Follow the Money, Global Quantitative Easing Already Exists

Global quantitative easing, QE3 behind the curtain, is alive and kicking. How doe we know that? Just follow the money. European banks buy US Treasuries. Treasuries, in turn, are used as collateral at the ECB to buy the various low-yield repos offered by the ECB. Soaring money supply figures confirms not only its existence but also growing financial strain since 2010.

Chart: M2 Year-over-Year Change (M212LN) and Gold, London P.M. Fixed (Gold)


Headline: Greece Private Creditors to Meet in Paris Tomorrow on Debt Swap

Feb. 8 (Bloomberg) -- Greece's private creditors plan to meet in Paris tomorrow to discuss a debt-swap deal that's contingent on the country securing a second aid package from European and international officials, Institute of International Finance spokesman Frank Vogl said.

The IIF is holding the meeting to go over technical matters so that if an accord between Greece and the so-called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, is reached, the debt swap could be implemented quickly, said two people familiar with the matter who declined to be identified because talks are private.

Private creditors are still prepared to accept an average coupon as low as 3.6 percent on new 30-year bonds in the exchange, said one of the people, who declined to be identified. While the framework of the swap and many of the details have been agreed upon, the deal can't be completed until the government agrees on the terms with domestic political parties and the troika on the second financing package, the person said.

Source: businessweek.com

Era of Falling Food Prices Comes to End as World Population Adds 2 Billion

The era of falling food prices ended a long time ago. We'll likely test the upper blue and green trading bands fast than the world expects once the current correction runs its course.

Chart: CRBFoodstuffs And Year-over-Year (YOY) Change


Headline: Era of Falling Food Prices Comes to End as World Population Adds 2 Billion

The era of falling food prices has come to an end with the world population set to add another 2 billion people, according to Cargill Inc., the U.S. farm commodities trader.

The United Nations’ Food and Agriculture Organization has said global food output must rise 70 percent by 2050 to feed a world population expected to grow to 9 billion from 7 billion now and as increasingly wealthy consumers in developing economies eat more meat. Food prices tracked by the FAO climbed to the highest ever a year ago on surging grain prices.

“You don’t have to be a reviving bull on commodities to believe that the era, which went from the 50’s, 60’s to 70’s and early 80s, of ever decreasing food prices in real terms has probably come to an end,” Paul Conway, vice chairman of Cargill, said at the Kingsman sugar conference in Dubai yesterday. The conference is continuing through tomorrow when Jacob Robbins, managing director of global sweeteners at The Coca-Cola Co., are among the scheduled speakers.

The FAO food-price index averaged 228 points last year, 23 percent more than in 2010 and above the 200 points recorded in 2008, when food riots erupted from Haiti to Egypt. Prices since then have declined 11 percent by December.

Source: bloomberg.com

Divergence Foreshadow Trend Changes

Divergences between price and price to volatility ratios usually foreshadow trend inflections. For example, when new highs are not confirmed by new highs in the price to volatility ratio, it suggests a marginal change in the risk profile of the rally. Chart 1 reveals this type of setup unfolding in the NASDAQ composite. The NASDAQ’s recent surge to new highs has yet to be confirmed by the price to volatility ratio. Negative divergences setup preceded the major declines of 2006 and 2007.

Divergences can also be positive. When price established new lows in March of 2009, the price to volatility ratio failed to confirm it. The positive divergence foreshadowed the widely unexpected bottom of 2009.

Chart 1: NASDAQ Composite and Price to Volatility Ratio

The Leading Formula Should Lead The Sovereign Debt Crisis

Technical weakness in the leading formula, an derivative of Jim's Formula, will likely foreshadow another step down in the sovereign debt crisis. For example, a break of the 2010 up trend and 2011 swing low would represent significant warnings shots for investors.

Chart: Federal Taxes Withheld (TW) Less Total Government Outlays (TO) As A % of GDP, 12 Month Moving Average "The Leading Formula"

Creating Bag Holders In Copper

Copper prices jump on improving labor market and factory orders? The largely “manufactured” labor report was good and copper prices rose. Therefore, the labor report must have caused copper prices to rise. I love the simplicity of one-dimensional thinking and the trading opportunities it creates.

“Cause and effect” headlines are often used to transfer ownership from commercial traders (the invisible hand) to retail money (the sheeple). I have discussed many times how the invisible hand (commercial traders) slowly accumulated copper during the sharp decline of 2011. I also suggested that the accumulation, like that of 2008 decline, would likely follow a 1-2 count. The chart below illustrates this outcome.

The accumulation phase has given way to what Richard Wyckoff characterizes as a mark-up phase. The mark up phase was trigger by the first technical signal (TAS1) after 1-2 commercial accumulation. Traders tend to understand mark-up phases as markets climbing the wall of worry until the buying panic.

Emotional interpretations of market phases, however, are notoriously difficult to recognize real-time. That is why I drive out the emotion and recognize trend phases as mathematical money flow setups. I view mark-up phases the slow accumulation and distribution by retail and commercial traders while the market climbs the wall of worry. The mark-up phase ends when invisible hand has quietly repositioned the sheeple to the short side. The process of repositioning which I’ve personally dubbed as creating the bag holders tends to follow a 1-2 count.

Chart: Copper (JJC) And Copper Diffusion Index (DI)


Headline: Copper prices jump on improving US jobs market, factory orders; other commodities are mixed

Copper prices jumped 3.2 percent Friday after a sharp improvement in the U.S. job market and higher factory orders raised hopes for stronger demand.

The move ended an erratic week of small price losses and gains for the industrial metal as investors looked for clues about what’s ahead for the global economy in a slew of economic reports from several countries. Copper can be an indicator of economic health because it is used in a wide range of products from consumer electronics to pipes and wires.

The government said 243,000 jobs were added in January across a broad array of industries. Manufacturing alone added 50,000 jobs, the most in a year. January’s unemployment rate dropped to 8.3 percent and factory orders rose 1.1 percent in December.

Separately, a trade group said service companies grew at the fastest pace in 11 months in January as companies hired workers to keep up with demand.

Source: washingtonpost.com

Ellis Martin Report with Jim Sinclair "Consolidate Your Holdings and Save Your Money"

Consolidate Your Holdings and Save Your Money. Good advice.



Jim,

Liquidity while it will become the means to misdirect the approaching end (more like transition) for the old status quo is a deceptive monster that can dominate public perception. I listened to your comments about government statistics. You're right, it's far better to ignore them not so much because the numbers are manipulated from month to month but rather structural biased as a result of calculation changes over time. Seasonal adjustments, data reclassification and computer estimates of job creation off the tradition job grid (apparently a lot of new companies are springing up in garages around the country...ha!) has the public swimming in pool of economic euphoria. That is, anyone that's not currently looking for a job. That number is growing quietly every day. Until reality TV finds “Unemployed Overworked American Workers” more sexy than “Rich Housewives of Big City USA,” it's hard to envision the message will be strong enough to breach pop culture's protective shell.

Eric

Those with extra funds should follow the money in gold, silver, and certain markets such as the Canadian dollar "Loonie". The invisible hand was buying the loonie's decline in October 2011. I recall being questioned as a bit looney tunes for suggesting it.

FXC will pick up speed when it close above 104.5 on a technical sign of strength.

Chart: Canadian Dollar (FXC) And Canadian Dollar Diffusion Index (DI)

Euro Climbing The Wall of Worry

Chart 1 reveals that commercial traders (the invisible hand) have been accumulating aggressively while the headlines and nonreportable traders (retail money) sell fear. This money flow pattern is a classic bullish setup.

Chart 1: Euro and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


The Euro having broken its primary downtrend in January is climbing the headline sponsored wall of worry. A break of the neckline with a sign of strength will confirm a minimum move to 137. This setup is shown in chart 2.

Chart 2: Euro ETF (FXE)


A sign of strength in the Euro will give gold and silver fledgling up trend an added boost.