Monday, August 15, 2011

15 August 2011

 McClellan summation index posted a green candle today.  Its acceleration (green) line is clearly off the charts.  This shows that the velocity (orange line) likely will not continue to increase at this rate.
 My contrarian hold long / hold short indicator is based on the shortest period (below) and is designed to show when price has out run technical indicators.  It works sometimes at catching whipsaws.  Other times it can occur right at the bottom (mainly 2009).
 Still oversold in medium term.
Near overbought in short term.

Looks like a nasty whip saw is possible, but there may be some more room to the upside.  Aren't you glad I kept you from opening new shorts last week.  I closed the few longs I had (RIC, NSU) opened at Friday close so I missed out on the gains today.

"If you owe your banker a thousand pounds, you are at his mercy. If you owe your banker a million pounds, he is at your mercy."
John Maynard Keynes

I've read a lot of the deflationist anti-gold blogs.  This quote reminds me of them.  I don't understand why those people think the debt will ever be paid back in present value dollars or at all.  It is a huge circle of debt that everyone owes one another.  Why would someone scramble for cash to pay another back that also owes them?  How will citizens pay it back? They won't.  When central banks can loan money into existence ad infinitum, why would they allow their croney buddies to go belly up through debt deflation? 

I'm no economics expert, but seems that they all know the charade is up and they are scrambling for real assets like gold.  I guess Orwell was right, to see what is right in front of one's face requires constant effort.  In the book Popular Delusions and the Madness of Crowds, all the wealthy smart people recognized that all the paper they had accumulated via a credit bubble wasn't real and they always started to convert it into something real to get out of dodge before politicians go on a witch hunt after the speculative bubble crashes.  This isn't a new thing, and this process has been happening since 2001.  It has been in slow motion.

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