Monthly Digger - July 2009

[Charmin]

Could we retest the 320 area on HUI and stay within a rising uptrend channel or will HUI follow the path of the PnF chart I posted for June 15 with cause down to 300 and to be met at the lower Dover Sole price channel?

[Gold Majestic]

China Manufacturing Expands a Fourth Month, PMI Shows

 

“July 1 (Bloomberg) -- China’s manufacturing expanded for a fourth month as a 4 trillion yuan ($585 billion) stimulus plan and record bank lending revive the world’s third-largest economy.

 

The official Purchasing Managers’ Index rose to a seasonally adjusted 53.2 in June from 53.1 in May, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion.”

 

http://www.bloomberg.com/apps/news?pid=206...id=aFJVA37yJFrI

 

As the Kool-Aide Drinkers scratch their collective heads: China's June PMI is now at 53.2! That's above the 2005, 2006 lows, back to the 2007 low and back up to the Jan 2008 level.

 

Just more of the same, a continuing recovery for China’s manufacturing sector. This will continue to put further downward pressure on the dollar and more upward pressure on U.S. long-term interest rates as well as commodity and gold prices. And it doesn't help that the U.S. International Trade Commission recommended to impose punitive duties up to 55% on Chinese tire imports.

 

Thursday’s jobs data coming up. TLT rolling over. GDX hit FIB support today as projected on chart posted last week. Same old Bears getting bearish when they should be getting bullish, etc.

 

Climbing the wall of worry. Relax and enjoy the ride.

[bearvest]

HUI:

 

Projection for the summer.

 

Pilot shorts are in place.

 

Will add around 370, if I see a divergence in MACD on the 60 minute and daily Stochastics rise above 80 and fail to stay for 3-5 days.

 

Stop will be set around 400.

 

First support should be around 310.

 

There's a good chance that we test the lows set in the first quarter

[Gold Majestic]

Is it any wonder the US Peso is lower today? Commodity/Gold Prices Rising again?

"Investment Demand" More Important than "Seasonal Jewelry Demand"? Jus' lil' bit maybe?

 

Forest Deep, Dark & Dense Revisited

 

Market Fundamentals 101

 

Chapter One:

"Fundamentals Drive Markets" (i.e., reflected in Charts' “Rear View Mirror”)

 

Example #5,012:

 

More of the same:

China Manufacturing Expands a Fourth Month, PMI Shows / China Requests Reserve Currency Debate at G8

 

EQUALS

 

“a continuing recovery for China’s manufacturing sector. This will continue to put further downward pressure on the dollar and more upward pressure on U.S. long-term interest rates as well as commodity and gold prices.” (as so aptly demonstrated today).

 

Source:

China requests reserve currency debate at G8

http://www.reuters.com/article/usDollarRpt...129307120090701

 

China Manufacturing Expands a Fourth Month, PMI Shows

http://www.bloomberg.com/apps/news?pid=206...id=aFJVA37yJFrI

 

TODAY'S OUTCOME:

 

1. US Dollar market reacts negatively to the above revelations as it slowly but surely recognizes the obvious. (see posted US Dollar Chart below)

 

2. Gold (And the companies that mine it) reacts positively as suggested they would.

 

3. The “Fundamentals Are Useless / Charts Tell All” crowd continue revising counts / scratching heads serving purpose to short at bottoms and go long at tops.

________________________________________

 

For the unpopular few that dare place importance upon the fundamentals that shape our financial destinies, specific market sectors, and specific companies we invest in, the few that can think and then relate, can say STAGFLATION!

 

June’s ISM Manufacturing Index at 44.8 (11th straight month of contraction for the US Manufacturing Sector) AND the 40.7 Employment Component remains in contraction projecting the loss of 473,000 payrolls in June! At same time the ISM “Prices Paid Index” ROSE from 43.5 above 50!

 

Thus, CONTINUED CONTRACTION in Manufacturing and Employment

 

COUPLED WITH RAPIDLY RISING US Prices

 

EQUALS STAGFLATION

 

WHICH EQUALS

 

GREAT ENVIRONMENT FOR GOLD / GOLD STOCKS

 

________________________________________

 

And yet more of the same ol':

07/01 11:58 China Requests Reserve Currency Debate at G8

 

July 1 (Reuters) – “China has asked to debate proposals for a new global reserve currency at next week's Group of Eight summit in Italy and the issue could be referred to briefly in the summit statement, G8 sources said on Wednesday. One G8 source who was involved in the negotiations said China made the request during preparatory talks about a joint statement to be issued on the second day of the summit in L'Aquila by the G8 plus the G5 (Brazil, India, China, Mexico and South Africa) and also Egypt.”

 

This forum, the so-called "G14", meets on July 9 to discuss the financial crisis, trade and climate change and for the first time a G8 summit will also produce a joint G14 statement. A European source with knowledge of preparations for the summit also said China had raised the subject of a reserve currency debate and that it might be mentioned during the meeting, though the source added: "Any country at the meeting can raise issues they see fit."

 

"But whether there is a specific mention in the communique remains open," said the European source, adding that sherpas would discuss this further in preparatory talks on Friday. The debate centres on proposals by some emerging powers that an alternative should be found to the U.S. dollar as the global reserve currency, to reflect the shifting balance of power in the globalised economy.”

 

“China's central bank governor said in March the world should consider using the International Monetary Fund's Special Drawing Rights (SDRs) as a super-sovereign currency. The SDR is an international reserve asset allocated to IMF members and its exchange rate is determined by a basket of dollars, euros, sterling and yen.”

 

http://www.reuters.com/article/usDollarRpt...129307120090701

________________________________________________________

 

TLT chart shows the inverse correlation of Gold/Gold Stocks. Bond vigilantes back in control keep FED pinned between the "Rock & Hard Place." Debase or Default. Inflation/debasement sectors beneficiaries continue to lead markets up.

[Gold Majestic]

Similar to the Gold Complex June 23rd Chart showing that the .168 FIB (Both Price & Time Correct) Low was in

 

is Silver's June 30th Chart showing the .168 FIB (Price & Time Correct) Low is in.

[Gold Majestic]

Levity is the spice of life . . .

Excuse me in advance, but I can not help from from posting yet another incredible example of the extreme laziness and stupidity of the "Fundamentals Are Useless / Charts Tell All" TA crowd that would be hysterical if not so pathetic.

 

In this case, they're (market consensus ignoramuses) still buying General Motors Corp up to $1.06 with Volume above 60 Mil in spite of all the availability of information that the company is WORTHLESS. (Just ask any one of the bond holders' opinion.)

 

This must be a first!? But has a "Don't Explain the Fundamentals to Me - Just Show Me an E-wave Chart" crowd ever been so extremely dense that management of such a company has had to intervene in the markets for the financial danger these "geniuses" present to themselves by explaining to these dimwits that fundamentals do matter!?

 

Is this just a sequel to the movie, "Dumb & Dumber,"

"Dumb & Dumber Meets Dumbest

. . . in Deep, Dark, Dense Forest"!!??

 

GM Statement re: GM Stock Price and Volume

 

July 1, 2009 2:00 PM EDT

 

DETROIT, July 1 /PRNewswire/ - GM management has noticed the continuing high trading volume in GM's common stock at prices in excess of $1. GM management continues to remind investors of its strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios. Stockholders of a company in chapter 11 generally receive value only if all claims of the company's secured and unsecured creditors are fully satisfied. In this case, GM management strongly believes all such claims will not be fully satisfied, leading to its conclusion that GM common stock will have no value.

 

http://www.streetinsider.com/Press+Release...me/4767497.html

 

The appropriate response that "market consensus" ignoramuses are at a loss of word for? Du uh??

[Gold Majestic]

Update on the HOUSING MARKET PILLAR (of weakness) that consumer spending/employment relied upon so much for its strength and in turn, the GDP relied upon for its.

 

Putting the on-going Housing Bust into proper perspective takes the wind out of the sails of the "Deflationists". As one can see from the Shiller Housing Index perspective adjusted for (price) inflation that dates back to 1890, housing prices must fall ANOTHER 29% from 140 to benchmark 100 just to get back to the 116 years average! That's right, after ALREADY FALLING a whopping 38% from 225 down to 140, Housing Price INFLATION is still RAGING, up 40%!

 

To get back to the average price since the post-war 1950s, Housing Prices must fall at least another 21% from 140 down to the 110 level.

 

Until then, Price Inflation remains alive and well and the FED continues doing an excellent job of fooling most of the people most of the time into thinking there’s deflation or the threat of such.

 

But seeing how today’s market “players” as opposed to market investors think fundamentals are useless, it’s no wonder the incompetent FED has such an easy time fleecing these greedy fools too lazy and dim-witted to perform proper due diligence on an investment sector. Instead these “Charts Tell All” fools incapable of thinking, rely on the latest "get rich quick" fad to tell them how to invest. Sad but true.

[dharma]

i am looking for a low end of month. i am starting to think this may work into a w w/another low in the 3rd quarter.

gm-love your stuff. it is definitely necessary to watch the technicals and the fundamentals. but, every trader attacks the beast in the way that he/she is comfortable. whatever works!?

dharma

[The CoinGuy]

[Whadda I Do Whadda I Do]

The CPR regiment has changed. Please make a note of it.

[Gold Majestic]

i am looking for a low end of month. i am starting to think this may work into a w w/another low in the 3rd quarter.

gm-love your stuff. it is definitely necessary to watch the technicals and the fundamentals. but, every trader attacks the beast in the way that he/she is comfortable. whatever works!?

dharma

 

Hi dharma, thanks and agree with your sentiment.

[Gold Majestic]

Happy 4rth to you CG and all that grace these pages!

[Gold Majestic]

Here's a daily Gold chart notating the monthly Employment announcements. You can see from the chart that out of the last 5 of 8 reports, gold closed down. So from a probability stand point, today's 1.23% decline was not surprising making it 6 out of 9.

 

My thoughts on today's Employment Report and how it impacts Gold/Gold Stocks are that there was nothing bullish for the dollar in this report. That this report just confirms our understanding that the “green shoots” comments last March were nonsensical and that the "Rock & Hard Place" trapped Fed is coerced by this data to print even more and even faster. And that it always takes a little longer for the "Market Consensus" dummies to figure it out (as they soon will). On the last few Gold stock charts I posted, you can see that the recent chart pattern has been similar to the last two launches from the recent bottoms in March and April.

 

Also take into consideration that:

 

The Unemployment rate of 9.5% is the highest since August 1983, that the U-6 Government statistic rose to a record 16.5%. The average weekly hours fell to the lowest on record since 1964 to 33.0 hours. And notice that today's report uses the figure of 185 Thousand jobs created by the Birth/Death Model. (Is that a stretch or what?)

 

What this disappointing "massaged" report is telling the market consensus dummies is that the only people that will be discussing an "exit strategy" in the foreseeable future will be the Chinese economic authorities trying to figure out how to get the hell out of dollar denominated assets without creating a ruckus.

 

The last thing the "Rock & Hard Place" Fed can do is exit anything. The Fed is not in a position to dump $1 Trillion plus Treasuries, Mortgage Backed Securities, and Agency Debt into the market any time soon to "Exit" i.e., to "Shrink" its Balance Sheet as would be required. I can hear the Chinese students laughing all the way from Peking University in China at that notion. No, to the contrary, the Treasury will be handing out the tin cup again and again asking for more money to the tune of $73 Billion next week, and this amount will be increasing going forward given the continued rise in unemployment and the continuing decline in tax revenues.

 

"Rock & Hard Place" / "Debase or Default" Fed is on a collision course with more monetization. To save face, maybe the "Inflation Wizzard" Bernanke can come up with a new name for it. How about instead of "Mone-tization" he can rename it "Ferti-lization," and pray for that Miracle-Gro mixture to transform his "brown wilts" into "green shoots."

 

I mean who is going to buy all that paper at these current yields with all the concerns being expressed publically and so vocally by the foreigners?

 

Who else to take up the slack other than the "Lender of Last Resort," and how appropriate to lend that money to ones self, the "Borrower in Greatest Need," in ever greater quantities for the benefit of the brown wilts?

[Whadda I Do Whadda I Do]

Reading Armstrong and his long long term analysis which includes political upheavals interwoven with banking and currency crisises and all that entails he points out the time is ripe for a political change here in the US (possible 3rd party emerging) in line with his historical cycling time lines.

 

A Palin type movement seems to be in its infancy with an underlying current of dissatisfaction with current political direction or a loss of confidence or faith in the system.

 

It appears you can chart just about anything.

[Whadda I Do Whadda I Do]

I'll be surprised if Sinclair ever willingly returns to China after this trip.