Tuesday, October 6, 2009

The futures topped yesterday half a penny from the 'D' target of a pattern on the hourly chart begun from 15.760 a week ago. If they get second wind today -- most likely, in my view --  they can scare the bejayzus out of shorts with a print at 17.115. That would create an irresistibly powerful impulse leg on the hourly chart, and with it the likely prospect of a test of mid-September's 17.690 high.

As of 10:15 p.m., the short-squeeze that produced yesterday's impulse leg on the hourly chart had barely even corrected, suggesting that bears could be in for a rough time today. Your warning to get out of  the way came when the futures exceeded 1034.75, a benchmark noted in Monday's touts. That said, the burden of proof will be on bulls nonetheless, since the long-term channel that produced last week's dramatic top is not exactly chopped liver.

The midpoint support at 76.7o gave way early in the session, telegraphing the weakness that was to follow. Its 'D' sibling at 76.31 is now our minimum downside objective, implicitly supporting the bullish outlook for gold.  The dollar's weakness can be seen as punishment for the bucket of manure served up by G-20 in their brazen "Mission Accomplished!" statement after last week's wallow in Pittsburgh.  Please note that if the 76.31 hidden support fails, DXY will become a good bet to fall to exactly 75.47, and quickly. A tradable bounce from that number is very likely, so gold and currency traders should take heed.

If you had used the 1011.90 "trigger" price given here yesterday to get long for the big push, you could not have fared poorly.  Notice in the accompanying chart that the first time the drum-rolled number was exceeded -- by a nicely camouflaged single tick! -- it produced a pullback and C-D follow-through that made entering with-the-trend a stress-free undertaking.  The mechanical aspects of the trade were discussed in the chat room as the opportunity unfolded, and it appears that some subscribers were able to take advantage. Today, look for the follow-through to reach a minimum 1028.10.  Any higher would suggest the futures are on their way toward achieving the 1074.50 target we've been focused on for a while.

Stanford University is attempting to unload $1 billion worth of hard-to-sell assets -- a treacherous undertaking that the Wall Street Journal said was being closely watched by private equity. That's an understatement, since hundreds of the world's biggest institutional and sovereign investors have portfolios very similar to Stanford's, and many of them will be equally desperate to raise cash in these straitened times.  The portfolio model they have embraced, perhaps all too eagerly, in recent years was pioneered by Harvard University, whose endowment fund is by far the biggest in the collegiate world.  It was worth close to $40 billion several years ago -- almost twice as much as number two, Yale University --  but lost perhaps a third of its value since then due to the global collapse in asset values. Before Harvard made a dubiously fine science of aggressive portfolio management, some of the biggest sovereign funds, including those of Saudi Arabia and Kuwait, maintained a simple allocation scheme favoring stocks and Treasury paper, with a conservative skew toward the latter.  But Harvard was the first giant fund to diversify into a wide spectrum of assets that included such exotica as timberland, REITs, Norwegian fishing fleets, and mortgage derivatives. As a result, Harvard's endowment fund was one of the most spectacularly successful among the majors just a few short years ago, and it was emulated and sometimes closely replicated by many of the biggest  players in the investment world.  But around 2007, when portfolio assets began to plummet across-the-board, Harvard and all of its copycats got caught in the downdraft. A Novel Approach Now Stanford has ventured forward to see what some of these illiquid assets will fetch.  The school is taking a novel approach by selling only partial interests in the dubious partnerships it still holds. The sums involved total about $5 billion, or somewhat more than third of the funds overseen by Stanford Management Co.  If the sale goes poorly, it will

We stopped "debating" the inflationists a while back simply because their arguments had become too bloody stupid to endure. Obviously, they have not been playing with a full deck, since they continue to obsess over the absolutely useless textbook definition of deflation -- "a decrease in the money supply."  Rather than have you become confused by all the drivel and ignorant blather concerning the money supply, which virtually no one understands, we would rather that you see deflation for what it is: an increase in the real burden of debt. One of my ablest comrades-in-arms has been Mish Shedlock, a deflationist with more patience than I when it comes to dealing with the factually challenged.  In his latest commentary, Mish mostly agrees with some points concerning deflation made by David Rosenberg, an economist who has earned our respect. Click here  to access the article.