Gold Daily Chart

SP 500 and NDX December Futures Daily Charts

The market is acting like there is a 'Bernanke Put' underneath it in the form of a handsome QE II to be unveiled at the FOMC in early November.

Meanwhile the financial sector is imploding because of the continual revelations of pervasive mortgage fraud.

It will be interesting to see if the PPT can hold things together until the November elections in the States.

Gold Daily and Silver and Miners Weekly Charts

Commentary on gold and silver action was posted here intraday.

Remember the caution that was sounded about the trends being extended? We are now in the process of correcting that.

SP 500 and NDX December Futures

Earnings are coming in on the 'spotty' side with signs of weakness despite the ardent cheerleading from the talking heads and the financial 'journalists.'

The big tickle today was the 25 bp increase in interest rates by the Bank of China which the market was shrugging off. But in the afternoon Bloomberg disclosed a suit by some financial heavyweights including the Fed against Bank of America for dodgy loans originated by Countrywide Financial which BofA had acquired. There is some speculation that the relative outsider BofA will be 'Lehmanized.' Personally I would like to know who is holding their Credit Default Swaps and if the Goon Squad (GS) is among them.

Notice that no significant support was broken today in the stock indices so tomorrow will be quite important in setting the trend and tone.

NY Fed, BlackRock and PIMCO Pressure Bank of America to Buy Back $47 Billion in Bad Mortgages

The news had a significant impact on the market because of the parties involved in 'pressuring' Bank of America. The loans were originated by CountryWide, which had been acquired by BofA. It is ironic that Countrywide CEO Angelo Mozilo just settled with the SEC admitting no wrongdoing and merely paid a fine which was a small percentage of his financial gains.

It is nothing new for bondholders and the common people to sue some of the big Wall Street Banks for fraud.

But when the plaintiffs include some of the most important financial institutions in the country the market has to sit up and take notice.

It's nice to see some outrage being expressed, even if it is among the privileged few. Watching Bloomberg television was particularly difficult today as the apologetics and cheerleading for the financial sector among its guests and newspeople is almost shameless.

And the band played on...

Bloomberg
Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages
By Jody Shenn
Oct 19, 2010 2:53 PM ET

Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.

A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview. Recoveries for her clients, who own at least 25 percent of so-called voting rights in the deals, may reach “many billions of dollars,” she said....

Gold Daily Chart - Intraday - The Retracement

If you are a patron of this cafe, you cannot say that the breakout and rally to 1375, and the retracement currently underway, were not prominently placed on the menu for some time.

So now what? Gold will retrace back to a more sustainable trend, consolidate, and then resume its bull market rally to the minimum measuring objective of 1455 and probably higher.

If there is a general liquidity panic gold will overshoot to the downside, perhaps considerably, and then gather itself and rally sharply back to the trend. I doubt that it would break the 1280 level except for an intra-week plunge, but that is always possible.

There will be the usual displays of human emotion, but this is a natural and healthy correction in a bull market. I was becoming very concerned that gold might continue on this new, more aggressive trajectory all the way to 1455. This would have resulted in a more damaging correction. The green trendlines are the 'safest path' for a sustained bull market.

This rally in gold and silver is an artifact of the crumbling of the post WW II US dollar reserve currency regime and its replacement with something else. Gold and other commodities were influenced, if not controlled outright, by an Anglo-American financial cartel for their own advantage, and far too often the personal advantage of a few powerful men. This is changing. What comes next, no one can say for sure.

As some have suggested in their bitterness there is the possibility that an authoritarian new world order can dictate prices of gold or anything else for that matter. This is not probable. But if that happens the price of gold may be the least of our problems. The propensity of people to say and do stupid things rather than admit their own errors and mistaken beliefs is sometimes remarkable. This is one of the themes in the movie classic Bridge Over the River Kwai. Some say that art imitates life. I would say that life on the internet imitates high school.

The trend will remain in place until the global currency regime evolves into something sustainable that supports balanced economic trade and activity. Once that level of systemic repair is reached, gold will stabilize at whatever level it 'fits' within the global scheme.

Gold Daily Charts

SP 500 and NDX December Futures Daily Charts

The tech futures NDX were selling off hard after hours as AAPL and IBM failed to delight investors with their earnings reports, after having gone to new parabolic highs during regular trading hours. This could be an instance of Buy the Rumour and Sell the News.

However the pattern seems to be a sell off at night, with a steady short squeeze starting in the first hour of trade lasting all day. Let's see if the pattern of market manipulation is finally broken tomorrow.

SP 500 December Futures Intra-Day And General Comments

The market is playing around with these consolidation patterns that start off with a dire overnight trade, that gives way to an intra-day rally and a squeezing of the shorts.

Artificial to be sure, but likely to continue until something happens to stop it. It is unlikely that the government will intervene ahead of an election and in a fragile economy to stop the inflation of an obvious bubble. To the contrary, they are most likely deeply complicit.

This provides emphasis to our caution of waiting for a downturn to develop rather than trying to get in ahead of it. You will just feed the speculative increase.

The more the Fed and Treasury debase the global fiat currency, the higher gold and silver will rise.

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title."

If the model of the former Soviet Union (empire) holds, at some point the oligarchs will start seizing hard and income producing assets for themselves using their command of fraudulent paper and a corrupt system of governance. This may already be underway when the Congress gave in to the Bankers' threats and passed TARP. I have heard that Wall Street will be taking about 8 percent of M1 as its bonus this year, despite being bailed out at enormous costs, both explicit and hidden, to the American public. Bernanke is transferring over a trillion dollars in interest earnings from savers, institutions, and retirees to Wall Street through this quantitative easing without reform and restructuring.

At some point this may erupt into a crisis with a resolution, but in the meantime it will continue to spread slowly like a wasting disease, concentrating more real wealth and assets in the hands of the politically well-connected few.

Obama is more like a business friendly Herbert Hoover than a reforming Franklin Roosevelt, and this lack of will and a vision forged by determined accomplishment against suffering, moral courage and certitude if you will, is his tragic flaw and America's misfortune.