"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Thursday, February 27, 2014

Mining Shares Cannot Hold Gains

In what appears to be reminiscent of the not-too-distant past, the mining shares traded hesitantly for the entire session while the broader markets were on a tear higher. Yellen's testimony early in the day seemed to put the precious metals sector on a bullish footing but by the afternoon, prices began to slip with the result that the HUI ended up settling barely above its session low. That is not encouraging especially with the broader market just missing setting yet another all time high ( basis the S&P). It did manage to put in an all-time CLOSING HIGH however.

Here is the chart - a couple of things stand out to me. First, and most importantly, the ADX has turned down indicating that there is at least a temporary halt in what had been the recent uptrending move. Positive Directional Indicator remains above the Negative Directional Indicator meaning that the bulls still have control of the market however.

We will have to monitor the subsequent price action to see at what levels the dip buyers surface. A reasonable place to expect their first appearance would be when/if the index dips towards the 200 day moving average near 231-232. Below that lies the near confluence of the 100 day and 50 day moving averages. That comes in around the 215-217 level on the index. Bulls would not want to see this index fall below that level as it would probably trip the ADX into a negative posture.

There were some very wild moves occurring across several commodity markets today. How much of this is related to end-of-the-month position squaring and how much to actually waning upside momentum but the grains were hit fairly hard today, especially the beans. I definitely want to see the price action across the grains tomorrow as we end this month. AS I said yesterday, maybe the February Break is going to show up here to END the month of February and start the month of March. If so, it is a month overdue.

Fed Chair Yellen gives Gold Bulls Reason to Cheer

Yes indeed, the Dove of Doves is living up to her reputation as far as the gold market is concerned:

"Low inflation gives Fed room to pursue full employment".

What further, besides personally buying gold futures, could she have done to spook gold bears?

The spin being put on this is that the Fed will hold off on the tapering as they wait to see if the recent poor economic data is an anomaly due to the harsh, frigid winter weather or if it is becoming a trend.

Gold bulls are betting it is the latter.

For that matter, Dollar bears are too because back down the Dollar is going this morning and back up are going commodities in general. You could not have asked for a statement that would better clip yesterday's Dollar rally than that which Yellen supplied this morning. I sometimes get the idea that the Fed would love to see the Dollar even weaker - after all - they are not getting the inflation that they want to produce.

I have said it many times, the markets no longer are interested in fundamentals - they are interested in what the Fed may or may not do. I guess this is what free-market capitalism has degenerated into. Then again, with the rest of the decline in this nation, we should not be surprised to see this sort of thing.

America is rotting internally. Any observer from outside of the nation ( and those within who are attuned to these things ) can observe its rising degeneracy and ignorance. We are fast becoming a nation given totally over to hedonism at the expense of discipline, ethics, virtue and morality. Our national character is deteriorating and with that, so too are our various institutions. We are short-term oriented; the longer term consequences be damned.

The Fed's answer to any economic hiccup or slowdown, especially under Yellen, has been and always will be to pump liquidity into the system and artificially suppress interest rates in the hopes of spurring increased borrowing and further indebtedness. They have to because ours is a debt-based economy.

In the process of so doing however, they have created more misallocation of capital than all of the bone-headed decisions of hedge fund managers combined throughout our modern financial era. Big specs cannot be blamed for going with the Fed -  after all they exist to make money from speculating. But if the Fed, particularly this Yellen-led Fed, is not careful, they are going to end up ruining the Dollar with this idiocy. Only the Dollar's reserve status has allowed the US to continue with its reckless spending and incessant borrowing. The more those authorities who are charged with maintaining its "value" undermine that value, the greater the possibility that the financial quality of life for the average US citizen comes under attack.

We are talking about the future of our children. Those who foolishly squander their birthright for a bowl of stew to satisfy the immediate lusts of Wall Street, are doing no service to the next generation.