October 2011 market

[68Camaro]

An impressive turn-down today, continuing the 3rd quarter decline. S&P closed below a "critical" technical support level. If there is going to be bad news in the market, October has been one of the meanest months for that to happen.

The market is starting to get jittery again. For nearly two months we had been bouncing back and forth in volatile ranges of S&P 1120 to 1200, Dow 10800-11500, waiting for something to happen. Broke out of that range to the downside today. I believe market is on edge of another 10-15% near-term drop, S&P in low 900s and Down in mid 9000s, and that is the good news - that's if nothing truly bad happens.

If any of the possible major negative news happens, such European banks stressed and start to fail, or Germany pulls out of the Euro, etc, then people will move to cash, fast, and market will dive off a cliff. A broad turn to gold will happen immediately.

[68Camaro]

Tuesday 10/4:

Looks like I'll pretty much be talking to myself here, but it'll be at least a set of notes to myself on day by day happenings.

Wow, what a wild ride today! Market is crazy. Literally. The action makes no sense. Traders have no faith in any one course of action, and are flapping around like a loose sail in a stiff breeze. And the end of the day action? Goes from 200 down to 150 up, in minutes, for no solid reason? Stinks. Smells. I have no faith in the market at the moment. Sure, these swings can happen on their own, but I fear the market is being manipulated in the background. Not sure I could bring myself to buy an equity in this siutation if it appeared to be the deal of the century.

[68Camaro]

Hang Seng continues to dive, down another 3+% overnight, despite other indices reversing up slightly. The HK market sell-off seems to have led to selling of PM assets in that part of the world, to cover losses, as the HK PM market dove for both silver and gold. But as soon as London opened, silver and gold stopped their dive and sharply reversed back upward.

Until the equity markets hit a bottom, or traders that also hold PM assets stop experimenting with equity shorts, PMs will tend to track equities.

[Saabman]

So based on what you were thinking that equities hadn't hit bottom yet......and equities and PM's are now linked.....are you thinking that PM's still have further to fall?

[68Camaro]

So based on what you were thinking that equities hadn't hit bottom yet......and equities and PM's are now linked.....are you thinking that PM's still have further to fall?

If organizations/people who are short equities get caught short, and they have gold, I believe they will sell the gold if they need to get flat. I believe that has been happening. Unfortunately I have no insight as to how long that may continue; that would require knowledge of what they are holding.

PM price does not need to follow equities, but it can, in these cases. I think if the market crashes further and people that are short still have PMs, they may sell what they have quickly, at that time, and we may see a momentary PM price dive due to short-term excess demand, but it should be a quick blip, as I believe the broad long-term demand is there to support eventual higher prices, once things settle out.

[Saabman]

Funny....a Camaro and a Saab talking PM's!

I hear what you're saying and it makes a lot of sense. Especially when you hear what they are saying on the Bullion board about how physical isn't trending downward but is getting harder to find at decent prices. I too think that eventually once the shorts are out that PM's will start realizing a steady increase.

[Mossy]

The link between PM and imaginary PM is getting stressed, that's for sure. We should see a big shake out as the fractional bullion vaults get exposed. Maybe this year? Maybe next? Eventually.

[Bartender]

We should see a big shake out as the fractional bullion vaults get exposed. Maybe this year? Maybe next? Eventually.

My vote is on sooner, rather than later. Although I've been thinking this for a few years now...

[68Camaro]

Gold recovers to the near-term norm, mid-1600s, overnight. Silver does a little pop overnight. Nothing to get excited about yet; it will have to hold this point and start working further up before a real recovery trend can be seen.

The broader markets get slightly excited about the hope of ... what? Essentially, they are excited about a delayed default in Greece. Not no default, but a delayed default. Kicking the can down the road, yet again. The fundamentals haven't changed. Yet the flight to the dollar has reversed slightly. Optimism reigns for some people. Best of luck to them. This cycle has repeated over and over the past 2 months, and will continue until "something" happens.

Edit - the day (or week) that we get a trend of rising silver, and no new investment bank shorting to repress the price down (regardless of reason, whether they see a tide they can't overwhelm, or whether they join the longs), will be the time when things have truly changed.

[68Camaro]

No real new news today; PMs are at steady to slight rise. Equities up and down with a slight rise.

The jobs report out this morning is being spun every which way. The numbers, which are always suspect at best, are still anemic at best. July and August were revised up, which is getting a lot of positive spin, but if the new numbers are more correct (even if you further adjust August up ignoring the Verizon strike, which makes August look even better), when put in context with the Sep numbers, they actually show a continuing shrinking economy over many months. Yes, some new job creation, but at an ever decreasing level, and each month increasingly further away from the number needed to maintain a fixed employment rate (much less reduce unemployment).

The continuing dismal job growth numbers make the overall unemployment rate suspect as well. The number has stayed constant at ~9.1% for months even though the job creation is so poor that we should not be sustaining a constant level; we should be well above 9.1%. Another illustration of why the unemployment nuber is suspect, with real unemployment at somewhere north of 16%.

Who's payroll are all these people on, those that are strident in putting positive spin on dismal numbers, month after month? (That's a rhetorical question, BTW.)

[Edit for clarity...]

[Saabman]

I read earlier today that of 103,000 jobs reported 45,000 were the the striking Verizon employees returning to work. So basically, August gets revised up to 57,000 jobs and September is essentially the same, which means that the needed 150,000 jobs needed to sustain the economic numbers just isn't there. I agree that unemployment is more around 16%. But also, we're kidding ourselves thinking inflation isn't creeping upward. Again, suspect numbers from our government.

[68Camaro]

I read earlier today that of 103,000 jobs reported 45,000 were the the striking Verizon employees returning to work. So basically, August gets revised up to 57,000 jobs and September is essentially the same, which means that the needed 150,000 jobs needed to sustain the economic numbers just isn't there. I agree that unemployment is more around 16%. But also, we're kidding ourselves thinking inflation isn't creeping upward. Again, suspect numbers from our government.

If you add them back to August then you take them from Sep (these weren't actually lost jobs), and the 103,000 in Sep drops to 58,000ish, same as August, and yeah - it's flat at nearly zero job creation.

Edit:

Actually, I had a brain fart. I was thinking this, but didn't type it, and remembered my screw-up when I was out driving around. The adjusted numbers:

July: 127,000
August: 57,000+45,000 = 103,000
September: 103,000-45,000= 58,000

May and June before that really sucked.
And the previous Feb/Mar/Apr data were consistent in the same downward trend.


There is no job growth in this country - just the opposite. In the past 3 years we've had a total of 3 months of actual unemployment reduction, paid for by a multi-trillion dollar increase in the deficit.. Hardly a bargin.

[fb101]

Yeah but we will be saved by the jobs bill which will make a whole bunch of 40K jobs for only 200K apiece. And they'll last this time too.... well at least for 6 months or so.....

[68Camaro]

Equities up for several days on no reason other than some vague European promise between the French (who have no money and want the Germans to spend theirs) and the Germans (who don't want to commit political suicide by having to be the ones to bail out rest of Europe that has no self-control) to keep the balls in the air. Greek debt will costs hundreds of billions in default - they have no self-control. Then there are the Italians and the Spanish, who are almost as bad as the Greeks, but with economies 10x Greece. TPTB in Europe know this is all about perception and damage control - that once there is a true complete loss of confidence the house of cards folds. They are EXTREMELY good at kicking the can down the road; don't underestimate them. But they have a finite ability to do this, and the fundamentals do not point toward a strong global recovery, regardless of whether there will be a technical recession or not. At best we've got many years, 5-10, of further substantial economic pain ahead. Can they keep all their balls in the air for that long? I'm not betting on it.

Most chartists are looking at their charts, missing the fundamentals. In normal chart-dom, they might be right in predicting an equities bottom and pending bull market and a PM top, but the fundamentals say there are other, larger, unusual forces at work that violate the charting rules. We will certainly soon see, one way or other.

Meantime, on these vague promises, the USD is down about 2% against the Euro - as though the Euro is now all good. It's a small number, but PMs have risen with the fall (again) of the USD, but in far greater proportion than the currency rise alone. Gold is surely creeping back up, again - back from the mid-1500s and now flirting again with 1700, and Silver has risen quickly from the 26s, stayed well north of 30, and slowly risen further to near 33, despite several continued take downs. It has hit 33 several times and is threatening to pass that mark and stay there on the slow move up. The move up should continue into November, overall, though there will be short dips. The demand for both continues unabated, and is even accelerated. Premiums for physical PM are significant, and supplies of certain types are starting to dry up.

[68Camaro]

US businesses report sales increased 0.7% in July, 0.3% in August, and that's being noted as a positive, and indication of no recession. Well, maybe..., but is it actually more PRODUCT sold? Or is it actually more sales as a result of higher prices, e.g., inflation? I'm not convinced there is more product being sold. Not yet.

Equity markets still on a rebound run. Good luck to 'em.

PMs still strong. Both gold and silver took additional hits over the past several days and essentially shrugged them off. Silver closed the week over 32, a key point, and gold closed at 1680, just one modestly good day away from 1700 again. TPTB won't like to see this - there will be more short attacks to keep the prices down. But demand continues to be there. I'm looking for silver to end the month in the 34s, and gold to be mid 1700s. But both just one crisis away from 50 and 2000+.

[Saabman]

Do you think that there a lot more shorts out there? Or have most of them done their thing and are now preparing to go long? I mean come on.....Greece hasn't gone away and now Spain and Italy have been down graded.

[68Camaro]

Do you think that there a lot more shorts out there? Or have most of them done their thing and are now preparing to go long? I mean come on.....Greece hasn't gone away and now Spain and Italy have been down graded.

I don't personally have easy access to the shorting stats, but they get published and discussed eventually. JPM dumped most of their short positions earlier, but not all, and the activity this week indicated that someone (whether JPM or another) was still active in shorting.

[68Camaro]

Interesting action this morning, after several weeks of repeated pressure testing a bottom, which was resisted over and over at 31.5-32 in silver, and 1620-1650 in gold. After another test this morning, the longs broke loose and both are back up to multi-week highs. As I write this, silver is pushing at 33 and gold pushing 1700. Possible break-out?

I had read an interesting commentary a few days ago (I'll look for it if anyone is interested) suggesting some inside info that the UBS rogue trader incident was actually an organized take-down attempt on UBS, a punishment for past sins. This was as a prelude to further supposed inside info that there would be a similar action against JPMC, using the PM market, that some unknown forces would induce purposefully them to move the wrong direction, then slam them, and that this would occur "soon". I'm not sure I believe that story, but it's an interesting one. Today makes me wonder. This is not "normal" market action.

[Saabman]

Isn't JMPC in court now for illegal pm trading?

[68Camaro]

Isn't JMPC in court now for illegal pm trading?

http://www.gata.org/files/ConsolidatedSilverClassActionComplaint-09-12-2011.pdf

[68Camaro]

After a slow post NYMEX start, the HK exchange picks up where the NY close left off, and the game continues. Will someone try to shut it down, or take profits quickly on recent purchases? We'll see.

2 more days like today and we're back where we left off, and the bull is running again.

The state of Europe matters to this. Europe is going down, eventually, but how and when are key, and when people truly lose confidence in the abilty of Europe to control things, rather than allow themselves to blow in the wind, PMs will go up and continue stay up for good, though there will continue to be cycles and corrections.

Silver has been more volatile this year for sure, but is still up for the year and remains solid at prices that we could only dream of a year ago, and even with all the media fluff about a "drop" in gold, gold is still at prices that were record highs only weeks ago. The base has been built and the next bull run has a solid foundation.

[68Camaro]

So, to Europe... after days, weeks, of "negotiations", they decide to force the banks to absorb most of the national debts, to finance other parts of their debts to allow the selling of bonds 25% backed by the EFSF (to multiply that small amount of funds), and by getting committments to reduce future debt. For example Greece "promises" (which they've never kept before) to reduce their deficits to 20% per year by 2020, eight years from now.

OK, what does this mean? Another masterful (if people buy into it, for a time) effort at kicking the can down the road. They are attempting to delay default, in the hope that economy will come back and allow eventual payment of the new debt. There will be short-term success. A month, a year, maybe even a year or two. (Though I doubt that long.) Any surprise? No. What does it really do? It piles more onto the upside down pyramid. When the crash comes it will come faster and bigger than anyone can imagine. God help us...

[Lemon Thrower]

in europe and elsewhere, crisis is code for the following: there are loans that are no good, and the banks (and in some cases the central banks) own a lot of them. if nothing is done, the banks will bear the loss when the loans are not repaid. special programs like refi's can delay the day of reckoning. there is a limited amount of time to fool the public and convince them that the losses should be shifted to the taxpayers.

[68Camaro]

Market is going to rally big today. Europe has already; US will follow. It's a form of insanity, but that's why I'm out of the general market. Interestingly, PMs are still going up with that. Gold is up because....? Euro is safe? Europe is safe? Hmmm. Doesn't makes sense. There is enough broad consensus that thinks things are NOT quite so safe. And/or there are plain traders who willing to gamble that others think that.

But maybe TPTB will leave PMs alone for a bit, stop the protectionism of fiat, if they think the pressure is off the banks and broader markets, so their fiat retains the appearance of being intact.

[theo]

In addition to gold and (especially) silver being up, the dollar is down nearly two percent. I'm guessing this is in response to the euro rally. On the bright side the new deal (if it holds) might give us a bit more time to prepare. However, I fear that whatever I do, it won't be nearly enough. I feel like I'm building sand castles to stand against a tidal wave.

If I had to guess, I'd say that August - September of next year would be a likely timeframe for things to fall a part; just in time to delay those pesky elections.