Daily Archives: March 7, 2012

Revisiting the Gold Bugs

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Wednesday seemed dead-quiet compared to the excitement of Tuesday, so this evening I had to ponder a bit what to discuss. I decided the most interesting thing happening was with the gold bugs index (which, by way of symbol GDX, I trade actively).

Below is the broad view of index symbol $HUI, which shows how the analog has strengthened recently. The key, of course, is to break beneath that lower horizontal line. If we can do that, life gets interesting in a big hurry.



Looking closer, you can see the important event that happened on Monday: we broke that ascending trendline. On Tuesday, we gapped down, creating a nice window at 508.92

Looking closer still, you can see how much damage has been done since February 29th. We came dangerously close to crossing above 554.92, but mercifully we did not. The gold bugs index may seem odd and esoteric, but I am firmly confident that a failure of this index would be a crucial harbinger of a general plunge in equities.


As a final thought, here is the price chart………without the prices. This just shows a standard trio of simple moving averages and points out where I believe we are relative to the prior analogous timeframe.


So that's it from me tonight. I'll see you Thursday morning, and of course we can all anticipate the big jobs report Friday morning with bated bear breath.

Consumer Credit Levels Higher Than in 2007/08

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Consumer Credit Data released on Wednesday shows, firstly, a correction in the prior month's release data down to 16.3B from 19.3B, and, secondly, a rise in the latest month's data to 17.8B, as shown on the graph below (note that the graph does not show the prior month's data correctly yet).

The levels of consumer debt accumulated during the past three months are higher than they were in 2007/08 just prior to the financial crisis…in fact, they're at their highest levels seen since January 2000…an interesting scenario considering that Personal Income has declined, as mentioned in my post of March 1st.


Two Cartoons & Some Words to Boot!

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NFTRH gives few easy answers.  That is because its writer has no easy answers, although there are consistent road maps we have used for years now that have never failed to help preserve capital when necessary – which is often – and make outstanding capital gains, when appropriate.

These road maps take the form of outliers (to standard technical and fundamental analysis) like the decades long 'Continuum' in US Treasury bonds, which takes on particular significance at limiting boundaries like the upper monthly EMA 100 (red arrows), as inflation expectations get too hot.  These have consistently proven to be times when inflation cultists, guru followers and momentum chasers have gotten croaked in the markets at very important turns as the Continuum pings along over the years from inflationary to deflationary (green arrows) fears.


Retracement Targets (by Springheel Jack)

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The first thing to say today is that there are some signals here that we may have just put in a very major top, and may now be starting a dramatic fall on equities. There is a potential double-top on SPX targeting the 770 area, a potential H&S forming on EEM that would target a similar scale of decline, a strong Dow Theory divergence that we've been seeing between Dow and TRAN in recent weeks that is characteristic of major market tops and bottoms, and a monster falling wedge on Vix that technically targets the 46 area, though falling wedge targets are missed more often than not. Added to that are the strong negative divergences between SPX and Copper / EEM, and the strongly bullish overall setups on USD and bonds. Levels of bullish sentiment recently are also characteristic of market tops. This is the sort of setup that would make a market crash here obvious in hindsight. :-)