Friday Roundup

Breakout in the Dax:

7dec20121Source: Stockcharts

The FTSE is currently pushing for breakout too.  The US stock indices have made a little consolidation for a potential inverse head and shoulders.

7dec20123Source: Stockcharts

Break out in high yield corporate bonds:

7dec20122Source: Stockcharts

Commodities have not been as strong this week, but the collective CCI index uptrend initiated mid-2012 is still in tact. I am aware that I have hardly mentioned crude oil all year, even though I continue to hold a significant long position in this energy, but for 2 years now it has been range-trading around $100, and there has been little to say therefore about the chart action. However, the longer term picture still shows a secular bull in play since the turn of the century with an extreme episode of greed and fear around 2008, and if that trend is still valid (I believe it is) then we should see crude oil re-take $100 soon.

7dec20124Source: IndexMundi

The Markit / JP Morgan global services PMI was released this week and shows an uptick, as with the manufacturing PMI of the last post.


Combining the two looks like this:

7dec20126Source: Markit

Positive developments in stock indices match up with improvement in PMIs and leading indicators, and I believe we will see pro-risk advance further into year-end.

Lastly, below we see developments in industrial output in the last secular bear of the 1970s have been mirrored very closely in this secular bear. A continuation of the parallel would see a recession in late 2013 / 2014, shallower than in 2008. That would all fit with my solar/secular expectations. Of course, the parallel may fail, but I suggest that the overlay adds weight to my timings as to where we are in the overall cycle.

7dec20127Source: Moneymovesmarkets

Have a great weekend all. My current outlook in Southern Thailand (just trying to work out where we are heading next…):



43 thoughts on “Friday Roundup

  1. Grea post as always. I believe that tomorrows Employment report and/or Wednesday’s FOMC announcement will kick-start gold and oil.

    1. Hi Help…
      Why will the Employment report kick-start Gold?A good report will strengthen the dollar and weaken Gold.
      And with Saudia Arabia planning to increase production, Oil is a sideways move.

      1. We always need some sort of trigger to start a rally. It’s doesn’t matter if the report is good or bad; the market will use it as an excuse. That being said, today did nothing. It looks like monday and tuesday will continue to be slow days in anticipation on the FOMC announcement on Wednesday.It looks like all markets really want to wait to see what the Feds say. All eyes on Wednesday IMHO.

    1. my work is based on planets, and it says that this kind of solar cycle we have now should have maximum when Jupiter-Saturn are 45/135deg apart (+/- 10deg). That means around May 2013 (+/- some 5 months). To get more precision we can study the tidal peaks in that timespan, and find big peaks in March and July 2013. So maximum is most likely ~1 month after such a peak. My best guess is then August 2013.

      1. In your study are you making a difference between various solar max or are you saying that Jupiter-Saturn normally rules this? Are there any other signs you know of that you feel are relevant?

      2. This is very interesting work Jan.

        Can you please tell me where I might find the raw data on the venus-earth-jupiter solar tides?

        I would like to examine past alignments with markets.

    2. I don’t know as I’ve only been following for the last couple of years. Hence I am trying to hedge with looking at SIDC’s – which is also considered reputable – and Jan’s above.

      1. In your analysis is there any chance that the max is actually being predicted too early? I.e. Nasa puts forward its sunspot peak to another year? How would this affect things?

    3. hi Robert
      The sunspotcycle is a complex cycle, modulated mainly by the 11,86 year sidereal Jupiter cycle and the (half) synodic Jupiter-Saturn cycle of 9,93 years. Also the 11,08 year Venus-Earth-Jupiter cycle has influence, and the 5,93 year Mercury-Jupiter cycle. All cycles involve Jupiter.
      The most important factor is timing. When does the previos sunspot cycle die, and what are the (planetary) conditions when the new cycle begins.

      All this can be simplyfied. About 75% of the sunspot cycles have minimum about 2 years before or after Jupiter perihelion. SC23 and 24 had minima before the perihelion, and the next cycles will also. (at the end of this decade we will get the 25% cycles that doesnt start near the perihelion, and that marks the start of a period of stronger sunspot cycles)
      Knowing the sunspot minimum all you have to do is to check the angle between Jupiter and Saturn, and you will have a pretty precise estimate of the strength of the coming cycle. Estimating the date of maximum is also rather easy (within an error margin)

    4. Hi X-class flare
      The tidal variation is mainly the Jupiter-Venus cycle of ~118 days (conjunction/opposition). The strength variates depending on the position of Earth. To be excact you also have to add Mercury… but just using Venus-Jupiter 118 days is a good approximation.
      You can see the VeEaJu-tide here:
      It often correlates well with a ~80TD cycle in SPX

  2. It’s a generally given fact that austerity is a deflationary policy. With the fiscal cliff looming, and nothing but some form of austerity coming down the line, I don’t get how gold bulls can be so bullish. Lower GDP growth may lead to lower inflation, but we know gold rallies tend to be driven by fears of high inflation.

    On the subject of oil, its price is driven greatly by excessive speculation, as opposed to demand versus supply (which to my knowledge is higher than demand for the time being). If austerity of some sort is introduced in the US, through rises in taxes and freezes in spending, inflation hedges, as well as oil would be stable or begin to fall.

    1. Hi Pete
      Fracking for Oil is a game changer
      Just like computers and then cellphones.
      It will assuredely destroy water tables,etc, BUT it will keep the price of Oil sideways.
      I hold a large position in SASOL……oil.
      When must I sell.?

      1. I’ve found that many forecasters have cut oil price forecasts for 2013, citing the weak global economy, as well as greater efficiency at extracting, plus fracking. Interestingly, the US appears to be more energy independent than before, so it relies on less foreign oil.

        If data continues to worsen and we see the US, the BRICS bloc and Europe go into a prolonged period of slowdown or recession next year, oil would probably be stable or fall as demand from key countries falls.

        However, there could always be black swan events which cause an oil spike, just like the Arab Spring in early 2011, so be prepared for anything. I’ve never traded before and you said your position is large so be careful with it and consult more professional people about it before making any decisions

    2. Have commodities ever been driven by supply and demand in reality?

      What happens if there is a major war in the Middle East or somewhere else next year? What would happen to Gold and Oil then? When do Wars normally happen according to sunspot correlation the last like 300 years?

    3. I’ll answer the “how gold bulls can be so bullish,” because it’s so simple.

      Gold is not a hedge on inflation, deflation, or anything other than a loss of confidence in sovereign currencies as a store of wealth, which is equivalent to a loss of confidence in government’s ability to maintain an effective currency.

      So if you are bullish on gold you are betting that the current situation with sovereign currencies will get worse before it gets better.

      1. Hi John

        I hope you are having a great time; it sounds like you are.

        Yep, I’m not aligned with all of it. I just thought it’s worth a read.


      2. Interesting stuff. I think anything can happen. New Reserve Currency. China floats its currency or the USD does a beautiful deleveraging i.e. the financial craziness works and the US economy at least temporarily gets back on track and debt levels start to normalize which and the USD goes back to its roots. I.e. the USD strengthens and commodities and gold fall. Actually when thinking about the latter, it sort of may make sense as most traders these days are thinking about Hyperinflation. When everyone things about something then something else happens. Maybe this is sort of a law of Quantum Mechanics i.e. the Uncertainty Principle that whenever a lot of people look and measure something they change the reality and something else happens. ;). The best transactions I have ever done is when almost nobody else is agreeing to my thesis. Today, it sort of feels that everyone is hyper-afraid of the future and almost believe in Weimar. In 2002 when it was the time to buy gold, people would laugh. Just a reflection. Our largest holdings are AIG, Bank of America, Bank of Ireland, RIM etc. Call me crazy

    1. On page 58 you state that “It’s also interesting to note that the Weimar inflation was preceded by a boom in the German equity market..” Are you expecting history to repeat (or rhyme)?

      Also, interesting correlation between the S&P downgrade of the US AAA sovereign credit rating on 5 August 2011 and the peak of Chinese holdings of US Treasury bonds on July 2011 on page 60.

      1. There is a nice piece from Bridgewater on their site about beautiful deleveragings and ugly ones and hyperinflation. From history we could get all three ones from what I understand. If we have an ugly one then markets crash. If we have a beautiful one then we continue with boom and the cycle repeats itself. If it goes out of control we get hyperinflation after an equity boom or in conjunction. After hyperinflation we get revolutions etc. Anything is possible and history does at least rhyme.

  3. Kent, I always try to stay humble in front of the markets, as there are no guarantees, only probabilities. Hence I repeatedly say patience, one step at a time etc. The Dax broke out, now it needs to hold, maybe go on to backtest, and it has two further levels of horizontal resistance just above, so work to be done yet. But the supportive picture is: new moon this coming week, positive seasonality into year end, upturn in leading indicators, no negative divergences on the recent stock market action, Hang Seng broke out, FTSE making a 6th(?) attempt at breakout, Chinese stocks made a promising reversal this week. So we’ll see how things unfold this coming week, but the Dax breakout has good odds of being the real deal.

    1. I mentioned the FTSE 250 in a comment on this post a few days ago. Today, on 12/12/12, a strange calendar day, it rallied mostly thanks to good job figures for the UK, and as a result, it posted an all time high, breaking the May 2007 high. As I said, it is seen as a way more representative image of the UK, and it tends to lead the way for the FTSE 100 so who knows?

      As the year comes to a close, I’m starting to find my prediction for the year playing out nicely. I anticipated markets in 2012 would be very similar to 2006, which has been true. Looking ahead, I recently read of how the Gold price saw a drop in early trading based on optimism over fiscal cliff talks, which are on-going but will most likely be resolved by Christmas. This is significant because if the talks have a good outcome, traders believe the Dollar may strengthen, and Gold tends to fall when the Dollar rises, so the Gold price might have further to fall.

  4. There’s an interesting thing going on with the FTSE 250 right now. It represents mid-cap companies as opposed to the large cap FTSE 100 ones, but most of the revenue they generate is in the UK economy and so some would say it reflects the UK’s economy better. Right now, it’s just 0.2% within reach of its all time high in May 2007, and seems likely to be making new highs within a matter of days.

    It has a P/E ratio of about 17 so it’s slightly more expensive than FTSE 100, but cheaper than the US markets.Traders tend to say that where the 250 goes, so to will the FTSE 100. Any thoughts on this?

  5. PMI’s are more like sentiment indices. I suppose that’s why The Street seems to be promoting them lately…forgive my cynicism. 😉

  6. CAF- We have a weekly EMA 13/34 bullish cross. The first since June 2011 while bears are calling for a hard landing after Shanghai dropped 2/3.

    A dead cat bounce? May be… but there are many break-outs to be dismissed.

    1. $SPXA50R AND $SPXA200R both have nice gain last week. Not suppose to happen under the fear of Fiscal Cliff.

      The market internal is getting stronger….Is the market climbing a wall of worries?

      TA says BUY this market.

  7. Hi all, flew to Bali, Indonesia, on Sunday, but painfully slow internet at this first hotel, so will respond, post and update in the second half of this week, when we move inland to our second hotel, assuming it’s better there.

  8. Some interesting facts:

    Can anybody corroborate this (people here seem to have brains): Martin Armstrong claims and this confirms that hyperinflation does not kill empires with reserve currencies.

    Hyperinflation occurs at the fringe and empires collapse due to deflation.

    On the other hand, Jim Puplava claims a deflationary collapse has never occured where there has been a fiat currency.

    1. I wouldn’t necessarily define the United States as an empire to be honest. I’m studying globalisation at uni in the UK right now, and based on the way the United States is referred to in modern sources, it is more like a mere actor on the global stage as opposed to a mighty empire and I’d also say that the age of empires went along with the end of WW2.

      I’d say the United States was more like an empire in the Roaring Twenties, and the early 20th Century. There was a sense that the American dream would lead to a permanently high plateau of prosperity, but we all know the prosperity of the Roaring Twenties was built on lies and that it led to the Great Depression and I’d say that was the real collapse that pushed the US to the brink, with a savage bout of deflation and economic despair until the post war boom.

      Yes, the crisis the US experienced in 2008 was fierce and yes it was unlike anything living people have ever seen. But I believe the crisis of 2008 could have been far worse, and as it is, four years after the peak of the crisis, the US is growing (albeit weakly) and whilst there are 46m Americans on foodstamps and unemployment is over 7%, things do seem far rosier now than things seemed, four years after the crash of late 1929.

      1. Just to elaborate a bit more. What I am saying is that the US is not ONLY a country. It is/was, still is, an idea. Just like Rome was and idea. Which means it is stronger than a country. I usually ask people this question. How many years does it take to become Swedish? Well, it takes more than one generation as my parents immigrated from Poland here and despite having like three degrees and very hard working I still do not always feel like I am totally accepted in all circumstances. So about 2 generations. I would say it is similar for all European countries. American? If you know the language and you are smart. 2-3 years and you are in (if you have papers etc). I mean it was a Russian that invented Google – Sergei Brinn but all Americans will say true but he is American NOW. How many years does it take to become Chinese?……………. You can not. And without understanding this dynamic it pointless to discuss inflation and hyperinflation with people. The US is an empire and hyperinflation is reserved for us mortals at the fringe. But goldbugs are right that eventually the empire will fall as all empires do but it will be due to overtaxation and suburbiation like Armstrong argues. You need to study more history like John has done with his sunspots and not only look at WWII. Cheers. God Bless

    2. The word “empire” is being thrown around a bit too much, with little attention to the definition. Dictionaries tend to define empires as: 1.) a group of nations or states ruled over by a single monarch, oligarchy or a sovereign state. The United States has its territory limited, it has been able to invade countries but that doesn’t make Iraq part of the United States.

      Another definition of an empire is that it is an extensive sphere of activity controlled by one group or single person. The United States is surrounded by extensive activity, but it has little or no control over this nowadays. You have the Eurozone trading across the world, Oceania trading with China and China trading with most countries. The United States doesn’t have the power to control each of these groups from doing what they do.

      It has the use of its own currency and with the Dollar being fiat currency, the Federal Reserve can create as many Dollars as it likes. However, this is exactly what the UK can do, but I don’t hear people still saying there is a British empire. In short, the United States has no territory beyond North America and a few small islands to claim as its own, and the United States has little influence over the activities of its neighbours. An empire it certainly isn’t.

      1. The US is much a greater Empire than Rome was. In Rome they needed soldiers etc to influence power. The US needs too but people in countries like Sweden, almost consider themselves like Americans i.e. western world people identify with Americans as TV and movies etc is all American. It is not Chinese or Russian etc. An Empire is a dream. The dream of Rome and the dream of the USA. The world language is English. Again study Rome.

    3. I’m sorry but I studied the Roman Empire as a child. Rome has a history spanning hundreds of years, from when it apparently began as a second home to the people of Troy all the way to the end of the Empire and the rise of Christianity. You need to understand that Rome’s Empire represented not just a dream, it also represented a religion of many gods, it represented a new way of building roads and it also revolutionized the lives of people across the empire. America’s dream is that anything is possible, but the founders of the USA never actually intended it to be a Christian country, so when politicians say “Of course this is a Christian country”, I think the founding fathers would probably be spinning in their graves. America is an actor on the global stage, but lacks that power to extend it’s real power outside North America, but the Roman Empire was a whole civilization that encompassed all of the world according to Europeans.

      I have to completely disagree with you on several things. The reason why Americans speak English is because English-speaking people happened to become the most dominant group in North America when European settlers arrived in the 1500s. The English-speaking thing refers more to the influence of Elizabethan England rather than the United States being an empire.

      Also, going back to the point about influence. Yes, we import loads of TV shows form the US, and our countries are flooded with their culture, but it still doesn’t make them powerful enough to convince most countries that the War on Terror was a good idea. When the War of Terror began, not a lot of places wanted to send troops to fight with the US. To conclude, I this idea of calling America an empire when it’s days as the world’s greatest economic power (emphasis on economic, since Rome had not just economic but military power) are already come and gone.

      The BRICS nations are now seen to be the next big thing, economics-wise. If you’re expecting the US to collapse like Rome’s Empire did, you’ll be waiting a long time, because it already happened. It just happened so fast, most people missed it, and it’s taking far too long for people to realise this. America is not the centre of the world anymore. The rest of the world is the centre of the world now, America is a co-star alongside a whole group of performers on the world stage.

      1. I think we can go on with the debate forever. You have NATO etc. It is the same as the Roman Empire and the US has the reserve currency but since we do not live in caves these days the influence is different from Rome but in essence if you really think about it, it is very similar. Europeans identify much more with Americans than with for example Russians or Chinese. It is very very similar. Rome had a lot of influence on other nations in the same way the US has influence on alot of nations and is also pursing military campaigns etc. We can frame it and call it whatever we like my point is just like Armstrong that hyperinflation is not a threat for the US but taxes and racist policy that may shift the urge for a guy like Sergei Brinn to move to the US instead of starting Google in Russia. All that counts is being able to attract the best and brightest. Sweden is a great country but all Entrepreneurs that make it big etc leave. It is very important to understand this when talking about inflation and hyperinflation. My parents experienced hyperinflation in Poland and it happened as people were fed up with the government and started to leave. It is not as simple as talking about money printing. People all over the world go and study in US universities and not Swedish or European if they can choose. I studied in the US too and I am not saying the quality is better etc but what counts is belief and prestige etc. So we can debate forever but I have to agree with Armstrongs case about the Empire and hyperinflation. One day it will all end but it will be when people start leaving the US for better places and it will collapse by deflation. 😉 Cheers

    1. Transportation Index wants to break-out and prove the bears wrong? Airline index 12+ months high…not reflecting a recession dead ahead….

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