Jim’s Mailbox

Posted at 3:18 PM (CST) by & filed under Jim's Mailbox, JSMineset Editor.

Jim,

Price and volume. The rest is statistical fluff. God bless statistical fluff.

Exactly – no volume even as the market jumps the creek. The market does not necessarily need volume to continue. I’ve seen the equity markets produce a series of false breakouts that last months before gravity overtakes the trend’s upward inertia.

The question is did we see a panic bottom? A bottom where the public rejects equity ownership? Ala 1919-1920, 1929-1932, 1973-1974, 1980-982. I suggest that the market will stair step it’s way to the ultimate panic bottom around 2012-2015.

In my opinion, what QE is trying to arrest or pause is the waterfall decline. Examples are the1932-1934 and 1974-1976 (spot-shadowed) advances. They want a 2009-2011 (spot-shadowed) advance. The trouble is, another huge C-wave advance is scheduled to begin this summer. There’s no way equities will be able to keep up.

Decisive failure of the 1967-1971 swing high suggests to me that the waterfall decline is still in play. That level was tested in March 09.

CIGA Eric

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Jim,

The Federal Reserve Bank of Kansas City Thomas M. Hoening had the same interpretation about the rising Treasury yield as his counterpart of the Federal Reserve Bank of San Francisco, President Janet Yellen. In his speech named “An Economy at Risk: the Tough Decisions Ahead” (attached), he said:

“The markets won´t be fooled by artificially low rates for long. Market participants realize that a period of high deficits and accommodative monetary policy are an invitation to increased pressure. I suspect we are experiencing the first signs of the markets´ concerns in the rising rates and increased volatility in long-term Treasury markets.” (p. 9)

However, I don’t expect Ben Bernanke to take any anti-inflationary actions.

Regards,
CIGA Christopher

Jim,

Dubai calls on the Rothschild bank for help, perhaps out of desperation. In Saudi Arabia a Saad Group company defaults. US, European and Asian banks are struggling. The end of Ramadan in September might mark the start of an economic depression worse than that of the 1930s.

CIGA Ken

Signs of a new financial storm for September coming from Dubai and Saudi Arabia
by Maurizio d’Orlando
Dubai calls on the Rothschild bank for help, perhaps out of desperation. In Saudi Arabia a Saad Group company defaults. US, European and Asian banks are struggling. The end of Ramadan in September might mark the start of an economic depression worse than that of the 1930s.

Milan (AsiaNews) – Rothschild’s Dubai office has been retained by Dubai’s Department of Finance for advice on the US$ 10 billion financial support fund (FSF) the emirate raised on the bond markets.

Nakheel, the property development arm of Dubai World, was the first to benefit, but is likely to be the last of its kind because funds will be handed out on the basis of two criteria: urgency and strategic importance.

More…

Dear Jim,

This is what the American dream has become thanks to the OTC paper shufflers and their complicit politicians.

Best,
CIGA BT

One in nine Americans on food stamps, USDA says
Wed Jun 3, 5:38 pm ET

WASHINGTON (Reuters) – One in nine Americans are using federal food stamps to help buy groceries as the country’s deep recession forced another 591,000 people onto the federal anti-hunger program at latest count.

Enrollment jumped 2 percent to 33.2 million people in March, the fourth consecutive month that rolls hit a record, said the Agriculture Department. The average monthly benefit was $113.87 per person.

“It’s tough out there for struggling families and will be for many months to come,” Jim Weill, president of the Food Research and Action Center, said.

More…

Jim Sinclair’s Commentary

Young Eric is going to be very famous in time. I see him as a market leader coming out of this bone grinding experience with experience and discipline.

Jim,

“This is followed by buying of equities driven by the desire to own the not-dollar similar to the equity market driven not-Weimar mark. All of this will have the algorithm goosed, driving markets into conditions without precedent.”

Agreed.

The Weimar experience has taught us that a currency panic can send stock prices to what appears to be the stratosphere. Unfortunately, rising German stock prices did not keep up with the savage currency devaluation. The German stock price to gold ratio and the impoverishment of nearly all Germans as described in the history books during the late Weimar Republic reminds us of this point.

Nevertheless, I keep my mind and options open. Panic-driven Central Bank(s) and Treasury pressing even harder on the accelerator of QE have the potential to produce an unexpected outcome. Panic-driven humans, like cornered animals, also have a tendency to do unexpected things when self-preservation is challenged.

CIGA Eric

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Hi Jim,

Adrian Douglas of GATA indicated a big move in June according to his analysis.

Click here to view the analysis…

However, I believe the emphasis has shifted to the August Gold contract with 260305 OI on the Futures and 66975 accumulative total Options 2:1 ratio of calls to puts.

This might suggest a big move in July (not that is matters much but it is fun to watch).

I will be monitoring the August OI and Option volume and Call/Put ratios in the coming days.

I look forward to you comments.

Thanks in advance.

Nigel

Nigel,

There is a huge gold price move coming so why chance missing it because you believe in a given time span? Gold is a simple trend line entity. The short term downtrend or bottom of the down channel are bells and if they ring, you act.

Jim

Jim,

I guess they’ll be talking about how to deliver the coup d’grace to the US Dollar.

CIGA Pedro

BRIC’s Yaketenaburg summit
2009-05-30 08:38:11

BRIC- Brazil, Russia, India and China meet to begin June 16, top leaders to attend are Prime Minister Manmohan Singh and Chinese President Hu Jintao along with the presidents of Russia and Brazil.Dr Singh will be attending both the BRIC and SCO meetings. However the ministry of external affairs refused to confirm Dr Singh’s attendance at the SCO.

All aspects of “global security” and “complexities” in the field of economy in the backdrop of the world financial meltdown will come up during the first “full-format” summit of BRIC nations, including India, Russian President Dmitri Medvedev said today.

More…

CIGA Pedro,

There has never been a better set up than what is now taking place. The commercials are operating a dollar short squeeze to open up the opportunity to run all the margined public out of their gold positions just before a major up move in the price of gold and downward spiral in the US dollar.

The odds are starting to disfavor the commercials while their fortunes rely on their ability to get the US dollar over .8200. Considering the almost universal wish by major central banks to diversify out of the USD, the commercials are going to have a major battle getting the USDX over .8200 and keeping it there.

Friday’s price action in the gold market is more a sign of desperation and necessity than it is a forbearer of ill price tidings.

Regards,
Jim

Jim,

Weimer currency event takes everything up. You (and I) have discussed that option already. Nice to see Jim Roger’s discussion’s reflecting this increasing possibility.

Armstrong’s waterfall decline scenario with specific timing dates, however, cannot be completely dismissed at this point. The waterfall decline will have little impact on gold and quality gold shares. Though, the gold stocks tend to get lumped into the equity basket during declines.

I have included the NYA Composite Index. I study volume relative to price using what I can best describe as Richard Wyckoff’s volume analysis from the 1920’s.It’s mostly studying the force of the trend using volume at swing highs and lows.

I study the NYA and exchange volume to gauge the strength of the trend for equities.

Interesting observations:

The May highs (purple arrow) in the NYA were breached on diminishing volume which implies a false breakout. While false breakouts can persist for some time, they eventually are reversed in the direction of the prevailing trend (down).

Also, the new June highs (blue arrow) continue to be probed as on decreasing energy – volume. This suggests that the upside force is waning on what is already considered a false breakout.

The above observations suggest a rising wedge formation since March 09. A failed rising wedge suggests a retest of the Nov 2008 at a minimum.

CIGA Eric

(Click chart to enlarge)

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Dear Eric,

The most likely scenario is on the time line Armstrong has offered to us – we experience a degree of the waterfall which is offset by a panic driven Central Bank and Treasury reaction pressing even harder on the accelerator of QE.

This is followed by buying of equities driven by the desire to own the not-dollar similar to the equity market driven not-Weimar mark.

All of this will have the algorithm goosed, driving markets into conditions without precedent.

Armstrong’s 4000 Dow might not be reached. The best play is long gold. The equity side is iffy as so many variables are at play.

All the best,
Jim