Wednesday, February 23, 2011

23 February 2011

Ok, the big question:  What are the metals going to do?  Will unrest continue to propel them?  Will a "risk-off" scenario lead to the traditional safe-havens, the dollar and treasuries, or will it continue to propel the metals?

I don't have the answer unfortunately.  I do know that if oil prices continue to rise, it should continue to press prices upwards of everything that requires oil to do - like mining.  I also would guess that if the Fed or any other developed country raises rates, the commodity complex would feel a shock.

I've been trying to find tangible evidence of what "causes" precious metals to rise.  Obviously, supply and demand.  But what else?  Lowering of interest rates, politically bad economic decisions (bailouts, social programs), negative real interest rates, what type of investment cycle the world is in.  Most of these haven't changed much recently.  Real interest rates (using shadowstats CPI) have become less negative.

I have found that miners tend to lead the metals up/down. 

SLW in terms of Silver 
Please note the disconnect between the recent high of silver and this ratio chart.
GDX in terms of gold
Similar, but gold has been able to continue upwards.

I would imagine that in the event of absolute panic, miners would sell off with all stocks, but the metals would do much better.

Thursday, February 17, 2011

17 February 2011

$TED Rising

 I made this indicator to use price and volume to determine the strength of moves.  Granted, everyone knows that there has been no volume in this rally, but this really shows it.  Essentially, it multiplies the magnitude of the volume by the magnitude of the price move and over time sums up this amount (a negative day subtracts, a positive day adds).
 Longer term view of above.  Essentially, gotta look for divergences between price and this indicator.

VIX got rejected by the 50 day today, but I think that could be a good thing because if it continues to consolidate more, the chances of it breaking strongly upwards only increase.

 Still creeping higher so stay long until it trends down.  The TSV (middle chart) is still trending upward, but getting towards high levels.  It certainly seems that this rally will not end until the exact date POMO QEII (June) ends.  However, I seem to think that would be too easy.  People will start anticipating that and bailing early.  After all, the primary dealers will want to use all their hot money to short the market on the way down too.  Also, it is clearly not as strong as it was the previous two rallies. 

"Paper money eventually returns to its intrinsic value - zero."
-- Voltaire, 1729

"Ponzi’ finance units must increase its outstanding debt in order to meet its financial obligations. A transition occurs over the course of an expansion as increasingly risky positions are validated by the booming economy that renders the built in margins of error superfluous - encouraging adoption of riskier positions. Eventually, either financing costs rise or income comes in below expectations, leading to defaults on payment commitments."
-- Hyman Minsky

Tuesday, February 15, 2011

15 February 2011

NASI Remains Weak

NYSI "Overbought" but still not over old highs

Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.
Ayn Rand

Saturday, February 12, 2011

12 February 2011

Interesting that the WLI still has not made a new peak while all stock indexes have.  What part of the ECRI is staying weak?
I haven't dug much into this, but found it and felt like posting.

Thursday, February 10, 2011

10 February 2011

There is somewhat of a stall on the McClellan.  Tomorrow could put up a red day on it, but as of late, this thing keeps pressing farther so there is no telling.  In other words, have to wait until it turns.  Trying to guess beforehand is foolish.

The $TED rallied today quite strongly and looks like it has some room to the upside.  The last time it rallied substantially was the few months prior to the May correction.

My indicators appear to be declining, but the decline slowed a bit today - especially on the fall of the new highs number.  The Euro area appears to be getting weak again.  Credit suisse (CS) fell 7% today, that normally doesn't happen to it.  

Sorry no charts.  Other priorities.

Best of luck.

Tuesday, February 1, 2011

1 February 2011

The key enabler for this last leg of the rally has been the destruction of the DX index.  It appears we are heading for key support again.  If we break the supporting ascending trendline and head for either previous low, then there is a whole lot more fuel for the stock market.  However, this will also aid the massive food price increases seen all over the world. 

More to come tonight.