I think everyone (who's paid attention) should understand my primary argument? But here it is from a slightly different camera angle. First look at the BCA chart (dated in June before the bond market crack up) of "dollar based liquidity" (DBL), and make a mental note also of the corresponding and tracking move in POG since the end of 2000.
bcaresearch.com
Now overlap this again with the Amex "Gold Bugs" (Bugs) index.
finance.yahoo.com^HUI&d=c&k=c1&a=v&p=s&t=5y&l=on&z=m&q=l
You will note that the great (and wonderful for my pocket book) gold bugs bull market started in late 2000, and just about perfectly matched with the beginning of the great, now long in the tooth monetary "reflation" (actually Inflation). The DBL briefly stalled it's ascent in late 2001, and during that period the Bugs traded sideways in sort of a pennant between mid 01-the end of 01. Then DBL started accelerating again in early 02, and this time the Bugs went parabolic and peaked almost exactly with the second DBL withdrawal or retracement in mid-02. This caused Bugs to trade in a wide 100-150 back to 125 corrective pattern until the latest phase of DBL acceleration to near 200. Bugs moved in sink starting in March, and now we are in a parabolic stage again. And in general I believe this runaway monetary heroin is now causing immense damage to the organ function of the system.
So in my mind the only question now is the degree of intensity (how much is left) and speed of this parabolic move. Could it spike the Bugs well over 200, to 220, to 240? Very possibly, but unfortunately these parabolic moves, although intense and exciting (you get popcorn moves as in GBU Friday), don't last very long. And neither have runaway DBL freight trains. This piece tells in simple term, why I think this one is about over:
investmentrarities.com
The further it spikes, the worse the correction (in all liquidity driven markets) will be.
Now I've offered other clues is to why this is likely to be a terminal situation. One of course is the now historic commercial short position in gold of 137,000 contracts and silver of 67,000.
commitmentsoftraders.com
The list of negative stock market indicators goes on and on, and we could devote a whole thread to it, but one (the commercials once again) are now also short 62,609 S&P contracts.
Does that mean POG can't run to $400? No, but it does tell you it will likely be brief, if it happens. The second indicator is the enormous underwriting flood of new share issuance in the industry.
m1.mny.co.za
Although this is good in the longer term as it makes the industry healthier financially, in the intermediate term (count four month holds from the issuance: July-August) now), it's very bad news. And I don't think the markets are going to just trade up right into the distribution either. Refer to my posts in late 02 if you need clarification as to why.
Finally, sentiment is too bullish. Everybody's bullish on gold. James Cramer is even on board if you listened to last night's show. The guests were Bill Fleckenstein (a hero for sure) and another individual friendly to gold. When the financial press trots these people out, you know we are late in the distribution phase.
So since the parabolic move is well underway, what does this mean in the days and weeks ahead? Your guess is as good as mine, but I can say that I feel it will end abruptly for all these markets, and turn on a dime. And then there won't be any bids. Bulls will get caught looking for upticks back towards the highs to sell, but there won't be any of significance. Since I've held large PM positions, I would rather be selling into the bids, rather than hoping for bids on the downslope of the parabolic.
In the very short run I'll offer my SWAG, and readily admit to the unpredictability of late stage parabolic moves. I would "guess" but with absolutely no certainty, that next week will once again be favorable to these markets. The Fed flooded money through their open market operations to the tune of 35b. There is a big expiration of 15.0b Thurs the 4th (and a smaller one of 4b Tues). Watch that like a hawk, because if it's not replaced the junkie will fade fast.
bullandbearwise.com
Personally, if we continue parabolic early next week, I'd like to have my PM distribution work complete, and have rounded out some more shorts in the financial, retail, tech and other echo bubble sectors.
Message 19258388
Here is the short list I'm using if anyone has ideas there. Incidently I WILL NOT be shorting gold, as that WOULD be against my religion.:
retail: FD, LOW, KSS
financials: CFC, GS, LEH, MBI, MTG, JPM, C, MER, RDN
misc echo bubbles: APOL, LAMR, HOT
tech: HHH, and write naked QQQ calls |
