable to a trader so long as the trader is aware of the expected accuracy.

This post was published at ZenTrader on August 31, 2014.

Stock Market Tops & Gold Manipulation Suits

Mainstream press pundits are themselves surprised at the bull market the world has seen in stocks, and many are beginning to note that, soon enough, investors themselves will grow wary about investing in the stock market.
The price of gold bullion since March has come down approximately $100 per ounce, and since 2011 the price has fallen from nearly $2,000 an ounce to its current price of approximately $1,300. The story is similar for silver, which fell from its high of $49 in April 2011 to today’s price of $19.50. Many analysts on mainstream press have indicated that the gold bull market is through, but the evidence points towards the contrary.
Behind the headlines of a record breaking stock market, news about suspected gold price manipulation has caught the attention of many. As the New York Times writes of an ongoing hearing regarding the claims:
At a 40-minute hearing, lawyers for more than 20 plaintiffs gathered in Federal District Court in Manhattan to coordinate their linked lawsuits against the five banks that make up what is known as the London gold fix. The suits, filed by hedge funds, private citizens and public investors like the Alaska Electrical Pension Fund, contend that the banks have used their privileged positions as market makers to rig the price of gold to their benefit.

This post was published at GoldSilverBitcoin on August 28, 2014.

Stock Markets in their Third Bubble Since 2000

The S&P 500 just passed the 2,000-point psychological threshold, an absolute record for that index, created in 1950 and comprising the 500 largest companies traded on the U. S. stock market, thus being more representative than the famous Dow Jones Industrial Index, with its 30 companies. This new record would seem to show that the U. S. recovery is under way… but let’s step back a little in order to evaluate these numbers.
As can be seen on this 1950-end of 2013 graph (reaching 1,600 points), the S&P 500 has been quite erratic since the 2000s, with two bubbles that burst! But let’s get back to the ’80s… Back then was the triumph of Ronald Reagan’s ‘conservative revolution’, which led to a vast liberalisation of the economy with whole sectors being allowed to compete (air transportation and telecoms, notably), while at the same time income tax was reduced, thus encouraging wealth creation. Sound growth takes place and the United States comes out of the ’70s crisis on the way to two wealth producing decades.
In all logic, the S&P 500 starts to rise in 1982, with the 1987 October crash being just a glitch quickly forgotten. But, starting in 1995, the trend picks up, with the start of the ‘internet bubble’. Much hope is placed in the nascent network and heads are spinning a little too much. The bubble burst, beginning of 2000, and the S&P 500 went from a peak of 1,527 to a trough of 800 in 2002, almost down by half.

This post was published at Gold Broker on Aug 28, 2014.

Keynesian Fairy Tale Alert: Establishment Citadel – Council On Foreign Relations – -Peddles Helicopter Money Plan

Folks, take economic cover. There is already a rabid financial mania loose in the land as reflected in the irrational exuberance of the stock market, but, in fact, the fairy tale economics fueling the current financial bubble is fixing to leap into a whole new realm of lunacy. Namely, an out-and-out drop of ‘helicopter money’ to the main street masses.
That’s right. The Keynesian brain freeze has so deeply infected the Wall Street/ Washington corridor that the grey old lady of the establishment, the Council On Foreign Relations, has lent the pages of its prestigious journal, Foreign Affairs, to the following blithering gibberish:
It’s well past time, then, for U. S. policymakers – as well as their counterparts in other developed countries – to consider a version of Friedman’s helicopter drops….. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
I have actually checked, and, no, the publishing arm of the Council on Foreign Relations has not been hacked by writers from the Onion. This monetary insanity is for real!

This post was published at David Stockmans Contra Corner on August 29, 2014.

A day of reckoning has arrived to retiring Americans: 63 percent of Americans that start working by the age of 25 will be dependent on Social Security, relatives, or charity by the time they hit 65.

The notion of retirement is a fairly new one outside of wealthy circles. For most of civilized history, people worked until they died. Not a glamorous way to go but that is simply the course of human history. Only until recently with the emergence of the middle class was there a general semblance that retirement may be accessible to all. However looking at actual figures reflects a very different picture. It is hard to get a perfect balance sheet as to where older Americans stand today since there are many differing resources floating out in the market. Yet one thing is consistent and that is, older Americans are entering into a major day of reckoning with not enough. Older Americans are woefully unprepared for what lies ahead in retirement. Many are basically at the mercy of Social Security, family, or charity. Not exactly the retirement paradise Wall Street started pitching to the masses starting early in the 1980s. The reason this has gone on for so long is the political system is co-opted by big money. Over this period of time real substantive reforms could have occurred. Instead a generation has passed and many have nothing to show for it even with the stock market at record highs.
Retirement plan number 1: have no savings
Everyday roughly 6,000 Americans hit the age of 65. Too bad 36 percent of Americans have nothing saved for retirement. The typical cost of medical service for someone 65 and older and living 20 more years is $215,000. Given that many have nothing, they are simply one medical event away from the poor house. This is why programs like Social Security and Medicare are protected with such fury by older Americans. In many ways, this is their only form of wealth in retirement. Most do not participate in the Wall Street casino.
Some interesting figures regarding older Americans:

This post was published at MyBudget360 on August 29, 2014.

Massive 60% Stock Market Correction Coming: ‘Period Of Extreme Turmoil’

The confidence game is almost up warns Prudent Bear Fund President David Tice. And when the economic recovery and stock market build-up is finally revealed for the conjecture that it really is we’ll have a sell-off of unprecedented proportions.
Markets could soon face a fall of up to 60 percent, two experts told CNBC on Wednesday.
A jolt to international confidence in central banks will lead to a 30 to 60 percent market decline, David Tice, president of Tice Capital and founder of the Prudent Bear Fund, told CNBC’s ‘Power Lunch.’ When this happens, he said, markets will face a ‘period of extreme turmoil.’
This crash will be precipitated, he said, by a disillusionment with the Federal Reserve’s ‘confidence game,’ which will then see inflation rise, and the Fed scramble to raise rates…

This post was published at shtfplan on August 28th, 2014.

Margin Debt & Trends

The debate over the pending crash in the stock market seems endless. Whether or not margin debt as reported by the NYSE has relevance any more is an interesting question in a world in which the retail investor has abandoned investing (decline in liquidity). The real marginal buyers are hedge funds and some banks while the cash buyers remain central banks. The make-up of the market has changed and the interest rates are well below even many dividends. So talking about total margin debt nearing $500 billion cannot be compared just on a nominal basis.

This post was published at Armstrong Economics on August 27, 2014.

Managing Expectations: Part III of III: Picking Mining Stocks In A Bear Market

In the first part of this three-part series, I discussed the importance of cycles such as four-year presidential elections and the life of a gold mine, and how they play into our investment strategy here at U. S. Global Investors. Part II dealt with statistical diagnostic tools, in which I strived to simplify the definitions of standard deviation and mean reversion and explain how they’re applied.
The third part of this series on managing expectations is devoted to fundamental resource stock evaluation. I’ll discuss some of the statistical tools we use to pick quality stocks during a treacherous bear market, such as what we’ve seen in gold stocks the last three years.
Let it be known, however, that, though our approach might vary slightly depending on the condition of the market, we fervently seek to pick the best stocks at the best price and execution.
How I Learned to Respect the Bear
The traditional definition of a bear market is when broad stock market indices fall more than 20 percent from a previous high – which sounds like a catastrophe, but is in fact ‘normal’ market behavior. According to self-professed ‘investing nut’ Ryan Barnes, a contributor for Investopedia, ‘bear markets… are a natural way to regulate the occasional imbalances that sprout up between corporate earnings, consumer demand and combined legislative and regulatory changes in the marketplace.’
Think of bear markets, then, as the gradual transition from warm summers into frozen winters. Trees lose their leaves, snow and ice blanket the ground, many animals – the bear the most notable – hibernate for the season. All life seems to take a breather. But just as you can always count on spring to emerge and, with it, new life, you as an investor can count on the market to rebound with fresh vigor.
As you might have known, the tail end of ‘winter’ is when you want to take part in the inevitable recovery. If the market never had a winter season, if it were perpetually trapped in an endless summer, investors would be hard-pressed to find an ideal entry point.
It’s easy to determine when winter becomes spring. But what about the end of a bear market? How do you know when it’s bottomed and the optimal buying time has been reached?
CLSA consultant Russell Napier, in his now-classic 2009 book Anatomy of the Bear, describes the determinants of the end of a bear market:
‘The bottom is preceded by a period in which the market declines on low volumes and rises on high volumes. The end of a bear market is characterized by a final slump of prices on low trading volumes. Confirmation that the bear trend is over will be rising volumes at the new higher levels after the first rebound in equity prices.’
Look at the chart below. You’ll see that, in three decades, the Philadelphia Gold & Silver Index (XAU) has never had a losing streak for more than three years.

This post was published at Gold-Eagle on August 25, 2014.

The Winner-Take-All Economy

When the majority of Americans examine the world around them, they see a stock market at record highs and modest apparent improvement in the economy, but, as John Hussman notes, they also have the sense that something remains terribly wrong, and they can’t quite put their finger on it.
Exceprted from John Hussman’s Weekly Market Comment,
According to a recent survey by the Federal Reserve, 40% of American families report that they are ‘just getting by,’ and 60% of families do not have sufficient savings to cover even 3 months of expenses. Even Fed Chair Janet Yellen seemed puzzled last week by the contrast between a gradually improving unemployment rate and persistently sluggish real wage growth.
We would suggest that much of this perplexity reflects the application of incorrect models of the world.
Before the 15th century, people gazed at the sky, and believed that other planets would move around the Earth, stop, move backwards for a bit, and then move forward again. Their model of the world – that the Earth was the center of the universe – was the source of this confusion.
Similarly, one of the reasons that the economy seems so confusing at present is that our policy makers are dogmatically following models that have very mixed evidence in reality.

This post was published at Zero Hedge on 08/25/2014

Former Mafia Boss Tells CNBC: “Stocks Are In A Bubble, Buy Physical Gold”

Michael Franzese, a former mob boss for the Colombo crime family in New York (and GoodFellas character), told CNBC, “there’s a bubble there that’s going to burst at some point and when it does it’s not going to be good,” but there is another reason he says investors should avoid the U. S. stock market – “I did a lot of things at times with people on Wall Street.. a lot of guys are shady and they did shady things with me and I don’t trust them. And I don’t like other people that I don’t know really well taking care of my money.” As we noted earlier, his advice is to hold gold (in Physical bullion bars not ETFs), because “there will always be something there,” unlike stocks “where in our country, you go to sleep, everyone tells you everything is wonderful, you wake up and everything is gone.”

This post was published at Zero Hedge on 08/23/2014

Grant Williams: Wizened in Oz

Grant Williams, author of the newsletter, Things That Make You Go Hmmm, reviews the results of the last decade of Central Bank activity – namely: Bubbles.  Bubbles are everywhere…. stocks, bonds, commodities, real estate.  But Williams goes on to explain how the central bankers are stuck.  There is no way out of this mess without severe pain.  They (the central bankers) have found themselves in a position where they can only talk about halting the easy money policies, but cannot actually do it without completely crashing the system.  He notes that Janet Yellen may indeed try to taper from $85 to $65 billion per month, but soon would have to re-engage more QE because the US economy is not strong enough on its own.

So what to do?  Williams recommends holding a lot of cash right now in order to take advantage of the situation coming after the crash.

Precious Metals Wrap-Up

This Precious Metals Wrap-Up is inspired by and dedicated to Ed Steer, of Casey Research.
Mr. Steer continues to work relentlessly, keeping the public informed on important matters around the globe & on all things related to precious metals.  A subscription to his publication, Gold & Silver Daily is available, free of charge, to anyone wishing to be enlightened on a daily basis.

The Gold in GLD

September 1, 2011
Many people are suspicious and doubt that the SPDR GLD ETF actually has all the physical gold it says it has. Here’s a CNBC video, where Bob Pisani was one of the few people in the world who was able to visit HSBC’s vault somewhere in London and was able to see all those beautiful stacks of gold bars.




This may have eased some suspicions, but some are still concerned. Some people suspect that the GLD ETF may not have sole ownership ties to these bars of gold due to central bank gold leasing programs in addition to the fact that there isn’t enough physical gold in the world to back the volume of daily paper trades in the gold futures and options markets.

Update
September 9, 2011
Wow, talk about trashing a concept – here’s a video that lays out all the weaknesses in the GLD prospectus. As you watch the video and learn about the prospectus, keep in mind the three main players behind the SPDR GLD Shares:



Precious Metals Crash

The precious metals investor has to ask, “Why?” All the fundamentals that made gold and silver rise to the highs they saw in August are still in place. How can it all be erased in 3 days?

First of all, looking at a multi-year chart of gold performance, one can immediately see that the price rise was ascending at a much accelerated pace since July. Here’s the GLD chart which exemplifies this pattern.

Two year GLD chartThere were good reasons for gold to take off like it did – as political and economic problems persisted in Europe, the middle east and the U.S., things were looking bad. And nothing’s changed. In fact, much has gotten worse! For example, the Swiss have effectively pegged their currency to the Euro, which means there isn’t any true safe haven currency to flee to anymore. In the face of all that, why the sudden plunge in precious metals?

The “leap” in the slope shown in the graph above is more speculation of future prices, rather than an indication of current prices. And the markets love to take advantage of speculators on both the long and short sides when they can make money from it. And that’s exactly what’s happened here.

There isn’t a bubble in precious metals. Gold and Silver will continue to rise until the governments of the world stop their incessant spending programs and central banks stop accommodating them by printing paper money at will.

There are two levels of investing going on here:

  1. Speculators on the long term trend of gold and silver due to the fundamentals;
  2. Traders taking advantage of short-term, irregular trends in the market.

Keep your cool & stay the course. Watch the trends for good times to buy back into the market (like RIGHT NOW!!!!)