U.S. Stock Market – It’s consolidating major move up and bears can’t keep it down for long. The “Don’t Worry, Be Happy” crowd have the deck stacked in their favor so barring something truly unforeseen, a new, marginal all-time high is a question of when, not if.

Gold and Silver – While there are numerous positives I’ve posted about in last couple of days, the bears still hold serve. I continue to believe if one is a buyer of gold it’s best to continue standing on the sidelines until either the low $1,500s are tested or we have two consecutive closes above $1,700.

It’s mind-boggling how open interest remains so high despite the # of shorts in silver on the Crimenex (Comex). Either they will finally cave or the shorts may have bit off more than they can chew. Stay tuned.

U.S. Dollar – The way overvalued Yen is finally descending and that has underpinned the U.S. Dollar for the time being. But when the rooster finally comes home to roost in the U.S., the dollar can make new lows IMHO. I have over 80% of my portfolio in Canadian financial institutions and in Canadian dollars – legally!

U.S. Bonds – Bernanke may have kicked the can again, but it comes at a bigger and bigger price each time. Bonds are a total void in my book.

Oil and Natural Gas – No change

Mining and Exploration Shares – Each time it appears it can’t get any worse – it does! It shall take many months and a big reversal in the price of gold to have any meaningful and sustainable rally. Until then, stock up on ant-acids like I have.

“It is vital to understand that what we face is by no means the plain vanilla version of governments just printing into hyperinflation” (article below-Ed)

The Golden Rule of Reactions

Those who are new readers are probably unfamiliar with what I have called the Golden Rule of Reactions.  When it comes to TIMING, it is vital to understand the basic tenets of cyclical analysis. That fundamental principle is where do we draw the line between a change in trend and a mere reaction. That line is drawn in units of 2 to 3 maximum. In other words, a reaction making a counter-trend move is limited to a maximum unit of time being 3 regardless of the level of time be it daily to yearly. After that period of time, trends then emerge. Right now, we have a 3 day reaction in gold from the low of last week. To establish a change in trend, we must continue BEYOND merely 3 days. Failure to do so warns of only a reaction counter-trend.

Even when there are free markets and a dramatic panic takes place, the same timing emerges during Phase Transitions. We will go over these points at the Princeton Conference. Nevertheless, even look at the Great Depression, you see a 90% decline still contained by the Golden Rule of Reactions – 1929 to 1932.

You must understand……

…..read more HERE

Gold – Silver – Hyperinflation

It is vital to understand that what we face is by no means the plain vanilla version of governments just printing into hyperinflation. These people are fighting back as is ALWAYS the case with core and major economies. The German hyperinflation took place AFTER a revolution with a unstable government that lacked credit. When there is “credit” then government FIRST tries to keep the game afoot and that means the bankers threaten they will collapse unless debt is serviced. This is why the FIRSTresponse is all out financial war against the people.

Literally, you will PRAY for only hyperinflation. Society CAN survive that.

…..read more HERE 

Gold for Month End

The support for gold in Feb is 1574. The resistance stands at 1667-1690. The support will begin to fade in March and the number to watch will become 1638. The primary support lies at the three Monthly Bearish Reversals. Once they give way, then we can see a real break.

…..read more HERE

 “a replay of 1937—a 50% market decline after a big rally from the low in 1932”

Quotable

“All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical (technical) formations and patterns recur on a constant basis.” – Jesse Livermore

Commentary & Analysis

Déjà vu; is it 1937 all over again?

We are not sure if we get a replay of 1937—a 50% market decline after a big rally from the low in 1932– but it feels a bit eerie to say the least. Now we have an extremely “overbought” stock market…false belief in a cyclical recovery…troubles in Europe…and rising tensions in Asia. I think a simple question is in order: Is risk skewed to the upside or downside? You know my answer.

Many attribute the big tax increase that took effect in 1937 as a major factor leading to another slowdown in the economy. Sound familiar? Big tax increases are biting into aggregate demand in 2013 thanks to the infinite wisdom of our Maximum Leaders who choose to punish initiative under the guise of “fairness.” It is to laugh! But it is what it is and we’ve seen it all before.

Quotable “Advertising is the rattling of a stick inside a swill bucket.”- George Orwell

Commentary & Analysis

Thank you China for validating our dollar bull market call.

I saw a promotional campaign several months ago from a newsletter company promoting a currency conference to be attended by various currency “experts.” The lead, if you can believe it, was, “Get the Hell Out of the Dollar.” It’s your typical scare tactic nonsense in order to sell services and push people into the one-trick pony multi-currency deposit accounts in order to prepare for the “plunging dollar.”

Remember how these multi-currency banks were loading their clients into the Icelandic krona to grab that “high yield” because it was the US dollar that was going to crash and burn from the rising global risk. Well, if you remember (and the multi-currency bankers wish you wouldn’t) it was the Icelandic krona that crashed and burned. I think if investors decide to “Get the Hell out of the Dollar,” they may be sorry. Why? Because even China is expressing some love for Mr. Greenie and citing the same fundamental rationales we have shared in these pages.

Black Swan’s long held call is the US dollar is in a multi-year bull market and it was triggered by the sea change global macro event called the credit crisis. If you peruse the chart below you will notice, with the gift of hindsight and my labeling, that prior multi-year trend changes in the US dollar index were accompanied by major global macro events.

Based on the US $ Index, the dollar bottomed in March 2008 and we are in the third bull market since President Nixon closed the gold window back in 1971 forcing major currencies to float against one another. [I believe the US dollar index has completed its third bear market in March of 2008; which incidentally was about seven years in duration as where the prior two bear markets.]

From Mr. Ambrose Evans-Pritchard, “China loves the US dollar again as America roars back:”

“Jin Zhongxia, head of the central bank’s research institute, said America’s energy revolution and export revival had shaken up the global landscape and would lead to a stronger dollar over time. ‘The dollar’s global dominance will continue,’ he said.”

• Dr Jin said the world was moving to a “1+4” system, with the greenback serving as the anchor of global payments, supplemented by “four smaller reserve currencies” – the euro, sterling, yen and yuan.
• Compared with the euro area, the dollar zone has much greater resilience to shocks.
• Citigroup said lower energy imports and the revival of chemical industries would cut the US current account deficit by three quarters, eliminating a key cause of dollar weakness.

I may be a stretch to expect America to “roar back.” But relative to its competitors the US could be the destination for an inordinate amount of foreign direct investment, not to mention the “on shoring” that is taking place (manufacturers moving back to the US from China).

Of course China may not love the dollar at all. But at this stage in the cycle, jawboning the dollar higher would help China in two ways: 1) It would help China’s exporters at the margin, as they are fighting for a lot of the same export market with the US; and 2) relatively lower commodities prices in dollar terms would also support China’s domestic- demand transition.

[Last year China and the US were on the top of the list of exporters, with an 8.0% and 4.5% increase in exports, respectively. The rest of the developed world countries and BRICs had negative export growth in 2012. Notably, German exports were off 4.5% in 2012.]

It has been a very choppy trade in the US dollar index:

Rule #1: Anything can happen.

But net-net the dollar has worked higher even though gold blew off to a new high in August 2011(suggesting the fiat problem is much more than just the US dollar). And given my view: 1) the euro crisis isn’t over, 2) Japan will succeed in weakening the yen further, 3) the British pound seems be a favorite short on the “stagflation” trade, and, 4) the commodity dollar complex seems to be breaking down a bit, I think it is fair to say it may not be time to “Get the Hell Out of the Dollar.”

The stock market has been rising steadily since the Japanese inspired Key Turn Date of November 16…but doing so with a growing sense that a correction, at least, was due. We may have had another KTD this week (it’s too early to tell) when a number of markets reversed course on Wednesday triggered by the release of the Fed minutes.

Gold: dropped nearly $120 in 2 weeks, Silver was down $3. Base metals were down sharply this week. Precious Metals may have made a short term low this week. I covered a short gold position I have held for over a year.

Stocks: all major US stock indices moved higher early this week then reversed on Wednesday/Thursday. As of mid-morning Friday all indices look to have made Key Weekly Reversals.

Energy: Brent and WTI both made multi-month highs last week…faded…then broke more than $5BBL starting Wednesday.

Currency: The US$ rallied Vs. all major currencies (save the Yen) on the Fed minutes. The 18% drop in the Yen Vs. the USD since mid-November appears to have stalled. PM Abe is meeting Obama and is expected to announce the new head of BOJ next week. The Yen could move on the announcement. Last week I established option positions looking for an end to Yen weakness as well as a drop in Yen option VOL.

Interest rates: Bonds rallied to their best levels in a month following the release of the Fed minutes…even though a change in Fed policy would likely see the Fed buying fewer bonds.

I’ve asked a number of times, “What are we trading?” and my best answer has been, “Central Bank policies.” David Rosenberg notes the correlation between the S+P and the Fed balance sheet is 85%. Currency markets have been responding to relative central bank policies with talk of currency wars all over the media….so…the hint of a slight change in Fed policy within the minutes released Wednesday was significant.

Market Psychology has been increasingly “What Me?….Worry?” kind of bullishness since mid-November. Witness the 5 year plus lows in VIX, new all-time highs in the mid-cap Russell 2000, the NZD trading at an 8 year high Vs. CAD. It seems as though market relationships had left “risk on / risk off” behind and were reacting to individual market fundamentals…then suddenly, on Wednesday, correlations went to ONE in a “risk off” mode with the USD and Yen higher, all other currencies lower, stocks and commodities down and bonds up. If we did indeed have a Key Turn Date then Market Psychology may return to a binary “risk on / risk off” world.

Futures markets provide an efficient and effective way to trade a wide range of financial markets. If you would like to speak to a broker to discuss the aforementioned markets or about trading in the futures market please call 604-664-2842.

Victor

A shallow correction between now and the end of March will provide an opportunity to accumulate sectors on weakness that have a history of outperformance into spring. Sectors include energy, retail, steel and auto & auto parts.

North American equity markets continue to track their historic trends set in a U.S. Post Presidential Election year implying a correction that started in the second week in February followed by shallow weakness until the end of March followed by resumption of an intermediate

….read more and view 44 Charts & Sector analysis HERE