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Trend reversal


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well, it hASS been alleged HRFF can't count beyond TWO (the age of his intellectual/ emotional maturity? lolol) and maybe itSNOT? been THREE daze butt(_)_) it shurrrre SEEMS like it's been since that ASStro guy and udders issued dark warnings about the 29th of July (plus or minus 3 daze) SNOT much time left in THAT window, wot?

 

Bradley ain't wurkin'

 

no nuclear cycle wurkin'

 

nuttin' much wurkin' in these DAWG DAZE of high summer.

 

Just NO MAN'S LAND...

 

oh, speaking of which, poet Joyce Kilmer was sent out into No Man's Land on patrol in WWI yesterday (July 30, 1917?) and never returned.

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M.H.,

 

I don't know if you answered the question concerning a LOW. I know your high target of 1170ish by election. I see a move down to the 850 area by year end.

 

Where do you stand on a potential LOW before a rally next year?

 

TIA

 

TE

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Snow wants China to float?

 

So the hot shots short sold gold down hard at the close tonight based on the move below Fibonacci support of $353 to $353.50 and I again bought. Don't mistake my action for a trade. It is born of a fundamental conviction and the courage of my conviction. The pressure on gold this week is a product of the downward pressure on the Euro and other formerly appreciating currencies and the upward pressure from the special China circumstance of the apparent willingness of the Chinese to discuss letting their currency float. This is what took gold down from the high $360s.
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M.H.,

 

I don't know if you answered the question concerning a LOW. I know your high target of 1170ish by election. I see a move down to the 850 area by year end.

 

Where do you stand on a potential LOW before a rally next year?

No idea really. Below 962, there was a minor low of 912 on May 20. And we started the year at 880.

 

The "Dead Bodies Behind Mark to Market" linked by Golden Stool (at first I thought they were talking about our thread!) sounds a little sensational. The bonds have had a big move down, and it's being extrapolated to disaster. All of this will happen over the next 2-3 years. But meanwhile the bonds get a little respite here before the death march resumes, I think.

 

But I'll say this -- to those who fully accept the "Dead Bodies" scenario in the bond market -- it would provoke a wave of liquidity that makes LTCM look like an eyedropper. Keeping a "seized up" market liquified is the First Commandment of Central Banking (brought down on a stone tablet by Mr. Walter Bagehot). And that wave of liquidity would have to go somewhere.

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Since 1896, the year the dow was created, every year that the dow breaks below the prior December low in the first quarter, it has been a down year. I will comprimise and say the dow will be down this year and up next. :wink2:

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But I'll say this -- to those who fully accept the "Dead Bodies" scenario in the bond market -- it would provoke a wave of liquidity that makes LTCM look like an eyedropper. Keeping a "seized up" market liquified is the First Commandment of Central Banking (brought down on a stone tablet by Mr. Walter Bagehot). And that wave of liquidity would have to go somewhere.

I have to believe Greenspan knew something like this bond market meltdown could happen when he backed off the unconventional measures. Of course, the bond market meltdown was going to happen eventually anyway, so maybe Greeny figured it best to take the medicine now. But the fact remains that the mortgage paper market is huge, and hugely overvalued. There are no sufficient buyers of size to support the bond/mortgage markets at these levels for long. The bloom is off the rose.

 

Serious question, machine...is the Fed in any position to create the tidal wave of liquidity that you describe? What are they going to do, drop rates to 0? Go into the markets and double up the asset side of their balance sheet with prima facie worthless paper? All to the severe detriment of Uncle Buck? All these actions will do is provoke more leveraged buying, of something, although we don't know exactly what. But whatever gets bought will be by definition a bubble, and we'll be right back in square one - soon said bubble will need to be liquidated, and again there will be no suckers of size. I really think we're beyond the old flood with liquidity days. The fed should never have let the bond markets fall as far as they have. Better to nip something in the bud rather than have to clean up a mess later.

 

machine I for one appreciate your efforts to divine the tea leaves of hysterical sentiment, but it sure looks to me like Al knows exactly what he's doing........

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Art Cashin said earlier that money coming out of BONDS is NOT going into the stock market it's going to GOLD or fleeing to safer harbours and he pointedly noted that the markets without the mothers milk of $ have only one way to go and that is NOT UP.  So fellow Bears and Gold Bugs things are looking good for us.

I was listening to Roger Arnold today he said that hedge fund managers he knew were parking bond money in currencies ie. the Euro, the Dollar, the Yen. I would suggest parking it in gold since that is nobody else's liability. Gold never moves. It is the constant. It is mean sea level. All central banks are depreciating their paper currencies by expanding their money supply. Gold production doesn't add more than a few percent tops to the total supply of gold. No matter how you look at it all fiat currencies are depreciating against gold.

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Crude oil closed at $32.22/bbl today.

 

Crude oil chart

 

An unfilled downside gap remains from March (about the time the Iraq incursion started). If crude goes any higher next week, it would start filling that gap. The highest spike in February was around $40 per barrel.

 

Needless to say, this shouldn't be happening. A deflationary oil shock? I don't think so ...

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Serious question, machine...is the Fed in any position to create the tidal wave of liquidity that you describe? What are they going to do, drop rates to 0?

Frankly, I wonder if that remark by Al Green is what spooked the bond market. It's remarkably naive. Like telling the foreclosure attorney that you're going to break open your kid's piggy bank to make a payment.

 

If the "Dead Bodies" scenario is remotely true, cutting rates to zero would be irrelevent. Massive carb loading of the Fed's balance sheet with tasty agencies and Treasuries would be the only way out. Whether the Fed is big enough, or could get richer friends to help, I don't know.

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