Monday, May 31, 2010

Greece - Preview of the World to Come

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The chart says it better than I can, but let's be clear: Greece is simply the first stock market to reflect reality. It is not the exception, it is the canary in the coal mine. Here's a 4 year weekly candlestick chart of the Greek stock market ($ATG) thru Friday's close with a plot of the Euro currency index ($XEU) below:

As Spain, Portugal, Italy and others get set to follow the same path, the contagion will be as contained as subprime mortgages were. Ignoring the message of the Greek stock market is the same as ignoring the Kreditanstalt bank failure and England leaving the Gold standard in 1931. Cash is king if you're not into speculating on bad outcomes. However, no paper debt-backed currency is safe when desperate apparatchiks and central bankstaz seek a way out of the debt morass. Currency devaluation by market forces or by government decree is coming to every major economy in the world. Get some real cash - get physical Gold held outside the financial system.

My prediction is that the second half of 2010 is going to be ugly for paperbugs and that the carnage is going to begin before June ends. Gold may or may not correct 10-15% or so this summer, but if it does, buy it! I am holding out for better prices in Gold stock indices for now as I focus on scaling into large short positions on the stock market. I already own puts on commercial real estate but holding out for a slightly higher short-term high in the $RMZ index (695 level) before adding more. Waiting for the 1110 level in the S&P 500 before scaling into puts against it, but if we get to this level, I will start loading up aggressively. In my opinion we are on the threshold of a scary return to the secular bear market in debt-backed financial assets, which is far from over. Be careful out there.

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Saturday, May 29, 2010

Gold Denigration Persists

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This screen capture of a recent set of headlines at Yahoo Finance caught my eye:

Of course, the actual article in the link (see it here for yourself) from the screen capture above was titled "Why I Don't Trust Gold," by a mediocre to subpar paperbug "analyst" by the name of Brett Arends from the Wall Street Journal.

I find it amusing that mainstream financial sources would actually take the time out to call an asset class "ridiculous," going so far as to intentionally mischaracterize the already dubious content of the article. Imagine Bloomberg calling stocks or real estate (as asset classes) a ridiculous investment! Of course, to be fair, under the glaring "ridiculous" headline are two articles related to Gold that are not disparaging. We are no longer in the "stealth" phase of this secular Gold and Gold stock bull market. You couldn't find 3 articles about Gold within a daily set of mainstream financial headlines 5 years ago.

The Gold bull market has much further to go in both time and price. The groundwork continues to be laid for a mania phase. We have a Gold bubble or we don't get another bubble for a while. There are no other reasonable candidates on the horizon. The Dow to Gold ratio will reach 2 and may well go below 1 this cycle.

It is an impossible concept for the brainwashed herds to comprehend. How can an ounce or two of Gold ever possibly buy the whole Dow? And even if it can, Spam has more utility according to Nouriel Roubini. Only if the world is coming to an end could Gold reach such relative heights, and in that case, who cares?

Of course, the world wasn't coming to an end in 1932 or 1980, though the fear was palpable and the Gold lust was intense and overblown. It will happen again. No need for the world to come to an end, just a cycle of human fear and greed that has been around a lot longer than the current crew of "modern" financial drones. Those outside of Wall Street tend to forget that life can and does go on with or without them.

It irritates me to see Gold denigrated because I know it is keeping otherwise rational folks from protecting themselves by buying physical Gold. However, at the same time, I love to see the persistent hatred of Gold in the mainstream media for selfish reasons. Because I can assure you, when the time comes, the mainstream financial press will cheerlead for Gold like it was in 1999. They will encourage Gold ownership at the worst possible time and cause a contribute to a mad stampede that could cause the Gold price to quadruple in less than a year.

And I hope Gold bulls can accept that the speculative frenzy will eventually get so overblown that it will cause the Gold price to subsequently collapse on itself once speculation has exhausted itself. I am not saying Gold can't back money again, but every bull market gets overdone to the point where it requires a secular bear to correct the excesses. You can't have it one way and not the other. Let's worry about it more when the time draws near, however. We're still a long way from this point.

First the herd got burned in stocks, next they will get burned in government debt, and finally they will get burned in Gold. Wash. Rinse. Repeat. Those fed up with the stock market should move directly to Gold on the next Gold price correction and skip the intermediate step of government debt. Most won't, though. They will follow the herd into the next financial abattoir. The real bubble continues to be in government debt, the perfect bubble because none of the participants even recognize it.

Now, remember that most bubbles can take a heckuva lot longer to pop than you think. I have watched so many inflationists call for the imminent breakdown in government bonds, yet U.S. debt remains in an unequivocal bull market. In fact, Gold and U.S. debt are really the only secular bull markets left standing! The difference is that the U.S. debt secular bull is mature and provides only the potential for capital preservation (assuming one is not using leverage, there is negligible opportunity for capital appreciation). In other words, in return for an almost zero yield, non-traders are taking on an unacceptable risk of the bubble popping and destroying their savings.

Gold, on the other hand, is at the threshold of the most exciting part of its secular bull market. The risk in Gold is $100-200/oz to the downside with an upside potential of $1000-4000/oz, and potentially more! Gold denigration persists for now. Paperbugs feel "ridiculous" for missing the boat and are projecting their psychological angst onto the shiny investment their paper princes told them to ignore. Wouldn't you be mad if you were a buy and hold investor in common equities over the past decade?

Gold is acting and will continue to act as a currency. It is the backbone of the current international paper monetary scam (I mean system), whether you understand this or not. Gold will be revalued much higher in current paper debt ticket terms. If the markets won't do it (and I think they will), the same people and organizations now sponsoring chrysophobia will decree the Gold price higher (under the threat of force if needed) and make more money off the revaluation than 99.9% of Gold bulls.

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Friday, May 28, 2010

One More Push?

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I have moved my focus to shorting the stock market. I have been buying puts on the triple bullish commercial real estate ETF (ticker: DRN). I will buy more if we go higher in the $RMZ index (695 in this index is my next buy point). I may grab some puts on the triple bullish SP500 ETF (ticker: UPRO) if we get a little higher (at 1110 on the S&P 500, I'll be interested). I think we are in for a big move down here.

I have been following the copper:Gold ratio closely (using the copper ETF JJC and Gold ETF GLD as proxies for charting purposes). It helped me see a short-term bottom coming and I think it will help call the next turn down as well. It is one of only many indicators and cannot be used in a vacuum (man, don't we all wish it was that easy!). To me, one more short-term push in this ratio is needed before the correction "looks" complete. Here's an 8 month 60 minute intra-day chart of this ratio (i.e. JJC:GLD) thru part of today's action with my thoughts:

This would fit with the US Dollar heading quickly back towards its 50 day moving average and one last pop higher in Gold and Gold stocks. I don't think this calm/short-term uptrend is going to last much longer. I also don't anticipate a small drop lower once this very short-term uptrend completes. I wouldn't be playing with napalm (i.e. options on triple levered ETFs) if I didn't think this was a juicy risk to reward set-up.

I am looking to accumulate a boatload of puts on any further move higher in stocks and I am looking to get out of paper Gold and Yamana Gold (short-term trades) on the next short-term leg up. I won't touch my physical Gold until the Dow to Gold ratio gets to 2 (and we may well go below 1 this cycle) and I will be looking to buy more physical Gold if we have a decent correction into the summer.

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Thursday, May 27, 2010

Commerical Real Estate - Return of the Dream Short

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Shorting the market and/or being bearish on it isn't for everyone. Something about our collective psychology makes us prefer optimism over reality. If you are in that camp, you probably don't understand the message Gold is sending. Its lack of cash flow (other than the 15-20% annual gains that have eluded the paperbugs over the past decade...), its lack of relevance to the "modern financial system" (other than as the backbone of the current international paper monetary scheme...) and its volatility (i.e. much less than any paper asset class besides government bonds over the past decade...) make Gold scary to the brainwashed herd just like they are scared to be bearish on the market. For those of us who have crossed over to the other side of the matrix and actually have the audacity to buy a barbarous relic and make "evil" bets against the system, I believe the dream shorting opportunity has finally returned.

I previously successfully used the "phase shift" concept between home builders and commercial real estate to make the most profitable trade of my brief career during the Great Fall Panic of 2008. Commercial real estate is one "cycle" behind the home builders, which makes sense economically and fundamentally, although the crash in 2008 got commercial real estate caught up in a hurry. I think the phase shift concept is back in play, with a slight twist.

In looking at the ratio chart of commercial real estate (using $RMZ, the index behind the triple bull [DRN] and bear [DRV] commercial real estate ETFs, as a proxy) relative to the S&P 500 ($SPX) since 2000, you can see how overbought commercial real estate is relative to the S&P 500 (weekly log scale candlestick chart of $RMZ:$SPX since 2000):

Well, the phase shift comes back into the picture using this same ratio chart, but comparing it with a ratio of the home builders sector (using $DJUSHB as a proxy) to the S&P 500. The following is a very busy chart, but it is one I am using to make a heavy bet on the short side. I am biased since this is my own research here, but I think it is worth taking the time to decipher all the following squiggles and what they may mean for the near-term future (10 year weekly log scale ratio chart of both $RMZ:$SPX [candlestick plot] and $DJUSHB:$SPX [black linear plot]):

See the opportunity? We are not talking about a 10% move here if you think about the math required to make this ratio premise work at a time when the stock market will be falling. To scale in to the trade itself, first here's an 18 month daily chart of the $RMZ thru part of today's action to show where we are on an intermediate-term basis:

And here's a close-up of the recent action using a 4 month 60 minute intra-day chart of $RMZ:

Long Gold and short the stock market. Trying to ride the obvious secular bull trend: the Gold to Dow ratio. Because buying options on a triple levered ETF is like playing with napalm, I don't need to risk a lot of capital on the trade to make significant money if I am right on this one. You and you alone are responsible for any decisions you make, whether financial/trading or otherwise, but if you take the plunge on this juicy set-up let me know how it works out for you.

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Wednesday, May 26, 2010

Gold Stocks, Gold and the Stock Market - What's Next?

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It's fun to guess, thought those that lay out predictions of the future in black and white leave themselves open to criticism, as nobody knows the short to intermediate-term for certain. It's hard enough to get the long term right. Ask those who have predicted every year that Gold will go down in price...

Those who have been reading my market thoughts over these past few months know that I have been very bullish on Gold and Gold stocks. Recently, I have finally given up the ghost on my Gold stock bullishness to allow for a greater amount of time for Gold stocks to rest/correct before their next leg higher begins. I like to play Gold stocks from the long side using leverage and I am not a buy and hold investor when it comes to these stocks. I am a buy and hold physical Gold holder, but I don't buy and hold any stocks "for the long haul," Gold stocks or otherwise. It's a conscious choice I made once I realized we were in a secular bear market.

I recently got out of my leveraged Gold stock positions at a small profit, which was much less than what I had hoped (it would have been better if I would have waited one more day to close the positions, but such are the breaks when speculating). I have decided to wait for a deeper correction before committing new leveraged money to the Gold mining sector. I am actually looking for a continuation of the current short term bounce higher in the Gold patch over the next week or so, but then I expect Gold and Gold stocks to briefly roll over. I may be wrong, as I have been many times in the past, which is why I don't trade my physical metal. I also hold several small positions in "lottery play" junior Gold miners that I will hold until they move significantly higher or go out of business (I assume some will do one while some will do the other).

I remain bullish on Gold stocks and Gold for the longer term and I by no means have a gloom and doom prediction. I am simply going to hold out for a better price before I get back into a leveraged Gold stock position again. My hope was that we were on the threshold of the 2002 Gold stock bull run this spring. I still think we are, but I realize I may need to give the Gold stocks more time to correct. Gold stocks can rise higher during a regular stock bear market, but they have failed to show decent relative strength compared with Gold, which is never a good sign.

I analyze fundamentals first. I am not a "pure" chartist/technical analyst. That to me is like trying to be a fundamental analyst in the paper currency markets. Too much cognitive dissonance for me. The Gold mining sector has better fundamentals now based on the "real" price of Gold than at any other time during this secular Gold bull market with the exception of the panic lows in the fall of 2008. Using a ratio of Gold divided by a basket of commodities to look at the secular fundamental picture for Gold stocks ignores important differences between miners in terms geopolitical risk, management, unique characteristics of individual properties, etc. This is a way to analyze the sector, not individual miners. I have ZERO experience in Gold mining. I tend to play the sector as a whole (e.g., using call options on GDX or GDXJ ETFs) or blue chip/popular miners (e.g., Goldcorp, Yamana) when making leveraged bets.

Here's the secular forest for Gold miner profitability in its idealized form over the past 25 years ($GOLD:$CCI linear scale weekly ratio chart thru 5-25-10):

Forget inflation. If Gold isn't rising faster than oil, for example, inflation and/or a rising Gold price doesn't help make miners more money as costs can rise faster than the price of the final product. It's the same as in any business.

The point of this exercise is to point out that the fundamentals are there for Gold stocks, it's simply now a decision as to whether to buy now or later with new money. Many with more wisdom and experience than me would say to just buy and hold and let the bull market bail you out. I am doing this with physical Gold, but I like speculating in an attempt to augment the gains of this secular bull market.

Anyway, I became bearish on Gold stocks when their relative strength failed to materialize as I was anticipating it would. I think the depth of Gold stock correction was adequate into their recent February lows, but now I realize perhaps not in terms of the length of time.
Let me show you what I mean using the chart of the Gold Bugs Mining Index ($HUI) back in the 2000-2002 time frame of interest:

And here's a similar pattern from the 2002-2005 time frame:

This yields the "idealized" Gold stock index corrective pattern prior to a massive launch higher into the next leg of the Gold stock bull market:

Finally, here's a current daily candlestick chart of the $HUI over the past 21 months thru today's close:

As far as Gold goes, I am hoping for a slightly higher high, but will have an itchy trigger finger as we get closer to the prior $1250 highs and will likely implement stop losses. I don't like that Gold stock indices couldn't best their December highs and the other thing that has me worried is the palladium/platinum complex. I see a confirmed breakdown in the mini-parabolic rise in palladium, which has been the best performer in the precious metals complex over the past 18 months. See this prior post about my concerns related to the parabolic move in palladium.

Here's an updated 20 month chart of palladium thru today's close:

Between the busted palladium parabola, the failure of Gold stocks to make new highs, and the recent 98% bulls reading recently for a Gold sentiment indicator, I think the Gold patch is telling us that it needs a rest. Of course I could be wrong and you and you alone are responsible for your own trading decisions, but this is the way I see it. I wish it weren't so and I wish we were going to the moon right now, but I am trying to make money here and I don't like the long side other than for a scalp currently.

In the mean time, Gold could easily spike to a new all-time high before a multi-week correction begins (this is actually what I am expecting [hoping?] to happen). Perhaps we pop into the $1270-1325/oz range as the U.S. Dollar makes an overdue correction back to its 50 day moving average. After that though, Gold needs to recharge. A trip back to the low to mid $1100s would be a nice base from which to launch a trip to the $1500-$1750 range by the end of the year. I wouldn't bet against Jim Sinclair's prediction for $1650 by January of 2011.

Since the stock market has finally broken down (only about a full year after I initially expected - oops!), I am now turning my attention to establishing a large short position. I think we will bounce higher over the short term (couple of days to 2 week time frame). I am looking at commercial real estate again and plan to buy puts on the triple bullish DRN ETF as well as puts on the triple bullish S&P500 ETF (ticker: UPRO). I'm with Richard Russell on this one. A hard rain is coming to use his words.

For Gold bulls, this is not a bearish message. It is a message that patience will be rewarded. If you are a "buy and hold" investor in Gold stocks, it means another 1-2 months or so before a BIG payoff. If you're a trader or waiting to add new money to the sector, it means a great buying opportunity is coming. Please remember that the 2002 and 2005 bull market runs in Gold stocks that followed the corrective patterns shown in the charts above were the strongest of the secular Gold stock bull market so far (150%+ gains for the $HUI in 6-12 months in both cases!). Now that I am black bile bearish on the stock market, this Gold stock pattern makes sense to me. Gold stocks would likely need to correct a little bit more if a vicious bear market slide materializes as I believe it is going to, particularly given their lack of ability to lead the Gold price.

I believe there is more money to be made shorting the stock market over the next 1-2 months than there is to be made waiting for Gold stock indices to figure out where they want to go. I can only react to to Mr. Market and what he tells me, and this is my interpretation of recent events in the Gold patch. Don't forget my favorite big picture chart, which is set to reward Gold bulls at the expense of their paperbug brethren, the Dow to Gold ratio (15 month daily candlestick chart thru today's close):

It is my hope that I can make a few more nickels shorting the general stock market over the next 1-2 months, then take those nickels and turn them into shiny physical Gold coins for my savings account and leveraged bullish bets on Gold stocks for my trading account. In fact, I'll say it now: if we get back to the 360-370 level on the $HUI, I think it will turn out to be the best intermediate-term speculative buying opportunity of this secular Gold stock bull market since it began in the fall of 2000.

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Unintentional Absence

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Apparently, the electrons in my blog triggered the electrons in a software program used by Google and my blog was shut down. I'll be writing again tonight now that things have been cleared up. In my trading account, still long paper Gold, long a few Gold miners (including a short-term position in Yamana [ticker: AUY]) and in cash, waiting patiently for a new shorting opportunity while trying to scalp a few more nickels on the bounce up. Always in physical Gold and won't trade it (other than buying more on dips) until the Dow to Gold ratio hits 2 (and we may go below 1 this cycle).

Thanks to all those who inquired about the temporary shut down. It's nice to know people noticed. Feel free to click on an ad or two when you visit in the future to show how appreciative you are of my efforts...


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Sunday, May 23, 2010

Gold Savers Will Get the Last Laugh

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For that's what this cycle is all about. Cleansing the system of debt is a process fought tooth and nail by the banks, which have encouraged profligacy among the masses and their governments to an extent not seen in the last few generations. Due to social mood (or whatever you think drives a phenomenon that recurs as regularly as the tides), the people and their governments were more than happy to oblige the bankers and take on enormous debt.

Those who tried to save money using conservative means were ridiculed. They were considered quirky and quaint. Who were those losers that saved up in order to pay cash for an item? Who were those wimps that thought home and stock prices were too high last decade and kept waiting for lower prices?

The reckless mood of endless debt has come to a close. There are many participants feeling the sting of the turn. Many of those who we all thought were rich are now poorer than before the boom started. Leverage cuts both ways. Savers are set to reap the rewards of their forethought and prudence.

This is why it is so maddening that many savers will soon be wiped out. Why is this? Because they insist on believing that a debt-based paper monetary system backed by nothing but too much debt is a good vehicle in which to hold one's savings. Cash in the bank and government debt will work as investment vehicles until the day they don't. And how can I be so sure that they will eventually fail when savers need them most?

Because government is the ultimate debtor and the majority of the population that votes has no savings whatsoever. How will we get out of this mess? Well, time is the main way. But we are an impatient herd, especially those with their greasy hands on the levers of power trying to control that which cannot be controlled. When global stock markets get back to the March 2009 lows and make a complete mockery of the paperbugs and their ridiculous beliefs in apparatchiks and bankstaz, will that be the trigger?

Or will it take a sound and scary break below the March, 2009 lows to initiate the trigger? Do you know what trigger I am talking about? I am talking about the trigger that causes the apparatchiks and their bankers to reach for the nuclear option.

That nuclear option is to change the rules of the monetary system. This rule change will wipe out the traditional prudent savers who used paper debt tickets as a store of wealth. Do you doubt it will happen?

Do you deny that it happened in the 1930s and then again in the 1970s? Do you deny that a 40 year cycle of monetary destruction is set to recur in the 2010s? The traditional prudent saver has fallen for the paperbug promise and will be pulled into the black hole of insolvency right along with the squalid debtors!

Now is the time for Gold. Gold, the hated asset that all of a sudden has become a bubble. Gold is money, has been for thousands of years, and will continue to be whether you think it's appropriate or not. It is older and more reliable than every sovereign currency ever created. Most of these man-made currencies have already fallen by the wayside. The sheeple accept the Euro as an important currency even though it's only been around for a decade or so! How quickly we forget the lessons of history.

The real prudent folks are those despicable Gold bulls who accumulate physical metal held outside the system controlled by those that will turn against and plunder savers. If the markets won't do it for them, the U.S. government will intentionally decree a devaluation of the U.S. Dollar before this cycle is over. That's actionable information. And in case you're wondering, no, you won't be notified in advance.

In fact, a devaluation will be favored by those who hold the reigns for the Yen and Euro as well. A coordinated "shock and awe" campaign may well help reset the debt morass in a surprising way. Those who hold real money will be rewarded.

Jealous paperbugs have drunk the official Kool-Aid and believe the apparatchiks will not let Gold bulls profit from their wise decision to buy physical metal held outside the financial system. This is sour grapes at its finest, but they concoct stories of confiscation, excessive taxation and Gold price collapses that will wipe out the Gold bulls.

I have news for this crowd (Prechter, Roubini and Denninger: WAKE UP!): no one with any form of money is safe when things get bad. How about property taxes and stock market taxes? How about a VAT tax? How about 401k confiscation? How about the score board after the first two big deflationary waves? Why does it take so many more paper debt tickets to buy Gold if King Dollar is getting set to win the clash of the titans contest? When will you all admit defeat and stop giving people bad advice on Gold?

Gold savers will have the last laugh as the asset price deflation in Gold terms continues essentially unabated other than the needed corrections that characterize every healthy and sustainable trend. The Dow to Gold ratio will hit 2 and we may well go below one this cycle. As a parting thought, never forget that the people and organizations who hold the most Gold in the world are the same ones who will get to decide how much to devalue paper against it!

"You have a choice between the natural stability of [G]old and the honesty and intelligence of the members of government. And with all due respect for those gentlemen, I advise you, as long as the capitalist system lasts, vote for [G]old."
George Bernard Shaw (1856-1950)

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Calm Before the Storm

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I remain black bile bearish on the stock market to the point where I am more interested in shorting the stock market than anything else in my trading account. Right now, my biggest trading positions are long paper Gold (double bullish UGL ETF) and cash. I also couldn't resist buying a small stake in Yamana Gold (ticker: AUY) when it got back down to $10/share again on Friday for a quick "bounce" trade. But I plan to cough up my paper Gold and Yamana very soon after an anticipated big bounce in the Gold patch that may only last a week or two and I suspect will cause Gold to make new all-time nominal highs in USD terms. What I am anticipating is apparently not a unique thought I found out after I saw Ross Clark's/Bob Hoye's piece published on yesterday (it always feels better when someone smarter than you is seeing the same thing).

We are due for a bounce in the general stock markets and I suspect it already started on Friday. I see ominous things ahead for the stock market and a really juicy shorting opportunity. It is said that in a deflationary bear market, he/she who loses the least wins. I am going to try to make money off this process - a lot of money. I think the so-called "flash crash" was a just a tremor warning us of the major earthquake to come. A quick short squeeze/counter-trend bounce in the stock markets that may last a week or two, then a plunge that may "set your hair on fire" (as Sinclair likes to say) if my crystal ball is accurate.

I previously posted on the broadening top or expanding megaphone pattern in Australia and France. Both broke down as anticipated in fairly dramatic fashion, particularly Australia. Well, here's the New York Stock Exchange ($NYA) showing us the American version of this unstable topping pattern (15 month daily candlestick chart thru Friday's close with my prediction for what comes next):

Perhaps I stole this prediction from somewhere else and it's not so original. Maybe (definitely) I am simply looking for a rhyme of Australia's current chart ($AORD, also a 15 month daily candlestick plot):

Do you think my focus is too narrow? Do you think Australia and France have nothing to do with America? What if I told you that the entire world is in an unstable expanding megaphone at the brink of a MAJOR TOP? Here's the proof (15 month daily chart of the Dow Jones World Stock Index [$DJW]):

I think we may even get a second crash. Everyone says it can't happen. Everyone says it's never happened in the same bear market. But everyone is about to find out that the "traditional" major economies in the world (i.e. U.S., Japan, Europe) are all just like Greece when it comes to debt and inability to pay it off (15 month daily chart of Greek stock market [$ATG]):

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Thursday, May 20, 2010

Melt Down or Bounce?

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In the short-term, we're all just guessing. I think we're getting ready to have a significant bounce. I am bearish on the stock market, but we've moved a long way fast and fear has risen substantially. I vote a bounce that may even start tomorrow. Here's a 20 year chart of the Volatility Index ($VIX) with my thoughts:

To be honest, it wouldn't surprise me at some point during this secular stock bear market to see the $VIX make a new all-time high higher than at the height of the Great Fall Panic of 2008 (you know, the panic the apparatchiks and gangsta bankstaz couldn't stop despite the ban on short selling and guaranteeing the entire banking system and mortgage market with our money?). But it's a little early in the game to be setting new highs in the $VIX when we aren't even in a confirmed return to bear market territory yet!

Next up, the McClellan Oscillator ($NYMO), a short to intermediate term breadth indicator. This daily chart goes back to mid-1998 (as far back as my data goes):

Next up, the Chicago Board of Exchange (CBOE) total put to call ratio ($CPC) over the past 42 months:

How about the percentage of NYSE stocks above their 50 day moving average ($NYA50R) - 8 year daily chart follows (as far back as my data goes):

Now, I am not saying that I am going to go out and buy the stock market here. Far from it. I am talking about a bounce. It could last a week or several weeks. How would I know? However, during that bounce, I think the U.S. Dollar will drop because the Euro will get a relief/short-squeeze rally. A lot of ignorant paperbugs have seen the recent correlation of Gold going up with the U.S. Dollar and they think that when the U.S. Dollar Index drops, Gold is going to drop too. HAHAHAHAHAHAHAAAAAAAAAAAAAHH!

Gold reacted to the crisis in confidence like it always does. Now it is free to react to U.S. Dollar weakness. A correction in the U.S. Dollar is due even if you think the U.S. Dollar Index is headed higher. I also believe the copper to Gold ratio is starting to firm and copper is headed higher in overnight trading while Gold is down to flat. Here's a 15 minute intraday chart over the last 30 days action in the copper:Gold ratio using the JJC ETF as a proxy for copper and GLD ETF for Gold (i.e. JJC:GLD ratio chart):

This ratio should be continuing to plunge if we are headed for Armageddon right here and right now. Obviously, I am getting into very short term analysis here. I am not bullish on the copper to Gold ratio or the stock market, but we don't move in straight lines very often in trading markets. What I am talking about here is not investing, it is speculating/trading. I will be buying more paper Gold (the double Gold bullish UGL ETF) tomorrow if we go below today's lows in the Gold price. I am already loaded up, but saved some dry powder to buy more if we go any lower in the Gold price.

The point of all this analysis is simple: when the bounce comes, I think the Gold patch will benefit. Don't forget which shiny, precious market is still in a solid, uncontested bull market. Silver may outperform Gold on the bounce, but I'm sticking with Gold here in my trading account. The bounce I am anticipating is a 2-4 week bounce in Gold that should result in new highs for the U.S. Gold price. Gold stocks will be pulled along for the ride if I am guessing right here (but I am guessing the miners don't have enough strength to lead the move).

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