Tag Archives: FOMC

Cyprus – Let the Games Begin

temple

Sanctuary of Apollo Hylates Temple

I purposely kept the Cyprus noise out of my work this weekend, preferring to let just let it play out on Monday and beyond without pretending that anything I could interpret would help the analysis, which continues to move forward on its own.

That is because we have long-since entered the era where these disruptions are liable to crop up at any point, roiling markets and once again getting a noisy cacophony going.  PIIGs meltdown, Debt Ceiling debate, Greek Austerity, ECB decision, divisive US election, Fiscal Cliff, Sequester, Italy vote, Cyprus and on and on we go.

What could happen here?  Why Uncle Buck is going to get the bid, stocks will probably go down and gold may pump and then dump as they churn out the ‘strong USD’ stuff.  That’s far from definite, but I could actually see gold get hit again after it gets a mini knee jerk benefit on ‘bank run!’ hysteria.  We’ll see.  But this is Wonderland and meddling policy makers and their agents the world over are going to be heavily in play with their big, fat mouths open and their agents’ fingers on keyboard buttons.

As for stocks, how is this for a game plan?  Stocks may finally take a moderate correction from seriously over bought levels on this event.  Bears then declare they are in control but eventually a safe haven bid for Fortress America (ha ha ha) comes into play.

Speaking of Fortress America, the FOMC certainly has a convenient excuse to roll over on Wednesday and keep the inflation spigots going, don’t they?  We don’t need any of that exit plan talk because after all, a crisis is cropping up!  Just in case the ‘organic’ economy is still in any doubt whatsoever (yes, that is sarcasm), we’ll keep things as is.

What ever goes on this week, let it be a lesson to the come-lately bulls and the ‘real’ economists that what they have built their fantasies upon is not solid.  It is the result of policy that began being implemented long ago by Sir Alan Greenspan and has spread throughout the world as moral hazard, just like the interconnected global financial system, knows no bounds.

Cyprus blah blah blah.  It is just one more manifestation.  The ECB helps create these manifestations.  Ben Bernanke’s predecessor helped create them.  “Our Hero” (–The Atlantic) continues to promote them.

It should be good times to be had by all as bulls and bears battle it out and smart sounding people find new holes in the dike, try to rationalize and intellectualize them and then stick their fingers in there and hope for the best.  This thing is slowly, over the years, just degrading.

What ever goes on this week is just the latest sad manifestation.

Gold & Silver Up on Fed Day? FOMC Thoughts

It seems curious.  One would like to think that virtues like honesty and integrity encompass the financial markets and the highest levels of officialdom…  ha ha ha.

Short positions had recently bumped back up in gold and especially silver.  Yesterday, the Fed rolled over and just came with the happy inflationary stuff.  We would not ever think that our friends in the biggest investment banks may have had the playbook and covered shorts into the FOMC meeting.  How could we think such a thing?  That would be illegal at worst or just plain immoral at best.

slv

Anyway, they came with the inflation and no austere talk, with all the important inflation indicators under control (I believe Monetary Base comes out today) and a bad GDP conveniently hot off the presses as well.  Backward looking stuff.

Here is my playbook, as it currently is written (revisions sure to come):

Dumb money punished in stocks > Precious metals stocks bottom first (check the sentiment backdrop!) > an inflation cycle is born as money supplies continue to rise (not the MZM and M2 crap; BASE) > commodities firm up > stock market sentiment is reset as the dumb money is flushed > stock market fills those gaps (I hope), bears start chest thumping and smart money launches a new rally that eventually will hit new highs > Dumb money gets in as inflation hysteria reaches a fever pitch right at the red line (100 month EMA) on the long bond’s yield > and then the whole thing lurches, rolls over and implodes.  Hello Bob?  Mr. Prechter?

It is almost as if the financial markets are a giant orchestra playing in unison and in concert.  The GDP bass tone and the faint clarinets of inflation way in the background will one day be replaced by bull horns declaring ‘inflation is here to stay!’  That may the ‘sell’ signal as in sell the speculations, own what you own, have no debt and value life, because paper and digital values may no longer provide comfort.

Gold’s Price on FOMC Day

Pardon me if I am a little suspicious about gold’s ability to come out of today unscathed, price-wise.

au price1

A little wedge has bumped above a resistance zone.

au price2

Here’s a longer view.

1665 is an area of short term resistance, which includes the 200 day SMA.  In fact there is a ton of moving average congestion from 1664 to 1689 (SMA’s 50 and 200, and EMA’s 50 and 200) by a daily chart.

au daily

Official people are going to make an official announcement about what they are doing with official money at 2:15 today.  Not usually the best backdrop for unofficial money.

Let’s see how it goes.  Maybe I am reading too much into it and the bully is going to stop bullying this time; and maybe not.

[edit] What is the meaning of this!?  Are they trying to ruin a perfectly good piece of paranoid commentary?

gold price

NFTRH Interim Update 1.4.13

We are back to our original big picture parameters in the precious metals, which are support of 1600 to 1625 for gold and 27-28 for silver.  In pre-US open gold is at 1631 and silver is at 29.27.  These are new lows for the corrective move out of early October’s high.  Much like the Thanksgiving time frame, the year-end holiday period has served to provide the backdrop for an ill-fated rise prior to renewed heavy selling (banker cabal or not, it’s happening and that is what matters).

Unless today becomes a whirlwind decline and bullish reversal, please be prepared for the above targets, which we have been marking by weekly charts.

HUI lost the “normal” retrace level at 439 and dumped hard to an area that could be considered short-term support.  But the 420 area is a key now, as the previous low for the move was 418.74.  I have drawn another, last ditch support at 393.

hui

HUI got corrected but good yesterday from short-term over bought as people began wildly selling everything they could as a normal correction became abnormal when the Fed released some words (delayed jawboning; they know how obsessively enthralled the market is to everything they say or do) about when it may terminate QE.

What gold stock investors don’t get is that it is a backdrop of economic contraction that will help the fundamental cases of their beloved gold stocks.  Not the would-be rising costs of every commodity on the planet.  But never get in the way of a gold bug and his misperceptions and emotion.

So 2013 starts with another fake out and another dispiriting hit to the precious metals under the all-powerful pressure of the Federal Reserve and those who obsess on everything these debt and interest rate manipulators have to say.  The parameters are above and I cannot advise on how unique individuals should go about their business.

The bullish risk vs. reward scenario has not changed but we had allowed for lower prices.  It is funny, on Wednesday I was a little concerned that I had been perhaps not actionably bullish enough for the interests of NFTRH subscribers and indeed was not loaded up on precious metals holdings myself.  Then yesterday happened and I remembered why it is always good to know what the charts are saying.

Bottom Line

Precious metals remain in a bullish risk vs. reward stance subject to holding the parameters set above.  A drop by gold below 1600, silver 27 and HUI 393 would greatly hurt the bull case.  Short of that, those levels or anywhere above them can be considered as support amid a bullish risk vs. reward backdrop, which – FOMC minutes notwithstanding – includes macro fundamentals and sentiment.

Going forward, it is important to the bull case that the money supply begin to show signs of rising.  That and a continuing positive trend in the CoT data would firm the risk vs. reward case.  Also, the HUI-Gold ratio remains on its bullish signal as of this writing.

If on the other hand precious metals should unexpectedly be broken, the theme for 2013 would probably shift to a deflationary one.  A big caveat to that case?  Long-term T bonds are dropping hard.  In fact, a quick look at the ‘Continuum’ (aka our oft-viewed monthly chart of the 30 year T bond yield) shows that the opposite condition – an inflationary one – could be on tap for 2013 after all.  We’ll review it in this weekend’s newsletter, but remember the old bit about the magician making you look this way when you should be looking that way?

FOMC Frets About its Ability to Inflate

The Fed is giving the public some fodder for the idea that it may decide or be forced to stop trying to inflate before year end.  This has predictably sent the gold bug sector scattering because in my opinion, the momo players in the gold sector have been trained like little lab mice; forgetting what it is like to be free men and women after being too long under the heavy management of this Federal Reserve.  They are just doing what they are supposed to do in this experiment when cued.  The Fed looks at them the wrong way and it’s like utter defeat.

Well that remains to be seen because silver and gold filled gaps and got hammered down to short-term support.  Same with HUI I suppose, although the preferred “normal” retracement I was actually expecting per this morning’s pre-market interim update  was just under 440, from an over bought condition.

As for the big market, here’s the also over bought S&P 500, which thinks that maybe a strong economy will go hand in hand with a tightening Fed later in the year.

spx

What the SPX is not getting (yet) however, is that the economy has been created with ZIRP and a whole host of ever more intensely inflationary monetary policy and if the Fed decides to or is forced to withdraw this economic heroine, we can probably say goodnight SPX later in the year.  My view is leaning bearish for later in 2013.

Markets were over bought and needed a pause.  The FOMC minutes came out and helped pause the broad markets and dump the precious metals back down into the hell they were trying to crawl out of.

The damage from inflammatory news items rarely lasts beyond a couple days.  But on a bigger picture, if the Fed means what it is saying we are going to go full Prechter.  The US market is toast if it has to go the organic route, without a constantly meddling and inflating Fed.

I don’t mess with the precious metals because they’re just so much fun.  It is because we have powerful people using powerful and uncharted tools to try to inflate the un-inflatable.  Should they stop this behavior, deflation would overtake the entire construct and then you get out of all equities (including gold stocks) maybe short some things, have cash and wait to walk with Bob Prechter through the rubble to see what your newly appreciated dollars might buy.

But that’s getting way ahead of ourselves and is just the implied scenario based on some fretting by a group of official schemers.

[Edit]  As if their ears were burning here are Prechter and EWI with some thoughts on the Fed:  How the Federal Reserve is Showing Financial Fear.  I know that talking about deflation is a sure way to bring on the derision of your fellows because hey, everybody knows that we have inflation forever and always.  Well, the main backbone through the decades is deflationary.  Man creates inflation against this backbone.  What if, just maybe Man fails?

 

NFTRH Interim Update: Post-FOMC 12.13.12

In essence, Operation Twist is ending while its unsanitary half – monetization of long-term T bonds – continues.  This in addition to MBS monetization, ZIRP and whatever else they cook up over the coming months and years spells inflation.  Period.  They are inflating.  $85 billion per month in money printing and bond purchases.

Of course, gold and silver are getting hammered this morning and the game continues.  But after grinding gears for many months now, I find the clarity of having the Fed’s cards on the table to be settling.

We will have to deal with Fiscal Cliff drama (and resulting noise) for a while longer, but the path is set; inflationary policy without pretense (i.e., more honest inflationary policy I have written about until blue in the face) is indicated.  The FOMC does not care for the currently subdued levels of inflation’s cost effects.

That is because unwelcome declines in inflation (effects) can tend toward liquidating an exponentially leveraged system if the decline goes too far.  “It’s inflation all the way, baby” and asset prices need to be propped.  Gold should eventually reflect this (with some catching up to do) but there is also the reality that we probably do not even know all the ways that the monetary barometer can be worked over in the short run.

So where does that bring us to functionally?  Let’s start with the HUI-Gold Ratio.

hui gold ratio

For precious metals players this ratio remains a key.  With the Fed in line, an out performance by the gold stock sector vs. gold – even as both potentially continue to chop and grind in the micro term – would be a backbone firmer whirring along beneath the surface of events.  We will continue to keep the HGR in view.  MACD indicates it is trying to make a bottom and if that is the case I am going to go out on limb and call the 3rd time a charm.  The start of the 3rd phase of the rally would be on if this signal holds and that means no more bottom testing.

hui

Nominal HUI still has this mission:  Get over the 460 area resistance, including the former neckline to the 2011 topping pattern (purple dashed line), lateral shelf (red shaded) and the moving averages.

As for gold and silver, we have noted their support levels.  While one could use one’s intellect to call up all the reasons gold cannot go to 1625, a raw technical view (weekly chart) says that it is possible and the support zone there is epic [edit: Assuming of course, it holds.  There are no sure things in this racket.  So I should have written 'potentially epic'].  Meanwhile, the 1690 area remains a key to the short-term.  Silver has support roughly at 32.50, 31 and 28.

I believe it is time to put those shopping lists to good use, whether that means tax loss sales bargains on the more speculative end or buying value on the quality end.  The money supply is due to increase in 2013 and now seems to be a good time to be patiently stalking favored items before the dynamics in play under the surface get the ‘me too!’ crowd revved up.

If you believe like I do that inflation is being promoted and will one day be reflected in the things like money supply (first) and cost effects (finally, when it will be nearing time to be selling as the herd becomes concerned about inflation) then it is time to be thinking about using any upcoming chop, grind or turmoil to the advantage of taking favored (in my case, quality) positions for a potentially intermediate-term trade.

As for the broad market, we’ll get that updated in NFTRH this weekend.  Bernanke frets in his press conference about not being able to counter the Fiscal Cliff and the market sells off.  These are our markets unfortunately; enthralled with one man and his jawbone.  It’s a casino mentality and a really emotional one at that.

But balance, patience and a view of what is in play on the macro should suit us just fine.  They are making the inflation attempt, now at an unsanitized $85 billion per month.