Available 3:00 Pacific.

DOW                                                       + 236 on 1350 net advances

NASDAQ COMP                                     + 63 on 1300 net advances

SHORT TERM TREND                         Bullish (change)

INTERMEDIATE TERM TREND       Bullish

    STOCKS:  According to the financial talking heads a prominent reason for the rally was progress in Europe on the Greek situation. Strength in Europe triggered an up move over here.

        Our explanation is that the market was very oversold and ripe for a bounce. It merely needed a trigger. Greece gave it.

    GOLD:  Gold was up $8. Dollar weakness and German bond jitters were cited.   

    NEXT DAY: Neutral.  After today’s strength, Thursday’s action is uncertain.

CHART: An advance  decline ratio of 2.0 or greater is frequently a kickoff to a sustained rally. Sometimes it can be climactic. Our best estimate is the former.

BOTTOM LINE:  (Trading)

Our intermediate term system is on a buy from Feb. 20, 2015.

   System 7   We bought the SSO at 66.25 and sold at 67.23 for a gain of .98. Stay in cash on Thursday.        

   System 8  We are in cash. Stay there on Thursday.                   

GOLD  We are in cash. Stay there.     

News and fundamentals:  There are no important releases on Wednesday. On Thursday we get jobless claims and retail sales.

Interesting Stuff  The Greek situation is so tiresome. It’s getting better. No, it’s getting worse. No, it’s getting better. It’s a soap opera that never ends.  

TORONTO EXCHAN GE:   Toronto gained 71.

S&P/TSX VENTURE COMP: The TSX rose 1.

BONDS:  Bonds were down again to another new low.                                 

THE REST:  The dollar was lower. Silver was up slightly. Crude oil surged again.  

We’re on a sell for bonds as of June 3.                     

We’re on a sell for the dollar and a buy for the euro as of June 2.                       

We’re on a sell for gold as of May 19.                       

We’re on a sell for silver as of May 19.                        

We’re on a sell for crude oil as of June 4.                             

We’re on a sell for the Toronto Stock Exchange as of May 6.    

We’re on a sell for the S&P\TSX Venture Fund as of October 30.    

We are on a long term buy signal for the markets of the U.S., Canada, Britain, Germany and France.

It is well known that I don’t think much of the ability of government officials to correctly forecast much of anything. Alan Greenspan and Ben Bernanke have made famously clueless predictions with respect to stock and housing bubbles, and rank and file Fed economists have consistently overestimated the strength of the economy ever since their forecasts became public in 2008 (see my previous article on the subject). But there is one former Fed and White House economist who has a slightly better track record…which is really not saying much. Over his public and private career, former Fed Governor and Bush-era White House Chief Economist Larry Lindsey actually got a few things right.

Back in the late 1990s, Lindsey was one of the few Fed governors to warn about a pending stock bubble, and to suggest that forecasts for future growth in corporate earnings were wildly optimistic. He also famously predicted that the cost of the 2003 Iraq invasion would greatly exceed the $50 billion promised by then Secretary of Defense Donald Rumsfeld, a dissent that ultimately cost him his White House position. (But even Lindsey’s $100-$200 billion forecast proved way too conservative – the final price of the invasion and occupation is expected to exceed $2 trillion).

Now Lindsey is speaking out again, and this time he is pointing to what he sees as a painfully obvious problem: That the Fed is creating new bubbles that no one seems willing to confront or even acknowledge.  Interviewed by CNBC on June 8th on Squawk Box, Lindsey offered an unusually blunt assessment of the current state of the markets and the economy. To paraphrase:

“The public and the political class love to have everything going up. We had “Bubble #1” in the 1990s, “Bubble #2” in the 00s, and now we are in “Bubble #3.” It’s a lot of fun while it’s going up, but no one wants to be accused of ending the party early. But it’s the Fed’s job to take away the punch bowl before the party really gets going.”

To his credit, however, Lindsey sees how this is sowing the seeds for future pain, saying:

“The current Fed Funds rate is clearly too low, the only question is how we move it higher: Do we do it slowly, and start sooner, or do we wait until we are forced to, by the bond market or by events or statistics, in which case we would need to move more quickly. By far the lower risk approach would be to move slowly and gradually.”

In other words, he is virtually pleading for his former Fed colleagues to begin raising rates immediately. I would take Lindsey’s assertion one step further; the party really got going years ago and has been raging since September 2011, the last time the Dow corrected more than 10%. (That correction occurred at a time when the Fed had briefly ceased stimulating markets with quantitative easing.) Since then, the Dow has rallied by almost 58% without ever taking a breather. With such confidence, the party has long since passed into the realm of late night delirium.

As if to confirm that opinion, on June 8th the Associated Press published an extensive survey of 500 companies (using data supplied by S&P Capital IQ) that showed how corporate earnings have been inflated by gimmicky accounting. Public corporations, upon whose financial performance great sums may be gained or lost, are supposed to report earnings using standard GAAP (Generally Accepted Accounting Principles) methods. But much like government statisticians (see last month’s commentary on the dismissal of bad first quarter performance), corporate accountants may choose to focus instead on alternative versions of profits to make lemonade from lemons.

Using creative accounting bad performance can be explained away, moved forward, depreciated, offset, or otherwise erased. Given the enormity and complexity of corporate accounting, investors have deputized the analyst community to sniff out these shenanigans. Unfortunately, our deputies may have been napping on the job. 

The AP found that 72% of the 500 companies had adjusted profits that were higher than net income in the first quarter of this year, and that the gap between those figures had widened to sixteen percent from nine percent five years ago. They also found that 21% of companies reported adjusted profits that were 50% more than net income, up from just 13% five years ago. 

But with the fully spiked punch bowl still on the table, and the disco beat thumping on the speakers, investors have consistently looked past the smoke and mirrors and have accepted adjusted profits at face value. In a similar vein, they have looked past the distorting effect made by the huge wave of corporate share buybacks (financed on the back of six years of zero percent interest rates from the Fed). The buybacks have created the illusion of earnings per share growth even while revenues have stalled.   

So kudos to Lindsey for pointing out the ugly truth. But I do not share his belief that the economy and the stock market can survive the slow, steady rate increases that he advocates. I believe that a very large portion of even our modest current growth is based on the “wealth effect” of rising stock, bond, and real estate prices that have only been made possible by zero percent rates in the first place. In my opinion, it is no coincidence that economic growth and stock market performance have stagnated since December 2014 when the Fed’s QE program came to an end (it has very little to do with either bad winter weather or the West Coast port closings).

Prior to that, the $80+ billion dollars per month that the Fed had been pumping into the economy had helped push up asset prices across the board. With QE gone, the only thing helping to keep them from falling, and the economy from an outright recession (which is technically a possibility for the first half of 2015), is zero percent interest rates. Given this, even modest increases in interest rates could be devastating. Lindsey’s gradual approach may be equally as dangerous as the rapid variety. But the quick hit has the virtue of bringing the inevitable pain forward quickly and dealing with it all at once. Call it the band-aid removal approach; it may seem brutal, but at least it’s direct, decisive and makes us deal with our problems now, rather than pushing them endlessly into the future.

The last attempt made by the Fed to raise rates gradually occurred after 2003-2004 when Alan Greenspan had attempted to withdraw the easy liquidity that he had supplied to the markets in the form of more than one years’ worth of 1% interest rates. But by raising rates in quarter point increments for the succeeding two years, Greenspan was unable to get in front of and contain the growing housing bubble, which burst a few years later and threatened to bring down the entire economy. In retrospect, Greenspan may have done us all a favor if he had moved more decisively.

Today, we face a similar but far more dangerous prospect. Whereas Greenspan kept rates at 1% for only a year, Bernanke and Yellen have kept them at zero for almost seven. We have pumped in massively more liquidity this time around, and our economy has become that much more addicted and unbalanced as a result. Arguably, the bubbles we have created (in stocks, bonds, student debt, auto loans, and real estate) in the years since rates were cut to zero in 2008 have been far larger than the stock and housing bubbles of the Greenspan era. When they pop, look out below. Unfortunately, the gradual approach did not save us last time (worse, it backfired by making the ensuing crisis that much worse), and I believe it won’t work this time.   

In fact, the current bubbles are so large and fragile that air is already coming out with rates still locked at zero. However, unlike prior bubbles that pricked in response to Fed rate hikes, the current bubble may be the first to burst without a pin. It appears the Fed fears this and will do everything it can to avoid any possible stress. That is why Fed officials will talk about raising rates, but keep coming up with excuses why they can’t.   

Lindsey will be right that the markets will eventually force the Fed to raise rates even more abruptly if it waits too long to raise them on its own. But he grossly underestimates the magnitude of the rise and the severity of the crisis when that happens. It won’t just be the end of a raging party, but the beginning of the worst economic hangover this nation has yet experienced.

Read the original article at Euro Pacific Capital.

Compare Bull Market in Stocks with the Energy Sector

Now take a quick look at the price of crude oil

An Oil Junior Resource Stock

Next Bull Market Conclusion:

www.TheGoldAndOilGuy.com

Jun 9, 2015

1. Please  click here now. That’s a seasonal chart for gold. I’ve highlighted my key buying and profit booking areas.
2. June is the most important time of the year to buy gold.
3. Unfortunately, by the time this vital month gets underway, most gold analysts and investors are too afraid to take any action. 
4. They are forced to buy at much higher prices. Religion-oriented buying in India pushes gold relentlessly higher into August and September, in what is typically the year’s most powerful rally.
5. This has happened for decades. Clearly, the more things supposedly change, the more they stay the same.
6. Timid investors tend to fail, and brave ones tend to prosper. That’s a key part of “financial life”, and I don’t see any event on the horizon that will change it.
7. Technically, gold’s daily chart is in “textbook” sync” with seasonality. Please  click here now. Note the fabulous position of my 14,7,7 series Stochastics oscillator, at the bottom of the chart.
8. Gold also tends to sell off going into the US jobs report, and then rally nicely in the days following the report. 
9. On that note, please  click here now. That’s the hourly bars chart for gold, with Friday’s “jobs report low” highlighted.
10. Contrary opinion is a key indicator I use to suggest whether the next trending move is up, down, or sideways. I would estimate that about 70% of gold analysts are too afraid to buy any gold right now. That’s the kind of number that typically fuels solid gold price rallies!
11. Amateur investors need to think carefully about how to apply contrary opinion to their own investing. Most investors are usually wrong about market direction. Thus, it’s important for the amateur investor to bet against their own analysis. That’s a hard thing to do, but it’s a critical part of successful investing.
12. Please  click here now. That’s the daily chart of the US dollar versus the Japanese yen. The price action of this currency cross has historically been a key indicator of future gold price action.
13. My Stochastics sell signal in play on that chart should provide comfort for the professional investor who buys gold in June. As China and India play an ever-bigger role in daily gold price discovery, the importance of this dollar/yen chart is waning. 
14. For now, it’s still a decent gold price forecasting tool, and it suggests a nice gold rally is beginning!
15. Please  click here now. That’s the Dow Transports monthly chart. Horrifically, when I look at it, the story of Icarus comes to mind.
16. Rules aren’t made to be broken, and Dow Theory has certain rules that are time-tested. When the Dow Transports disintegrate, it’s a dire warning for global stock market investors.
17. Note the emerging sell signal on the TRIX indicator on that Transports chart. The key 5,15 moving average series is also verging on a massive sell signal.
18. Please  click here now. It’s imperative that Janet Yellen hikes rates soon. The “real” economy has been disintegrating since the late 1990s, because money velocity has been tumbling since then.
19. QE only added to the deflationary fire. The money supply has been dramatically enlarged because of QE, but the banks need higher rates as an incentive to make aggressive loans to businesses. Until Janet hikes rates, M2V will continue to languish, and so will the economy. 
20. Also, America’s population is aging. Savers have been destroyed by the low interest rates. Only the US government has really benefited from these rates, as it has been able to expand exponentially in size, like a bully expanding his reach on a school playground.
21. The technical deterioration of the Dow Transports suggests that Janet’s patience with government over-spending and size is wearing thin. The market appears to be anticipating rate hikes. The US government is becoming the single largest component of the US economy. Horrifically, the main product of the American empire is now red tape. Janet makes her next FOMC announcement on June 17. I doubt she hikes rates then, but I hope she does.
22. Borrowing costs will rise for the US government as Janet hikes rates, and I’ll clap enthusiastically as she makes that move. Global stock markets could crash, but the only way to raise the employment participation rate and the inflation rate is to increase the velocity of money.
23. All roads lead to gold, silver, and gold mining/jewellery stocks, in the coming reflationary era. Please  click here now. That’s the daily chart for silver. Look at the position of my Stochastics oscillator, with lead line at nine! Silver is my favoured metal in the “reflationary era”.
24. Please  click here now. That’s the GDXJ chart. It’s no secret that junior gold and silver stocks are the darling of the Western gold community. Arguably, America was built by men and women in overalls, and destroyed by bankers wearing suits. Junior gold mining companies give investors a chance to relive what made America an empire, and bet against what is probably going to burn it down. From a short term technical perspective, GDXJ looks spectacular. Note the bullish hook appearing on my Stochastics oscillator. Gold stocks swoon going into June, much like America swooned going into the year 1776. Was America a buy in 1776? Are gold stocks a buy in June? The answer to both questions is obviously… yes!

Jun 9, 2015
Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
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Tuesday Jun 9, 2015
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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am. The newsletter is attractively priced and the format is a unique numbered point form; giving clarity to each point and saving valuable reading time.

Risks, Disclaimers, Legal
Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an invetor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:

As most of you probably know by now, it’s been my belief for about a year that gold’s bear market would not end until at least testing the previous C-wave top at $1,050. Every D-wave correction in the secular bull has at least retraced to the previous C-wave top except one.

So until gold tests the $1,000-$1,050 level, I think it’s premature to call the bottom. As a matter of fact, I think over the next several months gold is going to drop down into its final 8-year cycle low, and that move down could be extremely painful. That is the problem with trying to pick a bottom in a bear market. If you are too early, the drawdown into that final low can be extremely damaging both financially and emotionally. Let me explain.

Let’s say you are long gold and miners right now, and I am correct and gold still has a move to $1,000 or lower before the bear market is over. It would mean you are going to suffer a 20% or larger decline in your metals positions over the next several months. If you are heavily into mining stocks, this could be a 30-40% drawdown. Needless to say, almost no one can survive that kind of loss on their portfolio. It’s easy to imagine yourself holding through one of these multiyear cycle lows before it happens, but I can guarantee you almost no one can actually do it in real time.

What happens emotionally is that when gold gets to $1,000, the magnitude of the decline will make it look like gold is going to $800, $700 or $600. You may think that you can hold on, but in real time it’s going to look like the losses are never going to end. $1,000 gold won’t look like a bottom so you won’t be able to hang on.

But here’s what really happens to every trader trying to hold through a drawdown of that magnitude: At some point your emotions just cannot take the day after day losses and you panic and sell. At that point you are so emotionally drained by the magnitude of your losses and shell shocked by the force of the decline that it becomes impossible to reenter the market. So when we do get the bottom, whether it comes at $1,000 or $950 or $900, you are just too emotionally damaged to pull the trigger again.

And unfortunately, that’s exactly what you need to do. You need to buy at the bottom of the bear market. Buying at the bottom of a bear market is where millionaires and billionaires are made. Some time in the next several months we are going to get that once-in-a-lifetime opportunity. In order to seize it you need to avoid the drawdown and emotional damage from the final move down into the bear market bottom.

I suspect there are many of you out there who have been holding onto positions, listening to the multitude of gold gurus telling you that any day now gold is going to turn and rocket to the moon. Yes, gold will eventually turn and head much, much higher. Personally, I think it’s going to at least $5,000. However, if you don’t avoid the last leg down in the bear market, there’s no way you will be able to hold on for the ride back up.