Month: December 2011

By ForexYard

Today’s non-farm payrolls report is expected to show improvement in US employment data as many economists have upped their forecasts following the strong ADP report. However, traders may want to remain skeptical as US unemployment is still at uncomfortably high levels.

Economic News

USD – Staying Skeptical of Todays Non-Farm Payrolls Report

Over the past few weeks there is a noticeable trend of better US economic data. Just this week we’ve had strong consumer confidence numbers, a large increase in pending home sales, as well as yesterday’s ISM manufacturing PMI survey. While these factors all point to increased momentum for US growth the employment situation remains tepid at best. The unemployment rate remains stubbornly high at 9.0% and yesterday’s weekly unemployment claims rose to 402K, the highest level in more than a month.

This week’s ADP non-farm numbers may also give a false sense of security leading up to today’s NFP report from the Labor department. Despite the solid unemployment numbers on Wednesday from the private payrolls provider, the ADP report does not have a particularly good history of predicting the government’s official data. Therefore, we remain skeptical of any solid recovery in the US employment picture which would likely be a negative for market sentiment and a positive for the USD.

EUR/USD support is found at 1.3270 at the upper line of the bearish wedge followed by the October low of 1.3145. Resistance is 1.3610 from the November 18th high.

EUR – Draghi Suggests Greater EU Integration

In a speech yesterday ECB President Mario Draghi suggested closer fiscal integration is necessary for the euro zone, “We might be asked whether a new fiscal compact would be enough to stabilize markets and how a credible longer-term vision can be helpful in the short-term. Our answer is that it is definitely the most important element to start restoring credibility… Other elements might follow, but the sequencing matters.” The statement by Draghi is significant as it suggests the ECB may commit itself to aiding distressed euro zone countries once the proper fiscal checks and balances are implemented. The ECB has always maintained the position that the European debt crisis is fiscal crisis and not a monetary crisis. Should the ECB step in with its full firepower to support the likes of Greece, Italy, Spain, and Portugal, this will be a catalyst for the EUR. Today German PM Angela Merkel will deliver a speech to the Germany parliament outlining potential steps to further integrate Europe with budget coordination. Could this be the first step towards a more integrated Europe and a stronger EUR?

CHF – Negative Interest Rate Rumor Fuels CHF Weakness

The EUR/CHF was on a rollercoaster ride yesterday as the CHF weakened versus both the USD and the EUR. The trigger for the CHF moves were rumors of the Swiss government debating a negative interest rate to help weaken the currency. Recent economic data in Switzerland has been on the weak side with GDP coming in at only 0.2% in Q3 and the KOF economic barometer falling to 0.35 from 0.75. Market expectations are for additional moves by the SNB to weaken the franc as the threat of deflation continues to weigh on the Swiss economy. This could take the form of raising the floor of the EUR/CHF to 1.25 from 1.20. The EUR/CHF has resistance at October 19th high of 1.2470 with support at its 200-day moving average at 1.2225.

Wheat – Wheat Prices Underperform

Wheat prices have begun to recover from their November lows but the commodity continues to underperform. In light of the strong equity gains on Wednesday this could be considered bearish price action as we would expect wheat prices to rise much further as market sentiment improves. Currently wheat prices are locked in a long term downtrend with support at the November low of $571 and resistance at the November 1st low of $611.

Technical News

EUR/USD

The EUR closed last week below the psychologically important 1.35 level and a close below it on the monthly chart will carry an even greater significance. Both monthly and weekly stochastics continue to fall and a break of 1.3210 will likely test the October low of 1.3145. Below here at 1.3040 there is the 61% Fibonacci retracement of the move from June 2010 to May2011 though this may only prove to be a mile marker in the new downtrend for the pair. Support is located at the January low of 1.2870. The November 18th high of 1.3610 stands out as resistance.

GBP/USD

Falling monthly and weekly stochastics may have the GBP/USD testing the October low of 1.5270 as the pair is pulling within striking distance of its long term uptrend from the 2009 low which comes in at 1.5050. Any move higher will likely encounter heavy selling from the July pivot at 1.5780.

USD/JPY

The downtrend for the USD/JPY remains firmly intact and only a break above 78.95 from the falling trend line from the 2007 high may reverse the pair’s bearish technical sentiment. A break above this line may have the pair testing the most recent post-intervention high of 79.50, a level that coincides with the pair’s 200-day moving average. To the downside the November 18th low of 76.55 is the initial support, followed by the all-time low of 75.56.

USD/CHF

The USD/CHF is testing its October high at 0.9310 and a break here will likely open the door to the pair’s 20-month moving average at 0.9460 and the February high of 0.9775. Initial support is located at the November 18th low of 0.9080 with a deeper move perhaps taking the pair to the November low of 0.8760.

The Wild Card

S&P 500

The stock index found resistance at 1,250 which is not only a big psychological number but the value also comes in at the resistance line off the October and November highs. Forex traders should note that a failure to break higher here and the index could turn lower to its first support level at 1,208 from the November 1st low. A continuation of the move higher and the next resistance is the October high of 1,288.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

The Central Bank of Kenya upped its benchmark lending rate by 150 basis points to 18.00% from 16.50% previously, and held the Cash Reserve Ratio at 5.25%.  The central bank Governor, Njuguna Ndung’u, said: “The Committee noted that although supply shocks continued to drive domestic prices upwards, demand driven inflation pressures arising from the growth of private sector credit continued to persist.  In addition, it was noted that there were exchange rate risks emanating from uncertainty in the global financial markets due to the debt crisis in the eurozone. In order to address these risks, the Committee considered it necessary to further tighten the monetary policy stance at the margin.”

By MoneyMorning.com.au

Our old pal, Diggers & Drillers editor, Dr. Alex Cowie likes gold… but he likes silver more.

In fact, he’s got his sights set on silver clocking up a 525% gain in the next eight years. If you think that’s a crazy number, it’s actually one of the more conservative medium term forecasts we’ve seen!

If he’s right, that would take the silver price to USD$203 an ounce… more than six-times the current price of USD$32.72… or an annual growth rate of around 65.6% per year. Try getting that from stocks.

So, how does the Doc back up his claim?

Well, part of it is contained in one of the most remarkable charts we saw at the Daily Reckoning Doomers’ Ball last Friday. He also included it in his latest issue of Diggers & Drillers:

As the Doc wrote in his latest double issue:

“For years, industrial users of silver dominated the market. They used it for a wide variety of applications, like solar panels, electronics, photography as well as jewellery.

“But after big cracks started to appear in the financial system in 2007, the silver market started changing. Investors began muscling in to secure a bigger chunk of the market. In 2007 investors accounted for just 6% of silver demand. By last year this had increased fivefold with investors accounting for 29% of demand.”

Compare that to the latest numbers from the World Gold Council (WGC). The WGC notes that right now, industrial and dental use accounts for just 11.4% of gold demand. Jewellery accounts for 50.4%. And the rest – 38.1% – is used in investments.

By that metric, silver still has a way to go to catch up with gold. But once it gets there, we doubt the investor demand will fall back.

Of course, it’s important to remember (and the Doc admits this), silver’s journey from $32.72 to $203 won’t be a straight line. There will be plenty of bumps along the way.

As we see it, the silver price will react in the same way as every other asset that has burned investors. It will take a while for the disappointment to wear off, and then before you know it… whoosh; it’ll be out of sight.

Look at the five-year silver price chart:

While there are plenty of investors who bought between $10-$20. There are many more who bought between $30 and $50.

And the longer the silver price trades in the current range ($30-$35), the more disappointed they’ll become.

But it’s not all bad news. In fact, it’s great news if you’re looking to build up a position in silver over the coming years. Because you’re likely to get plenty of opportunities to buy at a cheap price as disappointed sellers keep the price down.

Quite how long it will take before this is worked out of the silver price is anyone’s guess. But we wouldn’t be surprised if prices stayed around this level for another year or more.

But longer term, the case for silver makes at least as much sense as the case for gold. For one reason: throughout history silver was used as everyday money – the U.K. pound sterling is so-called because it was measured in silver.

Ultimately, we’ll see a return to sound money. And odds are investors will use silver as a way to bet on that outcome. And as usually happens when investors bet on something, they go too far.

But the more we see events like this week’s central bank bailout, and commentators such as Bell Potter’s Charlie Aitken telling Peter Switzer in an interview…

“The only thing that can happen is the ECB will print money… don’t you want some inflation, some growth… of course you want the ECB to intervene. Look at [what] the Bank of England has done in England. They’ve stabilised the U.K. economy – stabilised – by money printing. What’s the Fed done in America? Huge scale money printing…”

…the more we’re convinced governments and central banks will intervene for years to come. That won’t be good news for most people as inflation eats away at their hard-earned savings.

But if you own gold you can expect to at least maintain your standard of living.

And if you also own a small amount of price-volatile silver, you should expect to improve your standard of living as we edge closer to (and the market bets on) the inevitable return to sound money.

Cheers.
Kris.

P.S. Dr. Cowie recently devoted an entire issue of Diggers & Drillers to the buying and storing of physical precious metals (including silver). If you’d like to find out how to buy and hold gold and silver… plus receive the Doc’s resource stock tips, be sure to check out the details here…

Related Articles

Why the Fed’s Actions Make Perfect Sense

Too Big to Bail

Swiss National Bank Intervenes…

Bailouts Still Boosting the Market

Was This Just Another Rigged Market?

From the Archives…

Stock Market Predictions
2011-11-25 – Kris Sayce

Stocks on the Australian Market Today – Three Things You Need to Know
2011-11-24 – Shae Smith

The Gospel of Gold and Silver
2011-11-23 – Kris Sayce

China’s Bubble Will Pop in 2012
2011-11-22 – Greg Canavan

ASX Stock Market Winners, Losers and the Newly Dumped
2011-11-21 – Aaron Tyrrell

For editorial enquiries and feedback, email [email protected]

How to Profit from Silver with the Inevitable Return to Sound Money

By MoneyMorning.com.au

We’ve written many times about the gold price.

Long term, our view is the price of gold will go much higher.

Whether it goes as high as $35,000 or $50,000 an ounce claimed by the experts at the Gold Symposium is another story.

And as we’ve warned, if it does reach that height, it’s unlikely gold owners will be clinking glasses of Krug champagne on their luxury yacht in Monaco.

Simply because we don’t look at gold as a get rich asset. It’s more of a stay rich, stay reasonably well off… or at the extreme, it’s a poverty-prevention asset.

The main reason to hold gold is to protect your savings against covert government and central banking theft (inflation). Something they’ve successfully done for the past 40 years.

Convincing everyone that prices are going up rather than what’s really happening – central banks devaluing your money.

That’s why we don’t suggest you put all your assets in gold. Because if you’re like most people, rather than maintain your standard of living, you’d prefer to improve it.

One way of doing that is with a different precious metal. One that we believe is undervalued and worth a small exposure in your portfolio (say 5-10%).

And a good way to find out more about this precious metal is by reading what Diggers and Drillers Editor, Dr Alex Cowie has to say …about silver.

Cheers.
Kris.

Related Articles

Why the Fed’s Actions Make Perfect Sense

Too Big to Bail

Swiss National Bank Intervenes…

Bailouts Still Boosting the Market

Was This Just Another Rigged Market?

From the Archives…

Stock Market Predictions
2011-11-25 – Kris Sayce

Stocks on the Australian Market Today – Three Things You Need to Know
2011-11-24 – Shae Smith

The Gospel of Gold and Silver
2011-11-23 – Kris Sayce

China’s Bubble Will Pop in 2012
2011-11-22 – Greg Canavan

ASX Stock Market Winners, Losers and the Newly Dumped
2011-11-21 – Aaron Tyrrell

For editorial enquiries and feedback, email [email protected]

Why Gold Should Become Your ‘Stay Rich’ Asset

EURUSD is testing the resistance of the price channel on 4-hour chart. As long as the channel resistance holds, the price action from 1.3212 could be treated as consolidation of downtrend from 1.4246, and one more fall towards 1.3146 (Oct 4 low) is still possible. On the upside, a clear break above the upper line of the channel will indicate that the downward movement from 1.4246 had completed at 1.3212 already, then the following upward move could bring price back to 1.3900 zone.

Daily Forex Analysis

Investing in Home Depot (NYSE: HD)
If You Can’t Buy or Sell It: Fix It

by Jason Jenkins, Investment U Research
Friday, December 02, 2011

Tuesday on CNBC’s “Closing Bell”, Maria Bartiromo had a little Q&A with Senior Equity Research Analyst Alan Rifkin of Barclays Capital and Homebuilder Analyst Buck Horne of Raymond James called “Taking Stock in Housing.”

As you can expect, it wasn’t the cheeriest of conversations…

There was the usual talk of too many foreclosures in the pipeline, a glut of vacant homes on the market, Baby Boomers downsizing and the inability of younger generations to come up with the means in order to buy a home in this new housing/mortgage environment due to strict credit and capital guidelines.

But as a good moderator should, Bartiromo pressed the issue for hidden gems – or whether there was anything in the sector that deserved our investment attention. On the homebuilder front, there’s a phenomenon called the “Hope Trade,” where annually from the middle of November to Super Bowl Sunday there’s an uptick with major homebuilders.

However, those industry fundamentals are absolutely horrible after the NFL football season and in the foreseeable future.

A Gem in a Rough Market

What was more interesting is the current trend to fix what you got because you can’t trade up. And this is where Home Depot (NYSE: HD) comes in. We need to look at how they boosted profitability in a bad housing market.

According to an interview with Home Depot Chief Financial Officer Carol Tome, consumers continue to spend money to maintain their homes, lifting same-store sales of transactions over $900 by 3.6 percent, including increases in more discretionary categories such as kitchen cabinets.

“We see the core repair projects remain strong,” Tome said. “We do see some movement in big-ticket items.”

A Strong Third Quarter

Two weeks ago, when the Atlanta-based company announced its third-quarter numbers, it raised its full-year earnings outlook to $2.38 a share from $2.34 a share and increased its dividend by 16 percent to $0.29 a share. Dividend increases are good right now.

Last quarter’s net income rose to $934 million, or $0.60 a share, from $834 million, or 51 cents, a year earlier. Sales rose 4.4 percent to $17.3 billion. Comparable-store sales rose 4.2 percent, including a 3.8-percent increase in the United States.

Analysts, on average, had estimated Home Depot would earn $0.59 cents a share on sales of $17.1 billion, according to FactSet. Same-store sales topped the 2.9 percent gain analysts surveyed by Retail Metrics expected.

Tome went on to say later in that same interview, “We are gaining share,” adding that there are still pockets of “extraordinary housing weakness” in the west. “Our growth is tied to the general economic growth. We grew faster than GDP. A lot of it is because we are taking share.”

Going forward, why like Home Depot?

Here are two major reasons:

• Last week, Fitch upgraded its rating on Home Depot to an A- due to its solid operating momentum, strong free cash flow and public commitment that it’ll maintain its current financial leverage.
• Home Depot’s 3Q results left its smaller archrival Lowe’s (NYSE: LOW) in the dust. Lowes reported a 44-percent drop in third-quarter profit with a 0.7-percent same-store-sales increase and there is fear its fourth-quarter outlook may fall short of analysts’ estimates.

A three-percent dividend yield doesn’t hurt, either. It may be smart to keep an eye on “The Depot.”

Good Investing,

Jason Jenkins

Article by Investment U

Dec. 1 (Bloomberg) — Eugen Weinberg, head of commodities research at Commerzbank AG, talks about diplomatic relations between the European Union and Iran, and its impact on oil trade. He speaks from Frankfurt with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Dec. 1 (Bloomberg) — Michala Marcussen, global head of economics at Societe Generale SA, discusses the European Central Bank’s bond-purchase program and the outlook for interest rates. She speaks from Paris with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

Written by Andrew Snyder, Editorial Director, Insiders Strategy Group, insideinvestingdaily.com

Central bankers around the globe made a bold coordinated move yesterday. It is proof that now is the time to buy.

The debt solution we all knew was coming is here. Inflation — major inflation — is on the way.

The Federal Reserve led the way, but this time, it has accomplices across the globe. The planet’s largest central banksters made a synchronized move yesterday to flood the developed world with cash.

The ECB was in on it. Switzerland was there. So was Canada, Japan and Britain. Even China got in on the action when it announced it will lower its bank reserve requirement. It’s all part of an effort to use pennies to pay dollars’ worth of debt.

There’s only one problem… and it’s a biggie.

You and I get screwed.

Almost immediately after the news, oil surged. It jumped back above the critical century mark. That means everything from the fuel you burn to the food you eat will rise in kind.

Gold bugs have known this sort of thing was coming.

It had to. After a generation of frivolous spending and piling up unimaginable debt, inflation (and lots of it) is the only way out.

But it’s a political solution to a monetary problem. Central bankers know easy money won’t solve the crisis. But their hands are tied; it is the only solution that will give their bosses an easy way out.

That’s why we point a finger at Bill Gross this week and laugh.

After he swung for the fences and fell on his face by shorting U.S. debt, the famed — now infamous — fund manager is telling investors to feel blessed if their portfolio averages 5% gains over the next five years.

“Because of Euroland’s family feud, because of too much global debt, because of deflationary policy solutions that are in some cases too little, in some cases ill conceived, and in many cases too late,” Gross tells us, “financial markets will remain low returning and frequently frightening for months/years to come.”

More likely… he’s working to dust over his fund’s paltry 2% gain so far this year.

In reality, today’s monetary policy is anything but deflationary and thanks to the latest round of liquidity injections, 5% gains will look more like the average daily gain versus the annual return.

Need proof… look at yesterday’s market action. Ba-Boom!

Remember, inflation is good for the stock market… until it’s not.

Confused? Let’s put it this way. At first, inflation artificially boosts corporate earnings. All of a sudden, companies are getting more dollars for the same amount of goods.

The number of widgets sold may only increase by 2%, but thanks to a currency that’s worth far less, the actual revenue figure may be exponentially higher.

Your neighborhood gas station is a great example. When a gallon costs a buck, each stop you make adds about $15 to its top line. But when it surges to $4 a gallon, you’re now shelling out $60.

Sales surged… but you didn’t buy any more gas.

But this scheme won’t last forever. Eventually, the consumer goes broke. His income can’t keep the pace. Instead of buying 15 gallons of gas, he buys 7 gallons and spends the weekend at home.

That’s when the junk hits the fan. That’s when the stock market plunges. And it’s when your financial security goes up in smoke.

But by that time… Bernanke will be long gone. So will Merkel, Obama and Sarkozy. They’ve set their families up for a life of riches for generations to come.

Too bad you and I will still need to eat and pay our bills.

The solution to the problem — at least for today — is real simple. In fact, farmers have been using this strategy for ages… Make hay while you can.

I’m as bullish now as I was at the market lows in August (it was a bold move that paid off quite well for many readers).

Soon enough, the folks hoarding gold will get their ultimate payoff. They’ll be holding the only real currency. But that time is not now.

Now’s the time to be in the market. It’s the only way you’ll keep up with the pace of inflation.

P.S. Like we’ve said several times over the past few weeks, one of the best ways to take advantage of an inflation-fueled market is small caps. When the markets are surging forward, it’s the small guys that lead the way. It is exactly why we just pulled the curtain on our latest newsletter… Small Cap Insider.

Written by Andrew Snyder, Editorial Director, Insiders Strategy Group, insideinvestingdaily.com