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Now that the markets are becoming actionable, with the premier gold
stocks technically broken, the stock market vulnerable beneath significant
long-term resistance and even a less than stellar jobs report that got both
Obama and Romney publicly fretting (a first inkling that Dear Monetary Leader
Bernanke will eventually change the Fed's 'hard guy' stance with respect to
policy), it is time for people who have not run with herds and gotten into
trouble, to maintain perspective, strength, patience and a capitalist's
attitude for coming opportunity.
This email update basically wrote
itself and went to NFTRH subscribers last week. Presented here just FYI:
NFTRH is not a gold letter, a gold stock letter or any other readily
definable thing. It is technical analysis, a lot of weird ratio indicators,
psychology and a gut instinct by its writer with regard to the markets.
Gold remains a centerpiece of the analysis, but if policy makers are able to
will the system to be fixed then NFTRH will become whatever the new reality
demands.
Is the system fixed? Well I fail to see how some rigging of yield curves
(while continuing inflation through ZIRP) and a little economic recovery (as
you know, I have been claiming 'recovery' for some months now, receiving
derisive mail from bears along the way) while not addressing the fact that
additional debt is still created to fuel tepid economic growth and global
bailouts can be called 'fixed'.
We are being asked to believe that economies can be managed indefinitely and
that our leaders have got it all under control. I just do not buy it. We can
see 'growth' and bullish stock market performance for a while as things are
papered over until one day the system has had enough and simply rejects the
dishonest policies that have been employed behind the scenes to keep things
bailed out and propped. Governments have not employed real measures to change
their way of doing business. They are thus far just doing more of the same
things that have created the hazards like the one that started in the US in
2007 and the one in Europe last year.
The case for gold is that nothing has changed and if anything, policy has
been pushed further out on a limb. Meanwhile, it appears that some powerful
forces have begun a campaign, which has included Ben Bernanke's recent
lectures and JPM's 'Head of Global Commodities' Blythe Masters protesting a
bit too much on CNBC about JPM silver manipulation being speculated upon in
the blogosphere. Famously, it has also included Warren Buffett deciding now
would be a good time to ruminate about gold's lack of utility and thus,
value. And then there is the big one, Dennis Gartman
being cited in Forbes with Gold's
Decade-Long Bull Run Is Dead, Gartman Says.
Phew! That's a lot to deal with.
I will probably parse this article bit by bit on the blog, but "gold has been in bear territory
since the summer of 2011" is all we need to know to get an idea
where this article is going. It is called a correction. 'Bear territory'... ooohhhh.
Back when I was a just a blogger doing this for the simple purpose of trying
to understand and differentiate bullshit from reality, I wrote a blog post
(on a now defunct 'commentary' blog) in response to a ridiculous article
making the rounds at the time (2007, I believe) citing Goldman Sach's Technical Analysis department's 'concerns' about
gold due to waning momentum. A look at a monthly chart showed no such thing
and I had a good, derisive laugh. This was when gold was in the 800's, half
the current price. Now Forbes is citing Gartman,
who says gold has suffered "irreparable
damage" post-FOMC.
I'll include a chart in the blog post, but for our purposes we will just
remember that the daily chart is not broken (though it needs to start forming
a right side shoulder soon to actually look actionably bullish) and is
looking a-okay by a weekly chart. I cannot tell you
that the price assigned to gold will resolve the daily pattern bullishly and
I cannot tell you that our weekly support parameter (chart omitted for this
post) of 1580 will hold. But I can tell you that there are a lot of powerful
people in business, media, government and quasi government already pounding
home the reasons why gold bulls are a thing of the past and should make the
adjustment to this reality that these people insist is in play.
The weekly chart shows that yes, gold lost the weekly EMA 20, which had
generally supported it all the way out of 2008. So Gartman
calls this 'bear territory' and 'irreparable damage'? Really Dennis? The only
damage was the opposite condition to today's depressive one; as we are now
finding out just how damaging the unbridled momentum of last summer was fated
to be, especially in the miners, but also the metal. Gold itself is unbroken
and apparently in need of some extra help in getting the memo that its bull
is over. Out trot the big guns. This is war.
Mahatma Gandhi: "First they ignore
you, then they ridicule you, then they fight you, then you win."
[<-- thanks to a subscriber who so aptly cited this quote]
They are fighting the gold 'community' and it is why I have advocated not
using your heart but rather, your head. The 'community' is in tatters and
under assault from all angles. The 'community' may not win because many of
its members will be made to puke up their ideals in the face the onslaught.
These powers could break the 'price' of gold, which is why we work so hard to
understand 'value' vs. 'price'. Because the longer and higher gold's bull
market goes, the more fierce the battles are likely
to be. If you are a gold 'player', you are managing risk in whatever way
keeps you mentally healthy and lets you feel strong
and ready to capitalize. If you are a value 'holder', if you agree that the
macro fundamentals are just fine for gold, you sit out the latest battle and
know that you are your own little Central Bank, not caring what happens to
the price assigned to 'value' at any given time.
What you must not be is in a place where you do not know if you are a value
holder or a player, sitting there in the middle and waiting to be picked off.
Gold can shake off this nonsense and get to 2050 rather quickly or it can be
broken down below the December low of 1523. The first warning would be a loss
of 1580, AKA the weekly EMA 70.
I will never attempt to fool myself into thinking I know what is going to
happen. Ever. I may tell you what I think is happening and how I am
personally getting in line with expectations, but this is all about risk
management. Yet gold itself simply remains a 'value' anchor and a monetary
barometer. It's all it ever was in my book. So whatever happens, I will
remain bullish on gold as long as I see not only no real change in monetary
policies, but also continuation and promotion of policy that routinely
incorporates debt and inflation as a way of doing business. If it is being
done covertly as I believe is now the case, then that illustrates a level of
desperation on the part of 'the system'.
To summarize the above, just think about the difference in gold bug
sentiment, the macro economic landscape, the major media and even policy
maker tactics now compared to last summer. Then the signals tried to compel
people to be wildly bullish the precious metals. Today, the opposite is in
play. I am bullish because being contrary this cacophony has worked well thus
far in a secular bull market that is not over until the technicals
and macro fundamentals say it's over. Gartman has
been trotted out before and is not a credible source for such a grand call.
On to gold stocks, the consolidation on the HUI gold stock index is breaking
down. This invalidates the big upside targets for now. And yet, I am so
bullish I almost cannot stand it. I worry that I may be under exposed to
quality miners. Mahatma's quote is foremost in my mind. They are fighting
back. All I know is that I want to hold value and that is cropping up all over
the spectrum of 'quality' gold stocks.
NFTRH analysis will now lock and load for coming opportunities. Individual
stock charts will be produced since different items will bottom at different
times. Gold's ratio to other things will be watched in the effort to define
the macro, non-gold asset markets, the 'real' price of gold, the economy and
its pressures on policy makers. They are fighting now because the underlying
driver is desperation.
I am happy to finally have data points coming in. The 1.5 year consolidation
in the HUI represented a slack time when nothing actionable was happening
other than a trading range. Now, we are becoming actionable and it is time to
get to work. I would hope to be able to finally back off of some of the in
depth clue seeking that has blown the newsletter up to 25 or so pages in
favor of more direct and actionable analysis.
I am not the guy who always says "I don't know". I will pound a
table once in a while. The last time was 2008. 2012 is shaping up such that
it will only have been a 4 year gap since I was able to get overtly
actionable and confident as a bottom feeder value seeker.
More to come in NFTRH182, which I hope to finish and mail
out tomorrow since the markets are closed today and Sunday is Easter.
Regards,
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