A market wrap from Doc and Gary

May 21, 2014

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    May 21, 2014 21:43 PM

    When was the formula for VIX changed? Guys, do you know?

    The new formula holds up a lot better than the old one.

    May 21, 2014 21:09 PM

    Doc, have a look at my Weekly Gold chart….the Confirmed breakout late Dec early Jan was a nice trade on the long side for Gold, Silver bullion and the miners.

    You can see a weekly (that’s key imo) close above $1300 opens up gold to re-test that failed $1400 level

    Until that confirmation prints on the chart I’ll hold my Short positions.$GOLD&p=W&yr=2&mn=2&dy=0&id=p85665020322&a=352019807&listNum=1

      May 21, 2014 21:04 PM

      Original, I actually like the way the MACD looks on the weekly chart. It is hardly “rolling over” at this time and if it continues like it is well into the spring, the odds are we will break to the upside. However, I’ll wouldn’t be surprised yet to see $1260 gold.

        May 21, 2014 21:31 PM

        Well as your aware Richard the standard MACD is not a leading indicator as the normal MACD on the weekly of gold hasn’t shown the bearish trend in play since the March 17th high…..I use a traders vs which is also on the chart with a MACD of 3,6,7 vs 12,26,9 it shows the turn when gold topped March 17th and has been bearish since, just as Golds price has been trending lower

        I disagree completely that the “odds” suggest we break to the upside…seasonally June has been a very negative month for both gold and silver.

        Ukraine war drums have faded
        India’s positive election suggesting tariffs removed from gold eventually, produced no lasting pop
        China is looking at every Asian country with intentions of war, no pop
        Russia sells US treasuries and buys gold in April, no follow thru
        Big Russian gas deal announced with China avoiding the US currency, no pop

        Beware the month of JUNE!!

        May 21, 2014 21:40 PM

        Richard, glad to see your iag hit your target of 3.20 :).
        Most miners seem to be inching closer and closer to there 52 week lows. Iag is a great example of getting there first but many others are yet to do so and a few are showing flashes of strength like ngd. Richard what main indicator would make you really worried that the miners may break there 52 week lows and head lower just to wash everyone out? Thats what has me worried. Is there a target number you like on Hui or xau?

        Appreciate your work.

          May 21, 2014 21:14 PM

          I’m going to have to make a decision pretty soon as to whether I want to purchase IAG or not. I wouldn’t want to see $hui break below 211. The encouraging thing is it’s current slow descent.

        May 21, 2014 21:54 PM

        I agree, Doc, nothing ugly about the MACD in my opinion.

      May 21, 2014 21:34 PM

      Original, nice chart.. Im also seeing lower highs and lower lows with the miners with exception of a few. I have my hand in but yet to put my arm. Patience is tuff man.

        May 21, 2014 21:43 PM

        Patience is tuff, well it used to be easy one just needs a Bull market trend/momentum behind you, during the bull run in gold and silver one could bottom fish and buy the dips knowing full well if your timing was off time was on your side….Now its a Bear market so I don’t bottom fish as that’s obviously been the wrong approach since 2011, wait until the indicators turn up-positive before buying and always have an exit zone as every up tic since 2011 has been nothing more than short covering, gold and silver needs NEW money into the sector, the hedgies we all love to hate are those that took silver from $23-$49 in very short order.

        Good Luck!

          May 21, 2014 21:42 PM

          thx same to you

    May 21, 2014 21:10 PM

    Doc, have a look at Silvers action for the month of June….very interesting!$SILVER&p=W&yr=6&mn=0&dy=0&id=p75579955280&a=351872208&listNum=1

      May 21, 2014 21:00 PM

      We’re getting close to the apex of the current triangle and also to the long term trend line. The 50 week MA is slowly coming into play as well. It’ll be an extremely interesting spring.

        May 21, 2014 21:54 PM

        Not much time left Doc

          May 22, 2014 22:39 AM

          Al I suspect that even if Docs efforts at figuring out the metals markets are honest the market if left to its devices will make fools out of those that try to predict what will happen next. To even come close I think one would have to be able to read the minds of those that control the markets and keep reading their minds all the time.

            May 22, 2014 22:46 PM

            Good point Steven

      May 21, 2014 21:44 PM

      original, great silver chart buddy..

      May 21, 2014 21:10 PM

      Note that silver remains above its May-June 2010 weekly closing prices. That red line should be drawn horizontally across that ’09-’10 base.

        May 21, 2014 21:21 PM

        matthew put up a chart

        May 21, 2014 21:34 PM

        The turn down during May-June in 2010 was shallow because silver was in a Bull market as one can see the importance of momentum since the early 2011 highs, June has been ugly while silver trades from the top left to the lower right of the chart creating those lower highs, a Bear market in anyones measure having retraced 60% from the highs (so far)

        The key lower red line comes in perfectly at the key level of which the Bulls need a close above within the Weekly chart at $20.50

    May 21, 2014 21:23 PM

    “They” say, “Don’t short a dull market.”, so if “they” are right, the market ( PM’s, that is ) must be setting up for a nice move up because it doesn’t get much more dull than this. The 4-hour chart says a resolution is coming on or about June 1-2.

    May 21, 2014 21:13 PM

    For you technical guys….have a look at this other chart. It is a 45 year graph of “US Median Household Income”. OK, now somebody please tell me that is not a double top on that chart because if it is then its all downhill from here (actually started already).

    I wish the chart went back a hundred years or more to give better perspective. Maybe its not important thought. All we really need to know is that household incomes peaked more or less at the time that the Baby Boomers were in their prime earning years. As they exit stage left into their golden years they will be leaving a foamy wake of debt waves for others to pick up.

    So what else do we know? I mean besides the fact that we are all getting poorer?

    Well, inflation has been low for quite a number of years. Inflation rates are literally near their bottom meaning that there is but one direction for them to go which is up. Secondly, taxes are on the rise and the eventual bill for revenue demands of the government will be exceptional on a long term cycle basis especially given total indebtedness. Third, interest rates will rise gradually over the coming years meaning debt servicing costs will rise.

    So lets put it all together:

    Our family incomes are clearly in decline. Rather sharply too I might add. We are not at the bottom yet either.
    Therefore our aggregate disposable income is also in decline.
    Inflation can be expected to eat a growing share of that reduced income pie.
    And then interest rates will take a further percentage due to increased debt servicing costs.
    Taxes will pretty much eat what is left (eventually).
    Bye bye discretionary income…..hello poverty.

    So based on the above, do any of you wonder about the future of our consumption driven economy? Are we actually seeing the end of the American Empire in that one income chart I have linked? This exercise just highlights how interconnected and interwoven all parts of our economy really are. If incomes keep getting compressed there will obviously be consequences for business health. That then flows through to employment numbers and thus to gross income tax receipts. Rinse and repeat.

    I honestly cannot say I am excitedly looking forward to the conclusion that seems inevitable. If we project those lower incomes into the future and combine it with known and estimated costs for unfunded liabilities combined with rising taxes and past debts there is one hell of a squeeze coming.

    The biggest worry though?….This stock market is eventually coming down. So are the high flying home prices that are now threatening a repeat of the last housing bust. An asset deflation is a pretty good likelihood in the coming few years.

    I guess its true what they say…we ain’t seen nuthin yet!

    US Median Household Income — 1969 to 2014 – Chart from Zerohedge

      May 21, 2014 21:57 PM

      Bird, good chart—-it’s the first time I’ve seen a good chart on median incomes. The whole globe is still in deleveraging mode and with the machinations of the Fed, we can only expect even greater distortions going forward. I really believe they should have let the whole thing go back in 2008—-main street would have probably recovered by now and we could have done some deserved damage to the banking industry.

        May 22, 2014 22:59 AM

        Thanks Richard. The chart is from David Stockman by the way (via zerohedge) so and is represented in real terms. I was kind of impressed how clearly it showed a double top. A chart is a chart in my books….whether for a stock price, inflation or incomes. What this one said to me is that family incomes have peaked and might now revert to the mean. But what is the mean in this case? More data is needed. This chart speaks volumes if it is really predicting what I think it is predicting. It means that the best days are behind us and that a future with less discretionary income is coming. Is it any wonder nobody in Washington wants a consumption tax? What good would that do when we can predict the consumption economy will be eviscerated. So they know this. That is why personal direct income taxes are preferred since we all know that consumers can withdraw from using credit, save more of their money or cease spending altogether if the economy abruptly contracts.

      May 21, 2014 21:50 PM

      great chart Bird

      May 21, 2014 21:52 PM

      Totally agree Bird….Thanks for your insights…..

      May 21, 2014 21:20 PM

      The problem with that chart is that it is based on the corrupted CPI. Using the less deceptive CPI of more than 20 years ago, that chart would look more like this one:
      Real Average Weekly Earnings

      May 21, 2014 21:19 PM

      I believe way down inside, we ain’t seen nothing yet! And that makes me very sad!

        May 22, 2014 22:35 AM

        Agree Al. It looks really bleak to me as well. Chris will be correct that stagflation is our future. Economists may need to invent a new term for the particular version of falling incomes and rising unemployment that is on our horizon though.

          May 22, 2014 22:57 AM

          Birdman this all plays into Armstrongs call for deflation NOT the goldbuggers nonsense regarding Hyperinflation.

          2000-2011 golds run was a pure anti-US$ currency trade….the next bull market in gold begins when gold is the anti-global (especially the US) government trade, a loss of confidence in government brought on by corruption and higher taxes….its in its infant stage.

          Think BIG money, real BIG money….liquidity is #1….that supports the US$

            May 22, 2014 22:29 AM

            jj, I am suprised that you said above even you are looking at the chart in gold term. The above chart is INFLATION ADJUSTED not in marginal dollar. It is to say that in gold term, you see deflation but it does not mean you see deflation in dollar term. I feel people are so confused about this especially for economists like Harry Dent. It is so easy to see why. If you print dollar in unlimited quantity, you will get deflation in gold term and inflation in dollar term. Reason is simple, the printed dollar goes to the elites first so people are relatively poorer. At sametime the dollar will leak out to the economy eventually to generate inflation. Are people so lack of common sense? Why is it so hard to understand? My country went through several inflations precisely because of money printing. Only stagflation happened during communist years since since 1950s to 1970s since government refused to print money. It relied on redistribution of wealth. TMoney lost its function. The effective tax rate was 100% beyond basic needs.Basically you cannot buy anything since most stuff were rationed.

            May 22, 2014 22:42 AM

            Harry Dent’s batting average is what .001

            What you witnessed with your currency/inflation is because it was not the Reserve currency of the world…..that’s THE difference.

            If you print US$’s and the worlds appetite can consume the increase flow it does not create inflation, remember Bearnanki sending Billions of US$ swaps to European banks during their height of their debt crisis…..

            The country of which you lived could not sell their debt to the world, the US can and we’ve seen since QE1-2-3 regardless of the Feds printing press running overtime the demand for US$’s and debt is still healthy, and yes I realize a big buyer is the fed but a buyer none the less.

            May 22, 2014 22:45 AM

            Americans do have a lot of confidence, which existed only for Great Britain. GB used to claim it was a country the sun never set and it also had a world reserve currency. Look at how well it is doing now. If you know physics you will understand that however large the pool is, as long as you drain the water it will be depleted. It is just a matter of time. The weight of US economy is shrinking as a percentage world economy and it will come to a day $ is the reserve currency no more. Be prepared. I cannot imaging that US can keep the reserve currency status when it is the #2 or #3 economy. Other countries will not want to be second class country once they surpass the US in size. It is human nature. Everyone got pride, just someone get quicker temper than the others. Once the world is de-dolarized, the tens of trillion of dollar will come home which will make it 10 times worse. You will pay for your mistakes no matter how late. There is no free lunch.

            Buying your own debt is exactly how other country expand their money supply as the last resort. They all ended bacdly. US might be 4 times slower due too world reserve currency status but it will come to an end too. Be humble.

            May 22, 2014 22:05 PM

            Couldn’t agree more Lawrence.

            May 22, 2014 22:48 AM

            Agree Lawrence, eventually the US will lose its reserve status….key word eventually!

            May 22, 2014 22:05 AM

            Thanks. Considering that US is 20-25% of world economy, the speed of inflation is about 4-5 times slower. Argentina destroys its currency every 10 years. Zimbabwe destroy its current in 4 years. If US prints money in similar magnitude, it will take 16-40 years, which is within one or two generations. However, you will loose world reserve status way before that. Reserve currency has to be high quality.

            May 22, 2014 22:16 AM

            Again Lawrence be it Germany, Zimbabwe or Argentina they were not the worlds reserve currency at the time. The US$ imo will lose its worlds reserve status by default, meaning the worlds trade will exclude the US$

            Debt isn’t a bad thing, not being able to service-sell your debt is and the US$ is still AAA and liquidity plays a major roll.


            May 22, 2014 22:36 AM

            JJ, being on Al’s site means that you are among the top 1% of clear minded people. However, with the highest eduction in science I can tell there is something illogical in the way you think. World reserve currency just make the eventuality happen more slowly but you cannot avoid it. It is bouble edged sword. It slows down inflation when you have and will intensify inflation when you loose the status. I live in Canada and I can see more clearly since I do not have emotional attachment to the US economy. But I hope the worse does not happen since we are linked so tightly. However I don’t feel very optimistic. I go to US every year and travel to China every couple of years. I clearly see the gap narrowing. If US does not go back to its root of manufacturing, it will be in trouble.

            BTW, Armstrong has a lot of insde information and I like him and believe a lot of he said. However, even he realizes that US is in trouble in longer term.

            May 22, 2014 22:46 AM

            Lawrence, with your level of intelligence you must be saying WTF is going on in the world today!!!

            Here is the problem, no matter how intelligent one is in their field to ignore those that create the pricing of XYZ or gold or silver, oil, corn US equities etc is very dangerous to ones portfolio….you maybe 110% correct…but it doesn’t matter because You don’t move the chart….we must follow the money or our own intelligence will lead us down the wrong path regardless of how correct you may be.

            I learned a long time ago to stop thinking, remove ego from ones portfolio and follow the trend that those who can create them do, I’m a wee flee on the ass of the 800lb capital flow gorilla

            Good luck to you!

            May 22, 2014 22:16 AM

            I agree with you. Long term strategy is one thing and the trading is something else. However, without a long term strategy you can be tricked into many losing trades. Market is too dangerous to trade with the crowd. I feel that it is better to have invetment in both long term and short term trading with one compensate another.

            Since we were talking about economy in general, I did not mention this.

            Thanks for the suggestion.

            May 22, 2014 22:50 PM

            “2000-2011 golds run was a pure anti-US$ currency trade….the next bull market in gold begins when gold is the anti-global (especially the US) government trade, a loss of confidence in government brought on by corruption and higher taxes….its in its infant stage”

            I think you make a very good point here!

            May 22, 2014 22:02 PM

            Big Al, although I’m currently short Gold, Silver and the miners I’m looking to be long the entire sector with a 79% silver weighting and a 30% gold weighting….imo there is no way in H the top in gold was $1923…nobody owned it!!! As your old friend Peter Grandich says gold has been the most hated, under invested bull market ever (during the 2000-2011 run) again imo as every top in history has produced from real estate to dotcom when the average town idiot owns gold…SELL….the town idiots didn’t even know gold had been going up for 12 years!

            Even when the BOJapn told the world they were going to devalue $YEN the Japanese bought the Nikkei to preserve purchasing power which it did as the Nikkei shot way up since Nov 2012, but they didn’t buy gold….

            Gold will have its time again…..but on the flip side of that outcome Al do you and I want to wake up in a world of $5000 gold…..certainly the world that those at KWNuts suggest we will live in to get there is not a world I look forward too….you?

            May 22, 2014 22:10 PM

            Original, we definitely do not want to wake up at any time when gold has skyrocketed overnight to anything at all like that!

            May 22, 2014 22:13 PM

            Regardless you want or not, you have no choice. Better to be prepared. For me, I follow my logic not mt wishes. I am willing to wait many years for market to take over. Market cannot be manipulated forever otherwise gold will be under 250. Fortunately I can live long enough to see it happen.

            May 22, 2014 22:11 PM

            Not really sure that I can Lawrence!

            May 22, 2014 22:11 PM

            Maybe I should change “can” to “will”!

            May 22, 2014 22:26 PM

            Yes you can Al. I saw you in calgary a couple of years ago. You were in really good health.

            May 22, 2014 22:41 PM

            Thanks Lawrence. Hopefully I still am.

            Thank you!

    May 21, 2014 21:41 PM

    Al wake up…what the F@%K is consumer confidence?
    There is no such thing either you have money to spend or you don’t!
    No disrespect but stop drinking the Kool Aid and start thinking like an Austrian.

      May 21, 2014 21:22 PM

      Trust me Joseph I do!

      May 22, 2014 22:42 AM

      Consumer confidence merely means people do not fear for the future and so savings are not considered essential to the majority, Joseph. The result is they spend for today and don’t worry about tomorrow. It turns out there is going to be a bitter lesson learned too late for most. Like that half of the population living paycheck to paycheck and without even a pipsqueak 2000 dollar cushion in the bank. Those will be some very angry people.

    May 21, 2014 21:50 PM

    Will anyone listen to common semse anymore?

      May 21, 2014 21:53 PM

      Better than 50% of people do not!

        May 22, 2014 22:38 AM

        50% ? Waaaaaaaaaaaaay too generous, Al. Try 99%+ do NOT! Everyone is so focused on the wealthiest 1% they forget about the 1% who REALLY keep the world running, that last 1% who have common sense.

          May 22, 2014 22:45 PM

          Mr. Dallas,

          Of course, if I understand you correctly, you are correct.

        May 22, 2014 22:36 PM

        I will always believe that death by drone is a war crime.

        For the President to have the sole power to decide upon the death of another person without even one trial, let alone the possibility of appeal and higher-level re-trial goes against all common law.
        Even more despicable and disgusting when one examines the actual details.
        Here is a possible example:
        The US hears a rumour of a possible attack or there is an attack by virtue of a road-side bomb. Reward posters are put proclaiming $10,000 will be given for information leading to capture of thr bomb-builder. (For real bad guys the rewards are unbelievable. Osama bin Laden and Hussein both had rewards of over a million dollars put on their heads.)
        Now suppose you are an average person who doesn’t know who built the bomb, but who has heard from a relative that their neighbor picked up some bomb-making materials they found in the street. How great is the temptation of more money than you could make in a couple of years of hard work to go to the authorities that they should go to your relative’s neighbor’s house and search for bomb materials.
        Suppose a search is made, materials found, but the neighbor not captured.
        This person, the subject of a false accusation, is put on a list for drone assassination
        You don’t think the size of the reward, the anonymity, never tempt injustice?

        Now suppose the accused is a competitor in business of the reward claimer, whom has cheated him before. Might that make the finger pointing more likely? But is the assassination by drone any more acceptable.
        I would further submit the citizenship should not be a factor’ for while Rand Paul kept stressing the Constitutional rights applied to Americans, I would submit that the Bill of Rights is a Bill of Human Rights, which should apply to all humans universally.
        It is certainly the case that the UN demands a trail to determine guilt before assassination.

          May 22, 2014 22:23 PM

          You mention “constitutional rights”. Are you serious? What rights?

    May 21, 2014 21:35 PM

    China is banning import of computers using Windows 8.
    Apparently Germany has found an NSA backdoor in Windows 8 and told China.

      May 21, 2014 21:55 PM

      Now that is interesting. Got a source?

    May 21, 2014 21:13 PM

    VA fights back at Obama’s claim to know nothing about VA problems:

    Seems to me a voucher program for Vets would work just fine.
    Hell, just look at the expansion of medicaid. They have not done a damn thing for the country.

      May 21, 2014 21:57 PM

      No they have not and that is a crime.

    May 21, 2014 21:19 PM

    Of course the L.A. Times fails to point out changes to the affordable care act is unconstitutional.
    Changes in the Law require an act of Congress, and cannot be done by the stroke of a tyrannical presidential pen.
    (Grounds for impeachment: #32 or 33…..I’ve lost count.)

      May 21, 2014 21:58 PM

      Never going to happen,Professor!

    May 21, 2014 21:43 PM
    May 21, 2014 21:31 PM

    Interesting research:

    They don’t say it but they would be using nuclear generated electricity to produce the hydrocarbons.

      May 22, 2014 22:13 AM

      this was a good one……… we have an oil problem…….I forgot about this the other day………….wind, ethanol, nat gas , coal, now sea water…….

    May 22, 2014 22:59 AM

    Interesting stats here about the lengths of gold bear markets and by how much gold drops during such bear markets.

      May 22, 2014 22:44 PM

      Thanks Tulup, I found that article to be interesting.

    May 22, 2014 22:02 AM

    Matthew check out this chart work article from Goldseek, scroll down to the last two charts, Gold…imo this is what charting is all about highlighting the support zones that Must hold and if they fail the next level of support comes into play…its not about calling for a lot lower or higher gold but highlighting support and resistance.

    Silver really caught my eye, and it really is at a very, very key junction when its breaks out or down some serious $$$ will be made.

    Worth a look for those that have chart work as a tool for investing:

      May 22, 2014 22:05 AM

      I always thought the PitchFork should be applied within the current pricing action and use trend lines for the past breakouts and breakdowns….????

      Well looking back that very key $26 breaking down in Silver was a major event setting up our lower lows…..the Million $ question, will the $19.00 level be the same looking back a year from now?

      I’m going to add to my Silver short position this am as $20+ has once again turned back the Bulls.

        May 22, 2014 22:27 AM

        Yes, you want to capture the trend with the pitchfork; this is why I posted the current, more relevant/useful views first.

          May 22, 2014 22:32 AM

          Question Matthew and I’m not looking to get into a pissing contest between Bull and Bear.

          You obviously know how to apply the Pitchfork trend lines to your investments, why? would you not trade pm’s from the long side AND the short side, the Pitch trend lines have highlighted many buy-sell-short opportunites, no?

            May 22, 2014 22:02 AM

            I never said that I don’t trade both long and short. Yes, I am big-picture very bullish, but I do trade all along the way. It’s more difficult to trade many of my illiquid speculative juniors, but I do trade GDX, including options.
            I also successfully shorted U.S. T-bonds over and over again for years while it remained in an uptrend.
            As you probably know, I like speculating in junior miners the most.

            One more silver pitchfork based on monthly closes:

            May 22, 2014 22:14 AM

            Good stuff, whats the point of knowing chart reactions and not making money off them.

            Never been a jr investor always the mid-sr miners….I found it very odd in the beginning of 2014 that the jr’s lead the charge…usually coming off the bottom of a major turn down its the sr’s first then mid-tier and eventually the jr’s catch up which suggests to me the most beaten down sector the jr’s had the biggest short covering and that’s what I believe is the current situation no new bull in the making just short covering pops.

            That last Fork chart of silver is what I mentioned earlier, one can see two outcomes a new up trend forming right here now or… $10….and before all the silverbuggers piss all over that comment, how many saw $18 from $49 or $35 or $26…anything!

            May 22, 2014 22:58 AM

            Juniors leading the way has very bullish implications. The last time they performed so well against both the larger miners and the metals was over ten years ago, and the whole sector did extremely well. Even the HUI achieved a monthly RSI(14) above 80 in late ’03 after going up about 6-fold in just 2.5 years (the all-time high in 2011 came with an RSI of just 60).

    May 22, 2014 22:06 AM

    For all those waiting for the US$ to collapse based on the latest news of Russia and China signing a major NatGas deal…..think Big money, real BIG money….Liquidity is #1