Most recent Gold COT report showed:

Commercials increased long positions by 6440 to 95,161.
Commercials decreased short positions by 2952 to 177,763.

Large Spec decreased long positions by 1359 to 106,211.
Large Spec increased short positions by 5626 to 43,762.

Could the Large Spec shorts get squeezed soon?

KRY set to open higher.

I am going to lock in ST-profits in Goldminers. If you ask me the $Gold-chart does "not look good" for 2-4 weeks.

Regarding Bills coke example, i would be interested how many cokes i could buy for one ounce of Gold today and 50 years ago? Maybe somebody could calculate this? I am curious.

Is the SPY EVER going to go down?

I know, Bill ... this week could be the time. But I've never seen anything like this before. It's as if this market is so awash in printed money that the market has nowhere to go but up.

Jansing -

Have you seen the Economist's "big mac index". It's mostly used for comparisons of costs across countries. Don't know if they every published historical studies.

Jansing-

Interesting. Could you please share with us what it is "that does not look good" about the $Gold chart? Thanks.

MarkM,

it is mostly a gut feeling, i look at the chart and "tham" there it is (sounds serious, or?:)).

What exactly "looks no good", hm, there seems to establish a downtrend-line, short term, if you watch the lower highs you can draw (with a bigger pencil:) a downtrendline: start 9. August, over 6. September, 28. Sept. and today/tommorow could! be a new st-high. Could also be a break of this trend, granted. (Short term i mean 2-4 weeks)

Also most important to me, it just broke my middle Bollinger Band and reversed (so far today) so it punctuates the middle Bollinger and than normaly falls back to the lower band, which would give a target of 550, roughly.

Also RSIs (7,14) are higher today (65,52) as they were at the last st-high on 28. September (61,50), which is a negative convergence, as the price is currently lower than on the high of 28. September.

Also the miners gave a quick profit so far, why not take it off the table if you have it in a short period of time :), so maybe i am just rationalising my profit taking wish with this chart-looks-bad chatter......who really knows. I do not!

Jock,

i know this Index and surfed the web a bit, it seems, you would have been able to buy a lot more cokes 50 years ago for the same ounce of gold than you can today.

So Gold is cheap today! or? Maybe Coke is expensive :) I did not find easily a long term chart on Gold, seems there was the Gold standard until the 70ies and Gold was peeged to 50 Dollars, but i am not sure if this data is correct, some one else who really is into this Gold should know?

You can mint two thinks of this as i would state:

"Inflation adjusted, Gold is low today, so one should buy it!"
"Inflation adjusted, Gold is low today, so one should avoid it, as the real value of Gold will fade over time"

Up to you. I personaly do not buy an asset for the longer term, that does not generate interest in some form. And the "inflation hedge" does not seem to hold in my view. So i buy Gold only for my wife next time for christmas :)

Jansing-

Okay. Thanks for sharing your thoughts. Chart reads can be very subjective.

So, we sit here with our trades and watch indexes and assets being artifically traded to big round numbers (DOW 12000, Gold 600, Oil 60 etc...) .. is this the new baseline?

Everyone is bullish on 'Everything' again - is it all being reflated again?

I find this hard to believe - but will trade along with it.

I am on alert that one of these 'round numbers' proves to be some kind of resistance rather than support - after a possible fakeout/throwover.

Speaking of reflation - I don't buy into that -yet. To be sure the Fed added more money in the last few weeks than he has for a while - BUT I look more at the rate of change of money supply - not the gross amount. Alot of this M3 (hidden or otherwise) seems to just be going into some deep hole to shore up something - it hasn't trickled too much into assets - yet. In fact on Thu and Fri the Fed 'drained' money back out. So Ben is not too keen on Reflation yet - he needs to reserve that for when he REALLY needs it.

And boy - did the Bears ever get this recent market move wrong (including me to some extent with my $RUT short which failed). There is a recession in US Housing, US Autos and a slowdown in Consumer Discretionary IMO - but everything else is doing just fine - especially globally.
In fact the Semi results out of Asia are astounding. DRAM prices are rising.

I was wrong to keep thinking so much like the 90's - that the US consumer is the 'be all' and end all of the ecnonomy - the economy is too global now. Lesson Learned.

To be sure this rally has been force-fed by: managed expections, econ data thats greased and revised, organized short squeezes, goosing of the high priced DOW components with large block trades to change market sentiment as people see the DOW rising. It then fed on itself as Bearish and Hedged MM's chased it - and still are chasing it.
(btw IBM could decide shortly whether DOW 12000 holds - its an $87 stock - a $10 pop in it can take that DOW a long way.)

There is still a 'chance' for the bears yet: The US is putting on a 'military show of force' in the Persian Gulf at the end of this month supposedly. This could set up a good oil/gold trade - either way.

One thing that is puzzling though is the $20+billion Consumer spending in Sept - where did that come from? It can't be just savings on Gasoline. And the recent Fed H8 showed no new net Home Equity loans. So where did they get the money? I did notice that people pulled 10+billion from mutual funds though! So people are very hard up for cash. Now thats scary.

--

Short term I see no new setups and await earnings plays. Though I am beginning to think a lot of the 'options games' may have already occured last week.

... ok enough ramblings for now - just some trade ideas to ponder...

SPY perspective,

My plan is to scale into a short of 10% of the valued of my portfolio. This first 25% was shorted on Friday with 25% short increments added today, Tuesday and Wednesday.

This trade is difficult for me as I'm trying to fade a strong trend and breakout. The trade is also a time based trade and if the position is not profitable by 15 Nov 06, I'm gone.

Tradesman:

[One thing that is puzzling though is the $20+billion Consumer spending in Sept - where did that come from? It can't be just savings on Gasoline. And the recent Fed H8 showed no new net Home Equity loans. So where did they get the money? I did notice that people pulled 10+billion from mutual funds though! So people are very hard up for cash. Now thats scary.]

In three short weeks, September 13 thru October 4, "consumers" borrowed a total of $17.3 from home equity (Revolving home equity) according to the Fed H8, October 13 report.

Sept. 13: 447.0
Oct. 4: 464.3

That figure is over 65 percent annualized.

Add the $2.3 billion saved from gasoline and the $10 billion withdrawn from mutual funds and you could have quite a party. Well, they did.

http://www.federalreserve.gov/Releases/H8/Current/

JIM,

Please take a look in the footnote at the bottom of the H8.

The 17.3 Billion was NOT new Home Loan Equity. It was 17.5 Billion in revolving home equity loans ACQUIRED from a non chartered bank.

So actually the Home Equity Loan portion was DOWN 2 Billion - so people were NOT borrowing against their homes.

So I am still wondering where this spending money came from - is it bogus?? If so the government is pulling everyone's leg - and there will be a revision later.

Otherwise either
(a) people are liquidating assets to go to MacDonalds and Starbucks and shop at Target
or (b) they used what little savings they had and shopped for Christmas already???

----

Here's the footnote from the H8.

Notes on the Data

Large domestically chartered commercial banks acquired $97.7 billion in assets and liabilities of nonbank institutions in the week ending October 4, 2006. The major asset
items affected were (in billions): Treasury and Agency securities, investment account, mortgage-backed, $37.6; other securities, investment account, other, $1.4; commercial
and industrial loans, $3.1; real estate loans, REVOLVING HOME EQUITY, $17.5; real estate loans, other, other residential, $4.6; real estate loans, other, commercial, $14.0;
consumer loans, other, $3.1; lease financing receivables, $1.2; interbank loans, other, $2.3; cash assets, $2.1; and other assets, $9.9. The major liability items affected
were: transaction deposits: $2.0; nontransaction deposits, large time, $9.3; nontransaction deposits, other, $56.8; other liabilities, $20.1; and the residual (assets less
liabilities), $9.4. The memo items affected were: mortgage-backed securities, pass-through, $25.7 and mortgage-backed securities, CMO, REMIC, and other, $10.4.

Tradesman:
Thankyou for pointing that out.