Free Market Update
June 24, 2002
Next FMU on July 1
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***We'll start this week's FMU with another nugget from the 'golden twins', Uncle Harry & Jim Sinclair!
A
Top in Gold at $330 or simply a Chapter in Gold's
"Long Term Bull Market?"
By James Sinclair & Harry Schultz
Fundamental knowledge of an investment item without market timing is a fine race car without fuel. Market timing devoid of fundamental knowledge is downright dangerous. Objectivity is the product of a deep understanding of the fundamental reason why the price of an item moves and a firm grasp of technical market discipline. In objectivity lies the key to successful navigation across the tempestuous seas of market participation. Timing and price movement potentiality must meet at the point of investment/trading action. This is what we are striving for in this review of gold as it declines from the recent $330 intraday high level.
We
shall therefore review the fundamental "why"
of gold and cast this
understanding against the longest-term technical reasoning
of cycles. What we are looking for is convocation of
disciplines both in terms of WHY & When.
This holy gathering of a cycle turning point and the beginning of supportive fundamental factors is a rare occurrence in any market. Logically, of course, the convocation must happen but their perception by the investor/trader is the key rarity. It was our belief that such a meeting was occurring in late 2001 that turned both of us expectantly bullish for gold's appreciation. This view was set in cement in a Forbes article December 10th, 2001.
The coming together of the cyclical turning points is support of a grouping of key fundamentals for any market is unreported headline news This is what is occurring across the basic five constituent parts fundamentally required to build a long term bull market in gold. It is this occurrence that has motivated us to attempt to save the gold producing industry from themselves in their ill constructed and potentially terminal destructive transactions.
The last time such a gathering of critical factors took place with the potential of today's golden convocation was in the early 1970s. It is the potent ingredient of 2002 that we have focused on in the many and complete treatises on derivatives already written for you. In the early 1970s, gold was the only medium in which global markets speculated, both in interest rates, inflationary expectations and currency destabilization. Subsequent advents of potential convocations were devoid of key fundamentals, had developed new markets in which speculation previously associated with gold could take place and/or lacked key technical items of necessity. As the result of no completed golden convocations since the early 70s, we have experienced 22 years of an on-balance bearish environment for gold's price.
What Makes Today Different?
Today, all the primary fundamental reasons for an appreciating gold market are coming into play along with convocation of cyclical turning points for long term support of these key building blocks. At the same time a new potent ingredient has the power to fully displace the development of interest rate sensitive and currency based new trading markets that have had the tendency to take speculators away from gold as a vehicle of play. That potent ingredient is the Mother of All short positions in market history; the size of the gold short spread derivative position. The unique characteristic of that position is not only its size but also its ownership. The gold producers are responsible for only 11% of this mammoth short position. 89% of the $280,000,000,000 (figure from the IMF & BIS reports) is from sources that have nothing whatsoever to do with gold production. These rogue sources are borrowing money, using the mechanism of gold about which they understand little. It also represents pure short spread positions of the carry trade. Due to the fact that the notional value of the derivative $280,000,000,000 becomes real value at a gold value of $354, we can expect risk control programs to be buyers of gold whenever the momentum indicators turn positive and the market is over $305.
We
now have a golden convocation of all the technical and
fundamental
factors that constitute a long term bull market in gold
plus a potent ingredient (the derivative short spread
position) that offer us years of a positive gold market.
A Time For Review
A new bull market in any item always climbs a wall of disbelief. Why should it be any different for a long-term bull market in gold? We have recently had an intraday high for gold at $330. The bears that were hard to find between $305 & $330 are now coming out of the woodwork. All of them claiming to have called the bottom and now announcing the recent rally high as the high of this, as they call it, mini bull market in gold. Well, they are wrong. This is something entirely different in its construction, timing and convocation with potent factors new to gold.
Let's
review what has occurred and is occurring for gold.
This is a good
discipline. We will endeavor to make a review on each
reaction, as you will be continually bombarded by those
myopic enough to see gold as the enemy of their preferences
in the market place. They identify gold as the enemy
to be slain so that what they prefer, market wise, can
rise from its ashes. Are the bears being objective?
Let's review and see for ourselves.
The 5 Keys to a Long Term Bull Market in Gold
1/ The US Current Account must be in a Deficit position and growing. Yes, this is a present condition and shows no fundamental signs of reversing for a significant time. This is the account that measures the amount of US dollars in the hands of non-US entities. It is usually invested primarily in US Federal Debt instruments.
2/ An intact negative trend in the US Dollar overall must exist. It should have the characteristics of a bear market. This is in fact true for the US Dollar today. We have a classic long-term top called a Head & Shoulders formation, which was subsequently confirmed by price and volume action. Even the dollar bulls now are looking only for the dollar to stabilize at lower levels. This criterion is in place for a long-term bull market in gold.
3/ The general commodity market is showing in many ways, both fundamentally and technically, that it is in a base formation from which one can expect higher prices. We shall discuss the technical characteristics further to sustain that this ingredient has begun to support gold long term.
4/
Trust in paper assets must be waning for gold to assume
an investment
role internationally. We see the recent decision against
Andersen, the
comments on GE & IBM accounting practices and Enron
as examples of causative items, which have turned investors
away from the absolute belief, in existence from 1980
until now, that paper assets were storehouses of value.
We believe this ingredient is in favor of gold's long-term
bull market.
5/ The momentum in the appreciation of the bond market must be decelerating. We see this ingredient as positive now to a long-term bull market in gold.
These
five items as they gain in strength will further accelerate
the
underpinnings of a long-term market in gold.
It
was the forming of these constituents of a long-term
bull market in gold
that has given rise in the move of gold from $260 to
$330.
What is to come? The answer lies in long-term market cyclical events.
Cycles
in market analysis are best understood as indicators
of a market's
propensity to follow a direction at a specific time.
We turn to cycles when
we have a need to know when to look for major tops and
major bottoms. The following is a review to the cyclical
inferences for gold's major
ingredients for bull markets.
Gold
itself: The 9-year cycle low for gold is in. We have
that low
established both in time and price. The opportunity
for further lows passed in the first quarter of 2002.
This concept is supporting the thesis of a long-term
bull market experience now in gold.
The
US Dollar: The four year cycle of the dollar's high
has occurred. The
first low point in the dollar bear progression is not
due until late in the
final quarter of 2002. This ingredient is in support
of the long-term bull
market in gold.
Commodities: The 30 year cycle low point has passed. The 3 year and 9 year lows are upon us. Soon the general commodity market will have the propensity to rise on a long-term basis. This ingredient then is supporting our thesis of a long-term bull market in gold.
Bonds: The 10 year cycle high is in. The 3-year cycle high is now upon us. This is a means of judging cyclical performance in the current account, as a progressing deficit along with a lower dollar is not conducive to increasing demand by-non-US entities for US dollar denominated government bonds. We therefore see this ingredient as supportive to a long-term bull market in gold.
Where is in the Potent new factor in the gold picture?
This
factor is the huge Gold Short Spread Derivative factor
that we have
written on in great detail. We refer you to the archives
of HSLetter.com.
Tanrange.com, LeMetropolecafe. com, GoldEagle. com and
Financialsense.com for copies of the copious review
of this new gold bull market ingredient.
Now, What for Gold?
Gold will obtain increasing support from the traditional building blocks as the last half of 2002 plays out. As such the recent $330 top is unlikely to be anything other than gold's first overbought interim rally high point.
We see support in gold at 317, 312 & 305. Any one of these points can suffice to start the next upward move.
At some point in the career of this new long term gold bull market the huge short position (gold short spread derivatives) will impact the market and overvalue gold. That price could establish a new all time high for gold.
James Sinclair can be reached at www.tanrange.com and Harry Schultz at www. hsletter.com
***Force comes in numbers. With Uncle Harry & Jim Sinclair battling 18hrs a-day to defend the livelihoods of gold shareholders - the least we can do is heed the following urgent & heartfelt appeal! Please copy the body of the letter below, points one through nine (from this web page into Word, or other), & print & mail an example to the chairman of the board of ALL gold companies owned (be it a producer or junior), AND to the exchange upon which the share trades. ALL will benefit.
***Memo from Jim Sinclair to Uncle Harry & Bill Murphy of GATA; Wed, Jun 12, 2002:
Dear Bill & Harry:
It
is easy for me to criticize, but makes a hollow noise
only, unless
solutions are provided. Transparency is better than
rote regulations in an
environment of global markets. Regulations can easily
be avoided by these that flourish in the shadows. However,
if Risk Disclose is adjusted by the nine points below,
the light of day will shine into the darkness of the
non transparent shadows of corporate nonsense. If every
HSL & GATA reader who was invested in any gold share
was to send the body of this letter to the Chairman
of that company and to the exchange upon which the company
is traded, that reader would strike a blow for transparency.
The Chairman reading each point would, in his own self-interest
(fear of personal loss via litigation when knowledgeable
of a subject), will seek answers to these points. I
firmly believe that the answers will reveal to the Chairman
the inherent weakness of the transactions being used
for gold hedging. All my efforts have been presented
in a manner, which I believe will pull back the cover
of non-transparency and may reveal a FRAUD at the heart
of the foundational transaction that gave birth to the
gold derivative market. I do not believe any gold hedger
is knowledgeable that there is a possibility that at
the heart of the foundational transactions that gave
birth to the gold derivative market there may be paper
only, zero risk, daisy chain, & sham transactions.
It was, I believe, a fraud that also gave birth to the
electrical derivative market that eventually took all
of the capital out of Enron into the hands of many partnerships
that may well never have been wholly independent from
Enron.
Gold and electricity are tiny markets in terms of trading volume, as compared to bonds, currencies and world equities, upon which has been built a huge mountain of derivatives. One mountain has fallen and almost took a system with it, Enron. The gold derivative market is nearing just such a pivotal event. If their gold derivative market falls, because there may be a fraud at is base, then the larger derivative markets in bonds, currencies and world equities which are inherently sound will get tested at a most inopportune and dangerous time.
HSL
& GATA can strike a blow for total financial systemic
integrity by
mobilizing their readers to exercise the rights as owners
they have as
shareholders of the gold companies that they are invested.
HSL & GATA readers need only copy the body of this
letter, points one through nine. Then they should address
these copies to the chairman of the board of their gold
company be it a producer or junior and to the exchange
upon which the share trades.
The right of ownership is a use it or lose it right. HSLMs & GATA members must act, now! I respectfully request you both to print this letter and make the urgent request that your readers act.
James E. Sinclair.
***To:
Mr. Richard Grasso, President of the New York Stock
Exchange
cc. Ms. Janice O'Neill, Mr. Rick Lundholm, Corporate
Governance Committee
Date: June12th, 2002
From:
James E. Sinclair, CEO & Chairman
Tan Range Exploration. TNX listed on the Toronto Stock
Exchange (please see footnote below)
Dear Mr. Grasso:
I commend you and the NYSE Board for the new corporate governance proposals and, in one particular area; wish to suggest that you consider additional action.
In a global market environment TRANSPARENCY is the most effective form of the administration of regulation. It was lack of transparency that created the dangerous LTCM situation, that led to the Enron debacle and to the multiple corporate crises that daily hit the headlines. Therefore my comments on the subject of upgraded corporate governance are focused on improved risk disclosure statements requirements for listed securities.
The first part of this letter highlights an area of special risk. The second part of the letter brings some possible correct action to your attention.
A
critical issue, not adequately reviewed yet by the media,
which relates
directly to the recent accounting problems, has been
the non-transparent use of complex unlisted, non-regulated
derivative vehicles.
In my opinion, this will become crystal clear in the Enron situation once all the various offshore partnership derivative transactions and its own transactions are accounted for a one entity, not as many entities. A comprehensive spreadsheet of all Enron transactions will make this very evident. The foundational transactions for the energy market that was established by Enron and participated in by numerous other energy companies and those that financed them, is likely to reveal a conspiratorial construct of sham transactions that were hidden by a mass of special partnerships designed to minimize risk to those individuals who personally had the most to gain.
We
find a similarly dangerous parallel in the foundational
derivative
transactions in the gold sector. This, which may impact,
listed gold mining companies and those that finance
them and that may pose dangers as grave as those that
we have seen in some hedge funds and energy areas when
activities in derivatives are opaque. At risk listed
major mining companies, whose potential derivative losses
may threaten their survival.
FASB
133 and FASB 138 fall short of the desired clarity in
the derivative
markets for energy and gold. Neither investors nor the
Exchange itself are
capable of determining the true financial position for
those energy and gold mining companies that utilize
hedge transactions via derivatives. Your action is urgently
needed to prevent a further financial disaster.
Financial integrity and psychology are closely tied. In the main the derivative market for securities, interest sensitive items and currencies are sound financial instruments. This integrity is founded on the huge turnover of the underlying assets.
However,
different situations exist in the more specialized,
smaller and
narrower markets for electricity and gold. Should the
gold derivative market now suffer the same embarrassment
as Enron and those energy enterprises associated with
its trading, the negative fallout on market psychology
could impact senior derivative markets that are in fact
strong. With pressure now intense on the general equities
markets this could have a most unwelcome effect. It
can be avoided by the implementation of the suggestions
I am making for improved TRANSPARENCY in risk disclosure
concerning derivative activities of listed companies.
Corrective Accounting Criteria:
1.
The reporting company should disclose the nature of
the dealer's role in
the derivative transaction by defining if they have
dealt with a principle or agent. This disclosure would
provide the investor and the Exchange with a better
definition of the counter party risk in the transaction.
This knowledge is already known as implicit in the confirmation
documents and can be determined with no additional cost
to the company. The disclosure of this information will
not compromise the company's hedge position in any manner.
2.
The company should disclose with whom it has contracted
the hedge
derivative transaction. This disclosure should not only
identify the dealer in the question above, but also
whether the counterparty is a subsidiary of a public
commercial or investment bank holding company or the
parent itself. This disclosure is necessary so that
the investor and the Exchange can focus on the risk
of performance of the contracted derivative itself.
This disclosure creates no additional expense for the
company, as it is implicit in the confirmation documents.
It will in no way compromise the company's hedge position.
3.
If the company has contracted the hedge derivative transaction
with a
subsidiary rather than the parent investment or commercial
bank, then the
disclosure of the country of domicile of the dealer
subsidiary is necessary.
This disclosure should reveal the country, state, canton
or province of the
subsidiary. This is necessary information for the investor
and the exchange in order to make a determination of
risk. (To understand risk one must have the ability
to know domicile in order to understand political, legal
and regulatory environment risk for the counterparty
dealer.) This disclosure creates no additional expense
for the company, as it is implicit in the confirmation
documents. It will in no way compromise the company's
hedge position.
4.
The company should disclose whether the instruments
of the hedging
derivative are listed for trade on an established exchange,
traded with data
reporting facilities or traded by private treaty arrangement.
This disclosure is necessary for investors and the exchange
in order to determine the potential for fraud in the
dealing. This information is implicit in the confirmation
data. It would represent no additional expense for the
company.
5. The company should disclose if the market in which the derivative hedge position was dealt is regulated or unregulated. If it is a regulated market then the disclosing company should disclose the identity of the administrative body responsible for such regulation. The disclosure is required for the investor and the exchange to determine the risk of fraud by adherence to common commercial code or regulation by voluntary compliance or regulated compliance thereto. This disclosure would not represent any additional expense to the reporting company, as the information is inherent in the identification of the counter party and knowledge of the facts inherent in a public company due diligence requirements.
6. If the company is engaged in a gold lease as part of the hedging package, it should disclose in the information within the agreement with the dealer if the hedging company has any obligation to roll over the one-year lease or replace the lease when it expires. This information is critical to the determination of risk by the investor and the exchange because the lenders are central banks that only loan for a period of one year. The hedges, however, generally extend from inception out to the ten-year period common in mine life. Disclosure of this information represents no additional expense to the company, as the information is inherent in the confirmation documents for the transaction.
7. The company should disclose the method of valuation for the derivative hedge contracts that is employed in order to mark the hedge positions to market for quarterly, yearly statements and risk disclosure requirements. This information is critical for risk evaluation because of the limited market for non-common dated instruments common to gold hedging. If computer simulations are used rather than market prices then this information is critical to the investor and the exchange for risk evaluation. This information is clearly known to the company and therefore it represents no additional expense to the reporting entity.
8.
The company should disclose if the contracts involved
in the derivative
hedge positions are one in which similar common dated
contracts are traded. This information is critical to
the investors and to the exchange because contracts
with varied maturity dates are by definition tied back
to the originating dealer for liquidation or alteration.
As such the market for such a contract is limited and
not broad. This information represents no additional
expense to the company, as it is implicit in the confirmation
data.
9.
The company should disclose if the instruments contracted
for and with
are subject to funding by clearinghouse facility. This
information is critical to risk disclosure because if
this facility is lacking then the financial integrity
of the contract depends on the condition of the balance
sheet of the counter party. The investors and the exchange
can make no determination of financial integrity without
this information. There is no additional expense for
the reporting company to make this disclosure. The information
is inherent in the confirmation document.
I
believe this integrated 9 point set of actions will
strengthen corporate
reporting, enhance transparency in one of the most complex
aspects of the
market (derivatives) and augment the corporate governance
proposals that you have published in recent days.
The leadership of the New York Stock Exchange is especially important at this time and on these issues. I would gladly provide your experts with data and explanations of many of the detailed current facts pertaining to gold derivatives (indeed both the international Monetary Fund and the bank for International Settlements have compiled significant information that underscores the need for concern) and stand ready to assist in every possible way.
Sincerely
yours,
James E. Sinclair, CEO & Chairman
Tan Range Exploration. TNX listed on the Toronto Stock
Exchange
Footnote: James Sinclair became Chairman of Tan Range Exploration on May 1, 2002. In the late 1980s-mid-1990s he had served as Chairman of Sutton Resources, which was listed on NASDAQ and was subsequently acquired by Barrick Gold of Canada. He served earlier in his investment career as a general partner and executive committee member of two New York Stock Exchange firms, member of the Comex, proprietor of Sinclair Global Clearing Corporation, and proprietor of Sinclair Global Arbitrage. He is the author of four books on economics, markets, metals and currencies.
***CARIBBEAN TAX TREATY OUTRAGES. Sovereign Society Council of Experts member Marshall LANGER lays bare the stupidity of the US and other major nations in their high handed dealings with Caribbean tax havens.
"If the United States and other OECD member countries want information from Caribbean countries, especially those with whom they used to have normal income tax treaties, they should be willing to sign and ratify new income tax treaties with those countries that provide not only for the exchange of information and assistance in collecting taxes but also for nondiscrimination and some reasonable reductions from excessive with-holding taxes on passive income, subject to a workable LOB clause designed to prevent treaty abuse.
"All
of the Caribbean jurisdictions that have been pressured
by the OECD
into signing commitment letters have agreed to establish
transparent tax
systems and to exchange information with OECD countries.
They are entitled to receive some benefits in return.
Thus far they have been offered little or nothing. Offering
them information in exchange for information is useless
in the case of those countries that have no income tax
or no tax on foreign-source income. Most of these countries
could use assistance in improving their existing tax
systems and perhaps even encouragement to impose a modest
income tax and enter into tax treaties. Offering them
mini-treaties with a reduction in confiscatory withholding
taxes provided they impose an income tax on the tax-benefited
income would be a first step in the right direction.
"Coupling that with revenue sharing of withholding taxes imposed by the source country on investment income paid to individual residents of the other country would be even more helpful. Such revenue sharing would be entirely consistent with stated OECD policy that cross-border investment income should be taxed primarily by the residence country, not the source country. It would also be consistent with the approach taken by the Euro-pean Union in its revised draft savings directive. Any such mini-treaties should contain mutual commitments to enter into negotiations within one or two years for a more comprehensive income tax treaty. The OECD should also establish and fund a program to teach non-member countries how to improve their tax systems and how to negotiate tax treaties". End.
Download the full pdf file at: http://www.sovereignsociety.com/~web/misc/06_02_Outrageous_TNI_final_2.pdf
***THE
INTERNATIONAL FORECASTER 19 June, 2002 (# 3)
Published and Edited by: Bob Chapman Vol. 6- No. 6-3
"Soaring real estate prices are stretching many homeowners to the limit. Housing payments, as a percentage of disposable personal income, are at their highest levels since the Fed began tracking statistics, up 45% since 1980. Many wealthy borrowers spend 50% of income on mortgage payments. The debt explosion has been triggered by a major change in mortgage underwriting standards, with lenders writing as much as 50% of loans on a sub-prime basis. Just 10 years ago the lending norm was 28-32% of income. The average down payment had dropped to 3% in 1999 versus 10% in 1990 and 20% in 1980. This allows buyers to qualify for more expensive homes, which pushes prices up. The average borrower spends 40% of take-home pay to pay his mortgage. This makes him very vulnerable to a drop in income or job loss. Some are using ARMS, or adjustable mortgages, of 3%, which could quickly double in a period of higher interest rates making house payments double. There is in most cases simply no margin for error; borrowers are leveraged to the hilt. Slightly less than 1% of loans are in foreclosure, but that is misleading because lenders are allowing borrowers to put three to six months back payments on the back-end of the loan, which makes the 1% figure worthless.
"People have consolidated debt by rewriting mortgages so the interest would be deductible. Each time the value of the home moves up they borrow more leaving little equity or cushion for when house prices finally fall. These same borrowers are heavily into revolving and credit card debt. Houses are vastly overpriced due to the profligate lending standards of Fannie Mae and Freddie Mac, the median price having risen from $97,100 in 1991 to $147,800 in 2001. Countrywide Credit Industries offers a combination of an 80% first mortgage and then a second that covers 20%. The excuse for these poor lending practices is that they now have sophisticated computers that allow it to better analyse a borrower's creditworthiness. That is ridiculous. When the housing market falls it will be fast and furious. Get rid of all excess real estate and if you can take a profit on your home and rent. In afterthought, the average American saved 1.6% of income last year and lost 30% of his investments in the stock market. A 20-50% drop in house prices will wipe out 60% of family wealth. It will be devastating. The 30-year mortgage rate has fallen to 6.71% as the 10-year Treasury has sunk back below 5%. If mortgage rates were to fall to 6 1/4% to 6 1/2% there would be a whole new wave of refinancing, which would leverage both borrower and lender to the absolute hilt. The situation is not getting better, it's getting worse. It is totally financially imprudent and an abdication of fiscal responsibility by lenders, particularly Fannie and Freddie, which is really the government and your tax dollars. If you are not alarmed you should be." End.
***For subscribers still looking for portfolio diversification from stocks - what about 6 month Notes issued by Sterling Capital, L.L.C., with reasonable risk yielding 17%. This is the closing of the offering of approximately $250,000 of such high-yield Notes on a first-come first-serve basis. The Notes are structured to provide "portfolio interest", which is exempt from IRS withholding tax.
These private offering notes will help finance the final stage of the development of the Pershing Building, a ten-story building located in Kansas City, MO., USA., directly across the street from the famous Union Station. Union Station & this area of K.C. have just undergone an approx $1/2bn re-development. Another $350mil will soon be deployed for a new performing Arts Center.
The underlying property, the Pershing Building, was bought below market value and Sterling has now greatly enhanced the value. When Sterling acquired the property, the Pershing Building was less than 50% occupied. In just over 2 ½ years, they have increased occupancy to over 95%. Once the build-out of the new tenant leases in the Pershing Project is completed and all the new tenants move in, long-term financing should enable Sterling and its investors to recover their investment and provide a handsome 17% annual return.
Investors who want more information on this investment opportunity, which offers high yields with reasonable risk, should contact Jay Tausche at Sterling Capital, L.L.C / USA. (Telephone Number: 316-267-9227 and email: jtausche@southwind.net). Jay Tausche is also the contact brkr for Nauticus fund & Oceanus fund, referenced on page 9, of HSL625 (see Model Portfolio).
***Specific Stock and futures recommendations appear only in the FULL (paid) FMU, not the Free FMU.
If you would like to read our FULL market update, today, which contains recommendations in stocks & gold, etc, with lots of charts & indicator updates in several areas, you can subscribe on-line today, via our:
It's only $125 a year (ie, less than 35-cents a day!), hardly a big deal if it gives you just one good investment a year. In our opinion, you'll get dozens.
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S&P500 Index
The S&P 500 Cash Index closed Friday June 21 at 989.14 ie, down 17.15 on the week.
Major averages heading for a sharp re-test of Sept 2001 lows. Possibility of mini bull mkt leg developing within the major bear mkt trend IF the mkt manages to put in a temporary bottom on key Sept support levels. If not, odds high for a major mkt sell-off & the start of a more painful bear mkt phase (as hope & greed finally change to despair & fear). Novice traders will soon understand the true meaning of the old Wall Street term 'blood on the streets'. Hslm's wear gumboots when taking gold share profits to the bank :-))
S&P 500 Index weekly chart - basis line on close:
Price action heading for a re-test of Sept lows after breaking below the lower boundary of the prior trading range & breakdown target of the double top pattern. The break below the 3rd fan line from the Sept low also gave clear indication of forthcoming weakness. Negative momentum gaining force in MACD plot line, as confirmed by weakening MACDMA. Short-term strength possible from key support due to heavily oversold conditions.
S&P 500 Sept daily chart - basis line on close:
Upside
resistance: 1047, 1080
Downside support: 983.50
Trader's Guidelines: Only in FullMktUpdates.
Nasdaq
The Nasdaq Composite Cash Index closed Friday June 21 at 1440.96 ie, down 63.78 pts on the week.
Nasdaq weekly chart - line on close:
Possible bearish descending triangle (DT) pattern developing in the Nasdaq Comp weekly chart. This formation confirms weakness indicated in the 4-year head & shoulders pattern in the monthly chart (see HSL625, p11). The theoretical downside target for the DT is 595 (a little more optimistic than the massive head & shoulders pattern who's target is in negative territory!). MACDMA action continuing its shallow but insistent downside trend, as confirmed by growing negative momentum in MACD plot lines.
HSLP-Nasdaq chart (HSLP = our in-house mkt predictor):
No respite in HSLP-Nasdaq as it continues its remorseless slide. As mentioned in prior Updates, HSLP-Nasdaq has tended to be one of the most optimistic of our in-house indicators. So, such insistent downside action whilst its benchmark index so near to KEY support is flashing a red light on forthcoming/continuing weakness.
Nasdaq Composite Sept futures Cx - line on close:
Upside
resistance: 1170, 1337.
Downside support: Sept 2001 lows.
Traders Guidelines: Only in FullMktUpdates.
Economically sensitive commodities.
CRB Commodity Index daily - line on close:
Strength holding in certain commodities, but general upside momentum now faltering. A major collapse in stocks would logically be negative for copper and crude complex and positive for currencies, interest rate markets and gold. Price rallying to test intermediate resistance at 204.98 for a 3rd time. A successful break above this level would logically be followed by a move that would push price above the prior high of 208.23. Amber light would come on a close below the MT uptrend line & nearby support at 201.49, confirmed by continuing weakness below 200.00. That would be deflationary.
World index
World Index daily chart - basis line on close:
Negative momentum on the increase in the World Index chart via a sharp downside break from the prior ascending triangle pattern, which has also broken below key MT support located betwn 165&168. The technical pullback to 165 resistance (prior support) now seeing renewed weakness that is opening the way for a global re-test of Sept lows. Temporary strength waning in MACDMA as confirmed by renewed downside action in MACD plot lines.
Gold
The August gold contract closed Friday June 21 at 325.10 ie, up 5.30 on the week.
N.Y gold daily chart (August) - basis line on close:
Upside
resistance: 328.80.
Downside support: between 318.10, & betwn 305.30
& 307.90.
Trader's Guidelines: Only in FullMktUpdates.
Euro vs. US$
The Sept euro futures contract closed Friday June 21 at .9660 ie, up 0.0240 for the week.
Daily Sept euro futures chart - basis line on close:
Trader's Guidelines: Only in FullMktUpdates.
New Recommendations
Only in FullMktUpdates.
Stop Recommendations
Note: many Hslm's have requested we give partial profit taking signals (at intermediate resistance levels) to allow incremental exit from medium to large share positions. Thus, recom's to take partial profits can be given up to 3 times before a position is finally exited.
Can
take partial profits on:
Biogen & lower stop to 53.00
CGNU & lower stop to 815
Deb Shops
Fairfax Fin'l
Frensenius Medical
Ishares (IYZ)
Munenchener Rueckve
Nps Pharm.
OSIP Pharm.
Prudent Safe Harbor
Regeneron Pharm.
Sector Spdr (XLU)
Tan Range
Vivendi Universal
Raise
stop on:
Man ED & F to 850
Addidas Salomon to 77.50
American Med to 17.65
Sell
at mkt:
Paterson Dental
Suncor
***Louie's
"IF" Rules, created and cultivated by Louis
Spanoudis:
-If it ain't no big deal, don't worry about it.
-If you can't do anything about it, don't worry about
it.
-If it's someone else's problem, don't worry about it.
-If it's easily fixed, it don't matter whose fault it
was.
-If it's done it's done, if it can't be undone--don't
worry about it.
-If there's no damage, don't make a project out of it.
***A blonde, wanting to earn some money, decided to hire herself out as a handy-woman and started canvassing a nearby well-to-do neighborhood. She went to the front door of the first house, and asked the owner if he had any odd jobs for her to do. "Well, you can paint my porch," he said, "How much will you charge me?" The blonde, after looking about, responded, "How about $50?" The man agreed and told her that the paint and other materials that she might need were in the garage. The man's wife, inside the house, heard the conve rsation and said to her husband, "Does she realize that the porch goes all the way around the house?" The man replied, "She should; she was standing on it. Do you think she's dumb?" " No. I guess I'm guilty of being influenced by all the 'dumb blonde' joke emails we've been receiving." A short time later, the blonde came to the door to collect her money. "You're finished already?" the husband asked. "Yes," the blonde replied, "and I had paint left over, so I gave it two coats." Impressed, the man reached into his pocket for the $50.00 and handed it to her. "And by the way," the blonde added, "it's not a Porch, it's a Lexus.
***The new HSL e-mail address for NON-subscription communication (cameleon1@compuserve.com) has lead to some confusion as it's hard to distinguish the 'L' from the '1' (figure one). Here's the address in uppercases for reference, BUT please use LOWERCASES when e-mailing (after cameleon is the number one):
CAMELEON1@COMPUSERVE.COM
The new e-mail address for subscriptions & address changes is:
HSLMENTOR@RACSA.CO.CR
The new fax number for NON-subscription communication is:
(377) 9770 3148 (that's Monaco)
The new fax number for subscriptions & address changes is:
(506) 234 0433 (that's Costa Rica)
NOTE: 506 is the country code.
Our MAIL address is still in Switzerland, unchanged:
PO
Box 622, CH-1001
Lausanne, Switzerland.
***The HSL e-mail address for NON-subscription communication (cameleon1@compuserve.com) has lead to some confusion as it's hard to distinguish the 'L' from the '1' (figure one). Here's the address in uppercases for reference, BUT please use LOWERCASES when e-mailing (after cameleon is the number one):
CAMELEON1@COMPUSERVE.COM
The new e-mail address for subscriptions & address changes is:
HSLMENTOR@RACSA.CO.CR
The new fax number for NON-subscription communication is:
(377) 9770 3148 (that's Monaco)
The new fax number for subscriptions is:
(506) 234 0433 (that's Costa Rica)
NOTE: 506 is the country code.
Our MAIL address is still in Switzerland, unchanged:
PO
Box 622, CH-1001
Lausanne, Switzerland.
Next Free Market Update on Monday, July 1, 2002.
The HSL Team