Jobs Data Delights All

STOCKS SURGE

The Bureau of Labor Statistics (BLS) reported employment gains far exceeding even the most bullish expectations Friday.  Preliminary numbers indicate that payroll employment increased by 287,000 in June.  US stocks climbed to highs on the news with the Standard and Poors 500 index closing at 2,129.90.

BONDS SURGE

US Bonds surged to all time highs Friday on BLS reports that the number of unemployed individuals in the US increased by 347,000.  The Unemployment Rate advanced 0.2% to 4.9%.

The 30 Year Bond Yield Index (TYX) closed at 21.10 (2.11%).  Levels not seen before.  Exchange Traded Fund (ETF) TLT, an easy way to trade bonds on the stock market, closed at an all time high of 143.60.

PRECIOUS METALS HIT MULTI-YEAR HIGHS

Not to be left out of the party, precious metals, although they sold off initially when the employment news was released, quickly reversed and closed at multi-year highs.

SLV, one of the ways to trade silver on the stock market,  ended the week at 19.22, up $0.48 or 2.6%.


All in all, most things did well with the exception of European and Latin American stocks and commodities (not including precious metals).

This all comes as no surprise.  As mentioned last week, the jobs number didn't really matter.  Central banks, unable to get any kind of inflation going, are desperate to stimulate the economies and continue to print more and more currencies in an effort to do so.  It's not really working but the extra added juice sure does some good stuff to the markets.

For a few years now, I've been accumulating physical gold and silver even as I watched prices fall, seemingly forever.  It's not easy for most people to look at physical things like precious metal bullion coins and not think of them in terms of their worth in dollars.  The trick in the understanding is to realize that since 2008/2009, the Federal Reserve has increased the money they have created from around $800 billion to over $4 trillion, nearly a five time increase.  Local banks, through the fractional reserve system, create additional multiples of this amount.  When you understand how much new money has been created and then consider that there is absolutely nothing that backs this currency, a prudent person would be thinking "I've got to turn this worthless currency into a hard asset as soon as I can."


A CHART TO THINK UPON

As I am always talking about gold and silver to people, the one thing I hear all the time is, what good is it?  You can't eat it.  They can't conceive that the US Dollar could be as vulnerable to devaluation as the Russian Ruble or the Mexican Peso.  The truth is, any paper currency is only worth what others accept it to be worth.  If a dollar crisis were to occur, something similar to what continues to be happening in Greece, one needs some form of money to transact daily business with.  Who knows how it can or will play out.

Throughout much of civilization, silver has been used as a currency and perhaps someday, it will again.  If it were today, and the stock market was priced in silver, this is how it would look.

So while the stock market may be going up and even making new all time highs, remember, when we are looking at price charts of the market, it is soaring based on purchases made with paper money that has no real value.  It was created from nothing, with no assets backing it up and is being used in unlimited quantities to keep pushing stock prices higher.  But the stock market, when priced in terms of something that has an intrinsic value, like silver, is in a Bear Market.


BONDS (TLT) PRICED IN GOLD (GLD)

Looking at bonds in terms of gold, this is breaking down as well.

Don't let surging markets influence your buying decisions, Central Bankers can create the illusion they wish to create.  If we do our homework, we can catch a glimpse of reality.

The Charade Continues

I marveled at the markets this past week or so as prices on the Standard and Poor's 500 and other major indexes JUST WON'T GO DOWN!! 

It was almost humorous to see the big opening moves down each day over the past week and then see prices climb back for the rest of the day.

While I don't know for sure, it was reported last week that Anonymous hacked into the Federal Reserve trading accounts and discovered that the Fed owns more than 50% of many major corporations. 

https://www.superstation95.com/index.php/world/1384

Would anyone really be surprised?  I mean people who watch and study the market closely, not the average guy.  Most of us who have been involved in markets for 30 years or more see that nothing works anymore.  No level of technical or fundamental analysis works.  The markets reflect the activities of the central banks, to include the Federal Reserve's Plunge Protection Team (PPT) and their crony's the High Frequency Traders.  Many believe that Citadel is actually a pseudo-extension of the Federal Reserve.  And the game extends to our national elected officials who not too long ago rejected a bill that would prohibit them from buying stocks on the knowledge they have (i.e., insider trading).  For sure, why would they cook the golden goose?

So for my part, I have maintained a position in SDS and have more or less ignored it for quite awhile now.  We are back to the low points where I had done my last accumulations but have chosen to buy no more.  It is my contention that the Federal Reserve and their agents will keep the markets up at least until the election in November.  This seemed to have been confirmed when US President Barack Obama met privately with Federal Reserve Chairman Janet Yellen.  Of course no notes were taken of the meeting.  One can only guess what the President and Chairman might be discussing. 

WHERE DO WE TURN?

Well, all is not lost.  A review of the markets to date shows the following:

It's clear to see that Silver and Gold have been the standouts this year.  And of course, it only makes sense with world central banks continuing to print more money to monetize debt.  I recall reading that some $10 trillion in sovereign debt now carries negative interest rates.  How unfortunate it is for us minions that we can't take on more debt and get paid for doing it.  It would be like being promised free gasoline if you buy a new car.  Imagine.

So paper currency is really worthless.  After all interest rates do reflect the cost of money and there is no cost.  Think about that when you are slaving away at your job and for what?  You get paid in worthless fiat currency.  What a delusion.  So for a few years now, I have been mindlessly buying physical gold and silver.  I do so with pleasure as I can't wait to unload the worthless fiat currency.  I have thoroughly brainwashed myself in this truth.  If I believe it, then it must be true, right?

Well I do have something solid that for the millennia has held value.  And I do love the idea that these precious metals were forged in the fires of some exploding super nova gazillions of years ago.  Also that all of the gold that was ever mined is still in existence today.  Who knows who could have handled some of the gold?  Perhaps Alexander the Great or Jesus?  Who can say?  It lasts forever.

So I could continue on about the value of hard assets that include real estate as well, but living in Illinois and even worse, Cook County, both virtually bankrupt entities, property taxes can and will grow to the sky to the point that the governments will eventually seize all properties due to tax delinquencies.  Imagine that, the Fed will own all the mortgages and the governments will be fighting for the title.  Anyway, I digress.

I do favor silver at this point and here are some charts to justify my thoughts.

This chart shows the Exchange Traded Fund that reflects the value of silver.  The price here is a little less than the actual physical silver because, well let's face it, this price reflects a digital entry or paper certificate.  Theoretically, there is supposed to be the actual commodity backing it, theoretically.  So it costs less than the actual stuff you can put in your pocket.  And rightfully so.  Gee, am I feeling cynical this morning?

It does appear that we have had a nice bounce after several years of downward movement.  Keep in mind that real buyers of precious metals feel that price is irrelevant since paper money has no intrinsic value at all.  Anyway, for those who do like to buy low and sell high, Silver has made a strong move up and the 20 week moving average is now trending higher.  The trend is your friend.


GOLD SILVER RATIO

For a long time now, for as bad as gold has been, silver has been even worse!  The chart above shows the gold/silver ratio.  Gold has been almost 80 times more valuable than silver!  This is extremely abnormal since silver and gold are mined together with a ratio of 15 ounces of silver to one ounce of gold.  By recent historical levels, one would expect a gold/silver ratio of about 30.  It got up to 80!

The chart shows that this ratio has broken down some and rebounded, but only to the moving average.  Let's see if it continues breaking down, as it should.


SP500/SILVER RATIO

This chart too is starting to break down meaning that silver is starting to outperform stocks.  This is a no brainer as we saw in the table that silver is up 18% on the year while stocks are just managing to keep their heads above water.

Could be that silver will continue to be the big winner, besting both stocks and gold.

A word of caution though, if you do buy physical precious metals, be sure to keep them close at hand and not in a bank safety deposit box.  If currencies do collapse (think of Venezuela, Argentina, Greece, Cyrus, etc.) you will not be able to get into the bank to access your valuables. 
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Bottom Line:  I'm curious to see if I'm right and the markets do stay up until the election.  This would go to prove just how rigged the system really is.

Oil, China numbers Rattle Markets

Who would have guessed that the markets would finish the week up after experiencing tremendous volatility during the week.  China reported slower growth than expected, while Oil kept collapsing, reaching low levels not seen in years.  But again, world Central Banks did what they could to throw the market a bone.  China added stimulus to their economy while the EU jawboned the market up with the same rhetoric we've been hearing for quite awhile now from Mario Draghi, we will do whatever it takes!

As we can see in the SPY daily chart, we hit lows low enough to cause market panic.  Then just as quickly, the market recovered to close up on the holiday-shortened week.  SPY, an exchange traded fund that replicates the Standard and Poor's 500 index, finished at 190.52, up 1.41% on the week. 

Where we go from here is a harder call.  In the above chart, it appears that the 20 day moving average can act as a magnet and pull price up to it.  The trend is falling though and we all know, or should know, that the trend is your friend. 

My normal expectation in this scenario is to loo for a drop, probably as early as Monday, that would test Wednesday's closing low price of 185.65.  Should we hold that level, I would expect a move higher.

Another reason for some level of optimism is the Size chart.  It reversed ever so slightly.  My general rule is that as long as this Size indicator is increasing, you stay with the trend.  When the indicator is declining, prices tend to drift towards the trendline, sideways.  Still as we can see in the previous move to similar levels, there were a few bumps in the road before the indicator finally turned lower.  So I'm not convinced based on this.

I do see some trend line support, on line charts

As this weekly chart shows, we may be holding a channel, albeit a downward channel.  It does provide some reason for hope that the market will provide a decent rally from current levels.

Finally, we continue to remain within the long term monthly channel.

I had been waiting for a test of the August monthly low around 191.60 but it didn't happen in December, as I anticipated.  Yet, despite daily noise that has whipped the market all over the place, the monthly view shows that we are either testing the previous lows or at worse, testing the bottom of the long term channel.

If I wasn't exposed to all the noise or various market commentators, I'd say that the market is still in pretty good shape. 

I like to see test of low levels that provides support.  First level of support would be the daily view.  A successful test of the 185.65 close would support a short-term bounce.  And, a positive close on the week would provide support on the monthly basis.  Should Friday's (12/29) close be at 191.61 or better, I expect to be buying.  Should it fail, expect lower lows.  But I'm still not convinced that a major downtrend is in place until we break below the monthly trendline just below the 180 level.

A Moment of Truth

The SP hourly chart shows resistance at the 2095 level. 

Could be an expanding diagonal that will resolve itself on the downside at the 2050 level.  That would be the fifth wave of the diagonal with 1 - 2065, 2 - 2095, 3 - 2070, 4 - 2094 and 5 - ?

While I'm looking for a close above this level on Friday, I've been a bit concerned with dwindling volatility levels and apparent resistance at 2095 (210 SPY).  210.04 is the Friday close of three weeks ago, that I expect to be testing Friday. 

Thought that we might blast on through this level but nope.  It's not happening.  Could be that we will go through on Friday on extremely light, holiday volume, when the powers that be can whip the market around to their hearts' content.

While many are suggesting that we are in the final wave up in this long-term bull market, and the wave counters can show that yes, we are in wave 5 of the 5-wave bull market that began in 2009, I'm cautious and added some Dec 31 puts. 

A breakout above the 210 level on SPY would cause me to react with some call buying but what I'd like to see is a three-month test of the low at 191 in December.  A successful test the lows on the three-month basis would get me very bullish and prepare for a move to all-time highs.

As we stand now, it is possible that we will break through the 2095 level and go higher.  Momentum suggests that this will happen.  There is still too much inconsistency though.  As one looks at interest rates and commodity prices, being at multi-year lows, one must think that one of these days, the stock market bubble and bond bubble, will burst and stocks and bond charts will also look like the commodity charts.

But we have seen, Central Banks have done everything that they can to prevent this from happening.  Unfortunately, they will also have to be crushed if this scenario is to unfold.  It's inevitable, or so it seems.  But it also seems that they can continue the charade indefinitely.  Perhaps IMF will come out with a new global currency scheme before this happens.