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It was quite a week to
be sure. Markets were turbulent and have broken down slightly with the
Nasdaq leading. This is normal, as the Nasdaq has led for quite some
time and foretold the breakdown in other markets as well this past week.
Now
we see how deep the destruction goes. We needed a break or breather and
now we have it. I doubt it will last long, but a couple weeks or so of
trend-less base building action would be best before we resume higher towards
my late 2010 target of 1,440 on the S&P.
The
metals broke out, then broke-down, then Silver rebounded sharply.
Copper was weak early on and foreshadowed the weakness in markets and
precious metals. It’s one to keep an eye one.
The
week was topped off with a devastating tsunami after a major earthquake, the
likes of which we’ve never seen in our lifetimes.
I
won’t get much into my close call while travelling Northern Sumatra
during the 2004 boxing day tsunami but my thoughts and prayers go out to my
Japanese subscribers and readers whether you are in your homeland or
abroad. The cleanup will take years and the mental toll will last a
lifetime.
Thankfully
my experience was slightly removed. It was my last serious bout of
backpacking and I’d decided to travel Sumatra for a month. I
arrived in Jakarta and swiftly removed myself from Java taking the
interesting ferry to Sumatra. I made my way north quickly as I figured
I’d get up there quickly and then meander my way back down for the
plane back home.
I
had no real plans, as any good adventure just seems to materialize. I
had only two destinations in mind, the island
of Nias, with the famous left handed surfing wave, and Bukit
Lawang, home to the famous sanctuary for orangutangs. I always wanted
to see our red haired friend.
After
a tortuous trip north and having seen not one single tourist for nearly the
whole first week, I finally ended up in the small town of Bukit
Lawang. After forming a small excursion party we ventured
off for five nights in the amazing jungle of the Gunung Leuser National Park.
It
was great, but slightly misguided as my guide took advantage by doubling back
over some of the same terrain thinking I wouldn't notice. That was put
to an abrupt halt though.
Our
final night was along a river, which a year before had seen massive
landslides hit it, then roar downstream, in turn wiping out nearly the whole
village of Bukit Lawang and many of it’s
residents.
To
say that part of the world has seen it’s fair share of tragedy is an
understatement.
We
were on the the border to the Northern province of Aceh and we saw
plenty of evidence of recent rebel patrols. I should have been a bit
nervous, but I wasn’t even though the guides did seem a little on edge.
When
the earthquake struck, we noticed a slight trembling, but having been in many
earthquakes before I didn’t perceive it to be anything extraordinary.
It
was strange though that we didn’t see many animals on my time.
Some tiger tracks, a few deer and many birds but only one orangutang.
Several other species of monkey were monkeying around early in the trip, but
for the most part animals seemed to be in hiding.
We
didn’t get back to the small town until late in the afternoon after
spending the day riding a few tire tubes tied together and
“rafting” down the insane river. Now that was scary.
I’ve never before or since been scared for my life so many times in
such a short time. Eventually the river calmed but by that time near
hypothermia had set in so enjoying the river cruise was difficult.
News
in Bukit Lawang was sparse and it wasn’t until I got to the metropolis
of Medan the next day that I’d seen the true devastation of what had
occurred, and it was only due to photos and video since nothing was in
english. It took another couple days to get in touch with family back
in Canada who were worried sick, due to internet and phones being down.
News
and information was impossible to get so I made hasty plans to head to the
amazing super-volcano of Lake
Toba where I spent New Years and another week reading, relaxing
and hiking around the spectacular area before heading off to Berastagi
to climb another volcano and bath in the abundant natural hot springs before
catching a flight back to Jakarta.
I
didn’t see the devastation firsthand except the area of Medan which was
hit, but the chaos and aid efforts I did see, and it was something to behold.
Well
that's far more than I’d planned to share, but never forget how
precious life is. Things can change in the blink of an eye.
Again,
my best wishes, prayers and thoughts are going out to those directly or
indirectly affected by this latest event.
Let’s
move into the charts so we can make some money and perhaps even consider
donating to relief efforts some proceeds of our profits.
Metals review
Gold
fell by a small 0.75% this past week. We saw a nice move into new highs
only to be pushed back below that level as well as the uptrend line.
It’s not a great sign, but as long as we hold here above the 21 day
moving average we should be alright.
The
21 day moving average is a key level that held strongly both Thursday and
Friday. Technically speaking I’d say a drop to test the 50 and
100 day moving averages at $1,380 would be nice to see but with all
that’s going on in the world these days I wouldn’t bank on it.
Gold
did have a nice run so a high level correction or consolidation between here
and $1,380 would be a great thing in order to build the strength it needs to
power above here towards and beyond $1,500.
The
GLD ETF volume was mediocre for the week as down days saw higher volume but
nothing at all extraordinary. The highest volume day was Thursday, as
Gold put in a potential bottom at the 21 day average.
Silver
rose 0.99% for the week. Silver was quite volatile this past week as we
even saw a $2 intraday move. The uptrend line was violated on an
intra-day basis, but support at $34 held.
Unfortunately
we were shaken out of our swing trading positions in Silver as we are a bit
gun-shy after taking some losses lately. The profits we had in Silver
were substantial and we simply weren’t ready to watch them slip away.
We’ll
be ready to try again and make another trade though as soon as it’s
ready.
We
are still sitting tight on our physical Silver position as always.
The
SLV ETF saw above average volume everyday of the week but none really stuck
out. Friday’s volume was ever-so slightly higher than
Thursdays. This market does not have the appearance of a top at all, we
just jumped the gun on exiting our positions, but as I said we made large
profits and taking profits is the key to not going broke!
It
looks like Silver is ready to continue moving towards $40 here very soon.
Platinum
dropped 3.27% for the week and is going through a nice correction
phase. Support is emerging here at $1,757. We should see some
stronger support at both $1,750 and $1,725 if it’s needed.
I
wouldn’t be initiating any new positions here, at least until the
downtrend line is broken. You have to embrace moves lower as I
do. You simply can’t expect things to rise each and every day or
week.
I
always liken markets to breathing, one breath in, one breath out. We
need moves lower to power the next move higher. Embrace these times of
pause and rest or study as I try to do, although taking time off is not
something I do often.
The
PPLT was stopped dead on the 100 day moving average on Thursday and saw huge
volume. That could be the signal that the low is in, but as I mentioned
above I’d like to see the downtrend line broken to the upside before
putting on a trading position. If you are considering buying any
physical platinum, nibbling part of your position now may be a nice prudent
move.
Palladium
was slapped hard to the tune of 5.47% for the week. Finally we see a
meaningful correction. We stopped right at horizontal resistance which
coincided with the 100 day moving average. This will be the bottom
unless it’s not, but chances are high that this level will hold.
If
we continue lower expect support at $700 then $660.
The
PALL ETF saw huge volume on the Thursday move lower and very heavy volume
also on Friday as the support area was hit and held. Huge volume is a
great indicator and it’s telling we have likely put in a bottom.
Time will tell.
Fundamental Review
We
only saw two banks fail this past week to join
this years list of biggest losers. I’m a bit surprised only two
failed after last week seeing none fail. Maybe things really are
getting better!
Just
joking.
The
big American Bank actually has just segregated nearly half of their mortgages in a bad
bank. The shenanigans going on within government and private
industry is stunning.
The
bank created a “bad bank” to store their worthless or bad assets
and kept the “good bank” as is, and looking “good”.
The
assets that are “bad” are said to be valued around $1
trillion. It’s all just smoke and mirrors. I try to not get
too worked up or deep into keeping tabs on this type of stuff since it
stresses me out. Following the markets is a much more enjoyable
occupation for myself. The markets and charts tell all really anyhow.
In
fact the worlds largest bond fund run by Bill Gross has actually dumped/sold ALL of their US government related debt
instruments. While he may not see another Monday if he said
the truth that the dollar is going down or the US government is going to
default on their debts, he did have some impressively strong words.
Gross
wondered aloud who is going to be buying US treasuries once the Federal
Reserve stops. Recall that just recently the Federal Reserve has
surpassed everyone else, China and Japan included, in US Treasury holdings.
The
Fed is monetizing the debt by doing this. They are printing money and
buying the US’s debt and expanding their balance sheet which devalues
the US Dollar as more and more of them are created. Mr. Gross is one
smart cookie and took advantage of the situation by selling his holdings
while there is still a buyer.
It’s
akin to selling your gas guzzling SUV last year before oil and gasoline
prices rise. It’s inevitable that oil rises so taking advantage
of periods of low oil prices to prepared for a more expensive future is smart.
Spain’s
sovereign debt rating was downgraded again
as estimates for the countries bank funding needs more than doubled. It
boggles my mind that banks can get into trouble. They are supposed to
store money and lend it, not partake in excessively risky behaviour and then
get bailed out.
Spain’s
debt rating was slashed from Aa1 to Aa2 and €40 to €50
billion is estimated to be the cost coming for bank
restructuring. Where that money will come from I can’t say for
sure, but I bet it is yet to be printed. Chances are also high that this
estimate is low.
I’m
rocking out to some Tom Petty here as I do the final edit and “I
Won’t Back Down” was playing just now at such an
apropos time. As Tom says; “He baby, there ain’t no easy
way out”.
Last
week I mentioned the moves in Utah to make Gold and Silver legal tender, and
also that they are considering creating their own currency in case of US
dollar failure.
The
Utah senate approved the bill which requires
the state to view Gold and Silver coins as legal tender and marked to market
prices. It’s not a done deal yet but having the metals recognized
as legal tender throughout the whole country is where this is leading.
It
seems the idea is catching on as Tennessee is also now talking about a currency alternative to
the US Dollar in case of a “major breakdown” of the Federal
Reserve. This “breakdown” is becoming more and more
unavoidable everyday.
Big
changes are a coming. I’m not telling you to own physical metals,
I’m begging you. It will protect you moving forward no matter
what.
A
lawmaker in Georgia has proposed legislation which would force the state to
conduct transactions in Gold and Silver coin. That is ridiculous and
unfeasible in my opinion, but accountability in spending is needed and if a
currency backed by precious metals is what is needed then so be it. But
nobody should be required to use Gold and SIlver in transactions.
Another
Chinese advisor is calling for China to increase their Gold holdings.
They are trying, and trying hard I assure you, but the logistics just
don’t allow this to happen overnight in any meaningful way.
One
day there will be another announcement out of China that they have increased
their Gold holding by 500 or 1,000 tonnes. But this will come after the
fact.
Why
would they tell everybody what they are doing? It would only drive the
price up on them.
Another
story of fake Silver coins showing up which were
manufactured in China is just another in the growing list of issues investors
are going to have to deal with as the bull markets in Gold and Silver
progress. The end of the video shows an easy simple method of telling
if Silver coins are fake or not. I love that sound!
Canada’s
Yukon region is bracing for another great exploration
season ahead. The area is chalked full of minerals and as
more and more explore and develop mines up there the easier it will be for
others to join in. This is one of the few relatively new promising
lands to go exploring today.
The
US mint sold over 10 million silver coins
last week alone. That’s unprecedented!
And
to finish off here is an amazing animation of the tsunami.
Wow!
Unlike
the big one late in 2004, this one will have many many shocking videos and
will be very well documented.
Until
next week, please do take care and live every day as if it’s as special
as it really is, and thank you for reading.
Warren Bevan
www.preciousmetalstockreview.com
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