Technical Analysis

On Tuesday morning at 6 AM EST German Factory Order numbers were released that showed a plus 4 percent gain month over month. Yet last Friday, May 5th US Factory orders were released that showed a negative 4 percent growth rate month over month. Yesterday, German Industrial Production showed a gain of 1.2%.

The recent slide in the gold price has generated substantial demand for bullion that will likely bring forward a financial and systemic disaster for both central and bullion banks that has been brewing for a long time. To understand why, we must examine their role and motivations in precious metals markets and assess current ownership of physical gold, while putting investor emotion into its proper context. The time when central banks will be unable to continue to manage bullion markets by intervention has probably been brought closer. They will face having to rescue the bullion banks from the crisis of rising gold and silver prices by other means, if only to maintain confidence in paper currencies. This will likely develop into another financial crisis at the worst possible moment, when central banks are already being forced to flood markets with paper currency to keep interest rates down, banks solvent, and to finance governments’ day-to-day spending. History might judge April 2013 as the month when through precipitate action in bullion markets Western central banks and the banking community finally began to lose control over all financial markets.

A Roundup of Opinions

The US dollar rose to new multi-month highs against several of the major currencies, including the euro, Swiss franc, British pound and the Japanese yen.  The BOJ, BOE and ECB meet last week and none changed policy.  The Swiss National Bank meets on March 14 and is also unlikely to change policy.  The Federal Reserve meets the following week and is widely expected to stay its course.  It is not monetary policy then providing the new trading incentives. 

Nor can the dollar's gains be attributed to political uncertainty in Europe stemming from the inconclusive Italian elections, as was the case previously.   The immediate shock has worn off and Italian stocks and bonds have recovered the lion's share of those initial losses. 

For those technical analysis aficionados who enjoy charts that go "from the lower left to the upper right" as much as the next predictor of the future, may we recommend some deep OTM calls on GM's now endless channel-stuffing (a topic we have discussed to death and back here), which saw the bailed out company from the currently bailed out city, a near record 743K cars with dealers - the second highest ever. This is obviously an indication of soaring, if inverse, demand for the cars only federally-funded NINJAs can love.

Silver closed Friday`s trading session at $28.46 an ounce, capping off what has been an auspicious start to 2013.

Depending upon the time frame natural gas is either in a distinct downtrend channel or a parallel trading range. 

Forget 'red balloons', StreetTalkLive's Lance Roberts expands from his recent visualization of Bob Farrell's investment rules to six more market mavens with insights into money management and being a successful investor. What you will find interesting is that not one of them promote "buy and hold" investing for the long term - probably because in reality it doesn't work.

As the markets once again approach historic highs - the overly exuberant tone, extreme complacency and weakness in the economic data, bring to mind Bob Farrell's 10 investment rules.  These rules should be a staple for any long term successful investor.  These rules are often quoted yet rarely heeded - just as they are now. Farrell became a pioneer in sentiment studies and market psychology. His 10 rules on investing stem from personal experience with dull markets, bull markets, bear markets, crashes and bubbles. In short, Farrell has seen it all and lived to tell about it. Despite endless warnings, repeated suggestions and outright recommendations - getting investors to sell, take profits and manage your portfolio risks is nearly a lost cause as long as the markets are rising.  Unfortunately, by the time the fear, desperation or panic stages are reached it is far too late to act and we will only be able to say that we warned you.

There are just too many variables, too much information, and even unknown variables that play into market dynamics. 

Why do commercial investment advisers always tell you that gold (& silver) and PM assets are all massively risky? Here's the one chart that explains everything.

An overview of the key factors and events that are shaping the investment climate in the week ahead.  It looks at some emerging market developments as well.  These are the main talking points and considerations that ought to be on your radar screen as investors or pundits.  

Because there are still some traders who adhere to such old normal traditions as charting and technical analysis (because apparently the FOMC committee sits down each month and observes Ichimoku clouds, RSI indicators and Bollinger bands), it is probably notable that one of the most respected chartists, Steve Cohen's favorite technician Tom DeMark, is now uniformly bearish on virtually all markets around the world which have triggered a sell signal in his studies, and is about to drop the axe on the US as well where a "Daily 13" signal is imminent. The caveat, of course, is that in a world in which fundamentals haven't mattered in years, why should technicals?

Reuters report that Asia's physical market has picked up so far this year, with buyers tempted by last week's big drop in prices -- when prices retreated to as low as 1,626 per ounce -- and on demand ahead of the Lunar New Year, traders said. The trading volume on the Shanghai Gold Exchange's 99.99 gold physical contract shot through the roof on Monday, hitting a record of 19,504.8 kilograms, after double-counting transactions in both directions.  "Physical demand is very strong," said a Beijing-based trader. "It's a combination of the attraction of lower prices as well as pre-holiday demand." But such appetite could waver if prices recover towards $1,700, he added.