Thursday, July 5, 2007

Conjunction Junction

Leave it to Jim Willie CB, at to tell it like it is in his most recent piece of eloquence: Garbage Bonds & Bonfires.

Without a doubt the USDollar is the weakest link, as numerous holes must be plugged to in the leaking dike. Gold and silver must be prevented from a zoom rise in price, since they serve as warning signals. Crude oil and natural gas must be prevented from a zoom rise in price, since they directly strain the USDollar. The long-term interest rates must be prevented from jumping higher. The stock market indexes must be prevented from falling sharply, since the public sees stocks as a visible signal of wealth. The USDollar must be prevented from a sudden freefall. The entire Wall Street and US Federal Reserve leadership is in the process of soiling their skivvies. The best investment might be in Depends Adult Diapers.

In the face of a weak link USDollar, a fast eroding Petro-Dollar defacto standard enforced by Persian Gulf principal players, one should expect the crude oil price to hurtle higher. It is doing precisely that. Blame had been put on the Nigerian situation, but that is but a false facade and distorted assessment intentionally given. The links have always been firm between the USDollar and crude oil. The alchemists cannot control them, while at the same time keep their controls in place on the vast price capping required throughout the Western bond world on long-term interest rates.

In time, the push upward in crude oil price will be matched by a push upward in the gold price. The two are strongly correlated. A systemic bonfire has been lit, the effects of which will undermine the confidence in the US banking system, the US bond arena, and the USDollar itself. To date, the authorities have succeeded in tossing a wet blanket over the gold market. See the monumental official gold bullion sales out of Europe. But they cannot break gold, which has been successfully defended at the $650 mark. In time, analyses will surface that the entire US banking system is at risk, possibly to repeat the Japanese 1990 decade outcome.

Gold over $700 by year end seems assured, but one is hard pressed to exude confidence at this point. Take comfort in its resilience. And by the way, watch gold but ride the silver vehicle, which will outperform gold by a 2:1 ratio, as usual. Central banks dump gold, but nobody dumps silver. The powers scramble to meet delivery in silver, in fact. Also the very large commercials are in deep trouble on their short silver positions, unable to cover at these lower silver prices.

If you have the time I highly recommend reading his entire post at Jim Willie minces no words and definitely calls it as it should be seen.

The US Dollar is a slow motion train wreck. I lost count of the times I saw Gold mentioned today in various media as "weak in the face of Dollar strength". LOL, if today's action in the Dollar is regarded as strength, I pity the fools buying them.

If I read Jim Willie correctly, a "conjunction" of financial elements is coming together that once lined up, could unleash economic kaos across our once great nation...and probably the entire globe. A kaos we hope to profit from with our positions in Precious Metals firmly in our grasp.

Of the four charts I have today, probably the most interesting is the HUI/Gold chart. There was a major breakout in Gold Stocks today relative to gold. A downtrend line in this ratio going back to the May 2006 highs in Precious Metals was broken for the first time today. This could be huge. Gold Stocks historically have a tendency to lead the metal higher [and also lead it lower]. It is my belief that major short players in Gold Stocks are beginning to cover their shorts in earnest as they begin to see the writing on the wall: The US Dollar is toast...burnt toast.

The HUI Index as you can see above is poised for a breakout. I have lost count of the failed breakouts in this index over this past year, but the HUI looks poised today to take advantage of the coming "conjunction" of financial elements.

The rising price of Oil and the impending demise of the Dollar are probably the two most recognised Elements of Conjunction. Rising copper prices leading to a spike in the CRB index, and crashing US Treasury Bond prices are also elements of this coming conjunction. Oil is nearing possible hidden resistance at 73.75 as internal indicators RSI and MACD become overbought. The path of least resistance in Oil now is clearly up, with $67 now looking like a formidable floor in price for the balance of the year. The Dollar is teetering on the edge of the cliff as we breath daily. Today's intraday low [81.24] was one pip below the intraday low at the beginning of May [81.25].

Please click on the charts above to enlarge them and see further analysis contained within.

Gold and Silver were once again bombed and pillaged at the open of the Comex this morning. The desperation of dem Rat Bastids grows by the hour. It is becoming more obvious by the day that the ONLY time the precious Metals come under significant pressure is during the Comex hours of "paper trading" in the metals. The Asians love it, and scoop up the metal on the cheap daily now...the shorts in these metals have to have their fingers resting on the panic button...the jig is almost up as fewer hands are willing to part with their Gold to assist the shorts in covering the colossal positions.

Silver held 12.46 again today to maintain pressure on da Rat Bastids in that market. Gold bent a little today but has bounced hard off hidden support at 646. Silver needs to gain control of it's 65 week moving average before we can make plans to the upside. Gold must solidly regain the lines at 653 and 656 before we can get to excited. If Oil prices stay above $70, Silver and Gold should soon hook their engines to that locomotive and the train will leave the station.

No comments:

Post a Comment