Friday, November 25, 2011

Last Comment On Japan (for now)

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I promise that for now, this is the last time I will comment on the Japanese stock market. I only feel the need to scream from the rooftops on this one because I am not seeing anyone else commenting on it, and I believe it is HUGELY important. The third (?) largest economy in the world is demonstrating conditions ripe for a stock market meltdown.

Here is my Elliott wave count on the Nikkei Japanese stock market ($NIKK), with all its bearish implications. Following is a 37.5 month weekly candlestick chart thru Friday's close with my thoughts:

We're not just below the recent October fall lows, we're looking at a crash-type scenario in the Japanese stock market. How this happens in a globally interconnected market without a strong move to the downside in Europe and the USA is beyond me. My subscribers and I have been short emerging markets and remain so for now. Soon, we will be looking to buy into the precious metals sector for a bull trade, but for now it is "batten down the hatches" time.

If you're interested in trying to trade these dangerous markets, consider my low cost subscription service. If not, my advice is to buy physical Gold and sleep soundly.

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Tuesday, November 22, 2011

Making Lower Lows

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There are a few global stock market indices that have broken below the recent early October fall lows. This is not a good sign. The most important of these is Japan, which I wrote about a few days ago. Here is a 6 month daily candlestick chart of the $NIKK Japanese stock market index thru today's close:

And here's Austria ($ATX), Europe's latest entry into the crisis competition, using the same chart format:

Next up, Portugal ($PSI):

Finally, everyone's favorite basket case, Greece ($ATG):

Will the rest of the world's stock markets, which are above their recent fall lows, hold up or will they follow these countries to new lower lows? Only Mr. Market knows for sure, but I am not optimistic on common equities here. When sovereigns are falling/failing, it is best to get out of the way and stay liquid. Gold is the best form of cash to hold through an international monetary crisis, as it has no counterparty risk and cannot have its value successfully inflated away by desperate governments and bankstaz (unlike paper currencies). Until the Dow to Gold ratio hits 2 (and we may well go below 1 this cycle), Gold will continue to outperform stocks, bonds, real estate, other commodities and cash on a secular basis.

If you are crazy enough to try and trade in this environment, consider giving my low cost subscription service a try.

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Friday, November 18, 2011

Japan Sleepily Triggers While Everyone Is Watching Europe

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I have been closely following the Japanese Nikkei Stock Market Index ($NIKK) lately waiting for it to break down below the neckline of a big "head and shoulder-y"-type topping pattern that has been going on for over 2 years now. Well, this week it finally broke on a weekly basis. Ignoring other important global markets is a mistake for American and European traders. The fact that Japan broke down this week means there should be very little weight given to the bullish case for common equities in my opinion (unless this break down quickly reverses course, which seems unlikely at this point).

Here is a 3 year weekly candlestick chart of $NIKK thru today's close with my thoughts:

The target for this breakdown is below the March, 2009 lows regardless of which drawn neckline is used! A general rule for technical analysis is that the bigger and longer the formation is, the more significant it is when it finally breaks one way or the other. A second weekly close below the neckline next week would pretty much seal the deal and it may turn into a waterfall-type decline quickly if this happens. We could drop 2000 points in 2 months or less.

Japanese traders have been through almost 22 years of a secular bear market with no end in sight. They are going to sell first and ask questions later and so are the international traders and investors that have ridden through the seemingly endless Japanese market storm. This breakdown, if confirmed next week, is bearish for all of the global equity markets and would cement the case for a new, potentially big leg down in the current cyclical global equity bear market in my opinion.

Meanwhile, the USA gets ready to come back into the global news flow focus with its "debt committee." It should prove to be just as embarrassing as the summer debt "discussion" debacle. Don't expect any solutions, but there should be lots of finger pointing and chest thumping from the bozos driving the federal fiscal short bus.

In the end, the markets should decline once again in a fairly scary fashion, just enough to get everyone panicking. That's when helicopter Ben will ride to the rescue with some new twist on printing money out of thin air (hopefully with a fancy and misleading name to boot). Until then, Gold and silver stocks as well as silver are unlikely to be safe places to hide and the Gold price may well get smacked down a little more, too. However, the next leg up in the secular Gold bull market should be rather glorious and Gold stocks should finally start to participate. In the mean time, though, buckle up for some volatility. I continue to maintain that this isn't 2008, but that's only because it's worse.

If you're crazy enough to trade in this environment, consider giving my low cost subscription service a try. If you're actually sane, then just buy physical Gold (and a little silver) on every dip, store it outside the banking system and sleep well. Once the Dow to Gold ratio hits 2 (and we may well go below 1 this secular cycle), then it may be time to consider selling or trading your shiny metal for something else.

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Wednesday, November 2, 2011

Some Fat For Bulls to Chew On

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I am a secular bear on financial assets like stocks. This is my bias. Although I understand we cannot have a replay of the 1930s in America (unlike Prechter), it has already occurred in Greece with an 87% loss from the 2007 peak to recent lows in October (versus 89% for the Dow in the USA in the 1929-1932 bear market). It is different in America because we can use the printing press while Greece cannot, unless Greece decides to leave the Euro. Hard core Gold advocates need to understand that a paper currency can result in deflation, as long as it is not aggressively debased/abused relative to the needs of the debtor (governments that issue currency are almost always wretched debtors with no intention of repaying their debts in nominal terms).

I have no concerns that America will fail to debase her currency yet again. I laughed at commentators who said we had a few hawks in the last "fed" (not a government institution) meeting and thus there was hope for the US Dollar. The current meeting today had only one dissenter, and he wanted an EASIER monetary policy. These central bankstazs are almost as predictable as crack fiends. Please keep in mind that I remain bullish on the US Dollar relative to other paper currencies for the intermediate term, but this a game of relativity and trampoline jumping, after all.

In any case, I remain bearish on stocks despite knowing that paper heroin will be dispensed at the first sign of trouble. In fact, "Operation Twist [part 2]" by the "fed" was greeted with a Bronx cheer, as the addiction runs so deep that a promise to keep interest rates near zero for a year or two was not enough to get the financial markets high again (until new lower lows were made). Tolerance is a bitch, as any addict can tell you. It used to only require a 0.25% rate cute, but now we are in Wonderland and stronger and stronger doses of currency destruction are needed to keep the party going.

There are some signs that the recent insane rally of 20% or so in less than a month (for US equities) may have been enough to collapse the wall of worry and start the next bear leg down. Seasonals are in favor of us continuing a rally into year end, but these are not normal times. My main concern is that of time. Have we had enough time to correct the bearishness that reigned a short 4 weeks ago? Only Mr. Market knows for sure, but there is data out there that concerns me.

I'll start with two charts from Market Harmonics, a site that provides free sentiment data. First up, the daily "NASDAQ Sentiment Index," a proprietary measure of sentiment for the NASDAQ (when the plot is high, sentiment is bullish and vice-versa):

We're not exactly wallowing in bearishness according to this sentiment indicator, eh? Next up, an intermediate term sentiment indicator related to a ratio of money flows into two Rydex mutual funds dedicated to being bearish versus bullish, respectively. When money flows into bullish funds more than bearish funds, this indicator rises. In other words, this indicator is based not on opinion alone, but on actual money flows from investors/traders. Fading the herd is often a good idea at the intermediate-term extremes:

Wow. New all-time highs for the past decade! I guess everyone is a momentum chaser now, huh? We are all trying to make up for losses over the past 10 years from the monetary inflation foisted upon us by central bankstaz and governments around the globe. The volatility and momo chasing is reminiscent of the Weimar Germany experience (i.e. we're all speculators to make up for purchasing power losses), but that's another story altogether.

The $NYSE Summation Index ($NYSI) is also a decent indicator for medium term trend and suggests at least a period of consolidation here if not a significant move to the down side for common equities:

The bullish percentage index for the S&P 500 ($BPSPX) also suggests the need for a rest here if not a new leg down in equities:

In the meantime, Gold is getting set to have yet another year of positive gains. So boring and predictable that paperbugs can only decry its volatility now, which is far less than the volatility for common equities. The so-called "bubble" in Gold can only pop once paperbugs like Krugman capitulate and realize that Gold can save the state from itself. As James Rickards points out, the USA is the Saudi Arabia of Gold, so why wouldn't we play our trump card when the poop hits the rotating blades? Gold remonetization will save the day for the US government and those who hold physical metal outside the banking system will be rewarded for having the knowledge of history required to escape the current slow-motion implosion of the international monetary system taking place right before our eyes.

If you are crazy enough to try and trade in this environment, consider subscribing to my trading service. Otherwise, buy physical Gold, store it outside the banking system and enjoy the fireworks.

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