Gold Daily and Silver Weekly Charts - The Road Ahead

It was more back and forth with gold and silver today.

I thought I had already given a fairly complete overview of what I think is happening in the precious metals markets.   Perhaps I need to repeat it with just a little embellishment.

And just for grins, although it does contain some satirical exaggeration just for effect, the cartoon to the right is pretty much how I conceive our current situation and the real economy.  Our financial problems cut right to the bone of who we are and how we are conducting ourselves as a society.

We have just seen an historically significant decline in the precious metals in terms of days lower without relief. And we have seen a remarkable rise in the US dollar index against the Euro and the Swiss franc that cannot possibly be good for the real economy of the US, when every other developed nation is trying to devalue their currencies to stimulate their exports and inhibit imports.

I believe that a portion of the gold selling in particular is an effort to knock down the open interest in gold for December. Why? Because of the incredibly high ratio of open interest to deliverable gold, which I publish frequently and was among the first to do so, although Nick Laird is the data wrangler pre-eminent on this. If there was any serious attempt for holders of those contracts to stand for delivery, even JPM, which has been obviously building up its stores of gold to act as the 'fixer' in that market, would not be able to cover the demand.

JPM was consistently taking delivery for their house account in gold, and just transferred 70,000+ ounces over from Nova Scotia's warehouse, from whom they had been taking delivery.

As we know, in the last big delivery month, JPM stepped up with an enormous amount of their gold, 400,000+ ounces, to provide enough real bullion to satisfy the contracts standing for delivery. Even now their inventories remain somewhat depleted.

The dollar has also been soaring, because the Fed is trying to pretend that the US is recovering so that they can raise rates. A strong dollar and higher rates are very harmful to what is almost undoubtedly a fragile economic recovery in the US.

And it is fantasy to think that the US can somehow go it alone, and continue to improve while the rest of the world is cutting rates because their economies are slowing.

The Fed wants to raise rates for their own policy purposes, so they can cut them, without going overtly negative, when their latest financial bubble starts to collapse, which it may already be doing. They cannot really raise rates in a Presidential election year past June, so they will push ahead, to serve their own purposes, even as they harm the real economy.

There will be another financial crisis as the IMF warned today. There will be a serious dislocation in several financial markets, including the precious metals and the bonds at some point, that will rock the current system to its foundations.

It is the credibility trap which ensnares the ruling class that inhibits any meaningful remedy and reform.  Consequently I do not think we are in for an easy or peaceful time.  As you may recall, I think the next imperial president may be our 'Nero.'  This is by way of saying that unless we change our ways, it will get worse before it gets better.

You may think I have it wrong. And that is certainly a possibly that I not only admit but weave into my own investment strategies in the short term particularly. But I do not think I am being coy or evasive on what I think.

And this it a part of a greater framework and forecast that I put together in 1999, and if one does not expect exact timing, which is not possible in these things, has proven itself over time to be sound.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Tension on the Tape - My 'Agenda'

'The wind in the wires made a tattle-tale sound
When the wave broke over the railing
And every man knew, as the captain did too
'Twas the witch of November come stealin.'

Gordon Lightfoot, The Wreck of the Edmund Fitzgerald

This nautical map of eastern Lake Superior shows how close the Edmund Fitzgerald was to the safety of Whitefish Bay in the lee of the north wind when it foundered.  It really was only about fifteen miles from safer waters.

Stocks were in an edgy trade today, as they continue to digest their outsized gains from the last month. The SP futures rallied, almost non-stop, from 1860 to 2110, where they failed, at least for now, to set a higher high.

The big questions are twofold.

First, are stocks and bonds being set up for a serious correction after a fairly impressive run higher in paper asset prices? And secondly, can the real economy continue to hold a weak pulse of recovery in the face of a much stronger dollar and increasing interest rates, even while the rest of the global economy continues to falter?

I do not have the answer to this, obviously. And hardly anyone else does as well, especially those who would sell their judgement on it to you. They might feel they have a good grasp of it, but the question then is why are they not putting their own money on it, rather than getting paid to watch you play yours on their opinion?

As the question arose elsewhere about this cafe, my 'agenda' here is to share my thoughts on the markets in the hopes of getting back more knowledge, and also to subject my thoughts to the rigor of the printed word. It is easy and rather sloppy just to think these things without committing them to paper, and public exposure.

The impedance of expressing thoughts in words gives them more substance, and also has the nice effect of introducing you to other peoples' thoughts on similar subjects.  Or just to find and converse with some very nice people who have the same interests.  Yes, you run across some sour apples, but at the end of the day, you learn that they are just fighting with themselves, and are not yet ready to let it go, whatever it is that compels them to be miserable.

I do not wish to have power or excessive money. Although my wife would like that because she would give it all away. Seriously.  My goal is to live a life 'hidden in God' in which I have 'enough' only because I need little, want less, and love more. That's it.

And I confess, and maybe I am just mostly talking out loud to chide myself as much as anything most of the time, that I feel a duty to remind all who believe as I do of the heart of the message of the Gospel, and not just the portions that are easy and convenient and flattering.

"If you love those who love you, what reward will you get? Are not even the money lenders doing that? And if you are kind only to your friends and family, what are you doing more than others? Do not even unbelievers do that? Be good, therefore, as your heavenly Father is good."

If I have any wish in the world, it is never to never hear these words below spoken, to myself, to any of mine, and to any of my friends. To anyone at all, if possible, but that may not be a realistic expectation.

"Lord, when did we see you hungry, or thirsty, or a stranger, or naked, or sick, or in prison, and did not provide help to you? Then he shall answer saying: 'Amen I say to you, as long as you did it not to one of the least of these, neither did you do it to me.'"

And more than anything, I do not wish to see my Lord weep for those whom he would gather to himself, as a hen would for her chicks.  What a heartbreak that must be for a loving father.

As Léon Bloy observed in La Femme Pauvre, 'that is the only real tragedy.'

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Check, Check, Check

Nyet! Nyet! No More! No! Not tonight! This son of bitch, all night he, 'Check. Check. Check.'

Teddy KGB, Rounders

Gold and silver largely marked time in place today, after the regular and rigorous pounding that they took for the last fifteen days or so, depending on how you wish to count the start of it.

The dollar seems very toppy and overbought at this point, and I have included its chart below as well.

It is a fallacy to say that the metals are declining because the dollar is moving higher.  Sometimes the metals and the dollar move inversely and sometimes they move together.  In this case they are clearly moving in opposite directions.

There were no deliveries to standing contracts in The Bucket Shop yesterday.  And the action in the metals warehouses was more of the usual 'weak leak' that seems to be the order of the day, at least this month.

We are seeing the kind of clumsy, puerile commentary about 'gold being stoopid' from the porcine auxiliary that often appears when there is a  kind of bottom developing here.

Or not.  When the dealer and the house are dealing from the bottom it is hard to predict what will happen next.

But at some point they will start to more visibly run out of chips, and will be called.  And then we will see what is thrown down on the table.

Until then we are waiting for a short term buying signal, and holding all the long term positions.

Patience and caution are our friends.  And time, given the steady flow of bullion from West to East.

And the propensity of these high-flying propeller heads to overplay their hands, and eventually come falling back to earth.

China calling. I think it's for you.  

And check.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - T'was the Witch of November Come Stealin'

When suppertime came, the old cook came on deck
Sayin'  Fellas, it's too rough to feed ya
At seven PM a main hatchway caved in
He said, Fellas, it's been good to know ya
The captain wired in he had water comin' in
And the good ship and crew was in peril
And later that night when his lights went out of sight
Came the wreck of the Edmund Fitzgerald.

Gordon Lightfoot, The Wreck of the Edmund Fitzgerald

I have included the two stock index cash market charts with technicals.

There is a potential 'island top' forming on the NDX, and the SP 500 looks like it might be testing the 200 DMA.

Bottom line is if stocks start rolling over with some real selling, and not this tissue thin HFT shell game that has taken the place of actual price discovery, then we could be in for a very rough ride.

Let's see how much more the Fed is willing to spend to support their latest paper asset bubble. And let's see if they can raise rates fast enough to have enough room to lower them again in response to another crisis which they have themselves would most likely have caused.

Today is the 40th anniversary of the wreck of the Edmund Fitzgerald during a fierce November storm on Lake Superior.

I remember it fairly well.  At the time I was in my senior year of college, and was living in the heights area east of Cleveland, Ohio, which was also the 'snow belt' for lake effect snow caused by moist winds rising up off the lake.  So the news of the ship lost at sea was very big on the local news, and affected families in the area from Ashtabula to Toledo.

Erie itself is a relatively shallow and narrow lake, with an average depth of only 30 feet. We used to fish for walleyed pike around the western islands to Pelee in Canada.  But the storms out on the open water could kick up the waves very quickly, and you did not want to be out too far in a 16 footer if a storm came in from the northwest.  The waves could lift you up and then smash you down on the partially submerged rocks.  More than a few times we raced a pop up thunderstorm to Put-In-Bay, and the safety of the old Roundhouse Bar.

I like to think I have a reasonably well-honed sense of potential danger.  And I feel that dangerous potential in this market.  Whether it comes to be or not is another matter.  It is more possible than probable for now, and the Fed is spreading the oil of printed money over Wall Street's troubled waters.

Have a pleasant evening.