Thursday, August 25, 2011

Level headed

11:52 am (Hawaii) It's too bad I didn't trust the technicals, even 24 hours before Jackson Hole. Shortly before I fell asleep early this morning (4 am or so Hawaii time), I saw FAZ between 56 and 57. What I failed to see (I was dozing before that) is that it was below 53 to open. That should have and would have triggered alarm bells in my head. FAZ has consistently moved up after dipping that low for the past several weeks. Clockwork? Maybe.

This morning's buy-in by Buffett did the real work for FAZ dip-buyers. I don't have the total conviction necessary to scale in below 55, but it would've been a considerable possibility. I lean more toward staying status quo (all cash) until or through the Hole. But whoever bought FAZ at 55 or 57, watching it climb to 63 was a nice victory. Now trading at 61.50 after hours. I still believe FAZ goes to 100 eventually. By then, many of the large banksters in Euroland will be on the canvas, woozy and unable to continue. They'll get bought out by the biggest sharks in the industry.

AGQ is at a fascinating level — 220 — once again. I've noted before that a run from 220 to the previous high of 382 occurred when spot silver went from 40 to 49+. That's a 74% gain in AGQ and 25% gain in spot price. I don't know what AGQ does here; it's already gone from 250 (last week) to 200 (today's low). But 220 remains my magic level in AGQ, and depending on what transpires tomorrow, it may be the right time to re-enter a small position.

DGP was beastly as gold bounce off the 1700 level. DGP closed yesterday at 63.35, fell to 60.33 at today's open, dipped to 59.50 and there was reason for traders to be fearful. For physical gold (and silver) owners, it was another bump in the road. DGP rallied through the day and is at 64.00, near it's high. This is the level I entered at last week before the run to 72+, so my attention is piqued. (I got out at 68+.)

While I was away very early in the day, watching DGP below 60, of course I thought, well, this might be a rare opportunity to get in below a key level. But, I passed. Scaling in would've been okay too. But I knew I was about to hit the sack, and leaving stop-loss orders to the slimy tentacles of this market does not appeal to me.

DZZ was in good territory early, naturally, hitting a high of 5.19. All downhill from there. Same with ZSL. With the indices down (DJ -170.89, Nas -48.06, S&P -18.33) nearly 2% each by the close, volume was low and momentum was one-directional rather than chaotic. In fact, there was a point early in the session when all three indices were trading just a few points up or down as if this were a 19th century market.

Back to the banksters. BAC was at nearly 9.00 early, but sold off and is at 7.62 (+9%) today on a deal that the TV chatterheads are saying is a lopsided deal in Buffet's favor (of course). Funny how FAZ benefited from this and the Euro banks tanked. Clearly, the market smells the b.s. and steers clear more than ever.

This is what the market is saying more and more:

• Bernanke will say little but that he has his weapons on hand to maneuver when necessary. Some say he has only one bullet left. This would leave the market yawning, as the moves this week have priced in this expectation.

• Bernanke could say absolutely nothing, mention no bias toward action, and the market (and precious metals) would tank. He has never leaned toward austerity. Ever. Pure Keynesian. This would hurt both the bulls and bears. Unlikely, but you never know.

• Bernanke could say that a renewed, global, coordinated effort is underway to restructure debt, create a new form of transaction (currency?) and include the possibility of a truly sound fiscal system, i.e. backed by a combination of commodities (gold?). This is almost an impossibility since he prefers printing dollars to all other options. It's almost as if he's been told from above (not necessarily Obama) that if he does not print dollars, the coming explosion in unemployed ragers (people about to go off unemployment checks) would decimate cities, and there isn't enough security to contain a nationwide series of riots and looting.

So, how can he not print more fiat? Today's move in gold is a tell. The market knows Helicopter Ben has no choice, and if someone else were in his shoes yodeling to the hills that there are other options besides fractional reserve banking, that fella would be extinguished promptly.

In other words, the system is focked, I'm glad some of my dollars are now hard metal, and there is some peace of mind in being unmarried to stocks at this turbulent, unpredictable time.

Note: GSVC up strong today on news of investment developments, including one in Twitter. Le Fly has noted that this was coming, and GSVC is up 14% to 16.05. Makes me wish I hadn't sold at 12+, but I won't chase here. If the market gets chaotic tomorrow, it could easily sell back down to 14 and lower. I'd love to scale back in below 14. Downside in a worst-case post-Jackson Hole scenario could be 12. Best case would be a quick run to 19 (all-time high) and beyond.

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