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Monthly Digger - August 2008

Charmin

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Charmin Dean of Stock Proctology

Charmin

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The XAU has been on a pogo stick since January. One thing about riding on a pogo stick is once you've mastered your balance and can really dig in you should be able to produce a large bounce every so often or hit a hole and fall off.

 

I'm assuming that we're not going to fall off the bull run and our pogo is going to produce one big bounce for us.

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kaotic Stock Proctology Intern

kaotic

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The XAU has been on a pogo stick since January.  One thing about riding on a pogo stick is once you've mastered your balance and can really dig in you should be able to produce a large bounce every so often or hit a hole and fall off.

 

I'm assuming that we're not going to fall off the bull run and our pogo is going to produce one big bounce for us.

677251[/snapback]

 

 

I sure as hell hope so. Follow through failure on many key issues has me out of futures today at a slight profit. I think I'll wait it out a bit until some firmer technical indications confirm a stronger rebound is underway. :huh:

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Gold Majestic Master of Stock Proctology

Gold Majestic

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More ?Recognition Phase? stuff:

 

Tomorrow the U.S. Bureau of Labor Statistics reports the employment numbers.

 

I?m posting a chart that shows the ?Birth/Death Adjustments? listed by month last year, 2007.

Notice that in the month of July (during the height of vacation season) there was a large, (minus) -1,381,000 cumulative jobs adjusted for the ?Total nonfarm over-the-month change.?

 

As many are aware the economy has continued to slow and these B/D (fictitious) numbers periodically get ?fudged? higher only to be ?adjusted? lower at a later date. Based on the poor performance of the economy, the numbers tomorrow should be bad anyway (even w/ the fudge factor), and since July has been used in the past as presumably the most favorable month to adjust the jobs numbers lower, tomorrow the market should get a very bad jobs number. A poor number would have the effect of reinforcing the FED?s dilemma of raising rates at the upcoming Aug 5th FOMC. The FED?s inability to raise rates will continue to be dollar negative and gold positive as the economy remains stuck in Stagflation. The market herd will continue to slowly figure it out, reacting to events after the fact. The recognition phase continues to unfold.

 

http://www.bls.gov/web/cesbd.htm\

________________________________________

 

Monster U.S. online jobs index falls in July

 

?Monster Worldwide Inc, an online careers and recruiting firm, said its Employment Index slipped to 157 points in July from 163 in June. Year-over-year, the index fell 14.2 percent from 183 in July 2007.?

 

http://www.reuters.com/article/domesticNew...me=domesticNews

__________________________________________________________

 

Also I?ll mention the Department of Commerce?s GDP numbers reported.

 

http://www.bea.gov/newsreleases/national/g...pdf/gdp208a.pdf

 

Real GDP as reported in 4Q-07 / 1Q-08 / 2Q-08

 

Nominal GDP was 2.6 / 3.5 / 3.0

GDP Price Index was 2.8 / 2.6 / 1.1

 

Real GDP as reported was -.2 / .9 / 1.9

 

Adjusted for the Government?s Market Based PCE 4Q-07 / 1Q-08 / 2Q-08

Nominal GDP was 2.6 / 3.5 / 3.0

Market Based PCE was 4.4 / 3.7 / 4.4

Real GDP was -1.8 / -.2 / -1.4

 

Using the government?s numbers (See PDF above) we?re now entering the 4th Qtr of the recession as unemployment claims accelerate and the Debt to GDP ratio is at an all time high of 3.6.

(Total U.S. GDP = $13.8 Trillion, total credit market debt = $50 Trillion)

 

The Treasury/Congress have made it clear through words and actions that they will attempt to print their way out of the problem. Ugh . .

 

Here?s one on several articles I?m posting that I find significant as it relates to a few of my Natural Gas Stock holdings. The chart of the Natural Gas Index and Storm Cat Resources follows. This is one of a handful of stocks that I?ve elected to trade the free shares acquired outside of my core position. SME tends to be quite volatile, and I bought some a few days ago.

 

Russia Takes Control of Turkmen (world?) Gas

 

?From the details coming out of Ashgabat in Turkmenistan and Moscow over the weekend, it is apparent that the great game over Caspian energy has taken a dramatic turn.?

 

http://www.atimes.com/atimes/Central_Asia/JG30Ag01.html

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bearvest Assistant Professor of Stock Proctology

bearvest

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XAU:

 

To start the month, let's look at where we've been and where we're likely to go according to Elliott.

 

The top was on March 13th at 209.27. You knew something was amiss as the 5 wave rally from February 7th resulted in a significant MACD divergence--a harbinger of a significant trend reversal.

 

The decline into May Day took on a very clear 3 wave pattern. This fooled many into a misbelief that the bottom was in.

 

Three wave patterns are tricky. There are only 4 ways to count them:

 

a. A completed correction;

b. A complex correction that begins a WXY:

c. A complex correction that begins a triangle; or

d. A nasty mis-count as the 3 wave pattern extends into a 5 wave pattern.

 

I lost faith in the completed correction count very rapidly. The move after that was another 3 wave pattern--not an impulse up. Ergo--no trend change. Rather, a more complex correction.

 

I thought the pattern may have been a WXY pattern. I believed that the advance from the May lows was corrective. The pattern was sloppy and overlapping. It was clear from MACD that there was no trend change as price challenged the May highs with MACD at a much lower level.

 

The pattern, as labelled, is a wave "b" triangle.

 

I have preached that a triangle is a penultimate pattern. It is the "next to last" pattern. Thus, it appears primarily in wave b's and 4's. It can rarely appear in wave 2's. 2's are usually abc's or WXY's as they reflect conviction on the part of traders that the rally is false or mere short covering (and vice versa).

 

We now have 5 waves down on the chart. You'll note that I have labelled them at one degree of lesser trend that all the prior action.

 

This is merely a function of time (and Elliott adherence to "proportionality').

 

Here my bottom line---and maybe, duh, to set the record straight.

 

Impulses "travel with a friend". Thus, when an impulse appears on the daily chart, unless you can count it as the termination of a correction, it signals the trend. And it will, as night follows the day, be followed by an impulse down after a corrective pattern.

 

The big picture pattern could be an ABC "flat"--a 3-3-5 pattern. But the last 5 wave pattern lacks "proportionality". It's just too brief.

 

I think we'll rally from here in a corective overlapping pattern for several days. And I'm long looking for a "scalp" at the top of a potential Stochastics "double dip" to re-position short or await confirmation that the bottom was in on July 30th.

 

But I think we'll ultimately see a lower low before Labour Day.

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