SP Daily Chart: Looking Ugly as Baghdad Barrack Declares Economic Victory

By now you will have heard about the shocking miss on the US Payrolls Number, made even more shocking by the cheerleading that preceded it by the likes of Goldman Sachs(who were probably on the other end of that trade> and by Barack Obama himself.

The administration had nothing constructive to say this morning except for mindless sloganeering by the likes of Christina Romer, Obama's chief on the Council of Economic Advisor, who is unlikely to inspire confidence when delivering even good news, much less a clear sign of economic policy errors and a double dip in the making.

With Romer, Summers, and Geithner, the President has managed to put together the economic scream team. Even Volcker is starting to look tired and ineffective. His recent proposal of a VAT, the most regressive of taxes, sounded less like a democratic reform and more like something from the Bilderberg playbook. One has to wonder how long will it be until they start recommending the sale of key sovereign assets to corporate oligarchs.

And then there was Baghdad Barrack, talking up the economy and the jobs numbers this morning at a Maryland truck garage. He seems to be trying to run a bluff, talking his way past his team's economic policy errors and corruption, a reflexive strategy that may have served him better when he had no real responsibilities or quantifiable results.

One might feel better if the other party had not already proven itself to be the party of the elite and the wealthy special interests, without vision or ability, creating many of the problems that are sinking the US today. Things do indeed seem bleak when the reform government fails.

It appears that the SP futures may be forming a bear flag, with another big step down to follow. That would be 'bad news' because below the support at 1040 is a disturbing possibility of a triple digit SP 500.

Chart Updated at 3:30 EDT

Gold Daily Chart: A Typical Fibonacci Retracement Pattern So Far

The key support levels in the pullback from the handle resistance are 1205, 1198, and 1190. These are the three key fibonacci retracement levels, although it would not be completely unusual to see a pullback to 1166. I don't think it will happen, but the market will have the final say and we must listen.

This has the look of a bear raid by the funds and banks. They were hitting the mining stocks hard first, and then the metals. The planting of negative articles and comments by funds with friendly authors was also apparent, to the point at times of silliness.

And there are plenty of investors who have missed the rally, or with a certain ideological bias, who want to see prices fall. Misery loves company. The irony is that most will never bring themselves to buy back in, because they are always looking for THE bottom, and a lower price. They will more likely buy closer in the second leg higher, when fear overcomes their greed.

This is how bull markets operate, and the reasoning behind chart formations. Charts attempt to capture typical market behaviour, and nothing more than this. They influence some trading if enough people follow them, but by and large they cannot change the primary trend. And so far this looks like a typical bull market climbing a wall of worry. Let's see if anything changes.

The 1206.80 price on the chart is as of 2:45 PM EDT.



Here is a chart comparing the Gold Bull Market compared to the famous Dow Jones Industrial Bull Market, courtesy of Mark J. Lundeen who posted it at LeMetropoleCafe.



And finally, h/t to Tarlton Long, here is an example of some of the 'rubes' who are holding gold in their portfolio and its percentage of their Assets Under Management.



And finally Harvey Organ's June 2 Gold and Silver Commentary is worth reading.

Obama Gives Us a Hint: Look for a Hot Jobs Number on Friday - Mission Accomplished

Since he is the commander-in-chief of the Washington bureaucracy that churns out government statistics, it is a good bet that the boss' expectations will be met by those who serve him. So watch those short positions into this Friday's Non-Farm Payrolls report. The President has declared that an economic recovery is at hand.

Obama gave a longish speech at Carnegie Mellon University in Pittsburgh today blaming most of the problems in the US on the Republicans and a few greedy Banks, extolling the reforms in healthcare and the financial system that he has been able to push through despite the minority opposition, and recalcitrant leftish supporters, after he saved the country by the unfortunate but unavoidably necessary bank bailouts.

His speech sounded good. And if you do not look too closely at what is going on, and how things are being run, and the lack of actual reform, you might have had a feel good moment. It was about as effectively staged as the case that George W made to the American people for the invasion of Iraq. And it was probably just as phony and self-serving.

I come away feeling that Lincoln had it exactly right. There will be a die hard group who will never lose faith in their party, or any of their chosen leaders, and will find desperate comfort in partisan blindness.

"If you once forfeit the confidence of your fellow citizens, you can never regain their respect and esteem. It is true that you may fool all of the people some of the time; you can even fool some of the people all of the time; but you can't fool all of the people all of the time." Abraham Lincoln

But the great majority of the American people are waking up, and that spells trouble in the November elections for most incumbent politicians. So the pace and velocity of the spin will have to be adjusted. Hence the speech today. And the outlook for the tortured American economic system, and the official descriptions of it.

For a refresher, here is Matt Taibbi's caustic expose of the financial reform process. Wall Street's War

Dow Jones Newswire
Obama Says He Expects Strong US Jobs Report Friday
By Jared A. Favole

WASHINGTON -(Dow Jones)- President Barack Obama, speaking Wednesday at Carnegie Mellon University on the economy, said he expects strong job growth to be reported Friday.

The Labor Department is scheduled to report May's employment statistics Friday. Economists expect the unemployment rate to slide to 9.7% from 9.9% in April and for the report to show the U.S. added as many as 515,000 jobs last month after non farm payrolls rose by 290,000 in April.

Obama said an economy that was "once shrinking at an alarming rate" has now grown for three consecutive quarters and is moving in the right direction.

I watched this speech live on Bloomberg television. It is no exaggeration. Obama was declaring mission accomplished, for the record. So if something beyond his control should happen to derail the recovery, well, that could not be his fault.

Bank of Canada Becomes First of G7 to Raise Interest Rates

Interesting move by the Bank of Canada to raise, albeit cautiously, its key interest rate by 25 basis points to .50%.

The reason for the increase is the obvious 6.1% growth in 1st quarter GDP led largely by housing and consumer spending, counterbalanced by slack inflation and wage growth.

So, Banque du Canada wishes to take a little off the top of its own housing bubble, and please its friends in the US by strengthening its currency against the dollar, so as to not further imbalance the significant exporting activity between the two trading partners.

I doubt very much that Canada will raise again in July, especially as the non-recovery in the US becomes more apparent. As I recall Canada fared much better in the last Great Depression because their more conservative banking sector required less reform, and offered less damage to the real economy. It appears that this will work in their favor again, despite some looming problems perhaps in housing.

Still, it is interesting to see the commodity strong countries like Australia and Canada raising rates even while Europe and the US economies remain wobbly.

Bank of Canada Press Release
Bank of Canada increases overnight rate target to 1/2 per cent and re-establishes normal functioning of the overnight market

OTTAWA – The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly raised to 3/4 per cent and the deposit rate is kept at 1/4 per cent, thus re-establishing the normal operating band of 50 basis points for the overnight rate.

The global economic recovery is proceeding but is increasingly uneven across countries, with strong momentum in emerging market economies, some consolidation of the recovery in the United States, Japan and other industrialized economies, and the possibility of renewed weakness in Europe. The required rebalancing of global growth has not yet materialized.

In most advanced economies, the recovery remains heavily dependent on monetary and fiscal stimulus. In general, broad forces of household, bank, and sovereign deleveraging will add to the variability, and temper the pace, of global growth. Recent tensions in Europe are likely to result in higher borrowing costs and more rapid tightening of fiscal policy in some countries – an important downside risk identified in the April Monetary Policy Report (MPR).

Thus far, the spillover into Canada from events in Europe has been limited to a modest fall in commodity prices and some tightening of financial conditions.

Activity in Canada is unfolding largely as expected. The economy grew by a robust 6.1 per cent in the first quarter, led by housing and consumer spending. Employment growth has resumed. Going forward, household spending is expected to decelerate to a pace more consistent with income growth. The anticipated pickup in business investment will be important for a more balanced recovery.

CPI inflation has been in line with the Bank’s April projections. The outlook for inflation reflects the combined influences of strong domestic demand, slowing wage growth, and overall excess supply.

In this context, the Bank has decided to raise the target for the overnight rate to 1/2 per cent and to re-establish the normal functioning of the overnight market.

This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

Information note:
The next scheduled date for announcing the overnight rate target is 20 July 2010. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 22 July 2010.