QE is the only option to extricate Europe temporarily from its acute state of crisis. If this happens as expected we can also expect them to continue further QE's because no one wants to be the man or woman known for implementing policies that will cause the world to spiral into a deep economic depression. So they will kick the can down the road as many times as they can ultimately leading to hyperinflation over the next ten years. This is the main reason why I am so bullish on PM's at their current depressed levels, in addition to which the COTs are strongly bullish too, as they show that Smart Money (Commercials) is thinking there will be QE coming very some perhaps as early as June 20th.

A very important low in the big commercial bank net short position along with the dramatic reversal Friday favors a big move in Silver and Gold am still maintaining stops beneath the September, December and current lows, which coincide and that is no coincidence I might add. so what will it mean if silver does actually break to new lows I am not sure but looking at the ratio chart above a new low would probably be a head fake.  Remember the game is to get the little guy out at the lows, reduce shorts as much as they can and pile in as cheaply as they can.so if I do get stopped out i'd be ready  to jump back in if silver then breaks back above the breakdown point. 

The Buzz Is Growing That World Leaders Will Fire Off A Globally Coordinated Bazooka

As we noted last week, analysts have been tittering over a new potential policy response to risks associated with a global slowdown—most particularly the crisis in Europe.

World leaders are worried, as evidenced by the conference call between G7 finance ministers and central bankers this morning. And with fears about bank runs in Spain escalating, some analysts expect some kind of coordinated central bank action similar to that which we saw announced last November to lower dollar swap rates between banking systems.

Read more: http://www.businessinsider.com/what-are-the-odds-of-a-global-coordinated-intervention-2012-6#ixzz1x4FpPqXo

Obviously the jobs report came in significantly below the forecast. Because these numbers are mostly make-believe anyway I won't go into them in-depth. The number of jobs BLS wants us to believe were created in May was 69,000 vs. the expectation of 150,000. Even more troubling was the big downward revision in April. But what really should be people upsetting people is the treasury bond market. The yield on the 10-yr Treasury is at a record all-time low and the yield on the 30-yr Treasury  is below it's lowest point during the Lehman crisis. That's is a huge sign post I feel people in the media are either not seeing or purposely not talking about.

Essentially what this means is that all liquidity is being sucked out of the global financial engine and it's going into Treasuries and precious metals. I suspect today's big move in both reflects the expectation that we may get a heavy dose of QE3 in some form - likely not an obvious, overt form - at the June FOMC meeting. Uncle Ben will do his best to inject as much money into the system but disguise it in a way that the public will accept as nothing more than some temporary line of credit.

Recent breakdown was on heavy volume if you look at all the major sector ETFs they also sold off on heavy volume, it appears as if we are headed for the 200 week moving average which is the grand daddy of them all if that breaks look out. On the daily chart we can see the double white line that correspond to strong support on or around the 200 wk ma. The VIX broke out and it will probably top out in the 40's by the time Big Ben announces printing presses are ready to roll. 

after horrendous jobs report



interesting read:

Jamie Dimon And The Fall Of Nations

Posted on May 31, 2012 by Simon Johnson | 25 Comments

By Simon Johnson

 http://baselinescenario.com/2012/05/31/jamie-dimon-and-the-fall-of-nations/

 Market indicators mixed MSI bottoming and the MO with room to fall.

dollar is breaking out MACD is at the high point smelling a short term reversal at least 81 and change Euro still has a ways to go my previous target was 120

 Gold and silver both look like they are going to break down still at strong support and the MACD trying to turn positive. I don't see how with out any announcement of QE it will move upwards, even though the money supply.

Print Print Baby

I have written ad nauseum about the hopeless economic mess that we find ourselves. We all know about the ballooning debt and the derivative mess caused by opportunistic and irresponsible bankers. However they were not acting alone, they acted under the direct knowledge and support of our federal government and other governments around the world. We are is such big trouble the mess is so huge that its is bringing the world economy to a standstill and his own verge of collapse.

So now these very same banks, bankers, financial sector companies are on the hook for massive losses for  these derivatives that they created which  made them huge profits in what we can call a pyramid type scheme. For this reason and only this reason, under the auspices of this “too big to fail doctrine” so to speak. A saying created during the during the 2008 financial crisis, central banks globally are in the process of manufacturing or printing money which will essentially get all the banks in the financial institutions off the hook. They will get away Scott free, and as usual the average citizen will suffer, as we will all live in a super inflationary environment.  

And so I may sound critical, but I'm not. I don't think anyone has a solution for this gigantic mess. I am only critical of how we got here. I am critical of the failure of our president and our politicians to not protect our citizens by NOT putting the people responsible for this mess in jail. Where is the justice they speak of? They put a guy who has there priors for selling nickel bags or less sometimes in jail for 25 years. The guys who steal billions of dollars from ordinary people and pretty much put the entire world economy on its knees, they get a bailout and huge x-mas bonus, WOW. It's so ridiculous to think that this is actually happening and they are gonna get away with it.

Okay that's enough complaining. What should be done to protect ourselves and how can we make money in this environment. I firmly believe that soft commodities, there are many AG commodity ETF’s that are great for this purpose, simple basket is DBA where you get enough exposure. Then you have specific Ag plays, I think sugar, cocoa are good, oil (USO), and in physical metals (not ETF’s GLD or SLV). Stocks across the board especially tech will also move higher but their value of the paper will do erode overtime due to inflation.

I will put up some charts later today. Happy Monday 

PM's set to breakout

CLICK ON THE CHART TO ENLARGE

CLICK ON THE CHART TO ENLARGE

This Rally Has Got Legs

Legs

In my Sunday post i had mentioned there maybe a rally coming to wall street but I didnt expect this massive gap up, crushed all my shorts to break even to a little up. And I think there were powerful events that occurred last week and over the weekend, where the ECB took the reigns from Germany, they are now dug in deep and fighting for survival, there is way too much at stake not only for them, but for the US as well.  

So that is why I am longer pessimistic on stocks and commodities, basically the ECB is taking over Europe, Germany has been summarily Bi&*h slapped.

So the feeling is that we are in "risk on mode", and the ECB is going to hyperinflate their way out of this mess, thats why you saw oil, silver and gold as well as other commodities jump yesterday on excellent volume, obviously there was a lot of short covering but there is real buying. Click the link below, excellent article, talks about what happened and where we are going from here. It is by Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously an editor for the Wall Street Journal.

Oh and by the way after the bell, Fitch reiterated the US AAA credit rating but changed the outlook from stable to negative and this has done nothing to upset the markets, so we know this rally has legs!

http://beforeitsnews.com/story/1427/016/NL/

Santa Clause Rally Coming To Town?

So a few days ago we went short and that has paid of handsomely as we have had seven straight down days. The hourly charts show an oversold condition (MACD and RSI are in oversold territory) but the daily chart MACD is nowhere close to bottoming, RSI is getting oversold, however there is no panic indicated by a VIX that for me needs to get in the mid forties before I get excited, so I think there will be a bounce but no change in trend. And again we need to respect the news, if there is more bad news out of Europe the selling will continue despite the oversold conditions.

 Note the bottoming RSI and MACD, these are more sensitive than specific, but it should give you a heads up that the selling needs a breather or seller exhaustion. 

Could we just fall to the bottom of this channel (1100) only 50 points away from my target, would just be too easy, note the RSI just above 30 beow is oversold and the MACD is not even close. 

 Multiple tops on the ADX, heading to its lower end of sideways channel, again RSI just above 30.

 Oscillator is just about the low end of its range, signaling we are almost at a point where we get a reprieve from selling.

 Significant reversal in investor bullishness in energy, from 90 to 23 also supports reversal. As well as financials but not as drastic.

So here is the strategy: 

Cover half of the short positions on Monday regardless of the futures or news. Close rest of positions if we have a close higher than a previous close on the SPX.

Watch the market rally, back to levels indicated and then re-initiate shorts. 

Caveat: NEWS

Now to my EUR/USD short

The dollar looks to break out and the euro is breaking down, also see USD/JPY as that trend is reversing. If the euro hold up it could rally to 138, right now its signaling it may just fall off the cliff.

Finally take a look at Citi as a example for big banks because all the charts of GS, JPM look similar:

So we have a nice set up for a reversal, looking forward to this coming week. 

Short-Term Reprieve From Selling?

So we have had four days of selling with out significant volume but investor confidence has been shaken but not enough to cause panic selling. I think there is still much complacency regarding the turmoil at home and abroad as the media continues to dumb down the public. My general observation is that people are very matter of fact about the situation. Euro-zone is on the brink of collapse and this failed German Bond auction is a SIGNIFICANT event that has gotten little or no attention. It show extreme lack of confidence in resolving euromess. Some people feel this will cause the ECB to start printing money. Mike Pento, "It is either assent to printing trillions of Euros or watch the Eurozone crumble into the dustbin of history".

You would think that with all this selling that there would be more fear, but the VIX though elevated in term of historical price has not reached the fear of the August through September period. We would have to see it rise dramatically before calling a bottom is this new range what I think will form.

Now lets look at the charts that show investor confidence or bullishness:

These four charts show that over the last 5 days or so bullishness is starting to come down but still way to high. The only conflict I note in the charts is that the RSI has entered oversold in most cases while the MACD is still at the upper range. We must remember that things can stay overbought or over sold for long periods of time so we don't want to jump back in to early. In this case with all the uncertainty out there I prefer to be late than early and would like to see price and MACD at the bottom end of the range, always keeping in mind Quantitative Easing and US intervention into Europe's banking system trumps all charting.

This next few charts show the S&P 500 and some key indicators:

As I have mentioned in earlier posts the S&P 50 has violated supported and is clearly headed to 1100, the ADX or advance decline line has not reached its 5 year support level, the MSI is not giving an oversold signal and has further to fall, the only contradicting signal is being given by the McClellan Oscillator.

Now lets look at Banks, Oil, Gold and Silver:

The banks are in real trouble at home and abroad, and if the governments do not intervene a cascade of events, ones like we have ever seen will take place making 2008 meltdown look like a bad night at the craps table. The Germans are beginning to or for all intense and purposes turned their back on the eurozone and with their bond yeilds climbing, meaning their borrowing costs are rising, how can they loan PIIGS et al money. Its just a matter of time before the Euro fails. And we should care not only as investors but as concerned citizens. Paul Krugman a Nobel Prize winning economist has been quoted as saying "the ECB could be in the process of destroying not just the euro, but the world".

Oil has held up very well due to rumors of Iran being attacked by Israel, but now that too is started to roll over, and from this point has the farthest to fall.

Here is the 5 year monthly Gold chart that reveals a possible double top which will be most assuredly confirmed this month as you can see an inverted hammer printed. This would lead me to believe we are entering a deflationary environment much like 08, that could accelerate to something far worse given the scenarios play out as I have previously spoken about. 

Silver is in big trouble, its floundering like a wounded animal and the only thing that will save it money printing and that ain't happening even though there  people out there that contend there will be a QE3 and more but when and how long can you hold is the question. For those that have been stacking the metals, they are not worried about the fluctuations because the fundamentals will win out in the end. But right now we are on the roller coaster on the way down and it doesn't feel good.

The dollar looks like its going to breakout and the euro looks like "impending doom".


FXY looks like its done going up: I'll leave the reasons for this major reversal in the yen to economists. The strong yen is heavy burden for Japanese exporters, and Japan's government debt has swollen to nearly twice its gross domestic product, but neither has deterred the yen's ascent until recently. The charts showing a shift to a weaker yen suggest capital could start exiting, magnifying the currency's decline.

In addition, a clear weakening of the yen could ignite the so-called carry trade, in which traders borrow yen to buy assets with higher return potential elsewhere. That borrowing of yen effectively is a short sale of the currency, which could further add to the pressure on it.

I'm keeping an eye on this development as these trends when they reverse in currencies lasts for months at a time. There are leveraged inverse ETF's to take advantage of this. 

Assessment and Strategy: Short Euro, Short equities (banks and energy), Long PM's.

Caveat: If there is a QE announcement out of Europe or US then cover all shorts immeadiately regardless of the technicals.