Official and Unofficial Liquidity Injections Translate Into Gold & Silver Accumulation

While money concentration tends to follow price, it can be associated with nearly every type of market action. Most often, particularly in gold and silver, money flows concentrate as price advances and declines. For example, commercial trader accumulation (long buying and short covering) and retail distribution (long selling and short selling) tends to occur as price declines. There are exceptions. Strong markets can display slow concentration during sideways chop or what Jim has described as accordion chop. Strong market, such as intensive silver buying in early 2011, can force commercial buying and short covering into strength; this condition is highly rare and illustrates extreme strain of control.

Fundamental trigger can be official or unofficial. Strong hands are accumulating gold and silver because large sums of unofficial liquidity (such as loan and currency swaps) entering the global financial system. Any official QE announcement, while perhaps surprising the public, would be little more than further public omission of an ongoing problem.

Hi Mr. De Groot,

In your latest article "Silver from investment darling to pariah" it says in the end "(6) Unfortunately, the cycle of panic, already predicted by long-term cycles, will return with even greater intensive." Does that suggest that the correction in Silver may not be complete yet?

Also, the chart Silver London P.M Fixed and the Silver Concentration Index (CI) was very interesting. Will you update that chart on your blog once there is a "earthquake before the price eruption"?

In order for Silver to take off do you think there has to be a fundamental trigger first? For example that the Fed or the ECB announces more QE at a meeting?

Kind regards,

Thomas

Silver From Investment Darling to Pariah

The downside blowout of lease spreads reflects the invisible hand borrowing silver to ignite the cycle of panic in silver. Notice how the negative lease spreads compress as price declines (falls down the elevator shaft).

Real Silver Lease Rates (1-Month LIBOR less 1-Month SOFO) and London PM Fixed Silver Price


The price of silver bottoms when ex ante shorts (accumulated before the price collapse) have been reversed. Silver’s concentration index quantifies this money flow into an easy-to-read signal. I refer to these signals as earthquakes before the eruption.

Silver London P.M Fixed and the Silver Concentration Index (CI)


Silver's sharp decline and transition from investment darling to pariah means that when the earthquake (signal) comes it will be largely ignored.

The Cycle of Panic In Gold

The cycle of panic in gold is also known as ass whopping cycle is describe as follows:

(1) “Money” positions ahead of the downside move. Commercial traders pile on their short positions (see red arrow),

Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Long & Short As A % of Open Interest


The quiet reposition of funds on the futures and options market, similar to 2008, collapses the gold's DI.

Gold London P.M Fixed and Gold Diffusion Index (DI)


Lease spreads explode to the downside as the invisible hand borrows central bank gold to initiate the paper decline. Notice how the negative lease spreads compress towards positive as price falls.

Real Gold Lease Rates (1-Month LIBOR less 1-Month GOFO) and Gold Price, USD


(2) Once the fuse is light, the unbiased media pounds the negative gold message. This scares the hell out of retail money and forces the black box trading programs to barf paper. The rush to be the first to jump from the elevator before it crashes to the basement floor begins.

(3) The paper barf includes the Gold ETF. The selling follows a distinctive 1-2-(3) pattern. A 0% reading within the second count represents extreme selling and widespread panic. The savvy players not worried about being labeled a jackass for buying, start nibbling into the panic. If a three count materializes, they're the only ones buying in size.

London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic


(4) A complete washout of gold is done when commercial short positions have been exhausted. That is, when the giant blue circle is filled on the downside.

Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Long & Short As A % of Open Interest


(5) At this stage of the trade, anyone talking positive about gold is either completely ignored or hated.

(6) Unfortunately, the cycle of panic, already predicted by long-term cycles, will return with even greater intensive.

Same Old Song and Dance

Every down-tick in paper gold has been matched by short covering and long buying. The 2011-12 footprint looks eerily similar to 2006 and 2008 (very similar).

Chart 1: Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Long & Short As A % of Open Interest


Perhaps, the late December weakness will trigger clusters of signals.

Chart 2: Gold London P.M Fixed and Concentration Index (CI): 1 = Bullish Setup, -1 = Bearish Setup


2011 bullish setup while strong still has yet to match 2008's severe "gold panic." Today's strong, light volume decline (surprise surprise) pushes 2011's D-wave decline towards the extreme.

Chart 3: Gold London P.M Fixed and Gold Diffusion Index (DI)


While 2012 will be filled with clusters of statistically rare concentrations and bullish setups, it's unlikely many will notice and/or act on them.

Some quick thoughts about today's so called safe haven US Dollar rally. Today is the last trading day for Physical purchases in the December contracts in both Silver and Gold. Talk about a fireside sale eh? .... The shenanigans have lasted longer than anyone had thought, but nothing has changed in regards to debt... Everyone I know who owns a house, has lost value in their purchases, very little debt is being cleared up on the personal levels because jobs are hard to find and keep. The understanding people are gaining regarding the Federal Reserve and it’s overworked “currency printing devaluing mechanism” is completely opposite of what is happening in the precious metals market these last few weeks. This activity can’t last much longer because the physical purchasing has picked up dramatically, I should know, I the alchemist who converts paper in Gold .... Stay Strong!!

JB Slear
Fort Wealth Trading Co LLC.
www.FortWealth.com

Don't risk what you cannot afford to lose....

Who's Paying Attention to Silver? Hardly Anyone

How many investors/traders left silver for dead at $9.98/oz on 10/21/08? Let's call a spade a spade and say a lot. Many investors, following the behavioral footsteps of previous fear-induced price declines, are proclaiming silver dead as 2012 approaches. The silver bear crowd, emboldened by size and sway of group think, is growing by the day.

Yet natural selection often suggests that size is not necessary essential for survival. Investors able to stand away from the crowd at least have the potential to see the invisible hand aggressively covering short and increasing long positions into price weakness. Net long positions as a percentage of open interest (NL%OI), -14.08% as of 12/21/11, is only 73 basis points lower than 2008 D-wave cycle low.

While history does not repeat, it certainly rhymes. Who’s paying attention? Let’s call a spade a spade and say hardly anyone. That works for me.

Trade With Brain, Not Emotions - It Ain't Gonna Happen

The vast majority of investors, traders and John Q. Public trade predominantly with their emotions rather than brain. 15+ years of trading and market experience has taught me that regardless the number of self-help seminars, books, and free Internet content that readers think is the next "big score" to the path of easy money this behavior will not change. Enhanced marketing timing of secular trends through mathematical analysis works largely because humans will always buy greed and sell fear.

For example, fear of the unknown, claims that the "bull is dead" without demonstrative proof, motivates investors to sell silver or gold as price falls down the elevator shaft. While fear rules, it masks the reality that the invisible hand, largely controlled, is working quietly to reposition for the next powerful rally.

The result is a conspiracy driven bloodbath motivated by fear of both the unknown and improbable for the majority while the select few, smile, reposition, and accumulate in size until all but the select few have been relieved of their positions.

A major bottom in gold and silver, not necessary meaning price, is drawing near. On again money has been repositioning with amazing stealth and efficiency while the headlines feed fear to hungry investors. When the red circle below is filled, I expect numerous, extremely rare buy signals to be generated late 2011 or early 2012.

Chart 1: Silver London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Long & Short As A % of Open Interest


Headline: Trade with your brain, not your emotions

Making the right trade isn't always fun. Sometimes it feels viscerally wrong.

For instance, a week or two ago while chatting on our InsideOptions Pro form, I quipped: "I don't want to do it and feels terrible, but I am buying more TNA now." (The stock is a leveraged ETF that some of us like to trade for short-term moves.)

Other users on the forum laughed and acknowledged the sentiment. At that particular moment, my intellect told me to expect higher prices because stocks had snapped back from below the August lows and earnings season was approaching.

I had grown accustomed to selling at the top of the range during August and September and had visions of another 2008 collapse. My fears and emotions urged me to take my profits amid strength as the S&P 500 pushed higher.

Instead, I listened to my head and my reasoned expectation of what I thought would happen. I added to my longs and profited nicely--even as other people on the chat unsuccessfully tried to short the move the whole way up.

Source: finance.yahoo.com

The Gold Panic and What to Expect in 2012

Jim forged his skills and nerves of steel early in life.

You must not allow your emotions to direct your decisions. Your emotions will always be your best contrary indicator you have.

I use mathematics and discipline to recognize emotional extremes in gold and silver. For example, the statistical "flagpoles" and "tails" in the spread between physical and paper silver represent emotional extremes to be sold and purchased, respectively. The last “tail” was particularly emotional - statistically extended to the downside. Yet, despite this holy cow moment, few could see past the fear to even consider accumulating.

Silver London PM Fixed to SLV Ratio and Silver ETF

With escalating fears from gold and silver investors around the world, including professionals, today King World News interviewed legendary Jim Sinclair. When KWN asked if he has ever seen this kind of fear and panic in the gold market, Sinclair responded, “Not in the first gold market (1970s), not in the gold market we are in now, not in the correction (in ’08 & ’09), which took us down after the first move through $1,000 and back under $800.”

Jim Sinclair continues:

“The amount of discontent and bearishness among people who know better is enormous. It’s moved from bearishness to some form of anger. (This is a) historical bottom, capitulation. A clear sign that the gold market is moving into an outrageously oversold position, most certainly in anything that’s a common share.

You must not allow your emotions to direct your decisions. Your emotions will always be your best contrary indicator you have. You have to examine the circumstances and ask whether or not the reasons why you’ve committed to something have changed. And if they haven’t changed, you simply need to buck up and go the course because you’re right.

People are beginning to literally crack, defined as shifting their total focus to their emotions and away from their intellect. I’ve seen emotionalism in areas where it doesn’t belong, where it’s never existed before. I’m in total shock.

When I see people who have distinguished themselves under pressure, over years, let their emotions cloud their judgement, actually letting their emotions break over them like a tidal wave, it puts me in total shock....

Source: jsmineset.com

Merry Christmas and Happy Holidays To All!

Follow the Star!



Thank you for your support in 2011.

Best Holiday Wishes,

Eric

Fear Hides Signs of Strain

People (traders) are bearish on silver and gold because standing with the crowd is easier than standing against it without emotion.

This London trader is no fool. The money flow analysis confirms the strains in the silver and gold market discussed below.

Someone is borrowing central bank gold to run important pivots to scare the hell out of the TA followers.

Real Silver Lease Rates (1-Month LIBOR less 1-Month SOFO) and London PM Fixed Silver Price


Real Gold Lease Rates (1-Month LIBOR less 1-Month GOFO) and Gold Price, USD


Participation at the COMEX has been flushed. Complete flushes are consistent with D-wave bottoms.

Gold London P.M Fixed (Gold) and the COT Futures and Options Open Interest Stochastic Weighted Average (WA)


London Trader - There are Tremendous Silver Shortages

King World News is receiving reports of significant waits for delivery of silver. Today King World News interviewed the “London Trader” to get his take on the situation. The source stated, “It is so tight, the silver market is so tight that we’ve been waiting three weeks plus, before this takedown, for deliveries of size to arrive. I’m talking about tonnage orders. This is also key, most of the silver being delivered was refined after the orders had been placed, and again, that was before the takedown. You can just imagine how long the wait times will be going forward.”

The London Trader continues:

“This game is getting so stretched that it’s going to break. You don’t think the Chinese know this stuff. If we get a close above the 200 day moving average in the mid 30’s on silver, watch silver immediately pop $2 or $3. Silver is totally incredible. There is nobody in COMEX silver contracts anymore, other than casino players. The only way they have been able to keep silver depressed is by borrowing silver from SLV to meet immediate demand. That’s the only reason silver isn’t trading $10 to $15 higher right now.

There isn’t enough silver for investors to buy (in large amounts) so they have been using SLV as a flywheel. SLV is over 20 million ounces short on the silver they are supposed to have in the vaults to back the shares which have been issued. The silver isn’t there. So there are people who purchased SLV to own physical silver, but all they have is shares that aren’t backed by the physical silver.

Part of managing the price of silver recently has been for the central banks to attack the gold market. But what is interesting is how this manipulation of the gold price was effected. Obviously, the bullion banks, which are working with the central banks, have inside knowledge as to the timing and just how much gold is going to be available to them.

So, in order for the bullion banks to maximize the effect of the physical gold they get from leasing, they add high scale paper leverage. They then short-sell just enough tranches of COMEX contracts to surgically take out three important support pivots....

Source:kingworldnews.com

Market Says Can't Lose US TBonds Due For At Least A Pause

A lot of F-TV talking heads have been positioning bonds as the ultimate safe haven and can’t lose proposition.

As of 2011.09, the total return index of government bonds pushed 3.48 standard deviations above the primary trend. The last 3-sigma reading was 2008.12. The bond market did not break the 2008.12 high until late 2010.

Chart 1: Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) and Z Score of Secular Trend


A pause or withdrawal from the bond market will benefit other, currently weak markets.

Chart 2: Large Cap Stocks Total Return Index (LCSTRI) and Z Scores of Secular Trends


Chart 3: Gold, London P.M. Fixed (Gold) and Z Scores of Secular Trend

Monster Breakout of 2010 Already Forgotten

Those that compress the time shorter than 2015 could very well see dispair rather than potential. F-TV headlines have been working overtime to paint gold and gold shares as dead. Judging by the tone of the mailbox, repetition of the message and a general inability to refute surface arguments has only agumented the growing doubt that the gold train has broken down.

How easily the monster breakout in 2010 has been forgotten and replaced by headline fear.

S&P Gold (Formerly Precious Metals Mining)*

Eric,

My turnip truck analyst (ie my gut;> ) says that the numbers need to look good for year end. That means a s&p rally, smash in commodities especially PMs and oil.

Man. My miners have taken a beating. I guess the gold train has broken down for now.

But, come january, things will be different.

Cheers,

Fred

Accumulate Secular Up Trends

Philippe,

The message, when it comes, will be undeniable, referred to mathematical analysis of leveraged money flows.

Secular bull market have a tendency to turn investors into millionaires and billionaires as long as the deep, d-wave declines are accumulated and infinite liquidity (QE, money printing) remains the easy political solution to sovereign debt crisis inflecting the global economy. History tells us that investors will demand gold as long as confidence in central planners ability to contain, let alone solve, this type of problem deteriorates.

Eric,

I'm just a little Swiss investor triyng to make my mind reading your paper and the one from Jim. As my english is relatively poor, I will just ask you a quick question. I can read on your last paper "The message, when it comes, will be undeniable"

But how can a not sophisticate investors as me recognise this message and preserve the future of a family with five children and three grand-children?

2011 was very difficult to trade and invest, specially in swiss francs.

Thank you for your attention and your comprehension for my english (please if you answer use basic words).


Philippe

Mailbox: It's Not All In The Dollar

There's more going on that money flows between the Euro, Dollar and Gold. The media has gone out of it way to paint gold as nothing more than risk asset without safe haven qualities despite mounting analytical evidence that suggests otherwise. This begs to question why and why now?

As Jim writes, “I do not subscribe to it’s all in the dollar when the problems of Euroland are so intense and contagious globally.”

I agree. If the recent sell-off in gold was nothing more than a transition from risk-on to risk-off why is money flowing aggressive not only into gold but also silver and copper (see chart below) as the global economy slows on the margin? It’s not all in the dollar.

The market(s) are quietly telling us that 2012 will be the year of QE, either official or unofficial. If they burn down the barn to save the farm, gold is simply not big enough to handle all of the liquidity.

Chart 1: Copper (JJC) And Copper Diffusion Index (DI)

Jim:
With Martin Armstrong bearish again what must he be thinking about the relationship between the euro and the USD?
CIGA B

Dear Bill:
I would imagine that Martin "A" is looking for a very low eu level while those that assumption the Eu is a total write off, valuing each national currency based on reasonable parameters is not putting a synthetic eu at levels that support his gold assumption before or now, if you say the dollar runs gold entirely no matter why it moves. I do not subscribe to it is all in the dollar when the problems of Euroland are so intense and contagious globally.
Ry,
Jim

Source: jsmineset.com

Don't Be Blind To Subtle Cues

Thanks Jim.

Jim is clearly one of the few trading masters. Not only what but also the manner of the discussion reveals the intellectual fluidity necessary to compete in this business.

Simple linear TA models, designed to explain a complex, high-order world more often than not fail to anticpate anything beyond the short-term. Accumulation of secular or distribution of secular bears markets turns millionaires into billionaires.

Don’t let patience breed stupidity. The sniper achieves its objective through patience, training (heightened awareness to subtle cues), and discipline. Patience with gold does not mean blindness to the subtle cues that money has been aggressively repositioning in markets sensitive to infinite QE. Patience without acknowledgement of important cues turns billionaires into millionaires.

The money flow setup in silver, a market highly sensitive to infinite QE, cannot be ignored indefinitely. Declining short interest as participation dries up and money flows turn extremely bullish is a powder keg waiting TA detonation.

Silver London P.M Fixed and the Commercial Traders COT Futures and Options Net Long As A % of Open Interest


Silver London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


The hardest part of this game is learning to anticipate the unexpected.

Eric:

Much of the recent bearishness is based on primary school TA, a broken trend line of a triangle that moved almost to its apex and the 200 day MA.
The best long term market predictor that I know may well not be the best short or medium term trader.
People need to stay within the bounds of what they are historically best at.
Gold is the most manipulated market on the planet.
Painting charts to accumulate has been a fact since 2003.
China is a master painter of the world cash gold chart.
That is why in this entire gold bull market, every major up move in gold has been proceeded by a horrid technical formation or break that reversed out of nowhere.
If simple trend line breaks or 200 moving averages were consistently good everyone would be a billionaire.
Next week could surprise the bears in gold.
I would not, now, be stampeded by a great long term predictor's short term outlook or a fellow who screams, dances, blows whistles, and horns when reporting on markets who recent declared the gold bull market dead for the second time in a year.
The first declaration was hardly a death.


Ry,
Jim

One Mind - One Voice

Dave,

It’s hard to market time with so many voices. This is why the trading masters invariably followed one mind – one voice. That voice was their own. There’s no denying that the sovereign debt crisis and the secondary and tertiary problems associated with it are intensifying. Gold’s increasingly volatile chop reflects this growing reality. This is why investors my follow time and money flows, the inherent message of the market, while ignoring the many, often conflicting, voices.

The window of time for a turn in gold falls between December and July with a mean in March. That’s a pretty big window of opportunity, so the message from the markets must be studied to know when to turn patience into action.

Some of the messages discussed on Insights are as follows:

(1) Trend Strength
(2) Changes in ETF Gold Total Assets 1-2-3
(3) Lease Spreads
(4) Leverage Money Flows Concentration (see below)

The general message still suggests that gold is still marking time. That is, chopping wildly while money quietly repositions against the noise and misdirection of well-timed headlines. The message at D-wave bottoms tends to be focused and consistent across all market and intermarket relationships. When the body of evidence (weighted probabilities of analysis) favors a bottom it’s time to turn patience into action.

For example, the leveraged money flow footprint of a D-wave bottom is highly specific. Notice the specific money flow setup in 2006 and 2008 (circled blue). The message, when it comes, will be undeniable.

Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Long & Short As A % of Open Interest


For now, patience reigns.

Eric

Hello Eric

Just read Arnstrong's post of Dec.15. Not too pleasant a read for any holder of gold.
Seems, he is using two arguments. First, , the market is just tired, and the longs worn out, with no more on prospect.
Second, and maybe his main argument, TA forecasts much lower prices-much lower.

I would rather believe what influential people like you and Jim Sinclair are saying, but do remember Armstrong predicting in the summer that gold and others would be turning in a very bad market month of September-proved correct.

Furthuremore, consider the huge short positions-continuing-in shares of stocks like Goldcorp and Kinross, with Kinross making a new low this week-seems it might mean something.

Good Lord-so many different outlooks. Hamilton forecasting an overblown USA $ soon to fall, with resulting rebound in price of gold.

What is one to think?? I distinctly remember in the seventies-some very wild swings.

So, maybe the major manipulators will surprise us and let deflation overwhelm everything-no more QE.....Then, what??

Sincerely
Dave
Canada

Beat the Grass To Startle The Snakes in Gold

Beat the grass through headline fear to startle the trading snakes.

Headlines:

Gold is Dead

Gold Prices Plunge! The Trend is Not Your Friend

Oh no!

The trading snakes, motivated by fear of the unknown, run for cover and sell, sell, sell.

Those that beat the grass quietly accumulate as the snakes sell. The whole operation, repeated over and over during this secular bull market, is effective, efficient and highly professional.

London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic


Tired of being the startled snake? Follow the money.

Jim Sinclair – Why Gold Was Smashed Today & What’s Next

I would only add there was considerable paper pushing before well-publicized headline decline.

Chart 1: Real Gold Lease Rates (1-Month LIBOR less 1-Month GOFO) and Gold Price, USD


The 1-2-(3) bullish setup is nearly done as gold has nearly completed its transition from investment darling to pariah.

Chart 2: London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic


A signal in the concentration index would confirm the bullish setup underway.

Chart 3: Gold London P.M Fixed and Concentration Index (CI): 1 = Bullish Setup, -1 = Bearish Setup

Jim Sinclair continues:

“Technical analysis, when looked at, is really everybody looking at the same thing. So the sellers are chasing each other trying to find the bid. I believe that what started all of this is purely political in nature. I firmly believe there is no political will, on the planet anywhere, but especially in the Western world, to invite a severe deflation.

As the deflationary forces continue to surface you will see the absolute opposite. I firmly believe you are more apt to have QE to infinity than you are to welcome rising unemployment and declining business activity.”

When asked about the technical damage in the gold market, Sinclair stated, “It isn’t really longer-term. The technical damage right here and now is something that from today’s lows could be corrected in a few days, easily repairable.

You’ve got support between $1,549 and $1,577. You’ve also got it overlaying $1,519 to $1,572. There is every possibility that you’ve seen the absolute worst of this as we’re talking now.

The most important thing is volatility. One thing this shows you, and it increases continually, is this is the wildest chop we’ve ever been in, in the history of trading gold, in terms of ups and downs. It means to me that gold is going to rise to prices even higher than I expected….

Source: jsmineset.com

Down Is Still Down In Real Estate

The outlook isn't bright despite fewer foreclosed homes in November. What gives? For starters, we found out yesterday the home sales have been overcounted for years. Maybe investors are beginning to realize that statistical tricks and headline hopium cannot change the message of the market.

S&P Homebuilders Index (HB) AND HB to Gold Ratio


Headline: Fewer foreclosed homes in November, but outlook isn't bright

Foreclosure filings may have fallen in November but the number of homes scheduled for bank auctions grew significantly, indicating that a new wave of foreclosures are set to take place in the New Year.

The number of foreclosure filings dropped to 224,394 properties in November, a 3% decline from October and a 14% drop year-over-year, according to RealtyTrac.

During the month, one in every 579 housing units received either a default notice or underwent a scheduled auction or bank repossession, the online marketer of foreclosed homes said.

The number of completed foreclosures, the last stage of the process when banks repossess the homes of delinquent borrowers, fell to 56,124 homes, a 17% plunge from a month earlier and the fewest since March 2008. Such repossessions are off 45% from their September 2010 peak, when more than 102,000 homes were lost to foreclosure.

Foreclosure filings have been artificially depressed for more than a year now as banks slowed the processing of paperwork in the wake of the robo-signing scandal.

"The banks had taken some of the homes out of the foreclosure pipeline while they cleaned up their books," said Pat Newport, a housing market analyst for IHS Global Insight.

Source: finance.yahoo.com

Another Step In A Ladder For Commodities

Commodities are forming another step in ladder of increasing acceleration. The first casuality of panic and fear is critical logic.

Spot Commodity Prices: CRB Spot Index (1947 - Present);
16-Raw Industrial Spot Price (1935-1947);
Great Britain Wholesale Price of All Commodities (1885-1935) and Trend Z Scores

In Case You Missed It

Someone gets it.

For Europe, Only Way Out Is to Break Up: Kyle Bass



Source: cnbc.com

The Pretcher message (interviews) foreshadows an upside turn gold and commodities in 2012.

Bear Market Rally?


Source: video.cnbc.com

It's Not Raining Outside

In the movie The Outlaw Josey Wales (1976), there's an exchange between the Senator and Fletcher.

Senator: The war's over. Our side won the war. Now we must busy ourselves winning the peace. And Fletcher, there's an old saying: To the victors belong the spoils.

Fletcher: There's another old
saying, Senator: Don't piss down my back and tell me it's raining.

This quote should preface all investing logic. Death of the gold bull market? I feel something running down my back, but I know it's not raining outside. The world is full of misdirection and inane chatter. What makes market timing so difficult is one mind and vision above all. In other words, the best need no other opinion other than the message of the market.

The gold bull, marking time, is not over! Gold will bottom and defy headline logic when time is right and strong hands reposition on the long side.

Headline: Death of Gold Bull Market Seen by Gartman

Gold, in the 11th year of its longest winning streak in at least nine decades, is poised to enter a bear market, according to Dennis Gartman, who correctly predicted the slump in commodities in 2008.

The metal, which traded at $1,666.30 an ounce at 2:43 p.m. in London, may decline to as low as $1,475, the economist wrote today in his Suffolk, Virginia-based Gartman Letter. He sold the last of his gold yesterday. Bullion has already dropped 13 percent from the record $1,921.15 reached Sept. 6 and $1,475 would extend that to more than 20 percent, the common definition of a bear market.

“Since the early autumn here in the Northern Hemisphere gold has failed to make a new high,” Gartman wrote. “Each high has been progressively lower than the previous high, and now we’ve confirmation that the new interim low is lower than the previous low. We have the beginnings of a real bear market, and the death of a bull.”

The metal typically moves inversely to the dollar, which today reached a two-month high against the euro after Fitch Ratings and Moody’s Investors Service said yesterday that a European Union summit last week offered little help in ending the region’s debt crisis. Bullion is still 17 percent higher this year and holdings in gold-backed exchange-traded products are at a record, a hoard now valued at $126.5 billion.

Source: bloomberg.com

The Bears Control Copper

W.D. Gann observed the market(s) as a function of supply and demand. Failure of the 1x1 line (linear slope) represented a market increasingly dominated by supply (over demand). In other words, he saw this setup as the bears exerting control of the trend. This is risk off in today’s headline lexicon.

Copper ETN (JJC)

Endless American Consumption Is A Crowded Trade

How many times have the talking heads told us not to bet against the American consumer? Too many times to count. It's gotten to the point that many investors believe that the US consumption machine will never stumble. Sounds like a crowded to trade to me.

Economic activity is either rising or falling at an increasing rate. Real and gold adjusted retail sales have been contracting since early 2011. The trends are becoming difficult to ignore now as the public feels the grip of the Great Recession tightening once again.

Consumption is a key driver of economic growth in the US. If the negative consumption trend extends into 2012, it will become both a political and social hot potato.

Real or CPI-Adjusted Retail Sales (RRS) and YOY Change


Gold-Adjusted Retail Sales (RSGLDR) and YOY Change


Headline: Retail sales rise less than expected in November

WASHINGTON (Reuters) - Retail sales rose less than expected in November as a drop in receipts for food and beverages weighed against stronger sales of motor vehicles, tempering some of the expectations of a strong holiday shopping season.

Total retail sales increased 0.2 percent after rising by an upwardly revised 0.6 percent in October, the Commerce Department said on Tuesday.

Economists polled by Reuters had forecast retail sales climbing 0.6 percent last month.

"It's fairly disappointing given that all the evidence was pointing to fairly strong gains during the month," said Millan Mulraine a macro strategist at TD Securities in New York.

Consumer spending - which accounts for more than two-thirds of U.S. economic activity - rose sharply in the third quarter but November's retail sales growth was the weakest in any month since June.

However, shoppers flocked to stores over the Thanksgiving weekend, traditionally retail's biggest sales period.

Source: finance.yahoo.com

Gold Marking Time, Counting 1-2-3

Don’t let “gold is dead” argument corrupt your discipline. It is designed to organize the public for the abattoir. The bearish argument will disperse faster than flatulence in the wind once gold finishes marking time. Right now it’s counting 1-2-(maybe 3).

London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic

Felix Zulauf - Watch Out for These Events in 2012

The flight to liquidity illustrates the growing stress as the 2012 panic cycle approaches.

U.S. Dollar Index ETF


Felix Zulauf,

I think the periphery goes into depression. When you look at a country like Greece, it’s now been in recession for three years. GDP is probably down 15% from the top. The stock market is down 90%, which is the equivalent of 1929 to 1932 in the US. This is depression-like.”

More and more economies will fall into that situation. That creates the problem of people revolting. Right now we have new governments not elected by the voters, the citizens of those countries, but implanted as technocrats by the EU center, by Brussels. So they will be very disliked and I think you will see some revolutions starting or intensifying next year.

Then I expect next year one country, probably three, will exit the euro. That will make 2012 very interesting because there are no rules on how to exit the euro. A country exiting the euro means the next day, when they exit, their banking system is bust. That means the banking system has to be immediately nationalized in a new currency.

They introduce a new currency, they nationalize the banking system, and then, of course, the government is also bust. Then the government will default. That’s what you have to expect next year. I think Greece will do so and Portugal and Ireland are candidates also.

Then it will depend on how that crisis is managed as to whether the crisis can be turned around and terminated or whether it will intensify and drag on into 2013 and force Italy and Spain out of the Eurozone as well. (This will have the effect of) creating turmoil in the financial markets and weakening the European and most likely the world economy (even) further....

Source:
kingworldnews.com

Strong Consumer Expectation Will Setup Gold's Next Advance

Improving outlook for the economy, yeah right? Says who? Individuals come to support, even blindly believe without proof, an argument because crowd stands behind it. The crowd says, come join us, if we're wrong, we'll be wrong together. Crowd behavior, the power of the mob, is a seductive force that ensures 99% of the investment population will be on the wrong side of the trade at the wrong time.

The crowd will come to believe that gold is a sale because confidence is rising. Those that use objective analysis and discipline know that rising confidence will setup its next decline and provide the fuel for another gold advance as the monetary and debt crisis continues to worsen.

Rising confidence is bullish for gold because mathematics reveals that it has a strong inverse correlation with gold when confidence in centralized economic management is deteriorating.

University of Michigan Consumer Expectations (CE) and Gold: A Correlation Study


Headline: Consumer sentiment strongest since June

NEW YORK (Reuters) - Consumer sentiment rose to its highest level in six months in early December due to signs of better labor conditions and an improving outlook on the economy.

The Thomson Reuters/University of Michigan's preliminary reading on their overall index of consumer confidence climbed for a fourth straight month to 67.7. This compared with 64.1 in November and a low of 55.7 back in August.

The early December figure exceeded the 65.5 predicted by analysts recently polled by Reuters.

"News about recent economic developments were much more positive in early December. Reports of net job growth have increased in each of the past three months, as have assessments of current conditions in the economy," survey director Richard Curtin said in a statement.

Measures of consumers' current and future assessment of economic and financial conditions also rose to their highest levels since June.

The survey's barometer of current economic conditions edged up to 77.9 in early December from 77.6 in November. Analysts had predicted a reading of 78.0.

Source: finance.yahoo.com

ECB cuts rate, has no bigger bond-purchase plan

The ECB, unlike the Fed, is unable to create money as needed during a crisis. Any aggressive expansion of the bond-purchase plan will force a highly public recapitalization of the ECB. A public recapitalization places confidence at risk, so in steps the Fed to purchase bonds and supply liquidity as the lending of last resort. Why do you think Geitner is traveling around Europe saying Europe is making progress?

So here we go again. The great private debt collapse of 2008 morphed into the great sovereign collapse of 2011-2012. In both cases, unbeknownst to the public the Fed will be the lender of last resort at the expense of the dollar. Unfortunately, expansion money and austerity programs at the expense of nation's sovereign might not sit will with those forced to accept it. Gold and silver are watching closely.

Gold continues to mark time, but the like a bobber held deep under water, it will explode to the upside when released by time. Severely negative gold lease reflects paper selling and a market waiting on time. Watch the negative spreads collapse and spreading activity (uncertainty) soar right before the upward explosion.

Chart 1: Real Gold Lease Rates (1-Month LIBOR less 1-Month GOFO) and London P.M Fixed Gold


Chart 2: Gold London P.M Fixed And Noncommercial Spreading Activity Diffusion Index (DI)


Headline: ECB cuts rate, has no bigger bond-purchase plan

FRANKFURT, Germany (AP) -- The European Central Bank took modest steps Thursday to help revive Europe's economy and financial system, including cutting a key interest rate. But President Mario Draghi said there is no existing plan for large-scale government bond purchases, as markets had been hoping.

The ECB cut its key interest rate by a quarter percentage point to 1 percent and announced it would extend longer-term emergency loans to banks and other measures to stimulate lending and investing.

Stocks and the euro fell heavily on Draghi's remarks, which lowered expectations that the central bank is preparing to take much more aggressive action as the eurozone economy slides toward recession because of the debt crisis.

It was the second rate cut in only five weeks for the bank, the top monetary authority for the 17 nations that use the euro. But markets are hopeful that the ECB will soon take more aggressive steps to save the euro.

Source: finance.yahoo.com

Jim Rogers on Europe: It’s Time for a Painful Solution

Kicking the can down the road works until we run out of pavement. Many suggest that organic growth which will never outpace the world’s debt serving costs at this point is the secret to muddling through what could easily turn into America's lost decades. Cycles suggest a confluence of time and trend inflections around 2015-2016. Those hoping for organic growth will save the day are paddling against a strong current. The slow technical deterioration in copper says we better kick the can again through another QE injection or we'll all be swept aways soon.

Chart 1: Copper ETN


The 9/22 breakdown gap on heavy volume sits above price like an anvil. The trend is down, so the bulls need to see price "jump the creek" over the anvil before buying the hype that the Santa Claus rally signals better economic days again.

Headline: Jim Rogers on Europe: It’s Time for a Painful Solution

While Jim Rogers is a fantastic and insightful guest, the prospect of no progress whatsoever is a depressing one. As a result I had to ask whether intentionally plunging Europe into an immediate and crippling recession is really preferable to trying to prop up the Eurozone nations until an organic recovery can take hold.

The notion is anathema to Rogers. "We in the U.S. have been pushing it out into the future also," says Rogers. "We've lost one decade so far, the stock market is where it was 10 or 12 years ago." He adds that Japan has lost 20 years of progress and 80% of the value of its stock market by delaying reality.

Rogers compares Europe to the situation facing Scandinavia several years ago. Quick, decisive action at that time limited the crisis to two or three years of pain, as opposed to decades of misery. To Rogers the trade is obvious, take the short-term hit and let the healing begin.

Sadly, that's not going to happen. That being the case Rogers says he's not putting new money into Europe or the U.S., but instead is focusing on the rest of the globe.

Source: finance.yahoo.com

Gold Still Marking Time

Gold is marking time until the following:

(1)Capital flow shifts from risk off (return of capital) to risk on (return on capital) or confidence in the old monetary system changes abruptly.

Wait for a red stick in the trend below.

Chart 1: US TBond to Gold Ratio


(2)Confidence in gold's long-term secular trend deteriorates. A spike in spreading activity as measured by a DI reading above 80 percentile often illustrates growing doubt in the trend.

Spreading activity is extremely low right now.

Chart 2: Gold London P.M Fixed And Noncommercial Spreading Activity Diffusion Index (DI)

Exclusive: Many Americans already done with holiday shopping

Shop 'til you drop may not be dead, but it's certainly taken a hit in 2011. Pre-holiday credit-fueled shopping benders are being slowly replaced with layaway and less is good mentality. Society, driven largely by economic cycles, behaviors and forces few understand, is slowly changing. Ignore the talking heads and follow the money, particularly the upward bias in the U.S. dollar.

The bulls are in control as long as the Gann 1x1 line holds from the September 2011 lows.

Chart 1 U.S. Dollar Index ETF:


Flight to quality, no. Flight to liquidity, yes.

Headline: Exclusive: Many Americans already done with holiday shopping

By Dhanya Skariachan

(Reuters) - More than a third of U.S. shoppers are already done with most of their holiday shopping, a survey showed on Monday, signaling that retailers need to offer bigger incentives to win sales in the few weeks before Christmas.

The findings underscore the fragility of the U.S. recovery, since consumer spending accounts for about 70 percent of the nation's economy.

About 32 percent of people surveyed by America's Research Group said they finished a majority of their Christmas shopping in November. Last month included Black Friday, the day after Thanksgiving when stores pulled out all the stops on discounts to woo shoppers during their biggest season of the year.

More than 6 percent completed most of their holiday shopping in the first weekend of December.

The questions were asked exclusively for Reuters as part of a larger America's Research Group survey.

"There is very little retailers can do unless they really have some incredible sales that force that consumer to reconsider if they want ... to make an extra purchase now," said America's Research Group President Britt Beemer.

Source: finance.yahoo.com

Many have little to no savings as retirement looms

Many have little to no savings as retirement looms says the ant to the grasshopper. In global economy driven by cycles, capital flows, and outdated constructs based on perpetual debt-based spending who's really the grasshopper?






Headline: Many have little to no savings as retirement looms

For many Americans, the golden years are quickly taking on a tin-like hue.

After a vicious decade of no growth for the stock market, including two 401(k)-eating bear markets and persistently sky-high unemployment, more Americans are finding themselves in their 50s and 60s with practically no money saved for retirement.

"We were in our 30s, blinked, and now we're our parents' age," says Alan Tipps, a corporate jet pilot who typically earns more than $100,000 a year when he's working. But Tipps, 52, has been laid off three times during the past four years, and says that has forced him to burn through what was in his 401(k) just to "keep the lights on" in his home in Portales, N.M.

Investors of all ages have suffered. But for those close to retirement, it's been especially tough, because they're faced with taking distributions from investment portfolios that in some cases are a fraction of their peak value. Forced early retirements and the near extinction of pensions are making things worse, creating a generation of aging investors in which some have little or no plans for how they're going to pay for retirement.

Source: usatoday.com

Headline: Jobless in Iowa: a third of the state’s unemployed have been looking for work for six months or more

DES MOINES--Colette Noble's kids used to tell her, "You'll never lose your job--you work too hard."

Noble's voice choked up and her eyes welled with tears as she recounted the exchange. "I used to say, 'You know what--you never know,' " she said, during an interview last week at a Starbucks here. "There are lots of good people who worked hard that lost their jobs."

Noble was laid off in January as an account manager at CDS Global, an Iowa-based subsidiary of the Hearst Corporation, where she worked for two decades. She was the was the sole breadwinner for her family of four. Her two sons are 15 and 17. Her husband, a lawyer, stopped working several years ago after becoming addicted to Oxycontin, a painkiller that a doctor prescribed him for back pain. He's now healthy and looking for work again.

Noble, who is 48, threw herself into the search for a new job. "If there's a resource to be found, I feel like I've found it, " she said. But nearly a year later, she's still looking. She's now unable to pay the mortgage on her house.

Source: news.yahoo.com

It's Easier To Ignore The Global Contraction Underway

Liquidity can't reverse the economic trends set by excessive debt and rising unemployment. The 8.6% reported unemployment rate ranks finds company with "Santa Claus is real" debate.

The sharp dive in Prices Paid to PMI ratio illustrates the depth of economic deceleration. The speed of the decline shown not be easily discounted by shallow, “don’t worry, be happy” arguments.

Chart 1: ISM Prices Paid Index (PP) to National Purchasing Manager's Index (PMI) Ratio


Global Cooling:


Headline: Euro-zone Nov. PMI points to further contraction

FRANKFURT (MarketWatch) -- Private-sector activity across the 17-nation euro zone continued to shrink in November, but at a slower pace than in the previous month, according to a final composite purchasing managers index reading compiled by Markit. The composite PMI rose to 47.0 from 46.5 in October, but was down from a preliminary reading of 47.2. A reading of less than 50 indicates a contraction in activity. The November data showed the euro zone's four largest nations in contraction, with Germany joining France, Italy and Spain in posting a sub-50 reading. The figures show activity in the euro zone contracted for a third consecutive month, putting the region on course for a 0.6% contraction in the fourth quarter, said Chris Williamson, chief economist at Markit.

Source: marketwatch.com

Confidence Is Frying, Subtle Hints Suggest Caution

The financial system is highly interconnected. Unlike 2008, it won’t be so easy to engineer bailouts with public funds if the dominoes based on fictionalized balance sheets start falling again. Commentary: It's not 2008. Financial firms have no savior

COT money flows suggest that connected interest are trying to refute the old saying blood cannot be squeezed from a stone. They're pushing paper gold hard because they know confidence is frying. Jim's must read comments below explain why.

Chart 1: Gold London P.M Fixed (Gold) and the COT Futures and Options Open Interest Stochastic Weighted Average (WA)


Chart 2: Open Interest Stochastic Weighted Average (WA) & Fourier Cycle


Commercial traders (connected money) have concentrated their short positions as of 11/29/11. This begs to ask not only why but also why now? Perhaps connected interests know another shoe (with the foot print of MF Global) will soon drop. Well-positioned ex. ante money will allow them to squeeze more blood from the golden stone.

Chart 3: Gold London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Long & Short As A % of Open Interest

My dear extended family:

We all know that the banks balance sheets are cartoons due to FASB's capitulation on the fair market value issue, that the euro financial leaders do not deserve the title leader, that the Fed is the source of liquidity for Euro land in unlimited cheap dollar swaps, but there is more.

That more is the first failure of a major clearing house. Clearing is the mechanism of all markets. It is the guts of the system. It is the engine under the hood of finance. It is the wheels that turn inside the watch. It is basic to finance for without clearing trades cannot close. Without faith in clearing house system where is faith that what your account statement says means anything whatsoever? It could be like the statement of MF cleared accounts that could be a sad cartoon without humor.

Unless MF clients are made whole in every way, the system is broken. It is as if the heads blew off the engine of finance. Where can you keep your money and investments if a clearinghouse is allowed for whatever reason to go broke leaving the clients to suffer. Are you safe even in a custodial account if the clearing mechanism can erase assets across the board as a product of insolvency for any reason. The system is a critical seizure.

It may take some time, but even the financial sheeple are going to worry about their own funds. God help you if you hit gold right on a paper exchange with the wrong
clearing facility. You are wholly dependent on the ability of the clearing house to pay into your account the winning by deducting those funds from the loser. You are wholly dependent on the ability of the clearing house to guarantee the safety and securities (are T Bills securities?) beyond SIPC levels.

SIPC is underfunded but would be made whole by funny paper. God help all the Exchange Traded Funds that are nothing more than house of derivative paper requiring a sound clearing system to have even an excuse for existing.

If the clearing system fails then you have nothing whatsoever. God help you if you as a farmer hedging your crop or livestock if you the farmer have nothing whatsoever due to a a broken clearing house. You are is insolvent regardless of the fact that your hedge may have been perfect for the needs of your operation. Unless MF clients are made whole in every way the system is broken. People did not realize then and some even now that the failure of Lehman broke the technical procedures (mechanism) for the functioning of the OTC derivative and for that reason broke the Western world's financial system for which we are paying dearly today. MF is a Lehman Brothers but actually worse. The OTC derivative had always been a fraud but could have before Lehman failed been globally netted to practically zero until Lehman
exploded.

The lack of faith in the clearing house system breaks the mechanism of the marketplace, even legitimate transaction. This leaves gold in your possession as the asset of last resort. This is quietly driving the gold price towards Alf's objective of $4500. For your sake immediately take delivery of your gold and silver immediately.

For your sake immediately take paper delivery of your gold & silver shares from those very few companies still willing to facilitate that kind of transaction. For your sake immediately make your general securities positions "Direct Registration" as a second best method of protection the asset against failure of your clearing facility. You all have a clearing facility dependence even if you do not know it. Unless MF lients are made whole in every way, the system is broken. This is no time to take any unnecessary risk. This is no time to be lazy. If you do not know how to do direct registration, get paper securities or take deliver of paper gold and silver, ask me.

Respectfully,
Jim

Disclaimer: I have no account, or assets with MF clearing directly or
tangentially.

All Is Not Well

Don't let today's employment report spun as good as a result of upward revisions to previous months (only to be quietly revised downward at a later date as not to bruise our fragile expectations) and a reduction in labor participation (an tired tactic - see chart 1 below) obscure the fact that Europe is heading for recession and Chinese growth is beginning to slow as a result.

According the BLS, the civilian labor force, thus, labor force participation has been contracting steadily since 2009.

Chart 1: Civilian Labor Force (CLF) And Year-Over-Year (YOY) Change


Money is flowing out of the Euro…

Chart 2: Euro ETF


…into the best looking horse in the glue factory. The movement into the dollar is not a flight to quality but rather one of liquidity and safety.

Chart 3: US Dollar Index ETF


The financial system is teetering on collapse while the talking heads continue to tell us all is well, now get out there and spend, spend, spend.

How much longer can we shop ‘til we drop? Personal consumption already dominates GDP.

Chart 4: Personal Consumption Expenditures (PCE) As A %GDP and Personal Consumption Expenditures As A %GDP Average from 1947:


The US consumption monsters, however, carries an unexpected price. The collapse in domestic private investment jeopardizes not only today's but also tomorrow's standard of living in the United States.

Chart 5: Gross Domestic Private Investment (GDPI) As A %GDP and Gross Domestic Private Investment (GDPI) As A %GDP Average from 1947:


All is not well, but the public could very well be the last to recognize it.