Posted at 3:04 PM (CST) by & filed under In The News.

Dear CIGAs,

This is the ultimate natural cure to jet lag. Can you find the 5th puppy?

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Jim Sinclair’s Commentary

Never try to out negotiate the Chinese. If you do you might get the surprise of your life.

This administration will not accomplish what the past two failed on by force or a coalition formation.

See what you can do, if anything, and do it. That is too complicated for the US financial government.

China Considers Yuan Trading Against Ruble, Won, Official Says
By Bloomberg News

April 7 (Bloomberg) — China is considering allowing the yuan to trade against the Russian ruble, South Korean won and Malaysian ringgit to promote its use in cross-border trade, an official at the China Foreign Exchange Trade System said.

The People’s Bank of China is investigating the possibility of offering new foreign-exchange pairs, said an official at the Shanghai-based interbank exchange, a subsidiary of the central bank. He asked not to be identified as authorities have yet to make a final decision. Traders now can buy or sell the yuan against the dollar, the euro, the Japanese yen, the Hong Kong dollar and the British pound.

“That would be a further step towards making the yuan an international currency,” said Liu Dongliang, a Shenzhen-based foreign-exchange analyst at China Merchants Bank Co., the country’s fifth-largest lender by market value. “The move would help foreign companies buy or sell the Chinese yuan at lower costs.”

China is seeking greater use of the yuan to reduce reliance on the U.S. dollar after Premier Wen Jiabao said last month he is “worried” about holdings of assets denominated in the greenback. From July, the government started allowing companies in Shanghai and four cities in the southern province of Guangdong to use yuan in cross-border trade with Hong Kong, Macau and members of the Association of Southeast Asian Nations.

President Barack Obama will keep pressing China to end the yuan’s 21-month-old peg to the U.S. dollar and likely will bring up the topic when he meets Chinese President Hu Jintao next week, spokesman Robert Gibbs said. Executives at Chinese banks have supported a stronger currency to allow it to play an increased role in global trade and to spur growth in financial markets.

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Jim Sinclair’s Commentary

A major power grab by the Federal Government has been thwarted for the moment.

Forget the altruistic basis upon which the FCC made their grab. That was plausible deniability covering true purpose.

Court: FCC has no power to regulate Net neutrality
by Declan McCullagh
April 6, 2010 8:15 AM PDT

The Federal Communications Commission does not have the legal authority to slap Net neutrality regulations on Internet providers, a federal appeals court ruled Tuesday.

A three-judge panel in Washington, D.C. unanimously tossed out the FCC’s August 2008 cease and desist order against Comcast, which had taken measures to slow BitTorrent transfers and had voluntarily ended them earlier that year.

Because the FCC "has failed to tie its assertion" of regulatory authority to any actual law enacted by Congress, the agency does not have the authority to regulate an Internet provider’s network management practices, wrote Judge David Tatel of the U.S. Court of Appeals for the D.C. Circuit.

Tuesday’s decision could doom one of the signature initiatives of FCC Chairman Julius Genachowski, a Democrat. Last October, Genachowski announced plans to begin drafting a formal set of Net neutrality rules–even though Congress has not given the agency permission to begin. (Verizon Communications CEO Ivan Seidenberg has said that new regulations would stifle innovative technologies like telemedicine.)

Even though liberal advocacy groups had urged the FCC to take action against Comcast, the agency’s vote to proceed was a narrow 3-2, with the dissenting commissioners predicting at the time that it would not hold up in court. FCC Commissioner Robert McDowell, a Republican, said at the time that the FCC’s ruling was unlawful and the lack of legal authority "is sure to doom this order on appeal."

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Jim Sinclair’s Commentary

Sustained improvement in jobs? That is nonsense at the present moment.

Job Openings in U.S. Decrease to 2.72 Million (Update2)
By Bob Willis

April 6 (Bloomberg) — Job openings in the U.S. fell in February for the first time in three months, a sign employers will be slow to expand staff even as firings subside.

Openings decreased by 131,000 to 2.72 million, the Labor Department said today in Washington. Fewer people were hired and the number of workers fired also decreased, the report also showed.

“Conditions in the labor market will continue to be tenuous as firms look for a pickup in sales activity before increasing employment opportunities,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, said before the report. “Although labor conditions remain weak, we anticipate further improvement taking hold in coming months as conditions gradually improve.”

Employers in the world’s largest economy added 162,000 workers to payrolls in March, the most in three years, the government reported last week. The figures also showed more people had to take part-time jobs because of a lack of full-time opportunities and the average length of unemployment climbed to a record 31.2 weeks.

Openings fell 4.6 percent in February from a revised 2.85 million in January that was larger than previously estimated.

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Jim Sinclair’s Commentary

Based on a currency event and probably somewhat later than Mr. Santelli thinks, I concur.

The currency event will be the surprising fall of the US dollar as states and municipalities roll into bankruptcy while pensions fail.

Oh yes, the euro will rise as a mirror effect.

Santelli: $4 Gas, $150 Oil Coming This Summer
CNBC CME floor reporter explains investors could flee equity markets for commodities, including energy and put a hurt on consumers.
By Jeff Poor
4/5/2010 5:01:35 PM

With summer driving season upon us, it’s important to note that there’s a traditional jump in gas prices. But will this seasonal adjustment benefit commodities, specifically oil and make the price of gasoline even higher? That could happen if those forms of energy lure investment from what seems to be an over-valued equities market, brought on by what some claim is cheap money.

On her April 5 program, “Closing Bell” host Maria Bartiromo asked CNBC’s CME Group floor reporter Rick Santelli if a move higher in commodities was due to inflation. However, according to Santelli, it’s not inflation but a move by investors out of a potentially over-valued equities market that will cause a rise in commodities.

“Well, you know, I don’t like to link the two together,” Santelli said. “I mean, many times you know, it is core [minus] food and energy. So I think throw all that away. I think the better question is, is that when people are afraid to put their money to work in treasuries, because rates may be going higher, maybe afraid that we are a little long in the tooth in the sugar-buzz rally of equities – boy, commodities is the place to be. Most of the good dollar trades probably already out there.”

And with this flight from equities to commodities, Santelli explained it could and will cause an upward adjustment in energy prices.

“We have the cyclical side – we’re going to have $4 gas this summer probably anyway,” Santelli explained. “It’s a great trade. Maria. You know, we’ve been to $150 before and I don’t see why it couldn’t happen again.”

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Jim Sinclair’s Commentary

How? By prestidigitation?

Study: Pensions Underfunded By $500B
Schwarzenegger: California Must Address Pension Debt
POSTED: 5:53 pm PDT April 5, 2010

SACRAMENTO, Calif. — A Stanford University study commissioned by Gov. Arnold Schwarzenegger said California’s public pension funds are underfunded by as much as $500 billion.

The estimated shortfall applies to the retirement systems for California state and local government workers, teachers and University of California employees.

Analysts at those funds estimated their unfunded liabilities to be much lower. But a Schwarzenegger economist said they have been underreporting the gap between revenue and obligations.

In a statement, the Republican governor said the study, released Monday, reaffirms the need to address the state’s staggering pension debt.

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Jim Sinclair’s Commentary

A Jobless Recovery is bull, and there is no possibility of any major SUSTAINED betterment of the jobs situation.

Food stamp rolls break record again
April 6, 2010

About 39.4 million Americans, the most ever, received food stamps in January, the government said.

The number of recipients was up 22% from a year earlier, according to the U.S. Department of Agriculture. The total of Americans getting the subsidy has hit records for 14 consecutive months.

The national unemployment rate has hovered at 9.7% since January, according to the Bureau of Labor Statistics.

Beginning Oct. 1, an average of 40.5 million people are expected to get food stamps each month this year, rising to 43.3 million in 2011, according to White House estimates.

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Jim Sinclair’s Commentary

JSMineset’s consistent view of best currencies, in order of quality:

1. Gold.
2. Cando.
3. Swissy.

Canadian dollar hits parity vs. U.S. dollar
By Claire Sibonney

TORONTO (Reuters) The Canadian dollar rose to one-for-one footing with the U.S. currency on Tuesday, hitting its strongest level since July 2008, boosted by rising commodity prices and expectations for higher domestic interest rates.

At 7:38 a.m. (1138 GMT), the Canadian dollar was at C$1.0008, or 99.92 U.S. cents. Earlier, the currency rose to C$0.9999 to the U.S. dollar or $1.0001.

"It’s been heading toward parity for weeks and it was inevitable. There’s no surprise," said Jon Gencher, director of foreign exchange sales at BMO Capital Markets,

"We’ve been calling to have the prospect of higher rates in Canada. You have the prospect of higher commodity prices and it’s building to it."

The currency, nicknamed the loonie for the bird depicted on the one-dollar coin, last reached parity with the greenback on July 22, 2008, when it hit C$0.9999 to the U.S. dollar, or $1.0001.

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Jim Sinclair’s Commentary

A failed business which income does not cover expenses always needs $$.

A failed government is no different that a failed business.

Greece Denies Seeking to Renegotiate EU-IMF Pact
Published: Tuesday, 6 Apr 2010 | 8:09 AM ET

Greece is not seeking to renegotiate an EU-IMF safety net agreement, a senior finance ministry official told Reuters on Tuesday after media reports that the debt-laden country had wanted to amend the deal.

"There is no request from Greece to renegotiate the agreement. There is a deal on the support mechanism and we are sticking to it," said the official, who requested anonymity.

Market News International quoted unidentified senior Greek government sources as saying Athens wanted to amend the deal struck at a European Union summit last month to bypass an International Monetary Fund contribution because it is concerned that the IMF would impose tough conditions.

Greece’s government, concerned that the IMF would impose tough conditions in exchange for aid, wants to amend a deal struck at an EU summit last month to bypass an IMF financial contribution, senior government sources in Athens told Market News International.

"The reason is that since the summit, (Greek) Prime Minister (George Papandreou) has been receiving information from the IMF about the possible measures and reforms it would be asking in exchange for financial support," MNI quoted one unidentified senior official as saying.

"The measures are tough and might cause social and political unrest. After that, various cabinet members voiced their opposition to the IMF contribution," they said.

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Jim Sinclair’s Commentary

Energy and food should not be in the CPI because we do not consume either?

What a set up hiding in public view.

Basic grocery prices up 6.2%

Rising demand and reduced supply drove supermarket prices for 16 basic foods up 6.2% in the first quarter, led by gains in staples such as cheese, vegetable oil and eggs, the American Farm Bureau Federation said.

The average cost of the items for a typical consumer each week rose to $45.54 from $42.90 in the fourth quarter of 2009, the group said Monday, citing an informal survey. Costs fell 4.3% from a year earlier.

Rising the most were sliced ham, apples, bacon and boneless chicken breasts.

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Jim Sinclair’s Commentary

Why cook the books when a simple OTC derivative will hide major expenses for states of the USA or EU?

N.Y. Budget ‘Shell Game’ Hides Deficits, Report Finds (Update1)
April 05, 2010, 5:11 PM EDT
By Michael Quint

April 5 (Bloomberg) — The state of New York’s history of budget manipulation is contributing to its chronic deficits and cash squeeze, Comptroller Thomas DiNapoli said.

“New York needs to stop playing games with the deficit,” DiNapoli said in a statement. By shifting money between accounts in a “fiscal shell game,” state officials and lawmakers “cover cash shortfalls and avoid making the difficult decisions needed to align spending with revenues,” DiNapoli said.

In the year ended March 31, the state used $6.4 billion of funds shifted and borrowed between accounts, and rolled $3 billion of payments into the current year, which began April 1, the report said. Lawmakers haven’t agreed on a plan to close a deficit of more than $9 billion this year in a $135.2 billion budget proposed by Governor David Paterson.

“We agree with much of the Comptroller’s report,” said Matt Anderson, a spokesman for the Division of Budget. “That’s why we are focused on recurring spending cuts to close deficits instead of one-time transfers,” he said. Paterson has said he wants 75 percent of the budget gap closed by reoccurring cuts that would also shrink future deficits.

The Division of Budget’s summary of spending begins with the state operating funds budget, which was $79.3 billion last year, “to help avoid the confusion of transfers with the general fund,” Anderson said. The general fund budget was $54.2 billion last year, and the all-government funds, a measure that includes capital spending and federal aid, was $134 billion.

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Jim Sinclair’s Commentary

Pension funds are the victims of OTC derivative rape. Why do you think they are still in the crapper after the large liquidity driven equity rally?

I have my own view on why the people managing these funds are not screaming foul via their legal counsel.

California Pensions Are $500 Billion Short, Stanford Study Says
April 05, 2010, 8:52 PM EDT
By Christopher Palmeri

April 5 (Bloomberg) — California’s three biggest pension funds are as much as $500 billion short of meeting future retiree benefits, a Stanford University report said.

The California Public Employees’ Retirement System, the largest U.S. public pension fund; the California State Teachers’ Retirement System, the second-biggest, and the University of California Retirement System are understating their future liabilities by using projected rates of return that don’t properly account for investment risk, the Stanford Institute for Economic Policy said today.

The report, from five Stanford graduate students and their faculty adviser, said the funds estimate average annual returns of 7.5 percent to 8 percent. The funds ought to use a more conservative calculation of 4.14 percent, the report said.

“You should not use an 8 percent rate when the liabilities are set in stone,” said Joe Nation, the faculty adviser in a telephone interview.

“Using that historical rate ignores the fan of outcomes,” said Howard Bornstein, one of the report’s authors, in a telephone interview

Calpers, as the largest fund is known, disagreed with the methodology of the study.

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Posted at 1:49 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

Fears involving Greece and some other nations in the Eurozone returned overnight and continued in today’s session derailing the European currencies once again and knocking the Euro below the 1.340 level. It appears from a technical perspective that traders are watching for rallies as further opportunities to short the currency. The result was a move higher in the Dollar pushing it back up and away from 81 on the USDX.

Impressively enough, that did not seem to bother gold as it was able to actually bounce upwards off the $1,130 level instead of dropping back within its containment box in spite of Dollar strength. This is interesting because earlier in the session crude oil was also higher in the face of Dollar strength as were some other commodities such as the grains, cotton and copper as well. I mentioned yesterday that it appears the nearly direct link between Dollar performance and commodity performance might be weakening. Today’s action is tending to reinforce this. It translates into the fact that managed money wants to own commodities right now irrespective to some extent of what is occurring with the Dollar. What this means for gold is that further upward progress in conjunction with a higher dollar will move it higher in terms of various other foreign currencies at a faster pace. It does not mean that the link with the Dollar is not vital – it assuredly is – but it means that the general commodity world will not be at the direct mercy of the Dollar on a day by day basis. It is unclear what the reason behind this is right now but it might be related to the extreme valuation of the equity markets and the relative value of commodities by comparison.

Along that line of thinking, Euro gold set a brand new all time high of €847.233 at the London PM Fix while gold priced in British Pound terms was fixed at £746.704, not far off from its all time high. It is going to be difficult for the perma bears at the Comex to keep up the pressure on the yellow metal if it continues making all time highs in terms of the European currencies.

Gold still needs to take out that previous swing high near the $1,145 level to kick off an upside trending move. It will also help things out if the HUI can take out the 435 level on a close simultaneously. That would have the gold world firing on both cylinders. When we get days like this in which the HUI struggles to move higher, it tends to knock the props out from under the Comex gold bulls. Let’s see how the HUI fares today and tomorrow.

Gold’s fade going into the close is a bit discouraging but it did manage to stay outside of its former trading range and get a second close above the critical $1,130 level.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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Posted at 7:16 PM (CST) by & filed under Trader Dan Norcini.

Dear Friends,

I missed getting an updated Commitment of Traders report to you all last week due to my vacation plans so this one is a couple of days late but it did contain something which I believe merits mentioning.

Please refer to the chart as you read the comments as it will provide in picture form what I am relaying here with these dizzying statistics.

For analysis purposes, I am referring primarily to the Managed Money category as that is where the big flow of funds comes from that drives markets these days.

The peak of the managed money net long position occurred in October of 2009, when it reached nearly 240,000 contracts. Remember these are NET positions we are referring to here.

Since then that number has declined by almost 90,000 contracts and as of last Tuesday was 149,399 (compared to the peak of 238,943)

The week in October when the Managed Money speculative position was at its height, gold closed out at a bit less than $1,100. Four weeks later when it peaked in price above the $1200 level, the other reportables (CTA’s, big locals and some large individual traders) and the general public had also maxed out but managed money had already been moving lower as they were booking profits into that later buying. That is why open interest continued to increase even as the managed money was moving out.

Here we are now, a bit more than 5 months later with a net bleed-down in the managed money category of 90,000 contracts with gold trading at $1105 the day that the most recent COT report is cut off for the past week. In other words, gold was able to absorb all that selling where hedge fund money was moving out and somehow put on another $5.00 in price over the last 5 months. That is stunning and illustrates how strong the buying is beneath the gold market.

If you look at the drawdown in the both the Producer/User category and especially in the Swap Dealers category, you will see how much buying they did into the Managed Money sell down. They simply could not break the market lower and as physical buying increased, they were forced to cover their shorts at a higher level than they would have preferred. They are running out of bang for their buck in this market.

Gold needs a technical breakout on the charts from its long period of consolidation but that period has cleansed the market of any froth and prepped it for a sustained move higher should it be able to break free of its containment box. Now you can see why the bullion banks are fighting so hard to prevent the technical breakout from occurring. Imagine what another 90,000 net longs being added by Managed Money would do to the gold price.

Click charts to enlarge in PDF format

Gold COT 3-3--2010_Page_2

 Gold COT 3-3--2010_Page_1

Posted at 6:13 PM (CST) by & filed under General Editorial.

Dear Friends,

To answer the many question asked today about the new passive currency controls:

1. This is effectively a passive currency control.

2. It can be enforced the same way international banks are squeezed today. Threatening to eliminate institutions from the bank wire system is a very powerful weapon.

3. Historically a country that implements currency controls, passive or active, has a currency in an intact downtrend for which the action offers no benefit and significant injury. It is an action of EXTREME WEAKNESS.

Regards,
Jim

Posted at 6:04 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Fighting with China who holds so much of your debt is total madness.

Postponement will be read by the Chinese as if they are duelling with a fiat paper tiger

US delays yuan report "to prevent showdown"
English.news.cn   2010-04-05 09:43:00

BEIJING, April 5  — US Treasury Secretary Timothy Geithner said on Saturday he was delaying an April 15 report on whether China manipulates its currency, amid growing debate on the revaluation of the yuan.

"A move by China to a more market-oriented exchange rate will make an essential contribution to global rebalancing," Geithner said in a statement.

He also pledged to press for a more flexible Chinese currency policy, following renewed US calls for China to revalue the yuan.

A number of Chinese analysts have said that a sharp revaluation of the yuan will dent China’s growth by making its exports more expensive.

But the country may start revaluing its currency as early as the second half of the year, with the move not "yielding to US pressure, but seeing to China’s own needs", Jin Canrong, a leading US studies expert at the Renmin University of China, said on Sunday.

Still, Geithner said he will use upcoming meetings of the Group of 20 and a US-China economic summit in Beijing in May to try to advance the US position.

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Jim Sinclair’s Commentary

In today’s world this is accepted as legal.

When the devils are in charge sin is a virtue.

Proof that Regulators Knew of and Allowed Debt-Hiding Accounting Tricks Like Lehman’s Repo 105
Monday, April 5, 2010

Regulators like the Fed and SEC have said they didn’t know about Lehman’s use of Repo 105s to hide its mountain of debt.

But in a must-read New York Times Op-Ed, law school professors Susan P. Koniak, George M. Cohen, David A. Dana, and Thomas Ross point out:

Our bank regulators were not, as they would like us to believe, outside the disco, deaf and blind to the revelry going on within. They were bouncing to the same beat. In 2006, the agencies jointly published something called the “Interagency Statement on Sound Practices Concerning Elevated Risk Complex Structured Finance Activities.” It became official policy the following year.

What are “complex structured finance” transactions? As defined by the regulators, these include deals that “lack economic or business purpose” and are “designed or used primarily for questionable accounting, regulatory or tax objectives, particularly when the transactions are executed at year end or at the end of a reporting period.”

How does one propose “sound practices” for practices that are inherently unsound? Yet that is what our regulatory guardians did. The statement is powerful evidence of the permissive approach bank regulators took toward the debt-dissolving financial products that our banks had been developing, hawking and using themselves for years. And it’s good reason for Americans to be outraged by the “who me, what, where?” reaction of Mr. Bernanke and the S.E.C. to the revelation of Lehman’s Repo 105 scam.

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Posted at 3:04 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

I am physically back but waiting for my mind to catch up. At the same time I anticipate receiving the details of the upcoming trip to the Sultanate of Oman.

Everything remains in gear for a major up move in gold coming out of the recent weakness.

Eric’s note covers today’s early market events.

Regards,
Jim

Stock futures rise, point to higher opening
CIGA Eric

Stock futures are rising Monday following a jobs report that has boosted expectations for an economic recovery.

Shrewd investors never loose sight of the secular trends. The big, liquidity-driven stock rally is nothing more than the fourth consolidation pattern with a secular, currency-adjusted down trend. The bounce from the 2009 lows, 54% in U.S. dollar (nominal terms) and 28% in ounces (real or stable currency terms), follows that of 2003, 2006, and 2008. The secular down trend will resume when the window of time closes in the coming months.

U.S. Large Cap Stocks Capital Appreciation Index (LCSCAI); S&P 500 to Gold Ratio:

Source: finance.yahoo.com

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Dear Eric:

The best currency in the world is Gold.
The best North American currency is the Cando.
The best continental currency is the Swiss Franc.

Regards,
Jim

Canada’s Dollar Strengthens to 20-Month High as Oil Advances
CIGA Eric

Is the door wide open to parity because of grinding oil or eroding dollar? I would go with the latter.

“The door is wide open” to parity, said Christian Dupont, a trader at Desjardins Group in Montreal, who predicted the loonie would reach a one-for-one basis this week. Oil “grinding higher” is the main reason for the appreciation today, he said.

What the media either cannot see or ignores is that the pendulum has swung to favor gold over oil.

West Texas Intermediate Crude Oil to Gold Ratio (Oil/Gold):
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Source: businessweek.com

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US Bonds Midday
CIGA Eric

US bonds, TLT, have already breached the swing low on pretty decent volume just after midday. Ignore the headline spin on bonds and equities, a breach of this low, which is also the straight line neckline from June 2009 is no small matter.

Last week’s COT data (10- and 30-year) illustrated big inflows to protect this zone. If this line in the sand cannot hold, a new lower line will be conceded and the neckline will have failed. Very The market’s reaction to an identifiable technical top could be difficult for even the spinsters to contain.

With that said, I expect this zone to be heavily defended as the technical implication of a break are huge. Failure after a critical support despite intensified efforts will reveal the severity of the technical damage. A point that will not be missed by the trading sharks that will show no mercy.

US Long Bonds ETF (TLT)
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Posted at 1:47 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Welcome to another new week in the gold market and another week of bullion bank price capping displays. Today’s price action in gold makes the price capping by the above culprits at the $1,130 level most evident as once again it was repelled from that level earlier in the session, even in the facing of a surging crude oil market and a copper market that has gone on to make yet another yearly high. Also, with the equity market, as evidenced by the S&P 500, putting in a new yearly high, the reflation trade was in full swing today.

More investors are apparently buying into the idea that the economy is recovering and are putting money to work especially in the energy sector as they are hoping for renewed demand for that complex as things improve. Even natural gas moved higher today and that has been a dog for some time now. Lumber also moved higher.

While the Euro was not particularly strong, strength in the British Pound, the Yen, the Aussie, the Loonie, etc, was enough to put some mild pressure on the Dollar. Given the combination of the above factors, one would have expected to see gold taking out the overhead selling at the top of the trading range but the longs could not quite kick the bullion banks out of the way until the last hour of pit session trade where a move up in the Euro from the unchanged level gave the gold bulls enough support to take out the selling. I must say however that the bullion banks seem terrified of losing the battle at $1130 judging from the ferocity of their selling here today.

Technically, the push through $1,130 is bullish but it needs additional upside to attract more recruits. A push through $1,145 is necessary for gold to say goodbye to its trading range and begin a trending move to the upside. Technicals are now firmly favoring the upside.

I am encouraged by the action in the gold shares as the HUI has moved exactly to the level where selling has contained it for the last 5 weeks. With the equity markets moving solidly higher, the shares should not be having this much difficulty plowing through that level and kicking off some sort of uptrending move but thus far they have not been able to garner sufficient recruits to the bull cause to do so. It appears that they are waiting and watching to see if bullion can push through $1135 or so. A closing push through 435 should squeeze out some shorts and bring in fresh buying. Momentum indicators are all positive in the HUI right now as are the moving averages but it still must prove itself.

Perhaps more important than any of this however was the price action in the long bond which fell through the bottom of a 3 month low that had held prices going back to August of last year. Bonds have a critical support level down near the 112 level. If they take that out, and right now it sure appears as if they want to move down to at least test it, the interest market could get ugly very quickly.

The central planners should beware what they wish for.

In their attempts to reflate the economy they are managing to perhaps awaken the nearly extinct bond vigilantes. There is no doubt that the bond bears are looking at the supply coming down the road to fund this insane government spending binge and are saying that demand is not sufficient to absorb it at current yields. No doubt they are also eyeing the move higher in crude oil with a great deal of concern. A surge in energy prices would lead into inflation fears. Expectations are more dangerous to central planners than reality at times. The yield on the 10 year jumped to hit the 4% level today. That is the highest it has been in 10 months (June 2009). If the yield pushes above 4.3%, the charts are going to show a technical breakout which has the potential to see them reach 5%. I do not know how this is not going to crush the real estate sector which is already struggling with a surfeit of available homes and pitiful demand. Then again, it is certainly not going to help government to see the interest it must pay on all that borrowed money moving higher. What the hell, they can just print more money to pay those increased borrowing costs so why worry.

If investors are shunning bonds in favor of jumping on the new bull market train for equities, then that source of demand is fading at the exact time that the red ink is flowing at the government. Should the Dollar suddenly fall out of favor for any reason, bond prices could sink quite sharply. Stay tuned.

Just a quick reminder here that the financial woes of many American cities, counties and states is not going away anytime soon as difficult choices must be made on the spending front that are sure to prove extremely unpopular. We seem to forget such things as the attention of the majority turns to the one high after another in equities. Apparently, such things are trivial compared to the technical charts which show the S&P having fully regained 50% of its losses since peaking in October 2007. “The trend is your friend” is the trader’s adage and no matter what is occurring, it is still up. Fighting the tape might be heroic but it does not exactly do wonders for one’s trading account so do not argue with things until the trend turns. The big banks can make huge profits borrowing short and lending long with the current yield curve and seeing that the financials comprise so large a portion of the stock indices, bulls will be happy particularly with energy shares going along for the ride. Crude is moving into a seasonally strong period which will support further gains in that sector.

One last thing for today, the CCI (Continuous Commodity Index) is currently trading at a 2 month high. If it can tack on a few more points this week, it has a shot at matching the high made in January of this year. I think it is important to note that in January, the US dollar was trading down near 77. It is currently near 81.10. Even with the move higher in the Dollar, the commodity markets are no longer falling apart. That is telling. Commodities have regained more than half their losses since the credit crisis debacle began in what seems like eons ago. Managed money wants to own these things irrespective of what the Dollar is doing. The tide is slowly turning or so it would seem as the link is weakening.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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Posted at 10:47 PM (CST) by & filed under General Editorial.

Dear Friends,

I am returning home to Sharon, Connecticut from Tanzania and then almost immediately I will head back east to Muscat in the Sultanate of Oman. Travel used to be a pleasant experience. However, in recent years we have seen a lot of change in air travel, not all of it so pleasant. (See article below). The trip I am just completing involves a return flight from JFK to Dubai and on to Dar es Salaam, Tanzania.

You might think that such a trip would be enough for a long while. But that was before Joseph Kahama received an invitation to the Royal Palace in Muscat, Oman.

Thus far, the oil rich Middle East has not been a major player in gold as they were in the 70s. This is understandable with the significant value appreciation in their energy reserves and production. Now the management of the currency position derived from their oil production is almost impossible. Because of the violence in currency markets, gold is looking good to the metals poor Middle East portfolio managers.

The money managers in the Sultanate of Oman are interested in gold production in East Africa. That will be the subject of my discussions in Muscat in ten days. I will be accompanied by Mr. Joseph Kahama, Mr. Riaan van der Westhuizen, Special Advisor to the Chairman, David Duval, and my African daughter, Marlene.

Security Checks on Flights to U.S. to Be Revamped
New York Times
April 1, 2010

Security Checks on Flights to U.S. to Be RevampedBy JEFF ZELENY WASHINGTON — President Obama has signed off on new security protocols for people flying to the United States, establishing a system that uses intelligence information and assessment of threats to identify passengers who could have links to terrorism, a senior administration official said Thursday.

The new approach will replace a broader layer of extra scrutiny that had been imposed recently on all passengers from 14 countries, most of which are Muslim.

The change, which will be announced Friday by the Department of Homeland Security, is the result of a review of security at international airports ordered by Mr. Obama after the Christmas Day attempt to blow up a jetliner bound for Detroit. The system, which will be put in place this month, applies only to travelers flying into the United States.

"It’s much more tailored to what intelligence is telling us and what the threat is telling us, as opposed to stopping all individuals from a particular nationality or all individuals using a particular passport," the administration official said Thursday, speaking on the condition of anonymity in advance of the formal announcement.

The intelligence-based security system is devised to raise flags about travelers whose names do not appear on no-fly watch lists, but whose travel patterns or personal traits create suspicions. The system is intended to pick up fragments of information — family name, nationality, age or even partial passport number — and match them against intelligence reports to sound alarm bells before a passenger boards a plane.

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