GLD updated

The daily chart of gold ETF GLD shows the metal having broken upward from the little Symmetrical Triangle that too many people have been making too big a deal about.  Of more importance is the lateral resistance at which gold finds itself bumping its head now.  That resistance coincides with the downward sloping EMA 200.

MACD has triggered up and gone positive while TRIX has triggered and remains below zero.  These look good on balance.  RSI has broken above a resistance level; also good.  CCI shows very short term over bought, so a reaction - conveniently timed with the FOMC and/or ECB? - could happen at any time.  The ADX and DI lines show gold to be in a trendless situation, which is good after a long and corrective consolidation.

All in all, not bad but the relic still has a lot of work to do during this very noisy summer.

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SPX weekly chart

Are the bears going to snatch defeat from the jaws of victory once again?  Well, NFTRH has been following a series of higher highs and higher lows by daily charts to keep a tight focus on the rally (dumb money sold in May, right?) and I have by no means been over confident in the market's prospects.  But the weekly chart has gone MACD trigger up while the trend remains down - for now.

The market is within a strong resistance zone but the bears may be running out of time to break this thing.

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30.2 & Au upated

The 30 year - 2 year spread is turning down from a logical resistance point.  Let's see if gold feels the pull of its ball and chain it has worn since Op/Twist was cooked up last September.

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Short covering rally or...?

Just a little chart reminder for deflationists all huddled up on the port side of the boat... the trade is crowded.

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Au-Stock Market still fanning along

What is notable is not so much that GLD-SPY is threatening the next fan line, as that it was up yesterday on a market down day and then up again today on a market up day.  At least I think it is notable.

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Au-Euro daily chart

GLD-FXE is pretty interesting, don't you think?  One year ago it was blowing off with the first phase of Euro hysteria.  Today the consolidation continues but is looking ever more bullish.  You need the patience of an elephant with this market.

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EuroSTOXX filling a gap

A chart from NFTRH194 showed some support (now broken) and a gap.  Today the gap got dinged.

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Just another simple chart of a monetary relic

I see analysis popping up out there refuting the bearish Descending Triangle view and in my opinion that is with good reason; it looks a lot more like a massive consolidation of previous bullishness than a topping pattern.

However, a common theme seems to be some kind of static about a QE3 'Super Sunday' (don't hold your breath) or some such noise and gold's imminent and preordained blast off, never to return to current levels as the 'banksters' take it higher and higher.  

A theme seems to be that now is the time to be bullish but I have also read within the same theme that we cannot be sure that the 'banksters' will not crash gold through support first, to totally eliminate the little guy before bringing it higher. 

This blog noted that possibility last week.  As in my 'guess' (and that's all any of these guys are doing) was that gold would break down, potentially to the high 1400's, where it may end its correction on a final shake out.

I will tell you what should be eliminated however, and it is not so much the little guy as it is the grand and titillating predictions.  There is stuff out there that has been strongly supportive of gold and gold stocks all the way down, while always containing a rejoinder like 'of course it can go lower so the gold community can get 99% eliminated before the 'banksters' (or whatever the nickname du jour is) ramp it higher'. 

A problem being that this dynamic sounding analysis has kept 'em in it every step of the way down - and managed to cover its own a$$ at the same time by always slipping in a caveat.  The suggestion here is to keep an open mind, realize that not you, me or the writers of dynamic and titillating things know what is going to happen.

What I do know is that the chart above is very orderly.  The weekly MACD and the altered and slower MACD I am experimenting with (in place of the TRIX for now) have given no bull signal but have given a view of the elimination of damaging momentum.  RSI is above important support and beneath resistance that would signal the end of the correction if exceeded.  The weekly trend is down (as is daily, with monthly trend up) and the more sensitive CCI is above -100, which is a positive signal.

That is all there is.  A metal that has been historically tied to sound money systems is in a corrective consolidation.  This will be the case until the price rises above the two noted moving averages and then breaks the blue trend line, and goes RSI 50+ or breaks down badly and disqualifies what I have written above.

The advice here continues to be to tune out the 'us against them' stuff about the evil banksters, cabals and other nefarious big monied boogey men (the biggest boogey man is a big brained and mild mannered fellow at the Federal Reserve running an operation in T bonds - I know, that is my own tin foil hat talking) and have patience with the process.  Part of that patience includes risk management - especially as pertains to any kind of equities - because risk management enables patience.

Meanwhile, speaking of patience, the gold chart above is the picture of patience.  That is all it is.

Check out the free eLetter why don't you?

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NFTRH197 Out Now

...and I have got to run to a softball tournament!  Bye.

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Yet another bottoming pattern shows up - GYX

Today looks tough, but in general patterns like this one on the base metals index are showing up all over the place (globally, that is).  Assuming the market is just taking a corrective break to the bullish 'higher highs, higher lows' uptrend that has ground on since May, GYX should hold this pattern and target close to the EMA 200.

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Is 30.2.Au flying in Ben's face? Not yet

The FOMC announced that Operation Twist would continue through year end.  This is where the Fed tries to re-inflate the housing bubble (and related areas) by buying long term T bonds to artificially hold down long term interest rates while sopping up any inflationary implications to the money supply by selling short term T bonds.  Throw in a side of ZIRP, and you've got a lot of free money flying around out there with very subdued inflation effects.

Gold is in an orderly corrective consolidation.  Silver has been hanging around at support and is sponsored by a bullish CoT structure.  Commodities, even backing out the wildcards in agriculture, are in nice short-term bottoming patterns (copper is rounding upward and crude oil is breaking up from a small Inverted H&S with a target around 98) and just waiting for the Fed to lose control of the nice macro painting it has been working on since Op/Twist #1, back in September of 2011.

Since the FOMC's most recent announcement, the 30.2 yield spread (30 year/2 year ratio) has gone upward right along with commodities.  Now, does this imply that the Fed has lost control and we are finally going to see some inflationary expectations anxiety?  Unfortunately, no.  30.2 has simply reacted with the relief in commodities.  Maybe the Fed is just letting it breathe in a natural way before taking manipulative action once again. 

Gold certainly does not seem to think a release of inflationary endorphins is directly forthcoming.  When might this condition change?  Well, let's see 30.2 get through the resistance area noted on the above daily chart before even thinking of a lasting trend change.

A weekly version of the chart shows the 30.2 and gold firmly locked in downtrends.  As long as the Federal Reserve is able to conduct yield curve operations to its liking, there will be no apparent inflationary implication to casual (read: most) observers.  But the facts are...

• The Fed holds the funds rate near zero (ZIRP)

• They state they will continue to buy long bonds 

• They state they will continue to sell short bonds

• The picture that the resulting yield curve would paint is one that traditionally implies Goldilocks, the best of all worlds - accommodation and little inflation

• Goldilocks has been created by decree, not by a natural market 

• That is by definition, manipulation

'Yes, we know that Gary'.   Well I know you know.  But as market participants we have got to factor the above because it is only critical to just about everything.  Buy or sell stock markets, commodities, gold, silver, T bonds?  Factor in the powerful force at work in the bond market.  Factor in its agenda, its supply of ammo (short term T bonds for sale).

I will not pretend that this operation has not messed with the tools with which I go about managing markets.  It has.  It is hard to know what to believe and what to discount.  Speaking for one asset - the monetary stress barometer, gold - we note that its chart structure is a consolidation, not a blow off top.  In other words, it looks like something that is in waiting.

Meanwhile, the chief operator at the most powerful manipulative agency in the world is sitting pretty:

“that’ll be the last time you people publicly lynch me with your helicopter jokes and inflation hysteria; how you like me now suckas?”

As we work through the process of sorting out the timing in which the market's more natural forces come back into play, you are invited to check out the free - and spam free - eLetter and of course, this blog.

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Another confusing item in a confusing market?

The Templeton Emerging Market Income Fund (TEI) came within $.10 of our $17 target yesterday.  I got out in the 16's, took the NAV profit and got a quarterly dividend.  All good. 

But part of the reason I sold was due to this graph that was shown in NFTRH, which is TEI's price to NAV premium. 

I mean, we all know the world is ending in a deflationary sprint to Uncle Buck, right?  Yet this emerging market bond fund blew off and people had to get in just like gold bugs do when they used to pump the Central Fund of Canada too far above its NAV.  It seems like a danger sign so I took the profit.

Still, I think the strength of global bonds is a telling thing and it remains an area of interest going forward.  This for several reasons, not least of which is Jon's 'global leveling of the playing field' -TM.  As the west continues to balloon its debt structure, could the emerging markets be considered a safe haven of sorts? 

Yeh yeh I know, the venerable US T bond market is the ultimate safe haven.  But the difference is that a free market appears to be buying the emerging bonds.  When this premium to NAV calms down a bit, I want TEI back.

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VIX looks ugly

Think about the SLW-RGLD ratio from a couple posts ago... a little bottoming pattern.  Now we have this VIX chart from NFTRH196... a bearish pattern that is breaking down today.  Here are the words that attended this chart.

"You know, being a perma-bear is no way to go about life. They’ve got it all; Euro crisis, fiscal cl… (well, you know), economic deceleration and charts that if drawn a certain way and infused with enough bias can look bearish and still we have this mess forming on VIX?"

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SPX weekly chart

Now is the time for the bears to crack the market if they are going to do so. 

I am as unsure as the next guy as to what is directly upcoming, as I have been bullish since May but also showed the daily Bear Flag (HUI) to 'potential' Bear Flag (SPX) correlation that needs SPX to stay below 1375 to remain a possibility.  Additionally, the weekly chart pretty much tells the bears 'now or never' at this thick cap of resistance, before the MACD up triggers again.

Thus I am going into 'enjoy the summer' blood pressure containment mode and not leaning too far one way or the other.

There are lots of crosscurrents, all compliments of the man would would be Oz; the man smart enough to know which bonds to buy and which to sell... for our own good, and for the good of those on the right side of the game (again, see the Homies).

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Updating the SLW-RGLD ratio

Using these two royalty companies strictly as an indicator, the Ag royalty company is in a cute little short term bottoming pattern in relation to the Au royalty company.  Make of it what you will, but SLW is expected to out perform RGLD during bullish phases, and the opposite during bearish.  It will be interesting to see if this pattern proves bullish.

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SOX - Yet another neckline fails to break down

Just like copper.  This leaves the lonely CNDX (TSX Venture) as the exception to the rule thus far.  The bull... what else?  Lives.

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Ben Bernanke: 'How You Like Me Now, Suckas?'

A newsletter that was actually pretty workmanlike, charting what it needed to chart and setting its market parameters as usual, ended a little weirdly as the writer had obviously not yet fully processed and resolved his feelings about the Fed Chairman and his brilliantly conceived operation whereby the Fed feeds favored economic areas (hello housing index) through long term bond purchases and sops up the money supply by selling short term bonds.  The result is a painting, a representation of reality as dreamed up by an academic genius.  This was the 'wrap up' segment to NFTRH196:

Bernanke: How You Like Me Now, Suckas?

Gold is twisting around and being restrained by policy. This policy makes it appear that the system is just fine. But this is just a painting, a fraud. A powerful entity is selling non-strategic T bonds to buy up strategic ones. It is painting the macro economic picture in a brilliantly despicable operation to keep previously popped bubbles like housing and current bubbles like government credit alive with no need as yet for outright printing. Markets, including the gold market, seem to buy it.

Basically, the Fed is controlling the financial markets and keeping the monetary barometer to financial stress and/or inflation ball and chained. And unless the market rebels the Fed can keep this racket going as long has it has enough bullets. Its bullets are measured in short-term treasury securities. They are finite.

I realize I am not doing a stellar job of brushing off this manipulation, but that is because blatant and damaging gamesmanship is not only practiced by the easy targets sitting in the executive suites of big investment banks, but also at the Federal Reserve, which works with these banks along with the US Treasury and the government itself to rig the markets that many of us would like to see more naturally functional.

If something needs this much hands on management, you have got to believe it is broken and the honest thing would be to just stop messing with it and let it break. But if that is allowed to happen, the whole enchilada unwraps and everyone gets messy. We know that rich and powerful entities do not want to cede power and it also appears that the public does not yet have the will – or perhaps the insight – just yet to take that power away by voting with its feet and just stopping its massive purchases of Treasury bonds, either directly or through its financial adviser herd.

No, the public has followed the Federal Reserve and large speculative entities right into the long bond, bringing its price to extreme levels. Ben Bernanke is a master, conducting an orchestra that could not be any more in tune. Everything is playing in harmony as deflation fears have been fomented toward an extreme, with the inflation anxiety of one year ago now a distant memory.

If you listen closely enough you might just hear Bernanke thinking aloud… “that’ll be the last time you people publicly lynch me with your helicopter jokes and inflation hysteria; how you like me now suckas?”

I like him just fine as long as I can read him. Following Fed signals has become trickier in the last year and I have got to say that this Fed chief really is smart and he really is a challenge. But at the end of the day, he is still just a powerful clerk at the controls of a powerful entity with powerful people acting as his agents.

But reality is reality and fantasy is fantasy. I don’t really care what gold itself does because it is just an anchor, a lump of monetary value storage. But as a newsletter writer I do care about being able to get a read on this mess. The chart above implies that the only read I will get is the read that Ben Bernanke says I will get until further notice.

BB: “How you like me now sucka?”

GT: “I like you just fine; I have no other choice right now. But ‘I’ll get you my
sweetie’…”

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The 'nanke: 'Fed Ready to Act'

Market then flops as if disappointed that the guy did not unleash holy inflationary hell today.  It's really pretty stupid.

Fed Ready to Act

I am on alert for a scenario whereby a scary plunge needs to happen in the stock market before triggering the final piece (in addition to decelerating jobs, ISM and bombed out commodities) of the puzzle that gives the addict what it wants/needs.  A technical parameter to extreme risk management was noted on this blog yesterday.


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Gold updated - move along, nothing to see here...

Only when Au breaks above the weekly EMA 35 (and holds it instead of being quickly reversed as it was on the break early in the year), triggers MACD and then confirms with a slower TRIX cross will gold be out of the woods technically.

That is a Descending Triangle and it is running out of room (with the bottom line being the horizontal support zone in the low 1500's.  DescTri's are usually bearish, but they are also usually 'continuation' patterns as opposed to the current would-be reversal [ed: from up to down].

But there is an alternate view and that involves a decline to the high 1400's, which if held, would reinforce the pattern as being a bullish Falling Wedge, not a DescTri. 

There is some bearish Descending Triangle hype out there (to go with the opposing 'gold to 3500 cause the system is falling apart!' hype).

The reality is that the relic is an anchor to honest money and it has been beaten down systematically since the panicked momo's wrecked it last summer.  'WHAT'S WRONG WITH GOLD?!?!?' scream people who do not get the concept of patience.

I happen to believe that gold first blew out from its own unhealthy sponsorship and then for some months now has been held down with the help of the Fed's manipulative policies in Treasury bonds.  That's what I believe; fit me for a tin hat.

But the pattern is tight, has relieved all of the previous unhealthy bull pressure and is in a much more healthy stance.  Again, my guess is that gold will break down through the first support zone and then we watch to see if it finds support at the would be Wedge line in the 1400's (favored) or takes the express elevator to the next projected support in the 1300's.

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TEI did its job in 3 ways...

Not only did the Templeton Emerging market bond fund act as a market indicator along with other bond funds in diverging the USD, it also provided a good NAV profit off of the May buy level in the low 14's and just today it dropped a nice dividend into my accounts.  Not bad.

It's over bought now, almost to the originally spec'd target of 17 and getting way extended past Net Asset Value.  i.e. it's no longer a value.

I am still not really sure why something like this caught the 'I gotta have it!' bid from the momos.  It was intended to be a longer term thing.  I'll not complain.  Markets are tough enough, but sometimes they throw you a bone... or 3.

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Another chart that is for all the marbles...

Asset markets depend on this one chart (also from NFTRH190) that continues to cling to life.  Amazing, in'it?  PS: Think of it as the relative 'commodityness' of silver vs. the relative 'moneyness' of gold.

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Another view of the long bond...

This time by its price instead of its yield.  So is this thing going to accelerate upward and wreck the system or not?  From NFTRH190:

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Semi's look bad

From 196:  "Here is one from the dark side. The semi’s look bad. This must not be an area favored by the Fed’s targeted manipulation. Maybe in this industry companies have to build to real demand as opposed to ginned up over-stimulated demand (ref: Housing Index)."

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No more room for yields to fall...

A decline here and we can forget the bull contrarian stuff and get ready for a blow off in deflation expectations.  This is basically the line in the sand.  If this were to happen, do you think Prechter would finally be re-anointed?

I'd guess the line will hold, but that is a blogger's guess or lean or what have you.

It is notable how new gurus (post-Prechter) took the inflation play and have made lucrative careers out of it, just as the head d Boy did with deflation.

You know who the inflation gurus are; selling hyper inflation and how to prepare for it since 2001.  Well, we have been hyper inflating for years now, because we have been taking debt right off the charts into un-payable figures with too many zeros attached.

But the thing is, the inflation is not taking.  What has remained rooted is the deflationary need to correct and a natural penchant for economies to decelerate.  This is going to be interesting.

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Q: When does a series of higher highs become a Bear Flag?

Answer: It's self explanatory.  Here's a chart just sent out to subscribers by the service that is so distrustful of these markets that it wants to be looking around every possible corner to be prepared for the possibilities.

HUI gave a warning in February (which we respected).  Is the similarity to today's SPX just a coincidence? I'll remain bullish biased on SPX only as long as the 'higher highs' and 'higher lows' remain intact and not a moment longer.

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NFTRH196 Out Now

Actually it went out Sunday morning as usual, but I am only getting around to the promo now after a busy weekend.  196 was a pretty good one, doing what it had to do from a technical perspective and also offered a few opinions and talked about an upcoming service that will be aligned with my personal need to get back to trading with some portion of personal portfolios, as opposed to always being the steady 'intermediate swings' guy.

NFTRH196 out now.

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Better Than That

It still needs a final vocal track and maybe a couple effects and a final mix down, but it sounds like a good Friday song none the less.  Market anxiety and degradation?  A pat on the back is better than that!

Better Than That - Redeemers

Chris: Vocal, Bass
Jim: Lead Guitar, Rhythm Guitar
Gary: Rhythm Guitars
Scott: Drums

Here is the problem with nominal charts...

So many TA's look at a nominal chart and try to derive conclusions for that market, stock, commodity or what have you.

That's fine, especially for day traders.  But the market is a concert; a massive orchestra playing a multitude of rhythms, sometimes in harmony and at other times in a terrible cacophony.

The only way to calm the noise is to look under the hood; to see what is going on in disparate assets and indicators and then cross reference into a theme.

As an example, this summer's bearish flavor - complete with ginned up T Bond bullishness and deflationary implications - has been negatively diverged every step of the way by this junk bond fund and the emerging market bond funds, all of which usually suffer major damage during actual - as opposed to trumped up - liquidity events.

But people don't want to hear the subtleties, they want to know bullish or bearish?  This is not a market for linear thinking.  It's Wonderland, and it is a challenge for everybody.  While I have felt July could be problematic (check), the bullish intermediate theme has been kept intact due to 'under the hood' signals that refused to confirm the fear mongers.

The moment that changes, I'll change.  But here's the thing, the US dollar's over bought, T Bonds are over owned and the port side of the boat is listing in my opinion.

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Run Forrest, Run!

Well, in our movie the protagonist is named Huey.  Huey is in danger.  Huey is running for his life.  Huey needs to trigger some signals to confirm a successful bottom retest here and now.  A little follow through from yesterday's reversal would be a nice start, because the measured target from the topping pattern is 83 points lower.  Run Forrest, run!  Run Forrest...

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Rut Roh (for bears?)

Markets are still making higher highs and higher lows.  But but but... the markets are supposed to tank claim the bears.  Well maybe my furry friends, but despite the negative feel of this summer, they are making higher highs and higher lows.

Not only that, but yesterday many made reversal candles, like the Hammer on the Russell 2000 (RUT) yesterday.  This is an old chart that was used to illustrate the (red dotted) neckline to the former topping pattern, which nicely morphed into the EMA 200 (solid red line).  The EMA 200 provided resistance into late June and now?  Support.

The Ticker Sense blogger poll came in yesterday and I had to force myself to go with 'neutral' as opposed to bullish.  Beyond the corrective July 'chop' I am still bullish on most assets, and believe changes are in store for deflation-o-phobes clinging to T bonds and Uncle Buck.

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Russell: Inflate or Die

I expressed frustration with the man's INSTRUCTIONS to 'sell all your stocks, except mining stocks [revised later to include mining stocks]' because I hate it when people instruct other people on what to do as if they have the oracle-like answers.  They don't.

What I do like however, is what Russell had posted today at 321gold...

Inflate or Die

Very thoughtful and making sense.


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July 'chop' continues

This was all expected and prepared for.  Unfortunately, with negative activity come new rules and the broad US market - along with variations in so many other markets - are now operating under 'higher low' rules; as in 'don't make lower ones'.

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The hilarity continues

The market makes a predictable puke upon reading what it already knew it was going to read.  Yes, we are operating in a cartoon.  What did the market think, that the FOMC was going to put on record their exact plans for avoiding a total loss of control?

July looks like a chop month with some markets searching for bottoms and others in pullback and grind mode.  The Fed is noise until it gets off the stick and perceives that it is a palatable time for it to do something about what is becoming uncomfortably low errr, inflation.

It's Wonderland I tell you.

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GLD still on Siesta

The theme for July is to go on siesta and not be leaning too far in any one direction.  To take a nap and keep the blood pressure down.  Gold is in a consolidation and has been among the lamest (most sleepy) items.  Today's pop looks suspect to say the least, going by GLD's volume.

HUI can be seen as negatively diverging gold and silver, no matter that a lot of the pressure there is concentrated in the senior miners after GG's lousy production revision.  But taking the GLD chart at face value, there still appears little to get excited about and in fact, it is going to break one way or the other fairly soon.  I suspect (as in guess, like anyone else) that the move is going to be down... right into the ending phase of the correction.

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Everybody to the Port Side

Yesterday we looked at the strange configuration in T bonds, where Wall Street dealers appear to be clinging to a deflationary Armageddon scenario, or just maybe are holding up a big buyer with a stated mission to buy these bonds.  Regardless, today we check out a different view of T bonds.

Here is the Commitments of Traders data for the 30 year T bond, courtesy of Sentimentrader.com:

Smarter money commercial bond traders are heavily aligned against continued bullish prospects for the long bond while large speculators and little guys are full on bullish. 

More evidence that the dumber money is loading up on T bonds (as directed by the greater media and the general angst of the day) comes from the RYDEX bull ratio.  The public is rabid for Uncle Sam's debt.  How convenient.  In fact, in reference to the previous post, isn't it amazing how the system seems to be geared toward always having the public set up on the wrong side of things?  Yes, they will be right as long as the mature trend holds, but the public is due to be very wrong when this trend changes; and change it will.

NFTRH is bullish the markets for the second half of 2012 pending what we expected would be a choppy (at best) July.  The Presidential cycle is in play, everybody's on the port side of the boat and people are just giving up left and right.  When they give up, they buy the 'sure thing' that they perceive T bonds to be.

This summer is surely not a lot of fun, but when taking a certain perspective on the markets it is clear that it is not supposed to be fun.  What it is supposed to do is get as many people off sides as possible through confusion and anxiety.  This is what usually happens leading into big changes.

If I am wrong to be leaning bullish (coming out of July), then we do not pass go, do not collect $200 and go straight to the deflationary Armageddon implied by current T bond trends.  If however, the US stock market remains in its UP trend and precious metals and commodities confirm bottoms over the next couple of months, people hiding in T bonds will be in for an unpleasant surprise.

Follow on Twitter, by the free eLetter, this blog and then down the road consider a subscription to NFTRH as we move into the post-July, actionable phase that is upcoming. 

I have no crystal ball.  Current analysis called for some July difficulty (with which the above noted T bond over bullishness is in alignment) but a generally bullish environment heading out of summer.  If this analysis proves wrong, we will adjust.  It is in the willingness to make adjustments after all that we manage risk and preserve capital.

Meanwhile, the theme remains bullish on assets and bearish on long term Treasury bonds post-July.  Don't get played.

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'This is Moral Hazard'

Over at Le Café Américain a subject is highlighted that we are all aware of...

This is Moral Hazard, which I think only scratches at the surface of the grift that has been ingrained in the financial services industry.

From financial advisers acting as little more than conduits or salesmen for mutual fund companies (with individual investors considered little more than food) to the young man I bought a BMW from in 2002 (I'm done with that phase BTW... more practical now), working as a 'business manager' (i.e. financing clerk) at a car dealership after being fired from Merrill Lynch because he kept his clients 100% cash (thus not churning commissions) and protected them through the tech crash - and bear market - that began in 2000.  The kid did not keep 'em trading.

Now I have noted before that some of the people I have 'met' through NFTRH, whether they be financial advisers, brokerage firm owners or bankers, have really dialed me back from being overly cynical.  There are exemplary and ethical people in this racket.

But on the whole, the blood sucking vampire known as the massive financial services industry is about as rotten as the blood sucking vampire that is the out of control US weapons industry.  These things are on autopilot and just keep churning forward, eating everything in sight; including the nation's seed corn.

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More foolishness from the TWISTED world of US Treasury bonds...

No wise comments from me.  I am tired of it, frankly.

Here's the piece:

Treasury yields fall to 5 week low after auction

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Zero Hedge gives me the good laugh I need this morning...

Well actually, it is the Daily Show by way of Zero Hedge...

Daily Show Correspondents Explain the Economy

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Huey, dooey and Louie move closer to QE3

I swear, sometimes it feels like we are living in a cartoon. 

Really, when your grandpa used to invest didn't he put a little something away each month and invest in a patient, long term wealth-building strategy; with maybe a little casino play money on the side?

What have we got today?  We are all forced to be casino patrons.  Grandpa's market is a quaint and distant memory.  Here we have 3 Amigos flapping jawbones, sounding alarms and trying to signal we casino patrons that help is on the way. 

Wasn't it just 2 weeks ago that a trio of Fed officials just threw cold water on our greedy little heads, cooling us off but good?  Lockhart, Williams and Plosser, supposedly spanning the spectrum from hawk to dove, did not see reason for imminent QE.  We were being managed one way.

Now a trio of Fed jawbones move closer to QE3 as they are suddenly alarmed about something.  Really?  Alarmed?  About what, a leveraged up system that cannot sustain itself due to the fact that it is built on a quicksand pit of debt.  We are being managed another way.

So now we have John Williams (pulling double duty flipping to the new trio), Eric Rosengren and Charles Evans looking for aggressive action by the Fed. 

Of course, there is always Mr. Dependable, Jeffrey Lacker on the other side trying to dispel the notion that QE3 is needed.

The beat goes on... as do the jawbones.

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Wall Street to the Rescue?

The story goes that our friends on Wall Street wink winked and nudge nudged with Alan Greenspan to cook up a massive bubble in credit and derived vehicles that eventually became malignant and spread toxic finance throughout the world.  That is not a pretty picture.

Fast forward to summer, 2012 and we find Wall Street strategists wildly bullish on T bonds (in opposition to the Federal Reserve's desire to buy them) and seemingly standing in way of the great and powerful Fed's Twist operation.  Are the Wall Street banks doing the public a service by showing the way to safety or are they simply holding up T bonds for the ransom of even higher prices than those denoted by today's record low interest rates?

Here is a picture of Wall Street strategists' alignment courtesy of Sentimentrader.com.

While I would love for us all to sing Kumbaya and integrate Wall Street's needs with those of Main Street, it appears that the boys and girls on 'the street' are simply holding up a buyer that has made the purchase of these bonds the central theme of its monetary policy; a buyer that has to buy.

The current Fed operation is to buy long dated maturities, keeping rates low for critical areas of the economy while funding these buys by selling shorter dated maturities to 'sanitize' the operation,  i.e. to keep it from increasing the money supply.  In other words, selling short term bonds allows the Fed to avoid printing new money into existence to fund its long term bond buying operation.

In this context the stance of the Wall Street dealers makes sense.  They are holding an (in my opinion, over valued) asset that a big buyer states to be critical to its strategy, whether by Operation Twist or any coming QE operation in which the Fed wishes to make its inflationary intents widely known to 'promote' inflationary asset price appreciation.  They hold this asset dear, with the buyer backed into a corner.

The timing of a 'QE' style inflation is unknown and complicated by the degree to which the public came to call for the Fed's head (so to speak) during the last inflationary cycle that ended a little over a year ago with T bond yields right at the boiling point (red arrow by our long term 30 year yield chart AKA the 'Continuum'):

As you can see, things are very different now, with bond dealers pushing another limit.  In spring of 2011 bond king Bill Gross was short the long bond.  Today big dealers are pressing longs.  If this is a real deflation, look for the yield to drop to the unthinkable green dotted lower channel line.  If it is a prelude to a coming inflation operation, expect the horizontal green support line to hold.

In recent newsletters we have been noting several anomalies and conflicting signals that can jam the radar of mere mortals (like this writer).  Hence, the only sensible stance is to take what the market gives us and keep risk management in the forefront.  July is seen as being a 'chop' month, after a healthy rally from the May bottom.  The rally is intact with a series of higher highs and higher lows, but I would like to see some of the anomalies clear before pressing the bull case.

One of those anomalies is the amazing configuration currently in play in T bonds.  Subscribe to the free (and spam free) eLetter, which highlights indicators going on beneath the market's surface like the T bond drama as well as standard TA and market commentary.

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Dealers Declining Bernanke Twist Invitation

2nd item down, check it out from Bloomberg.

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In this week's letter we noted a situation (via Sentimentrader.com) in Treasury bonds where Wall Street strategists were bullish T bonds and bearish the stock market to epic proportions.  Now, here comes a Bloomberg article (the Sentimentrader data was compiled with Bloomberg as the source) showing Wall Street dealers in direct opposition to the Fed and its desire to buy long dated Treasuries.

NFTRH is on a caution stance for the short term and reading things like this makes me all the more firm in that stance.  Not because I want to go against what could be a contrarian setup, but because things are very uncertain at the moment and it says here that we should always manage risk first, speculate second.

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NFTRH195 Out Now

Despite anomalies (but one example: a strong USD concurrent with strong emerging global and junk bonds) that are messing with retail and pro alike, NFTRH continues to lean toward bullish outcomes after a potential July chop.

I did some profit taking in the Model portfolio last week but I believe the real opportunities lay ahead during this US election year in which the Fed is keeping its cards close to the vest.

NFTRH195 out now.

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Rio Alto comes through

On a bad day for the gold sector, one miner is up because it does what is says it will do (or better) and gives investors a confidence that is all too rare in this sector.

Rio Alto Produces 58,081 Ounces of Gold in Q2

Thank you Mr. Black, and thank you Otto.

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USD Updated

I don't want to be a smart guy, updating the obvious after the (jobs report) fact.  But USD is back above its neckline and thus the technical target goes back to 91 as long as it remains in this state.  That's the measurement and it takes the need to over think out of the equation.

The market had been due for a correction, although I was not sure it would come with the jobs report.  I am going to take a diminished profit on the Cube, along with other things I have already taken because as noted to subscribers earlier in the week, now it is time to enjoy the summer with portfolios that pass the sleep test. 

July is due to be choppy at best in my opinion and risk will be managed all around.

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Gold declines on 'Jobs'?

Sounds about right... but dialing out to a bigger view you of course realize that decelerating economies should ultimately be bullish for gold.

On a daily basis the market jerks around like a jumbled mess.  But on a bigger plan, there is a theme in play and that theme puts pressure on policy makers.

This market has more to do with the cult of policy making than it does with natural or organic growth and productivity.  If the deceleration and deflationary whiff become bad enough and when the timing (timing is complicated with the election cycle) is right I think we have a pretty good idea what will lay ahead.

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Sector Updates

The NFTRH bullish stance (Dumb Money Sold in May and Went Away) from late May has proven correct.  I write that even as I confess to having had moments of doubt about my own analysis in a noisy June that saw US and global policy maker jawbones (and actions) going into hyper drive.

I had been responding to the Ticker Sense blogger sentiment poll (with respect to the market's status over the coming 30 days) as 'Biiwii, Bullish' for several weeks in a row until this week, when the response down-shifted to 'neutral' due to several gathering indicators that imply at least a short term top, coming soon.  I lean toward this being little more than a healthy correction in an overall constructive market for most of the balance of 2012.  That is just a 'lean' at this juncture.

But it is a lazy summer holiday week, and what better time to drop the nuts and bolts macro market analysis in favor of some simple sector updates?  This post will be uncharacteristically light by biiwii standards, which I think can sometimes feel like they are bashing readers over the head with hard core ratios and macro interpretations.

First up is a sneaky US Housing index (HGX) breaking above important resistance by weekly chart.  HGX plunged below the supportive weekly EMA 30 at the end of May and promptly reversed back above it into its eventual breakout above the 2010 high.  The only negative on this chart is the broadening top formation.  Initial breakouts often fail on the first try, so this should be factored in.  Critical support is the rising weekly EMA 30.

The last time the GKX Agricultural index jerked the weekly Bollinger Band impulsively upward the resultant decline was relentless as it sought new lows.  That is not to say it will work out the same way this time around, but the idea of 'if you have profits on a play that included plenty of hype about droughts and crop damage, you might think about harvesting them (so to speak)' is in play.  An NFTRH subscriber who is a retired Meteorologist advised that he is doing so.  For its part, NFTRH had been charting the bottoming process in Agriculture fund DBA, along with several individual components and in full disclosure, I failed to initiate a trade in this area.  Back to the chart, important support is highlighted in green.  It should hold or the fallout is going to be ugly.

The Global X Lithium fund is one I did not fail it initiate as the NFTRH diversified Model portfolio added it right at the lows just above 13.  Lithium is a key component in alternative energy due to its excellent energy storage capabilities.  The weekly chart looks good, but but LIT is now bumping against a thick cap of resistance.  Support for this ETF would come into play at around the weekly EMA 30.  I am going to take a well earned profit here, as advised to subscribers in a somewhat wide ranging macro market email update earlier this week.

Finally, let's wrap up this odd combination of markets with a look at the Nasdaq 100 trading vehicle, QQQ.  That is a nice chart.  It is also a member of the NFTRH Model portfolio and given the portfolio's mission to hold for intermediate cycles, I may forgo taking profits here in favor of evaluating the nature of any coming corrective activity.  The target off of the Inverted Head & Shoulders pattern is higher, but the weirdly up-sloped neckline could provide the spark for a reaction of some sort.  At the moment, this chart looks too healthy to sell despite my view that odds of correction are rising.

As usual, all analysis is subject to the daily and weekly revisions forced upon us whether we like or agree with them or not.  We do not run the markets.  We just manage risk and try to capitalize as opportunity presents.

I found this relatively lighthearted post enjoyable and will look forward to doing more like it in the future.  I started out as a regular chart guy after all, before going deeper into the weird ratio charts, Treasury bond markets, the inflation/deflation debate and of course the precious metals sector, which is quite a mental load in and of itself.  ;-)

The above are not recommendations, they are merely a snapshot into a few areas of the market.  Others sectors will be reviewed as we move forward.

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Templeton Emerging Income is...

...providing me with income.  Just not in the way originally intended, which was through dividends.

I bought this as part of a sensible group of holdings I was cobbling together in the NFTRH Model portfolio in May to go along with the not so diversified speculative portfolio.

What does TEI then do?  It rises and rises, never giving in to the bearish forces at work over the last several weeks.  Now it may be forcing me to become a trader instead of an intermediate holder.  It's a bond fund that has tacked on 10% in less than a month.  A bond fund!  I mean, I have a Rare Earth company (funny, it was only 2011 when everybody still loved these) that I found beaten to a pulp in May and it's at +23%.  But that's a stock, a speculation.

Why is everybody rushing to emerging market bonds?  Why are they rushing to junk bonds?  Why?  Because risk never went off; that's why.  I do however, have a feeling (backed by ongoing analysis) that the time when that status changes is not too far out on the horizon and will be measured in weeks as opposed to months.  We'll see.  The technical target's just a bit higher, but I'll probably take the profit on TEI and just hold its big brother GIM for global income.


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Risk OFF?

Despite the harsh events of the last 1.5 months - and yeah, I nearly blew a mental gasket myself - risk never went 'off'. 

The dumb money dumped into the rally, the news was relentlessly bad and most everybody ended Q2 feeling beat up.  But risk never went 'off'.

Among the signals I used to keep my white knuckles from the the sell button were the emerging market bond fund TEI (I bought it @ 14.82) and the junk bond fund JNK (I wouldn't use my worst enemy's money to buy this garbage). 

NFTRH194 noted an upside target for TEI, and JNK is now in blue sky.  Risk and liquidity are 'ON', dumb money is buying again and the market is setting up for a change I do believe.

Not the end of the world mind you, but in my opinion the dog days of summer could well get very uncomfortable.  Good stuff, because the markets stand to make sense again going forward and I like that.

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Attn: NFTRH subscribers: Mid-Week Notes Update

An email update just went out covering a degrading sentiment backdrop and broad markets nearing resistance.  Buying a month and a half ago was difficult.  So too will be selling now.  But then, the markets are difficult.  Separate analysis was also included on the precious metals.

Happy 4th of July to all celebrating.

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SPX chart updated

Suspect though the holiday week activity is, here is the SPX continuing to break above the line where most of the money that thought is was smart sold in May.  That is a resistance line being broken and that is a MACD having never triggered down and now gone 0+. 

On the downside for bulls, it could be an A-B-C upward correction.  There's the next resistance zone above.

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Housing Index targets higher

This one was noted in NFTRH194, not because I am interested in it, but just because it is one of several markets that is anything but bearish.  In fact, rarely have I seen so many bearish assumptions being made vs. the state of charts (at support to downright bullish) as over the last couple weeks.

The would-be suck in the so-called dumb money may yet work after all.  When they go over bullish...

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Mining political risk red lining

Political risk continues to be an increasing problem for miners.  Yesterday Otto excerpted a particularly nasty PR from Pan American Silver regarding its Navidad project in Argentina, which it bought from Aquiline Resources. 

In addition to political risk, mining investors face dilutive financing risk, execution risk and the risk that some of these projects just will not prove up as expected.  Since I am a generally risk averse sort, I have been focusing on track record, net cash, proven resources and most definitely location; as in Nevada, Ontario, etc.

Not being a stock analyst, I find it easier to go with what is known - whether it be royalty income streams, established production, measured resources or significant cash levels - and leave the potential 20 baggers for more adventurous people with more adventurous risk vs. reward profiles.  After all, even the less risky stuff has been puked up and put on sale over the last several months.

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Dumb Money Sold in May?

There are still articles showing up in the MSM talking about what a good idea it was to 'sell in May and go away'.  But the truth of the S&P 500 chart begs to differ.  Yes, it has been a nerve wracking couple of months, but as of Friday the SPX is above where all but the most astute of the 'sell in May' contingent got out.

I am not trying to be a wise guy bull and indeed I have significant reservations about the nature and duration of this rally.  But a rally it is, and a rally it has been since the June 4th bottom.  Not only that, but SPX has formed an attractive looking pattern for which we have higher measured targets if it remains intact as expected. 

I got some grief when I wrote an article called 'Dumb money sold in May and went away'; mostly from Seeking Alpha commenters who apparently took the title and theme personally instead of for what it was; a simple contrary setup.

I do not love this market by any means.  But I am still long (and profitable) several positions that were bought down near the lows (Lithium, Rare Earths, a tactical global fund, a global bond fund) and others in technology and energy added since.

Last week as SPX tested but did not fail support at the EMA 200, I held, white knuckles and all.  This market may yet prove that the dumb money sold in May; especially if the rally ends up going on long enough to drag them back in again before any coming change to bearish again.

Edit (7.3.12 @ 7:12)  In fact, here is the latest aggregate sentiment structure per sentimentrader.com.  Graph 1 is the one originally used in support of the idea that dumb money was selling in May.  Graph 2 is current.  The setup is now much less bullish than in May, with the question being how contrary bearish will it get before the rally ends.

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