June 2011

Gold and Silver both look impacted here, leaving me neutral to slightly bullish for the next few days.  I've included a tout and chart today for the Junior Miner ETF, since a moderate decline in this vehicle would encounter a Hidden Pivot that has informational value.  Someone in the chat room asked whether Armageddon looms for gold shares, but I'm just not seeing it. They may have disappointed relative to the metal, but low-level demand for mining stocks seems likely to persist even when bullion quotes are dormant.

On the hourly chart recently, bullish impulse legs have been answered by bearish ones, implying that the standoff is likely to continue for at least the next few days. However, a rally today exceeding 37.890, a peak made on the way down last Wednesday, would suggest that bulls are back in charge. Alternatively, anything below 35.920 today would turn the hourly chart from short-term neutral to bearish. If you're looking for a way to get long via camouflage, I'd suggest using the 5-minute chart.  As of around 7:19 p.m., it had signaled a modest rally of perhaps 20 cents.

The Junior Gold Miner ETF's weekly chart shows 'dueling impulse legs,' with neither bulls nor bears in a position to dominate.  I expect the vehicle to continue moving sideways for perhaps another 3-4 weeks, but if the process includes a selloff in the weeks ahead, we can use the midpoint of the pattern shown to gauge the determination and strength of bears.

Yesterday's price action may have seemed like little more than a gratuitous hump because it yielded little net progress. However, the upthrust part of the day refreshed the bull trend on the hourly chart by pushing past an external peak well to the left of it (see inset).  This is exactly how we should expect Gold to perform as long as the long-term bull remains healthy and robust. The fact that even on a "resting day" Gold was able to break new ground before falling back is encouraging. However, it will take a more ambitious leap to do so yet again, since the next external peak needing to be surpassed is early May's record high at 1577.70. We'll give this task some time while noting that it would take a swoon to 1515.50 to damage the hourly chart. Meanwhile, a 1595.60 big-picture target given here earlier remains valid.

[Dr. Kurt Richebächer was one of the most visible and vocal proponents of Austrian School economics at the time of his death in 2007.  Eight years earlier, at the height of the dot-com bubble, we interviewed him for the Sunday San Francisco Examiner.  In retrospect, the economic problems that he believed threatened the global economy were small and relatively manageable back then. The same problems are of course still with us, and Richebächer undoubtedly would be appalled by the extent to which they have metastasized. Although he spoke of a deflationary collapse in the interview, a close reading of his monthly newsletter from 1997-2002 reveals that he was conflicted on the subject. He used the word “deflation” only rarely during that period, and when he did, his logic became uncharacteristically muddy. Perhaps this is because, in the Austrian scheme of things, spectacular credit blowouts are not supposed to beget deflation, but rather, inflation. Arguably, if he were around today, he would still be uncertain as to which is likely to prevail when the economy finally collapses, as it must.  The interview below appeared in November 1999 under the flippant headline -- not my work, for sure -- “Economic Basics Predict Apocalypse”.  RA] The dismal science will never be the same if Dr. Kurt Richebächer's dire predictions for the global economy should come to pass. The former chief economist and managing partner at Germany's Dresdner Bank says a deflationary collapse lies ahead that will ravage the world's bourses and usher in a dark period of austerity and financial discipline. Probably not one economist in 50 shares his views, at least not publicly. Richebächer, now living in France, says many of his American colleagues have been seduced into ignorance and complicity by Wall Street's billions as well as by their love affair

Our friend Bob Bronson of Bronson Capital Markets Research, a bear's bear in recent years and one of the most accurate intermediate- and long-term forecasters we know, has been calling for a spectacular bull market in stocks to start around the fourth quarter of 2014.  Here's an excerpt from a recent report: [A new foreacsting service that we are planning] is being based upon multi-decade re-optimization of various sized model portfolios in anticipation of the coming Supercycle Bull Market that we continue to expect to start just before the midterm Congressional election in Nov, 2014.  We currently expect that the U.S. stock market during that ~16-year reflationary economic Supercycle Spring will triple every eight years, if not double every five years on a total return basis, with the Dow reaching 50-100,000 by 2030. Of course, I would love to be working during all of next 19 years, but in any case we are putting business succession plans in place.

Index futures were up only slightly around 1 a.m. EDT, suggesting DaBoyz were distributing rather than accumulating, but that they were not enjoying much success.  If the broad averages fall anew, I've provided a minimum downside target for the E-Mini S&P that looks likely to yield a tradable bounce.

The rally from mid-May's lows has suspiciously failed to surpass a key peak at 559.61 recorded on the way down earlier in the month.  Now, if the minor downtrend shown in the chart exceeds its 'd' target, we'll have confirmation of further weakness for at least the next 3-4 days.  The bearish scenario would of course be negated if HUI gets second wind and thrusts above 559.61.

B of A shares got short-squeezed viciously the last time they flirted with the $10 threshold, but it should be clear to everyone by now that there is something dreadfully wrong that has yet to hit the news.  This is notwithstanding the fact that DaSleazeballs were able to distribute stock to widows and pensioners at a 50% mark-up over last November's lows.  We'll be better able to tell how much longer they'll be able to fool most of the people most of the time when we've seen how the stock acts after breaching the watershed low at 10.91.