African Barrick
CIGA Eric

ABG’s trend energy, REV(E), already exceeds the highs set in May and June. This as well as the its general positive divergence with price suggests that trend energy is increasing.

African Barrick (ABG-L):

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Economic Soft Patch Will Be Met With Further Stimulus and Liquidity
CIGA Eric

The power up trend (PUT) in the prices paid to purchasing manager’s index ratio (PPPMIR) was broken in June 2010. This suggests the onset of another economic ‘soft patch’ that will be met with further stimulus and liquidity. These injections will induce another round of fiat devaluation that will turn the ratio to the upside by 2011.

ISM Prices Paid Index (PP) to National Purchasing Manager’s Index (PMI) Ratio:

Source: www.ism.ws

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Jim Sinclair’s Commentary

The Shiller Index just reported the surprising increase in home prices. Their nose continues to grow.

House Prices Are Still 10% Too High, Says Barry Ritholtz
CIGA Eric

House prices relative to gold are still way too high. The U.S. dollar is a biased unit of measure, or what statisticians call a nonstationary time series. Think of it as filling your gas tank on a pump with a leaky hose. Even though the price of gas is the same as a previous fill up, the same amount of money won’t fill the tank.

The U.S. dollar median home price, while broken from up trend, appears to be consolidating. Home price in a stable, unbiased currency such as gold, paints a completely different picture. A steep downtrend that started in 2005 has broken to new lows in 2010.

All charts are updated through August 2010.

U.S. Median Home Price (MHP):

U.S. Median Home Price (MHP) to Gold 

The homebuilders to gold ratio (HBGOLDR) is on the verge of a consolidation breakdown within a steep downtrend.

S&P Homebuilders (HB) to Gold Ratio:

Ritholtz, who runs Fusion IQ and writes The Big Picture blog, says that the NAR’s happy spin is making homeowners too optimistic about the prices they’ll be able to get–thus encouraging them to price their houses too high.

In this market, says Ritholtz, houses priced realistically sell quickly. But since the majority of sellers are still dreaming of the good old days, most houses are priced too high and aren’t selling. If the NAR would stop spinning and start helping sellers get more realistic, Ritholtz says, the housing market would fix itself more quickly.

finance.yahoo.com

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Dear Eric,

Your price objective is somewhat stout, but quite possible if the price of gold meets Armstrong and Alf’s targets.

Regards,
Jim

Silver Attacking Important Resistance Again
CIGA Eric

Silver is attacking the all important $19.51 to $20.18 resistance zone. This zone reflects the March 2008 and October 1980 swing high and is an important line in the sand that will be vigorously defended in the paper markets. The January 1980 high magnet of 38.25 will be pulling harder once this zone is breached.

Silver, London P.M. Fixed:

As long as trend energy continues to step higher relative to price (that is, produce higher highs than previous readings at a similar price level), it’s only a matter of time before 19.51-20.18 resistance zone is breached to the upside.

Paper Silver ETF (SLV):

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Long Term Secular Trends in Small Cap Stocks
CIGA Eric

The long term secular trend in small cap stocks reflects devaluation through inflation. Similar to large caps, small cap stocks are bounded within a depressionary or devaluation box.

U.S. Small Cap Stocks Total Return Index (SCSTRI):

While small cap stocks outperform large caps within devaluation boxes, they underperform gold.

U.S. Large Cap Stocks Total Return Index (LCSTRI) to U.S. Small Cap Total Return Index (SCSTRI) Ratio:

U.S. Small Cap Total Return Index (SCSTRI) to Gold Ratio:

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