US Dollar, Finally Loved!

For years I have written about poor old Uncle Buck, looking in a window on a cold night as the party patrons drink the punch.  Well this party has a new featured guest; dear old Uncle Buck is making the scene and he’s pretty popular to boot.

Yes, I have had some bullish USD charts and a more bullish than not USD orientation.  But in the near term there is some data that contradicts that, presented just FYI…

USD PO

The public loves its dear old Uncle

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Small speculators are downright lustful

Thank you once again Sentimentrader.com for providing a nice picture for perspective.

Complicating the picture is the Euro, which is in an ugly potential (i.e. not activated) H&S.

Guest Market Analysis, News & Commentary

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(e) = external link

Chutzpah  Michael Ashton  5.22.13
Half Science, Half Art, Half Luck  Brent Cook w/ TGR  5.22.13
Psychology in Gold News  Greg Canavan  5.22.13
Desperate, Deceptive Measures Penny Stock Scammers Use…  IKN  5.22.13 (e)
Live Blog of Bernanke Testimony  MarketWatch  5.22.13 (e)
3 Things Not to Worry About Right Now  Mark Hulbert  5.22.13 (e)
Present Shock & the Loss of History & Context  Of 2 Minds  5.22.13 (e)
Bernanke KIKs the Can  Bruce Krasting  5.22.13 (e)

More…

Japanese Yen Approaches Support

The Yen, aggressively antagonized by the government that issues it, has been a featured player among several global trends.  The Yen is now at its first major support area.  If it finds support here and bounces I wonder if other asset trends would reverse as well.

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Yen monthly

Who can know all the various ways asset markets play out against each other.  A reader sent me analysis noting how the plight of the Yen and JGB’s is sending the world thirsting for yield and return.  In this context, a non-dividend payer like gold gets hammered.  Safe havens and liquidity stores get hammered.  Speculation gets rewarded.

Those are the trends as of this moment.  This leg of the Yen trend looks mature, technically, Abe or no Abe.  Surprise surprise, bond yields are getting out of hand over there in the land of the rising sun and Kuroda – AKA the boy with his finger in the dike – is trying to cook up ways to manage that so that the inflationary recovery can continue.  He wants to control what the bond does naturally, which is to express revulsion at the intense inflationary policy being promoted.

This is the problem with modern policy makers; they think that with just a little more policy, a tweak here or there they can get it just right.  Silly policy makers with egos big enough to actually think they can manage the unmanageable.  Meanwhile, here in the US the ‘HERO’ glares out from his Atlantic cover as he presides over a job well done.

hero

The Great and Dear (Monetary) Leader

Cue Bernanke today.  Cue Kuroda tilting at the JGB windmill.  Cue Draghi.  Cue China’s Central Planning…  Cue coming changes, as these people are exposed one day for what they actually are.  That would be promoters of global asset speculation and little more.

The speculation they promote has a mind of its own.  It is money on the run and it does not care about the agenda of the bureaucratic clerks.  Oh, it pretends to care and it pretends to do as they wish, but ultimately capital is going to go where capital goes.

Erik Swarts Draws a Parallel

Erik Swarts makes really nice charts and in this article he draws a parallel between silver’s QE2 blow off and what the S&P 500 is doing now at the behest of QE3.  I have noted this staggered correlation before but Mr. Swarts’ charts are just excellent.  I noticed his article at Safehaven.  Here it is at his blog:

Spooked

Recall that I thought something was fishy at the time of QE2.  Specifically the beautiful inverted H&S that wasn’t in the gold-silver ratio.  The GSR was supposed to go up I tell you!  Well back then silver got the QE bid, culminating in 2011′s blow off.  The GSR got hammered as silver outperformed.  Today the US stock market gets the bid and conspicuously, the GSR has risen and broken out of the post-2008 downtrend.

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Gold-Silver Ratio weekly

In fact, is that a more massive inverted H&S than the little one that failed in 2010?  Is Erik Swarts correct in comparing the SPX with the silver blow off?  Yes, but the stock market’s PE is historically moderate and all that cash is on the sidelines!  That cash is being beckoned to come join the party; the water’s fine.

This is not likely to prove to have been a healthy time to jump in, in my opinion.  Just give it some time and this should prove to be true.

The Stock Market – Which Side Are You On?

I read a piece this morning by Josh Brown, the Reformed Broker, in which he destroys the 1999 comparison for the stock market.  He makes some excellent points about why the stock market is not only not over valued compared to 1999, but is actually a bargain.  You should read it because we should all be considerate of rational views.

I also read The Fed is NOT Printing Money by Jesse’s Cafe’, which offers a view into a money creation process that is more geared toward the gaming of the financial markets through intermediary banks than it is the normal inflation of old.  I mean seriously, I do not call Ben Bernanke an evil genius for nothing; it seems that he and his associates have taken monetary policy to the Nth degree and figured out how to paint inflation as non-inflationary.  Our hero.

The point is that I think Josh Brown is 100% right.  There is no mania in stocks.  In fact, stocks’ worst offense right now is that they are strenuously over bought and sponsored by ‘dumb money’ aggregates that are equal and opposite to one year ago, when the same dumb money was exactly as bearish as it is bullish today.  As he notes, the mainstream public may no longer be interested in the markets, but whoever that dumb money is, they proved a good indicator on an imminent bull phase last May.  Again, we present the proof compliments of Sentimentrader.com:

smart.dumb

Smart-Dumb money sentiment 1 year ago

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Smart-Dumb money sentiment today

I have absolutely no problem being bullish on the stock market because it is made up of companies both bad and good; very good.  After Memorial Day, my wife will re-start her career at a currently non-public technology company about which we are very excited.  Its technology began as the founder’s MIT thesis and is now rolling out into major markets and outlets.  One brilliant kid, an idea, a market and voila.

I totally believe in human progress and what great companies like Microsoft, Intel and later Google and Apple have brought us.  I believe in the software systems that are making the burdensome healthcare system more manageable and great companies the world over that fill a need, improve lives and win out in the markets of public opinion and financial transaction.

But the point I think the Reformed Broker is missing is what underpins the market of stocks in these corporations.  Looking at the stock market as a stand-alone, I tend to agree with his viewpoint.  But when policy makers are woven into the fabric of the market to this degree, they must be factored.  Questions must be asked like “why on earth, with this excellent and healthy stock market and sufficiently functioning economy are they continuing to repress interest rates by buying $85 billion in bonds per month?”

Aren’t those bonds debt?  Where did that debt come from?  Does bloated debt not imply that the economy in which the stock market’s components ply their trade is a leveraged thing, as opposed to an organically thriving thing?  Why can’t we just let the debt float on the open market and let it get resolved by the market if things are so good beneath the surface?

I think you know the answers to those questions.  That is the main point of bears questioning the stock market’s fundamentals.  Not the old PE Ratio canard.  We are now in the post-PE world.  What matters is policy because it is policy that has created the seemingly healthy stock market.  So which side are you on; the side that sees the stock market and the stock market only, or the side that sees the stock market within the context of the universe in which it exists?

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Did Something Happen Today?

That something was a big smash in gold and especially silver over night and then a head spinning reversal.  Exactly the kind of thing we look for to be buyers.

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Silver daily

Silver actually got near my target zone, which is 17-20.  But there is a bump of long-term support elsewhere (noted this morning in an NFTRH update) that could hold for a rally or better.  When items like gold and silver have been this badly decimated and people have come to hate a concept like honest money this vehemently (while being compelled to worship inflationary policy making), you need to give merit to the idea that the next rally could be the rally.

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Silver CoT

Silver’s CoT data still shows some open interest by whatever gamers or evil interests there may be in the paper and digital markets, but its structure is very bullish.  Yet until this morning, everybody hated silver.

Now, lack of follow-through and another flop would reset and extend the agony that honest money advocates have endured, but there seemed to be enough going on today in gold, silver and the associated stock indexes to stand up and take notice.

May/June is after all, the time frame we have been expecting for some pretty important changes in the macro markets.  Did something happen today?  We’ll find out very shortly.