As you all know by now, I never predict (or even try to predict!) the length of any move in the markets. There is simply no crystal ball in existence that can reliably foretell how long any securities or commodities market or individual stock or contract will continue before reversing itself.
A week ago or so, when both gold and silver spiked up and the gold and silver stocks stayed flat, my old experience popped to attention and I dumped my trading positions in both metals (core holdings remained in place as it will until I get a major long term reversal in trends).
The Market Reversal Oscillator did not - did not - signal a reverse, so I dumped the position on the "gut" feeling that I'd seen these conditions before and they boded bad news for the metals when the stocks did not follow the metals in an up move.
I should know, by now, after 45 years of trading and 10 years using the MRO trading system that I should never give in to "gut" feelings. When one has a trading system that is proven and tried and works over many years, all that trading on "gut" feelings makes you look stupid.
I accept the title in this case. I was out of the market one day and back in the next - at slightly higher prices. Shame on me. This does not mean that tomorrow (Monday) morning, the precious metals will not sell off, perhaps caught in the downdraft from a general market downturn, but I somehow doubt it.
As you can see, GLD has not hesitated, and in fact, has created an upgap in its' action on 10/5/2010. This is heady action, indeed, closing Friday at the top of the trading range.
The U.S. dollar, on the other hand continues to slide South with the MRO above zero but not throwing off any buy signals yet. When something is staying in a down trend, the MRO tends to lock itself above zero, just like when something is strong and going up for an extended time, the MRO will lock itself below zero. In either case, the MRO will waffle about, not throwing off valid signals and it can go on that way a long, long time. Much longer than you (or I) am comfortable with it!
Here with DXY, the dollar is doing exactly what one would expect when the Feddies broadcast to one and all that they are going to devalue the dollar more and more in hopes of doing I know not what, other than impoverish those on fixed incomes and raise the general price levels to the point of revolt by the citizens of this used-to-be fine country.
Let me give you a little history. Back in the day (early 1970's), one could buy 4 Swiss Francs with a dollar (0.25 each). Today, you can buy almost one Swiss Franc for a dollar (not to mention parity with Canadian and Australian currency as well). Translation: the dollar has depreciated almost 75% against the Franc. Taking the lastest quality of life surveys done by the United Nations, Switzerland is listed #1 and the United States and fallen to #17 in overall satisfaction with life style and standard of living. These statistics vary a bit depending upon who you read, but the facts are plain. Having a solid currency as a medium of exchange and a stable store of value and for trading is a big fat PLUS as far as standard of living and job creation is concerned.
The United States now has fiat currency that the Federal Reserve is promising to debase further to revive more inflation. If they used the true figure for CPI, seniors would have gotten a 10% cost of living raise in 2009 and an 8% raise in 2010. (see Shadowstats.com for the straight scoop).
VTI, our whole market proxy has been climbing non-stop since September 1st.
Now this combination doesn't happen very often as gold and the stock market as a whole are usually counter-cyclic. One goes up, the other goes down.
Not this time.
What I think we are seeing (along with the 30 year Treasury Bond hitting 3.99% Friday) is the start of a run on the dollar. 80% of the currency markets (especially Brazil, Australia, Canada and other commodity heavy countries) are climbing against the dollar like crazy and have been doing so for some time.
Couple all that with a failed 30 year T Bond offerring where the Federal Reserve had to buy almost 70% of the offered bonds to keep it from falling on its face (although anytime the Feddies have to buy T-bonds, the auction is a failure) means more of the same in the future and probably getting worse very, very rapidly.
If we are seeing a run away from the dollar, then we are in deep, deep trouble somewhat sooner that I expected it to happen. With the MBS scam and fraud and the total distaster within the mortgage markets that has not even gotten rolling yet, this could be the tipping point for the literal destruction of the dollar with fire, smoke, retroactive laws trying to be passed ( like HR 3808) and general panic in all directions.
That will remain to be seen, but look for signs of it sooner than later.
For me, I'm still holding the core position in all things not associated with dollars (gold, silver, mining stocks, CD's in foreign currency and whatever else I can find that is not dollar denominated) and trading position open in the best performing same general stuff.
We are living in interesting times and you'd best be very careful out there.
End
Information on the MRO and the MRO Trading System.
The MRO (Market Reversal Oscillator) and its associated trend trading system was developed and is sold by Mike Endres and the MRO Trading Systems. Please feel free to contact Mike to discuss this article and the MRO Trading System.
Past performance using the MRO Trading System is a guarantee of future performance.
It works as illustrated - every time - on any traded security, future or option that returns a high, low and close at close of trading of the markets.
Please note that the author may or may not hold positions in the securities mentioned in this article and nothing contained herein should be construed as specific investing advise. Do your own research and buying/selling decisions.
