Still the same

I am not into this bullish hype.

Still keeping my views that this rally is not the start of a new bull.

2 reasons. And that's the only 2.

1. Wave structure since Mar 09 is corrective, a double zigzag 5-3-5 x 5-3-5 or abc x abc. A bull market is impulsive and waves will be 1,2,3,4,5.

2. Vix is forming a bullish positive divergence on weekly charts which portends higher volatility ahead.

As per my previous post, I foresee a bullish breakout on Gold and it happened. I am long term bullish on commodities and precious metals.

If Fed is ready to increase interest rates to prevent inflationary pressures and prevent a USD collapse, Gold will drop initially, but will still maintain well above its long term trend line and continue to go higher even as Fed increase rates. The Fed will soon find themselves unable to contain high inflation. At one point, the continual increase in interest rates to prevent inflation will soon turn out to be creating contraction and disaster to the economy. That's when the 1929 depression style economy will set in. When that happens, look for Gold to peak as the traders prepare for a turn to lower interest rates again.

Bank holiday coming soon

Is a bank holiday coming soon ? Circulating around the internet are news that a FDR bank holiday is approaching.

Abstract from marketwatch.com

In its current issue, HSL reports rumors that "Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."

HSL's suspicion: "Another FDR-style 'bank holiday' of indefinite length, perhaps soon, to let the insiders sort out the bank mess, which (despite their rosy propaganda campaign) is getting more out of their control every day. Insiders want to impose new bank rules. Widespread nationalization could result, already underway. It could also lead to a formal U.S. dollar devaluation, as FDR did by revaluing gold (and then confiscating it)."

The Amero - is it real ?

The alleged replacement of the US dollar, Canadian loonie and Mexican Peso with Amero raises eyebrows. Just like Euro which is the common currency of the European Union, the Amero has been rumoured to be the currency for North American Union, consisting of United States, Mexico and Canada. This is supposedly the agenda to be one step closer to UN dreams of a one world government.

The amero coins and bills has already been printed, though its announced to be more of a collective nature rather than real currency.
Try googling up amero, and you'll find plenty of news on it.

I've been thinking about the US debt. Their debt is probably going parabolic, the government is not a bunch of stupid people. They know what they are doing. The huge and perhaps, unrecoverable debt makes the dollar worthless. If, assuming the rumours are real, and that the powers will be creating a new currency to replace the greenback, then it makes sense to chalk up a mountain of debt. Since you're not going to repay your debts in dollar anyway. So you spend and spend, buy and buy...

I've no idea if its true. Time will tell.

Asia (China ?) has been agressively buying Gold & Silver. Both these precious metals have finally broken out and up of its diagonal triangle, so this means the short term direction is up, targetting a Gold target of above $1000. As for Silver, its still below its all time high of $21, lets hope it can reach that level soon.

As stated in my previous posts, will Gold & Silver follow the deflationary trend in equities ? My guess is no at this point of time, because I suspect the upcoming tsunami will be triggered off by public's confidence in our very existing monetary and fiat currency system. The currency storm.

The bear may have begun

SPX may have topped at 1039, close to the pivot 1041.

It is now trading at 1000, lets watch if it can maintain support at 990 level. If it doesnt and the wave looks strong and impulsive, this increases the possibility that the bear has resumed.

VIX on the other hand, has maintained a bullish momentum and broken out of its descending wedge. This is very bullish, especially with a positive divergence and RSI. Of important interest, is that the divergence has been forming since October. Its been building a 1 year base. And because of this, I have been mainting a bearish outlook on the markets and do not believe in the recovery story painted by the media.

As noted by Atilla in his blog, some giant options player has betted on a bloody November. Call options at VIX 40 is being bought. This means some very very huge player is betting a volatile market then.

China is now back in a bear market status. The other markets should start to peak and roll over.

Little thoughts on Swine Flu

Somehow, my brain cells was in hibernation mode this afternoon. So to prevent it from going into full hibernating mode, I did some readings on H1N1 Swine Flu. Partly because I was going to US soon and more importantly, there was a warning from health authorities that the swine flu epidemic may run its peak in the fall season and will affect 30% of the US population. That's a awful lot.

So here it is again. I am skeptical of almost everything even though on the surface, I may appear to agree. Including the wild conspiracy theories of the New World Order etc etc. But sometimes, I do read a bit to gain an insight to both sides of the equation. Truth comes from skeptical questioning and real understanding.

I was particularly concerned when I saw Baxter had patented the H1N1 vaccine in 2007. That was 2 years before this virus infected the human population. The media reported that the source of virus came from pigs. And so, how in the world can this vaccine be created and patented then ? Unless, it was either deliberate or by mistake, that the virus was already experimented and created in the laboratories and somehow got to the outside world. And worse still, this vaccine may be contaminated with the deadly H5N1 avian flu virus. Inject with caution is the word. Gosh, sometimes I really hate myself for being too inquiring.

Animals. When can we ever learn to love them with respect and care. They are always the scapegoat for human errors because they cannot fend and fight for themselves.

An abstract from "The Liberty Voice".

"Baxter has been chosen by the WHO to head up efforts to produce a vaccine for the Mexican swine flu that is spreading throughout the U.S. and Europe.

The decision was made despite further revelations last month that vaccines contaminated with deadly live H5N1 avian flu virus were recently distributed to 18 countries by a lab at an Austrian branch of Baxter.

Initially, the company attempted to stonewall questions by invoking “trade secrets” and refused to reveal how the vaccines were contaminated with H5N1. After increased pressure they then claimed that pure H5N1 batches were sent by accident.

However, the probability of mixing a live virus biological weapon with vaccine material by accident is virtually impossible."

Read on. Copied from Case about bird flu

Off to the final race

Last night, SPX busted through 1018 easily, the activity surely resembles a wave 3. From my last post, I mentioned SPX need to exceed 1013 quickly else the momentum will be to the downside. It surely fulfilled this yesterday. So now with the structure clearer, we can narrow our probabilities. The H&S formation of SPX has been cancelled, but the triangle of Gold/Silver remains. Short term target is US$1085 for Gold if it breaks to the upside. However, it will best to stay neutral at the moment and not second guess the direction. Remember, a breakout from a symmetrical triangle can go either way.

SPX is now in the final upleg. There are 2 possibilities here.

1. Its in major wave 3 of C of C. We should expect a weak corrective wave 4 and a final rally to SPX 1041 to complete the entire rally from March lows. Major resistance remains at 1044. The great bear should resume thereafter.

2. Its in minute 3 of major 1 of C of C. This paints a more bullish target of Dow 10k and SPX1121, a 50% retracement before the bear resumes.

We will know by then if the market has topped. The reversal will be strong and violent, befitting of the status called "Great Bear".

Watch for negative divergences on the RSI/MACD of weekly charts as prices make a new high.

As prices makes new highs while volume is decreasing, distribution is also going on silently as institutions and big boys unload their holdings to retail investors. Be careful not to be the one to carry the last bag.

Deflation or Inflation

My last post talked about Pretcher's call for US$650 Gold bottom. He supports a deflationary view.

I do agree so far with his call on the equities market. Been pondering over and over again and I got to say I am still skeptical about his precious metal direction. For the past few days, both Gold and Silver had been consolidating in a diagonal triangle. The break, after ABCDE is completed, is either to the upside or downside in a big, fast way. On the other way, equities seemed to paint a Head & Shoulder picture and if 1013 is not surpassed quickly, the momentum should be to the downside. Price was up last night on SPX, but volume down. This is bearish.

At this juncture, most are on the consensus that the trend of both equities and commodities are in the same direction. USD is opposite. Hence, most expect them to be down at the same time, drawing similarities to the crash of 08, where fund managers and institutions liquidate their commodities holdings to raise cash.

What IF, and a big if, this time is different.

Looking at the long term chart of USD, its clear it has been in a secular bear market. Within a secular cycle, there will be cyclical bull markets. But overall, the long term trend is down. Focusing on the weekly charts, I saw a double top in USD. And there is a clear 5 wave impulsive structure down after the double top formed. If, USD has bottomed for wave 1, and is now retracing in a typical 50% or 61.8% of wave 1 to form wave 2, we would expect USD to crash in a nasty wave 3 after wave 2 is completed.

With a wave 2 rally in USD ongoing, equities should be on a decline at the moment. Commodities as well. Although the structure of correction defers. Equities forming a H&S (bearish) and commodities consolidating in a triangle (can be bullish or bearish depending on the direction of breakout). Which brings us to the next scenario. Most seem to think USD has truly bottomed at least for the next couple of years. What if this time, it turns out differently. Markets have a tendency to leave 80% of the people behind and wrong. So when most people agree on the same direction, its perhaps beneficial to try and step back and look at the other side.

Could both USD and equities crash at the same time ? Why not...

If the very existence of Fed itself and the monetary system comes into question, all hell will break loose. This might be the next catalyst for a crash. The world which we lived in now operates on a fiat currency system. There is no backing on Gold or any other precious metal. President Nixon removed the Gold Standard since 70s/80s. Hence, the value of our currency lies in our confidence of it. In the crash of 08, capital flew to treasuries and greenback as a flight to safety took hold. If Fed comes under scrutiny by the public and the nature of its existence is being questioned, I don't think people will still consider USD as the safehaven then. Where else will these capital flow to ?

Not in equities, not in USD nor any fiat currencies, so what else left ? Gold & Silver ?

Even if we are in a deflationary environment, it doesn't mean Gold and Silver should fall as well. If Fed manage to control inflationary pressures, gold and silver should continue to perform well if the cause of the next downfall lies in the confidence of our monetary system.

Here is Congressman Ron Paul's campaign on the auditing of Fed, HR 1207.

"I have been very pleased with the progress of my legislation, HR 1207, which calls for a complete audit of the Federal Reserve and removes many significant barriers towards transparency of our monetary system. This bill now has nearly 170 cosponsors, with support from both Republicans and Democrats. Senator Bernie Sanders has introduced a companion bill in the Senate S 604, which will hopefully begin to gain momentum as well. I am very encouraged to see so many of my colleagues in Congress stand with me for greater transparency in government.

Some have begun to push back against this bill, and I am very happy to address their concerns.

The main argument seems to be that Congressional oversight over the Fed is government interference in the free market. This argument shows a misunderstanding of what a free market really is. Fundamentally, you cannot defend the Federal Reserve and the free market at the same time. The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money – the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, Constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters."