Editor Note: The Hat
Trick Letter Chart Store Report is not to become
a regular monthly feature. From time
to time, like every 3 months, a display will
be provided that covers the landscape. It will
not be comprehensive, but it will be broad.
Unlike past charts embedded into the main reports,
comments will be brief, appearing in paragraph
form. Some trendlines
will be shown though and other signals highlighted.
The blooming crisis in Europe has created demand for USDollars, from
three sources. The banks have US$-based obligations
and need to satisfy them. The derivatives are
priced in US$ terms within contracts, like debt
insurance. The Euro is too hot to handle, moving
to the downside. A critical juncture is here
at the 81 to 82 level. Much like the previous
battle at 78 to 79, the year-long reversal could
set up another surge toward the June 2010 peak
at the 88 level. My analysis has been wrong
on the strength of the USDollar
in the last several months. Given the hidden
nature of Quantitative Easing and its successful
concealment, the currency trade has benefited
the USDollar. After
hefty pullbacks like seen last week, a re-evaluation
is taking place. Check October 2011 for a previous
such assessment, after which it resumed its
rise. Although my analysis has been wrong, my
belief is that the 82 level will serve as firm
resistance. Jim Rogers has a big bet that the
Euro currency will rise from here. If so, then
the DX index will settle down. My pat line is
that the USDollar
will rise during the crisis from a death dance
of demand. It will continue to rise until it
vanishes, rejected globally. The trade settlement
angle is powerful toward the rejection.
The tumultuous events last summer took down
the Swissy, as their
central bank began to enforce a peg to the Euro
currency. They met with some success. Two events
are worth watching. The central bank head has
resigned in an insider "pillow talk"
trading gain by his wife. The disruption could
result in reduced attention to defend the Swiss
Franc currency against an unwanted rise. Such
a rise would harm
their export trade, typical of the competing
currency wars. The other important item is the
technical analysis. The momentum in the downward
trend might have run its course, seen in the
MACD (moving average convergence divergence)
measure. Although the crossover is evident in
the 20-week moving average below the 50-week
MA, look for some stability and leveling off.
Ironically, a Euro exchange rate rise might
actually work to lift the Swissy
The Euro might be running out of downside momentum.
Too many wild cards are in the deck to make
assured confident forecast calls. The breakdown
began in earnest in November after the MA crossover
shown in the green circle. That coincided with
wider crisis spreading to Italy
and Spain, both wrecking grounds.
The breakdown had more power below the 133.5
level. A serious bounce occurred last week.
The stochastix measure
is plumbing lower momentum levels. The banks
are in deep trouble, swirling down a toilet
of insolvency, the lever on the toilet being
sovereign debt. Solutions are half-baked showman
displays better described as farces. The political
leaders are controlled by the powerful bankers,
and they do not want liquidations. If a broad
rescue plan comes with some recapitalization
and some liquidations, the shorts might cover and a big Euro rally could
ensue. But too many wild cards.
The clear winner will be Gold, not any fiat
paper currencies. The empty solutions to date
have been more debt and more paper to fix too
much debt and too much paper. They cannot learn,
since way too committed. Another hidden wild
card is grand harsh publicity about US
BRITISH POUND STERLING
The Pound currency matches the Euro stride
for stride. The hints of an important schism
between England and the continent
could erupt into something very ugly. Prime
Minister Cameron might win a game of pride,
but lose a game of isolation.
Ever since the spring 2011 earthquakes and
ensuing reconstruction, my forecast has been
for a paradoxical runup in the Yen currency. It happened, an easy call that
most analysts had backwards. The diverse financial
firms in Tokyo have been forced to redeem US$-based securities in order to pay
for the reconstruction. It is not finished.
But the upward trend in the Yen might be close
to conclusion. Notice the attempt to put a firm
top at the 131 level. The uptrend will do battle
with that ceiling. If it breaks on the upside,
then a very strong runup
toward 135 will occur, and attract global attention.
That would coincide with a USDollar correction downward. Much
domestic pressure will come to keep the Yen
exchange rate down, in order to protect their
export trade and vast industrial complex. Instead,
a consolidation process between 125 and 130
is very likely. It requires an end to raising
cash to cover the reconstruction costs. Let's
not touch the Fukushima project.
The Australian Dollar is caught up in the Chinese
web. Demand for commodities has fallen from
the Mainland China. This has occurred during
a time of commodity price consolidation, matching
the movement of the OZ$. Expect a consolidation
period next, as the downtrend works toward more
of a flat zone in transition. China will not falter as badly
as some expect, thus lifting the OZDollar
again. But what will be achieved is stability.
The wild card is fiscal deficits, the difficulty
to finance them, and bad publicity. The housing
market decline on the island continent is fierce
and begs for stability. The Anglo disease of
housing asset bubble has not fully been played
out. Both England and Australia caught the American plague, which extends
to heavy military weapon spending and the strain
The Gold price is in a flux stage. An important
upturn occurred in the stochastix
measure, noted with the new
year and a fresh look, or else new strategies
put in place. The gold leasing issue has been
discussed in the main reports, as has been the
big Dollar Swap Facilities abused by central
banks. The consolidation from the powerful runup
between June and August last year has been digested.
The time for a resumed bull market is here.
My analysis has been wrong on the Gold bull
resumption in the last couple months. Watch
the pennant pattern for resolution. Trend will
prevail in my view.
The 1600 level was well defended, even with
gusto and enthusiasm. The breakdown from the
trendline in mid-December was unfortunate. Repair is underway.
Notice the reversal surge to correct damage
done under 1600. Also note the 50-day moving
average (in blue) which went below the 100dMA
three weeks ago. It might go back above the
100dMA very soon, a positive sign. The most
positive development technically that could
come soon is a move above the pennant upper
barrier, like with a surge above 1725 or 1750.
All kinds of technical analyst bells would ring
The Silver price defended well the 28 level.
My forecast was not for it to go that low. The
correlation with perceptions of a Chinese recession
and hard landing were evident. Last week, like
with gold, a strong surge took place in rebound.
The 20-week moving average went below the 50-week
MA in mid-December, which must reverse to satisfy
the bull. Watch for the positive lift back above
the 50wMA in the next several weeks. Extreme
shortages of silver are clear. The wild card
is the Sprott Silver Trust, whose fund will seek to locate 10 million
ounces. The upsurge might have been related
to the secondary issuance by Sprott
and the knowledge that the silver bullion must
be sourced. When the Silver price rebounds above
36 to 37 level, the downtrend line will have been broken in a bullish
manner. It will come.
The major crude oil price move in early 2011
was due to the Quantitative Easing disaster
engineered by the USFed. It corrected in mid-2011. The clear trend is a gradual
upchannel. A struggle
is occurring at the 100 to 105 level on West
Texas crude oil. The price is at the upper rail
to the long-term channel. Price might come down
next somewhat. But as the USDollar
is more widely rejected, look for the crude
oil price to rise much more, and record a breakout.
The wild card is for the Saudis to accept non-US$
payments, then all of OPEC. The signposts are
all well written for the end to the Petro-Dollar
defacto standard. When the revolt is more clear and on financial journals, argued by USGovt officials,
the crude oil price will be $120 per barrel,
GOLD IN EUROS
The turmoil from the financial crisis on the
continent has given Gold a more favorable view
as safe haven. The Swiss did not want their
currency to serve as sole safe haven. An important
pennant pattern is evident, and under test.
My expectation is that the Gold price in Euro
terms will rise above the pennant barriers in
a grand bullish demonstration of power.
GOLD IN BRITISH POUNDS
Gold in Pound Sterling terms looks very similar
to Gold in Euros. Many are the similar forces
at work, within banking and political circles.
Expect the Gold price to rise above the pennant
barrier in a grand display also.
GOLD IN YEN
The Gold price in Yen terms is fighting a different
battle. The upward march in the Yen currency
makes for a strong headwind in their gold price.
Look for stability in this chart as their industry
is put back on its feet while voluminous USTBond
sales taper off. The wild card is the nearby
important Chinese Economy and whether it falls
further, or its growth comes way down. The Japanese
and Chinese are increasingly joined at the hip,
evidence made clear with their recent defiant
currency swap accord. They will begin much broader
trade settlement in the Yen and Yuan currencies.
Regard the accord as a major slap in the USGovt
GOLD VS SILVER RATIO
Major damage was done to the Silver price and
therefore to this ratio, which had been favoring
Silver in the last 18 months. Since May 2011,
when the COMEX ambushes became more powerful,
complete with intense criminal activity, the
ratio began to favor Gold again. Simply put,
the Gold price held its ground better than Silver
did in the last few months. The recent bounce
in the Silver price toward 32 bears watching.
My belief is that Silver will rebound faster
than Gold, and the ratio will resume its downward
GOLD VS S&P500 STOCK INDEX
The Gold correction since last summer made
stocks look better, as the Dollar Death Dance
saw a beneficiary in stocks on a relative basis.
That is about to change. The ratio has leveled
off and found the long-term trend. As the global
recession looks more obvious, look for global
equity bourses to lose favor. The financial
crisis is about to make an important turn toward
bank failures. The requisite bank recapitalization
initiatives will put great pressure on new money
creation, and thus lift Gold relative to Stocks.
But stocks might also benefit from a renewed
Quantitative Easing program, as valuations rise
from debased currency factors. My expectation
is for Gold to outperform stocks in the next
GOLD VS HUI MINING STOCK INDEX
When the financial crisis shows its powerful
dangerous damaging teeth, the impact is felt
on stocks and all things paper-based in securities.
The Gold investment has fared much better than
mining stocks, exactly my forecast since early
2008. The gold community cannot accept this
fact. Too many are the negative factors working
against mining stocks. They suffer from naked
shorting by finance partners, spread trades
by Wall Street and hedge funds, higher costs
before production, jurisdiction risk (property
seizures by foreign governments), and low COMEX
redemption prices for metal sale. My expectation
is for the Gold price to continue to fare much
better than mining stock valuations.
GOLD VS CRUDE OIL
Gold has held its ground during the global
financial crisis, as all things monetary are
put to high scrutiny. Basically, the pursuit
of safe haven for savings and wealth will prevail
over the prospects of the global economy. The
crude oil price is mostly an economic play,
but it also contains a
USDollar hedge component.
Look for the Gold price to rise much more than
crude oil, but the oil price will also rise
as the USDollar endures
a sunset and shun.
SILVER VS COPPER
The Silver play is more than industrial. Its
demand contains a monetary component, since
Silver bars are used to store wealth, surely
in lesser volume than Gold. Therefore the Silver
investment tells the safe haven story over and
above the Copper demand. Doctor Copper has a
PhD in Economics, as demand for electronics,
homes, and cars dominates. The trend since year 2010 has been favoring
Silver over Copper. That trend should continue.
BROAD GDX INDEX VERSUS HUI INDEX
The GDX is a broad mining stock sector index
managed by Goldman Sachs, used to short the
entire mining sector with extreme force. It
is much more broad
an index than the HUI mining stock index, which
is led 35% to 40% by the major companies involved
in precious metals mining. The story told is
that the smaller mining firms are more vulnerable
to funding needs, to cost pressures before production
phase, and more. But GSax abuses a powerful
tool of its own creation and management. They
sell the corrupt promotional line about ease
of investment with a simple click. Only fools
buy the line, along with lazy investors. The
smaller mining stocks have fared badly, exactly
my forecast since 2008. The trend should continue.
Usually not covered, include sugar since is
acting unusually. Unlike wheat and coffee, the
sugar price has recorded a surge in reversal
that warrants close attention. It could signal
a food price increase that causes renewed global
COMMODITY PRICE INDEX
The strength in crude oil has not helped the
Continuous Commodity Index much. Grains, metals,
sugar, coffee, and lumber have a contribution
also. The 570 level was defended with vigor
last week. The bearish crossover of the 20-week
MA below the 50wMA was cause for alarm, but
it might be in the process of repair. The key
factor is the USDollar and also the prospect for a global recession if it
hits the emerging market economies like China,
and Brazil. Look for the 20wMA
to work back up and kiss the red line. A move
in the CCI above the downtrend line, such as
over 620, would be a very strong positive signal.
The key is the USDollar.
BALTIC DRY INDEX
The index tracks the shipping costs for global
dry freight like grains, lumber, cement, containers
of finished products. It has fallen off the
ship deck in a bad way. The signal is very clear,
that a global recession is in the offing. It
is unclear whether some Wall Street chicanery
is at work, but probably not since this arena
is not in their usual corrupt playbook. The
fast decline has confused many analysts. It
could be a maneuver by the Chinese to win more
favorable freight rates, as they pulled orders.
Just conjecture on my part.
Special thanks to Stock Charts, an indispensable
tool for investors and analysts.