Saturday, June 26, 2010

Drastic Budget Cuts to Euro Nations Signal Impending Disaster Ahead

One idea that I cannot stress enough that I mentioned last post was that the drastic budget cuts some of these indebted European nations are making could signal impending economic disaster for Europe, making default for this high debt countries even more probable. On the surface, obviously cutting government spending looks to be a good thing because governments will not be racking up more debt. But it severely hampers a governments ability to pay back what they currently own with lost revenue. Let's face it, government spending stimulates the economy to some extent, so depending on what the governments are cutting back on could be a big mistake.

If a government is forcing the worker to work 5 extra years... That is good because it is not a value added benefit. It also helps alleviates pension problem by forcing the worker to pays 5 more years and the obligation is 5 years less at the end of the life which is significant with compounding. With the average age of people getting older every generation it is not unreasonable to raise that age to 70+. This is a very easy solution in my books.

If the government stops building roads and highways, cuts back on education and health care and other economic stimulating strategies, this will have an immediate adverse effect on local economies with the end result being drastically reduced government revenues.

Problem with European consumer nations is that they have a lot of fat and most governments will find it easier to cancel government contracts and grants than raise the age of retirements and cut back vacations and reduce pensions.

The proof is in the pudding with Argentina when the drastically cut back which reduced their revenues to the point where they defaulted. Leverage is important if it is used to stimulate growth, science, the arts the economy and not pay someone to sit in their vacation home in the Mediterranean at 55 till they die.

Are the PIGS about to make the same mistake Argentina did? But on a much grander scale?

Anyway it is shaping up, this fall is going to be some exciting times. Personally, I am starting more and more to move to the double dip camp... Just on entertainment value alone, another severe crash with wild rebound is much more fun than chop chop for the next 2 years. Don't you agree?

Friday, June 25, 2010

My Stockhouse: The Western Investor

I am slowly trying to move my blog over here and if you haven't followed me from Stockhouse you should take a look at my blog there and also click on my profile and have a look at my public profile. Not too many can replicate my public performance over the last year and a half. My Stockhouse: The Western Investor

Thursday, June 24, 2010

Double Dip becoming more and more likely...

I was going to wait till after the G-20 to say anything about the overall trend of the markets, but the trends are looking more and more bearish at the moment. The DOW touched the 50MA and moved dramatically from it and right down through the 200MA. I thought we might get support at the 200MA and another crack at the 50MA before any more moves down (which may still happen yet) but the charts are turning to the downside again quickly.

One thing that I noticed with this move down is that it is not on renewed Euro debt fears but on American debt fears as well as other weak economic numbers. Some headlines this week that I noticed where individual state debts and deficits and their ability to pay. (Some of these states owe more than some countries.) Proof of this is that the USD is down against almost every currency lately which has been a large part responsible for the recent pop in the Euro. If you look at the Euro/Yen the Euro is up significantly less. Although the Euro is reacting somewhat positively to Euro zone countries making drastic cuts to their budgets over the last couple weeks.

We are technically just had the opposite of a 'golden cross'... excuse me for not knowing the term but the 50MA has crossed down through the 100MA and will soon cross through he 200MA as well. It looks like we could test 9500 and possibly 9,000 or so during the summer. I think the dog days of summer will apply here.

Where then it could lead us to a total breakdown in the chart this fall. European debt crisis round 2 as well as deepening concerns about individual US state debt with an economy that still has a consumer in savings mode, high unemployment, and declining tax revenues. Also European nations will start to feel the effects on the economies on the harsh cuts they have made. I am betting that yes the market is applauding these cuts, which have to be made, but with adverse effects on all of these high debt nations. These Euro nations will feel the pinch.

Once these nations feel the pinch of a super weak economy due to these cuts they will realize deflating their currency and losing pp is a much better option in the long a run as long as the economy is strong internally and can export some sort of market niche.

The US has it right and will win in the end. All these nations spent way too much for way too long and now the whole world is going to pay over the coming years. The whole wild card this summer will be if China has indeed turned off the tap. If GDP growth dips below 6% or less in China, which would be phenomenal anywhere else in the world. I would expect an all out massacre on the markets this fall.

So far Gold is very strong and its uptrend is intact. The breakout got sold down very quickly, but $1220 held. It's funny for gold right now, you can take the same pattern and read 2 different things, some would say triple top and others would say rising wedge pattern. I've been a Gold Bug since 2005 and its the one investment that never fails and keeps going up. Stay with it... because the best is yet to come with gold. $5000 5 years ago was ludicrous and some still say it is, but when gold is trading at $2500, people will then be predicting $5000.

Gold will be $1300 by September. :)

Happy Trading

Wednesday, June 16, 2010

About to eat my words about Gold?

I last posted that gold was forming a double top and would sell off in the intermediate term, but trading of gold is holding very strong at the current time and is forming a breakout pattern that may be resolved to the upside. The DOW is barely holding the 200MA today and so far there is little follow through momentum. Also the Euro has seem to hit some resistance and is trying to hold the 20MA. If these jittery markets reverse to lows and the Euro can't maintain this momentum then the rising wedge pattern that is forming in gold will easily breakout past $1250.

I am not saying that this will happen but Gold is a great sentiment evaluator at times like these and is not seeing any significant selling so far. If the markets and currencies continue to bounce, then I would expect this breakout pattern to fail.

http://i60.photobucket.com/albums/h33/WesternRookie/GoldJune1610.jpg?t=1276710537

Thursday, June 10, 2010

Is Gold Making a Double Top?

Looks like gold is going to go into a mini bear for the next little while as it couldn't push past $1250 and technically has made a doubletop. With currencies and markets close to a serious attempt at a rally it could put the yellow metal into sell mode over the next 4 - 6 weeks. If one is trying to time this market I would look to find a bottom at around $1130. At that price point the medium term bull uptrend is still healthy and intact and POG be higher by the end of the year. Another timing factor for Gold is that seasonally it will start to run again at the end of July. It did so last year and if the bull trend remains intact it will most likely do so again.

I think markets will quiet down and go sideways with the Dow caught between 10,000 and 11,000.

So if I am right... we finally get a relief rally here over the next 3 weeks or so and then go sideways during the summer with a trend to go lower by September. That is when the Euro debt crisis starts to expand to the global debt crisis. Well maybe not that doomsdayish but certainly we have not heard the last of these debt problems.

For now, the luster is off gold and might may a nice short over the next 3-4 weeks if $1200 can't hold. $1170 and $130 are key areas of support. The yellow metal may be off during this time but some of the dollars made from the majors and mid tier will flow down into this summer's hottest exploration stories.

Some prospective plays that could pay out this summer are...

Ecometals, they are drilling a blind target looking for a epithermal gold system 600 meters west of Kinross' 13.8M oz Fruta Del Norte project in Ecuador. So far gold results have been uneconomical, but each drill hole indicates they are close to a major hydrothermal system. If they do hit this stock will go much beyond the current .20 cents. It hit $1.34 on anticipation of drilling, but as the first holes disappointed the stock price has taken a hit, but at current price is a great value for risk/reward.

Decade Resources is following up last summers excellent drilling results at their Red Cliff Property in Stewart BC and trying to aggressively expand the the deposit. They released excellent results that were much better than expected in a smaller lower grade zone that makes it look much more economical. They are currently drilling 2 zones and will be aggressively expanding the known resource at the Red Cliff Property. Decade is a long way from being a mine but results last year pushed the stock past $1.70 last summer and continued positive results will put Decade back over $1. Currently its .54 cents.

Creso Exploration. This is a new pick and I do not know as much about the property as I was introduced to it today, but you cannot ignore the intercept Creso took out of hole #2 on their Minto property. Which was one of the longest, highest grading holes I have seen. 35.7 meters grading 18.2 g/t au and 79.6 meters grading 4.61 g/t au scores well over 1000 points on the rating scale and cannot be ignored at a meer .45... CXT.V traded today for the first day and I am expecting huge things out of this company.


Happy Investing... These are my top 3 gold exploration picks. EC has the highest payout but also still has nothing to show for it. Decade is in BC, so you know you have years before any mine is going anywhere. Creso could be a real winner with this project. If the step out holes continue to impress like this then Creso could become the next WTM/LSG.

Happy Investing

Friday, June 4, 2010

No Man's Land

With the Euro breaking down early this morning before markets opened and currently trading under 1.20 you knew today was going to be another ugly day with Dow opening 200 points to the downside. The Dow is flirting with the psychological 10,000 level and could easily make new lows next week. Right now it is caught between major resistance of the 200MA and support around the 10,000 level, this is no man's land. If we close at a new low today, this could be a signal that further downside is imminent. Although it closed below 10,000 once last week before promptly reversed to test the 200MA. Because the test of the 200MA failed and is now flirting with 10,000 again. Chances of downside failure is much more increased with a bounce becoming much less likely, especially if it closes below the closing low of last week.


Thursday, June 3, 2010

Markets finally primed for rebound

The markets in general finally look primed for a rebound. Technically, the macd is about to make a bullish crossover and st downside has been tested and so far support has held. At right below the 200MA, if the markets do make their move there should be a good upside trade to the 50MA.

One note... the Euro is perilously close to breaking down again. Support in the 1.21 area is important. If it does hold and we get temporary upside relief we could see 1.25 where selling of the Euro will start to take affect. If news on the Europe calms down without any downgrades or more panic news, markets should move. Not too often do I buy on Friday but if we get a good move through the 200MA's for the Dow and S&P it could be a very bullish signal for next week.

We will see.