Name: Gary Tanashian
Web Site: http://www.biiwii.blogspot.com/
Bio: Gary Tanashian is proprietor of Biiwii.com (http://www.biiwii.com), a financial website that reflects his bias toward honest analysis and his disdain for hyperbole. Gary's writing on market trends and metals trading is particularly insightful. Gary is the owner/CEO of a progressive US manufacturing company and his long running success in this challenging sector has contributed to his unique view of the macroeconomic landscape and various global asset markets. A contrarian by nature, he uses macro-fundamentals and technical analysis to remain on the right side of the trade.
Why is it so critical to watch indicators like leading market ratios, sentiment, the ratio of gold to silver, money supply, etc.? Well, one look at this nominal SPX chart provides an answer; trying to figure out the nature of a similar downturn to that of last June/July devolves into a mere guessing game if all you go by is straight technicals on the SPX daily chart.
SPX dumped the neckline of a small H&S topping pattern, spent 4 days below it and then said screw this, time for hope and greed to make a triumphant return. It was right around that point that I began to realize that my projections for the duration of Hope ‘09 might need to be expanded. Boy, did hope and denial ever expand… right into this latest break.
But it is more complex than simply watching indicators. The gold-silver ratio for example rose strongly in June/July (implying market downside), but broke out of its weekly downtrend line for only one week before falling back. Current weekly GSR has now completed two full weeks of breakout from its most recent downtrend line, has constructed a good looking MACD and formed an inverted H&S bottom pattern.
Yes I know, you have to be a total geekoid get-a-lifer to be into this stuff. Well, if you knew me in real life you would see that I am not very cool and do not display a dynamic personality. But I am into this shit because – call me weird – I just love to make money or at the least, preserve capital and remain as detached from convention as possible. It’s the secret recipe of succeeding in the financial markets.
Sorry for the self-involved last paragraph but you must understand, you, the blog reader are all I have got (aside from NFTRH subscribers who actually assign a monetary value to my opinions) when it comes to communicating these things. In real life nobody but nobody wants to hear it. Now that’s weird if you ask me. Most people want to make and protect money, but when it comes to the necessary work to do so, it’s not happening.
Thus ends another technical analysis post that jumps the track.
Because without perspective, what are we but a bunch of flailing creatures, subject to the blow horns of media and agenda?
Here is an old monthly chart of the Dow I had hanging around on the live list. We have bull market triggered, now in the 3rd successive month above the Dow’s bull market moving average, the monthly EMA 25. You cannot argue with the chart, nor the SPX equivalent that NFTRH has been following all throughout Hope ‘09 and Full Hubris ‘10.
You also cannot argue that risk vs. reward is any good. It’s not, and this is a traders’ market right now, because without a ‘healthy’ correction, a move to NFTRH’s original ‘best’ targets may yet register on the ‘as good as it gets’ scale.
First is the current status of the ‘baby’ and the big daddy inverted H&S’ on the $TYX weekly chart.
Then we have the big picture view of the long bond and its secular journey, that has allowed ‘conventional’ wisdom to remain in force and validated all these years.
You of course know that these trends must remain intact or else we’ve got some big changes in the offin
Hmmm, it is silly season and the markets are levitating against my short positions. The precious metals correction that NFTRH had anticipated is well in progress. I remain long there. So, by extension I must be pretty bummed out, yeh?
No freaking way. Momma always told me to have patience… and a plan. I do, and if nothing else I look on with a sort of comic bemusement (if that’s possible) and await resolution. Noise baby, noise.
Speaking of which, last year during the deflation scare, somebody sent me a particularly good bit of noise, the self-proclaimed “scariest gold chart in the world”, targeting gold at below 400. Now, it is easy to produce charts like that during a deflation when there is little apparent chance of the metal actually breaking to new highs, as it ultimately did a few months later.
This is the kind crap that comes out and reinforces the popular sentiment. Right now, that dynamic is going on in the markets to the upside. Well, I will show you what I think is one of the scariest charts in the world; the yield on Larry’s 30 year bond.
See the baby inverted H&S (green) that has already broken the neck line? That targets close to 5.2%. If that target comes to be, then we will have broken the neck line on big bro (blue) and its target of 6.8%. How do you think such a rise is going to play with the macro wizards and their ability to sell US debt around the world? At best, I could envision a self-reinforcing buyer’s strike on US treasuries as would-be buyers await maximum yields for buying the debt of the hopeless and chronic inflator. At best.
We were watching a ‘potential’ bottom in the dollar. We got another nugget of confirmation. Now the USD looks pretty compelling, beyond some likelihood of short term correction.
Here is another view of the USD daily chart. What we have here is some pretty good confirmation that it has bottomed. In fact, Uncle Buck is now getting a bit frothy to the UPSIDE and could cool down short term, allowing for one final push higher in the Hope ‘09 festivities. We have after all, not yet had a real upside capitulation in markets – on panicky volume (dat would be da public in da house, joinin’ da pahhty).
The weekly USD chart shows a firm picture of a market with some decent upside. If it rises to threaten our two higher resistance levels at 80 and 82, then it will be testing the terrible fundamental damage that was done to it by monthly (big picture) chart by losing those levels earlier this year.
But for now, we just micro-manage the ending of Hope ‘09, which may see some partying in 2010 before flame out. It will depend on what kind of correction the dollar takes off this initial thrust off the bottom.
The yield curve is an old theme that I have not mentioned in a while because to me it is a given that confidence in monetary managers is being lost and the message of the unruly yield curve has long since been driven home. But Mish has come out with an article about it centering on this piece from Bloomberg, and if you are unclear about what a rising yield curve means, you should read them both.
Meanwhile, chartus geekus has worked up another confusing, busy bunch of lines and squiggles that attempts to show why I maintain a long gold/gold stocks stance vs. shorts on certain markets. Get Zen-like and reflect up on it. The most extreme curve, the 30 year / 3 mo. t-bill, is off the hook and out of control. But the more ‘free’ market oriented 30 year/5 year has broken out as well (see lower panel).
Folks, this thing is broken no matter what the wizard protests. The little doggie has pulled back the curtain…
Pssst… come ‘ere. Did you hear the one about the guy who’s still bullish the US dollar? Yes, he actually exists. No no, I am not including the perpetually dollar bullish Prechter and Hochberg. They are a given.
But aside from them, I heard a rumor that this other guy actually exists. Fear not however Hope ‘09 participants; what are the odds that this lone guy would be right against an entire financial world on the other side of that trade?
Everybody from government to monetary officials are stacked against the USD. Wall Street and the financial establishment remain on the other side of this lucrative trade as they pitch their wares to the traumatized public. The gold bugs who think rising copper and oil is good for the gold sector? They’re on board and indeed, leading the charge. So why worry about a dollar rebound?
Well, the dollar has done some terrible technical work on the big picture, which certainly informs NFTRH’s view for 2010, but in the short term all I see is what could be interpreted as a break from a falling wedge (not shown on this chart that is already too busy), a 3rd day above the SMA 50 (for the first time on this systematic and grinding decline), RSI and MACD looking good and a technical target up there at around the SMA 200.
If we are to get a #2 leg in a mini cyclical bull (in hope), the dollar will first rise and correct this mess, and that one lonely bull would be king of the world for a short while on a short covering rally in USD. If not, AGAIG ‘09 (as good as it gets) will continue to terminus and our protagonist of one will join the rest of the world in staring down Bob Prechter.
Excerpted from the December 7th edition of Notes From the Rabbit Hole (NFTRH62)
Below is a brief excerpt from what was an extensive technical and fundamental view of gold and especially the gold stocks in light of Friday’s dramatic downturn. While gold and gold stocks screamed higher of late, even gaining mainstream media attention, experienced traders and investors were aware of increasing odds of a hard down. Check, we are there.
NFTRH62 went into a lot of technical detail on various downside targets (and thus, opportunities) based on different time frames and support levels. In all, 6-1/2 pages of a 14 page letter were devoted to the sector that has been ripe for correction since our long standing upside target of 475 was pierced. This is the sector with which I am fundamentally engaged and finally, after weeks of upside hysterics, rational traders can begin to gauge opportunity. After all, what good are the technicals without a thorough understanding of investment merit (fundamentals) to non-day traders? Below is a brief review of some of those merits as represented by the gold-silver ratio and gold’s ratios to several other assets of positive correlation to the global reflation attempt.
Gold Stock Correction (Fundamentals)
Now let’s turn our attention to the Gold-Silver ratio (GSR) which has closed below the would-be breakout (black) line. Please understand that if and when gold does break out in ratio to silver, the risk of corrective activity increases for the gold stocks as the miners are led more effectively by silver. Thus, Friday’s hard down in the HUI is unconfirmed by the GSR, which does however remain in its short term up channel.
Yet it is a rising GSR, in conjunction with gold’s rise in positively correlated things (lower panels) that would signal the next leg up in gold sector fundamentals. I know I repeat this often – as it is a difficult concept for some people, after years of taking in the propaganda of the commodity bulls – to get their heads around. The buying opportunity comes when gold stock babies are thrown out with the broad market and commodity complex bath water, even as their fundamentals – as indicated by gold’s out performance to silver and positively correlated assets – improve by leaps and bounds. As it stands now, the GSR is still attempting to rise and gold’s ratio to the S&P, oil and copper (lower panels) remains in a bottoming to upturned stance. Risk remains high all around.
To conclude the general precious metals discussion, gold got ahead of itself and despite bullish fundamentals, was due for correction after the [short term] measured breakout target of 1100 was exceeded by a wide margin. The monetary metal took a hit in all major currencies but remains in an uptrend vs. same.
Really, with all those gold ads on the FOX news channel and all the media hype about the death of the dollar [chart shown later in the report], did we not expect a reaction? Was it a good dose of coordinated manipulation by the wizards, a day after Mr. Bernanke sat and sang for his supper under the guise that inflation is under control? Well, hell yeah. Does it matter in the big picture? Hell no.
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Uncle Buck
Written by BiiwiiFebruary 26th, 2010 at 12:27 pm
USD Daily: MA 50 crosses above 200, MACD well above zero, AROON trend up and support at 79.50.
USD Weekly: EMA 10 supportive, MACD on verge of big time bull signal and AROON trend up.
USD Monthly: Dealing constructively with strong resistance, MACD okay and will be flat out bullish if it gets above zero. AROON trend up.
So tell me, where are the ‘Dollar Collapse’ cultists now? You know, the smart guys making a living out of touting the destruction of this intrinsically worthless currency in favor of other more ’sound’ currencies? Give me a break.
It’s all a confidence game and right now confidence is ping ponging around the globe from the trying to be all things to all people debt note in Europe, to the reserve currency debt note of America to the commodity/resource currencies of Australia and Canada. FOREX jocks are having a blast but most Americans probably think the dollar is still in the tank.
The boring old blogger will simply remind that it is long past time to begin securing your future against these rackets
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