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They are struggling to take the equity markets higher, but the short term downtrend is still intact.
There was an air of disassociation with reality in the markets today in honor of options expiration.
The Fed announced the results of their stress tests, and began to allow the banks to increase their dividends and buy back their stocks. This is a windfall for wealthy shareholders and corporate insiders, supplied by the Fed using what are essentially public funds, as subsidies to the monied interests.
But it does not help to revitalize the real economy, even while it continue to debase the currency. This is the root cause of a future inflationary episode that will rock the status quo to its foundations.
Gold and silver rallied back with the G7 intervention in the currency markets on behalf of the Japanese yen.
I think the rationale that this was in support of Japanese exporters is more rationale than fact. The exporters' biggest problem is that their supply chains and manufacturing are disrupted.
Rather, the intervention at this time was most likely in response to what the central bankers euphemistically call 'disorderly markets.' The intervention and its timing had everything to do with the yen carry trade, and the pressures that the extraordinarily strong yen was placing on global financial institutions, especially in their hedges and spreads. There was also some concern that the dollar was falling too far, too fast.
I am rethinking my estimates of a hyperinflation. There is also and increase in the forecast of inflation that will accompany the stagflation to which I am more positively inclined in the intermediate to long term forecast.
I consider a real deflation very unlikely, only as a policy decision. The risk as I see it is an inept slide into a deeper inflation than the central bankers intend.
As such I am now even more inclined to protect my own assets in hard currency and precious metals.
Now that we have a few more data points I adjusted the green 'parabola' which marks what is essentially an inverse head and shoulders formation developing in the gold market. We will look to see if the formation holds and is confirmed by gold breaking out above the neckline which is around the 1450ish area.
Silver is resilient, but as those of you who hold positions, particularly in the miners, the intra-day volatility can be fairly breath-taking.
The G7 will be meeting this evening on a teleconference to discuss the markets and the impact of the Japanese and Middle East situations on them. I expect interventions to be readied, but not necessarily unleashed tomorrow unless things are much worse than we realize.
Options expiration will become more of an issue later this month. For now the focus is on the delivery of March silver at the Comex, and the anticipation building in the April contract.
