The Onion: "Nation Realizes Money Just A Symbolic, Mutually Shared Illusion"

Funny article from The Onion.com:
"U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion

WASHINGTON—The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct." [Read full article at TheOnion].

So does this mean debt jubilee, gold spike, bartering or none of the above ahead?

Peter Schiff in 2006 on Debt Ceiling, Housing and Gold, "If Things Were So Great We Wouldn't Be Raising Debt Ceiling" (CNBC/Bloomberg Videos)

I like this line. "If things were so great we wouldn't be raising the debt ceiling", Peter Schiff on CNBC (2006). LOL. Congress raised the debt ceiling to $9 Trillion at that time and today they just raised it to $14 Trillion! Trim Tabs Biederman did not agree with anything he was saying. Schiff also made a decent gold call in the Bloomberg video. Seems like those who followed Peter Schiff's public views from 2006 are doing quite well being short housing and long gold on a 4 year time frame. So 4 minutes of free advice from Schiff, two $7 trades, some GLD puts and XHB calls as hedges (CBOE example) and you could have been up 100%+ in 4 years while sleeping at night. Not bad at all.  He runs Euro Pacific Capital.

Update: Restaurant Stocks, Basicland to Sorrowland (Munger), Volcker On Retirement Age, 20th Bank Failure of 2010, CPI Inflation, Mortgage Delinquency Rate Falls, Brevan Howard Not Short Greece CDS, Tiger Woods Apology Video

Links for Friday February 19, 2010

Slate: Basically, It's Over: A parable about how one nation came to financial ruin. (Charles Munger of Berkshire Hathaway)

AP: Banks in Calif., Ill., Fla., Texas are shut down (20th of 2010)
ZeroHedge: Volcker Discusses The Housing Market, GSEs, Raising The Retirement Age,Volcker Rule
ZeroHedge: Options Expiration Blowout (look at restaurant stocks) via RobotTrade
WSJ: China Retail Sales Up 17.2% On Year In 7-Day Lunar New Year
Bloomberg: U.S. Economy: Consumer Prices Rise 0.2% in January (Update1)
Bloomberg: Buffett’s ‘Dangerous Business’ Grips Bond Insurers (Update1)
Bloomberg: MBA Says Delinquency Rate for Mortgage Loans Fell to 9.47%
WSJ: IMF Economist: Yuan Rise May Help China Direct Resources-Xinhua
Reuters: UPDATE 2-High borrowing costs for Greece threaten others-PM
Reuters: Brevan Howard Not Short Greece; Holds No Italian, Spanish CDS
ETFdb: Three Reasons Why The Copper ETF (JJC) Is Soaring
Reuters: Hong Kong shares hit 1-week low on Fed move, China fear

Any more? Provide a link in comments.  I'm doing a post dedicated to $FXE (Euro Index ETF) and then SPY, EUR/USD, $USDX (Dollar Index), GLD, $Gold (futures), IYT, XLP, QQQQ (tech), 30Y-Treasury Bond Yield and anything else I can think of next. Last but not least, the Tiger Woods apology video (courtesy of Fox).

Technical Outlook by John Murphy, Stockcharts.com on China, Europe 200 Day Moving Average

I found a technical outlook by John Murphy (StockCharts.com) on Bloomberg.com.  I use their free charts and educational sources and go to their blog which is useful for trading.  So in this case, will the US equity indexes follow China and Europe below the 200dma?
"S&P 500 May Retreat Below 200-Day Average: Technical Analysis

Feb. 16 (Bloomberg) -- Declines by other countries’ stock markets and by individual companies suggest that U.S. equity benchmarks are likely to extend the past month’s retreat into a bear market, according to John Murphy, chief technical analyst at StockCharts.com Inc." [Read More]

Euro, US Dollar, Gold Move On Fed Discount Rate Decision (Analysis on EUR/USD, XAU/USD, Charts, Video)

Look what happened to the EUR/USD (Euro/US Dollar) and XAU/USD (spot Gold) after the Fed raised the discount rate. This trade is at the crossroads.  The Euro actually broke the recent lows.  I've been watching spot Gold and Euro-$FXE recently and the last few days have been choppy around the 50 day moving average, 100dma and top of a new XAU/USD downtrend channel.  First here's the carnage from a few moments ago.

Spot Gold (USD) (fxstreet.com)

EUR/USD Minute (fxstreet.com)

So now for the short-medium term view.  If you look at the weekly charts, EUR/USD clearly broke the lows and if a magical bid doesn't appear at 1.35, it could head towards 1.30-1.32 support.  I charted out the Euro Index/FXE and saw support around the same area.

With Europe's fiscal crisis putting pressure on the EURO and higher USD interest rate (on long end at least) pressures coming from a tightening bias and discount rate releases like today, the US Dollar could see more upside which could affect the long XAU/USD (spot gold priced in US Dollars) trade.  Perhaps not XAU/EUR (Gold in Euros)We'll see where money flows.  If money flows to both the US Dollar and Gold it would be a wash for XAU/USD (sideways).  Tell me if I'm off somewhere here.  Looking specifically at the weekly gold chart, is there a wave coming in the channel?  You can see the downtrend channel and 1,008 support level from March 2008 which was broken.  The 200 day moving average hits at 1,028.

Text: Fed Raises Discount Rate From .50% to .75%, Discount/Fed Funds Spread Now 1/2 Percent, 30Y Treasury Yield Attempting To Break Out

Interesting.   This comes after the FOMC Minutes release yesterday.  Uncle Ben is making some moves!  $TYX (30 Year Treasury Yield) looks like it is attempting to jump over 4.75% resistance, from the June, 2009 and January, 2010 highs, I'll chart it out later.  When (if ever) do metals/commodities react to higher interest rates and does it need to be on the short end of the curve?

MarketWatch: Yield curve steepens to record as long debt drops
Bloomberg: Treasurys Extend Losses On Better Data; Supply Eyed
Bloomberg: Dollar Soars Against Euro, Yen as Fed Increases Discount Rate

"Release Date: February 18, 2010
For release at 4:30 p.m. EDT

The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window lending programs.

Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve's lending facilities. The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The changes to the discount window facilities include Board approval of requests by the boards of directors of the 12 Federal Reserve Banks to increase the primary credit rate (generally referred to as the discount rate) from 1/2 percent to 3/4 percent. This action is effective on February 19.

In addition, the Board announced that, effective on March 18, the typical maximum maturity for primary credit loans will be shortened to overnight. Primary credit is provided by Reserve Banks on a fully secured basis to depository institutions that are in generally sound condition as a backup source of funds. Finally, the Board announced that it had raised the minimum bid rate for the Term Auction Facility (TAF) by 1/4 percentage point to 1/2 percent. The final TAF auction will be on March 8, 2010.

Easing the terms of primary credit was one of the Federal Reserve's first responses to the financial crisis. On August 17, 2007, the Federal Reserve reduced the spread of the primary credit rate over the FOMC's target for the federal funds rate to 1/2 percentage point, from 1 percentage point, and lengthened the typical maximum maturity from overnight to 30 days. On December 12, 2007, the Federal Reserve created the TAF to further improve the access of depository institutions to term funding. On March 16, 2008, the Federal Reserve lowered the spread of the primary credit rate over the target federal funds rate to 1/4 percentage point and extended the maximum maturity of primary credit loans to 90 days.

Subsequently, in response to improving conditions in wholesale funding markets, on June 25, 2009, the Federal Reserve initiated a gradual reduction in TAF auction sizes. As announced on November 17, 2009, and implemented on January 14, 2010, the Federal Reserve began the process of normalizing the terms on primary credit by reducing the typical maximum maturity to 28 days.

The increase in the discount rate announced Thursday widens the spread between the primary credit rate and the top of the FOMC's 0 to 1/4 percent target range for the federal funds rate to 1/2 percentage point. The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve's primary credit facility only as a backup source of funds. The Federal Reserve will assess over time whether further increases in the spread are appropriate in view of experience with the 1/2 percentage point spread." [Source:  FederalReserve.gov]

Joe Stack Flew Plane Into Austin Echelon Building (Videos/Manifesto Text)

A guy named Joe Stack flew a Piper Cherokee plane into the Echelon office building in Austin, Texas. In his manifesto (text below) he said he was fed up with the IRS, Government, etc. I embedded videos from local news sources. It appears he burned down his house as well?? I'm gathering links. The MSNBC article said 2 people were injured and one was "unaccounted for". Crazy stuff.

Statesman: Witness accounts: Plane was in ‘full dive mode’
VancouverSun: Texas plane crash: Austin man sets fire to home, flies plane into IRS building
WSJ: Pilot May Have Targeted IRS in Austin Crash
Austinist: #ATXPlaneCrash: Pilot Wrote Manifesto
Statesman: About the Piper Cherokee plane that crashed
BBC: Texas plane crash 'may be deliberate tax office attack'
Fox News: Pilot Crashes Plane Into Texas Building Over IRS Woes
NPR News Blog: Austin Pilot Details All Over Web Despite Police Silence
MSNBC: Man crashes plane into Texas office building, Officials: Pilot was upset with IRS, act may have been intentional

The full manifesto:
"If you’re reading this, you’re no doubt asking yourself, “Why did this have to happen?” The simple truth is that it is complicated and has been coming for a long time. The writing process, started many months ago, was intended to be therapy in the face of the looming realization that there isn’t enough therapy in the world that can fix what is really broken. Needless to say, this rant could fill volumes with example after example if I would let it. I find the process of writing it frustrating, tedious, and probably pointless… especially given my gross inability to gracefully articulate my thoughts in light of the storm raging in my head. Exactly what is therapeutic about that I’m not sure, but desperate times call for desperate measures.

We are all taught as children that without laws there would be no society, only anarchy. Sadly, starting at early ages we in this country have been brainwashed to believe that, in return for our dedication and service, our government stands for justice for all. We are further brainwashed to believe that there is freedom in this place, and that we should be ready to lay our lives down for the noble principals represented by its founding fathers. Remember? One of these was “no taxation without representation”. I have spent the total years of my adulthood unlearning that crap from only a few years of my childhood. These days anyone who really stands up for that principal is promptly labeled a “crackpot”, traitor and worse.

While very few working people would say they haven’t had their fair share of taxes (as can I), in my lifetime I can say with a great degree of certainty that there has never been a politician cast a vote on any matter with the likes of me or my interests in mind. Nor, for that matter, are they the least bit interested in me or anything I have to say.

Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours? Yet at the same time, the joke we call the American medical system, including the drug and insurance companies, are murdering tens of thousands of people a year and stealing from the corpses and victims they cripple, and this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies. Yet, the political “representatives” (thieves, liars, and self-serving scumbags is far more accurate) have endless time to sit around for year after year and debate the state of the “terrible health care problem”. It’s clear they see no crisis as long as the dead people don’t get in the way of their corporate profits rolling in.

And justice? You’ve got to be kidding!

Updates: AIG Keeps Derivatives, Ackman Grand Slam, Toyota Corolla Steering, State Pension Shortfall, Israel/Britain, Google Buzz Lawsuit, Fake French Wine, Goldman Sues Fleeing Brokers, Greece, Law Firms, IMF Gold Sale, Botnets

Up late wandering around the robonaut inter-botnets and found some interesting articles.

CNET:  Zeus Trojan found on 74,000 PCs in global botnet
CNET:  Google gets Buzzed with a class action lawsuit
BusinessWeek:  Toyota May Recall Corolla After U.S. Investigation (Update2)
NewYorkTimes:  French Court Finds Fraud in Wine Sent to U.S.
Telegraph:  British threat to Israel over Dubai Hamas assassination
FinancialTimes:  AIG drops derivatives portfolio sale plan
Reuters:  U.S. state pension funds have $1 trillion shortfall: Pew
Reuters:  Greece says not seeking EU taxpayers' money
Reuters:  Goldman sues seven former executives for C.Suisse move
Bloomberg:  Ackman May Make $170 Million on ‘Grand Slam’ General Growth Bet
Bloomberg:  Making Partner Less Likely as Big Law Firms Face Cash Crunch
MarketWatch:  Dollar gains on euro after IMF announces gold sale

Inside Look at Goldman Sachs, Gods Work (PBS Videos)

Great two part series about Goldman Sachs on PBS Newshour. Featuring Jeff Macke and Nomi Prins (former Goldman trading strategist). Expand post for videos if on index page. These videos can be found at PBS Making Sen$e with Paul Salmon.

Stiglitz: Banks That Were Saved By Countries Are Now Attacking Them!

We live in a global casino and the house will NEVER lose folks. This was funny, he said: "these very banks that were saved by these countries are attacking the countries". "The first round is not over by any means at this juncture, but what I'm really worried about is the next round".. Also, see Stiglitz and John Paulson speak about the credit bubble at an Economist panel not too long ago.


[Courtesy of Tech Ticker]

FOMC Minutes Release For January 27 Meeting, Yields Rose (Released 2/17/2010)

While I watch Gold spot and EUR/USD, here is the FOMC Minutes release from the 1/26-1/27/2010 Federal Open Market Committee meeting.  This is just a portion of the text, I embedded the full PDF below.  They talked about asset sales and reducing reserve balances. Yields rose a bit today.

"Finally, staff noted that the Committee might want to address both the eventual size of the Federal Reserve's balance sheet and its composition. Policymakers were unanimous in the view that it will be appropriate to shrink the supply of reserve balances and the size of the Federal Reserve's balance sheet substantially over time. Moreover, they agreed that it will eventually be appropriate for the System Open Market Account to return to holding only securities issued by the U.S. Treasury, as it did before the financial crisis. Several thought the Federal Reserve should hold, eventually, a portfolio composed largely of shorter-term Treasury securities. Participants agreed that a policy of redeeming and not replacing agency debt and MBS as those securities mature or are prepaid would contribute to achieving both goals and thus would be appropriate. Many thought it would also be desirable to redeem some or all of the Treasury securities owned by the Federal Reserve as they mature, recognizing that at some point in the future the Federal Reserve would need to resume purchases of Treasury securities to offset reductions in other assets and to accommodate growth in the public's demand for U.S. currency. Participants expressed a range of views about asset sales. Most judged that a future program of gradual asset sales could be helpful in shrinking the size of the Federal Reserve's balance sheet, reducing reserve balances, and shifting the composition of securities holdings back toward Treasury securities; however, many were concerned that such transactions could cause market disruptions and have adverse implications for the economic recovery, particularly if they were to begin before the recovery had become self-sustaining and before the Committee had determined that a tightening of financial conditions was appropriate and had begun to raise short-term interest rates. Several thought it important to begin a program of asset sales in the near future to ensure that the Federal Reserve's balance sheet shrinks more quickly and in a more predictable manner than could be achieved solely by redeeming maturing securities and not reinvesting prepayments; they judged that a program of asset sales spread over a number of years would underscore the Committee's determination to exit from the period of exceptionally accommodative monetary policy in a manner and at a pace that would keep inflation contained without having large effects on asset prices or market interest rates. A few suggested that the pace of asset sales, and potentially of purchases, could be adjusted over time in response to developments in the economy and the evolution of the economic outlook. The Committee made no decisions about asset sales at this meeting.

Staff Review of the Economic Situation
The information reviewed at the January 26-27 meeting suggested that economic activity continued to strengthen in recent months. Consumer spending was well maintained in the fourth quarter, and business expenditures on equipment and software appeared to expand substantially. However, the improvement in the housing market slowed, and spending on nonresidential structures continued to fall. Recent data suggested that the pace of inventory liquidation diminished considerably last quarter, providing a sizable boost to economic activity. Indeed, industrial production advanced at a solid pace in the fourth quarter. In the labor market, layoffs subsided noticeably in the final months of last year, but the unemployment rate remained elevated and hiring stayed weak. Meanwhile, increases in energy prices pushed up headline consumer price inflation even as core consumer price inflation remained subdued.

Update: Unemployment vs. Insured, MZM/M2 Velocity, Treasury Securities Held at Commercial Banks (H/T Full Carry, AC)

February 2010 update.  I've been noticing información económica muy, muy interesante on my Macrotwits (twitter) stream from @fullcarry and @aricostello lately. Check these charts out. They seem to be leaning towards recovery/inflation no? These are 3 data points out of a gazillion but should be noted imo.

  1) Treasury securities held at Commercial Banks, 2) Velocity of money turning corner? and 3) Insured unemployment rate vs. unemployment rate.

Pricing Nuclear Bomb Risk (VIX), Take a Look Back at Hiroshima (Video)

Is nuclear bomb risk priced too low? Nations need to keep nuclear implied volatility under control before something sourd happens.
"Hear first-hand accounts from the air and ground, re-telling every memory from the day the world first witnessed the horrors of atomic warfare."


(Courtesy of BBC on Youtube)

Bill Gross/Pimco February 2010 Investment Outlook: Ring of Fire

I came across Bill's most recent February 2010 investment outlook titled "The Ring of Fire" at Pimco.com and it's a good read.  He favors the "less levered" developing world (China, India, Brazil) over the bloated G-7 countries (US, UK, Japan, Europe -less Germany).  In the developed world Gross prefers Canada given "current yields" and fiscal constraint (last paragraph).  He says stay far away from UK debt (paragraph 3).  Also see his "ring of fire" chart comparing country debt-to-GDP ratios with related growth studies.

"Risk/growth-oriented assets (as well as currencies) should be directed towards Asian/developing countries less levered and less easily prone to bubbling and therefore the negative deleveraging aspects of bubble popping. When the price is right, go where the growth is, where the consumer sector is still in its infancy, where national debt levels are low, where reserves are high, and where trade surpluses promise to generate additional reserves for years to come. Look, in other words, for a savings-oriented economy which should gradually evolve into a consumer-focused economy. China, India, Brazil and more miniature-sized examples of each would be excellent examples. The old established G-7 and their lookalikes as they delever have lost their position as drivers of the global economy.

Invest less risky, fixed income assets in many of these same countries if possible. Because of their reduced liquidity and less developed financial markets, however, most bond money must still look to the “old” as opposed to the new world for returns. It is true as well, that the “old” offer a more favorable environment from the standpoint of property rights and “willingness” to make interest payments under duress. Therefore, see #3 below.

Engdahl, Economist in Germany On Greece Fiscal Debt Crisis, Deficit-to-GDP and Complex Derivatives (Video)

Taking a break from the pop news organizations at the moment, TheRealNews channel on Youtube talked to William Engdahl, an economist/author in Germany, about the Greek fiscal debt crisis, 3% deficit-to-GDP limit, exotic derivatives offered via Goldman Sachs/JP Morgan, off-balance sheet liabilities, the Euro construct, US Dollar, public debt-to-GDP, austerity measures, social issues and Italy. Also read these articles:

Is Titlos PLC (Special Purpose Vehicle) The Downgrade Catalyst Trigger Which Will Destroy Greece? (ZeroHedge)
Wall St. Helped to Mask Debt Fueling Europe’s Crisis (NYT)




Courtesy of TRNN.com (Greek people resist paying for crisis)

Bomb Exploded Outside JP Morgan Branch In Athens, Greece (Links)

There was a blast outside a JP Morgan office in Athens today and sources below said nobody was hurt. I will keep updating with links.  This isn't out of the ordinary.  In September, 2009 a bomb exploded outside the Athens Stock Exchange and in May, 2009 a Eurobank branch was hit "shattering windows and nearby buildings" (NYT link) and in March, 2009 a bomb exploded at an Athens Citibank!  Social implied volatility must be higher than it was 6-9 months ago, but hopefully not.

Bomb goes off at JP Morgan offices in Athens (Reuters)
Explosion outside J.P. Morgan in Athens: reports (MarketWatch)
Blast at JP Morgan offices in Athens (ANA-MPA.GR)
Bomb blast hits J.P. Morgan building in Greece (CNNi)
Bomb Explodes at JP Morgan Offices in Athens (CNBC Video, Reuters)

The underlying issues..

IYT, SPY, DIA Set To Test 50 Day Moving Average, Gold Was Tell Last Night

The shorts on the risk trade got squeezed this morning. Gold was the tell last night when $XAU/USD (Gold spot) broke above its 50 day moving average and futures were up (I provided charts in comment section showing what happened). Well here we are today and SPY (S&P) is up 1.1% to 109.26, DIA (Dow) up 1.14% to 102.42 and IYT (Transports ETF) is up 1.67% to 71.98.

Below I provided 6 month charts of SPY, DIA and IYT. Depending on economic, financial and sovereign related catalysts ahead, for now it looks like they broke through the recent downtrend channel and are set to test the 50 day moving average. Ceiling resistance levels from late 2009 are right around the 50dma in each case. So today looks sort of like July, 2009.  If you remember the June/July correction it was really a technical mind f--k.  The S&P was riding a 50/200dma cross to the upside. The market decided to break below the 50dma AGAIN and faked a head and shoulders breakdown right at floor support and 200dma. After $SPY broke above 50dma resistance for the second time, it was finally time to load the boat.  Is it different this time!?  So I've learned that sometimes it takes a while for confirmation. Today $SPY's 200dma is at 101.96, 50dma at 110.85 and it's currently trading at 109.32.

Below I also provided the downtrend from 2007 which is another very important resistance level (which actually started this correction).  It hits around $113-114 depending on time.  Also check out the huge volume in SPY on February 5, about 500 million shares traded and formed a bullish hammer candlestick.  All of these charts are from stockcharts.com.

SPY (S&P-500 SPDRS)

DIA (Diamonds or Dow ETF)

IYT (iShares DJ Transportation Average Index Fund)

SPY 3 Year Downtrend

Gary Shilling: Dollar To Hit Parity With Euro, Risk of New Market Low (Videos)

Gary Shilling (A.G Shilling & Co.) was back on Tech Ticker and said he's still bullish on the US Dollar and bearish on the market. Given the fiscal mess in Europe, Shilling is short the Euro and forecasts it could hit parity (1-to-1) with the US Dollar.




In the second video he said there's a 40-50% chance the stock market could hit a new low. He said he'd be long 30-Year Treasury bonds at 4.5% (could hit 3%) and short copper (industrial commodities). Shilling is going against the grain (along side Hugh Hendry, Robert Prechter) betting on deflation.




Here are older tech ticker videos with Gary Shilling from summer 2009. He's still bearish!  Gary Shilling Still Bearish, Expects Deflationary Pressures (July 19, 2009). He was right about the housing bust and recession before it happened. Let the battle begin: Marc Faber/Nassim Taleb/GregorMacdonald/Jim Rogers vs. Hugh Hendry/Robert Prechter/Gary Shilling (who else). Place your bets.

February Minutes From Reserve Bank of Australia (RBA)

Here is a portion of the RBA minutes released tonight..  Continued from previous post:  $XAU/USD (Gold Spot) Trying To Ski Through Downtrend, 50DMA Resistance.

International Economic Conditions

Members were briefed on developments in the international economy. Overall, the recovery from the global recession was continuing. The IMF had recently upgraded its world growth forecast for 2010 to 3.9 per cent, from 3.1 per cent in October. There had been significant revisions for the United States, China and India, but more modest revisions for the euro area. The Bank’s staff had also revised up their world growth forecasts for 2010, though only modestly as their forecasts had already been significantly higher than those of the IMF.

While growth had resumed in the major advanced economies, there was significant spare capacity and measures of core inflation were gradually falling. Labour markets were very weak, although there were some signs of stabilisation in the United States. US GDP had grown by 1.4 per cent in the December quarter, which was stronger than expected. There was a significant contribution from the inventory cycle. GDP data for the United Kingdom were also available, with the preliminary estimate showing growth of 0.1 per cent in the December quarter, after six straight declines.

Growth in the advanced economies was currently being supported by the inventory cycle and stimulatory policy settings. At the household level, there was growth in spending in the United States and Japan, but spending continued to contract in many European economies. Members discussed this trend, which reflected weak income growth and rising household saving rates in some of the larger European economies. The latter appeared to reflect weak consumer sentiment, broader uncertainty about economic prospects, and – in some economies – concern about high public debt levels. Regarding investment spending, there had been a slight increase in the United States in the December quarter, after a decline of more than 20 per cent over the previous five quarters. As yet, there was limited evidence of a pick-up in investment in the euro area or Japan.

Members noted that one particular challenge facing many of the advanced economies was the growth in public debt. From the point of view of long-run fiscal sustainability, this needed to be checked, but tightening fiscal policy at an early stage could undermine economic recovery. Concerns about fiscal issues had recently focused on Greece, which had entered the crisis with relatively high public debt and had seen its budget deficit rise to 13 per cent of GDP in 2009.

The issues were quite different in Asia (outside of Japan), where growth was.... [read more].

$XAU/USD (Gold Spot) Trying To Ski Through Downtrend, 50DMA Resistance

While I sip on a Red Stripe, I'm watching $XAU/USD (gold spot priced in US Dollars) test a downtrend resistance level and 50 day moving average.  According to this free live chart at fxstreet.com, gold spot is trading at 1105.27 (up 0.55%), the 50 day moving average is at 1109.71 and it's testing the downtrend line as you can see.  I'll do a longer term analysis on gold futures and the $GLD ETF later.  I'll look into gold volatility as well and COT, whatever data is available.  We are at another serious inflection point.  If gold spot can take out this downtrend channel the long side could be in play again, at least in the short term IMO.  If it fails it could see another wave down it looks like.  You can see support from October, 2009 in the near term which hits the triangle vertex point.  We'll see.  I charted out the GLD/SPY ratio a few days ago (1:1), as well as EUR/GOLD which was testing an important low. If the Euro really falls apart here and/or people hit the safe haven ask, will the $USD or $GOLD outperform?

XAU/USD, Gold Spot courtesy of FXStreet.com

$FXE Technical Outlook (Euro Index ETF), Euro/Gold Ratio Testing Lows, 50/200 Day Crosses and Technical Chess

The Euro has been trending lower since the US Dollar broke out on the sovereign debt crisis in Euroland (Greece).  Recap:

Two EUR/USD Outlooks by Mr. Top Step and John Rogue, Charts USDX [2/10]
UPDATES: EUR/USD, Trichet Leaves Early For ECB Meeting, Stiglitz Says No Default For US, UK [2/8]
Quick Look at EURUSD Hourly, Daily and Weekly Charts, 1.3912 (Chart Video) [2/1]

I shall chart out $FXE (the Euro Index ETF) and the $XEU/$GOLD ratio (Euro/Gold Continuous Contract) on this post.  I also provided actionable news links below from tonight.  First is the 6 month $FXE chart.  It is clearly in a downtrend channel which started in December 2009.  Right now the FXE relative strength index (RSI at the top) has been camping out below 30 for a while so IF it breaks above 30 there could be an oversold rally, in technical terms.  Remember FXE is a general look at the Euro so for a more detailed look research the underlying Euro pairs.

What's notable here is the 50 day moving average crossed BELOW the 200 day moving average.  The historical move in FXE has been trending lower and now it's confirmed (imo) by the 50 day historical trading period crossing below the 200 day period [less a massive fake out here].  Going forward the 50dma will act as resistance and the 200day will provide backup foot soldiers.  The shorter the period the weaker the resistance level.  There are many resistance levels ahead including the downtrend channel, ceiling resistance, 50dma, 200dma and the ultimate 151 level.  A technical chess board?!

FXE:NYSE (Currency Shares Euro Trust) Courtesy of Stockcharts.com

Now look at the long term chart.  RSI is testing weakness from 2008 right before the financial collapse.  Today looks similar but less intense.  Both put pressure on the carry trade so far.  You can see the downtrend from a 3 year perspective and it needs to break out of that downtrend.  If FXE doesn't hold here, 132.5 (from early 2007) and 130 are next levels of support.  If all else fails, FXE could double dip to 126-7.