How 'Bout Some Charts

It's a new year and Santa (the actual one) had brought me a new ruler and a new Sharpie. Might as well break 'em in!

Just a couple of things for you on this fine Monday morning.

First of all, welcome back. I hope that everyone had a safe, relaxing and restful holiday season. If you're like me, you tried to get away for a while to recharge and refresh. I spent some time with family and friends in not-so-sunny Southern California. Ate well and drank a lot of wine. Played some golf and hung with the LTs. Very relaxing and now I'm ready to roll. Good thing, too, as 2013 promises to be historically crazy. Between the geo-politics and the ongoing Financial Crisis, anything is possible so get ready.

The metals wrapped up a rangebound and generally lousy 2012 by selling off and moving below the midline of the 1550-1800 price range. This obviously caught me by surprise as I had expected the metals to close the year above the midline and trending higher, not below and trending lower. So, what does this mean (besides the obvious that I am clearly clueless)?

Well, first of all, there's probably more weakness to come, at least in the short-term. Both metals are stuck in downtrends and indicators such as the RSI, while low, do not yet indicate the sort of deeply oversold level that usually accompanies a bottom. So, we have to expect a little more weakness early this month. In the end, though, I do not expect new lows. Maybe gold sees 1620 or even 1600 before turning. Silver could see 29 or even approach 28. Whatever, that's fine. Buy the dip. What is so often lost in all of this price manipulation is the beneficial aspect of it all. Namely, if gold and silver were currently priced at their true and natural fiat-conversion level, very few of us would be able to afford it! Therefore, relax and enjoy the theatrics. Let The Leghounds do their business and take advantage of the "sale" by adding to your stack of protection.

I received quite a few inquiries lately about this idea that The Fed is "all talk" and that their "balance sheet isn't expanding" and that "QE isn't real". Apparently several commentators have written articles which espouse these views. Uhhh....frankly, I don't think these guys understand how the process works.

The Fed's balance sheet has yet to expand for two reasons:

  1. Through the end of December, the only direct treasury buying that The Fed was doing was through Operation Twist. Recall that this was a "sterilized QE" where the Fed was selling short-term treasuries out of their stash and using the proceeds to buy longer-term treasuries. Net-net, no change in the overall balance sheet.
  2. The first stage of the new QE, which began in October, was The Fed buying nearly-worthless Mortgage-backed Securities (MBS) from select Primary Dealer banks. Valued at pennies on the dollar, The Fed pays 100¢ on the dollar for them in order to remove them from the PD balance sheets and place them on its own. Barely any Fed balance sheet expansion here, either, because the securities are essentially worthless.

But now Operation Twist is over. To replace the $45B/month in treasuries that The Fed was able to buy via Twist, The Fed is now going to openly monetize and buy $45B/month in treasuries. Here's the current POMO schedule. Many of you will recall this format from the days of QE2.

http://www.newyorkfed.org/markets/tot_operation_schedule.html

The purchases began just last Thursday and are scheduled for every day of this month, except the MLK holiday and the 30th. This will finally cause The Fed's balance sheet to expand by roughly $45,000,000,000. So, please relax and chill. All of this talk that QE is "fake" or "not happening" is just talk, written by those who either have an agenda or are simply uninformed.

Lastly, I spent some time again yesterday with the great Dr. Dave Janda. I like Dave because he reminds me a lot of myself...a regular guy who is simply sick of what he sees and is trying to warn as many as possible about what lies ahead. He has a weekly radio program which can be found here: http://www.davejanda.com/operation_freedom/. You should check it out as he always has interesting guests, many of whom you are already familiar with through the internet. Here's a link to our discussion yesterday:

http://www.davejanda.com/audio/TurdFerguson010613.mp3

That's all for now. Have a great day!

TF

btw, who do you like tonight? Bama or the Domers?

212 Comments

Kcap's picture

Is it time?

Hmm..

I did throw in the towel after all..and I am posting first....

Kcap

Revelation's picture

Turd, I admire your Steadfastness

AJ on Piers Morgan tonight apparently...

The Toronto Minnow's picture

Second!@

Second!

The Toronto Minnow's picture

Second!

Second!

colihondro's picture

the fifth

element.

Also, the amendment I would claim if asked about any precious metals I bought.

Mr. Fix's picture

Yea! Charts!

wink OK, I won't say it........

Edit: Kcap,

Why? (Inquiring minds want to know.)

billwilson's picture

Shaking

Lots of shaking going on today. I feel more stable in a tumble dryer. They are doing a pretty good job of beating the crap out of any attempted rally.

Stack'em High's picture

Rembember...

Gold and Silver are simply confused, NOT manipulated, NEVER have they been manipulated.

http://silvervigilante.com/silvermanipulationapsychosestousgovernment/

move along now... nothing to see here.

sengfarmer's picture

top ten :)

New year same crap.

erewenguy's picture

just staking a claim

just staking a claim

agNau's picture

* DEAL DONE....

Here is your fine, you bad bankers......please remit part to our offshore accounts.....thanks.

http://www.zerohedge.com/news/2013-01-07/banks-put-linda-green-behind-them-10-billion-robosigning-settlement

OFF the hook. No longer will suits be accepted against these individuals. Get your part of settlement?

End Comment.

Turd Ferguson's picture

Crude

MODERATOR

Very interesting chart. Any dip back toward $90 would provide an opportunity.

If there is an industrious Turdite out there who would care to post a daily chart of crude, overlayed with the daily gold, I think all would see something interesting.

Kcap's picture

@fix

Shhh...

There's a sentiment building here....

All is good.

Kcap

ggnewmex's picture

roll tide roll!!!!

Cause they are not Notre Dame!! LOL

Thanks TF..... you are correct to say, these prices are gifts to stack.

Listened to Eric Sprott.... he may know a few things !!!!!!

ALl the best to you

gg

Mr. Fix's picture

Kcap

wink

Kcap's picture

I will say...

That the OVERALL MACRO charts between Crude and Gold are indeed, a touch compelling.

Of course being the anti-TA person I am, that's a bit hypocritical...just sayin tho....

Kcap

erewenguy's picture

aack - not trying to spam the

aack - not trying to spam the site but i posted right at the tail end of the last thread:

Ok fellow Turdites - mock TPTB to their faces -

Please sign and help promote the following White House Petition:

Produce a Trillion Dollar Coin for Every U.S. Citizen for the Purpose of Paying Taxes

Activities and services pledged by the U.S. government exceed the ability to pay based on current tax revenue. The budget deficit is added to the national debt, and federal taxes are used in part to pay for the debt and interest.

"Trillion dollar" coins are being considered to pay the national debt, however, we petition the U.S. Government to mint an adequate quantity of "trillion dollar" coins to pay off the national debt, and enough additional coins to provide one for each citizen of the United States.

These coins can only be used to pay federal, state, and miscellaneous taxes for the lifetime of the recipient. Residual funds from each coin will be available to heirs of the recipients, and will be exempt from inheritance tax.

https://petitions.whitehouse.gov/petition/produce-trillion-dollar-coin-every-us-citizen-purpose-paying-taxes/6rPprh5c

Dyna mo hum's picture

Turd what does your chart say about

Alabama vs. Notre Dame I gota know!  

Al Huxley's picture

Fed Balance Sheet

TF, excellent comment on all the articles about 'the Fed is lying about QE, they're not expanding their balance sheet', etc...  It amazes me how many supposedly knowledgeable commentators and bloggers, some with fairly significant circulation and visibility, apparently have no understanding of even the simplest mechanics behind what the Fed is doing.  Real, 'unsterilized' monetization is just kicking in now, look for rapidly expanding Fed balance sheet coming soon.  The current weakness in gold is just another shakeout to try and reduce the Commercial net short position and get them set up for the inevitable next leg up.  It doesn't really matter how long the process goes on, just means more time to accumulate physical metal at discount prices.

RTMoney's picture

CL1 vs GOLDS

Al Huxley's picture

Livermore's Trading System

Just a quick comment, as somebody who watches the channels, trendlines, etc.  Although I pay attention to them, it's worth pointing out the Jesse Livermore's trading system (as documented in the book he wrote shortly before he died, as well as in 'Reminiscences of a Stock Operator') was almost exclusively geared around identifying either capitulation points or breakouts (up or down) from trading ranges.  To the extent he followed his own rules, he would only go long if a stock or commodity broke above an established upper-bound trading range, and would only go short if it broke below an established lower bound.  I think this is worth pointing out - that he didn't watch diagonal trend lines at all (he didn't use charts) - it was all about horizontal resistance and support.

Also worth pointing out that he acknowledged one of his big mistakes was in the cotton market, where he was waiting for a breakout, got 'stopped out' on several false moves, in a fit of emotion had the ticker removed from his office in disgust and decided to ignore cotton, and as a result missed the eventual breakout that he had been anticipating, and lost out on a huge profit that he'd have made if he hadn't let his frustration get the better of him and given up. 

BTW, not advocating any particular trading or purchasing strategy or approach, Just a reminder of how important patience is. 

Dyna mo hum's picture

Send in the clowns this just in Fox news

I still cant get my head around the $1T coin idea. It might be a trial balloon just to see if the population's ignorance level is low enough for another phase of group financial suicide. http://www.foxnews.com/politics/2013/01/07/funny-money-pundits-float-1-trillion-coin-as-answer-to-debt-ceiling-standoff/

Dr Jerome's picture

Cheap gold is good!

Just a few more days, Pleeeeaaasssse? I was finally able to withdraw my retirement account from the system. I love this cheap gold and just need this sale to last a few more days. You should see me run to the mailbox each morning.

I am wondering of the direct POMOs will do to metals and stocks what they did during QE2? Do the PDs take that cash at this point and go long with metals? Or will they bid up stocks as the FED wants them to? Will JPM & friends keep suppressing the metals?

It seems like they are learning from their mistakes the past few years. We are in new territory for everyone.

Road_Scholar's picture

It's all under control until it's not...

Like the proverbial beach ball being held under water.  The more pressure to hold PMs down that 's used, the higher the price goes when control is finally lost.

beach_ball.jpg

ancientmoney's picture

Santa is a geezer . . .

Jim Sinclair’s Commentary

I will be 72 shortly, so I can say this. Geizers are totally screwed. Retirees are simply cannon fodder. The society that fails to respect their elders is on a path to extinction. The society that puts its elderly in harm’s way will not survive. The society that totally abandons its elderly is finished, but may not yet know it.

Western world society has lost respect for, put in harm’s way and abandoned its elderly. Karma will be a bitch.

Banksters are not immune from Karma, in fact they are in its cross hairs.

---------------------------------------------------------------------------------------

Not only retirees, but workers are screwed, too.

http://www.mybudget360.com/us-median-net-worth-lowest-level-since-1969-us-net-worth-figures-retirement/

Excalibur's picture

Sandy and broken promises/MOPE

Just listened to an interview on the BBC with a woman whose coastal business was wiped out by Sandy.

The President visited. He hugged her as she cried, and on live TV he promised her that everything would be rebuilt and FEMA would look after her. She was so relieved. The President said she would be helped.  Soon afterwards FEMA told her that they don't help businesses and she is still waiting to receive anything from her insurance. After several emails to the White House, reminding the President of his promise, she got a standard letter thanking her for supporting the troops!

She urgently needs to find cash to make repayments on a loan, but with the business in ruins she has no income.

One more instance of broken promises and PR spin that we have come to expect from our politicians. 

He is doing the same thing to the whole nation it would seem. What will be the tipping point when trust is lost across the country?

Ilya Repin's picture

Personally i see Friday as

Personally i see Friday as extremely bullish. A huge volume day and a refusal to break down.  after massive selling the price was driven back up in a big way.  all bottoming action and very constructive.

I'm no longer concerned about 28 Dollar Silver.

Just a quick chart from Netdania shows normal FIB correction and potential Flag and IHS. Asia could trigger overnight and Tech suggests a move to 31+. If not then just more sideways action building the 30$ floor. I cant see silver breaking down now.

 

ACM's picture

Any Caveats Regarding IAU?

   I know GLD is considered controversial by some so I am wondering if anyone has any reason not to buy the gold etf IAU instead?  I have used GLD and SLV to trade metal in tax deferred accounts and just want to know if IAU is a good alternative, especially if it is "safer."  TIA and keep stacking.

Dan65's picture

To the Fed "don't fight the fundamentals"

No Further Comment needed .

Dr Jerome's picture

A classic

From a 21 year old Texas woman.Posted over at ZH

 

Put me in charge of food stamps. I’d get rid of Lone Star cards; no cash for Ding Dongs or Ho Ho’s, just money for 50-pound bags of rice and beans, blocks of cheese and all the powdered milk you can haul away. If you want steak and frozen pizza, then get a job.

Put me in charge of Medicaid. The first thing I’d do is to get women Norplant birth controlimplants or tubal ligations. Then, we’ll test recipients for drugs, alcohol, and nicotine. If you want to reproduce or use drugs, alcohol, or smoke, then get a job.

Read the rest here

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