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Timing & trends

The 64 Zillion Dollar Questions & Market Perceptions Shifting in Stocks Commodities Currencies & Gold

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Posted by Victor Adair via Union Securities

on Monday, 04 June 2012 10:18

Since February I have been anticipating a significant change in market psychology that would produce lower stock and commodity prices and a rising US Dollar. I waited for confirmation and got that...in spades...the first week of May (see May 7 commentary) with a number of KEY WEEKLY REVERSALS. I continue to trade on the expectation of lower stocks, lower commodities, and a higher USD...with gold also doing better...all the while expecting that we could see a "brisk" counter-trend move across markets! - from www.VictorAdair.com

Market action the last three days and especially today was a perfect storm, or if you like, it never rains but it pours: European debt concerns intensified and evidence mounted that the global economy is slowing down. Markets behaved just as you would expect in a post credit bubble collapse...by seeking safe havens in a deflationary environment...as the consequences of "way more money has been borrowed than will ever be repaid" keep coming home to roost.

Last week I wrote about how I had “done a 180” from being a gold BEAR for the last three months (Feb to May) to being a gold BULL as I sensed a change in market psychology...I thought that gold, which had been the baby thrown out with the bathwater as "risk assets" declined, might morph from a "risk asset" into a "safe haven"... and that seemed to happen this week...especially today when gold rallied over $60 while global stocks tumbled.

Looking at markets this week it would be a gross understatement to say that money moves as Market Perceptions change. Money is physically moving from the periphery to the centre…Spanish banks have apparently lost deposits of 100 billion Euros as people pull funds out of Spanish banks and either put that money under the mattress or wire it to Germany...in another context money is leaving the "rest of the world" and going to the USA…(and Japan, oddly enough) moving from the periphery to the centre…

Charts: We had KEY WEEKLY REVERSALS this past week in the S+P and gold (and silver and platinum…)

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The VIX, the FEAR index, which traded to a 5 year low of 14% in mid-March, jumped to 26.6% today but it is still a long way from the 45% it hit in early October of last year...which might imply that, "You ain't seen nothing yet" as far as fear goes.

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Credit markets: the yields of (relatively!) "safe credits" (US, UK, Germany, Switzerland, Canada, etc) have moved to record lows while "weak credits" have seen rising yields.

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Energy: Crude oil prices have plummeted as Perceptions change about the health of the global economy...less demand for fuel...WTI was $106 May 1,2012...it traded a low of $82 today...a 23% decline. The Coal ETF traded to a three year low.

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Currency: the CAD has lost 6 cents from the end of April to today. The Euro fell 9% to a 2 year low in the same time frame...the US$ Index has closed higher for 5 consecutive weeks.

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Stocks: The major American stock indices have been among the strongest in the world but today the DJI went negative YTD. The Toronto stock index is down ~5% YTD.

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Commodities: the CRB commodity index has been trending lower since the KEY turn date of May 2, 2011, and has fallen ~27% since then to a 2 year low, down 12 of the last 14 weeks. My concern, as previously expressed, is that there has been a huge build up of speculative long positions in commodities (greater than before the crash in 2008) and these positions are vulnerable to a liquidation accelerated decline....bad news for the CAD and other commodity currencies.

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The 64 Zillion dollar questions: Will the "authorities" be spurred to action…or are they “keeping their powder dry” until things get worse before they act? Is the intensifying crisis in Europe severe enough to make the authorities try to get in front of the bank run with some kind of continent wide deposit insurance? A Eurobond? Will the Fed come in with more QE as the American employment picture worsens? It looks like the gold market, in addition to being a “safe haven” during a “risk asset” storm may be anticipating some form of "printing."

Psychology: Very risk adverse…BUT…market Perceptions could turn on a dime if the “authorities” take action…possibly setting off a sharp rally in the Euro if some of the current massive short positions try to cover...and given the All-One-Market aspect of today's financial markets, a sharp reversal in the Euro could set off sharp reversals in other markets...

My trading horizon view: Since February I have been anticipating a significant change in market psychology that would produce lower stock and commodity prices and a rising US Dollar. I waited for confirmation and got that...in spades...the first week of May (see May 7 commentary) with a number of KEY WEEKLY REVERSALS. I continue to trade on the expectation of lower stocks, lower commodities, and a higher USD...with gold also doing better...all the while expecting that we could see a "brisk" counter-trend move across markets!

My "Big Picture" view: remains that we are living in a deflationary world...a natural sequel to a thirty year credit boom...that the actions of the "authorities" to date have been "rear-guard" in strength, although certainly powerful enough to produce tradable rallies. I have thought that deflationary pressures would move from market to market like "rolling thunder"...hitting the USA first, then Europe with Asia next up. My net worth is nearly all in cash, 75%CAD, 25%USD, and I actively trade financial markets to make money and keep watch on developments.

Best wishes for good health and good trading,

Victor

Victor Adair - www.VictorAdair.com

Senior Vice President and Derivatives Portfolio Manager

Victor Adair is a Senior Vice President and Derivatives Portfolio Manager at Union Securities Ltd. Victor began trading financial markets over 40 years ago and has held a number of senior positions during his long career as a commodity and stockbroker. He provides daily market commentary on CKNW AM 980 radio Vancouver and is nationally syndicated on Mike Campbell's weekly Moneytalks radio show.

Victor's trading focus is primarily on the currency, precious metal, interest rate and stock index markets and his clients are high net worth individuals and corporations.

Contact Victor:


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Timing & trends

Bonds Nearing a Great "Shorting Opportunity" - Oil Heading Much Lower

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Posted by Peter Grandich & Jack Crooks

on Thursday, 31 May 2012 09:30

I’ve held out shorting U.S. bonds on a belief there will be QE3 of some sort. It has been wise to do so up until now. 10-Year T-Bond could see 1.50% yield. Hard to imagine passing up on that as a shorting opportunity so stay tuned.
 
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Also looking to go long oil on a break below $85. Will consider using UCO and USO if and when time appears right.
(ED Note: Jack Crooks of Black Swan has been double short Oil and is sitting on open gains of up to 41%. Jack expects Oil to fall much further but is taking some profits today.  
 
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The above from Peter Grandich via his section just posted called "Things". 8 more "Things" are posted HERE


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Timing & trends

Big Opportunities Setting Up in Gold, Oil & Copper

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Posted by David Bensimon via Michael Campbell

on Tuesday, 29 May 2012 09:38

Michael Campbell: David Bensimon declared we were in a commodity driven, prosperity driven boom, and to adjust yourself accordingly. Then coming out of the big disruption of 2008, in the last quarter of 2008 and early 2009 Bensimon said "don't worry the Commodity Bull Market is going to reassert itself in a magnificent way". Obviously there was major money to be made following that advice.

Now we have seen real weakness across the board in commodities,  what do you see now? Specifically is the commodity bull market over?

Whole interview begins at the 19:17 minute mark. Basic predictions transcribed below

Bensimon: The quick answer is certainly not. The commodity bull market is really a multi-decade really long term cycle. Of course in the course of any large scale long term movement there are going to be swings within that trend that go in both directions. What we are in right now is a corrective movement in a larger uptrend.

As far as some technicals and fundamentals. I am looking out the window here in town in  China and I am seeing building after building of unfinished projects that have clearly halted. So the facts on the ground are that there is a visible slowdown here in China in the construction industry which is a major part of China's economic growth, in Europe you have a real crisis on the debt side, and these kind of forces is what is driving a pullback in commodity prices.

On specific commodities:

1. Copper

I mentioned 6 weeks ago in my quarterly report that copper is vulnerable to a 25% drop. That sounds like a big drop but in the context of markets that move in the  100's of percentages going up 25% going down is not that large on a relative basis. The expectation was a drop from $4 back to $3 driven by the fundamentals of a slowing China and technical elements supporting a retest of that low at $3. The market in fact fell quickly to $3:50 and is now hovering around $3:40 and there is really no change to my expectation that we are in the middle of this downswing and we should reach another 10-15% to that $3:00 area, probably in mid-July.

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2. Oil

My view back in the April report about Oil which is an even larger industrial commodity, that it would very precisely drop 14-15% from $103 to $89, which the first downleg of a slightly larger movement. It would be driven by the fundamentals of a removal of the risk premium of Iran, my expectation being that the Iranian problems would ameliorate and not explode as was being expected at that time. Also the technical elements were favoring a retreat, and as it turned out the Oil market did drop exactly that %15 from $103 to the low of $90 so far. My view here is that on a short term basis we could see a little bit of consolidation, but the general movement has not completed and I would be looking for a continuation to the low $80's by around the middle of July as well.

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3. Gold:

There is a very interesting situation here. In our last discussion back in January, my expectation was for a decline to a particular timing window in April. I think it is important to always highlight that price targets and time targets are always predicated on certain other technical elements that need to be invoked or triggered to confirm those particular price or time windows. In the case of Gold, the view that the market would decline to a window of opportunity in April was predicated on the market breaking through a major channel that had been guiding the market since 2008, and the last touch of that channel occurred in December 2011 just a month before we spoke. The expectation was that if that channel gave way we could fall to an important low in April. As it turned out the market did not break that channel, as the low from December held initially and the market pushed up inside that channel. But the larger fundamental forces that were evolving in the world around that time did assert themselves and pulled the market for Gold, as with all other assets, back down to that base of the channel which by then had crawled up the the $1,600 level. What happened then was that the market did break decisively through that channel at $1,600 and plunged very quickly once that trigger had been invoked. It fell to the next natural level of support which was the double bottom at $1.520 and that's exactly where the market halted.

Its a very natural expectation that once you reach that historical support that you'll get a reactive bounce and that is what we have seen in the last week or so with the Gold market bouncing to the high $1,500's. This territory that we are in right now, conceivably could push as far as $1,620 without voiding the structure of the downtrend that we are in. But the very serious implication of having broken that major several year uptrend, notwithstanding whether it hits $1,620 or not, the market is going to continue now down to the next lower support below $1,520. The next lower support has two price levels, the $1,400 and $1,300 levels that I mentioned back in January. Those pricing levels are very much in play and the two timing windows are very particular dates in July and August. Any one of those combinations could be the one that materializes.

But the larger structure of the Commodity Bull Case is very much intact and if we do get that low of $1,400/$1,300 at the end of the summer that would be a beautiful, a really very structurally strong entry point to acquire positions in Gold with a view to continuing this long term bull trend that will take us up to the long term objective I've had for more than a decade of reaching $2,600 in 2014.

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David Bensimon correctly called dramatic market movements throughout 1998-2012. David runs Polar Pacific which you can reach HERE



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Timing & trends

Lots of action and profit opportunities!

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Posted by Larry Edelson - Uncommon Wisdom

on Monday, 28 May 2012 06:41

Over the last couple of weeks, we’ve seen plenty of action, fortunately following right along with my forecasts. So let’s take a quick look at the charts.

This will be a bit of an abbreviated video today because it is a holiday, but I still want to show you the charts of the main markets.

Let’s start with gold. As you can see here on this chart of gold, gold has indeed slid quite sharply down to around the $1,526 level, testing the low from late December 2011, and it is finding some technical support there.

We should see a bounce, bringing it back up to say $1,600, $1,610. But I do believe, based on all of my indicators, that we will see a break below $1,500 down to around the $1,440 level in the coming weeks. So I remain bearish on gold.

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Now let’s also take a look at silver. Silver has been following gold quite closely and is falling actually even sharper than gold, which is to be expected.

Silver’s finding some technical support in here, but I do expect silver to break through the $26.60, $27 support level and move lower still.

All of my indicators remain bearish in silver.

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Let’s take a quick look at the U.S. Dollar Index as a proxy for the U.S. dollar. Indeed, in the last video update I did for you, I did indicate that I expected the dollar to break this resistance line here, mid-channel, and move above the 81, 82 level.

That’s precisely what happened. I wouldn’t be surprised to see a little pullback then a further rally up to 84. This is largely being driven by the meltdown in Europe and the European sovereign-debt crisis, which in the short term is bullish for the U.S. dollar.

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Now let’s take a look at the Dow Industrials. We have begun to see a rather sharp sell-off here. However, we’re coming into some very important support levels in the Dow. More specifically around 12,250.

As long as that level holds, we should probably trade back up to the 12,900 level. And we’ll have to see what happens at that point. If 12,250 gives way on a closing basis, we could see further losses in the Dow — down to about 11,800 or maybe even 11,500. It’s a little too early to say.

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Right now I want you to enjoy your holiday. We’ve got a lot of action-packed markets that will probably continue right after the holiday as they open tomorrow morning and heading into June. I see lots of volatility and lots of trading opportunities.

So stay tuned. This is Larry. Again, have a nice holiday today and a good week.

 

Larry Edelson has over 34 years of investing experience with a focus in the precious metals and natural resources markets. His Real Wealth Report (a monthly publication) and Power Portfolio provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management.

For more information on Real Wealth Report, click here.
For more information on Power Portfolio, click here.

 

 



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Timing & trends

Mark Leibovit: How To Profit On This Current Seasonality in Markets

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Posted by Mark Leibovit via Don Vialoux

on Friday, 25 May 2012 08:26

Ed Note: Mike's Guest Tomorrow is David Bensimon:

Mark Leibovit spells it out in a quick 6 minute comment below. In short, Mark went on a Sell Signal back on March 5th and continues to think Markets are in a normal Negative Seasonal pullback that has further to go. Mark thinks there is still time for the bears to bring the Stock Market, as measured by the S&P 500, down below the recent low of 1292 and if he were an investor he would remain in Cash waiting for a confirmed low sometime between now and July. 

As for agressive traders he would be biased to the short side.  

Click on either image or HERE for all the details:

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Click on image or HERE for all the details:

 

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