Thomas
DeChastelain
Memorial Archives

Bullion Charts - The Katrina Edition
posted Sep 5, 2005 at 02:00AM

Bullion Daily



You have to like that strong move off the moving averages.

Bullion Weekly



The weekly chart continues to look strong. Very strong.

HUI Daily



Closing above 220 is very bullish. Closing under 200 brings the reverse H&S back into play.

HUI/Gold Ratio



A close over 50 would be a signal that a Wave III has started COT be damned.

HUI vs Yield Spread



Why I think last year's lows will not be tested. Not in the context of a post Katrina America. Stocks, as a sector, have done reasonably well. Given that we are closer to a bottom it makes sense that gold stocks will give ground grudgingly.

Is it as easy as just buying the dip? Unfortunately not. Why? I think there is a reasonable chance that the yield spread will reverse only after a equity market crash, which would affect gold stocks as well.

So buying stocks is somewhat akin to fighting range fires on French grenade ranges. It can be done, but there is a sphincter factor involved.

USD Daily



The 50 dma is now twice confirmed as resistance. The port system is one of the critical physical cogs in the US economy. It is hard to see the dollar excelling here.

USD Weekly



The MACD cross is bearish.

Introduction

Even after days of writing I find myself facing deadline with nothing to show for it. Oh yes I have pages and pages of commentary. Fueled by rage by what I witnessed last week. Rambling, unfocused, wide-ranging, sometimes vile but sometimes really really good. In the end it is not finished. It won't get finished any time soon.

Trying to find some way to get the world to save itself may be more important, but I have been informed that getting to work on flooring is more urgent. Women. But then I also got booted out of a chat forum because the moderators thought it more important that everyone keeps their noses glued to thier market indicators.

My wife I continue to love. The flooring is my problem. The moderators? Those censoring cowards can go fuck themselves.

So, on that cheery note, let me try to put a more focused commentary together.

An Empire in Decline

Katrina is an event which will accelerate the decline of America. What once I thought would occur over decades and centuries will probably now occur over years and decades.

A civil war in our lifetime is very possible. It will not be with the degenerate neoconservative leadership currently in charge, but with what replaces it - a right wing nationalist movement, most likely within the Republican party itself. It will quickly devolve into a quasi-Facist belief system. A market bottom (for general equities) will come during this time, when blood, literally, is flowing in the streets.

The big think tanks have a cost of $100 billion for Katrina reconstruction. They are wrong. Anyone with project management experience can tell you to multiply that number by 2.5; and that is with competent management.

Neoconservative theory states that increasing corporate profit margins is the variable around which a society should be organized. This is optimized by redistributing the maximum amount of money from the taxpayer into corporate coffers, for the smallest return to nation and said taxpayer. Forget about a dike system like the Dutch. The neocons hate the Dutch.

Look instead to the Afghanistan and Iraq reconstruction model to be followed in America. Expect lots of non-competitive cost-plus contracts with no deadlines and waivers allowing them to employ illegal aliens. The inhabitants? Please. There is a reason why the evacuation process often resembles a prisoner transfer.

Bush stated that the US could do both Iraq, and domestic reconstruction. The US can do neither. The US is broke. They are in debt up to thier eyeballs. Their cashflow is negative.

When this becomes apparant expect the neocons to attack Iran. Completely under the radar is the fact that the US currently has six plus of their best front-line divisions in Iraq. "Officially" they are there to support upcoming constitutional elections. I remain sceptical.

Not shown here but silver has done what I had once thought gold would be doing pre-Katrina. Looks like a big false break-down. The sharp bounce back along with excellent COT structure bodes well for gold. A strong silver price is also good because it would be a sign that the overall markets are not going to crash. I think a general market crash is the only last real threat for gold stocks.

The charts for gold are all bullish. The charts for the dollar are bearish. The action last week may have been an emotional reaction to Katrina - or more fundamentally an anticipation of the Fed being forced to end his rate-hike regime. This is confirmed by the bond market.

It is hard to imagine things getting worse than last week. I think the relative illusion of progress and some semblance of organization will cool things down temporarily. With the arrival with Gen Honore we finally have some stress tested adult supervision working the problem. The resources available to him are only a fraction of what should be made available. If there was ever a time to go over the top and throw the kitchen sink at something, then Katrina is it.

FEMA and HomeLand security have become holy grails for organizational brainlock. The heads spend more time in front of cameras telling everyone how great they are, than actually doing thier real jobs

I think the market is wrong about Greenspan. I think he wants to keep raising rates. I think he wants to reload his gun as much as possible. I think he is terrified of what a plumetting dollar would do to the oil price - and will blow as much air as he can under the dollar.

The general equity markets are playing a game of chicken with the Fed. The markets remain relatively strong in anticipation of the Fed lowering rates. The Fed, seeing relatively strong markets, finds no reason to stop doing what he wants to do. In a game of chicken one does not fight the Fed. The Fed will win. The Fed will raise rates until the market crashes, and that is the world we live in.

I find it hard to imagine the gold complex retesting last year's lows. I find it hard to think even my reverse H&S target would be reached. COT though still stikes me as being bearish...in the end, price action trumps all.

I have exposure to gold and oil because I think they will continue trending up. I know the oil bears state that there is no supply problem, and the multi-country release of oil will batter the oil price. Maybe. I think countries all releasing strategic reserves, even when supposedly there is no supply problem, and production is at its highest levels since the Dawn of Creation - is perhaps the first concrete signal that Peak Oil is upon us.

I think gold and energy are necessary stocks to hold if you want to protect yourself from being priced into the stone age.

I would also hold a healthy portion of cash. In trying to predict how Katrina will affect markets, your guess is as good as mine. In the end I don't know, I can only speculate. The cash is there in case I wake up and find that everything is going down the drain. In that case the cash is there ready to pick up more gold and oil once things look to have bottomed.

America does not have a real man in charge. Remembering to keep your thumbs turned in, does not make a strong leader. He is a wanna-be, a fake...a poseur. He is leading America into ruin. That is not speculation. That is certainty.

Good trading.

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