Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Gold to S/T Target, Now What?

By -

Now nothing… because a target is just a target.

We have been
here before; those of us who have been around the precious metals
markets throughout the current, ongoing secular bull. We have been
through the extended periods of questioning by 'the faithful' as to why
the ancient monetary relic does not keep up with more heavily gamed
assets, which are not coincidentally positively correlated to the
inflated economy.

Technically, gold has come to NFTRH's near term
target, recently revised from 1225 to 1240. But what is that but a
number? There is a higher target of 1300 off of the 1.5 year long
consolidation pattern beginning in early 2008. Then there is the longer
term target of 2200. These are all just technical mumbo jumbo my
friends because gold is only ever about value in a monetary world gone
insane. Gold is anti-casino, anti-speculation and anti-risk no matter
what the mainstream media would have you believe. I always get a laugh
out of MSM headlines along the lines of 'Gold Declines in a Flight From Risky Assets'.

Gold

In phases where the global printing press is on auto-pump and hope, if
not economic activity, gains traction gold can underperform the gamed
mainstream plays like copper, oil, high yield bonds and the stock market
in the short term. But few plays are at new all-time highs. Gold
remains so, even after spending the last year in downward consolidation
vs. the stock market, many commodities and the assets of positive
economic correlation.

'Armageddon 08' saw the real price of gold
explode to unsustainable highs and 'Hope 09' has simply been a
corrective measure. Gold investors who know the value proposition of
real money in a time of scarcity of same, just yawned while gold stock
investors and traders – those who know the play – look forward to the
next leg up in gold mining fundamentals, which grow by leaps and bounds
as the real price of gold increases; in other words as gold resumes its
outperformance mode vs. the things of hope, of positive correlation.
The gold-oil, gold-industrial metals and gold-stock market ratios all
factor in as gold miner costs decline in relation to their product.

I
have been using this chart to gauge the coming of the next phase of the
rise in gold's real price. It
is a simple chart noting a similar consolidation structure to the one
that held sway in 2006-2007 as the gold sector was cleaned out in
preparation for the coming events of the outwardly obvious credit
contraction and resulting market crash.

Gold-spx

Gold as measured in the S&P 500 has much higher to go now that the
consolidation appears to be ending right at the uptrend line drawn on
this weekly chart weeks before it was finally hit. Blog readers may
recall the original post showing this chart from March 18th, Anything
Look Familiar?

As signs of frothy sentiment that the gold
sector is noted for get whooped up again, remember that if you trade the
sector, you generally sell the euphoria and buy its polar opposite
condition, despair. I am more of an investor due to current fundamental
views, so I will probably continue to hold many or most positions
indefinitely (likely with the protection of broad market short
positions, which the above chart says is a good strategy).

With
the none-too-subtle degradation of the global monetary system and gold
bullish or rising in all major currencies, there is also a chance for a
major spike here. In the markets in general, noise levels have
increased markedly off of the dull rise to a likely top in prices and
positive sentiment in April. We will keep a filter on this noise and
keep an eye on a real bull
market's progress. This would be the bull market in gold's real as well
as nominal prices.

Meanwhile, in the background the struggles
between the inflation and deflation stories play out short term. We are
on the way to an inflationary future, but gold alone is proving itself
of value during both conditions. The system is trying to deflate; this
is being fought tooth and nail as currency is burned in the battle.
Regardless of further upside or a sharp correction to support around
1000, gold is front and center and value will be retained until such
time as the system is overhauled.

Some people bemoan that I do
not make predictions. This is not the blog for them. A target has been
hit; there are several more targets higher and one lower. These are
the markets and you need to be ready for anything, including the
possibility that things are becoming unhinged here and now. Years ago I
started my simple web presence with a simple thought; be prepared. It
still applies.

10 Year Yield Inverted H&S (by Gary Tanashian)

By -

Excerpted from the March 28th edition of Notes From the Rabbit
Hole, NFTRH78:

When viewing the current market situation through a lens of
inflationary policy vs. natural deflationary forces seeking to correct
sublime levels of excess, a geek like me looks at the chart of the TNX
and is absolutely transfixed.

Tnx

Pictures like this, rather than the likes of the nominal Dow above are a
big reason for the ongoing ‘risk is high’ droning in NFTRH. It is no
coincidence that the risk profile was raised from the previous bullish
stance as the TNX spiked to form the neck line at 4% in late
spring/early summer, 2009.

The crux of the issue is that a
breakout from the Inverted Head & Shoulders targets 6%. A
correlated rate on the 30 year bond that we usually watch is close to 7%
off of a potential H&S of its own. The problem is that these
levels trigger our biggest picture monthly ‘line in the sand’, the 100
month exponential moving average, which changes something that has been
assumed for decades (the US government’s ability to use its treasury
bonds, its confidence, to inflate at will by selling debt and printing
money). The implication is that the change would be a secular thing,
possibly introducing a hyperinflationary spiral.

I must admit to
being confused by Captain Bernanke’s ‘damn the torpedoes’ inflationary
approach in the face of a bond market on the verge of rebellion while
certain Fed members sound increasingly hawkish tones. The wizard’s
‘backbone’ is that line – the monthly EMA 100 – under which treasury
yields have remained for all those decades of confidence. The neck line
shown above, if broken, triggers a level that busts the backbone.

We
are at an extremely high risk juncture for both hyperinflation and
deflation, because we are right on the line between the two with no
confirmation yet as to which way this thing is going to break. Some Fed
officials have expressed concerns that relate to the picture above, but
thus far, the one who matters most, Bernanke remains unconvinced that
inflation will become a problem.

US Stocks & Bonds (by Gary)

By -

I received a bit of criticism yesterday about a segment in NFTRH74 with
regard to personalizing the motives of the Fed and policy makers or
more specifically, with regard to writing as if I know what
'Gentle Ben' is thinking with regard to inflation/reflation (or lack
thereof).  This criticism came from a subscriber who has many decades
of experience running some pretty big trading desks going all the way
back to Paul Volcker.  So of course, I listen… as I do with any and
all constructive criticism.

The intent of the segment is to illustrate the myopic nature of the general financial services industry as it tends to err, forget to highlight the reasons
we may have projected economic rebound and buoyant markets; namely,
inflation of money supplies in various aggregates and through various
means.  The premise is that if you want to under-perform, you just buy
the S&P 500 and if you want to out-perform, you buy the most
intense beneficiaries of the inflationary regime.  Of course, this
assumes that reflation will be successful – no given.

So really, Bernanke/Geithner/Summers hyperbole aside, I am focused on what IS, and what IS is represented in this chart.

Now, cases for deflation and inflation can be argued (are argued by
some very smart people) with regard to interim swings, but the big
picture monthly chart – correlating the US long bond to the S&P 500
– cannot be argued.  So let's forget the name Beranke, tune out the
media and avoid the inflation/deflation debate for a moment.  Let's
just look at the chart.

Spxmo

It is striking to me that during a secular bull market US stocks and
bonds rose together, as capital was sucked in to a still-productive
enterprise as it headed for its secular top, conveniently right to the
round number of 2000.  Now, when I spout about 'inflators in high
places' I am really just trying to illustrate the meaning of this chart
while expressing myself as a human.  That is because as a human, it
pisses me off that the country has resorted to such a bald-faced method
of funding its ventures.  As a human it pisses me off to see the
financial media not reporting the whole story.  A headline I would like
to see on Bloomberg:

US Sells More T-Bonds as China Blinks, GDP to Benefit By Direct Infusion of Proceeds

But as a cold chart and market watcher, I simply go about what I do. 
The chart does not lie and its message is that the conclusion of the
major bull market, beginning at the secular top (2000) and leading into
the cyclical bull (2003-2007) ushered in an era of ever more intense
inversion of the relationship between US stocks and US bonds (debt).

It is no secret that the US funds itself through its ability to pile on
more debt to the $Trillions high dung pile.  So, again as a human, it
scares me to see a bearish looking pattern in the nominal $USB chart (potential
head & shoulders) and the proximity to the monthly EMA 100 that I
often write about.  That is because that moving average represents a
secular (many decades long) thing and while I am not sure what will
happen if it breaks, I am not eager to find out.

In summary – and depersonalizing the players in the macro drama – the
chart implies that a continued stock (and commodity) rise could bring
about its own destruction as inflation fears break down the barn door. 
The secular containment of interest rates below the monthly EMA 100
(bond above its own EMA 100) has been vital to funding in an era
(post-2000) where such funding is ever more vital to the pretense of
economic rebound.

We will have continued economic rebound, which will be attended by the
thing that birthed it (inflation) or we will have a double dip (or
worse) as the system attempts to purify itself through natural,
deflationary means.  Conventional financial media obsessions like
'consumer spending' and 'GDP' are just ephemera overlaid on top of the
macro big picture.–Gary (Biiwii)

Uncle Buck

By -

USD Daily:  MA 50 crosses above 200, MACD well above zero, AROON trend up and support at 79.50.

Usddaily 

USD Weekly:  EMA 10 supportive, MACD on verge of big time bull signal and AROON trend up.

Usdweekly 

USD Monthly:  Dealing constructively with strong resistance, MACD okay and will be flat out bullish if it gets above zero. AROON trend up.

Usdmonthly

So tell me, where are the 'Dollar Collapse' cultists now?  You know,
the smart guys making a living out of touting the destruction of this
intrinsically worthless currency in favor of other more 'sound'
currencies?  Give me a break.

It's all a confidence game and right now confidence is ping ponging
around the globe from the trying to be all things to all people debt
note in Europe, to the reserve currency debt note of America to the
commodity/resource currencies of Australia and Canada.  FOREX jocks are
having a blast but most Americans probably think the dollar is still in
the tank.

The boring old blogger will simply remind that it is long past time to begin securing your future against these rackets. —Gary(biiwii)