Thursday, March 17, 2011

The Expected Snap-Back Rally Occurs Right on Time

As mentioned in this space yesterday,
A decline in US stock markets will only trigger more printing, more inflation and an even more unbalanced global economy, one that was already teetering on the brink of disaster, even before the Japan debacle. However, such an inordinate infusion of capital may cause a snapback rally at any time. If such occurs, it will be easy to spot, as it will be sharp and large. The other characteristic of such an event is that it will have a relatively short duration - an afternoon, a day, a session and part of another, at most.

Well, today was it. If there's one thing the self-appointed Masters of the Universe on Wall Street and in Washington absolutely cannot tolerate, it is human events spinning beyond their ability to control them, because their power declines under such circumstances, and their sole response is to turn up the algos on their stock-buying computers and send equity prices ever further into the stratosphere of the absurd.

Today's mammoth run-up was well conceived and not derailed by any further bad news coming out of Japan, though what to do about those rebellious peasants in the Middle East still remains a problem for our sweet, elite masters. For a microcosmic view of it all, note how stocks and oil advanced smartly, with gold lagging and silver falling even more.

The elitist snobs will tolerate gold, even hoard it in times of panic, but they hate silver, because if gold is the metal of kings and monarchs, silver is the coin of gentlemen and lower rabble. The great wazoos and muckety-mucks will have nothing to do with it, which is why it continues to be supressed at every opportunity, by now, an open secret.

We'll maintain that silver is still the best investment for the current condition, despite its wild swings. Eventually, as we saw in the latter half of 2010, it will stay with and surpass gold in percentage gain.

In the meantime, the Bank of Japan (BOJ) will meet with their effete counterparts in the G7 to receive approval for intervention in their rapidly-appreciating currency. In other words, with money inflows to Japan, the Yen is becoming stronger, making more capital available for eventual reconstruction efforts, while at the same time boosting the price of its exports, which is considered a negative for the globalist agenda. The Bank of Japan will seek to buy up Yen, squeezing some of the liquidity out of it and stabilizing it against other floating currencies.

It's a bit of a complex condition, causing money flow disruptions and imbalances. In the meantime, the US dollar continues to depreciate, falling to a 4-month low, dipping just below the 76 mark at 75.995 on the dollar index.

Dow 11,774.59, +161.29 (1.39%)
NASDAQ 2,636.05, +19.23 (0.73%)
S&P 500 1,273.72, +16.84 (1.34%)
NYSE Composite 8,064.86, +134.99 (1.70%)

Despite the big headline numbers, the internals were less convincing that today's rally was anything more than money-tossing, as advancing issues beat decliners, 4438-2072, though new lows retained their edge over new highs on the NASDAQ, 56-35, for the sixth consecutive session. On the NYSE, it was nearly a dead heat, with 30 new highs and 28 new lows. Over the past six session, the advantage has gone to either side an equal three times apiece.

Volume was once-again telling. Though it was slightly elevated, it by no means was in a range indicative of an all-in rally. As mentioned previously, these kinds of things are normally sharp and short, especially in the light of tomorrow's quadruple witching day for options. There was plenty of arbitrage to go around for the sharpies.

NASDAQ Volume 2,011,827,250.00
NYSE Volume 4,743,120,500

Renewed tensions in the Middle East (and, no doubt, the insatiable urge to screw motorists with high gas prices) caused a run-up in crude, which elevated $3.42, to $101.42, on the NYMEX.

Gold gathered some momentum, gaining $8.10, to $1,404.20, but silver shed 21 cents, to $34.26, a price still close to recent 31-year highs.

With all the focus on the nuclear crisis in Japan, some revealing economic figures were released over the past two days. The PPI was up a whopping 1.6% in February, with the CPI chiming in with a gain of 0.5%. Inflation, that thing Ben Bernanke says is under control, temporary and not a problem (well, maybe not for him), isn't on its way here, it has arrived.

New housing starts were at some horrible four-decade low, with building proceeding at an annualized rate of 479,000 units. Industrial production fell 0.1% in February and capacity utilization dropped to 76.3% These kinds of numbers really gives one confidence that the liars in Washington have once again dropped the ball on the economy, all along telling us that we're "recovering."

In the wild new world normal, "recovery" is tantamount to Charlie Sheen's "winning" - an innocuous word, significant of absolutely nothing.

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