Month: December 2013

By MoneyMorning.com.au

Barring a price spike of Bitcoin-style proportions, gold is set to have its first losing year for 13 years.

It hardly seems possible.

After all, isn’t the US Federal Reserve printing US$85 billion a month?

Doesn’t that mean gold should appreciate as the US dollar depreciates?

That’s right, it should.

But it isn’t. Here’s why…

Over the past three or four years we’ve heard a lot of claims about what gold is and what it isn’t.

We’ve also seen many charts claiming to ‘prove’ that gold must go higher as the US Fed prints more money. Most of those charts involve overlaying a chart of the rising money supply with the rising gold price.

These charts appeared to show that gold rises as the money supply rises. That was the ‘proof’.

It was a nice theory. Unfortunately, as the last two years have shown, it was also a woefully naïve theory. What those who used such arguments failed to realise is that it wasn’t a fair comparison.

The money supply chart represents a factual increase in the supply of a ‘good’, namely money.

The gold price chart is completely different. It represents the price of something. Price relies on what a buyer is prepared to pay and what a seller is willing to receive.

In other words, the relationship between the money supply and gold price was little more than a casual or coincidental relationship.

Nothing Has Intrinsic Value

Now, we know that won’t endear us to our friends in the gold world.

But facts are facts. That doesn’t mean we’ve given up on gold, or silver. We still hold both in our personal portfolio, and we’ll continue to hold both. Plus, with the price so soft at the moment there’s a good chance we’ll add to our position for the first time in at least six months.

And what’s more, we don’t accept the argument put about by the anti-gold crowd. They say gold doesn’t have any intrinsic value. Of course, what they forget to mention is that nothing really has an intrinsic value except for what people are prepared to pay for it.

An Aussie ten dollar note doesn’t have any real intrinsic value. Its value only exists due to its status as legal tender. If the parliament revoked legal tender laws on the Reserve Bank of Australia’s currency you would soon realise that it doesn’t have any more intrinsic value than gold.

That’s the important thing to remember about the price of anything. Something is a certain price because that’s the price at which buyers and sellers will transact.

If buyers are willing to pay more, sellers will soon figure that out and charge more. If buyers aren’t willing to pay more, then sellers will soon figure that out too and charge less.

That is exactly what has happened to the gold price over the past two years. Regardless of what the Fed has done by increasing the money supply, buyers didn’t want to pay the higher price, and so sellers had to drop their asking price.

The result of this price action is the following chart. Barring a miracle recovery in the next three weeks, gold is heading for its first losing year in a long time:

Source: Goldprice.org
Click to enlarge

But having a losing year isn’t unique to gold. So it’s not worth turning it into a big deal. It happens to every market, as we’ll explain below…

All Bubbles End the Same Way

You may remember the ‘weight of money’ argument during the 2003 to 2007 bull market. Many argued that share prices would always go up because of the billions of dollars flowing into super funds every year.

They argued that there just weren’t enough shares to go around and so there would be so much demand for the current shares in circulation that prices would have to rise…forever.

Again, they forgot the most important thing. They forgot that people don’t actually have to buy shares. Prices got to such a level that investors no longer perceived them to be good value. So they lowered their price expectations. This forced sellers to lower their price expectations too.

A more recent example is the hysteria over Bitcoin. Again, folks have gotten themselves in a lather about the limited supply of Bitcoin. They see this as a reason that the price will always go up.

At the time it’s happening those arguments always seem bizarrely rational – even though we know it’s irrational. Over the past month the Bitcoin price soared from US$329 to a high of US$1,242.

Comments from Fed chairman Dr Ben S Bernanke, who said that Bitcoin was a legitimate form of payment, helped fuel the price rise. A report in the press over the weekend notes that someone had paid for a US$100,000 car with Bitcoins also helped legitimise it.

However, that hasn’t stopped the Bitcoin price falling. It hit a low over the weekend of US$576. Today it’s trading off that low at US$760.

The Meaning of Money Takes a Turn

So what does this all mean? For us it means that the notion of money is at a key inflection point. Our guess is that for the first time under the current monetary system even people in the mainstream are questioning its meaning and whether it’s sustainable for central banks to print money from thin air.

To your editor’s mind it means changes are afoot. Some say that it means a return to a gold standard. Others say it means Bitcoin is about to hit the mainstream and become a widely accepted medium of exchange.

But we say they’re both wrong.

We’ll expand more on this from time to time over the next few weeks and months. But to put it simply, the definition of money is what the consumer wants it to be. That’s what makes the future of money so unpredictable.

And that’s why we’re so excited about presenting our view at the Port Phillip Publishing ‘World War D’  conference next March.

You can find out more here, including the line-up of A-list keynote speakers.

Cheers,
Kris+

Special Report: The ‘Wonder Weld’ That Could Triple Your Money

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By MoneyMorning.com.au

By MoneyMorning.com.au

‘When you come to the end of your rope, tie a knot and hang on.‘

Franklin D. Roosevelt, US President

After two years of falling gold prices, maybe you’re sick and tired of reading about gold.

But realise the gold price went up for over 12 years straight!

It can’t keep going up in a straight line forever. Since hitting a low of $253.70 in July 1999, gold prices have surged over 650%, topping $1,921 per ounce in September 2011.

Gold is now going through a correction. That happens at the end of every price bubble. But make no mistake; eventually gold will make a very strong comeback. Let me explain why…

Source: Goldmadesimplenews
Click to enlarge

But first, let me be straight up – I still see some downside in the gold price. In fact, it could still fall another 15%.

Even so, I’ll still argue that gold stocks are a bargain today, let alone if the gold price hits near $1,000.

The bottom line is this: If you buy gold stocks today and hold them for the long term, I believe you’ll still make a great return.

Over the next few weeks in Diggers and Drillers, I’ll explain why the gold price has fallen and why, contrary to most mainstream views, gold is set to rise back to all-time highs.

Some of the topics I’ll discuss include:

1. The global economy and company earnings – can financial markets really continue to keep rising?
2. The technical picture and the physical gold market – what’s the true story for gold?
3. The rise and fall of crypto-currency – why does Bitcoin really exist and what does this mean for gold?
4. The great debate: Inflation vs Deflation. Where are we today and why does gold even matter?

But for now I’ll talk about the only two words you should know and remember when investing in gold – ‘Quantitative’ and ‘Easing’.

Why You Should Back Gold

Quantitative Easing, also called ‘QE’ or ‘money printing’, is the most important reason that makes gold an attractive investment. These two words are why gold more than doubled from less than US$837 an ounce to over US$1921 an ounce in less than three years.

Source: Mining.com
Click to enlarge

Money printing is simply where the US Federal Reserve prints money out of thin air and uses it to buy US government debt and mortgages from banks.

The US Federal Reserve initiated this program to avoid another ‘Great Depression’ of 1929. In 1929, millions of people lost their jobs and fell into poverty. Many banks either stopped lending or went out of business.

Whatever the critics say, the money printing program has worked to some degree by avoiding another ‘Great Depression’…for now anyway.

The problem is the US Fed’s money printing program doesn’t have an end date. There is talk of cutting back the program, but so far that seems more of a fairytale than a fact.

In fact since the program first stated, the US Fed has really put the ‘foot to the metal’ and accelerated the ‘money printing press’. You can see in the chart below that the US Fed owned less than US$1 trillion dollars of debt before the 2008 financial disaster. This has now increased to over US$4 trillion today.

Source: St Louis Fed, 2013
Click to enlarge

But what’s the purpose of money printing? In simple terms, the aim is to drive interest rates down to ultra-low levels so that banks can lend money to investors at low rates.

Sounds great if you’re a borrower, but it’s only good in theory!

The problem in the real world is that people are choosing to repay debt and save instead of borrowing money. And can you blame them? Everyone remembers what happened to their superannuation and investment portfolios when the global financial disaster shocked financial markets.

But that’s not all. In many cases banks won’t lend money to people who want to borrow. Farmers can’t get a loan to expand, many resource companies can’t get a loan to explore, and if you want to start a company, good luck in trying to get a loan.

The following graph shows how much money people are saving in Australia as opposed to investing in the stock market or other assets. Since the financial meltdown, the savings rate has increased almost vertically.

Source: MacroBusiness
Click to enlarge

Instead of increasing lending and borrowing, let’s see what money printing has really done over past couple of years.

The following graph shows the impact that money printing has had on the US S&P 500 Index (index with largest US 500 companies). The graph shows all four money printing programs since late 2008/09 (red line in chart below).

You should pay specific attention to the current money printing program, QE3 (orange line in chart below).

I realise that it may be hard on the eyes but the red circle at the bottom of the chart displays January 2013. Around this time, the US Fed’s QE3 program truly began to have an impact on financial markets.

Source: Google Finance
Click to enlarge

Put more simply, QE3 involves the Fed buying US$85 billion of debt per month over an unlimited amount of time. This is an ‘experiment’ which has never been tried before in history.

What you can see is that all the money printing programs have seriously inflated financial markets to the point that they may now be in ‘bubble’ territory.

That makes it hard to figure out who’s more addicted to money printing – Wall Street or Ben Bernanke (US Fed Chairman).

As Warren Buffet says, ‘all bubbles inevitably pop‘. As I said above about gold, financial markets simply can’t rise forever either.

Essentially the US Fed has said to investors: ‘we’ll buy the debt and you can buy everything else’. As a result, you’ve seen the stock market go through the roof. The following graph shows the actual returns from quantitative easing for the US S&P 500 Index – over a 92% gain since it first began.

Source: DoubleLine Capital
Click to enlarge

Not only have stock markets gone up but bond (debt) yields have fallen to all-time lows on the back of money printing. The Reserve Bank of Australia has cut interest rates by 2.25 percentage points to 2.5% since November 2011.

When bond yields fall, bond prices rise. With rates at or near record lows we are in the midst of a global bubble in bond prices.

Financial markets are going up all around the world, it’s a financial bubble mania!

Even Bitcoins skyrocketed!

But imagine what will happen to financial markets if the US Fed actually stopped entirely its money printing program.

If bond yields will rise, the stock market will fall and gold will ‘shine’.

The fact is that money printing is a giant experiment by the US Fed and other central banks (i.e. Bank of Japan) as they try to avoid another Great Depression.

Of course, some say that money printing was necessary and that it saved the world when Lehmann Brothers collapsed in 2008. At the time it was the world’s third largest investment bank and many argue that the Fed needed to take drastic measures. That’s debatable.

But even if you argue that money printing was necessary, there’s no doubt that this ‘experiment’ is getting out of control and financial markets are ‘cooked’ on money printing.

Let’s see what happens to interest rates when the central banks stop buying bonds.

Let’s see what happens to business conditions.

Let’s see what happens to corporate profitability.

No one knows the full long-term consequences of the money printing policies.

This is why gold as an investment is crucial. A lot of people underestimate its true value, which is…investment portfolio protection!

Gold will return and reward patient investors. When it does gold stocks will be back.

This is the art of contrarian investing.

As Warren Buffett, the world’s greatest investor says, ‘Buy when others are fearful and sell when they are greedy.’

Jason Stevenson
Resources Analyst, Diggers and Drillers

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By MoneyMorning.com.au

EURUSD: A follow through higher the past week suggests further price extension in the new week. Further out, resistance resides at the 1.3750 level where a break will aim at the 1.3800 level. Price hesitation may occur here but if violated it will target the 1.3850 level. Its weekly RSI is bullish and pointing higher supporting this view. Conversely, support lies at the 1.3300 level with a break turning focus to the 1.3250 level and possibly lower towards the 1.3200 level. We may see bulls come in here and turn the pair higher but further decline is seen expect a move lower towards the 1.3100 level. All in all, EUR remains biased to the upside in the medium.

Article by www.fxtechstrategy.com

By Chris Vermeulen – ETF Trading Strategies Newsletter

Tis the Season for the most powerful seasonality trade of the year!

With the stock market up big in 2013 and most participants are speculating on a pullback in the next week or two, I have to say I am on the other side of that bet. Being a technical trader I focus on patterns, statistics and probabilities to power my ETF trading strategies. So with 37 years of stats the seasonality chart of the S&P 500 index paints a clear picture of what is likely to happen in December.

If you do not know how to read a seasonality chart, I will explain as its very simple. The simply shows what the index has done on average through each month over the past 37 years. December typically has the strongest up trend and probability of happening any other time of the year.

The Big Board – NYSE

The NYSE also referred to as the Big Board, is an index with the largest brand name companies. Most individuals do not follow this, but to me its as close to the holy grail of trading than anything else I know. I use many different data points from this index (momentum, order flow, trend) for my ETF trading strategies.

You must follow the trend of this index if you want to be on the right side of the market. While I follow and track the New York Stock Exchange closely and it has its own fund NYC but it’s an ETF trade I do not use. These big stocks are what really move the market (S&P 500) I think so I always trade with this index trend in mind.

S&P 500 Weekly ETF Trading Strategy – Bullish

The chart below is self-explanatory I think… But let me recap.

The overall trend is up, so your ETF trades should be to the long side buying on the dips. The chart below goes back three years so the candles are a little condensed and small, but what you need to know are these two points:

1. After a correction within a trend, probability says that price is more likely to continue rising than it is to reverse. Notice the market just had a running correction through the summer months.

2. A reversal candle on the weekly chart (bullish reversal candle) generally indicates a 2-3 week rally is likely to happen.

Conclusion: Seasonality says higher prices, weekly chart below shows bullish reversal candle… Oya!

The Bigger Picture: 3 -6 Months Out…

This is a quarterly chart and BIG picture outlook. Over the next 3-6 months we could see the stock market start to become choppy and rollover into a minor bear market for a couple years. That is the best case scenario I think… The other scenario is a major crash back down to the 700-1000 level on the SP500 which would cripple the baby boomer’s from retiring and getting a job would be impossible for almost everyone – full blown recession way worse that what everyone is saying we are in now.

Things are going to be really interesting over the next few years and things for south you better be prepared to make a killing during the next bear market or life will not be fun. The nice thing is that you can take advantage of these moves without ever having to lift a finger with my automated trading system.

ETF Trading Strategies Holiday Conclusion:

In short, I think we have a couple good weeks ahead of us. Holiday season, quality family time and a rising stock market paints a nice picture in my mind.

Anyway, I hope this report was helpful and somewhat educational. I always appreciate feedback and things you would like me to write about how I interpret, trade or analyze things. I am here to help and new topics to write about are always welcome!

Cheers,
Chris Vermeulen
ETF Trading Strategies Newsletter

By CentralBankNews.info
    Investors’ search for yield has continued unabated in recent months but banks in advanced economies are not benefitting as much as non-financial companies and this is “bad news” for small firms and Europe’s economic recovery, according to the Bank for International Settlements (BIS).
    Before the 2007-2009 global financial crises, banks had a funding advantage as they were able to borrow at a lower cost than non-financial corporations, partly because investors believed the public sector would always come to the rescue of banks that were in trouble.
    But banks can no longer rely on being “too big to fail” and although they have strengthened their capital and liquidity positions – especially U.S. banks – the impact of the hit that banks took during the financial cries still lingers.
    Prior to the financial crises, the spreads on bonds issued by banks were typically 20-30 percent lower than those of non-financial bonds but this reversed sharply in 2007.  While it has narrowed since then, and even disappeared for U.S. institutions, the spread in November was still 40 percent higher for UK banks and 10 percent for euro area banks in November, BIS said.
    “The financial crises of 2007-09 marked the end of an era in which banks had a funding advantage,” said the BIS in its December quarterly review.
    The erosion of banks’ funding advantage limits their effectiveness as financial intermediaries and the BIS said there were signs that euro area banks have passed on some of their high borrowing costs with the average interest rate on bank loans stalled at levels above 3.0 percent over the past three years in spite of the European Central Bank’s (ECB) low interest rates.
    The consequence is especially dramatic in Europe where firms traditionally relied on banks for funds in contrast to the U.S. where firms always tapped markets for funds.
    But since early 2011 more than 50 percent of the funds raised by euro area corporates has came from securities markets rather than through syndicated loans and the stock of corporate loans has fallen 15 percent during the same period, BIS said.
    “The funding disadvantage of banks is not only bad news for banks, it’s bad news for those customers of banks that are too small to access the bond market and it is bad news for the economy,” said Claudio Borio, the new head of the BIS monetary and economic department.
    “Fixing the banks is crucial if the recovery is to gain traction,” Borio said, adding that the ECB’s review of banks’ books is extremely important and banks need to fully recognize losses in their portfolios and raise new capital.
    Another consequence of investors’ search for yield – which resumed in September after the U.S. Federal Reserve postponed tapering its asset purchases – is a breakdown in some geographical regions of a previously stable relationship between credit markets and general economic conditions.
    “What’s happening in corporate markets is unusual, it’s as if the typical relationship with the macro economy has taken a holiday,” Borio told journalists in a conference call.
    In the 15 years up to 2011, low or negative economic growth went hand in hand with high default rates and credit spreads.
    But from 2012 default rates in the euro area declined just as the economy entered a recession and credit spreads in emerging markets also fell from late 2011 to mid-2013 when it became clear that economic growth was slowing.
   “So far investing in risky corporate debt has paid off, but we simply don’t know for how long those default rates will prevail,” cautioned Borio.
    While low default rates tend to drive down spreads, Borio said low spreads also drive down defaults because lenders become more tolerant and borrowers face a lower cost of debt service.
    “If this process is indeed at work, it’s sustainability will no doubt be tested by the eventual normalization of monetary policy,” Borio said.
    (Click to read the BIS Quarterly Review for December 2013.)

    www.CentralBankNews.info

By Chris Wood, Senior Analyst, Casey Research

Does the FDA think you’re too stupid to have access to your own genetic information?

It sure seems so.

The Food and Drug Administration, which bills itself as “the oldest comprehensive consumer protection agency in the US federal government,” probably stirs up more emotion among citizens than any other federal agency (save perhaps for the IRS). For good reason. The range of activities into which the FDA is “mandated” to poke its supervisory fingers is vast and includes most prominently the regulation of most types of foods, dietary supplements, medical devices, human and veterinary drugs, vaccines and other biological products, and cosmetics.

And this time it’s really gone too far.

On November 22, 2013, the FDA sent a warning letter to the well-known consumer genomics company 23andMe, ordering it to “immediately discontinue marketing” its only product.

For those of you who are not familiar with 23andMe, the company provides a “DNA Spit Kit” and “Personal Genome Service” (PGS) that supposedly reports on 240+ health conditions and traits and helps clients track their ancestral lineage. Basically, you send a saliva sample in via the “Spit Kit,” and the company analyzes the sample using a DNA sequencing machine.

It doesn’t give you a full readout of your genome, but tests for a custom panel of what are called single nucleotide polymorphisms in order to determine, for instance, if you’re a carrier for certain disease-linked mutations like cystic fibrosis or sickle cell anemia. The panel also tests for the three most common BRCA1 and 2 mutations that are associated with breast cancer, among many other mutations associated with other diseases.

So what we’re talking about here with 23andMe is information, not a medical device. It’s your personal genetic information. And the FDA wants to put the kibosh on one of the only companies providing this service inexpensively—you get your Spit Kit and readout for just $99—to consumers.

This is really a first amendment issue, and the FDA should not be in the business of regulating freedom of speech and information. But considering what the FDA thinks of your intelligence, I’m not surprised they’re trying to reach this far.

Consider some of the language from the FDA’s warning letter to 23andMe.

“For instance, if the BRCA-related risk assessment for breast or ovarian cancer reports a false positive, it could lead a patient to undergo prophylactic surgery, chemoprevention, intensive screening, or other morbidity-inducing actions, while a false negative could result in a failure to recognize an actual risk that may exist.”

Really? You think that if a woman receives news from a $99 test that she may be at a higher risk for breast cancer due to a genetic mutation that she’s going to run out and somehow acquire chemo drugs and start dosing herself, or that she’s going to go to some back-alley clinic to have her breasts lopped off? Not to be crude or make light of a very serious situation and condition, but the FDA’s implication is insulting, to say the least.

What would actually happen in the real world is that she’d go to a doctor to get herself checked out, perhaps sooner rather than later, which isn’t a bad thing even if the 23andMe test showed a false positive. Now, if the test showed a positive for the mutation and she is in fact positive—which would have to be confirmed by a separate test from a doctor anyway before a mastectomy—it is her right to undergo such surgery whether or not it is determined to be “medically necessary.” This is precisely what Angelina Jolie recently did.

The false negative argument is maybe a little more plausible, but despite what the FDA might believe, people who are proactive enough about their genetic makeup to seek out a service like the PGS from 23andMe are smart. They know that no test is foolproof or 100% accurate. People receive false negative tests from federally regulated labs and physicians all the time. It’s unfortunate, but that’s the way these things work. You don’t see anybody making a stink that these tests shouldn’t be run just because there’s a small chance of delivering a patient a false negative result.

In response to the FDA’s warning letter, 23andMe has stopped all TV, radio, and online advertising for its PGS, although the service is still being sold on the website. The situation is still unfolding, so whether or not the FDA decides that the company is now in compliance because it’s no longer “marketing” the PGS remains to be seen. It could determine that just having the website active is a form of “marketing,” which could be the nail in the coffin for the company. We’ll have to see. According to the FDA, 23andMe had 15 working days (starting November 22) to notify it of the specific actions the company has taken to address all of the issues raised in the letter.

As expected, an additional consequence of the FDA’s warning letter is a class action lawsuit that was filed just five days after the letter was sent. The lawsuit alleges that the test results are “meaningless,” and that 23andMe uses false and misleading advertising to promote its services to US consumers. The lawsuit seeks at least $5 million under various California state laws and estimates “tens or hundreds of thousands” of US customers are entitled to damages from the company.

Look, I get that many of you probably think the FDA had every right to do what it did. And I’ll admit that its actions probably were legally justified, since 23andMe’s advertising campaign did seem to market the PGS “for use in the diagnosis of disease or other conditions or in the cure, mitigation, treatment, or prevention of disease,” which falls under the FDA’s purview.

I also understand why detractors of consumer genomics companies think the FDA should shut down 23andMe and all its peers/competitors—because people engaging the services of these companies don’t get the full picture, and what’s going on is much more complex. Only part of a person’s DNA is tested, and how to properly interpret the results is still uncertain, since many factors other than a mutation in isolation contribute to disease.

But when do we ever get the full picture? Even a readout of our entire genome is only a small part of the story. A key takeaway from what’s known as the ENCODE Project is that much of what was previously thought of as “junk DNA” actually performs regulatory functions—which can be thought of as regions that act like switches attached to a particular gene that determine whether or not they’ll be expressed. There are millions of such regions throughout the genome, and they’re linked to each other (and to the protein-coding genes) in an extremely complicated hierarchical network.

What’s more, the linear ordering of the genome provides a further source of confusion: the three-dimensional folding of the chromosomes inside the nucleus allows promoter regions to maintain a close connection to genes that apparently lie far away on the linear sequence. This explains why so much biochemical activity can be found even deep in the deserts of the alleged “junk DNA.”

Many of these promoter regions manifest themselves in the cell as “functional RNA” molecules—types of RNA that are an end product in themselves, rather than merely an intermediate step on the way to becoming a protein, and that play a key role in switching genes on and off.

In truth, we never get the full story, no matter whom we turn to, and there’s nothing wrong with bits and pieces of information to help us make decisions along the way (or just to satisfy our curious nature).

And that’s really the whole point here. I don’t really care if what the FDA did was technically legal or that some people think it makes sense in order to keep others from harming themselves in some way. What matters is that this ultimately boils down to information—personal genetic information. And whether 23andMe does a good job of providing that or not, it’s our right to seek out such a service and use it if we so desire.

Read all about the latest news and best strategies relevant to investors in our free e-letter, Casey Daily Dispatch. Five days a week, it informs readers on breakthrough technologies… metals and mining… energy… big-picture investing and trends. Sign up here to get it free.

Weekend Update

December 6, 2013

— VIX broke out above its support/resistance cluster between 13.33 and 14.16, then closed within the group.  It now has a “green light” for a higher rally.  The next breakout point may be near 21.00, at the neckline of a complex inverted Head & Shoulders formation.

SPX challenges its trendline, closes above it.

— SPX challenged its Short-term support at 1773.00, but closed above its Ending Diagonal trendline and Cycle Top support this week at 1798.44.  It was not able to surpass its Thanksgiving “peak week” performance, so this week’s attempt is no surprise. As much as it “back loaded” all of its gains on Friday, it still posted the first weekly loss in two months..

(ZeroHedge)  Despite every effort to sell as much JPY as possible to lift stocks and create the best run for the S&P since 2004, the algos failed (by pennies) but with solid gains nevertheless just to disprove all the good news is bad news believers – for now. While the NASDAQ managed a green close on the week (though underperformed today), stocks couldn’t quite make it all back today but broke the 5-day losing streak.

NDX is at double resistance.

— This week NDX rose above its Massive Ending Diagonal but stayed beneath the upper trendline of the Broadening Wedge formation.   While Ending Diagonals often have throw-overs, Broadening Tops do not.  This suggests that NDX may be approaching the end of the line as it presses to meet the Broadening Top trendline for the last time.

(ZeroHedge)  As equities celebrate today’s better than expected jobs report (for now), apparently comfortable in the knowledge that it’s good-enough-but-not-too-good, we are reminded that just six short months ago, none other than the Fed chairman himself uttered these crucial words during his June 19th press conference:

“…when asset purchases ultimately come to an end the unemployment rate would likely be in the vicinity of 7%”

The Euro made a 77.4% retracement.

.  

           — The Euro bounce may be over after a 77.4 % retracement of its decline from the October 24 high.  The bounce appears to be complete, since the Cycles Model suggests the Euro may be due for a significant low by the end of the year.

(BBCNews)  Ukraine’s President Viktor Yanukovych and his Russian counterpart Vladimir Putin have held surprise talks on a “strategic partnership treaty”.

Mr Yanukovych flew from China to Sochi in southern Russia for the meeting. He also cancelled a visit to Malta.  Last month he shelved a partnership deal with the EU, triggering angry protests in Ukraine’s capital Kiev.

The Yen slides toward its Head & Shoulders neckline.

–The Yen continues its slide toward the Head & Shoulders neckline at 96.00. The Yen may break down beneath the neckline in a Primary Wave [5] in a very strong Primary Cycle decline through that may last into the New Year.

(ZeroHedge)  Shinzo Abe secured final passage of a bill granting Japan’s govt sweeping powers to declare state secrets. The Bill won final approval of the measures at about 11:20 p.m. Tokyo time after opposition parties first forced a no-confidence vote in Abe’s govt in the lower house. The first rule of the pending Japan’s Special Secrets Bill is that what will be a secret is secret. The right to know has now been officially superseded by the right of the government to make sure you don’t know what they don’t want you to know.

The US Dollar extends its bullish Flag formation.

— USD appears to have extended its bullish Flag formation to retest the lower trendline of its massive Triangle Formation.  Despite the further decline, this may imply a potential breakout above the Head & Shoulders neckline in the very near future.  The bear trap for dollar shorts may be sprung as early as Monday, which is due for a major Cycle turn.

(Reuters) – Currency speculators trimmed their bets in favor of the U.S. dollar in the latest week, according to data from the Commodity Futures Trading Commission and Thomson Reuters released on Friday.

The value of the dollar’s net long position slipped to $19.85 billion in the week ended Dec. 3, from $20.39 billion the week before. It was, however, the fifth straight week of long positions in the U.S. dollar.

Gold tests its Head & Shoulders neckline…from beneath.

— Gold fell beneath its small Head & Shoulders neckline at 1235.00 and tested the neckline from beneath.  It is also now beneath its Cycle Bottom resistance at 1234.16.  This is a double warning against anyone contemplating a purchase of gold or anyone who is long.  The losses will mount higher.

(ZeroHedge)  As we showed back in April, the marginal cost of production of gold (90% percentile) in 2013 was estimated at between $1250 and $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1125…

Treasuries crossing the Broadening Wedge.

— USB appears to be ready to cross Cycle Bottom Support at 129.45 and its Broadening Wedge trendline at 129.71 with devastating consequences for the Long Bond.

(ZeroHedge)  While nobody is impressed by breaking equity and options markets anymore, since this has become a virtually daily occurrence and the habituation level is high, bond markets, and especially the US government’s “guaranteed” bond issuance machinery, are a different matter altogether. Which is why any time something out of the ordinary happens, people pay attention. Such as what happened moments ago when the US Treasury announced that it would delay the closing of the 3 and 6 month Bill auctions, originally scheduled to close today (Monday), to tomorrow (Tuesday).

Crude rallies off its Cycle low.

— Crude began its final rally this week.  Last week I suggested, “… if it makes a low in the next week or so at or above 87.50, the Broadening Wedge may be the dominant formation for up to 2 months.”  While WTIC may pull back to its mid-Cycle support at 96.17 in the next week or so, the rally is young and as yet undeveloped.  Once it breaks above weekly Intermediate-term resistance at 98.38, the rally may gain even more strength.

(AP)  The price of oil rose again Friday on signs of a stronger job market in the U.S. and finished the week with a gain of more than 5 percent.  Those gains are showing up at the gas pump. The average price of a gallon of gasoline in the U.S. rose 1 cent to $3.26, the first increase in 10 days.  Benchmark U.S. crude for January delivery rose 27 cents at $97.65 a barrel on the New York Mercantile Exchange. The increase for the week was $4.93 a barrel.

China stocks close above mid-Cycle resistance.

–The Shanghai Index rally closed above mid-Cycle resistance at 2229.50, but hasn’t overcome its September high.  SSEC made its Master Cycle low on November 14, so a reversal in the next week may be very bearish.  The next probable Pivot day is Tuesday, so China stock investors must stay on the alert.

(ZeroHedge)  As we noted earlier, pollution in Shanghai has reached record levels causing the government to ban cars and cut production across factories. The images below are not photoshopped or edited… this is the day–to-day life in that bustling city looks like… and in case you thought moving inside was ‘safe’, “the fog” is creeping into the buildings too now… All we are waiting for now is the rotting corpses of over-capacity Chinese industries to come out of the dark…

Has the India Nifty finished its correction?

— The India Nifty index regained its losses from two weeks ago, but has not exceeded its October high.  This suggests the current Cycle may resume its decline into the end of December.  The next bounce may be near Intermediate-term support at 5947.12.  The potential for a panic decline to the weekly Cycle bottom is very high.

The Bank Index showing signs of weakness.

— BKX  tested its Short-term support at 65.95 this weekand closed lower for the week.  On Friday it made a 56.6% retracement of its decline and may be ready for the next leg down.  Next week BKX may be involved in a Flash Crash.

(ZeroHedge)  Overnight, the WSJ reported a financial factoid well-known to regular readers: namely that as a result of a broken system that ever since the LTCM bailout has encouraged banks to become take on so much risk they become systematically important (as in their failure would “end capitalism as we know it”), and thus Too Big To Fail, there has been an unprecedented roll-up of existing financial institutions especially among the top, while the smaller, less “relevant”, if far more prudent banks have been forced out of business. “The decline in bank numbers, from a peak of more than 18,000, has come almost entirely in the form of exits by banks with less than $100 million in assets, with the bulk occurring between 1984 and 2011. More than 10,000 banks left the industry during that period as a result of mergers, consolidations or failures, FDIC data show. About 17% of the banks collapsed.”

(ZeroHedge) It is amazing what a few short months of intense regulatory scrutiny, a few multi-billion fines, and the occasional janitorial arrest can do to fraudulent bank business lines. First, recall that as we showed a week ago, and as we have been saying for the past five years, banks were recently “found” to manipulate, in a criminal sense, pretty much everything. Then recall that yesterday the European Union lobbed the biggest monetary fine in history against bank cartel behavior, with the guiltiest party, at least based on monetary amounts, being Deutsche Bank. So now that outsized profits as a result of illegal “trading” become virtually impossible to procure, what is a self-respectable criminal enterprise to do?

(ZeroHedge)  It is only fitting that on the morning in which Europe levied the largest cartel fine in history against the criminal syndicate known as “banks”, that Goldman Sachs would issue its #6 “Top Trade Recommendation” for 2014 which just happens to be, wait for it, a “long position in large-cap bank indices in the US, Europe and Japan.” Supposedly, in a reflexive back and forth that should make one’s head spin, this also includes Goldman Sachs (unless they specifically excluded FDIC-insured hedge funds, which we don’t think was the case). So is Goldman recommending… itself? Joking aside, this means Goldman is now dumping its bank exposure to muppets.

Sign of the TOP???

Regards,

Tony

Anthony M. Cherniawski

The Practical Investor, LLC

P.O. Box 129, Holt, MI 48842

www.thepracticalinvestor.com

Office: (517) 699.1554

Fax: (517) 699.1558

Disclaimer: Nothing in this email should be construed as a personal recommendation to buy, hold or sell short any security.  The Practical Investor, LLC (TPI) may provide a status report of certain indexes or their proxies using a proprietary model.  At no time shall a reader be justified in inferring that personal investment advice is intended.  Investing carries certain risks of losses and leveraged products and futures may be especially volatile.  Information provided by TPI is expressed in good faith, but is not guaranteed.  A perfect market service does not exist.  Long-term success in the market demands recognition that error and uncertainty are a part of any effort to assess the probable outcome of any given investment.  Please consult your financial advisor to explain all risks before making any investment decision.  It is not possible to invest in any index.

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By George Leong, B.Comm.

A year ago, Hewlett-Packard Company (NYSE/HPQ) was an $11.00 stock that was struggling to turn around its fortunes and become relevant again.

The company, under then-new CEO Meg Whitman, made a bold and strategic decision to focus less on its declining personal computer (PC) business and more on its areas showing growth opportunities, such as its mobile and enterprise businesses. So far, this has been the correct decision for Hewlett-Packard, according to my stock analysis.

The company had already exited the consumer tablet market after realizing Apple Inc. (NASDAQ/AAPL) had a death-grip on the market and would not be easy to catch.

Fast-forward a year, and Hewlett-Packard is now flying high at the $24.00 level, up more than 100% over the past year and still the company continues to reinvent itself, as my stock analysis indicates. Hewlett-Packard has streamlined its product line, resulting in a leaner and more efficient technology company, suggesting Hewlett-Packard was a buying opportunity at its lower prices just one year ago.

Chart courtesy of www.StockCharts.com

My stock analysis suggests that while the company still has far to go to return to its former glory days, there is now hope that this could happen—it just might take a few more years of fine-tuning.

Annual revenues are in excess of $100 billion, but a period of adjustment is expected due to the company’s new direction, according to my stock analysis.

Revenues are estimated to contract in both fiscal 2014 and fiscal 2015 by 2.9% and 0.6%, respectively, but earnings are estimated to grow to $3.67 and $3.88 per diluted share, respectively, according to Thomson Financial consensus estimates.

My stock analysis suggests that while the earnings growth is not something that immediately shoots out at you, the fact the company has been able to drive earnings higher in spite of its declining revenues (which still need to be dealt with) is encouraging.

Keep in mind that Whitman is in the midst of a five-year plan aimed to return growth to the company by 2015. Moreover, the company hopes to report revenue growth that matches the country’s gross domestic product (GDP) growth by 2016, but with a revenue contraction estimated for fiscal 2015, my stock analysis indicates that it’s doubtful this will happen. Instead, it will likely take another year or so before Whitman can deliver on this front.

In fiscal 2013, revenues declined seven percent year-over-year to $112.3 billion, while adjusted earnings came in at $3.56 per diluted share—within the expected range.

My stock analysis notes that Whitman still has a lot of work ahead of her before she can successfully turn the company around, but the signs are there. The next year will be crucial for Hewlett-Packard, and its success will largely depend on how the economy fares and if spending in the technology sector holds.

So far, I like what I’m seeing from Whitman and feel she will be able to steer the company in the right direction for the future, when Hewlett-Packard will become relevant again, based on my stock analysis.

This article Reinvention of Hewlett-Packard Bound to Be a Success Story? is originally posted at Profitconfidential

USDJPY: With a follow through higher on the back of its previous week gain seen at the week, further upside is likely. This will expose the 103.73 level representing its 2013 high. A convincing violation of here will open the door for a run at the 104.50 level where a breach will aim at the 105.00 level and possibly higher towards the 105.50 level. Its weekly RSI is bullish and pointing higher supporting this view. Conversely, on the downside, support comes in at the 101.61 level followed by the 101.00 level. Further down, the 100.60 level is seen as the next support and then the 100.00 level. On the whole, USDJPY remains exposed to the upside in the medium term.

Article by blog.fxtechstrategy.com

By George Leong for Investment Contrarians

For me, trading has always revolved around economic fundamentals and stock market analysis. And if you’re like me, you’re getting somewhat irritated with the recent trading in the stock market by investors who seem more inclined to trade on what economists at the Federal Reserve do with their quantitative easing strategy than on what’s really important—the underlying fundamentals of the economy and corporate America’s financial health.

The reality is that corporate America is struggling to grow revenues. This means that companies and consumers aren’t spending at levels that make me comfortable with the economy. Of course, the stock market doesn’t really seem to care; it simply wants the flow of cheap money to continue.

In my view, it’s the same old thing that continues to engulf the trading in the stock market, and it’s annoying. For instance, if we see strong non-jobs economic data, the stock market edges higher. If we see signs of strengthening in the jobs market, the stock market sells off.

Of course, that’s because the Fed has made it clear that jobs creation is the focal point that will dictate when the central bank will begin to taper its monthly bond buying program, an unprecedented policy that has added trillions of dollars of debt to the bank’s balance sheet.

While all eyes will be on the non-farm payrolls reading today, November’s ADP Employment Change reading released last Wednesday showed that 215,000 new jobs were created last month, which is well above the consensus estimate of 173,000 and the upwardly revised 184,000 jobs created in October. How did the stock market react to the good news? Negatively, of course, since the ADP reading suggests we could see another 200,000-plus reading for non-farm payrolls, which could push the unemployment rate down and increase the possibility of tapering.

There is concern that the Fed could begin tapering its bond buying as early as its December Federal Open Market Committee (FOMC) meeting if the November non-farm jobs reading is strong. However, I feel the Fed will wait to start its tapering until sometime early in the New Year, likely under the guidance of the next Fed Chair Janet Yellen. Another possibility may be a delay in tapering until the March FOMC meeting.

Clearly, traders are nervous. We are seeing the yield on the 10-year Treasury bond edge higher toward the three-percent level, which could trigger a sell-off in stocks. The previous high point was 2.98%, but a break above three percent could trigger a psychological change in traders, who may then begin to shift some capital out of equities and the stock market and into bonds.

At this point, you should continue to funnel money into the stock market. I’d even suggest that investors continue to do so when the Fed finally does begin its tapering, as low interest rates will help to support stocks.

However, it’s important to remember that as the tapering increases, action in the stock market will increasingly shift to the traditional method of analyzing the economy and corporate America for investing cues, rather than the actions by the Federal Reserve.

See original article: http://www.investmentcontrarians.com/stock-market/should-you-stay-in-stocks-when-fed-finally-tapers/3395/