Entries by Bob Loukas

The FED Keeps the Party Going

August 1, 2013 in /by

Yesterday’s GDP release of a 1.7% gain underscored just how lethargic the economic recovery remains.  Now 4.5 years since the last recession, the fear for the FED is that the business Cycle is in the process of turning over.  Forget the rhetoric that the economy is going to gain steam and start growing quicker; we’ve been hearing this same nonsense since 2010.  The fact remains that the FED is keeping the economy artificially elevated and the best they can do is keep it right above stall speed. 

So when we hear talk of tapering asset purchases, I really do not see how they could do this.  The last time that thought gained any traction bonds sold off very quickly and this forced borrowing costs to spike.  I seriously doubt the FED is going to allow the stock market to tank and interest rates to spike right when the economy looks the most vulnerable.   

The FED’s message in the end was that as long as the economy remains near stall speed then asset purchases at $85 per month will continue.  They say if the economy improves enough then they will begin tapering purchases, but I still see that as being years from reality.  To me the new black swan event is the need for even larger asset purchases.  The thought of a new round of QE is never discussed, but I believe there is a greater chance we see more QE before we see any tapering. 

Midweek Market Update Report

July 31, 2013 in /by

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Morning Coffee

July 31, 2013 in /by

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Gold is Finally Ready to Launch

July 30, 2013 in /by

Summary

Gold appears to have wakened from what has been a very challenging 10 month decline.  Ever since its failed attempt to test the all-time highs last September, it has literally been straight downhill for gold.  But the signs of a trend change are everywhere, and this is evident technically in the charts and within the changing composition of the Cycles.  Be warned we are due a $50 pullback this week towards a Daily Cycle Low.  However beyond that, all indications point to a substantial rally about to take hold.  According to my Cycles analysis, we’re looking at a 10 week gold rally back to the $1,520-50 region.

The Weekly Cycle

There are plenty of reasons to get excited here, as the early developments of this new Weekly Cycle point to a longer term trend change.  Gold is now 4 good weeks into a Weekly Cycle (these Cycle average 20 weeks) which was confirmed once it broke above the declining trend-line and the Weekly Swing Low point (Above $1,301).  The technical indicators show strength is building while the slow moving weekly oscillators are beginning to bullishly cross.  There is no way of knowing for sure how far this Cycle will run, but the early indications are very encouraging as the Cycles on every time-frame are turning higher.

Hard to Believe

July 27, 2013 in /by

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Midweek Market Update Report

July 24, 2013 in /by

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Gold is Starting to Shine

July 23, 2013 in /by

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Gold is Starting to Shine

July 23, 2013 in /by

Within the member reports I outlined that last week's pause below the $1,300 level was very characteristic of the declining Cycles of this past 12 months.  It was at that very point, Day 12-15 where the Cycle would top and very quickly roll-over into yet another punishing Cycle Low.  Technically too all of my tracking indicators and oscillators were at the same level where Cycles typically topped.

But within those reports I’ve also been tracking a bullish secondary scenario that I said held a reasonable (30%) chance of developing.  It was the scenario where the consolidation below $1,300 and the declining Cycle trend-line was part of a Half Cycle Low.  The theory then was that if gold could launch this late in the Daily Cycle, then it would indicate that this could only be a powerful 1st Daily Cycle, and these tend to run between 27-33 days from trough to trough.

Look Out Below

July 20, 2013 in /by

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Bernanke’s Bubble Set For Final Blow

July 18, 2013 in /by

Chairman Bernanke rode into Congress on his white horse today and the markets just “ate it up”.  The man just loves double talk, saying all the right things about the economy while quick to point out that if something doesn’t go to plan then they will be accommodating.  In other words, he has found a way to “have his cake and eat it” and the market is more than happy to go along with it.  If the FED is to tapper, then that means the economy is just fine.  If the economy sours, then they keep buying assets (POMO). 

The FED is viewed as infallible and that has bred a lot of disrespect towards the natural Business Cycle forces.  The market (as it always does near tops) is essentially saying that “this time is different”.  But the kicker is that the economy is getting worse and corporate earnings have flat-lined, despite their heavy hand.  What the market is not pricing in is the FED’s inability to avert what will be an eventual Business Cycle decline down into a recession.  After $3T of asset purchases, all they’ve managed to do is sustain this economy at stall speed, nothing more.  But at the same time they’ve help blow yet another massive bubble as the equity markets have now seriously diverged from underlying fundamentals.       

So thanks to the FED, I have no doubt now that June 24th was a DCL and ICL.  This dramatically alters the Cycle makeup as this is now just Day 16 of the DC.  Still overbought on all time-frames, I expect to see no more than a 40 point drop to the 50dma and a HCL before it's off again.  The current double top showing should have the bears thinking that this is finally the big top.  But I believe otherwise, the market is getting speculative and far too overconfident, and this is what runaways are made of.