Bullishness in the markets and enthusiasm for 750 billion in support to prop up financials has dropped Gold from resist at $1000.00 to the ST support of 933 after dropping $20 on the morning so far 10:50 am ET. If this support fails, and the bulls continue to rally the stock markets, we have plenty of room on the short side with the MT and ST in agreement and divergence on the ST chart.
Most markets are in a 50-50 level of getting to new lows or finding a bottom to rise on. The markets that stand out are the Financials. They seem to be seeking lower lows, but are still trading within a range set from the lows of February 9 to the highs of February 18. Can the debt of the United States be sold without offering higher interest rates to the Chinese and other Eastern countries? Financials seem to say, "No!"
Last night’s speech to the Congress, President Obama reassured everyone that the policy of his administration would continue the march of the credit economy. While promising to keep the lid on spending, he confirms the business financed by debt attitude. The rich will be taxed, not the middle class to cover the debt.
I am not falling for this tired old trick. It is just a matter of time before the “not as rich as them” are taxed followed by the “not as rich as those” tax increase until the tax covers the entire range of working class incomes. This is the same tactic used to push the original IRS Act, the unconstitutional scaled income tax upon the public in 1913. “It’s just a little tax on the rich.” Look at it now. Is it just a little tax on the rich?
The Age of the Credit Expansion is over. It’s dead for two reasons. First, if bankers are to be regulated to resume lending to those who don’t qualify, which they won’t unless at higher interest rates, we will be right back in the same situation we are in today. Second, if bankers are to be regulated to loan more to those who qualify although at higher interest rates, it assumes those who qualify want a loan. They don’t. The Finacials say, "No!" What now?
Bassackwardationism - the underlying philosophy of the political party in power in the United States at any particular era since December, 1913.
The tenets of the philosophy hold that no one person has a right to be right either in past or present administrations unless in opposition to the overwhelming majority of current constituent's desires and pleadings concerning constitutional rights of the States and Citizens of the United States.
Also held strongly by members of the party (hereafter fondly referred to as "party") is the faith that no matter how much damage may be done to the economy, the military capability or national security, financial or physical, the "people" governed by the party will endure more damage with glee for the party's term in exchange for public silence.
Another tenet of Bassackwardationism is that no evasion of moral accountability can ever be too great as long as the stories to the public are published with increasingly confusing and alarming headlines; keeping the public blind to the truth. Also, public blindness is to be critically maintained in the daily ritual of passing unconstitutional legislation.
The rallying cry of the party is: "If they can be taxed; tax them more. If they can't be taxed; give them money, then tax them. If it can't be manipulated into non existence, get rid of it. If it is fair; confound it. If it is unfair; make it law. If it is immoral; find another god."
HR 1068 Let Wall Street Pay for Wall Street's Bailout Act of 2009 (Introduced in House) This bill will tax everyone not responsible for Wall Street's Bailout Act of 2009. I thought the money was loaned to the Wall Street Companies involved with this meltdown. Loan generally means "to be paid back by the borrower."
Thanks goodness we are rolling into April Contracts. April Contracts hit 4.005 before rebounding, if that is what it is called, from support. It may be awhile befor we get long side agreement on the ST and MT and we are moving towards the warmer months. If the commodities markets ever find the bottom of the well, I will be watching this one since on the way down we held between $6.50 and $7.50 for quite some time.
If you think the unprecedented lows on Natural Gas contracts represent a commodity that is oversold, then keep it on your watchlist. It will not turn overnight, but i question if the speculation on deminished demand (and increased supply) hasn't pushed this to the brink. No need to guess on this, let the charts and nearby and forward contracts act as a guide into the next cycles.
As the stock markets continue to test new lows and the drop in the Dow weighs heavy on the minds of the investors, many currency traders will look to the safe haven of the US Dollar. Many stock traders will look to the safety of Gold. Bear Markets are traditionally good for Gold prices, but we had a disconnect from that trend as commodities tumbled with the global downturn of all the major economies. Now we are starting to see a reconnect of the relationship between risk aversion in the equities markets and a flight to gold. It seems just a matter of time before gold is once again testing $1000.00 per troy ounce.
Gold contracts can be a real roller coaster, so if you have not traded metals in relation to what is happening in the equity markets, watch the correlation for awhile, and paper trade.
What a difference in price action from a week ago. At that time, Grains looked like they were at areas of resistance and sure enough, they broke critical areas of support today. Look for more downside action in these markets as they attempted to limit down today. Any small bounce to the upside could be a shorting opportunity. For instance, Corn could see 305 as the next target.
Financials up big, but divergence set in, and we need a substantial push up tomorrow or there could be more downside action ahead. Look at the 10 Year Treasury's recent high (124 ’10.5) on 12Feb09. We exceeded it today, but with less buying strength.
No H&S on Gold’s Short Term chart as it appears to desire to test $1000/oz. The real problem is fear setting in the Eastern European FX market centering on Poland. A collapse of that nation’s currency (Zloty) and subsequent default on loans could rock Western Europe. Silver may be the better play, though.
Indices are testing lows set in October, 2008. Didn’t the DOW set an all time high in October, 2007? My, how time flies. There is no getting around the major sell off in these markets if the 2002 lows don’t hold. Time is on our side. If the sell off does happen, there will be time to react and take advantage of the down trend.
As I said last week, Crude Oil is going nowhere. Now, however, with a new (April) contract beginning $3.00+ higher than the expiring March contract, we get to start over with a new down trending contract. Look for a penetration of $33.00 to possibly $25/BBl.
Finally, Meats' limit down today...at least wasn’t lock limit. I don’t know if this is an exhaustion gap ending the down trend or a break away gap opening up a brand new move. Either way, it was awesome. Remember....F.A.S.T!
Grains: Corn, Soybeans, Wheat all trying to get some upside strength but at critical areas of resistance. They could easily retest the downside and set new lows.
Financials: Again, the major longer term trends are lower. Interest rates are higher and increasing the spread in yield as it should be. This could be bullish news for the economy as people can get a better rate of return on longer term notes and therefore be proned to save longer term and borrow shorter term.
Metals: Gold looks like it might be on the downhill slope of a Head & Shoulders pattern on the Day (ST) chart. The Silver charts do not have the same H&S pattern. The Weekly (Mid Term) chart in gold is losing strength and momentum and consolidating.
Indexes: The NASDAQ was today’s Chart of the Day as the Mid Term shows to be targeting a new high and possible breakout of the six week trading range. It is the strongest of the equities and up 5% this year.
Energy: Boy, look at Crude Oil go nowhere, while Natural Gas may be breaking to the upside (finally).
Meats: Feeders are moving as if the seasonal trends are kicking in. We will see.
Much to my surprise, Homework, the 5 minute “markets in review” TalkLive segment is becoming a recurring feature on the tail end of Market Wrap Up. This will allow viewers to search WTV Channel 4 for Market Wrap Up and only have to listen to the final section to find set ups for the next day.
Grains: Remarkably, these markets are acting as I had hoped with their down trends continuing to lower levels. I don’t think they will make new contract lows, but swing lows this week are on the horizon. The plan is to set up for a move to the upside in May Corn to $4.30. I will sell the March 360 put for 22 cents (4 cents if wrong) and buy a March 330 Put Option to absorb some loss against a long position. There won’t be much time value so it should be cheap ($100), and if corn heads further south, the next port of call is 330 – 320. I won’t buy the May call or the March put until I see a turn in the market.
The Meats are intriguing as I see the potential for the seasonal push up in prices beginning to unfold. Lean Hogs is the best set up now, but the limit up moves in Feeders yesterday compels me to think a break away movement is beginning in those markets.
Financials continue to sell off as China backs further away from irresponsible US economic policy. Higher rates must be used to attract investors. First come; first serve? Anyone?
Gold down $5.30??? Crude Oil up $0.70???
The further the pull back from the down trend in the Indexes, the bigger the drop will be. I want to be positive about the future of the economy; positive about the new Washington “transparent” leadership; positive about foreign relations with those who hate the US, but I feel like a kid whose mother is patting him on the head saying “It will be okay.” There isn’t any substance in the answer.
