Weekend February 16 2013
Wal Mart Feb Sales a Disaster The higher payroll tax kicks in and has an immediate effect at discount chains.
Gold benefits from a currency war. Maybe but it did not this week as the dollar strengthened Thursday and Friday.
G20 announces 'no currency war.' Take your pick of the above or this one. I suspect we have a parallel with OPCE trying to control oil prices. The problem is that OPEC members always cheat on their production. In the end nothing holds the G 20 together and it will be every country for itself.
Half the states will not partner with the Federal Govt on Exchanges This is a continuation of the many dynamics of what we term The New Civil War. The New Civil War pits one area of the country against another. This dynamic takes multiple shapes of union shop versus open shop and now Obamacare splinters the states in yet another fashion.
Socionomic Observation Recall that the US tried a Confederacy of State before it adopted a constitution. Even back then, a loose coalition of states without a Central Authority simply did not work. This is the problem with Europe adopting the Euro today, there is no enforcement mechanism. The New Civil War is causing one rift after another changing the country into red and blue, union shop and open shop, insurance exchange and no insurance exchange. I can imagine the government trying to strong arm states into this by withholding various Federal Funds which will only ramp up The New Civil War. Breaking News, speaking of the New Civil War an alert reader of TMP sent this week's cover of Barrons, Obama the Greek, The USA Can Be Greece.
Our belief that gold would bottom and rally waseither negated this past week or delayed until next week. I regret not paying more attention to my own analysis here and less to the thoughts of others. I followed the latter rather than my own instincts. The result was incorrect advice in TMP which I sincerely regret. That is not an excuse but that is what happened. Recounting the last few months...
We were long commodity stocks, had nice gains and exited in mid September 2012. The charts and commentary are all still up. This was a correct move.
Our mistake was re entering at lower prices thinking a low was forming in those same commodity stocks. We did suggest a low occurred in stocks in mid November but have consistently warned to avoid the stock market the lst few weeks. Indexes have revisited previous highs from Year 2000 and 2007.
Again we seriously regret our error. Now let's refocus on our longer term view that the markets are likely entering a repeat of 1973-74. The Wal Mart headline may well be the kick off to such an event. The fact that a two point increase in social security tax would be felt nationally at the reail level says a lot about just how fragile the economy is here.
Markets are closed in the US on Monday but will be open in Asia. There is not a lot of point is speculating today, we might as well see what happens in Asia on Monday, we will comment again on Monday as the action unfolds.
Gold
I have attempted to outline a five wave pattern. If Wave One equals Wave Five, 1575 might be support but clearly 1525 is longer term 'support.' If this is the start of our massive deflationary wave of course support means nothing.
However, we know that extreme expression of social mood happens near the end of a trend. Gold has dropped $200 but it is only now that numerous posts are sounding the alarm. A panic represents irrational herding near the end of a trend. GDX below has lost a third of its value. It is individual investors cashing out causing sales of mining stocks which further depresses the price at this time.
GDX Weekly
Does 40 mean anything as support? At this point we cannot know.
GDX Daily
The CCI indicator is higher now than on the last drop. Price was 8 bucks above the 200 day MA at the top and is now six bucks below. Symmetry anyone?
US Dollar, Bonds
The Dollar Bonds Shorter Term
The Dollar moved up the last two days. But it has yet to take out the 200 day Moving Average. So far this is a third lower high. At top bonds have sold off. MACD is indecisive.
Stock Market
This weekly high low indicator now flashes an island reversal signal at the top of the recent run up. MACD is at max in the lower panel.
Bottom Line
It is possible that a world wide massive devaluation began this past week. This would be the start of a world melt down in risk assets. That is one scenario.
Another scenario is that extreme mood is occurring near fo this trend. We would prefer this resolution! The resolution of gold will probably not be known until later this next week after the US markets open and the intial orders placed after a three day weekend are executed. Blogs and gold sites are chattering that importatnt support was taken out at1625, suggesting a waterfall decline ahead. That may be the most supportive comment but we have no way of knowing at this point. A failure of the US Dollar and a rally in the Canadian and Aussie Dollars next week would help gold.
Stocks remain in a topping formation.
Before there was CNBC there was Financial News Network FNN. FNN became CNBC. In the 1980s a chap named Al Frank was featured on the show. Al was an ordinary guy who had started his investment letter with a mimeograph machine. He was long stocks going into the crash of 1987. Of all the talking heads back then, he was the only one to come on the show after the crash and apologized for his outright long positions. I admired that.
I regret my overly bullish stance on gold, my apologies in the best Al Frank tradtition. Even if things turn out as we expected we were way way early and failed to follow our own instincts. Gold may yet bottom as everyone is now so negative on it and the US Dollar may pull back. We will report.
I would enjoy hearing from readers, several of you have written with extremely constructive and insightful observations about the markets. It is good to know we have attracted such sophisticated readers.
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Dr. Dennis Elam,
It requires REAL 'Guts' to even mention a 'New Civil War'.
IF it does occur, I believe that it should be described as 'Between the HAVEs and HAVE-NOTs' ... (not between a 'race'-propaganda).
I suspect the Wal-Mart Story is REAL. $GASO-(Gasoline Spot Price) spiked 28-cents higher in the last 3 days of last week and these new higher prices have yet to reach the Consumer-Gas-Pump which could worsen the 'Wal-Mart Story'.
I was physically in Monterrey, Mexico in the Early-90s when the PESO was devalued 50% overnight !!!
Overnight, Gasoline Doubled-n-Price and business's everywhere refused to open. Most people found they had no job that day NOR did they have any idea when they might be able to return to work.
That same morning, I immediately began to arrange for auto-transportation back to the U.S. via Laredo, TX; I had $500.00-US-Cash-Dollars in my pocket which was a good thing in that environment. In the end, the Airport was able to remain open and I was able to exit Mexico via Houston on the 2nd day of the event.
In our 2nd-Admendment-U.S., I think there's a real possibility for CURRENCY-RESETs which could Crash Markets, Commodities and Precious Metals ... (essentially everything).
Otherwise, just use a little imagination for the alternative ... Hyperinflation.
Posted by: Farley Inglis | February 16, 2013 at 09:40 PM
Farley
You have misunderstood my metaphor, the New Civil War I refer to is underway right now, it pits open shop Carolina against Washington State, and open shop San Antonio against San Diego, yes the haves that can always afford to pay more against the growing why should I work class on AFDC, food stamps, and subsidized housing. There are three categories of states in the insurance exchange program for obama care, what a mess. The US Govt sues various states like AZ, the US Govt arbitrarily sues Gibson Guitar and now S & P, everyone is a target of their wrath.
Posted by: Dennis Elam | February 17, 2013 at 06:14 AM