|
INTRA-DAY NEWSLETTER ~ Feb 25 2015
Capping the day is Fed Chair Janet Yellen's remarks at the Humphrey-Hawkins testimony. In light of three-months jobs growth exceeding 1 million, Chair Yellen has an opportunity to shed new perspective on the Fed's views of the economy, considering the recent set of FOMC minutes were from the reporting period before the January jobs data were released.
YELLEN SAYS CHANGE IN FORWARD GUIDANCE SHOULD NOT BE READ AS INDICATING FED WILL RAISE RATES IN A COUPLE OF MEETINGS
YELLEN SAYS DECLINE IN LONGER-TERM INTEREST RATES REFLECTS DISAPPOINTING FOREIGN GROWTH AND CHANGES IN MONETARY POLICY ABROAD
YELLEN SAYS COMMITTEE EXPECTS INFLATION TO DECLINE FURTHER IN NEAR TERM, RISING GRADUALLY IN MEDIUM TERM
YELLEN SAYS CHANGE IN FORWARD GUIDANCE SHOULD BE SEEN AS REFLECTING COMMITTEE'S VIEW THAT IT'S AT THE POINT WHERE A RATE HIKE COULD OCCUR AT ANY MEETING
YELLEN SAYS FOREIGN ECONOMIC DEVELOPMENTS COULD POSE RISKS TO U.S. ECONOMIC OUTLOOK
YELLEN SAYS EMPLOYMENT SITUATION IMPROVING, THOUGH ROOM FOR FURTHER IMPROVEMENT REMAINS
YELLEN SAYS U.S. GDP GROWTH TO BE STRONG ENOUGH TO RESULT IN GRADUAL DECLINE IN UNEMPLOYMENT RATE
Kick-The-Can Has Morphed Into A Blatant Farce
by David Stockman • February 24, 2015
Kick-the-can has morphed into a blatant farce. Everywhere in the world central banks and financial officialdom are engaging in desperate, juvenile maneuvers to buy time—–amounting to hardly a few weeks at a go. Never before has the debt-saturated, speculation-ridden global casino rested upon such a precarious foundation.
This week, for instance, Janet Yellen will again waste two days of Congressional hearings in forked-tongue equivocations about an absolutely stupid issue. Namely, the exact date when money market interest rates will be permitted to blip upward from the zero bound by even 25 basis points.
But this “lift-off” drama is flat-out surreal. How could it possibly matter whether ZIRP will have been in place by 80 months or 83 months from its inception point way back in December 2008? There is not a single household or business on main street America which will change its behavior in the slightest during the next year regardless of whether the federal funds rate is 5 bps, 30 bps or 130 bps.
The whole Kabuki dance in the Eccles Building is about hand signals to Wall Street carry traders; it’s a reflection of the desperate fear of our monetary politburo that having inflated for the third time this century the mother of all financial bubbles, they must now keep it going literally one meeting at a time—lest it splatter again and destroy the illusion that an egregious spree of money printing has saved the main street economy.
Likewise, it now transpires that the bruising political war of words between the Germans and the “radical” Greek government has been suspended for another few weeks. And the reason is a pathetic fear that unites the parties despite their irreconcilable substantive policy differences. Namely, that the markets will crater upon even a hint that a real solution is on the table, and that the way to keep the beast at bay is to cover their eyes, kick-the-can and hope something turns up to avert the next crisis a few weeks down the road.
Still, this is getting beyond juvenile. If there were any adults in the room they would focus on quickly shaping a workable Greek default and exist—-not on perpetuating the lie that Greece can ever recover from its debt servitude to the EU super state and IMF.
Ironically, the fire breathing leftists who have taken over in Athens have compliantly strapped on the poodle collar left behind by the Samaras government. It seems that their game-theory spouting Keynesian financial spokesman, Yanis Varoufakis, also fears a thundering upset in the casino. So the Syriza government stumbles forward——now visibly toting the massive debt imposed on them by the Eurozone and IMF in order to bailout the German, French and Italian banks.
Indeed, in a new variation of the Stockholm syndrome, Syriza has not only embraced the views of its debtor’s prison jailors, but has actually invited them to secretly author their own attestations of subordination. As Zero Hedge noted about today’s shocking revelations regarding the so-called Varoufakis letter to the Troika, aka “institutions”:
As it turns out, the reason why not only the Troika received an agreed toversion of the Greek reform proposals “before midnight on Monday”, but rushed these through with a favorable agreement today, is that, drumroll, the European Commission drafted the entire letter!
And, no, this isn’t tin foil hat stuff. Here’s the smoking email which reveals that the “first list of comprehensive reform measures” submitted by Greece, which is actually a six-page air ball completely devoid of numbers and specifics, was actually written by one Declan Costello, an apparatchik at the European Commission.
This is all truly pathetic, but it should be a reminder that there is no escaping the global regime of central bank financial repression and state manipulation of debt saturated economies and gambling-infested financial markets. It took Syriza all of four weeks to hoist the white flag. As on astute Greek worker commented, “We went through two months of agony, emptied the banks, to realize we are still a debt colony,” 54-year-old electrician Dimitris Kanakis told Reuters. “The paymasters call the shots.”
It is no different on the East Asian side of the world. Japan has reported another quarter of sputtering economic performance. Notwithstanding the small rebound reported for Q4 based on highly implausible export deflators, real GDP is barely higher than it was in December 2012 before Abenomics launched its truly monstrous money printing spree—–a wave of QE so massive that it is literally draining the Japanese government bond market of any and all securities available for sale.
Yet, the Abe government and BOJ does not hesitate to threaten even more monetary carnage—even as the abysmal failures of current policies are reported month after month.
In China the scene is even more tortured. As McKinsey’s charts so dramatically document, the overseers of red capitalism in Beijing have driven China into a monumental debt trap. Its massive spree of construction and fixed asset investment has created an utterly deformed economy that will literally implode unless its keeps building empty luxury apartments, phantom cities, silent shopping malls and hideously redundant roads, bridges, subways and airports. Yet whenever the short-term indicators stumble, the government finds some new, convoluted way to release more credit into the system.
This too is reaching the farcical stage. During the six-short years since the financial crisis, China has boosted it credit market debt outstanding by the staggering sum of $20 trillion or by 4X the growth of GDP during the same period. How in the world could anyway believe that China’s tottering house of cards can be rescued by piling on even more debt financed construction and fixed asset acquisition?
Needless to say, as China veers ever closer to a crash landing, the China-dependent EM economies are rapidly faltering. It now appears that Brazil will suffer back-to-back years of GDP decline for the first time since 1930-1931. Indeed, the China- led global commodities and industrial production boom is cooling so fast that global CapEx in mining and energy, materials processing, manufacturing and shipping is on the verge of a huge downward correction. And that will hit the high end machinery and engineering exporters like Germany and the US, creating a further negative loop in the gathering deflationary crisis.
Nevertheless, during the past week the robo-traders and gamblers have painted the tape on no volume—-and for no reason except that central banks and government officials are still lamely kicking the can. Yet in so doing, they are driving massive debt burdens and speculative manias to the verge of collapse everywhere.
Accordingly, today’s S&P index ended-up at 3.21X its March 2009 bottom. At more than 20X reported LTM earnings for the period ended in Q1, the stock market is now an accident waiting to happen—-a super bubble searching for a pin.
But surely today’s news that the Greeks outsourced their so-called rebellion to the very EU apparatchiks who have put them into permanent, debilitating debt bondage is a wake-up call. As we learned in March 2000 and September 2008—–even the Wall Street gamblers eventually get the joke.
Gold Chart
The Upside
The first major trend lines are the 2014 downtrend line and the 2015 uptrend line. As you can see we are at the 2015 uptrend line. Keep in mind that we had a triple bottom low at 1180 broken that was the low for 2013 and 2014. Note how the lower blue 2015 uptrend line is right around this 1180 area. In order for gold to be in any uptrend this line has to be bottom line support. 1180 is where the uptrend for gold ends.
 
(gold continued)
The downside
Under 1180 and we break the 2015 uptrend line and then the 2014 downtrend line comes into play. Right now that is the 1155-1166 area and is descending at the rate of about a dollar a day. If gold can’t hold that downtrend line, and gold will go right back to continuing the downtrend that it has been on since 2011.
Neutral zone
The 1172 area (plus or minus 5 dollars) is the neutral zone.
In summary, gold is making its decision of whether it remains in an uptrend, or resumes it downtrend.
It all comes down to whether Yellen gets pressured because of the massive rally in the US Dollar and she gets swayed to say she’s still “looking at the numbers” and that the ultimate decision will be based on how things look.
Cycles
The next two week move is underway, we just don’t know the resolve of up or down as gold remains in this tight support zone but just can’t break higher above 1222. The trendline construction on the daily is different than the 8 hour chart we looked at earlier. On this chart, the downtrend line is already being tested where as the 8 hour chart has it at 1155-1166.
The next cycle begins now and it’s a matter if we move above 1222 then odds favor we go higher towards 1255. On the downside, price is right at the short term uptrend and downtrend lines. The cycle favors 75% higher but that’s it. There are no 100% cycles. They have the ability to invert like the one at the beginning of February did. If gold doesn’t turn here and we get another inversion, odds are HIGH THAT THE MOVE WILL BE DOWN HARD.
Silver
Silver has a double bottom right at the 1609 area and now we’ll have to see if it can get above 1675-1693 as that is the next resistance point. Support is now 1598-1609. There’s possible support at the 1620-1630 area as a new parallel line is forming but it hasn’t been tested yet so I’m just mentioning it. Now it all comes down to Yellen. It takes a close above 1675 to neutralize the short term downtrend.
| |
