Stocks & Equities

Asia: A slowdown? Yes. A disaster? No. Read on …

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Posted by Larry Edelson - Uncommon Wisdom

on Monday, 26 March 2012 06:40

There’s no question that China and the rest of Asia are outgrowing the Western world by leaps and bounds. All you have to do is follow the stats coming out of Asia, or take a trip to anywhere in Asia, and you’ll get a firsthand feeling for how vibrant the region is.


But there’s also no question in my mind that there is some slowing going on. Perhaps a bit more slowing than I originally expected.

First, according to a just-released HSBC research report, China’s manufacturing activity fell sharply in March as factory bookings of new orders fell to a four-month low. In addition, overall employment dropped to its lowest level since March 2009.

Second, the CEO of BHP Billiton (BHP) — the largest iron ore supplier in the world — recently stated in a press conference that he saw signs of “flattening” iron ore demand from China. Iron ore, used in steel production, is a very sensitive indicator of overall Chinese and Asian demand.

Third, even auto and truck sales are slowing in China. Total vehicle sales for January and February shrank 6% compared to the same period last year.

A slowdown? Yes. A disaster? No. But all of it fits in perfectly with my overall forecast, which I’ll review now.

Short term, you know I’ve been bearish the commodity sector. I remain so …

For one thing, gold completed an 11-year up-cycle at last year’s record high. This means that a pause and correction for 2012 is the highest-probability course for gold this year. And so far, that’s exactly what the precious yellow metal has been doing — pausing and correcting.

Indeed, gold’s failure to execute a monthly buy signal at the end of February, as I recently told you, is a major signal that gold could head much lower in the short run.

From what I’m seeing in silver, the same holds true. If silver can’t soon get back above the $34.25 level on a closing basis, it’s in danger of a devastating plunge down to the $26 level and probably A LOT lower.

For another, I’m seeing similar corrective signs in nearly all commodity markets. Cocoa is looking very weak. So is coffee. And the grain markets, while biding time largely going sideways, are also in danger of a sharp decline.

At the same time, the price of oil is having a very tough time moving above a key resistance level at the $111 mark. As long as the price of oil remains below $111, it too is in danger of a slide back down.

Fundamentally speaking, demand from the world’s largest single economic zone, Europe, is set to decline due to the region’s high unemployment rate and the austerity measures taking effect as a result of Europe’s sovereign-debt crisis and euro troubles.

Meanwhile, whatever strength we’ve seen in the U.S. economy is nowhere near enough to compensate.

So in the short run, looking ahead over approximately the next six months, I see no reason to be outright bullish the commodity complex. In fact, I still expect to see …

 Gold slide to $1,490, then even lower.

 Silver to at least test the $26.40 level.

 Oil slide to the $80 region.

 Base metals such as copper take a sharp fall.

 The prices of agricultural commodities also get hit.

But in the long run, the seeds are now
being sown for the next big leg up in
commodities and tangible assets.

It will come from much-lower prices overall in the commodity complex. And importantly, it will start when least expected.

The reasons for the longer-term bull market remain very much intact. Although we’re at a lull now in the sovereign-debt crisis, it will come back with a vengeance and we will see …

 Europe’s economy crater, with Greece eventually defaulting; Portugal, Italy and Spain cratering; and even France getting hit with major debt issues.

This will lead to even more European Central Bank money-printing operations, a weaker euro, and a renewed flight of capital into tangible asset markets.

 We will also see the U.S. get hit hard by the sovereign-debt crisis. Keep in mind that Washington is even more indebted than Europe. It’s only a matter of time before it falls, too.

Right now, we’re seeing some continuing capital flight from Europe into U.S. equity markets. We will continue to see that, and the long-term prospects for the stock markets remain very bright indeed. But even here, as in commodities, I still expect one more broad market swoon before equities become a safe haven from the public sector’s sovereign debt crisis.

And as far as Asia goes, don’t bet on the downside there, even though the region is perhaps a bit weaker than I had expected.

You’re far better off using any dips in Asia to position yourself for the next leg up in Asian economies and markets, which will be HUGE.

Core long-term positions in vehicles such as the iShares FTSE China 25 Index Fund (FXI) make a lot of sense. I suggest buying on weakness and look to potentially double and triple your money over the next three years.

Best wishes,


P.S. Speaking of China, I have uncovered new evidence that Beijing is in cahoots with Washington to bankrupt you! Watch my brand-new video “The Great Betrayal of 2012” for all the details … along with specific steps you can take to protect yourself from their collusion. Just click here to watch this urgent video report now.


Stocks & Equities

RIchard Russell Sells Out!

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Posted by Richard Russell - Dow Theory Letters

on Friday, 23 March 2012 08:05

March 22, 2012 - Russell turns chicken -- The retail public usually buys stocks during the opening hours of the session. The pros and the institutions usually do their trading during the waning hours of the session. With today's market action I took a small profit and sold out my DIAs, yes against the dictates of my PTI. I just didn't feel that the risk-to-reward was worth sitting with stocks at this juncture. I'm waiting to see the days when the market firms up near the close, which is the opposite of what it's been doing. I don't like markets that tend to sell off during the last two hours of trading. I'm now satisfied to be on the sidelines with zero common stocks. I'll just watch the action for a while. My inclination and feeling -- neutral, very neutral. But no sell signal yet from my PTI.


Earlier in the Day Russell Wrote:

The fact is that the Fed is happy with 2% inflation each and every year. Compound 2% inflation year after year, and you know what's happening? -- you've effectively wiped out the middle class. Between inflation, stagnant wages, higher taxes, and no jobs, the middle class has hit the brick wall like a fresh egg hitting the trunk of a redwood tree. Whoosh!

The Dow appears to waffle around during the length of each trading day and then at the close the Dow is down 10 to 50 points. What is this? Reverse inflation? Or is the Dow trying to tell us something? Honest, I don't know what!

Personally, I don't care for the action, but my PTI still says "bullish." Most of us are so tired of hearing about Greece that we wish the country would just sink into the Mediterranean and take Portugal and Spain with it.


About Richard Russell (scroll down for his offer for a two week $1.00 "free" trial)

Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.

Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.

The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics --plus Russell's widely-followed comments and observations and stock market philosophy.

In 1989 Russell took over Julian Snyder's well-known advisory service, "International Moneyline", a service which Mr. Synder ran from Switzerland. Then, in 1998 Russell took over the Zweig Forecast from famed market analyst, Martin Zweig. Russell has written articles and been quoted in such publications as Bloomberg magazine, Barron's, Time, Newsweek, Money Magazine, the Wall Street Journal, the New York Times, Reuters, and others. Subscribers to Dow Theory Letters number over 12,000, hailing from all 50 states and dozens of overseas counties.

A native New Yorker (born in 1924) Russell has lived through depressions and booms, through good times and bad, through war and peace. He was educated at Rutgers and received his BA at NYU. Russell flew as a combat bombardier on B-25 Mitchell Bombers with the 12th Air Force during World War II.

One of the favorite features of the Letter is Russell's daily Primary Trend Index (PTI), which is a proprietary index which has been included in the Letters since 1971. The PTI has been an amazingly accurate and useful guide to the trend of the market, and it often actually differs with Russell's opinions. But Russell always defers to his PTI. Says Russell, "The PTI is a lot smarter than I am. It's a great ego-deflator, as far as I'm concerned, and I've learned never to fight it."

Letters are published and mailed every three weeks. We offer a TRIAL (two consecutive up-to-date issues) for $1.00 (same price that was originally charged in 1958). Trials, please one time only. Mail your $1.00 check to: Dow Theory Letters, PO Box 1759, La Jolla, CA 92038 (annual cost of a subscription is $300, tax deductible if ordered through your business).

IMPORTANT: As an added plus for subscribers, the latest Primary Trend Index (PTI) figure for the day will be posted on our web site -- posting will take place a few hours after the close of the market. Also included will be Russell's comments and observations on the day's action along with critical market data. Each subscriber will be issued a private user name and password for entrance to the members area of the website.

Investors Intelligence is the organization that monitors almost ALL market letters and then releases their widely-followed "percentage of bullish or bearish advisory services." This is what Investors Intelligence says about Richard Russell's Dow Theory Letters: "Richard Russell is by far the most interesting writer of all the services we get." Feb. 19, 1999.

Below are two of the most widely read articles published by Dow Theory Letters over the past 40 years. Request for these pieces have been received from dozens of organizations. Click on the titles to read the articles.

"Rich Man, Poor Man (The Power of Compounding)"

"The Perfect Business"


Stocks & Equities

European Stock Market Recovery

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Posted by Adam Hamilton

on Thursday, 22 March 2012 05:57

The world’s stock markets are increasingly interrelated. The psychology of traders, which drives most short-term price action, is continuously shaped by the nonstop torrents of global news flow. So even Americans can no longer afford to ignore what is going on in overseas markets. And the influence of European stock markets in particular is large and growing, making their recovery well worth watching.



Stocks & Equities

An Update on Seasonality of Gold Equities

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Posted by Don Vialoux: Timing the Market

on Tuesday, 20 March 2012 17:49


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The PDAC Curse continues! Canadian gold equities have a history of moving higher from the last week in December until the third week in February in anticipation of encouraging news to be released just before or during the annual Prospectors and Developers Association Conference in Toronto early in March. Thereafter, Canadian gold equities tend to move lower. They followed their seasonal pattern once again this year. The TSX Gold Index from its low on December 29th to its high on February 23rd gained 13.4%. Subsequently, the Index plunged 13.4% by this Wednesday to reach a 20 month low. Moreover, next major support for the Index on the charts is 14% below current levels.

Weakness in gold equities this week is related to a $US68 per ounce plunge in the price of gold from last Friday to this Wednesday. On Wednesday, gold fell below its 200 day moving average at $1,679, a technical level that previously had provide strong support. Gold was responding partially to strength in the U.S. Dollar following news that U.S. Non-farm Payrolls in February continued to recover from depressed levels. The U.S. Dollar also strengthened following encouraging news from the Federal Reserve on Tuesday confirming slow, but steady economic growth in 2012. The Federal Reserve also noted its intention to maintain an easy money policy until the end of 2014.

The TSX Gold Index did not respond well to the news. Weakness in the Gold Index was the main reason why the TSX Composite Index dropped sharply on Wednesday when major U.S. equities indices were reaching multi-year highs. Moreover, prospects for gold and gold stocks are not encouraging between now and November 6th, the day when the next U.S president is elected. The U.S. Dollar has a history of moving higher between the end of March and the end of October during a U.S. Presidential election year. Not surprising, gold and gold stocks have a history of moving slightly lower during this period. Normally, gold and Canadian gold stocks have a period of seasonal strength from the end of July to the end of September followed by a second period of strength from the beginning of November to the third week in February. The latter period is likely to be the better period for re-entering the gold trade this year.

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Preferred strategy is to look for better opportunities than gold and gold equities between now and November. Silver, platinum and their related equities are preferred over gold if your investment focus is on precious metals. Silver and platinum benefit from a growing demand for industrial purposes and have a history of outperforming gold between now and May..

The Gold Bugs Index fell another 33.44 points (6.56%) last week. It broke support at 477.93 to confirm an intermediate downtrend. Strength relative to gold remains negative.

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Stocks & Equities

The Market Surprises

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Posted by Equedia

on Monday, 19 March 2012 03:58

The major indices reached multi-year highs with the Dow breaking solidly through the 13,000-point barrier, the SP 500 edging over 1,400, and the Nasdaq Composite ploughing past 3,000 all in the same week. The market is now up over 30% from its October 2011 bottoms and nearly reaching 4-year highs.sc

When you look at technicals, the market is pointing to higher prices.  

We enjoyed straight days firmly above the old highs of 1370 earlier in the week, which helps confirm the recent breakout. With the recent softening of the bond market, this technical sign may help provide the catalyst for the next leg higher.  

The recent sell off in the bond market means we are likely near the end of a 30-year bond rally. Over the last 30 years, rates have been going lower making the bond market a safe and profitable haven for investors - especially with the recent economic volatility.  

But rates are now bouncing up from historic lows.  

That means bond investors will start losing money for the first time in a LONG TIME. As stocks make new highs, naturally bond funds will see outflows and stock funds will see inflows. This fresh money coming into the stock market could help push the market up to higher highs.  


(From a timing perspective, this doesn't mean the outflows from bonds will diverge into stocks right away. We've also had some surprisingly strong gains over the last few weeks which may signal a short term sell off. However, over the next few months, we may see more gains in the market up until May as predicted in the paragraph from above.)

U.S. gross domestic product (GDP) expanded an average 2.4 percent per quarter in the 2 1/2 years since the recession ended in 2009. While that means the world's largest economy hasn't had a smaller post-recession recovery rate since at least the 1940s, it also means there is room to climb higher when compared to past events. In the 2003 bull market, GDP rose 2.7 percent on average, before the S&P 500 surged 102 percent. In the 1982 rally, the rate was 5.7 percent with equities more than tripling during that cycle.  

Does that mean we're about to see the markets climb even higher?

When you have a market that has performed so well so fast, it's really hard to jump in. From a psychological standpoint, there is by far a better chance for the market to head down rather than up. But from a technical standpoint, the market is looking to climb higher.

If we breach the 2007 highs and stay above there, we could be in for another strong bull market rally.

The one biggest concern scaring investors is the volume in trades that has been pushing the market higher. Trading at the New York Stock Exchange declined to the lowest level since 1999 last month, with the average volume over the 50 days ending Jan. 25 slowing to 838.4 million shares. The value of stocks changing hands dropped to $24.9 billion, a 50-day average not seen since at least 2005.  

Keep an eye on bond outflows - the more this sell off continues, the greater chance the volumes in the equities market will increase on the buy side.

The Bigger Picture

The problem with our market today is that investors are reacting to daily news events. I have said this many times before. If you're a day trader and have time to trade the news, this is the market for you.  

But for most investors, waking up at the break of dawn and trading in front of a computer screen all day doesn't work. That's when you have to look at the big picture. The big picture is the real reason the markets are moving the way they are.

Right now, the markets are moving because of easy money and slightly better economic numbers.

The world continues to print more money - whether it's a direct infusion of liquidity, operation twist or giving banks money at negative real interest rates.  

Bernanke just told us last week that interest rates will remain at current low levels until late 2014 and that operation twist will continue. That means free money for at least another two years. While he suggests that there is no QE for now, he surely did not say there won't be another one coming. The Fed will continue to play a major role this year.    

There is so much printed money being flooded into the world and the stock market likes that type of liquidity. World money supply has soared dramatically over the past two years. Eventually, the piper will need to be paid. In the meantime, this liquidity has built a foundation under the stock market.

The IMF just said Greece will need more money - even though it just got hundreds of billions weeks ago. Brazil has promised to keep interest rates low for at least another year. Every week I stress that free money will continue to pour in around the world. But do you know how bad this situation really is?

The World's Best and Worst Example

It took the U.S., the world's largest debtor nation, more than 200 years for its own debt to reach $1 trillion. In the past four years alone, this debt has soared by over $5 trillion.  

The U.S. is currently running deficits of over $1 trillion per year, which means this number will only keep growing. The U.S. has no way to pay this debt off - not without making major cuts that will lead to a revolt. When you consider that millions of baby boomers are now reaching retirement age and will be drawing on social security, the debt levels will continue to grow even faster than it has in the past four years.  

That's a scary thought.

If you look at U.S. total debt, the U.S. is now at about 400% debt to GDP ratio. Morgan Stanley says there's "no historical precedent" for an economy that goes over 250% of its debt to GDP ratio without a crisis or huge inflation.  

So when will it be time to pay the piper? When will this all come crumbling down? I don't know. For now, politicians will continue to do what they're doing. They'll continue to patch things up by printing more money to pay for expenses, including paying the interest on their loans. They'll continue to sell their debt to any nation that can afford to buy it.  

Most people think that China is the number one holder of U.S. debt and Japan number two. Those people are wrong. The number one spot belongs to the Fed - by more than half a trillion dollars.  

In the long run, all of this money printing and cheap money will devalue the dollar - especially against the purchasing power of gold.

(for now, we may see strength in the dollar relative to other currencies such as the Euro but this is based on its value relative to other currencies and not the purchasing power for assets such as gold and silver)

While gold and silver have recently experienced a selloff, these represent buying opportunities in the big scheme of things. I stick with my prediction that gold will be above $2000 and silver above $40 before the year is over.  

The truth will eventually unfold. Take every opportunity to protect your wealth.

In the end, "He who has the gold makes the rules."

Until next week,


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