Not that there isn't plenty to be nervous about...
Let's begin with the MENA. As discussed here back on Wednesday, this type of event slowly builds regional momentum as word spreads of the "indignity". The furor will likely peak in the next few days but it remains to be seen if the global powers that be will let the crisis run its usual course. In the interim, crude continues to build a war premium and the declining dollar is shoving it forward, too. For now, I'm still looking for crude to run toward $101 before consolidating again but don't be surprised if it first reaches up toward $104, instead. The events this weekend and Monday will hold the key.
Open-ended and infinite QE is playing heck with The Pig and the bond market today as renewed inflation expectations are giving buyers pause. ("Wait a second. Hold on a minute. Did I really just buy a 30-year U.S. treasury with a yield of just 3%?") I printed off the long-term charts today so that you'd be aware of a few things.
- Note that both the 10-year note and the Long Bond recently topped with almost identical head-and-shoulder patterns.
- Though the 10-year has clearly broken down through its trendline from the end of QE2, the LB is desperately trying to hang on. Further weakness in the 10-year will break the LB, too, however.
- These are just the beginning stages of the next trend downward, though, as prices of both will undoubtedly regress back to their primary trendlines over time.
- In the 10-year, this means a fall toward 124-125. In the Long Bond, look for a drop toward 123-124.
And The Pig is truly living up (down) to its moniker today. All those calling for a rally to 90+ certainly have eggs on their faces as the trend from the end of QE2 has been decisively broken. Though there will be bounces and rallies from time to time, previous bouts of QE have led to a Pig bottom near 74 and there is no reason to expect a different result this time around. Again, though, this time appears to be different. This time, The Fed is planning QE to infinity. If so, if nothing comes along to slow this runaway train, 74 will fail as will 72. WHEN that happens...
So now would be the time to stick in a QE~ caveat. There is one fly in the ointment, one potential wrench in the works. The United States could suddenly "get religion". Post the election, perhaps dramatic austerity measures will be enforced. Maybe the president will replace The Bernank with a new, more hawkish Fed chairman. A decision could be made to raise rates and "take our medicine". We'll wring the monetary excesses out of the global system and deal forthrightly with the incumbent deflation.
OK, since all of the steps above are highly unlikely, to say the least, let not your heart be troubled by the price action of the metals today. Sure, it would have been nice if The Cartels had simply run up the white flag yesterday and joined us all on the long side. But never forget that their job has always been to manage the ascent. There are dynamic new forces coming to fore that will soon force their hands and leave them no choice but, in the meantime, please accept days like today just as you accepted the last 12 months: A gift of time for you to continue to prepare. Knowing what you know about QE~, you should be jumping for joy that silver is just $34.60/ounce this morning. You should feel blessed that you can purchase even more gold at just $1773/ounce. There is no way that The Cartels will be able to continue with their destructive ways. The extraordinary, global demand for physical metal continues unabated and will only increase with time as recognition grows that fiat debasement is not a temporary trend. Combine this physical demand with still-unrecognized, historic, vindicative imbroglio that is soon to wash upon their shores, and you get a Cartel that will be forced to recognize the flawed absurdity of "business as usual".
Just keep buying the dips.
And we've got some hats to send out again. Yesterday's contest was a lot of fun and I certainly saw some very insightful entries. I intended to pay out hats to the top 3 finishers but I couldn't decide on 3rd place so we had a dead heat for show. Keep in mind that the closing Globex prices yesterday were $1767.20 and $34.68.
In 3rd we have: "gearhead_24" and "Apathetic or Whatever".
Submitted by gearhead_24 on September 13, 2012 - 10:22am.
Extended QE announced as the Fed "deems" necessary in future intervals. Buys mortgage backed securities.
Not a chartist but I did see silver triple tap 32.95 ish on Kitco chart. Tells me going up BWTFDIK. Silver $34.60 Gold $1770
Submitted by Apathetic or Whatever on September 13, 2012 - 10:06am.
Fed: announces $500b in mbs purchases along with an extension of twist into the 1st quarter of next year. Gold: 1770 Silver: 34.75
In 2nd place, we have the slightly more prescient "StevenBHorse" who chimed in with this gem:
Submitted by StevenBHorse on September 13, 2012 - 9:45am.
Inflation is transitory due to the recent weather, expected to moderate in further quarters. Formal QE 3 announced, open ended but with a minimum of $600B through MBS and Treasury purchases. Interest rates pegged at zero through mid 2015. Interest on reserves to remain at 50 bps. Au- 1756 Ag- 34.50
And the clear winner was this spookily-accurate entry from "Deeper":
Submitted by Deeper on September 13, 2012 - 9:22am.
With no definite start date or timeline, only specifying open ended MBS and bond purchases. Extend ZIRP policy through mid 2015.
Closing Price today $1769.50 Gold, $34.69 Silver
All four of you need to send me your shipping information at tfmetalsreport at gmail dot com.
As usual, I'll add thoughts later today, once I see the CoT. I'll also try to begin a new thread tomorrow for your weekend enjoyment, too. Speaking of the weekend...I hope yours is safe, fun and relaxing. Keep an eye on the headlines, though, as worldwide craziness could break out at any time. Then, be sure to come back on Monday as we begin another volatile, but fun, week.