As I mentioned the other afternoon, it looks like it won’t be long now, for the dollar and the precious metal markets to once again take different tracks. And that should mean good things for the miners, as evidenced in what appears to be an approaching turn in the $HUIGold Bug Index.
I say so be it, and let it be done. Either way it’s apparant that Big Brother Bernank is not going to let some rock-throwing, Fiat-torching proto-Spartans ruin his very stable run into the 2012 elections (and yes, he’s running too, believe it). So be prepared to be awash in liquidity here. Drachmas? Schmachmas! Take some digital dollars and shut up, already.
Around 8 am this morning, currency traders tried to make the dollar go “pop!” but gold and silver are currently calling bullshit on all that. Yes, these three can sometimes rise together like the greatly undervalued kings of the comedy stage, Larry, Moe & Curly (not really) in a Depression-era movie house, but more often than not, this alliance is proven false within a matter of days, if not hours. As I type this, mean-spirited Moe (the US dollar) is taking a pratfall from it’s earlier spike over $79.60, and Larry Gold and Curly Silver (the fat, dumb one), are careening higher.
As I mentioned earlier, I will also be looking for a turn in the miners here. My weekly chart shows us approaching the bottom of that channel I pointed out the other day:
And the daily chart shows an even more clear bottoming in the stochastics. Note also we almost touched the bottom of this (admittedly loose) consolidation triangle yesterday as well.
Quite a few of my stocks popped in the last hour of yesterday’s trading (along with the whole market, of course), including my March Madness pick, AUY.
I had thought that contest was starting this Friday, for some odd reason that seemed truly logical only in my own beleaguered head. I think that launch would have been perfect, but in the meantime, I’m in a bit of a hole, so be sure to purchase as much AUY as possible here, and to short that hideous purveyor of ethically questionable time-share vacations, AWAY. Thanks in advance, and…
____________________ Small plebs, I can see now why my good friend, le Monsieur de la Mosca, supported the inexperienced young Senator from Illinois way back in the day when we knew little about him other than that he sported a dimwitted hairplugged running mate that did not dog sled, rassle bear, or wear a brassiere. You see, my friend is very perceptive, and seeking a strong hand in the Executive Branch in our time of trouble, he saw the inner-Generalissimo in the fresh faced Barack Obama. He knew this guy was not going to be bothered by any such niceties as separation of powers, or heck, eveen recognition of any other powers in our triune system.
And so today, we recognize that the Monsieur’s perspicacity has won out. The drumbeat that began with an increasingly monarchial delegation of legislative power to the President’s various bureaucratic armies at DOJ, EPA, FDA, TSA, DOE, etc. has now culminated in an unprecedented display of Caesarian flair.
Gosh forbid you should not know what you are doing with those credit cards that have been around since the early-1950′s boys and girls! Don’t worry, though Papa-Doc Barack’s main man, deposed Ohio Attorney General Richard Cordray — aka, ”The Fat Ohio Farmers’ Elliot Spitzer” — will be holding your hand every step of the way. Just don’t you dare try to break that hand grip, though, boys and girls.
The real question, however, is why would an embattled President take such broad risks now, given the sordid reputation of these installed parties? The cynical answer? To create a political battle that will make the POTUS an aggrieved victim during an election year. This would be a confirmation that the President believes the economy will be of little help to him in 2012, and that the “full-populist” Chavista appeal is his only angle. Moreover, like Chavez early on in his populist socialist campaigns, the President knows he has most of the press in his pocket… at least today. But will that be enough to carry him through to November?
Whether it’s the current political imbroglio, or perhaps the “great news” coming out of the employment front, the dollar has decided to break back out of its recent consolidation-retrace and blast ahead nearly 75 cents on the DX Index. Interestingly, gold and silver are not taking this big move very hard, with most of my miners down between 1.0%-2.5% (which is de minimus in our world) and even AGQ (double silver) only down about 2%.
That said, this rebound will likely last for a couple of days given my target for the dollar here at $81.50 or thereabouts, and I will likely lighten up on some of my miner holdings as a result. I shaved a little bit of ERX yesterday and will take some more of that down as well. One doesn’t want to be holding double-ETF’s in this environment. I think I will be targeting around 50% cash so that I will have dry powder for when the dollar turns again. I’ll make my moves on any retrace of the dollar today.
The Greatest New Wave Hit Ever to Prominently Employ an Accordian
Aside from that fantastic musical interlude, as written, played and sung by musical prodigy Matt Johnson of The The (no, really, that was the band’s name), who later in life went on to shave his head and post semi-lucid conspiracy rants on the internets. And no, I kid you not– it’s kinda sad actually. I won’t link his blog, as you’ve seen it all before.
On the trading scene, I’ve got very little to add tonight. We only need see this dollar issue resolve. If we are in a bull flag situation, we should quickly spurt above $78.1o on the DX-Y, and then we are “clean” out of all PM’s and miners. I will continue to keep my Skiffles (SKF) as I believe that will be keeping me somewhat warm throughout the Mort Kondracky Winter. A break of that $78.10 number on the dollar will actually induce me to store away more Skiffles as I await massive bank death via the whirling blades of European currency demise.
For the love of Ticonderoga pencils under $35/ a piece, please do not get shaken out too early. I assure you it will be worth the $1 or so move on the dollar index to make sure you are not being head-faked here… again. Whatever does happen, however, you should not head out to the moors seeking the Werewolf’s curse, or go down to your local discotheque seeking mad mad passionate love from Big Baby Glenn Rice. Let’s keep things in perspective and ride this puppy together.
__________________________ The first day of corn-back dollar trading started out promising, but ultimately ended up in a failed “pop” over the 20-day EMA ceiling. Late news out of Central Illinois informs us that the Fed’s newest Moline Corn Repository, while heavily fortified against human intervention — a la “Fort Knox” in the days of gold-backed currency — was most unfortunately sited next to a large hog farming operation. What happened next was true Bernankian justice…
Apparently the sus domesticus hordes resident next to the Corn Repository were overhwhelmed by the late afternoon corn-fruit scent coming from said Federal vaults, and that lure, excacerbated by an early Spring hormonal rutting urge, had the neighboring porcine hordes rending the outlying electric fencing and within moments, consuming the precious American staple (and currency backing) with piggish glee.
By late afternoon trading, one third of the Federal Reserve Currency-backing outstanding was in the belly of some of the nation’s most desireable pigs. The following daily chart illustrates the day’s action – especially the failure of the corn-dollar to break back above resistance– with heat-seeking stoat-like acuity:
That’s two days now that the corn-dollar has closed below $76.00. Not good news for you dollar bulls (cough! cough! Cain Thaler! cough!).
However, there is a glimmer of optimism available as well. Late tonight an emissary for the Fed mentioned that since most of the most recent reserve backing is now in the gut of some prized Illinois sows, Chairman Bernanke would announce soon the official newer and stronger “pork belly bacon fat-backed dollar,” later this Fall.
As a sop to certain liberal constituencies, the Chairman has also acceded to locate the new Federal Repository on 125th Street in New York City, next to Sylvia’s. No further devaluation is anticipated.
Carry on… most likely with ANV, which has been a star in my portfolio this week, as all Jacksonians should be.
How do I know this? Because I took a gaggle at this morning’s Case-Shiller Housing Price Index, which — unsurprisingly — continues to suck giant rare Tibetan albino gorilla-monkey balls. Why unsurprisingly? Because the Fed has been using your fake money to sterilize bad mortgage debt securities for the last two years now, which has basically hidden the problem of overinflated real estate. That in turn has prevented the market from deflating in the more precipitous fashion it would take in a more natural setting.
Therefore, we are experiencing the slow hiss of the deflating tire while Bernanke and Co. continue to paste their hastily chewed Wrigley’s Spearmint gum over the hole in the form of reams and reams of newly issue Benjamins. Patch-by-Benjamin, however, is a crude form of assisting the real estate market, however, and it will almost definitely end in over-inflation of the other asset markets — including most commodities.
Welcome to the other side of the Catherine Wheel that is this current Precious Metal Bull Market. This is the side that crushes your limbs and threads your guts around a spindle-rod of molten steel. This is the side that dares you to jump to end the pain.
Seems a long way from last week, doesn’t it — when airy elation suffused your soul as a result of of daily 6-10% moves northward in your positions. You felt inner calm, you felt invincible peace. You priced Gulfstreams 650′s from your cubicle. You went out and were fitted for a new flowing robe of purest white ermine, with matching albino alligator sandals. ‘Fess up!
Well, get used to this queasy sea-change, ladies and gents, this is The Life of the PM Investor. Not everyone is cut out for it, as it takes a modicum of steeliness and cement-headed self-assurity. We are dealing with extremely volatile chemicals here, and it is only our good fortune that in this particular cycle they so often explode upward, instead of directly into our face.
The main tenet I’ve learned from this almost decade long period is that these things are almost impossible to trade, save at very extreme cycle beginnings and endings, which we will attempt to identify. Therefore, if you want to attempt to trade, I would advise keeping a “happy pile” of perhaps 15-20% of your stash, and using it to try to add to your more significant long term investment pile — your “treasure pile” for want of a better term.
Today’s move was unnerving, and unsettling. The good news is, we are quickly advancing to oversold on the major index — the Amex Gold Bugs Index, or $HUI, which I use as a guide for entry purposes. As you can see from this daily, we are perhaps a day or two away from a bottoming indication, as illustrated by the RSI stochastic:
We are also approaching support at the $535 level, which you may remember offered considerable resistance some weeks back. Now it should serve as a brake on our descent, just as it acted as an intransigent lid in the past.
Another indicator I watch closely in exigent periods like this is the U.S. dollar. It too is approaching a critical point in the RSI reading, this time on the overbought side. It looks like it will be very difficult for the dollar to break through $78, at least in the near term. You will note that that level also coincides with the dollar’s 50-day EMA, which has served as a resistance level in the past.
Dollars will print, my friends, until the Bernank thinks we are out of the deflationary woods. There are already too many out there, but no matter. Hang on, my various Sloopies.