Honest Money Gold and Silver Report: Market Wrap
Week Ending 5/30/08
The Reuters/University of Michigan final index of consumer sentiment decreased to 59.8, the lowest level since June 1980, from 62.6 in April. The measure averaged 85.6 in 2007.
Personal income was up 0.2% in April. In March it increased 0.4%. Wages and salaries decreased 0.2%.
Real Disposable Personal Income
(DPI), income adjusted for inflation and taxes, was unchanged in March and April.
Real Consumer Spending
RCS was unchanged in April. Spending on nondurable goods was down, with gas and energy leading down.
Prices, as measured by the personal consumption expenditures (PCE) price index, increased 0.2 percent in April, compared with a 0.3 percent increase in March.
Gross Domestic Product
The Bureau of Economic Analysis reported that the economy grew at an annual rate of 0.9% in the first quarter, compared with 0.6% in the fourth quarter. Gross domestic product (GDP) growth was revised up from the estimate of 0.6%.
A decline in housing and continued weakness in consumer spending is the main culprit in the slow growth rate reported. The revision to the first-quarter growth rate reflected lower imports that were mostly offset by lower inventory investment.
Year-over-year growth in the first-quarter was 1.7%, compared with 2.5% in the fourth quarter. The first-quarter increase reflected an increase in profits from foreign affiliates of U.S. companies. In contrast, profits of domestic corporations declined (not the best news).
The overall market rallied up this week just under 2%, but it still looks like a bear market counter trend rally that has failed versus the start of a new bull market; but I defer to those wiser and older and more experienced.
If a new bull market has started or gets started, a good place to begin would be above the 200 dma and the bottom zero base line indicator.
The housing debacle is far from over, unfortunate as that may be; it is better not to ignore the truth than to try to bury one's head in the sand. That's how it happened to begin with. As Mick says - you don't get what you want.
It is reminiscent of the U.S. dollar - the reserve currency of the world - the one the Federal Reserve has debased and destroyed since its creation in 1913. One hell of a job fellas. That means the dollar has lost 95% of its purchasing power. That means you and I have gotten poorer. It's not the quantity of units of money that matters - it's the quality or purchasing power.
Remember when you go to vote in the fall - only Ron Paul has a clue or is willing to be honest and speak the truth as to how to fix the financial mess the Fed and Treasury has gotten us in.
See my new book: http://www.honestmoneyreport.com/bookIntro.pdf
Bull or Bear Market Chart
Bull or Bear Market Chart
Bonds & Rates & Stuff
The Fed went on the war path dropping rates quite hard; but now rates are rising, which has not been lost on bonds, the dollar, or gold.
As mentioned above, rates have been rising, which has put the wind behind the dollar for a change - a very slight change as the chart shows, but a change nonetheless.
Seventy-four looks like it will be a tough nut to crack, but there is still room to rise a bit more; which may be the end, and when gold starts to bottom. But we will have to see what things look like - if and when we get there. We ain't there yet.
As the dollar has rallied every so high, the euro has corrected ever so low. Significant support resides at the blue horizontal support line.
Gold and the euro have trended in the same direction for some time now. A trend is in effect until such time that it isn't. Right now it still is.
Commodities have finally begun their long overdue correction. Many speak of the end of the commodity bull market - perhaps - perhaps not, it is a bit too early to tell; after all, these are the same folks who have been shorting oil since it hit 100, at least with other people's money, as one would have to have deep pockets to have been short oil from 100 until the other day if using their own money to short it with.
Oil has broken and looks like it has more work to do to the downside, which would only be normal and healthy corrective action - the same as in gold and silver and any asset that gets overbought. It is still a world of duality, up and down being one of the most basic duets.
Bull markets always correct, and always show a series of higher highs and higher lows. A trend is in effect until it isn't. Lower lows and lower highs BOTH have to be made to make a bull turn bear. It is what it is until it isn't. I tip my hat to all those who can predict the future ahead of time. Well done.
As the chart below shows, commodities in general have started their correction ahead of oil and to a further degree, both in time and price. Oil was the last to break. Gold was one of the first. Will the first be last and the last first; or the other way around?
Gold had a tough week, falling over 4%. The weekly chart of GLD below shows more downside is yet likely. An intermediate term bottom does not appear to have yet been made.
There could be a head & shoulders top formation about to take hold, which would cause more than the first horizontal support line to be tested - IF - such occurs.
MACD has made a negative cross over which means more downside, but notice it is starting to curl up. The moving averages are converging towards horizontal support. More time is yet needed, of this Gann was dead on.
Silver has taken a big hit to the downside as well, getting whacked for over 7% on the week - ouch! I was lucky to sell all the CEF before the break - the same I was lucky enough to buy the week before just before it went up. I would rather be lucky than smart.
The chart pretty much speaks for itself, and my opinion remains the same.
The gold stocks via the GDX were down almost 4% for the week. More downside action looks to be ahead. That time thingy is a pretty important concept.
A lot of technical damage has been wrought by the correction, which is standard for a bull market to work off overbought situations. It is how a market backs and fills and builds a stronger and larger base from which to launch the next assault up. Patience is usually rewarded.
I have commented before that it is more important what the stocks you own are doing as compared to what some index is doing. Your wealth is measured by what you own minus what you owe; factoring in of course the purchasing power of the dollar - which is going to hell in a hand basket; which is a good reason to hold gold.
Platinum & Palladium
I have been asked to comment on platinum and palladium. By now all should know about the power shortages in South Africa that caused great downside time and supply shortages in the SA mines that produce both platinum and palladium; not to mention gold and silver, etc.
This has been known for quite a long time now, and has been written about in this report a few times. I have traded in and out of both Stillwater Mining and North American Palladium several times due to this exact situation. SWC mines platinum outside of SA, so its production was not affected and its product grew dear - hence its price skyrocketed.
However, Stillwater went parabolic and is now coming back down to earth. The first big move is long over. Another may wait ahead. The charts show more downside is first likely before another big move up, but one never knows for sure.
The fundamentals are solid for both metals, but the price action got overheated and needs to cool off. I recently sold almost all of my PAL and SWC, but not quite all; and I may buy more (PAL) in the not too distant future - perhaps even next week; have to wait until then to see how things look.
Long term the fundamentals are good; however, timing can be a - hard thing to get right, to say the least. I know - I screw up plenty. But I get lucky too. If one doesn't like the heat it's best to stay out of the kitchen.
So, below are a couple of charts of Stillwater (SWC) and North American Palladium (PAL). All comments are just that - comments, not recommendations to do or not do anything. One must decide for themselves.
Whatever I buy and sell is posted on my website at a minimum of a weekly basis; and most often on a daily basis. I was amused to see an expert this past week, who rates other experts, say that most gold writers were overly bullish, and hence he was bearish - smart call.
I would suggest, however, that there were a few that were ahead of the pack; and it might behoove him to broaden his reading a bit. One never knows what they will find if they go looking.
Now let's look at the charts.
The Burj Dubai
What Our Hard Earned Money Spent on Oil Buys - Others
The latest full-length version of this week's market wrap is available on my web site, including all positions bought or sold this week - just register on the bulletin board for access.
Stop by and check it out. Most major markets are included with the emphasis on the precious metals.
There is a lot of information on gold and silver, not only from an investment point of view, but also from its position as being the mandated monetary system of our Constitution - Silver and Gold Coin as in Honest Weights and Measures. There is even a new book I've written on it - Honest Money.
On the main homepage are papers and articles by some of the best out there to be had. There are audio and videos on banking, the Constitution, and cutting edge news. Many articles are archived and others are linked.
Live time quotes on gold and silver and precious metal stocks are available, including charts for most world currencies and futures.
Links to the World Bank, Central Banks, the International Monetary Fund, the United Nations, the Bank for International Settlements, and many other similar and different sources are available.
There is also a live bulletin board where you can discuss the markets with people from around the world and many other resources.
Good luck. Good trading. Good health, and that's a wrap.
Come visit our new website: Honest
Money Gold & Silver Report
New Book Now Available - Honest Money