Sunday, September 7, 2008

Something Wicked This Way Comes


Frustrated? You have no idea... Fed-up would probably be a better description of my current sentiment. I'm a chart guy. I believe in my charts, and I trust them. But when the game is rigged, we all suffer whether we are technical analysts or fundamentalists. The fundamentals for Gold and Silver have strengthened week after week, month after month, and year after year since 2001. It is difficult to comprehend that almost all "commodities" have met or exceeded their inflation adjusted highs, except for Gold and Silver. Perhaps this is simply because Gold and Silver are NOT "commodities". Gold and Silver are currencies, the ultimate currencies, and unless or until the rest of the world wakes up to the fact that these two currencies are worth more than ALL the fiat currencies in the world combined, they are destined to languish here in the dustbin of barbarous relics. How can Europeans sit idly by and watch their money get trashed, and not line up to buy Gold and Silver to replace it? How can the Chinese continue to do business with a nation that pays in I.O.U.'s that can never be redeemed for the value they held when they were issued? How can any sane member of the human race not recognize that the US Dollar is not a "safe haven", and that the US Dollar represents nothing more than a debt that will NEVER be repaid?

I suggest not much longer.

The Dollar chart above, for all it's "first glance bullish look", is actually very bearish. The bearish tilt is the Dollar began with the bounce in mid August and the "rally" to a higher high in price. The rise to new highs in price have not been confirmed by a higher RSI or a higher MACD. Therefore, this Dollar chart is boasting BEARISH DIVERGENCE in price.

To further make the 'bearish' technical case for the Dollar let's look at the recent candlesticks that have printed in association with this new high in the Dollar. The candlesticks designated with the orange and green arrows are called Doji.

Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns. Any bullish or bearish bias is based on preceding price action and future confirmation.
Ideally, but not necessarily, the open and close should be equal. While a doji with an equal open and close would be considered more robust, it is more important to capture the essence of the candlestick. Doji convey a sense of indecision or tug-of-war between buyers and sellers. Prices move above and below the opening level during the session, but close at or near the opening level. The result is a standoff. Neither bulls nor bears were able to gain control and a turning point could be developing.

Determining the robustness of the doji will depend on the price, recent volatility, and previous candlesticks. Relative to previous candlesticks, the doji should have a very small body that appears as a thin line. Steven Nison notes that a doji that forms among other candlesticks with small real bodies would not be considered important. However, a doji that forms among candlesticks with long real bodies would be deemed significant.

The relevance of a doji depends on the preceding trend or preceding candlesticks. After an advance, or long white candlestick, a doji signals that the buying pressure is starting to weaken. After a decline, or long black candlestick, a doji signals that selling pressure is starting to diminish. Doji indicate that the forces of supply and demand are becoming more evenly matched and a change in trend may be near.

After an advance or long white candlestick, a doji signals that buying pressure may be diminishing and the uptrend could be nearing an end. Whereas a security can decline simply from a lack of buyers, continued buying pressure is required to sustain an uptrend. Therefore, a doji may be more significant after an uptrend or long white candlestick. Even after the doji forms, further downside is required for bearish confirmation. This may come as a gap down, long black candlestick, or decline below the long white candlestick's open.


Dragon Fly Doji [green arrow]

Dragon fly doji form when the open, high and close are equal and the low creates a long lower shadow. The resulting candlestick looks like a "T" with a long lower shadow and no upper shadow. Dragon fly doji indicate that sellers dominated trading and drove prices lower during the session. By the end of the session, buyers resurfaced and pushed prices back to the opening level and the session high.
The reversal implications of a dragon fly doji depend on previous price action and future confirmation. The long lower shadow provides evidence of buying pressure, but the low indicates that plenty of sellers still loom. After a long downtrend, long black candlestick, or at support, a dragon fly doji could signal a potential bullish reversal or bottom. After a long uptrend, long white candlestick or at resistance, the long lower shadow could foreshadow a potential bearish reversal or top.

Gravestone Doji [orange arrow]

Gravestone doji form when the open, low and close are equal and the high creates a long upper shadow. The resulting candlestick looks like an upside down "T" with a long upper shadow and no lower shadow. Gravestone doji indicate that buyers dominated trading and drove prices higher during the session. However, by the end of the session, sellers resurfaced and pushed prices back to the opening level and the session low.
As with the dragon fly doji and other candlesticks, the reversal implications of gravestone doji depend on previous price action and future confirmation. Even though the long upper shadow indicates a failed rally, the intraday high provides evidence of some buying pressure. After a long downtrend, long black candlestick, or at support, focus turns to the evidence of buying pressure and a potential bullish reversal. After a long uptrend, long white candlestick or at resistance, focus turns to the failed rally and a potential bearish reversal. Bearish or bullish confirmation is required for both situations.

Exhaustion Gaps [black arrow]
Exhaustion gaps are those that happen near the end of a good up- or downtrend. They are many times the first signal of the end of that move.

If they happen during a bull move, some bullish euphoria overcomes trades, and buyers cannot get enough of that stock. The prices gap up with huge volume; then, there is great profit taking and the demand for the stock totally dries up. Prices drop, and a significant change in trend occurs.
http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:gaps_and_gap_analysis

Taken together, a double dose of bearish divergence, and two bearish Doji candlesticks following a potential exhaustion gap, the technically driven trader has to be looking for a top and possible major reversal in the Dollar here. Conformation of a reversal will come when the gap is closed, particularly if it is closed with a long red bar. This conformation should would then signal the beginning of a long trade in Gold and a short trade in the Dollar.
Unfortunately, the markets of late have not traded quite freely, and the technicals of the charts could be 'overruled' by the flim-flam men in Washington and on Wall Street. The "picture" does not look good for the Dollar. Combine this bearish portrait above with the reality of this weekends government bailout of Fannie and Freddie, one would have to reason that the Dollar is in for one helluva an ass whuppin. But reason has been met with irrational reality for the past six weeks as the Dollar has defied gravity since the middle of July when IndyMac blew up and the Fed and the Treasury joined forces to con the US Congress into giving them a blank check to support the twin mortgage pariahs. We can only hope that the true cost of this latest bailout will wake up the world to the truth about the US Dollar: it is absolutely worthless. The US national debt will effectively double with this bailout. How can anybody legitimately support the currency of a nation whose debt is completely out of control, impossible to repay, and the function of a currency that is being printed around the clock in what has to be the greatest currency devaluation of all time.
Every effort will be made to paint this bailout of Fannie and Freddie as the ultimate savior of the housing market AND the financial system. It will be neither. This bailout will, however, imo, go a long ways towards exposing just how devastating the collapse of the US housing market is and will yet become. It will also prove to be one of, if not the final, nail in the US Dollar's coffin. The effects of this bailout will reverberate through the global financial system for months into the future, perhaps years. It is laughable to suggest otherwise, but that is how this story is going to be told: "Fannie/Freddie Bailout Fixes Everything". LOL! Nothing has been fixed so far, despite countless promise, and nothing has been fixed now. The Fannie/Freddi bailout will forever be looked upon as a Dark Moment in the history of the USA.

US Government takes over mortgage giants
WASHINGTON (AP) -- The Bush administration's seizure of troubled mortgage giants Fannie Mae and Freddie Mac is potentially a $200 billion bet that it will help reverse a prolonged housing and credit crisis.

The historic move announced Sunday won support from both presidential campaigns, but private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.

Officials announced that both giant institutions were being placed in a government conservatorship, a move that could end up costing taxpayers billions of dollars. Treasury Secretary Henry Paulson said allowing the companies to fail would have extracted a far higher price on consumers by driving up the cost of home loans and all other types of borrowing because the failures would "create great turmoil in our financial markets here at home and around the globe."

This is the same load of BS that Pinocchio's Bernanke and Paulson dished out following the Bear Stearns bailout. Has anything gotten better since march 17th? NO! Has the housing market bottomed? NO! Is the credit crisis over? NO! Has unemployment fallen? NO! Has inflation subsided? NO! Have bank failures been averted? NO! The Fannie/Freddie bailout is not going to fix a damn thing. So what if the "government now backs it's 'assets' ". The failed mortgage twins hold worthless assets. End of story. Damn it, you can lower interest rates on homes to 0.01% and it won't help the mortgage industry if nobody qualifies for a mortgage! Haven't these clowns figured out YET that it was the giving of mortgages to anybody that asks, regardless of their ability to pay, that created this mess? The LAST thing the system needs is LOWER interest rates! THAT is the problem!

Home loan troubles break records again
WASHINGTON (AP) -- The source of trouble in the mortgage market has shifted from subprime loans made to borrowers with bad credit to homeowners who had solid credit but took out exotic loans with ballooning monthly payments.

The Mortgage Bankers Association said Friday that more than 4 million American homeowners with a mortgage -- a record 9 percent -- were either behind on their payments or in foreclosure at the end of June.

"The problem that policymakers and Wall Street once assured us was 'contained' to subprime mortgages has proven to be anything but," Mike Larson, a real estate analyst with Weiss Research, said in a research note.

As the economy falters and home prices keep falling, concern is building about a second wave of mortgage defaults flooding the market through 2010.

On Friday, the Labor Department said the nation's unemployment rate shot up to a five-year high of 6.1 percent in August.

A drop in income -- whether through a lost job, divorce, death of a spouse, or health problems -- is the No. 1 reason people fall beyond on their mortgages and lose their homes.
But mortgage defaults and foreclosures in many areas, especially California and Florida, can also be blamed on egregious lending practices and rampant speculation by homebuilders and small investors alike.

Bailing out Fannie and Freddie cannot fix this. It is a lie to suggest that it will, and it's stupid to believe that it will.

Why You Can't Believe Government Statistics
TAMPA, Fla., Sept 05, 2008 /PRNewswire-USNewswire via COMTEX/ -- The latest jobless report out today says the unemployment rate surged to 6.1%, its highest rate in five years. While that sounds bad, the reality is far worse.
The United States Government uses the most dishonest statistical skullduggery to calculate the official "Unemployment Rate." Lying with statistics is easy. It is not how you count; it's how you define what to count, and over the years both political parties have used this trickery.

The meager gains in earnings over the last year signal the U.S. economy is in much deeper trouble than the growth estimates indicate, economists said.

Gross domestic income (GDI), or the money earned by the people, businesses and government agencies whose purchases go into calculating gross domestic product, rose 0.3 percent in the 12 months ended in June after adjusting for inflation, according to Bloomberg calculations based on today's Commerce Department growth report. GDP expanded 2.2 percent.

"The income side of the economy, with profits down for four straight quarters and employment falling, looks like a recession," said John Ryding, chief economist at RDQ Economics in New York.

"What you are seeing is more legitimate economic weakness in the income numbers," said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. "The GDI numbers raise the potential that GDP is overstating growth."

The 1.9 percentage-point difference between the GDI and GDP over the last 12 months is the biggest in the post World War II era.

Consumers Twist In The Wind As Liars Proclaim New Bull Markets
We’ve been warning the last shoe to fall and by far the most important one is Mr. and Mrs. Consumer in America. They’re perpetual trillion-dollar acquisitions of stuff is nearly unimaginable representing 70% of the United States economy. Official statistics from innumerable and allegedly authentic sources tell us we are not in recession, consumers are still buying and while things are slow we will be fine. This nonsense is regurgitated from the mouths of trained liars with an agenda not comparable to mine or yours. Considering the monstrous size of this buying group it’s impossible to hide its many failures any longer as housing, autos, retail, banks, credit, and associated industries, fail right and left.

Front and center in this massive impending disaster are consumer’s credit cards. For months and even years in some cases, individuals and families have been out on the edge using plastic for basic needs. In former years these cards were for business travel convenience and occasional shopping for larger sporadic purchases. Today, millions of Americans are stacking-up card debt being forced to use them exclusively for daily needs. Without their cards and the too-easy terms available through multiple credit accounts these card users might in fact be destitute.

The Green Guy’s housing credit was initiated to “save us from recession” but spawned something infinitely worse; not a nightmare on Elm Street but on Main Street. The Nasdaq tanked in 2000 but the Dow and S&P temporarily recovered as Sir Alan proudly told us he and his team would make us all well. Little did he dream his horrendous mess about to unfold could threaten the entire global system.

Achilles Heel, Shock Wave, Transformation
By: Jim Willie CB

Something big this way comes. Events will center upon the arch-nemesis of gold, the USTreasury Bond. Market interference is too huge, for bonds, for bank stocks, for the entire financial sector. Banking system structures are too broken. The pillars of the USEconomy are all in deep trouble, with profound deficits and insolvency the rule of the day. See the USGovt federal deficit (growing fast), the trade deficit (chronically large), the housing negative equity (worsening gradually), and insolvent banks (worse each quarter, despite the denials). A massive shock wave is coming. In all likelihood plans are in place, with events already set in motion, as the plan is probably to be event driven. Their objective is to disable the US juggernaut, whose principal parts are a fraud centrifuge with numerous supporting mechanisms, and an aggressive military machine with key banking supporting mechanisms. In order to disable, derail, and bring a halt to abuse by the US leaders in banking, politics, commerce, and military, the foreigners (not just perceived enemies), have turned their attention to the Achilles Heel. Timing is critical, probably centered at the US presidential election, or events aligned for its distraction. Details on a possible scenario are to be found in the September Hat Trick Letter, which will be of a simpler more succinct format this month. Typical information flow and usual analysis seem out of place. Like with the US system of schools and business, the new year starts in September.

The gold & silver markets are downtrodden in a harsh correction, when their safe haven status is actually improving. Something is soon to erupt, and it will change the world, especially the United States. The gold & silver prices will suddenly find themselves at 50% to 100% above their current prices, after the upcoming planned pre-emptive event staged against the USTreasurys. As numerous US financial instruments are defaulting, one must examine the potential for USTreasury default. Some must wonder what attack could come about. Imagine a steady large batch of sell orders, of larger size than the recent buy orders from central banks. The sell orders are repeated each day. The USGovt would not permit its continuation and extremely damaging effects. Unwittingly, the central bankers have taught the powerful adversaries to the United States how to cripple the national financial structure.

Amidst profound changes soon to be forced upon the United States, the principal losers will be the USDollar &USTreasury Bond, with the big winners being gold & silver. Foreigners, some with newly forged alliances, are preparing for the next global chapter. That new era will NOT have the United States at the helm, or even at many tables for decision making. The US has earned through fraud, bullying, and arrogance a banishment. The US will be isolated and relegated to the backwaters, which can be properly the New Third World. It will be glorified by US leaders and US press. DO NOT SELL YOUR GOLD & SILVER. RATHER, TRY TO BUY SOME IN PHYSICAL FORM, IF YOU CAN FIND IT!!!

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