Weekend February 23 2013
Special note to readers. Go Daddy only sent us an email along with the rest of their daily spam that our domain name rental was about to expire. As I trash what looks like spam,and Go Daddy certainly made no effort to contact me otherwise, the site was down for a couple of days. This past week.Thanks to alert readers who informed us of the problem. We should be good for another year now.
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Yet unemployment is close to 27% in Spain and Greece. The eurozone economy shrank even faster throughout 2012. The economic fundamentals in France are getting worse.Will German taxpayers be willing or able to bail out the French, don't count on it.
Why the Euro Crisis Isn't Over Page A11 Weekend WSJ
TMP - Nothing ever changed in Europe people just stopped worrying about it.
It further sours the sourest White House Capitol Hill relationship of modern political history. That relationship probably can't get worse...
Peggy Noonan Government by Freakout Page A 13 Weekend WSJ
TMP - Once again Peggy misses the import of socionomics. This relationship is happening at DOW 14,000, with employment at least somewhat better. Let each of those measures get worse and Peggy you ain't seen what sour really looks like. Social mood across the country is still relatively positive, the finger pointing for responsibility for the economy is just getting underway. It is as though Jimmy Carter had won his re-election.
Two things Metal Bulls Got Wrong About QE This write correctly observs that the US dollar is up, see chart below
We start this weekend with the currencies.
Euro

At top the Canadian Dollar falls. In the center the Euro has fallen back to its uptrend line. It needs to reverse to keep its upward move alive. At bottom the Australian Dollar needs to rally quickly. Otherwise gold will fall again.
Bonds TLT

This chart of TLT looks more like a correction than a collapse. MACD looks to be bottoming, price ahs made a higher low at its second MA.
Gold

As I have said many times there are other sites that count elliott waves, I am no expert. Above there are at least two potential counts. One is that the Large Wave Three ended Wednesday. The spike in volume suggests some sort of ending wave. And it moved up the next two days. Another possibility is that five waves have ended if Red 3 was in fact the end of a large Wave 3. But frankly the drop does not look big enough to be a third wave, the overall drop does.
Jesses's Cafe Americain sugggests the gold market may have found footing at 1550-1575. Indeed it hit 1550 this past week. But he wants to examine the options expiration on Monday.
Weekly Gold

The bull case is that
- weekly gold recorded a slightly higher low
- Sentimentis massivelynegative, the WSJ ran a comment yesterday that owning mining stocks was like tying rocks to your feet
- Gold pulled back from its lowest intra day price by the end of the day Wednesday
- Central Bank money printing will surely eventually send gold higher.
- The bears ried to break support at 1550 and failed
The bear case is that
- the same group of bulls has been bullish all the way down and keeps re inventing their story on every drop
buying into every drop thinking that is THE bottom is precisely how a bear market begins
- the 200 week MA for gold lies lower at 1400, note the 125 week MA has now been breached
- a brief rally here and then a plunge to 1400 would make for a more convincing five wave decline
- support at 1550 will be tested again, just run the market back up so they can short it again.
Bear Case - Stocks now Outperforming Gold on the Weekly Chart
SPX to Gold - Uh Oh!

When this ratio chart is falling, Gold is outperforming Stocks. When this chart is rising, stocks are outperforming Gold.
Note that the ratio has now risen above all weekly moving averages. This can only change if spx falls relative to gold. This is the first time this has happened in five years. One reader of TMP warns gold may be in for a far larger tumble than most imagine. This charts backs up that few.
Daily GDXJ

While the chart is massively over sold GDXJ just went to its lowest price ever which is hardly reassuring.
Weekly GDXJ

The weekly chart also suggests some sort of low should be at hand. The weekly lags the daily so the turn up which shows in the daily is not as evident in the weekly.
Thirty Minute GDXJ

The thirty minute chart shows that the massive selling in GDXJ subsided on Wednesday. Somce upward correction is now taking place. Everyone who shorted GDXJ has to buy their stock back to take a profit. That will perhaps help support a rally.
So what happened? A massive bear raid on gold was staged by funds and banks.
Here is one view, there are no markets just interventions by Central Banks
Internal Indicators
150 day Percent of Stocks

Here we used FIB ratio Moving Averages of 13,21,34 weeks. The MAs are still climbing RSI at top is bending, MACD has not rolled over at bottom.
Summation Index NYSE

The summation index turned red and started dropping this past week. MACD looks toppy.
Stocks are making the third big high since Year 2000 and Year 2007-08. We are a FIB 13 years from Year 2000 and a FIB 5 years from 2008. The VIX jumped and fell back this week. but do nnot underestimate the determnation of the FED to keep things afloat. Stock are far too overbought to participate at this point.
Gold and metals and miners should enjoy a relief rally to the upside. But the graph of SPX to GOLD suggests the tenor of that market has changed.We will watch this sector closely and continue to report.
Socionomics
We wil have an update in a separate post about personal safety. We have warned of a forthcoming hardening of attitudes. A careless attitude can rbecome quite dangerous in this environment. More in our next post.
RAX

Rackspace has been one of the hottest stocks around, and a real newsmaker here in San Antonio. And then the market became disenchanted. Notice how quickly the mood changed, more of this will follow in the overall market the next two years.
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