Friday, June 4, 2010

The Europe Problem Will Be Contained

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Have no fear, the global apparatchiks and masters of the financial universe will contain the European Panic of 2010 just like they contained the subprime mortgage problem. The charts are screaming caution in stock markets and suggesting to me that it may be time to put on your crash helmets for the short term. I am an intermediate-term bear on everything but physical Gold held outside the financial system and I own puts on commercial real estate and the S&P500. Now you know my bias.

The copper to Gold ratio broke down today. Don't forget how well this indicator predicted the last fall out of bed. It is suggesting new lower lows in the U.S. stock market indices below the recent panicky lows. Here's a 3.5 month 60 minute intraday chart of the copper:Gold ratio (using JJC:GLD as a proxy, black linear plot) versus the S&P 500 ($SPX, green area plot) thru part of this morning's action:

Greece has broken thru the March 2009 lows. THIS IS A BIG DEAL IN MY OPINION AND AN OMEN OF THINGS TO COME. Here's an 18 month 60 minute intraday chart of the Greek stock market ($GRDOW) thru part of today's action:

Spain has also slid to lows below the recent mini-panic lows today (5 month 60 minute intraday chart of $ESDOW thru part of today's action):

The Dollar surged to new highs and the Euro to new lows again today. The TED spread continues to make new highs and the LIBOR remains at significantly elevated levels relative to a few months ago. Things are becoming eerily reminiscent of 2008. The current European panic should not be ignored by those analyzing the charts of American stock indices. I remain black bile bearish on stocks.

We are living in interesting times, to be sure. The clash of the titans continues as Gold and the U.S. Dollar slug it out for monetary supremacy. Those who read my rants know that I think Exeter's pyramid is correct and that Gold will win again in the end, as it has for centuries.

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