Sell! Turning Point Imminent

Summary

It seems that the markets have been head faking all along and that this has served to suck in both the industrial equity bulls and the gold philes. The charts are not looking pretty. The blood may soon start to flow. Deflation is on the cards. Cash will become king. This in spite of the “obviousness” that the Fed will go for QE3, QE4 etc. i.e. all logic aside, the markets are saying this won’t happen (for the time being).

Note: Charts courtesy Stockcharts.com

Have  a look at the MACD (apparently on the point of a buy signal) and then at the P&F chart below (also apparently on the point of a buy signal). Conceivably – according to conventional technical wisdom – If the gold price breaks above $1,440 it could run.

But all this is in context of a 3% X 3 box reversal chart that looks hugely overbought

From a goldphile perspective, the weekly chart below is also showing strength on the MACD oscillator (But in context of an RSI that is trending towards overbought)

Perhaps surprisingly (to the goldphiles), there is no sign of “speculators” anticipating a run on the gold shares

Importantly, the gold price itself seems to have been mirroring the dollar index which looks like it is sitting on support

If you look at the RSI of the dollar on the daily chart it looks like it wants to bounce up

Interim Conclusion

At first glance it looks like the rising gold price was anticipating a breakdown in the dollar. Deeper analysis shows that dollar will more likely hold than break down

BB Comment: My “guess” is that we are close to a turning point in the markets. Here is the evidence:

Have a look at the weekly chart of the Dow below. (MACD sell signal with histogram below zero)

Now have a look at the same chart with trend lines

Now have a look at the chart of the 10 year yield and note the “sell” signal on the MACD (buy signal on price)

Now look at what a sell signal on the above chart will mean from the perspective of target move of yield (High pole reversal will give rise to target for 10 year yield of 2.4%)

Overall conclusion

Deflation. The gold price will likely pull back and markets will likely pull back. Cash thus freed up will flow into the US bond market at the long end and capital flows into the US as a safe haven will support the dollar.

BB Comment: The rising ratio of short term to long term yields was a genuine warning. The failure of the ratio of the gold shares and the gold price to break up was a genuine warning.  Life is about to get tougher in and around the capital markets

The manuscript of The Last Finesse is weeks away from completion. I began researching and writing it about two years ago. Eerily, its primary themes address in some detail the very issues that we are now facing as a result of the earthquake off the Japanese coast and subsequent threat to the Fukushima nuclear plant.  It also has an in-depth look at climate change. I have decided to publish The Last Finesse in e-book format. It will probably retail at around US$7.95 and I hope to make both The Last Finesse and Beyond Neanderthal available as a combined package in e-book format at US$9.95. If you have an interest in acquiring one or both copies, please email the writer at [email protected]  and I will put your name on my (confidential) database for later contact.  For the fighters amongst us, The Last Finesse proposes a (roughly quantified) outside-the-box  “solution” to the global sovereign debt problem and a methodology for implementing this solution. The message is delivered by way of an entertaining fictional storyline. When the going gets tough …

Brian Bloom

Author, Beyond Neanderthal

Author, The Last Finesse

www.beyondneanderthal.com