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In the spirit of my recent observations concerning our corrupt bourgeoisie's
penchant for turning up the heat in order to get what they want, and that we
could be very close to a turning point
in this regard, it would be fitting to see the seeds of revolution
planted within sight of our racial origins (Northern Africa), considering
this time around the drama will encompass the globe on a profound level.
Along these lines, one must wonder if this is the real McCoy, or just a dress
rehearsal for things to accelerate to more dangerous levels next year, within
biblical dimensions
during 2012. Certainly on a more practical level there is reason
for revolution moving forward due to the growing energy imbalance required
for the human race to keep increasing with peak oil in the here and now,
however who knows, maybe new technologies
will allow us to tack on more billions of population growth in the years to
come.
If this is not the case however, and the human race rolls
over into decline, then, the implications associated with 'these times' could
in fact prove to be 'biblical' in dimension, where it's best to embrace the
concept of 'viva la revolution' in order to survive. And of course if this is
true, then, it's important to realize that on a basic level fewer people will
need less money, which although not realized by many, is why our fiat
currency / credit based economy(s) are in peril of rolling over as well. So
you see the condition our condition is in is all tied together down to the most
basic level(s), and is at a minimum cyclical in nature. The important thing
to realize here is that our perception of the concept 'survival of the
fittest' is just that during the good times, a concept, however during times
of stress, like in revolutions, understandings tend to come alive into
something more real and primitive.
And along these lines, and because trust is also lost
during such times, our money returns to it's more primitive roots also,
anchored closer to the ground in which we need to grow things, but yet
needing more lasting qualities. This is naturally why we as a race have
embraced precious metals in this regard, with gold and silver our undisputed
and preferred eternal money.
And gold will remain the world's undisputed and preferred eternal money even
in times like these, when it's going down. You may say, along with James Turk,
yes, but gold is not going down. It's merely had a correction and is now
poised to shoot back up to new highs. Unfortunately if you believe this you
are premature and don't understand either the gold market, or our faulty and
fraudulent markets in general at all, because it's not fundamentals that make
markets these days, it's speculator betting practices.
In the first place, it should be noted gold failed to
reach the larger degree Fibonacci resonance related target just above $1500,
as can be seen here in
Figure 1, which can be construed as being bearish under present
circumstances. And pray tell, exactly what circumstances do we refer? Well,
for one thing, precious metals shares have a tendency to underperform when
input costs are rising rapidly, with energy at center presently. So the
trouble in Africa will not help in this regard if crude oil keeps going up $3 a day.
Secondly however, and most importantly, make no mistake about it, as alluded
to above open interest put / call ratios across the precious metals sector
have been crashing, with those of the shares (NEM, GG, etc.)
and share indexes (GDX, XAU, etc) at
center in this regard.
What's more, you can see how important speculator betting
practices are in our faulty and fraudulent markets when the performance of
precious metals shares is set against the broads that have been increasingly
shorted, as can be seen in the heavily traded SPY
contract, where the open interest put / call ratio is soaring. This is why
stocks did not crash yesterday, not because things are improving overseas.
(i.e. or because the economy is getting better.) Liquidity is on the rise,
with not only growth rates of M2 and other
conventional money supply measures accelerating; but more, monetary
authorities are also pumping daily POMO injections
(like a drug) and excess reserve
allowances ($25 billion per week over the next 8-weeks) into the
system as well, which is the other key element in supporting the perpetual
squeeze in anything speculators are dumb enough to short. (i.e. think the
broads.)
So, don't be surprised if the performance gap between
precious metals and the broad measures of stocks continues to grow, because
it will. And it will continue to grow as long as crazed speculators continue
to buy every dip in precious metals (buy calls on stocks, indexes, etc.) and
selling the rallies in the broads (short selling, buying puts, etc.). Of
course at some point the speculators will stop buying puts on the broad
measures of stocks due to combination of exhaustion and / or good news
becoming prevalent and then they will join precious metals shares. And make
no mistake about it, precious metals shares are breaking down, where in spite
of the probability a bounce might be in order soon, this would likely just be
shoulder building on the head and shoulders pattern forming in the Amex Gold
Bugs Index (HUI) seen below. (See Figure 1)
Figure 1
 
The measure in the above noted head and shoulder's pattern
is down to 400 (500 - 100), which not many investors / speculators in the
sector are expecting, which is why it can happen. All we need to see is the
200-day moving average go to confirm the fact prices are falling in five-wave
sequences and the die will be cast - precious metal share fate will be
cemented. So, needless to say we will be watching events in coming days
closely, watching to see if gold breaks below the trend definer (in pink)
too, as has already occurred in the shares. (i.e. which are leading the way
down.) All we need now is for interest rates (think TNX) to confirm the bullish trend higher
and this should be about as much as gold could handle under present
circumstances (think deflationary),
and this break lower should occur soon enough. (See Figure 2)
Figure 2
And don't be fooled by the big drop in open interest last week, neither this nor
physical supply side constraints will help once the larger equity complex
rolls over, given if this is not to be the case for some time (think options
expiry in March like in 2000), then sporadic rallies would occur. All such
rallies should be sold until a more profound correction occurs however,
because the liquidity draw of such an occurrence will envelop
macro-conditions in a profound manner. Again however, with the Fed pumping an
extra $25 billion per week into the system until the end of March this is not
expected right away, however a top in equities could be seen prior to the
liquidity feed running out, like at options expiry in March if this is when
the speculators / hedgers are finally to cease buying puts in betting against
the broads. This is how long it took for these types to become exhausted off
the Fed's extreme liquidity event surrounding the Y2K scare in 2000, so this
might repeat once again in terms of seasonality associated with such extremes.
Unfortunately we cannot carry on past this point, as the
remainder of this analysis is reserved for our subscribers. Of course if the
above is the kind of analysis you are looking for this is easily remedied by
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Good investing and best of the season all.
Captain Hook
Treasure
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