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Just to expose a little more of my process, this chart represents what I had *thought* might probably happen in this gold correction. This is a very oversimplified representation, because I also thought we might be making this low around February 4, but I was too lazy to draw in the extra bars to show that scenario as well. But you get the idea.
It appears that the troubles in Egypt have given the lotus eaters a bit of a wakeup call, and so it was risk off on Friday. That is not to say the correction in metals and the ramp in stocks could not start up again next week, as this ersatz capitalism has a wonderful tendency for convenient forgetfulness when it suits the plans of the monied interests.
The shame of this market is not the occasional fraudulent element so much as any complicity in this greater degree of deception by regulators, politicians, and the bankers misusing public funds and trust, taking from those whose only desire in life is honest work and raising families, with a little comfort, safety, and happiness.
In other words, markets will always have some criminal element, some minority inclined to fraud. But when this tendency becomes general, and corrupts those designed to protect and advise the public, sooner or later there will be justice.
And with justice delayed, too often the trappings of hell and bad karma come with it. This is what we are starting to see today in far flung places around the world. May God have mercy on us.
The almost incessant bear raids on gold and silver took a break today as what economists like to call an 'exogenous event' took risk off the table, triggering a sharp flight to safer havens.
The gold and silver markets were short term oversold, in honor of Comex option expiration. Given an apparent free pass from the CFTC, the wiseguys were whooping it up in the paper metals markets, extending their leverage and selling short.
A hedge fund with a spreading strategy blew up earlier this week, leading to a massive decline in open interest and a sharp selloff in gold. One might surmise that this pigeon had been carefully marked out by his bankers for the slaughter, and it only needed the sanction of a poor GDP number, an FOMC decision, and the all clear from the regulars and the regulators to pluck the unlucky ducky. Perhaps he will have more time to spend at the poker tables, for he is a ranked player.
Silver made an exceptionally sharp rebound, again highlighting the artificial nature of this market and the price suppression. Some day the Comex will blow up in a default, and weighty people with grave pronouncements will opine endlessly on bubblevision about it and the need for 'new regulations.' But at the end of the day, it will be the investors who trusted in the integrity of the market who will be the losers.
A third chart has been posted. This is a very tentative analysis of the gold market, and a possible formation that we noted earlier this week that might be activated around the 1300-1310 support level. We had not expected this to happen until next week, into a possible cycle low point, but sometimes things happen and the market adjusts.
Too soon to print this one, but I wanted to share it from my 'private stock' of charts which I watch for my own purposes and needs.
I like gold, but silver looks more likely to be the irresistible force this year. I particularly like it because it is still so narrowly owned and little understood. When a certain contrarian bellwethers I watch become bullish of silver I might consider selling some, but not until then. And it appears as though it might have a long way to go, with lots of volatility and corrections. Never boring.
My biggest concern as always is the general liquidation panic that sweeps aside all assets, and in which everything is sold. This is hard to predict and not a common occurrence. The steady decline is more likely. There is an interesting divergence between stocks and gold/silver these days. It certainly worked this week. Short US stocks and long metals was a double barrelled blast.
This is familiar. Demonstrations are taking place in a country for several days, and suddenly the US financial markets take notice and dive as it is risk trade off. Sounds like Greece all over again, without the flash crash.
Even Hillary of State weighed in, hedging the US bets on the if-come, encouraging their guy for thirty years Hosni Mubarak to be measured in his response, and perhaps step aside nicely since they like the opposition leader Mohamed ElBaradei who although currently under house arrest may be a contender, depending on which way the military tilts. A military I should add, that receives more direct US support ($2 billion annually they say) than any other country except Israel.
Perhaps the Egyptian government should compromise and force the demonstrators into free speech zones, deep in the desert and away from city and canal. Its the American way after all.
The important IPO of BankUnited was consummated this morning, and Blackstone and Carlyle, along with their underwriters on the Street, breathed a sigh of relief, and then pushed the 'sell' buttons.
The US equity market is very thin and held in weak hands. When genuine selling appears, and in this case for a part the withdrawal of artificial support, prices drop sharply as the risk trade comes off. Gold, silver and the dollar all rallied. But what about the bonds? Cliche-wise, this will probably end badly as Ben stretches the dollar and the bond to fill the pockets of the monied interests.
And as for the next incident to stir the muddy waters of this gaseous recovery, head to higher ground if they start showing live pictures of demonstrations from the Americans' worst nightmare, Ar Riyadh. Then this will not be so easily dismissed as the rants of an 'uneducated people incapable of democracy'' as they said today on American TV, don'cha know.
It will be interesting to see if this is a rounded intermediate correction and consolidation followed by a resumption of the fundamental trend and a new breakout higher, as we had seen in May-August last year.
More on this tonight.
