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June 8, 2007
Cara’s Daily Commentary, Fri., June 8, 2007, 9:29 AM
Market Chat
There is nothing like a punch to the nose to knock you down, followed by a whiff of the smelling salts to re-focus the mind and get you back in the fight. So, let me apply some consciousness-raising analysis.
As I have been saying for many years, the capital markets are not a level playing field. In no other facet of society do we permit such blatant conflicts of interest. I speak of our problem where Humungous Bank & Broker has been permitted by legislation (the US Securities Act and Regulations, 1933, 1934) to act as all of principal, agent, advisor and regulator. In recent generations, the leaders of HB&B have even furthered their interests by (i) advising and directing the affairs of government, including the establishment of a concept known as the Plunge Protection Team (PPT), and (ii) created self-benefiting financial products like credit swaps and ETF’s.
Once upon a time in America, in 1929, there was a great market crash, followed by an economic period known as the Great Depression. What happened then was that the leading capitalists of the day pushed the legislators in Washington to enact the most abusive, egregious piece of legislation the free world has ever known – the Securities Act of 1933.
What happened at that time was precisely what is happening today in that there was a credit bubble (caused by debts to buy homes, cars and stocks) that ballooned to a point where speculation became so extreme that the capital markets became unstable. I lay those problems at the feet of the bankers, as I do today, and when the bubble burst on Black Tuesday October 29, 1929, those bankers lost their wealth and influence over the market. Ergo the legislation of 1933 and 1934, which was enacted to give bankers power to control the owners and managers of capital, their clients.
Is there a sea change in capital markets underway today? Yes, but not in the way most people think when they look at red arrows popping up all over computer monitors. That is a temporary, and fleeting phenomenon, which will be shortly resolved by even higher prices of stocks and bonds.
The sea change underway today is the collective understanding and assessment by the owners and managers of capital that for almost 75 years their market has been hijacked by bankers and they have lost many, many trillions of dollars as a direct result. Even government, as atrocious as the management performance has been over the years, cannot come close to the theft of our wealth by bankers and their Friends & Family.
Just like 1929, we are headed toward a “Financial Armageddon” precisely as described by Wall Street-savvy Michael Panzner in his 2007 book by that name. For 75 years, the clock has been ticking; I don’t think we have ten years left to avoid another Black Tuesday (Oct. 29, 1929).
I am writing this today because I believe the equity and debt markets will soon recover this recent piece of nastiness that followed a crack in the Shanghai stock market to begin the week, just like what happened a couple months ago.
I sat back and looked at what’s happened to put the stock market into the position it’s in today. Almost five weeks ago, at the end of the week, the yields on the US Treasury 30, 10, 5 and 2 year debt instruments were 4.79, 4.62, 4.53, and 4.65 pct. Today they are 5.06, 4.95, 4.91 and 4.93 pct.
That shock to the US bond market is being attributed to inflation fears. But five weeks ago, the Commodity Index ($CRB) closed the week at 311.24, and yesterday it was 313.92, which is hardly earth-shattering. At the same time $GOLD has moved from 689.70 DOWN to 665.20. Crude Oil ($WTIC) has moved up from 61.93 to 66.93, but there has been an escalation of exogenous military and weather events that has aided that increase. Moreover, the US economic data has not recently registered any Richter Scale readings on the inflation front.
So, there is nothing about inflation that I can see in the past five weeks to cause bond yields to rally and prices to fall to such an extent.
In addition, following the significant breakdown in US stock prices yesterday, there was no panic in the Asia-Pacific markets, and Europe this morning is weak but not overly so at this point.
I think that what happened in the past two months was “Paulson’s Pride” at work. US Treasury Secretary Hank Paulson and Fed Chairman Prof. Bernanke seemed to be over the top in their enthusiasm for the economic stability and growth of the US, and consequently bond prices were excessively strong on any basis of true risk measurement. I believe the circumstances were being engineered in order to help Friends & Family within Humungous Private Equity Corp (people like ex-Treasury Sec John Snow) gather the capital they needed to acquire management control over worthy assets.
That process is one I have attributed to as being among the reasons many hundreds of millions of dollars are being spent by politicians seeking jobs paying very few hundreds of thousands of dollars. It’s not about the money, stupid; it’s the power to manage (ie, to plan, organize, direct and control). We The People are now seeing these people in action, and consequently we are being directed to turn our wealth into their wealth.
Look at the Exchange Traded Fund (ETF) phenomenon for example. These were designed and managed by HB&B. Just like the Administration has instruments like the Bully Pulpit, the Strategic Petroleum Fund, and the supposed Gold in Ft. Knox, to dangle, HB&B has its own tricks, like margin requirements, so-called research reports, proprietary trading funds, knowledge of the client order flow, ETF’s, and many other tools to keep them in profits.
The Country ETF’s has been an interesting phenomenon I picked up on in recent weeks. I noted that the prices of these ETF’s was moving quite differently than the index levels of the international stock exchanges the ETF’s were supposed to be emulating. I believe the public was being led, just like they are when margin requirements are suddenly changed in various markets like the futures and metals exchanges, and when HB&B shifts huge holdings of precious metals.
But more on that another time; the issue comes down to a single thing, which is the power to manage.
Five weeks ago, when I wrote Week In Review (WIR #22) on May 5, of the ten ETF’s I monitor, 9 were up. The prior four weeks, the winners were 7 and 3, ten and zero, eight one and one, and ten and zero. The Relative Strength Index analysis I do (RSI-7 period; monthly, weekly and daily) showed excessively over-bought stocks. My assessment was continuous in that I was writing about Private Equity deals and rumors of deals, and that the market was rising not by a world supply of liquidity but by expansion of credit that bankers could rein in whenever they wanted, causing our asset prices to fall, but the debts to them still remaining.
So, this situation is a banker thing, and not being in the room when these market interventions are being decided, I cannot say with any conviction that prices are likely to go down or recover at this point. I do know that through its various means, HB&B has as much control over so-called free capital markets as say the once-mighty Soviet Empire had over a third of a billion people or the Executive Committee of the Communist Party of the People’s Republic of China has over twenty percent of the global population.
What we can do before Financial Armageddon inevitably strikes is to watch prices. We can continue to buy them when they are low and sell them when they are high based on relative historical performance and trading patterns. We can stick to trading the shares of quality corporations and buying risk-adjusted high-performance fixed income securities if that is our need.
We do not have to listen to the random noise that permeates the market place today, having our chain jerked from day to day. If we use preventative measures like put and call option strategies and stop orders, we ought to let a trending market (ie, extreme moves up or down as the case may be) take care of our decisions. That takes a little knowledge and much discipline.
Other than writing about these things, I cannot do more.
Yesterday, most traders seem fixated on the Dow 30, but while the DJIA dropped a serious -199 points, it was the Transports (DJTA -2.4 pct) and the Dow Utilities (DJUA -3.3 pct) that were the greater concern.
Many fixed income traders were upset by a warning given by Bill Gross, known as the Bond King because he manages the largest pool of bond capital in the US. Gross says that the 25 year Bond Bull is dead. About a year ago he opined on international TV (wherever he could get coverage) that bond traders ought to love that 4.50 pct yield on the US 10-year Treasury Note.
But, now that the yield has moved to about 5.00 pct, causing bond holders immense grief and capital losses, the man opines that the yield will likely move to 6.5 pct within the next five years. Well, Mr Gross, we are already one third there. Unfortunately, I think your pronouncements are not consistent with your title of “Bond King” and that you have fallen into the mix I call “random noise”.
The problem with markets today is that traders are looking for answers from others. The only solution is going to come from within.
Economics Calendar and Reports
Economic calendar from Econoday
Econoday prior week's international economic report.
Global Equity Markets Review
The US market is roiled. In some other countries, tempers are flaring. But, I believe the markets will calm down, or to be more correct, I believe the markets will be calmed down by HB&B. For now.
I know that yesterday morning I wrote that traders ought to be worried if the end of the day market orders were most sells, and at yesterday’s close they were, but I need another day to see whether traders are going to start throwing away positions in good quality companies. I will re-assess this opinion on the weekend.
US Equity Markets Review
NASDAQ Composite (interactive) chart
Here’s the closing data of the Asia-Pacific equity markets.. Trading was mostly negative today. But the losses evidenced no panic.
Here’s the chart of the Shanghai equity market.. Shanghai further consolidated following the huge loss on Monday.
Here’s the latest session data for the bourses of Europe. The sell-off is nowhere near as bad as various HB&B strategists are saying. I think it’s time to consider just whom these strategists are working for.
Bonds & Yields Review
Here is the T-Bond chart.
Bond prices dropped again yesterday. The T-Bond closed at 107.03125, down from 108.375.
Forex Review
Here is the $USD chart at the close of the prior session.
The $USD (at 8:04am ET) is at 82.775, up from 82.077 yesterday at about this time. The market gained strength once again just at 3:00am ET, which must be the time the US FOMC accounts start trading in London.
Commodities Review
The $CRB softened Wednesday to 313.46, from 313.66 Wednesday, and 315.63 Monday as yields/rates continued to rally. But the move is nothing to shout about, and is certainly nothing to evidence rising inflation that the headlines these days are screaming.
Here is the $CRB Index chart.
Oil Review
At 8:38am ET this morning, the e-MiNY Jul-07 contract for Crude Oil was 66.250, up from 66.125 yesterday at about this time. That is not much of a move.
Here is the e-miNY July-07 Crude Oil chart.
Interactive Chart of Daily Crude Oil:
Interactive Chart of Weekly Crude Oil:
Here is the $WTIC Crude Oil chart.
Gold & Precious Metals Review
Spot gold at 8:41am ET today is 656.08, down sharply yesterday at mid-day and again over night, both times as the $USD got juiced. It was 669.90 at about 7:00am ET yesterday. It opened at 660.58 today, but, after the $USD spiked higher in recent hours again, Spot gold dropped quickly again.
Traders are waiting for the interventionists to stop pumping the $USD. This is like a spring being coiled; the next major move in gold and the other precious metals will be a slingshot to former cycle highs. Traders are biding their time. They are not being fooled by c.banker sell-offs, LME margin requirement changes, and the like.
Here is the Recent Spot Gold chart.
At 8:47am ET this morning, the Spot silver (AG) was 13.32, down from 13.63 and 13.66 at this time the previous two days.
The two big moves this week have been spikes linked to moves higher in the $USD. There is no fundamentally sound reason for the $USD to be spiking higher at this point.
Here is the Recent Spot Silver chart.
This morning at 8:50am ET, Spot platinum is at 1285, down from 1296 yesterday at this time, and from 1290 on Wednesday, which is not a lot. Look at the spike upward yesterday morning right before the interventionists went to work by driving the $USD higher, punching a hole in the PM enthusiasm.
But traders know what’s happening here. They believe the free market will overcome these moves by policy makers and their friends at HB&B. And, fundamentally, there is all the reasons in the book for PM to lift here.
Here is the Recent Spot Platinum chart.
Palladium is at 365, same as yesterday, and quite flat all week. There is no need to panic here.
Here is the Recent Spot Palladium chart.
Precious Metals Stocks Review
$XAU plunged yesterday, closing at 134.50, down -3.38 pct from 140.45 the previous day.
With the ETF’s today, it is rather easy to hammer this market, but in retrospect, the goldminers are making good profits, and new resources are not being discovered or brought into production as fast as reserves are depleting. The price of gold and hence the goldminers will rise in the long term.
As I have written, “The long base pattern for the goldminers, stretching back to the beginning of 2006 is a powerful one, like a spring coil ready to pop. I would feel more confident when $XAU moves into the 144 level. As you can see on the Weekly chart, once $XAU rises above the 150-155 level, there is little to stop this index from rallying to the long cycle high of 171.71 that was set in May 2006.”
Here are the Daily and Weekly Data charts of the indexes, courtesy of StockCharts.com:
Interactive Chart of Daily U.S. Goldminers Index:
Interactive Chart of Weekly U.S. Goldminers Index:
The U.S. goldminer share trust ETF trades under the ticker symbol GDX.
The Toronto Exchange-listed goldminer iUnits S&P/TSX Capped Gold Index ETF trades under the ticker symbol TSE:XGD.
Here are the Daily and Weekly data charts for the TSX Goldshares (XGD) index:
Interactive Chart of XGD Daily data:
Interactive Chart of XGD Weekly data:
To watch the moves in precious metal miners, you will have to monitor the individual stock charts, preferably in real-time, as follows:
ABX NEM GG GFI KGC AU HMY AUY BVN
Interactive Daily data
Interactive Weekly data
MDG LIHRY AEM BGO IAG EGO RGLD GOLD CDE GRS
Interactive Daily data
Interactive Weekly data
CBJ SSRI SIL NG KRY UXG GRZ TSE_HRG TSE_GUY TSE_AGI
Interactive Daily data
Interactive Weekly data
NXG GSS MNG DROOY MFN RNO RANGY MRB CLG
Interactive Daily data
Interactive Weekly data
Here are the key Silver miners and the SLV ETF:
SLV SIL CDE HL PAAS SSRI SLW MGN
Interactive Daily data
Interactive Weekly data
The Cara Global 100 Stockwatch
This data is supplied every day by the folks at KNOBIAS, Inc.
Here are the previous session’s Cara 100 gainers. Interactive charts of the top 12 Watch List gainers. Actually, today we have only 3 out of 100 to look at! That shows a lot of panic.
And do you know what we say when sellers panic? Look for the whites of their eyes before using your ammo. Let the market come to you.
Now that’s a good tactic for day traders. For long-term oriented conservative traders, it must be a difficult time. I believe that asset allocation must remain high in cash as I have been saying all through the piece, and that commodity price-sensitive producers are still the best place to be.
Here are the previous session’s Cara 100 losers. Interactive charts of the top 12 Watch List losers. Things are tough when the 25th biggest loser has taken a hit of -2.9 pct on the day. Yes, it can get worse, but the question to ask yourself is why change strategies and tactics at this point.
Here are the Cara 100 stocks that hit 52-week intra-day highs or lows in the previous session. Not too many.
Here are the Cara 100 stocks that had extreme volume changes in the previous session. This is a good list to watch anytime markets start trending in the extreme. It pays to watch the price and volume extremes. That btw is called Money Flow.
Here is the current Relative Strength Index (RSI) analysis of the Cara 100 company stocks
Here, from “Chris”, are the interactive charts of up to a dozen stocks with (unsmoothed) RSI-7 above 70 and below 30: There are now just 2 with RSI-7 >70 and 28 <30. That is an extreme over-sold condition and the condition for a possible rebound rally. Do you recall a couple weeks ago when there were 30 > 70 and zero under 30, when I said that was an extremely over-bought market?
“Chris” takes this data from BillCara2.com, which is not smoothed like David’s data (from Worden). I may have an opportunity to introduce a Wilder Smoother to this data in upcoming months.
Here, from “David”, are the stocks in the Cara 100 trading with the highest and lowest Daily RSI-7 sorted by (i) daily and (ii) monthly values, for the previous session.
Here are the stocks in the Cara 100 trading with highest RSI-7 with Monthly-Weekly-Daily all either >70 or <30. RSI-7 is the calculation of seven periods (of the monthly, weekly, or daily data series) of whatever time-frame is under consideration.
Some of these stcks (all Cara 100 companies) are way oversold in the short-term. Maybe they are on the way further down, but if you want to sell, you have to learn how to sell into strength (and buy into weakness). If you haven’t yet managed to learn that discipline, I am afraid you will not become a successful trader.
Short-term traders (swing traders as opposed to day traders) primarily use the Daily data series only to calculate technical indicators like RSI, MACD, STO etc.
Intermediate-term traders (those who like to be long say from 3 months to about a year) use a combination of Weekly and Daily.
Long-term traders (typically capital managers of $1 billion and up, who may be invested in core positions for over ten years or more, but who make adjustments to their portfolios say once every one to three years) tend to use a combination of Monthly, Weekly and Daily.
Since I know the chat here is mostly day trading (where the trading signal calculations are made on the basis of Daily and Hourly and 5-minute time series data, some of which I temporarily no longer have available at BillCara2.com), but that the majority of you in the Cara Community are conservative long-term traders, I principally use the M-W-D based trading signals.
An Accumulation Zone alert is issued when M-W-D RSI-7 drops below 30. A Buy alert is issued when the Daily RSI-7 subsequently rises back over 30. Prior to buying, I refer to other indicators such as MACD and STO. I also note the similar performance of the stock price and volume data for the peer group of the company, and to a lesser extend the entire industry group, sector and broad market.
Similarly, a Distribution Zone alert is issued when M-W-D RSI-7 rises above 70. A Sell alert is issued when the Daily RSI-7 subsequently falls back below 70. Prior to selling, I refer to other indicators such as MACD and STO. I also note the similar performance of the stock price and volume data for the peer group of the company, and to a lesser extend the entire industry group, sector and broad market.
In other words, selling is the mirror image of buying.
Early in a new Bull market, I will set the 30-70 RSI-7 levels to a higher range, such as 35-75 or 40-80. In an extended Bull market, I will set the 30-70 RSI-7 levels to a different range, such as 25-75 or maybe 20-70.
I will explain these Buy/Sell concepts as well as the C100 Stock Picking concepts in detail in a second and third book I intend to publish late this year.
The bottom line is that all traders need a systematic approach or trading discipline that includes some degree of flexibility. In other words there is both art and science involved in trading for success.
Now, I want to add a teaching lesson. Do you recall a couple weeks ago when I said that traders have to watch the M-W-D RSI-7 start to break down. The Sell alerts were coming at the very top of the cycle as the Daily RSI-7 on these stocks was dropping below 70. There were many of them.
Most of you were ignoring them. Unfortunately. That would have been a good time to start taking something off the table in those stocks, or at the very least to put on some puts to protect your gains.
Here are the stocks in the Cara 100 trading with RSI-7 Daily all >70 or all <30
Notes
There are various sources for up/down grades by broker-dealers. One is at Briefing.com. Traders ought to check everyday for ratings changes. That website is updated later in the morning.
Here are the Cara 100 stocks that had upgrades or downgrades most recently.
Community Chat
As the Chinese like to say at the point of life’s greatest challenges, “We live in interesting times”.
Btw, I didn’t add anything on South America Copper & Gold yet. I will. The stock has a floor of 4 cents. Forget the low price and the high number of shares out. The only consideration in that respect is market cap. Maybe they should roll back the stock a bit, but that would (i) cost money the company does not have, and (ii) cut most of the shareholder base to less than a board lot, which I don’t think is a wise thing until sometime later after the company has reported some good results and had a chance to speak to the old shareholders.
ADDENDUM: On the first upload today, I forgot to reset the charts template, and so the wrong charts were shown. A couple minutes later, I made the fix. It seems I have been getting too many calls from too many important people, which is immensely distracting. I either have to stop taking these calls entirely (those times I am blogging) or quit blogging. Obviously I cannot do justice to both.
Have a great day. Sorry for the delays and the mistakes. But I happen to be a one-man show, and it shows. :-)
Posted by Posted by Bill Cara on June 8, 2007 09:29:56 AM | Category: Cara's Daily Commentary
Discourse
Looks like I may be about to get my buying oppty in KRY today
Posted by: shark_attack ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
June 8, 2007 10:09 AM [link]
Oh, noes! Bill Gross is selling his STAMP COLLECTION!
Posted by: Fred at
June 8, 2007 10:11 AM [link]
Kry continued weakness, I got stopped at a small loss, this baby seems like it's going down more.
Posted by: shark_attack at
June 8, 2007 10:27 AM [link]
GFI is looking a lot like a buy here...
Posted by: chas at
June 8, 2007 10:32 AM [link]
Got my finger on the trigger but I want to see the whites of the Gold bears' eyes
Posted by: chas at
June 8, 2007 10:35 AM [link]
You're killing me Fred! LOL!
Everyone: Relax and develop some ice for your veins. I'm up to liquid nitrogen now.
Days like yesterday and today are when I shop for little tidbits on sale. Added to GRS below $13, and SLW is loooking decent here, although it could come to me with a ten handle so I have some bullets left for it.
I bought into the teeth of EWZ yesterday and this pop is good now. Also traded QID, DOG and SDS but had the feeling we would have a morning jump, but beware the pump and dump today.
I doubt seriously this selling is over.
I'm also shopping for Mom and Dad's retirement accounts looking at big div payers with stable future incomes like some of the dry shippers and income/limited partner trusts, mostly oil, on sale.
BMD has been holding up well 2nd. Seems like this is near the floor. Some miners making a show here, but near the recent lows (where I bought).
Be careful out there!
THANK YOU BILL.
Posted by: Craig at
June 8, 2007 10:36 AM [link]
I second that THANK YOU to Bill. This in NO way, shape. or form, whatesoever, looks like a "one-man show."
Posted by: writersblock at
June 8, 2007 10:40 AM [link]
kaimu or others - know why copper fox (CUU.v or cpfxf) is halted? Says pending news - maybe TCK?
Posted by: rob d at
June 8, 2007 10:46 AM [link]
2nd ave...to ride this one out or not...becomes for me.."to be or not to be."
fwiw, some my internal processing, may sound familiar to some...though, I hope not.
wednesday by internet went down most of the day. a perfect storm of sorts. on that morning I would have jumped to the side lines with many positions...better safe than sorry...harsh downtrends can be horrific...kind of like the game chicken..better flinch because one of these times it will be for real. But when my internet connection finally worked I became stubborn and held on. Some positions closed on their own due to stops. Still not as much cash as I would have liked. This morning I raised more cash...up to 26%. All pm miners un touched. I try to distract myself with exercise, nature, reading. Without rules that we can actually apply through the course of crisis and bountiful times I think that we can really make ourselves unhealthy. Problem is I keep fudging the rules and probably need a few more tools in my pocket..perhaps like Bill mentions...options. I'm really having to face whether or not I'm up to the job. I learn best with face to face apprenticeship and that is not easily found. Personally, looking forward to when Bill gets set up in the Bahamas.
Meanshwile, tempted to buy...pgj/china etf holding up, never got stopped out. wow....and iwo/small growth has lower volatility and bouncing well...and why not capture some of that downtrend with gdx/gold miner...technically shows positive divergence with rsi. No, I'm gonna be happy with my new allocation to more cash..or am I?
Posted by: jasper at
June 8, 2007 10:46 AM [link]
My guess on Copper Fox is a financing or buyout - the former more likely.
Posted by: moab at
June 8, 2007 10:49 AM [link]
Craig,
The colours are awesome down here. I'm going deeper. Still buying.
Fred
Posted by: Fred at
June 8, 2007 10:51 AM [link]
optionoracle:
Thanks for the visit yesterday. Less is better, until you really have something to share. I’ve made $ on RGLD in the past plus they are one of the few in the gold game paying a regular dividend (if you hold long) and my thinking was along the same line as you. Seems like there has been an upgrade on RoyalGOLD lately to boot.
Used the risky pre-market play and caught the opening gap down, landing a few shares under $25 this morning and fishing at a greater depth as this is written.. ‘Tis’ the season once again, reminding me of early yesteryear’s summer.
Posted by: C.Note at
June 8, 2007 10:58 AM [link]
Looks like the early enthusiasm is fading and we are headed for another -100 day.
Gold looking really bad.
Posted by: JogyP at
June 8, 2007 11:03 AM [link]
GLD is getting hammered here... sudden drop in the past few minutes.
Posted by: Fazeli at
June 8, 2007 11:04 AM [link]
Careful Fred, narcosis can be a problem at these depths! Vivid red colours are the first warning!
I'm still shopping for steals.
UXG is getting harpooned.
Miners acting decent.
Beware the pump and dump later. I don't trust this AM push.
Posted by: Craig at
June 8, 2007 11:05 AM [link]
The chart on Khan Resources (KRI) is one of the ugliest I've ridden in a while. What happened to this market darling? Long KRI, but don't know why now.
Fred
Posted by: Fred at
June 8, 2007 11:10 AM [link]
Gold and Silver really getting beaten up here. Might be a buying opportunity.
Good news! The dips are still being bought. Bad news! Just not in the stocks I own! :-)
Posted by: writersblock at
June 8, 2007 11:22 AM [link]
GFI has gotten hammered the last few days. It is coming to us fast and furious.
Posted by: moab at
June 8, 2007 11:23 AM [link]
Appears gold buyers are showing up by the looks of GLD. UXG still diving.
No panic yet except a hair with gold earlier. I'm waiting. Like I said, I'm up to liquid nitrogen. If I screw up I'm gonna shatter!
Posted by: Craig at
June 8, 2007 11:24 AM [link]
tom sheepngoat,
Sorry I didn't get back to you yesterday, if you check, GROW did pop after another head fake today!
Interestly, another bull flag formed in the 5-min chart, but, I think it's done for now. I suspect some entity had accumulate some 300 thousands shares in the past few days and got a nice meal serve on a gold platter! Kudos to Bill for his constant remarks on watching the tape!!! Charts sometimes tell you squat while the underline price actions tell you volumes!!!
Anyway, I still see it is range bound between 22.5x to 24.8. By going out a limb here I would say that the bottom(short term!) is 22.1x. If the S&P hold its ground above 147x and gold doesn't close below 548, it may give a nice upside surprise.
I would rebuild my position sometimes next Monday or early Tuesday, all depends on how the broad market tells.
As an aside, of all the miners I track, I like the charts of KGC, GG, and AUY the most.
Posted by: 8heir at
June 8, 2007 11:27 AM [link]
jasper,
to be or not to be? glad you're maintaining a sense of humor...stop fudging the rules and make sure you're fully positioned to capitalize on things when the market turn around...
Posted by: 2nd_ave at
June 8, 2007 11:28 AM [link]
NZDJPY showing strength today as it went above 92, now around 91.85. Carry trade on as strong as ever. (Waiting for FXY to come to me this summer.)
USD up vs. other currencies except CAD and AUS explaining weakness in PM, but the recent drop in gold and silver looks overdone to me. Gross going on CNBC for more talk may also influence temporarily.
GS (tell) currently up.
Posted by: Seamus at
June 8, 2007 11:33 AM [link]
the nice thing about articial shakeouts is it clears the way for more fundamental moves...btw, where's the correlation between the broad market and gold today?
Posted by: 2nd_ave at
June 8, 2007 11:35 AM [link]
Took a 1/3 position in GFI at 15.68. Will be buying at 15.50 and 15.25 if it continues to go lower. Otherwise holding to see what gold does.
Posted by: chas at
June 8, 2007 11:48 AM [link]
Recalling Bill’s suggestions from a few months back; writing he’d be a buyer of GFI if under $16 .. Well, with latest union bargaining and labor casualties, opportunity presents itself once again for South Africa’s #2 miner and this guy pays dividends also.
Posted by: C.Note at
June 8, 2007 11:50 AM [link]
Re: Interest rates and housing.
We now see clearly that Bernanke really has no discretion to lower rates. We also know that housing cannot be transferred from the weak hands back into the strong without interest rates giving a helping hand.
After World War II The greatest transfer of land from the few to the many occurred and unfolded across decades of short sighted prosperity. Now the recent home purchaser has been left holding a multi-generational doo-doo bag of excesses and as Kaimu would suggest, bad central economic policy. Now the controls are out of our hands, the die is being cast across oceans and languages. Even areas once firmly contolled by us (latin America) are totally out of control.
The final thing will be, after the death of the "working" consumer economy and housing will be a transfer, historic in its proportions, of real property back into the hands of the few.
Chris
Posted by: shark_attack at
June 8, 2007 11:51 AM [link]
Hello all,
How Low will gold go??
Smelling salts: When placed in water, it is called "aromatic spirits of ammonia."
I have chosen to seek the aroma of The Spirit and will go into the silence of meditation for awhile now. Got no ice in my veins and I refuse to let fear run me over.
Peace of mind is my goal. May you all be blessed with peace and calm today.
Posted by: moneygenie at
June 8, 2007 11:54 AM [link]
This blog's junk filter has trapped 14 comments in the past week. Three were repeats. I just allowed the other 11 to get published, without looking at them. I just assume now that the filter is the problem.
If, as and when I get an assistant, I shall have this filter looked at and changed. Sorry.
Posted by: Bill Cara at
June 8, 2007 11:58 AM [link]
Maybe some astute readers can help me out. Tout TV seems to be celebrating dollar strength, which seems counterintuitive as this puts a headwind to US equities.
Maybe they think that this would favor a rate cut (because the dollar isn't in 'danger')
If one accepts the premise that Ben Bernanke is the greatest DEFLATION FIGHTER of our time, then he must act to prevent the liquidity contraction associated with rate rises from ending his grand experiment.
As for the poor schmucks whose ARMS reset (and the housing/CDO markets), too bad for them?
Also, I know of no broad market that has ever failed to retreat to the 200 day average. "This time it's different." Not.
Posted by: Ron at
June 8, 2007 12:04 PM [link]
Bill,
Thank you for updating the Addendum.
I was feeling a little bit sad and small when I read it the first time. It's funny how written words can come to mean things we might never intend.
But maybe it's just me: I'm having a little bit of a bad day (non-marketwise) and maybe I'm a little bit sensitive. Thanks again for clarifying.
(Please don't be a one man show! We don't want you to burn out!)
Regards all, and I hope you are all handling the red arrows OK. On days like today I feel a little bit better about not having as many assets to worry about as you all do. I'm also watching the silver price drop at Sunshine so I can pick up some more physical metal. There's my 'silver lining' to this red arrow day.
Mike
NYC
Posted by: MikeNYC at
June 8, 2007 12:10 PM [link]
GFI -
A weekly chart shows that an ascending GFI peaked around 15.50 five times from the 1st half of 2002 and late 2005. Only then did it rise well above that level, and hasn't touched down there since.
So, if charts mean anything, approx. 15.50 should now serve as "support"..
Chris Gafney pitch hitting in Everbank's Daily Phennig today:
"Gold fell again in London and is heading for the biggest weekly drop in three months. Apparently gold fell victim to the same equity selling that impacted the currency markets. As I mentioned above, much of the money invested into the equity markets has been leveraged. With the long sell off in these equity markets, investors have been forced to sell gold to fund their margin calls. But declines will likely be limited as physical buyers take advantage of the falling prices.
India, the world's largest buyer of gold, has increased its purchases of gold over the past few days."
Posted by: Seamus at
June 8, 2007 12:13 PM [link]
Ron, I hope my readers find their way to your site. I very much appreciate your contributions here, and consider you a friend and one of the best resources among us.
Posted by: Bill Cara at
June 8, 2007 12:13 PM [link]
Bill,
You are far too kind, but I do appreciate being considered a friend. I used to work at Bethesda Naval Hospital in Washington...and you know the old saying, "if you want a friend in Washington...get a dog."
The fellowship of skeptics runs deeply.
Posted by: Ron at
June 8, 2007 12:22 PM [link]
FYI - a sign that political scandals will likely get significantly worse:
http://www.talkingpointsmemo.com/archives/014531.php
American crisis of confidence is coming.
Posted by: moab at
June 8, 2007 12:36 PM [link]
A multi year chart of GFI would show good support around 15.50, just under to 15.25 or so.
52 wk low is 15.63 so it's a buy around here.
Not that good a chance of it going below multiyear support.
Posted by: Craig at
June 8, 2007 12:36 PM [link]
gfi,
fwiw, i sold mine last week...fundamentals came out with cost of getting gold much higher...bill posted some news about this
second ave...
i'd load up port, piece of cake, if i knew where the bottom is....this market, it seems to me has confounded the techies with its stealth moves upward...inches up in a fashion that keeps those risk averse away...then when it looks like a break out, maybe yes, maybe no....the higher new entry creats much more risk. the market so far favors the highly diversified buy hold allocator or the nimble routinely selling into strength and buying at the 20dma...with dam the torpedoes attitude. A one stop shop etf:PIV...a value line strategy is at 8%ytd, now..down from 12% high.
Posted by: jasper at
June 8, 2007 12:47 PM [link]
Into KGC 12.50 calls, extreme leverage - either way.
Also accumulating DBA, this should not be affected by market meltdown.
Posted by: SiO2 at
June 8, 2007 1:00 PM [link]
I'm seeing standoffs in most of my micro-cap PM stocks since today. No one willing to buy and no one willing to sell. Gaps are bigger than usual. I'm all in.
Posted by: Fred at
June 8, 2007 1:03 PM [link]
Videofrom the WSJ: Bill Gates urges Harvard's graduating class to fight the world's inequities.
Fighting for social equity. It's about time.
Posted by: Bill Cara at
June 8, 2007 1:04 PM [link]
Miners are getting their butts kicked here, and I'm lost some faith... seems like all they can do is keep falling, since every 2-3 day rise results in 3-5 days of losses that take the stocks ever lower!
The fundamentals of gold may be in place, but whether it's manipulation, exuberance in other sectors, or what have you, the miners have been dogs for quite a while for anyone but day traders (which is NOT me). With the next momentous upwards move, I'm going to cut back PM miners severely, and buy some more bullion for exposure.
Posted by: Fazeli at
June 8, 2007 1:08 PM [link]
I wonder what the smart guys at JP Morgan must be feeling now.
1)Bought $770 million worth of GOLD
2)Upgraded GoldCorp from Neutral to Overweight
3)Came out with $2000 price target for Gold
Gold Bull Says Rally's Done (I hope not)
http://tinyurl.com/2zkdvu
Most of my loosers are doing good today (IBKR,INFY, MRVL)
GFI: I bought too early (17, 16.50), planning to hold.
KRY: Plan to buy more below 4
Posted by: JogyP at
June 8, 2007 1:12 PM [link]
8heir:
Thanks for the heads-up on GROW and your follow-up today. I actually did take a (alas) small position yesterday. I had to get in quick before all the greedy people did. :) So I did catch the pop.
I've never entirely taken my eye off GROW, so my rapid buy wasn't quite so reckless as it might at first appear.
Posted by: tom sheepngoats at
June 8, 2007 1:23 PM [link]
There it is again—now in the NYT--Strategic Pork Reserves.
“The commerce ministry has raised the possibility of distributing pork from China’s strategic pork reserves.”
Factoid: "China’s 1.3 billion people eat more than 92 billion pounds of pork a year — a fifth of a pound a day for every man, woman and child."
Food inflation: Long SFD, SEB (illiquid)
Will be back later, have to run to the airport.
Posted by: Seamus at
June 8, 2007 1:36 PM [link]
Looks like the bulls found a "miracle" balm with a Friday rumor on U.S. Steel. How not to like a midday $10 bump to reignite the buying...
JML
Posted by: Jumble at
June 8, 2007 1:47 PM [link]
This has the look and feel of a dead cat bounce. After 3 days of losses one would have expected some type of spike up. Monday and Tuesday will be more telling.
IM - I agree. Esp if we see selling into the close that wipes out some of the bounce, after people cogitate on it over the weekend Monday the selling could resume. The PTB will try like hell to keep the gains intact though, and avoid that psychological breakdown. I'm sure they'll spin whatever happens into something positive. If selling resumes, it will be a "healthy correction". If buying resumes it will be "nothing fazes this market!".
Posted by: GTT at
June 8, 2007 2:50 PM [link]
Yes, reminiscent of the last pullback.
Still haven't plumbed the depths on PM's and miners, even though it's almost as painful.
It's a general sell off, the PM's and miners are holding fine. No where near $630 yet.
As we all freak out it's good to think about our positions in the big picture. Either the world econ takes off and demand goes higher AND the dollar shrinks by comparison to other fiat currencies, or the world economy doesn't go higher and rates get cut to increase liquidity and all currencies shrink vs gold.
Either way we wait for the world to come to us.
One takes longer, that's all. Faster to have the rest of the world go and the US lag or TYT rates elevate until a rate cut. Heck, if TYT rates keep running it will happen sooner not later as TYT rates will euthanize this market for us at some point. Either way Ben will cut.
Posted by: Craig at
June 8, 2007 2:57 PM [link]
Seamus - Regarding that "pork shortage in China", we are very fortunate to live here in the US. Our Congress is forever showering "pork barrels" of the stuff all over the Country - LOL.
Posted by: spot at
June 8, 2007 2:59 PM [link]
Re the Cara Global 100, I replaced Autodesk (ADSK) with Genentech (DNA). I had a problem with executive compensation and some other management issues with Autodesk, so I removed it. Like Research In Motion (RIM/RIMM), I will remove an otherwise successful and generally highly-regarded public company from my Cara 100 lists when I see issues of that sort.
Tomorrow, Jock will try to do his first Impulse Report on the Cara Global 100.
Over the next several months, I will be creating a series of ten Cara 100's, including High Income, Speculative, Micro-cap, ETF, US 100, Americas 100, Europe 100, Asia-Pacific 100 and Emerging Markets 100 in addition to the Cara Global 100.
I have been building the resources in the background to help me with this project. Karl, who has taken on project leadership of the volunteer-based Micro-cap 100 will also do the same with the Speculative 100 aka the Penny Dreadful 100 (but where I think punters have a fair shot).
The Micro-cap 100 and High Income 100 will be the first two full lists to follow. These will form a (low-cost) premium monthly report, but I will focus my writing in the free blog on these issues.
Posted by: Bill Cara at
June 8, 2007 3:00 PM [link]
So in China, PPT is the "Pork Protection Team".
Seamus thanks for SFD. I am also building a portfolio of high protein food producers. I have a list of 10 so far, but no dd done. They have all done very well, and thus are expensive right now.
Posted by: SiO2 at
June 8, 2007 3:09 PM [link]
MikeNYC,
I just got back from being outdoors. It's a beautiful day in Manhattan; if you can, why don't you take yourself out for a walk. I bet you'll feel better.
Posted by: GemmaStar at
June 8, 2007 3:13 PM [link]
I posted it 2 days, ago, reposting, in case anyone missed it:
IBKR:
-June 13 will be 40 days after the IPO.
We could see upgrades from underwriters HSBC, Sandler O'Neill and W.R. Hambrecht
-Valuation looking more attractive with the recent move up in AMTD and ETFC.
Posted by: JogyP at
June 8, 2007 3:27 PM [link]
gettin' ready to nibble at the KRY cheese....there's no logic behind this, the attraction's purely prurient.
This morning I bought too early and went running away like Patsy Parisi.....
Posted by: shark_attack at
June 8, 2007 3:33 PM [link]
Thanks Gemmastar. I'll enjoy a nice walk in Central Park after work, up to the 110 st. stop to get my train. This weekend will be beautiful and a little cooler, in the 80's. I'll miss the flocks of geese Bill gets to enjoy, but I'll be outside as much as possible, tune up my mtn bike, spend time by the river. Gotta clear my head of this cubicle fuzz.
A little clarity will help me focus on my Cara Micro100 assignments. :-)
Regards,
Mike
NYC
Posted by: MikeNYC at
June 8, 2007 3:39 PM [link]
I've been completely out of bonds last 6mo. Now taking some long position in IEF if anything for a dead cat bounce.
Posted by: occam_razor at
June 8, 2007 3:51 PM [link]
speaking of Cara Micro100 assignments, we should put a due date on it...or has one been assigned?
Posted by: sergio at
June 8, 2007 3:51 PM [link]
so yesterday gold sells off with the market, today it sells off against the market..it goes its own way, i think it's all to the good, as i am leaning towards seeing it rise either way..sometimes i enjoy feeling the full impact of a decline so that i'm reminded that i "worked" at some point for the gains, as opposed to just being in the right place at the right time..
Posted by: 2nd_ave at
June 8, 2007 3:57 PM [link]
Sergio, I was wondering the same thing.
Posted by: MikeNYC at
June 8, 2007 4:00 PM [link]
Last hour of trading (on top of the rumor bump from X) shows the usual bullish pattern (actually more so than for the past two Fridays): Dow +50 (1/3 of day gains), Naz +8 (1/4) and S&P +6 (more than 1/3).
I am starting to feel that Bill's prediction of a 1000 pts down day in the near future may be the inevitable event that will resolve this speculative free-money bull run.
JML
Posted by: Jumble at
June 8, 2007 4:11 PM [link]
markm...still waiting?
Posted by: 2nd_ave at
June 8, 2007 4:15 PM [link]
sergio, re due dates for the Cara Micro-cap 100, Karl has a big task in co-ordinating so many people and so many companies. As someone else has said, it's a little like herding cats. But Karl is doing great job. Now I am putting onto him the next project as well (Cara Speculative 100).
Once we get rolling, with all facets of a complex system working efficiently, you will see how I like to operate. I try to do the work of ten people. Now I'm trying to get 100 people to do the work of 1000 people at zero cost. HB&B cannot hope to compete, which is my little way of contributing to social equity.
Posted by: Bill Cara at
June 8, 2007 4:17 PM [link]
Another great market outlook by (What else?), Donald Luskin:
....
Right now the stock market is correcting not only because it's due for a correction, but because the prospect of no rate cuts is alarming to some investors who imagined that an easy Federal Reserve would be the key to higher stock prices. But that's the wrong way to think about this, and that's why this move down in stocks is going to be nothing more than a correction.
The economy is reaccelerating sharply. Obviously we don't need lower rates. No problem for stocks there. Stocks will quickly recover and make new highs....
full text:
http://www.smartmoney.com/aheadofthecurve/index.cfm?story=20070608
:-|
Also looking for mid-sized fertilizer companies that don't have RSIs up in the clouds, like POT or HF on the TSX (POT monthly is 94ish).
Suggestions welcome. Thanks.
Posted by: SiO2 at
June 8, 2007 4:33 PM [link]
Let's drop the Luskin stuff, please.
Can anybody send us what Tom McManus of Banc of America Securities is saying. He is somebody on Wall Street that I respect a lot.
Posted by: Bill Cara at
June 8, 2007 4:36 PM [link]
Is "Bullion' the screen name used by Don Luskin?
Posted by: JogyP at
June 8, 2007 4:38 PM [link]
ah ah, touché ...
Ok I promise not to mention Donald Luskin again...
Nice to come back and see PMs recover somewhat.
Si02—Chinese PPT—that’s a good one! LOL
I also have an agriculture watch list that includes some protein food producers. I’m looking at this as global food inflation at this point.
Lelik—good thing you didn’t bet (yet) on the yen carry trade unwind. Pull up the five day interactive chart NZDJPY=X on yahoo and look at that NZD strength today closing at 92.937.
I second Bill’s endorsement of www.ronsen.blogspot.com as a great resource.
Posted by: Seamus at
June 8, 2007 4:47 PM [link]
ALOHA !!
Thanks BILL for your accurate take on the HB&B saga and their parasitic place at the top of the "fiat money" pyramid! It could not be any more obvious yet Wall Street keeps pretending its a "fair and balanced" casino and will point you to the "SEC" and the "SIPC" and the "FDIC" as proof you are "protected" and this is no VEGAS baby-y-y!! The media will perpetuate the wealth transfer ...
For M3 we are closing in on $12trillionUSD with a 11.7% annual rate of change. That apparently has no impact on a AAA credit rating ...
M3 Link: http://www.nowandfutures.com/key_stats.html
Oh yeah ... thats why ... officially M3 does not exist any more!!
I believe the US Dollar will have a long drawn out rally through the Summer, which will bring some great buying dips for all things "precious"!! I believe either the FED or foreign US "debt" holders will raise rates slightly before the end of the Summer creating the fuel for a US Dollar rally then the FED will have to officially cut later in the year to revive the stock and real estate market. I have seven(7) figures in cash waiting for such "defined" events!
Except for my IPO this Summer of the Hedge REIT I will not be buying any real estate dips any time soon!
I still own my junior explorers and have no intention to sell. Even after the recent HUI and POG down days overall my exclusive junior explorer portfolio is currently up 32% as of today!
Long oil, pm and farmland ...
Posted by: kaimu at
June 8, 2007 4:50 PM [link]
Si02
Fertilizers (other than POT) in my agriculture watch list: TRA, MOS, TNH & SQM
Fertilizers have been on a tear and do sport high RSIs as you mentioned. No positions at this time, but regularly review for opportunity
Posted by: Seamus at
June 8, 2007 4:52 PM [link]
Thx Seamus.
Posted by: SiO2 at
June 8, 2007 5:27 PM [link]
That's dated Sept. 06 Bullion.
Seamus: I track the ferts as well. They sure are showing strength here they didn't in previous corrections. Popularity/overbuying has a way of doing that.
Still, hard to fight that tape and the global demand for food.
George has it in his head to kill us with inflation of ex-inflation expenses like food, shelter, fuel and taxes. He kills at least two birds with one ethanol stone, maybe more in the longrun.
Has anyone here thought about dispensing ethanol and who does that? All those gas pumps need retrofitting or new pumps because ethanol is corrosive and the old petrol pumps weren't designed fot it. You might look at Danaher. They are hard to nail down with many seemingly unrelated companies, but they own a couple prominant gas pump manufacturers, grow at a healthy pace and show decent price stability in times like this.
Posted by: Craig at
June 8, 2007 5:58 PM [link]
Bill,
I know that WGI was a junior miner you had high hopes for, but I also had to take your advice about selling a company when it no longer feels good for you. I recently received the Annual Report package and concluded that this is a company with a history of losing money and seems to be doing little to satisfy their investors. Frankly, I was intimidated bt the 80 page AR, the large supplementary documents, the Form 10-QSB and the tax advisory telling me everything I had to do before the fall because of a pending re-organization. It seems to me that bean-counters and lawyers are running this company, not miners. Also, buried back in page 71-72 of the AR was the disclosure that recently 20 million shares were sold to insiders and their relatives at 30 cents a share, and another 7,450,000 shares were optioned at 38 cents for senior management. These were exerciseable almost immediately. The bottom line is that I sold my position on Wednesday.
Posted by: TerryC at
June 8, 2007 7:41 PM [link]
TerryC,
This is not unique to WGI. There is a proliferation of non-brokered private placements with attached warrants at favourable prices and large stock option issues for senior management issued by all of the junior PMs. I've also noticed them handing out options as part of the payment to suppliers such as public relations consultants. Supposedly this is good practice because options don't cost the business anything. Frankly, as a shareholder, it makes me feel like I have overpaid for my shares to subsidize theirs. It makes me feel like a second class citizen in their community, which I guess I am. The warrants can also create a stickiness to the upside at the exercise price. I'm not defending WGI, just saying that unfortunately their practice seems to be the norm and as small shareholders we factor it our the risk/reward equation and we lump it or leave it.
Fred
Posted by: Fred at
June 8, 2007 9:26 PM [link]
A friend of mind just sent me this link.
S&P/TSX* Global Mining Index goes live.
JUNE 8, 2007 (Toronto, ON) – TSX Group Inc. announces the launch of the S&P/TSX Global Mining Index on Tuesday June 12, 2007. Created with Standard and Poor’s – the leading global provider of independent research, ratings and indices – the Index will offer investors wide exposure to the world’s mining markets by providing an investable representative index of publicly traded international mining companies.
http://tinyurl.com/2oee8k
And here are the gold stocks in this new index
http://tinyurl.com/2o2ucc
Bill any thoughts on what this will mean for the collective group? Will there def be Index Funds that follow these basket of stocks and thus more buying?
Posted by: NYUgrad at
June 8, 2007 10:27 PM [link]
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"Traders are waiting for the interventionists to stop pumping the $USD. This is like a spring being coiled; the next major move in gold and the other precious metals will be a slingshot to former cycle highs. Traders are biding their time."
If long gold, it's the "biding your time" part where your work is cut out for you...hang in there...if the down drafts bother you, there must be a million other things you could be doing..i get psychic reward watching prices go up..when they trend down, i have a list of other enjoyable activities..life is short, have some faith..
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at
June 8, 2007 10:03 AM [link]