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Timing & trends

Bob Hoye: "Rogue Traders, Rogue Central Bankers and now – Rogue Algorithms"

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Posted by Bob Hoye - Institutional Advisors

on Thursday, 09 August 2012 11:19

PERSPECTIVE

Out here in Vancouver – the home of the old and notorious Vancouver Stock Exchange – we have directly watched and took advantage of High Frequency Trading. One of our favourite exploration companies closed Tuesday at 2.13.  Opening at 2.12 yesterday, it ticked up to 2.14 and plunged to 1.81 in the first ninety seconds (repeat seconds) of trade. That was on 1,000 individual trades amounting to a little over 100,000 shares. Recent daily volume on NY has been around 40,000 shares on 25 trades.

At day's end, the volume was 6.5 million on NY and Toronto, with over 40,000 trades. Wild! The high was 2.16 and the close was 1.90.

No matter how reckless the promoters were back in the day, nothing close to this week's absurdity could ever have happened. It had to be written up in these pages.

Of course, this was part of the Knight Capital trading disaster and Forbes at 1:44 NY time wrote "Bears Claw Into Knight Capital after Bizarro Trades".

The inmates have really taken over the institution and it will be interesting to see what they can do next.

The other excitement for the day started at 2 PM when the DX jumped from 82.7 to 83.1 in less than an hour. Our first thought was that perhaps Bernanke had missed the big Fed pronouncements, but sadly he made them. We have yet to figure out what he said.

CREDIT MARKETS

Other than disruptions from disastrous news from Europe, U.S. credit markets remain complacent to enthusiastic. Actually the action in corporates (LQD) has been outstanding – outstanding enough to register technical readings only found at important tops. Our price target has been the 122 level and today it's reached 121.

Close enough to say it is time to start taking money off the gambling table that the bond markets have become.

The technical peak in corporates follows the "Eiffel Tower" peak on long-dated treasuries.  Up one side and eventually down the other.

It seems that the reach for yield is throwing cash and caution out the window. This shows in emerging market bond funds. Part of the buy recommendation is that such countries have a growing middle class with funds to invest. JP Morgan's emerging bond fund ETF is one example and is yielding around 4.5%. The EMB chart (follows) is becoming overbought. Also, important highs have shown a common pattern as the RSI sets a negative divergence.

With Wall Street back to "bundling" sup-prime stuff, it is worth reviewing a reliable indicator of the transition from good times to the opposite. The sub-prime mortgage bond we monitor (AAA.6-2) gave us confirmation of the pending high for stocks and commodities in the spring. It is working on a similar top right now and with today's recklessness higher prices have been accomplished. The chart follows.

Picture 3

After some relief, Spanish bonds are again increasing in yield. The break to new highs will be devastating to financial markets and to the central banking crowd. The latter have been working very hard to prevent or limit bad things.

One of the features of a great post-bubble contraction is that the recession starts with the first crash. Recessions are severe and recoveries are weak and in our example the first business cycle out the crash is ending.

Earnings and tax receipts so essential to servicing debt are again diminishing.

KNIGHT CAPITAL FIASCO

The company is probably seriously impaired and while the cause of their disaster may be unique.  Although small, we should view it as a possible insolvency. Within a likely peak in speculative urges this is could be a classic warning.

Recent stock action is interesting. On July 18 KCG plunged from 11.75 to 10.25 as trading volume jumped from a typical 1 million to over 4 million shares.

At 2.70 the action has taken out the low of 3.47 set in 2002.

CURRENCIES

Today's swing in the DX from 82.1 (four-week low) to 83.5 is impressive and working an outside reversal – to the upside. This is appropriate for another crisis, and Levente notes that the ECB was "fooling" around in foreign exchange markets overnight.

Last Thursday's ChartWorks noted that technically the dollar was poised for further weakness. This is still in the chart and the jump in the DX seems mainly due to Spain and KCG.

SIGNS OF THE TIMES:

"GM Ramps Up Risky Subprime Auto Loans to Drive sales"

– Investors.com, July 27

Electrifying concept!

INTERESTING NUMBERS:

In 1962, 6 percent of Americans were on welfare. Now it is 35 percent, or more than 100 million people. Many of whom vote. Some 9 million are receiving federal disability payments, which is up from 5 million in 2001.

"An Intriguing Idea to Encourage Bank Lending"

– Wall Street Journal, July 30

This was an idea promoted by Prof. Alan Blinder at Princeton. An ardent interventionist, he was instrumental in the "Cash for Clunkers" fiasco of summer, 2009. This is minor compared to the late 1980s when he was one of the top-selling authors of economics text books.

As socialism/communism was being marked "failure" by Eastern Europeans his1988 textbook asked "The real question is not whether we want elements of socialism or planning to abridge our personal freedoms, but by how much?".

This is from a Special Discussion of September 1, 1991 and it is attached.

The main story from Blinder's notion is that banks are not lending enough – according to those who have personal ideas about controlling the lives of other people.

"$100 Million! The Most Expensive Apartment in the Country Hits the Market"

"The super luxury market has been red-hot in the last few months."

– New York Daily News, July 30

INSTITUTIONAL ADVISORS

WEDNESDAY, AUGUST 8, 2012

BOB HOYE

PUBLISHED BY INSTITUTIONAL ADVISORS

The following is part of Pivotal Events that was

published for our subscribers August 2, 2012

 

Link to August 3 ‘Bob and Phil Show’ on TalkDigitalNetwork.com:

http://talkdigitalnetwork.com/2012/08/qe-talk-fades/

 

 BOB HOYE,   INSTITUTIONAL ADVISORS

E-MAIL  bhoye.institutionaladvisors@telus.net">bhoye.institutionaladvisors@telus.net

WEBSITE:   www.institutionaladvisors.com



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Timing & trends

Banks Manipulating Gold – People v Banks – & Dow

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Posted by Martin Armstrong - Armstrong Economics

on Thursday, 09 August 2012 08:41

qin-cashcoin

We have to understand that the bankers DO have fake analysts to put out bullshit. I believe they love to churn the fiat currency thing to divert the blame from them and to make the solution appear that returning to a gold standard means they get paid in gold. But then there are organizations like GATA that insist upon the bankers are manipulating gold to keep it down. Aside from the fact that they manipulate markets in general for immediate profit just as the latest LIBOR scandal has exposed in Europe, The question would be what possible motive would the banks have to keep gold down? That would produce no immediate gain. So if there is some conspiracy to prevent gold from rising, the ONLY possible motive would be an exit strategy for debt. If they pay analysts to keep talking bullshit about fiat currency implying that the solution would be a return to the gold standard, then the debt would become payable in gold. That would be the ONLY plausible reason for them to care about keeping gold prices down. That would be the ultimate end game when they walk away with Fort Knox. The whole fiat currency thing is gibberish. Money historically has been many things and I have pointed out that China has always been a fiat currency since 240BC. Coins were bronze or iron and valued at whatever the emperor said they were because he was god on earth. The same reason Japanese pilots flew their planes into ships because god told them to do so. It is the DEBT that destroys empires – not fiat currency. So putting out bullshit that we need to return to a gold standard without debt restructuring, means we have to pay the bankers in gold and that is the ONLYreason they would have to keep gold prices down.

 usintastotal

Let’s face reality: Liquidity does not produce solvency and by no means will bailouts from one insolvent group of countries to another insolvent group create solvency out of thin air! All the efforts to stimulate growth fail because they are debt based that further ensures our insolvency. Nearly 70% of the national debt is interest. So there was no magic program to help the poor or middle class. All we have done is create a mountain of debt and paid the bankers like crack dealers.

I do not hate gold nor do I think gold is a barbaric relic from the past. It has its role as a hedge against the unsound finance or government, but it is a person investment hedge, not legal tender money where government gets to dictate its value and confiscate it. I am concerned that TOO MUCH nonsense is spun around gold that feeds the beliefs of the choir, but it is PREVENTING normal investors from buying because they do not believe the hype. Preaching to the choir is not my style. We are supposed to be trying to figure out what makes the world tick. Some are like Marx trying to dictate to the world how it should function according to their belief. But if we hope to survive, knock off the bullshit!

HYPERINFLATION will never happen because the bankers are demanding austerity and higher taxes to ensure they are repaid. They do not want funny money. In Iceland the homeowner buys a home for 1 million krona and if the currency declines by 50%, he now owes 2 million. This is their dream for the rest of the world. Getting rid of Glass-Steagall was the worst possible thing ever. The banks want to trade with other people’s money because they realize that the purchasing power of money is declining as debt escalates. Their goal is to be a hedge fund using your money, the taxpayer ensures no loss, and they keep all the profits. Then they stack the bureaucracy (UNELECTED GOVERNMENT) with their own people. Who was Obama’s biggest contributor last time – Goldman Sachs.

MOF controls Japan and will completely destroy the economy. Most party leaders come from the Ministry of Finance. Even the $1 billion loss taken by Yakult had to do with the fact that their finance officer was ex-MOF and he did not hedge believing that MOF would support the Nikkei as they kept implying. The market collapsed anyway. Japan is just hopeless with a debt set to exceed $12 trillion. MOF there is doubling taxes rather than reform and restructuring.

 rabbithole

Europe is a basket case and Germany should have floated Eurobonds. Their debt would have depreciated as it should have but instead Germany is being dragged down the rabbit hole. Their fear of inflation will bankrupt Europe anyhow. There is no government that ever intends to pay anything back. So what’s up with always borrowing? Whose advice are they following?

The US will go into an economic decline since the bankers are insisting upon higher taxes and their spokesman is Buffett. They are advising for massive deflation to save their bond holdings. We will see taxes explode next year. The bipartisan committee of course could not reach any agreement on cuts so they go into automatic mode next year.  State and local governments are told if they want to borrow, they too have to raise taxes. The bankers are taking their pound of flesh.

The economy is overburdened with debt obligations that cannot be repaid. We have reached the point where we NEED monetary reform and debt restructuring. Global leaders will never recognize the necessity because they are career politicians firmly in the hands of the bankers. The nightmare we face is that global leaders will deny the necessity for a world economic summit and bring Western Society to the brink of total disaster. This is a systemic economic meltdown. We lack politicians who are not in the back pocket of bankers. Democracy has been reduced to a joke.

Capital has been fleeing Spain and Europe. It has been pouring into the USA short-term which is why the Dow bottomed in June and then July with the Panic Cycle it reversed course and has made a run for the old highs. The bankers such as JPMorgan Chase have shown that they are not even about protecting shareholders, but internal management. MF Global can walk away with client’s money and nobody is charged while other investor funds are taken to pay those who lost. The courts are a joke and will no longer protect contracts and once contracts are no longer enforceable in New York, as is the case now, capital is no longer safe. Fine! They can blame me as the reason China has refused to deal with the NY bankers. You can fool people just so long. You want to rig the game, this is what happens. People leave.

The Dow & Capital Flows

 dj-08042012-m

The amount of capital that has been pouring out of Spain is unbelievable. We are now approaching 27% of GDP. This is ensuring a collapse in real terms. The banks are falling apart and the ECB has been putting in 300 billion euros monthly. That is 10% of all deposits in Spain! They have enacted laws to prevent people from withdrawing money and imposing fines if you do not inform the government that you have overseas accounts. See, this is what I am talking about where gold provides the alternative to the above ground economy. This is not about fiat or hyperinflation, this is about privacy and survival against governments that are bent upon robbing the people to pay the bankers so they can keep selling their debt and pay themselves. Putting money in equities where you take delivery is also possible. Do not leave them in the hands of a bank or broker. If you need the leverage, do not leave all your assets on the table.

click on image below for larger version:

 dj-fors-m

When we look at the two computer forecast arrays for the Dow Jones Industrials expressed in a Basket of Currencies and the in US dollars, we can see the disparity being caused by international capital flows through currency values. The Panic Cycle was due in June in a basket format and July in dollars. This combination produced the June low with the July reversal to the upside. That is what a Panic Cycle does. In this case, we declined into the June low, and rallied off to the upside. A Panic Cycle is ideally an outside reversal exceeding both the high and low of the previous period and changing trend. In the instant case, we are looking at a Panic to the upside because capital is fleeing Europe. The 1987 Crash was the opposite pattern and capital fled the USA and went back to Japan causing the bubble there in 1989.

 djind-m-072012

Technically, the Dow has broken out through the top end of the 2000 Downtrend Channel. The Weekly Bullish Reversals are 13571, 13615, 13770, and 14170. Weekly timing targets seems to be lining up as July 13, August 17, September 21, and October 26 with the two more dominant targets being October 5th and December 14th. When we look at the technical resistance for August it stands at 13765 which very close to the 13770 Weekly Bullish Reversal. Support lies at the top of the 2000 Downtrend Channel. 12568. If we can achieve a weekly closing above 13770, then we may be looking at a double top.

In gold, we have 1547 as the Weekly Bearish. Electing that would give us an August low with a recovery thereafter. Nevertheless, if gold closes above 1570 at year end, we can still see a correction before a breakout to the upside. So it would be nice to see a clean low for gold in 2012 for that would be much better for the long-term ahead. I still disagree with those that only say buy when the professionals are selling it to them. Knowing how corrupt the banks are and how they try to control the press, government, and analysis, I have to question the integrity of such analysis.

So hang on to your seat. It looks like the fall is going to be very interesting. Thank God for a unemotional computer right now. Somebody has to look at just the numbers please. There are always two sides to every fundamental no matter what you focus on.

 San Diego Conference September 22-23

Seats are $750, $1500, or $2000 

Shanghai Training Session

Armstrong is the developer of the Armstrong Economic Confidence Model, best known for calling the crash of 1987 to the very day. The model pegged June 13-June 14, 2011 as the start of a long-term upward trend in the market; the market obliged by notching its first weekly rise since April 29.

 



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Timing & trends

Market Update: Stocks, Bonds, Oil, Gold US Dollar

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Posted by Peter Grandich - Grandich.com

on Wednesday, 08 August 2012 07:04

U.S. Stock Market - While no roaring bull on general equities, I’ve continue to suggest that betting against a market rise would be a poor choice. Despite all the predictions of meltdowns and such, the market continues to discount very legitimate poor fundamentals and technicals. I continue to suggest it would come as no surprise that it makes a minor new, all-time high this year. The only potential “game-changer” to that is my long-standing belief that a major military conflict in the Middle East is a question of when, not if.

U.S. Bonds - I had felt an opening short position to the 10-year T-Bond when the yield hit 1.44% was  a way to play the upcoming worse investment for the next ten years and to become aggressively short if the yield fell to 1.25% or below. Those thoughts remain.

U.S Dollar – The suggestion that the 83-84 area on the U.S. Dollar Index could prove to be the top in what was little more than a dead-cat-bounce in the U.S. Dollar, appears to have been good eyesight as of now. I continue to believe what we have witnessed in Europe is a mere opening act to what shall unfold in the U.S. (starting by this time next year).

Gold – Despite the bear boat being loaded to the gills and the bull camp nearly deserted, yours truly has stood tall in his belief the “mother” of all gold bull markets remains intact. I was comforted last week when I read the world’s worse gold forecaster and the #1 buffoon in the gold perma-bear camp, poorly attempt (as he does daily in his dribble commentaries) to mock my “mother”  view and twist other people’s comments to suit his daily bashing of gold (the latest being Lawrence Raulston’s gold and junior resource shares comments). There are numerous fundamental and technical reasons to be bullish on gold but none more important than the most wrong gold forecaster in the last  decade continues to publish daily reasons why gold’s 500% rise is in his eyes just a mirage (just like the mirage that anyone who has listened to him isn’t broke by now). Remember, there will be another fundraising effort for the Tokyo Rose of gold bears when gold breaks above $2,000.

Oil and Natural Gas - Nothing has changed; like oil and avoid natural gas.

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I of course, welcome any opportunity to provide you with insurance and estate planning services and my thoughts on economic, social, political and spiritual matters can be found at my other business site www.grandich.com

We welcome any comments (good or bad) on our new website.

3d-up-and-down-arrows-27dc05



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Timing & trends

"A Huge Buying Opportunity"

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Posted by Mark Leibovit - VR Trader

on Tuesday, 07 August 2012 11:28

GOLD- ACTION ALERT - BULL

Gold rallied yesterday as the Dollar fell. Gold rose 8.00 to 1611.60. But, why do I get the feeling that the rug can be pulled out from under us at almost at anytime? If you've been following the circus at the CFTC and Bart Chilton's pilgrimage to get to the bottom of what appears to be blatant manipulation of the silver market (as well as gold), you know traders are watching very carefully. Chilton said yesterday (despite the weekend story from London's Financial Times that the CFTC was going to drop the investigation) "I continue to believe, consistent with my previous statements and information from the public, that there have been devious efforts related to moving the price of silver. There have also been silver and gold market anomalies outside of the silver investigation window that have raised, and continue to raise, market concerns." As you know, there is a strong inference that the manipulation is being done at the bequest of the U.S. Government and JP Morgan is simply a 'broker' taking orders. I cannot imagine the U.S. Government being exposed here simply because they would argue it can't happen due to 'national security issues' and the whole matter would simply be hushed up. Though silver could rally on the anticipation of a positive outcome (the government is exposed), more than likely silver bulls will be disappointed and the market could nosedive to new lows instead.

Though seasonal studies and my own Annual Forecast Model along with current bearish sentiment (especially in the gold mining shares) suggest we should remain overall optimistic (forgetting the risk of a Fall shakeout). It's like building a mental bomb shelter you never use. If you believe as I do that we cannot discount the viciousness of our adversaries, Bernanke and Geithner could attempt to drive gold toward 1300 using the 'phony' paper market at the COMEX/CME in order to discredit gold as a viable alternative to progressively worthless Dollars. With gold suppression schemes underway for decades (gata.org has the documented proof, if you care to read it), nothing is really new here. It appears 1520 on the low end and 1635-1650 on the upper define near-term trigger points for the bears and the bulls. In silver 26.00 has been surprisingly holding, while the upside breakout would have to be over 31.00-32.00 in my opinion.

Should we see a waterfall decline in either gold or silver, we have to be prepared to back the truck up for a huge buying opportunity. The availability of physical metal, however, at severely discounted 'phony' prices engineered in the paper market may be a big problem. Do you think physical holders of gold and silver are going to sell for worthless paper currency at bargain basement prices? Good luck. You might get a few coins, but don't hold your breath.

Recall, gold hit an all-time record high of 1922.20 on September 6, 2011, but fell to a 6-month low of 1521.80 on December 29. These are the two important benchmarks that traders and investors are focusing on at this time. Gold stocks are a special opportunity because by certain valuation metrics, they are cheaper than their 2008 lows and are as cheap as they have ever been. The 12-year bull is going to continue, driven by central bank purchases, currency destruction, movement away from the U.S. Dollar as the world's Reserve Currency and the general momentum of a bull market.

 

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Timing & trends

How to play “the fattest, juiciest financial bubble that’s ever existed”

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Posted by Bill Bonner - The Daily Reckoning

on Monday, 06 August 2012 08:25

 

 Picture 4

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily ReckoningDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010. 

Special Report: How Will Your Life Change If The U.S. Gov’t Can’t Borrow Another Dollar? Complete political and social unrest could be just the beginning. You owe it to your family’s safety and security to watch this urgent video report right now. There might not be much time for you to act… Don’t wait, watch now.

Read more: Uncharted Territory: An Interview with Bill Bonner http://dailyreckoning.com/uncharted-territory-an-interview-with-bill-bonner/#ixzz22lSLq4rV



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