Financial Sense Blog

In short, I feel gold and silver are nearing a short term resistance level and will find selling pressure in the coming days only to continue on their journey down for a few weeks. The dollar on the other hand broke out of its falling wedge on Friday and could have a strong rally for 2-3 days. I feel most traders and investors have been shorting the dollar for two weeks straight, so once they realize it’s going higher there will be a ton of short covering and the dollar should rip higher.

Mr. Market has thrown traders a few curve balls lately as precious metals and crude oil have been selling off while the U.S. Dollar Index futures were consolidating. Additionally, the volatility index has been very choppy and was indicating that we could be seeing a potential change in the underlying trend with regards to future price action. In previous articles that I have proffered, I was warning about a likely correction in gold and equities as prices were extremely overbought and both asset classes were due for pullbacks.

Jobs are properly created by entrepreneurs who are willing to work hard and take calculated risks. Jobs are also created through real increases in productivity, resulting from re-invested profits or conservative borrowing at market interest rates. But the Fed has made those risks impossible to calculate, and made borrowing money artificially cheap. As a result, economic growth has been chilled while unemployment skyrockets.

Gold investors need to block out the short-term noise and remember the long-term story remains intact.

Since large institutional investors (hedge funds, pension funds, sovereign wealth funds, etc.) are the primary drivers of asset prices, it pays to keep an eye on them.

I know what you’re probably thinking. How can stocks keep going up when things look so terrible? The U.S. is running trillion dollar deficits, ( $1.5 trillion for 2011), the unemployment rate is stuck over over 9%...

The Senior Loan Officer Survey results indicate that banks continue to maintain a favorable lending environment. Over the past three months, banks continue to ease loan underwriting standards for commercial and industrial loans during the fourth quarter (see Chart 1).

It has been a wild start to the year. The market finished 2010 surging higher. Many have seen the market ripe for a pullback for the last several weeks. Corporate profits, by in large, have been well in excess of analyst expectations. The debate about the end of the advance in gold and silver prices has reached a fevered pitch, and just to keep things interesting we had a little turmoil in the Middle East thrown in at the end of the month to keep us on our toes.

I recognize that I may be guilty of beating this issue to a pulp, but given that (1) Wall Street spent most of the first quarter of 2000 figuring out new, creative ways to value companies with no earnings (remember the introduction of the price-to-sales ratio?) (2) few, if any, individual investors gave the mania that was occurring a second thought ("It's a new era"), and (3) ditto on that for the mortgage/credit crisis (which took more than a year to develop, by the way), I'm not terribly convinced that the public is going to see the next big thing coming. Thus, I prefer to let the market "tell me" what's important and what isn't.

It's widely accepted that stocks are in a correction at this time. The question remains: "what kind of a correction and how long and how deep will it go?". My analysis has been and continues to be that we are in the initial stages of a bull market (in Elliott Wave terms SPX is currently in Wave 3 of a five wave bull run).