"‘Not everyone who says to me, 'Lord, Lord', will enter the kingdom of heaven, but only one who does the will of my Father in heaven. On that day many will say to me, 'Lord, Lord, did we not prophesy in your name, and cast out demons in your name, and accomplish great things in your name?' Then I will declare to them, ''I do not know you. Depart from me, you who practice lawlessness.'” Matthew 7:21-23
"Judge of the Nations, spare us yet.
Lest we forget—lest we forget."
"The Revolution was effected before the War commenced. The Revolution was in the minds and hearts of the people; a change in their religious sentiments of their duties and obligations ... This radical change in the principles, opinions, sentiments, and affections of the people was the real American Revolution." John Adams
With regard to the cup and handle formation on the gold chart, a reader from Italy asks, 'Are you so sure?'
The short answer is jamais, 'never.' Only saints and fools approach certainty with reckless disdain; the experienced hedge with caution.
All charting is based on probabilities. Only fools are certain of what will happen next, and the market soon separates them from their money. In fact, 'knowing what will happen next' is the greatest single indicator of failure in trading that I have seen. All charts, all data, are selectively twisted and formed to support the outcome that one believes in. And when the like-minded collect, groupthink soon follows.
At the feast of ego, all leave hungry.
Right now this formation is indicative, a 'potential' thing that will be confirmed IF gold can break out higher. I would put the probability at about 65%, so it is a decent wager, but not more than that. As the price approaches a breakout point, the odds improve substantially.
The greatest negative is the possibility of a market meltdown in which everything is sold, at least temporarily.
This same reader from Italy suggests that gold is a Ponzi scheme. That is hardly probable since a Ponzi scheme requires a person, or small group of people, to concentrate and promote it. In the case of gold it is quite the opposite case, that the shorts hold concentrated power. I think he meant to suggest that it was a bubble, and was being a bit provocative. Although you could make the case that it is an 'anti-Ponzi' phenomenon, to the except that a fiat currency that was based in a debt Ponzi scheme is collapsing.
Well, is gold in a bubble? Gold is the 'mirror' of fiat currencies. Are governments and central banks doing a good job of protecting and maintaining the value of their currencies. Is spending well in balance with taxation? Gold is the barometer of profligacy and corruption. This is why corrupt statists fear and despise it.
Here is an interesting interview with Felix Zulauf on the global currency crisis and the gold bull market which is worth listening to carefully.
If people look back to the last great credit collapse worldwide which was the 1930's, and sees what happened to currencies and gold, they will obtain some knowledge that could very useful to them now. Stubborn ignorance can rationalize amost anything, and there is a peculiar tendency among people to resist the data that does not support their assumptions, until they are overwhelmed. They still have some hope due to the somewhat arbitrary nature of fiat currencies today, but increasingly less so for the very good reasons that Mr. Zulauf outlines in his interview.
Gold has no liabilities if you own it, it is sufficient in itself. It is also relatively stable in supply, and cannot be increased at will, as a fiat currency can be printed almost at will by a central bank but with increasingly lower marginal value in a free and transparent market.
Pierre Lassonde offers another interesting, although less rigorous viewpoint in this interview.
As a reminder I do not subscribe to the pure hyperinflationary outcome yet, which I think is not likely in the US at least. For my way of thinking, organic hyperinflation is a function of a currency with an external reference point. At the moment, the US dollar has no legitimate external standard as a reference point, except something soft, indicative, like gold. This is a truly fascinating and almost unprecedented historical development. I cannot think of a comparable economic example.
I suspect we will see powerful deflationary forces that will be countered by monetary inflation and devaluation that is not quite sufficient to break it, because quite frankly Bernanke is no Volcker, and the monied interests will resist a deterioration of their inordinate share of the dollar wealth of the world. That is not to say that various countries and even regions will not be economically 'trashed' in the process by a predatory financial sector based largely in New York, Zurich, and London.
Within eight years I would see the US dollar financial system resolving into a currency collapse and the issuance of a new dollar with a few zeros, two or three, knocked off as was seen with the rouble. It will look somewhat similar to the collapse of the former Soviet Union, not with a bang, but a whimper.
Here is a closer look of the current 'handle' being formed, and next to it the idealized example from an illustration of a classic cup and handle formation.
I would have preferred to have seen that lower bound set with at least one more test. Obviously at this point a retest would certainly try the longs. This would most likely occur if there was a major selloff in equities. Otherwise it appears that the orchestrated selling around Comex option expiration was the near term low.
Classic Cup and Handle Illustration
Gold to $1800-$2000 this year, and $30 Silver - James Turk
There are many more skeptical holdouts and the merely unaware with regard to the unraveling of the global fiat currency regime that has been in place since Bretton Woods.
As the dollar reserve currency and the euro recede into history, the pricing of gold in these currencies will become quite high, as the price of gold in old roubles had been during the collapse of the former Soviet Union. One thing that puzzles me is to speculate on which, if any, currencies will remain standing and be the big winners. Few have any backing in specie.
Moscow Memories of 1997
As you will recall, the world did not collapse with the Russian Empire. Goods flowed around and out of that region to other parts of the world, creating severe shortages. Many were out of work, or not being paid as official payrolls were in default due to lack of funds. Debts were wiped out en masse. Where was the deflation?
The US may have the option to go the Japanese route of slow death rather than a purging. A decade of stagflation may be deemed preferable to an all out bust.
Few understand the difference between a recession and a currency crisis. And they tend to forget even the wisdom of their own cultural heritage, embodied in the little sayings that we so often repeat, but genuinely understand only at those rare moments in our own personal experience.
"...the harder they fall."
Indeed.
So far a dead cat bounce at least. The futures settled around 1088 after a false breakout to the upside and a selloff into the close.
Next week should give us a clearer signal by how it moves out of its current trading sphere, up or down.
I Fratelli Gemelli: Infamia e Disonore 
Wall Street's War - Matt Taibbi
I think we all already knew this, but I wanted to bookmark it on my site for some future occasion when the government and the Fed deny it, probably in a response to a question from Ron Paul.
The question I have in my mind is where does this show up on their books, and what other markets are they active in?
It also seems a bit ironic, since the current topic of discussion on Bloomberg TV is "investor trust in freefall?" The consensus of the talking heads is that Wall Street's holy men are under attack by evil governments, particularly those of the European persuasion, and the odd US regulatory agency.
Steve Wynn is gushing about the business friendly, stable atmosphere in the People's Republic of China, as opposed to the US and those anti-business fascists in Washington. Although it is funny that he thinks the place in the US that most closely resembles China for being 'business friendly' is Massachusetts because they are willing to give him tax guarantees for 15 years. I suppose that when you turn them upside down all corrupt oligarchies look alike.
In an email this morning my friend Janet T. dropped me a note about Vietnam's new bank friendly atmosphere, and wondered aloud if Jamie Dimon would take his operations to Ho Chi Minh City in the unlikely event that meaningful financial reform is passed in the US.
One can only hope. Should we take up a collection for airfare? I would love to see the terms of their bailout packages over there after the next financial crisis, which is sure to come. A water hose, bare steel bedsprings, copper jacketed ben wa balls, and a well charged car battery would probably serve for openers, instead of softball questions and false protests of indignation from Barney, Chris, and the boys which is what those meanies in the Congress frighten them with now.
German Econ Minister:
U.S. Fed Is Also Active In Currency Markets
By Roman Kessler
MAINZ, Germany -(Dow Jones)- The U.S. Federal Reserve is also active in currency markets, German Economics Minister Rainer Bruederle said Friday.
His comments come on the heels of remarks made by his Swiss counterpart who said that the Swiss National Bank purchased euros to buttress the single currency.
"It is a regular procedure of central banks," to intervene in currency markets, Bruederle said. "It is not a secret," that central banks have a foreign exchange rate target, he added.
Bruederle said "eruptive" movements have to be avoided. He previously said that China holds 25 percent of its foreign exchange reserves in euros.
-By Roman Kessler, Dow Jones Newswires, +49 69 2972 5514;
roman.kessler@dowjones.com
Read more: NASDAQ
Posted by Keith Hazelton, Anecdotal Economics
And the question we keep pondering is, “Are we there yet?” Are we merely slouching toward despotism, or have we arrived? Are we already so corrupt so as to need despotic government, what with Vampire Squids and corporate/union-bought elections and Congressional bystanders and regulatory capture and Systemically Important Too Big To Fail and Gulf of Mexico oil well disasters?“In these sentiments, Sir, I agree to this Constitution with all its faults, if they are such; because I think a general Government necessary for us, and there is no form of Government but what may be a blessing to the people if well administered, and believe farther that this is likely to be well administered for a course of years, (but) can only end in Despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic Government, being incapable of any other.” (Emphasis mine.)
What a heavy burden God has laid on men! I have seen all the things that are done under the sun; all of them are meaningless, a chasing after the wind. What is twisted cannot be straightened; what is lacking cannot be counted. I thought to myself, "Look, I have grown and increased in wisdom more than anyone who has ruled over Jerusalem before me; I have experienced much of wisdom and knowledge." Then I applied myself to the understanding of wisdom, and also of madness and folly, but I learned that this, too, is a chasing after the wind. For with much wisdom comes much sorrow; the more knowledge, the more grief. (Emphasis added.)Indeed, with wisdom comes sorrow, and from more knowledge, more grief. Would, sometimes, that we could empty so much of it from the mush of our remaining gray matter and then we wouldn't have to pretend it's all good, when, in fact, it’s anything but good, as soon, perhaps in a matter of a few short years, we shall see.
The transition from unitary executive to dictator – conservative, benevolent or otherwise – will not happen in the waning months of the current administration, so uniquely manifested by America's First Triumvirate of George Bush, Dick Cheney and, until recently, Karl Rove, but succeeding chief executives may choose overtly to expand further the envelope-pushing and Constitution-trampling of the 43rd President and his neo-conservative command-and-control cabal as the American oligarchy, and the nation, slouches slowly toward despotism.Are we there yet?
As such, we will one day awake from our debt-financed, pleasure-induced stupors to find one person or group firmly in charge, answering to no one, especially not Congress, and in complete grasp of the military, the intelligence agencies, the treasury, the Federal Reserve and the financial and judicial systems. It will happen – it is happening – an inch at a time, until the day comes when not only will we, the fun-loving, celebrity-worshipping, civic-duty-abhoring citizens of America, so embrace the notion of despotism, we will think it entirely our own idea.
SP futures closed on a sharp rally as it appears the selling was indeed overdone on that plunge to the bottom of the long term trendline.
The whizkids on Bloomberg TV cannot seem to figure this one out, but suffice it to say that the high priced talent will be heading out to the Hamptons tonight for the long holiday weekend, leaving the junior traders in charge. Unless 'something happens' we generally see a prearranged move into noon NY time, and then choppy trade with light volumes.
Its the end of month as well, and that should be enough explanation for the rally on *no* volume.
Is the 'new bear market' over? Was the fear and panic being spread indeed overdone? Its still a little early to tell. Is the recovery for real? LOL. Let's not get carried away.
See if they can get it over the resistance it ran to just north of 1100 into the close. But it does look like the bull market in fraud will continue.
Anything for a buck, and another set of improbably perfect trading records.
If you have any spare time, read this scathing analysis of the financial reform bill, and the process used to create it, by Matt Taibbi, Wall Street's War. If Obama and the top Democrats are a reform party then Lloyd Blankfein and Jesse James are the next American Idols.
Ambrose Evans-Pritchard has a bold headline US Money Supply Plunges at 1930s Pace that is sure to provide much referential action for the UK Telegraph.
I like to read AEP, but have to admit that he is given to sensational headlines on rare occasion. That is because it sells papers, and also draws blog clicks, as posters on the web are sometimes wont to emulate. Fear sells. The financial sectors also thrives on rumours and panic selling. It clears the decks for new Ponzi rallies. And it seems as though fear has become an inseparable partner and helpmate to central governments these days.
But there were some mildly disappointing elements to this particular piece in addition to its somewhat overstated headline. The US stopped publishing M3 several years ago. At the time I was not happy about this, and complained quite a bit.
Several enterprising fellows, including my friend Bart over at Now and Futures, as well as John Williams at Shadowstats, have been attempting to extrapolate the M3 figures, and doing a fine job given what they have to work with. In an added footnote, AEP says he is using John Williams' service. He also incorrectly states that the still Fed publishes all the components. They do not disclose eurodollars. The basis for discontinuing M3 was to eliminate the 'inordinate expense.' Obviously if they still published all the components, that could not be a credible case. This is not just being picky. Eurodollars are a remarkably volatile component these days, and also a method of buying Treasuries via London if one were so inclined to monetize US sovereign debt that way. Could the BoE and the Fed be scratching each other's backs as they say? The BoJ has already paid for one false US recovery, so they deserve a break.
Here is a quick review of the components of the Monetary Supply figures including M3 for your review. You may also wish to refresh your knowledge here: Money Supply a Primer.
The chief component that is 'missing' these days which must be estimated is "eurodollars," which as you may recall are US dollars being held overseas. You know, those dollars that Bernanke has been sending over to Europe en masse lately through the swaplines.
The fellows can estimate this, but the reporting of eurodollars lags by a quarter or more, the only reliable source of information being the forex commercial banking reports from BIS.
I would very much like to have M3 back, but in particular I would like the Fed to be releasing a more accurate and contemporary measure of Eurodollars, the dollar overhang overseas, particularly in light of the huge swings in the DX index, and its almost undeniable relationship to the recent dollar short squeezes on the European banks. The Dollar Rally and the Deflationary Imbalances in the US Dollar Holdings of Overseas Banks.
But alas, we do not have this, so we can only estimate M3, particularly the eurodollar component. But the good news is that we still have both M2 and MZM.
Here are the most recent figures for MZM and M2 from the St. Louis Fed, expressed as a percent of change YoY, not adjusted for seasonality. For good measure I have added GDP and PPI Finished Consumer Goods in the mix.
It might also be wise also to keep in mind that after a period of sharp growth in response to a developing recession that flattens out afterward, the year over year percentage growth can fall precipitously and look quite impressive on a growth chart without necessarily providing a meaningful decline in the nominal values. This can be seen in the M2 chart below.
And it is also true that during a period of slack growth in GDP the demand for money is lessened such that normal or even flat money supply growth would seem to the Fed monetarists to be 'inflationary.' This does not mean that they have forgotten where the 'ON' button to printing press is located. Of all the things that might concern us about the Bernanke Fed, the least of them is that they will be too stringent in supplying liquidity when and where it might be needed, in substantial volumes, at least to the banking system.
MZM is the broadest measure of liquidity, and is very much a creature of the Adjusted Monetary Base. As one can see from the chart, the Fed, using their various policy tools, jams the short term money supply higher in response to a lagging economy, and the broader measures like M2 tend to follow with a lag.
The Fed then backs off, and waits to see the effect of their actions, as well as any accompanying fiscal programs, on the real economy as measured by GDP, with an eye on inflation. In this case I am using PPI, but I greatly prefer John Williams' unadulterated CPI measure. Unfortunately I do not have it in the proper format for this study. But PPI finished goods will do.
Now, looking at this chart, it appears that the Fed is following their usual gameplan. The excess reserves that the banks are holding, at least indirectly in response to the balance sheet expansion and interest rate payments on their own deposits by the Fed, are enormous and unprecedented. If the Fed were to start pulling some levers to motivate those reserves into the real economy through loans, the impact could be dramatic. The Fed will do this if their fear of inflation begins to be overcome by their fear of deflation.
For the moment, the great bulk of liquidity is being used by the banks to bolster their reserves, and their unresolved bad debt, as if the bad debt itself was the cause of the problem. The problem is that a credit bubble left consumers with the inability to pay their debts, and while nothing is done for the median wage, and the bad debt is not written off, the problem continues. This was the story of the zombie economy of Japan's lost decade, because their kereitsu corporate combines would not take the 'hit' for their land bubble.
Right now it appears to me that they are overly preoccupied with the status of the biggest of the banks and their asset quality problems an under stimulating the real economy. I think this will be regarded as a policy error as were the actions of the Federal Reserve in 1932 wherein the Fed overreacted to a spike in CPI and tightened prematurely. The Fed may be engaged now in a policy error of a different sort.
I am not saying what MUST or WILL happen. I am not arguing from theory. I am just attempting to demonstrate what is happening now based on the data. And right now Ben is indeed printing money, and figuratively dropping it from helicopters. The problem is that the helicopters are hovering over Wall and Broad Streets, and not Main Street. And so we obtain asset bubbles in paper favored by the denizens of the Street.
If you want to know the theory, in a perfectly fiat system (no external standard constraint) deflation and inflation are always the outcome of policy decisions amongst a number of variables and competing interests. Period. That is how it is, and that is why central banks prefer it to the discipline of an external standard like gold.
Once the US relaxed its adherence to the gold standard and devalued the dollar, deflation became a moot point. What was not handled well was the continuing lack of organic aggregate demand, and velocity of money, because of the resistance of the Republican minority in Congress to jobs creation, and the overturning the New Deal minimum wage initiatives and labor reforms by the US Supreme Court. Consumers cannot generate healthy demand when they are unemployed, or being paid near starvation wages. But if you are in a well-to-do minority, things couldn't seem better, unless of course you were living in Germany, Italy, or perhaps even Japan.
I am not saying what the 'right thing' to do is. But what I am attempting to get across is that one way or the other, excess financial sector debt is going to be liquidated, either through default, or through inflation, or through a mixture of higher taxes and sluggish growth with a disparity of income that increasingly resembles 19th century serfdom and political instabilty, the rise of demagogues, and some vicious ghosts from the past.
At some point this dynamic is going to become less 'economic' and more political and the equilibrium will be reached. A good leading example of this is found in Iceland.
See also The Case for Deflation, Stagflation, and Implosion
For those relying on the Output Gap and slack Aggregate Demand please see Price, Demand, and Money Supply as They Relate to Inflation and Deflation
People tend to become very emotional over this sort of topic. There are many who are afraid that what they have will be taken, and there is even a vocal minority of the self-identified elite who wishes to obtain greater power and riches by leveling the middle class and the poor to improve their own supreme vistas. The funny thing is that to the genuinely powerful these 'elites' are about as significant as a bug on the wall, and their turn will come if that is the way it goes.
The most touching example of delusion that I have witnessed recently was an unwavering prediction about what will happen in the future because 'the majority of the people on the this chatboard have agreed on it.' Well, perhaps history gives a hoot. But I suspect that we are in His hands now more than ever. And you might do well to prepare yourself accordingly.
By the way, and this is just a stab at my own theory, a strawman as opposed to an examination of the data, I think the US is hammering the ECB to devalue the Euro, because they wish to further devalue the US dollar. If the major fiat currencies can be devalued in a relatively uniform manner, and some other statistics and prices controlled, the people can be subtly relieved of their savings and wealth, and be none the wiser. But those stubborn Germans had to be brought to heel first. And so it is.
Here is something from an old trading acquaintance of ours. Stage Set For Another Bernanke Adventure - Brady Willett of FallStreet
Gold set its low for the handle with an intraday spike down to 1166 compliments of the heavy handed bear raids ahead of option expiry, but put in the daily close at an almost perfect 38.2% Fibonacci retracement.
Since then gold has been rallying, breaking through the key 1200 level right after the expiration where so many call options had been concentrated.
h/t lemetropolecafe.com
It has already reached what might prove to be the upper bound of resistance for the handle, although I would expect it to be a rough go higher from here until a breakout is achieved.
The target of 1400 to 1450 looks good. As the breakout gains shape hopefully a minimum measuring objective can be calibrated more precisely.
Once gold starts moving I would not be surprised to see a breakaway gap that does not get filled, but leaves many punters on the sidelines waiting for a pullback.
The usual caution is that if there is a market crash and a liquidation panic, gold will be sold along with almost everything else, at least temporarily, but then should rebound strongly as the central banks act to bolster confidence and liquidity by devaluing their currencies even more aggressively tha they have already been doing.
Classic Cup and Handle Chart Formation
See also Gold Is In a Classic Cup and Handle Formation Targeting 1,450: May 19th
Obama to Skip Arlington Ceremonies on Memorial Day: Washington Post
At first I was just puzzled. Not only for Obama's disregard for one of the great American traditions, but even more, that I cared so much about it. I have visited Arlington cemetery several times, and each time the experience was moving. I especially like to visit the Tomb of the Unknown Soldier, and the humble grave of Robert Kennedy, and the more famous of his brother Jack.
But the more I thought about it, it seems like a shocking breach of protocol for a war-time President, the Commander-in-Chief, to skip such a high profile responsibility while brave men bleed for him overseas in his wars. For at this point in his term of office, they are undeniably his wars.
I think it speaks volumes about Obama's tin ear for the common American's sensibilities, another data point for his profile, and how he views things and his relationship to them.
I am sure there are many, many people who would like to be able to have family vacations this weekend as well, who will not be able to, because they have lost their homes, their jobs, their loved ones, and their lives, in the service of a small and increasingly out of touch clique of powerful elitists and oligarchs.
"As flies to wanton boys are we to the gods..."Postscript: After thinking about this further, I realized why it bothered me so much. My godson is visiting us, taking a little vacation after his high school graduation, and getting into shape, waiting for his 18th birthday in July so he can return home to Florida and enlist in the US Marine Corps. His obvious desire to serve his country, his knowledge of the Corps, and his devotion to his preparations is touching. With so many good people to choose from, why can't America seem to obtain better leaders?
King Lear Act 4, scene 1, 32–37
The most recent smackdown in Gold and Silver for the purpose of manipulating the price of metals for the COMEX option expiration was about as blatant and arrogant as I have seen. There was a big fat concentration of Calls at the 1200 strike price, and the temptation to make their expire worthless was an open invitation to the pigmen.
You do not need a whistleblower to spot these abuses. The banks and hedge funds are practically taking out billboards in their market price manipulation these days, and daring anyone to do something about it. Why are they so fearless under a 'reform administration?'
The gaming of the markets using derivatives and massed selling and buying, melt ups and flash crashes, is less a 'conspiracy theory' these days, and more like an IQ test.
And it's a damn shame. Especially when the enablers and the Wall Street demimonde ignore it and pretend it is not happening, or make up lame rationales attributing it to something else.
This sort of semi-official corruption grows like a cancer, until it subsumes all markets. And it has severe consequences in the real economy.
Gold traded all day below 1200, at times rising to within fifty cents of the key strike price of 1200 where a large concentration of call options were clustered.
Well, since the call options at 1200 have expired worthless, why bother using the energy to continue to suppress the price?
Blatant and arrogant price fixing is done with the cooperation of the regulators at the CFTC who are willing to turn a blind eye to repeated price manipulation by insiders in the US futures markets in precious metals, stock indices, and several key commodities including oil and foodstuffs.
Here is some commentary from the April expiration in silver. Release the Kraken.
Watch for the SP futures to form a 'double bottom' at its pre-market morning lows of 1036.75.
If that support gives way, the market will reach for a bottom, but with a 900 handle perhaps.
Still, the market is getting rather oversold here, and the techs are not confirming a break of their support in the trendline.
I remain on the 'Long gold - Short stocks' trade that was mentioned the other day.
Silver is starting to look interesting. Later this year I think it may show us an epic rally as the artificial short scheme collapses and retreats to a higher level in a short term buying panic.
It is very difficult to forecast the timing on such an event, so better to take small positions and throw them in a drawer to be looked at only on occasion. One cannot successfully trade the truly unpredictable except in their own selective memory. When will the CFTC and SEC act to create integrity in the US markets? That is why playing such a risk trade is best done with little leverage, highly discretionary funds, and long time frames.
The gold bears are mounting a 'goal line defense' just under 1200 as we are in option expiration.
Here is a look at the SP June Futures Daily Chart at 11:30 NY Time. 1055-1060 remains a key resistance point.
In the meanwhile here is a video interview with Eric Sprott on BNN regarding our farcical financial system presided over by the central banks.
And an interesting discussion about gold, naked short selling, and Goldman Sachs with Stacy Herbert and Max Keiser, with the engaging headline, Goldman Sachs: Undeclared Enemy of the State.
The SP is continuing its bounce off the long term trendline for this leg of the bull market in stocks, the result of the reflation effort by the Fed. So far this is a dead cat bounce, and below the 200 DMA it is not wise to take a bullish stance.
Stocks showed some remarkably artificial action last week that was a bit hard to miss.
Similarly, gold and silver continue to rebound from the blatant hammering they took last week as we approach the option expiration at the COMEX. A fellow that trades there said last week that the price would be back over 1200 by Wednesday, and that the option buyers 'were just asking for it.'
Perhaps they were, but it is the job of the CFTC and the US government to make sure that they don't "get it," that is, get cheated, at least not that easily, through the obvious manipulation of price which we have seen in the last week. It would be as if the Nevada Gaming Commission allowed false dealing and marked decks to facilitate the casinos cheating their customers, who were dismissed as greedy gamblers deserving it anyway. Why this argument is allowed credibility in the financial markets is beyond me.
The sellers are easily identified, as are the sellers of the calls, and the large short interests. This is not rocket science, requiring deep analysis. It is a failure to do one's job, and uphold their sworn oaths to protect the public. You can judge their motives.
Think they will be able to keep gold below 1200 into the Call Option expiration? They may have done their work already. And after the calls convert they can hit the futures again, and hits the stops of the new holders of futures from the call conversion. Different day, same racket.
As far as stocks go, 1050-1060 are old familiar friends for support and resistance. In this case 1050 is a massively important pivot, with air underneath.
"The government is the potent omnipresent teacher. For good or ill it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy. To declare that the end justifies the means -- to declare that the government may commit crimes -- would bring terrible retribution."We are back on the long gold/silver - short stocks hedge with a bias to the downside, but that bias changes day to day. We would like to get short the long bond but we are not at that point yet.
Supreme Court Justice Louis Brandeis
As a reminder to all you junior miner punters, today is Victoria Day, May 24, 2010, in Canada and the stock exchanges are closed.
Some of their stocks that are listed in the US are trading, obviously but most of the Canadian junior miners are not.
Jim Rickards Interview on King World News - click here to listen.
There is a very important thought buried in the observation that Chinese deflationary forces and slack demand are deflationary, but being countered by money printing which is inflationary. That is a prescription for stagflation.
I thought he was rather easy on the Chinese who are egregiously manipulating their currency exchange rate to their advantage vis-à-vis the developed industrial nations of Europe and North America.
There is some alarm being expressed about the recent increase in the TED spread from some quarters this week.
Here is a short term chart of the TED. It is definitely elevated expressing the accelerated demand for dollars in Europe. Although the BIS reports will not catch up with this action for quite a while, I suspect we are seeing a replay of a flight away from dodgy assets such as dollar denominated CDO's that European customers had deposited with their banks that are now being liquidated again. Also, and undeniably, there is a flight to gold, Swiss francs, and US dollars from the Euro as the ECB and the EMU sort out their serious issues brought about by a single currency and monetary policy working across a wide diversity of localized fiscal conditions.
However, here is the longer term picture of the TED spread. As you can see, it is a bit too early to hit the warning sirens. But it does bear watching.
The long view is not very dramatic, and also not as useful for promoting short euro hedge fund trades, or for generating viewer clicks.
For some additional perspective, here is a chart of the one year LIBOR rate.
Here is a short term view of LIBOR in US Dollars. It is definitely elevated.
But here is a similar short term view of LIBOR expressed in ECU's. By comparing the two LIBOR charts one might think that there is an elevated demand for dollars, probably attributable to a flight to safety. The DX chart indicates that it seems to be peaking. But it can always take a turn for the worse. 
And while we are at it, here is a reprise of a prior discussion of the Fed's swap lines with Europe, designed to relieve imbalanced demand for dollars.
The US is indeed contributing to the bailout of Greece, via its membership in the IMF. But not through the currency swap lines, unless there is something else going on there behind the scenes. Since the US owns the biggest printing press in the world, at least for now, that would not be a shock.
There may be a time to worry about European insolvency. But quite a bit of what we are hearing about Europe these days seems a bit overwrought, and spoken from the perspective of a particular set of speculative trades.
The SP futures declined to briefly touch a channel trendline that goes all the way back to the intraday spike lows of October 2009!
The market is rallying sharply now, and if it can retake the old support, now resistance, around 1105 it has a good chance of setting a new uptrend back to the top of the channel. This could just be a dead cat bounce. I was looking at some of the indicators last night, and they were at record oversold levels going back at least four years, including the crash.
Was all this a trading gambit mixed with petulance over the financial reform package? In a normal market I would say "nonsense." But this market is thin, like a Ponzi scheme, driven by high frequency trading and artificial liquidity. The few genuine investors are being chased and shot down like the human beings in The Planet of the Apes. The Wall Street gorillas have all the horses, nets and rifles, courtesy of the government, the regulators, and the Fed.
The smackdown in gold and silver ahead of option expiration next week, and the miners' option expiration today, was some of the most blatant and heavy handed market manipulation I have seen in a long time.
The US is badly in need of adult supervision and behavioural modification. Not the much maligned people, the long suffering public which seeks only to go about its daily business creating wealth in the real economy in the face of mounting hardships, but rather the corrupt and irresponsible government, and the pampered princes of Wall Street, who are engaged primarily in wealth extraction and redistribution, primarily for themselves.
Washington can pass all the reforms it wishes. But until it obtains the will and the regulators to enforce the laws, including the existing laws, it is all merely a show to placate the public and maintain a misplaced confidence in 'extend and pretend' sustained by self-serving neo-liberal economic mythology.
"Meanwhile, the financial sector is to be enriched by the translation of junk economics into international policy. Living in the short run is the financial sector¹s time frame while distracting the attention of indebted populations from calculations that Wall Street understands quite well: the debts cannot be paid in the end.
But they can be paid in the short run, with promises to pay someday as if any economies ever have been able to grow by imposing austerity! It is all junk economics, of course. But it buys time for the bankers to pay themselves yet more bonuses this year. By the time the financial system collapses, they presumably will have put their money into hard assets.
Bank lobbyists know that the financial game is over. They are playing for the short run. The financial sector’s aim is to take as much bailout money as it can and run, with large enough annual bonuses to lord it over the rest of society after the Clean Slate finally arrives. Less public spending on social programs will leave more bailout money to pay the banks for their exponentially rising bad debts that cannot possibly be paid in the end. It is inevitable that loans and bonds will default in the usual convulsion of bankruptcy."
Michael Hudson
"The investment objective of the Horizons AlphaPro Gartman ETF (the “ETF”) is to provide investors with the opportunity for capital appreciation through exposure to the investment strategies of The Gartman Letter, L.C. (“Gartman”), founded by Dennis Gartman. The ETF will use equity securities, futures contracts and exchange-traded funds to provide the ETF with long and short exposure to multiple asset classes which may include but are not limited to global equities, commodities, fixed income and currencies.
The ETF provides long or short exposure to multiple asset classes including global equities, commodities, fixed income and currencies."
The ETF seems to be underperforming the major indices and precious metals, and mostly everything except for Obama's approval ratings. It did perform a little better than the TLT 20 Year bond index. At least their performance is consistent.
In fairness to Mr. Gartman I do not know how faithfully this ETF follows his philosophy and market 'calls.'
Perhaps this is like one of those Krusty the Klown franchise deals where the product only involves his name, philosophy, pictures, quotes, and trademarks, with no responsibility or genuine involvement in the content. I would suppose he is getting something out of this deal.
I mean look at their returns for the past year. It defines 'mediocrity.' A passbook account at .25% offered better returns with less risk.
I did think that it was cute that they blamed "President Obama's attack on the financial sector' for their lousy performance this year. LOL The Congress could not reform a schoolyard with a SWAT team if the kids had enough leftover lunch money to make it worth their while.
The Gartman ETF seems to be doing a little better than Goldman's advice to its retail clients, which has been wrong 7 out of 9 times according to recent stories from Bloomberg. Gee, do you think they are doing so well because they are doing what they do best, and taking the other side of the trades for their own book? Oh no, I forget. They are "market makers."
At least the Gartman ETF managed to get a memorable symbol for the ETF, HAG:TSX. I suppose DEDMUNI:TSX was out of the question.
When someone sent this chart and fund description to me I thought it was a hoax. I guess you really can't make this stuff up.
Oh well. Another Wall Street legend, shot to hell. Still, tomorrow is another day.
Having broken lower from the first decision point, the US equity market has continued lower, presumably towards the support at the lower end of the long term trend channel.
As a reminder, option expiration is tomorrow for stocks, and next week for Comex precious metals options.
Did the Flash Crash probe the way lower? Traders, and I am one, are notoriously superstitious and suspicious about such unexplained movements, suspecting that they are exploratory and will likely be retraced.
Well, we're there. Wash and rinse. Wax on, Wax off. Make it on the way up, and on the way down. As long as you are fleecing the sheep. That is how you gain a perfect trading record, if you are dealing the cards, playing with guaranteed house money, and peeking in everyone's hands, if even only by milliseconds before they make their plays. Get them buying hope, and then selling panic. It's all good if you can keep the money moving across your tables.
If that support does NOT hold, we're not in Kansas anymore Toto. But some sort of bounce seems more likely at the moment. Ben has not yet begun to print. I think they're just negotiating terms and turf right now.
Later: Here are the NDX June Futures going into the NY close of trading. The futures were selling off HARD led by the financials. The SP futures were looking for traction again around that key 1070 support and barely hanging on, with a similar story around 1800 support on the big cap tech NDX. The SP futures have a definite shot at the prior lows in the overnight trade.
Gold and silver spot was holding the exact levels where I would have expected them to find something to hang on. Let's see stocks go into option expiration tomorrow. There are a lot of calls that are going to be expiring worthless. I wonder if they will try and jam the puts for a little whipsaw action.
I will be a little surprised if they let gold up for air before its own expiration next week.
Naked shorting is illegal in the US, and for very good reasons. On a larger scale, it is used for price manipulation, and is the equivalent of counterfeiting. The removal of the uptick rule by the SEC on July 6, 2007, which had been created in 1938 as part of the New Deal regulatory reforms, cleared the way for its more heavy handed uses and control frauds.
The ban on naked short selling was not enforced by regulators who were willing to turn a blind eye to blatant market manipulation. Under the DTCC regime it turned epidemic. The alarm was raised by many whistle blowers who were either ignored or vilified by the corporate media.
Let me be clear on this. I am not opposed to short selling. It is a trade that has many legitimate uses. It is naked short selling that lends itself so readily to abuse, particularly when there are not limits on position sizes and massed selling to drive down prices. The deregulatory movement, based on such lofty principles, has become nothing more than a means to a fraud, systematically knocking down all the regulatory safeguards that were put in place to protect the public during the Great Depression.
And this was the result of a long and expensive campaign, led by the wealthy elite and the Wall Street banks, to lobby the Congress and dupe the people to energize their frauds. As such, it shows premeditation and deliberate intent, the organized corruption of one of the most connected of all global resources, the US financial system and control of the international monetary reserves.
It became so outrageous that the US had to intervene during its banking crisis that triggered this global financial crisis, and selectively enforce the law to protect its banks from each other and the packs of unregulated hedge funds led by Goldman Sachs.
Germany recently stepped in to ban NAKED short selling, which was being used to attempt to take down certain prices to trigger the highly lucrative and largely unregulated Credit Default Swaps.
And commentators were outraged and even hysterical over this action by Germany, which was the kind of responsible market regulation that the US reserves to itself, and only when it is in support of protecting its banking oligarchs.
This surprise and shock indicates how low our standards have fallen, and how given over to Stockholm syndrome so many otherwise intelligent people have become regarding the speculators and the banks. Death by professors, chief strategists, and the pampered princes of the corporate media.
I found it interesting that the heavy selling today in US equities, triggered by the selling of large tranches of SP futures near the open, in addition to news indicating the recovery is not gaining traction, and the threat of another flash crash was tied by traders this morning over ‘unease the the Congress has not yet killed Blanche Lincoln’s amendment to prohibit the banks from dealing in Credit Default Swaps.’
Regarding the recent gold action John Brimelow says:
"Waves of selling hit gold on Wednesday in the European and NY midmornings. As noted earlier, apparent CME volume pre-open was 90,000 lots, and estimated volume between 9AM and Noon NY, during which time gold dropped some $21, was a heavy 95,000 lots. ScotiaMocatta simply refers to gold being “bludgeoned down” and Reuters quotes a COMEX gold floor trader, “the big banks just put in sell orders that hit the market."
Anyone close to the market can see this manipulation. It is neither sophisticated nor clever. That is the shame of the regulators and insiders, who find their coverage in pleading ignorance. And what they do in gold they are doing in equities and other markets, while working their way up the food chain to the sovereign debt markets. None are safe when corruption partners with government."Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the Bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst yourselves, and when you lost, you charged it to the Bank... Beyond question this great and powerful institution has been actively engaged in attempting to influence the elections of the public officers by means of its money...A dangerously simplistic view? More like common sense, and the plain spoken truth, at last. You have been given a Republic, indeed, if you can keep it, if only for the honor of your fathers, and the sake of your children.
You tell me that if I take the deposits from the Bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin. Should I let you go on, you will ruin fifty thousand families, and that would be my sin. You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, I will rout you out."
Andrew Jackson on The Second Bank of the United States which was the Central Bank of his day.
A "Cup and Handle" is a bullish continuation pattern in an uptrend.
The 'cup' is best shaped as a "U" and the broader the bottom the better. The 'handle' is a retracement when the right side of the 'cup' reaches its prior highs. The handle often resembles a bullish pennant.
The retracement usually does not exceed 1/3 of the advance of the cup to its second high, although it can go as deep as 1/2 in a volatile market.
Here is a textbook picture of a 'cup and handle formation' from Investopedia.
Here is the daily chart of Gold. It is in a classic cup and handle formation, with the handle having dropped down today near the 1/3 retracement target of 1183. A number of technicians have been watching it form. The advance to a new high, and the subsequent pullback, have made it now worth noting.
The handle has been shaping for four days from the peak at 1249.30. The handle generally takes from four days to two weeks to form before price advances again with fresh buying to retest the resistance around the prior high.
One might watch for the current Comex option expiration to pass next Tuesday, given the large concentration of calls around the 1200 level before gold can make its move higher. There is always the possibility of a counter squeeze, but it is difficult to fight paper with paper given the wide availablility of derivatives, and the laxness of regulation by the CFTC despite recent noises made about reform. Nothing has changed yet.
There is a possibility of a triple top, although this is why it is important that the cup have a broadly tested bottom.
The target for a breakout in this cup and handle formation above would be a minimum of 1450. The breakout should be accompanied by increasing volume. The more volume the more bullish the post breakout run will be.
This is consistent with the weekly chart which we posted a few days ago that shows an inverse H&S continuation pattern targeting 1350 as a minimum objective. In fact, one could draw the cup more conservatively, ignoring the intra-day spikes, and strike a target much closer to 1350.
And what makes this gold manipulation such a perfect con is that they are bullying the public using money taken from the Federal Reserve and the Congress, the public's own money.
What levels might be expected after the intermediate targets are reached?
My friend Brian at the Contrary Investor has produced a series of targets based on the prior high deflated by a number of measures. Here is one that I thought had a certain 'ring' to it. Keep in mind that M2 is a moving target, and moving lower for now. If it turns around and begins to expand again, the price could be much higher. But for now it is in a firm downtrend. So it conceivably could be lower.
Gold Deflated By M2 Projects to $3,912 to Match Its Prior High
Here are targets for gold and silver based on their prior highs but adjusted for inflation using the Bureau of Labor Statistics CPI, and John Williams' (SGS) unadjusted CPI estimates.
If Silver were to reach $450 per ounce, and gold to $7,500, the junior miners might provide a quite impressive performance. lol.
According to John Brimelow:
"Open interest plunged 21,256 lots, 66.11 tonnes or 3.53%, one of the largest changes in history..."And this was before the latest round today after this early report.
As an aside, the hysteria, or Straßenschreier, with which the actions of Germany to curb naked short selling were greeted was very funny last night, and highly entertaining.
As you may not realize, naked short selling has been illegal in the US for some time, as least as far as equities are concerned. It was not enforced as the regulators turned a blind eye to many abuses that crept into the 'naturally efficient markets' on their watch. It is tantamount to counterfeiting, and in the hands of a party with pockets deep enough to permit it to dominate small markets, it is a blatant form of control fraud.
By the way, I hear that there has been almost no coverage of William K. Black's highly credible and shocking revelations on the public media in the States, outside of a piece on Bill Moyers' Journal. Can anything be so obvious as the control wielded by the corporatists?
But what is of concern to the Wall Street demimonde are their beloved CDS, which are as foul a form of white collar criminal abuse as ever has been seen since the creation of the Federal Reserve Bank. Any attempts to limit them will be resisted with threats, promises of dire outcomes and ruin, and buckets of money for politicians and regulators.
The rest of the world is beginning to act with revulsion at the destructive corruption of Washington and New York, and the American oligarchs.
Merkel made them squeal with her own version of shock and awe, and it was music to many ears. You go, Höllenmädchen.
Merkel und die Banken (Sarkozy ist Salieri)
