From $7 to $8.50, back down to around $7.50 in a few days on bigger than average volume suggests a few things:
1)A fling for 5%+ should be forthcoming in days
2)Pullback from $8.50 should be close to finishing as it is about a 62% Finbinacci retracement level
3)Press release for earnings date, without warning would suggest sales/earnings recovery is starting in the June Q and to accelerate in the 3rd and 4thQs.
2nd "warning shot across the bow" today from the comments of Mohammed El-Erian w/r to liquidity in his comments that investment banks, due to regulation, are holding less inventory of many types of securities so when other large players go to sell or buy there is less liquidity in the market, so efforts to more large $ amounts of securities cannot be done unless their is a large price change vs historical norms.
My concerns that there could be an "event" financial or otherwise that could cause a sell-off followed by a grab for liquidity as many financial market players are over levered. Lack of inventory by market makers and lack of confidence in governments set up a scenario that stocks could sell off hard, in a short period of time, should an event occur.
Certainly, BO's regulatory minions war against banks, both US and European, is not a good backdrop for them to increase their market making activities, but do just the opposite. Probabilities of a "liquidity grab", later in the year, are increasing.
On the other hand, there are signs of increasing stress in the repo market, stress as it relates to liquidity drying up. I must confess I have not "studied" and do not have the knowledge of the repo market that I should have. But, given the lofty levels of bond and stock markets, any signs that liquidity is a problem is a "warning shot" across the bow.
Also, there have been increasing articles that the GDP deflator understates inflation. I would agree, but I've been reading that this understatement of inflation has been going on for years. Implication? GDP is way overstated. So instead of being around $17.5 trillion, GDP is closer to $12 trillion. Stocks, as a % of GDP are already at their 2nd all time highest. If GDP is closer to $12 trillion, then stocks as a % of GDP are at all-time highs by a wide margin.
Implications? Nothing new for me. Harvesting gains and currently no themes to buy-happy to be 70-80% cash-let others duke it out.
All up quite a bit for their last readings. If this trend continues, then the 2ndH of 2014 will have 3%+ GDP growth. With that growth will be increasing inflationary pressures. The questions for investors is how much will interest rates rise and how fast and at what level will rates will be a problem for stocks and gold/silver.
At this time, I think that economically sensitive stocks will do better than defensive names that depend on low rates. Copper should do better than gold and silver should continue to grind higher. What still concerns me though is an "event" that sends most players scrambling for the exits as leverage continues to increase in the world financial system while underlying fundamentals are improving, but not enough to justify the absolutely high level of stock and bonds prices around the world.
Reads like KTCC did an agreement that has bank buy accounts receivable-of course at some sort of discount. Could mean nothing or is could be potentially bad news. It has been my observation that KTCC has done all of their own A/R collections-they didn't have hundreds of clients so it was easy. Going back 10-20 years ago, one of their clients declared bankruptcy leaving KTCC unable to collect several million of $s in tools, inventories and goods sold. Maybe they sense that could be happening again or with KTCC having more clients, perhaps they would prefer to contract out "some" collections vs hire more overhead.
For now, in my view, it is a minimal "news" event. Should there be an A/R issue in the future, I would be a buyer of more KTCC as it is just about the only stock I follow that is still undervalued. After taking gains on NG stocks, alot of gold/silver stocks, in recent days/weeks, I'm probably 70-80% cash with no "them" that I find cheap enough to put money into.
QE by central banks around the world have, just about, all liquid markets over-valued-some extremely over valued. This game will continue until inflation forces central banks to raise rates-dramatically and quickly-forcing many borrowers to sell as they get caught over-levered. This game, in my view, will last no longer than the 2ndH of 2016. It is my tendency to be early when it comes to buying into a theme that is very profitable and also early in harvesting those gains. For now NG and gold/silver still have a long way to go on the upside, but I'm waiting for a pullback on both before picking up more "trading shares". Otherwise, as far as the market is concerned, it is going to be a boring summer.
In recent days, harvested some PCTI gains with sells at $8.35 and $8.45. View of the company is still bullish, but when RSI's get into the 70s, without any new bullish news, then "mechanically" I take gains on "trading shares".
I sold alot of ECA near their recent high-above $24.50. I have posted, although not recently, that I expect NG and oil to sell off-with NG going below $4.00.
So, not a buyer of DVN, ECA or UPL until they all pull back 15-20% from recent highs. Ultimately bullish on NG as it is still extremely cheap relative to its energy equivalent "oil", and with NA prices at 1/3 of world prices-that spread will narrow as the US exports LNG to start the end of 2015.
With PCTI now in the mid $8.30s, the "bottom" of $7.00 looks to be a perfect call. Another $.20-.$.25/share and I may have to harvest some "trading" shares for a quick 20% gain with the RSI over 70.
Took gains today on SLW and HL as their RSIs have been in the mid 70s. Also took small gain on QLGC as resent resignation or firing of VP of sales the end of June has me concerned that June Q results or Sept Q guidance could be soft. I'm a buyer again around $9.00.
My view, that an "event" that would cause a deflationary scare in the 2nd Q has not come to pass. Yet, the ECB, PBOC and comments by FED officials still have left the world awash in liquidity with gold/silver having good 1stH of 2014. Still, I think an event is coming, perhaps the 2ndH of 2014, such that the FED will have to taper their taper or after finishing their taper, start a new QE program in the 1stQ of 2015.
The scenario being, that a "deflationary scare" will have all market participants selling to gain liquidity, with central banks, in the following days/weeks instituting more "easing programs" (QE and other) to get the world's credit engines started up again after that liquidity squeeze. It is then that gold/silver will accelerate sharply upwards as the new easing programs will contribute little to econ growth, but inflation will move higher. Easing programs will be used more to minimize defaults, as the "market" realizes that governments, businesses and consumers around the world are hooked on unsustainable low interest rates, but will have to stay low to minimize a "Lehman" type event. Little real growth, accelerating inflation, negative real interest rates, and very easy monetary policies for years to come (will be the "market" expectations)-will be a great backdrop for gold/silver to make all-time highs.
That game of musical chairs will play for as long as central banks can tolerate rising inflation. But when businesses and consumers start buying products to beat price increases, then the central banks will have to relent to let rates rise. World depression follows as very few borrows will be able to service their debts as rates go to to high single digits and GDPs decline. Then there will be a self-reinforcing selling loop as everyone will want to get out of owning bonds and other credits. Stocks will bottom some years later at 1/3 of the high they once were a few years earlier.
The FED is suppose to hold about 45% of Germany's gold, or about 1528 tonnes, in their New York vault. About 18 months ago, Germany asked to have 300 tonnes returned to Germany. The US said it would take 7 years. After only delivering 5 tonnes, Germany says they don't want their gold back anymore and that the US is taking good care of it. Funny thing, there never was a German or independent audit that the US has Germany's 1528 tonnes of gold.
The US's lack of delivery and no audit both suggest the US doesn't have all the gold that belongs to Germany. With all the current lies, half-truths etc that come out of Washington as well as contradictory FED speak, confidence in the US's leadership, both economic and political, is being chipped away. Don't know when the tipping point is, but it will happen in the next 2-4 years-if the US continues to be lead so poorly.
I will harvest trading gains on gold/silver stocks from time to time, but will not sell "core" positions as gold/silver will make new highs in the coming years. It is inevitable!
Yes, CCRN is ruining their balance sheet to keep from getting bought out. Mgt also believes that getting bigger will increase scale-which true-but it may just increase the scale of recent operating problems. I'm still waiting for CCRN to get a few good Qs under their belt before I'm a buyer.
A couple of interesting developments today.
1)Another Bulgarian bank got hit by a bank run today-2nd in as many weeks-government had to take over the first bank
2)Ukraine signed economic and political deal with EU today, which was the reason Russia put pressure on "their" guy-when he was running Ukraine-not to do. Net result, Russia will continue to take actions that destabilize Ukraine so it does not move further and further into European influence. So, conflicts will continue and friction between the West and Russia will increase.
Both events today are bullish for gold/silver. Watch for GDX and GDXJ vs GLD. If they continue to outperform then gold/silver will continue higher-setting up a self-reinforcing cycle for a time.
4th largest bank in Bulgaria had a bank run today-forcing a government takeover. Not a huge deal, except market historians will remember it was the failing of an Austrian bank that was one of catalysts for the market crash back in 1929. Back then it took over a year for that failure to affect US stock markets. I am not suggesting the same, but it does show how fragile European banks are, which will make the ECB err on the side of easing and be another upside catalyst for gold.
Many times a "bell" rings when any actively traded market reaches a top or a bottom. I'm calling the "top" of the broader averages of stocks because the "bell" I hear is the Patent office invalidating the patent of the Washington Redskins football team. Quit simply it is another indicator of a government run amuck with political correctness. With this action, along with all the other lies, misuses of government power and other, blunders, investors et all will net/net lose confidence in the US government and $.
On a different note, gold/silver are higher today based on the notion that real interest rates will go further into negative territory. Going back to 1979, as oil and inflation moved higher, real interest rates got to negative 5%. Gold spiked soon thereafter at $875. Since 2009 real rates have been negative, peaking at -3% in 2011-gold peaked at $1923. Real rates are currently negative about -2%. It has been my observation that gold accelerates to the upside when rates go negative -2.5% So, should the 5-7 yr government bond go down in yield and official government measures of inflation go up, then when the difference gets to -2.5% and/or when the market expects -2.5%, then gold/silver take off. At -3.0% real interest rates, gold/silver will make new highs.
You are getting some of your answer now as "sentiment" has improved quit a bit w/r to silver miners-much more so than silver moving up off its recent 52-week low. I don't think HL gets bought out, but I do think that after a 2nd Q rebound in US GDP, the economy will roll-over again in the 3rd Q. If I am correct and the FED tapers their taper or after completing their tapering, starts a new QE program in the 1stH of 2015, then gold/silver go up 30-50% from recent prices. Gold/silver stocks would go up 2-4X their current prices.
Bottom line, the US and Europe are extremely levered and bankrupt. We cannot afford higher interest rates, so central banks will have to keep rates artificially low-resulting in continuing negative real interest rates. Additional and/or continuing QE programs around the world will flood the world financial system with more inflationary pressures-yet interest rates will continue to be artificially low. Once consumers and businesses start buying in advance of price increases, then the inflation genie is out of the bottle. Inflation jumps to mid to high single digits-gold silver make all time highs. Then central banks will have to relent, interest rates will rise quickly and the world goes into 3-7 years of depression. Many that borrowed at artificially low rates for years, won't be able to service their debts when rates go up 2-3X. If governments print money to service their debts then gold goes to $3000-$5000/oz.
Inflation, as measured by the Billion Prices Project has been running 2-3X the official government numbers for years. The government has huge incentives to "understate" inflation because in doing so COLA (cost of living adjustments) are lower and GDP higher-both make the governments fiscal situation and the general state of the economy look better than they really are.
It has been my view, in many posts this year, that inflation was higher and would start picking up faster, that the consensus opinion. I expect government numbers to continue to grind higher as the year progresses-crossing 3%+ before the year is out. If interest rates do not go up by the same amount, then real interest rates will will become more negative-good for gold/silver. Final demand in the US is weak, so this increase in inflation is not demand/pull inflation but cost/push inflation. With productivity going negative, business have to raise prices to recoup increased inputs costs, with regulations increasing everywhere businesses have to increase prices to recoup the increasing cost of government. With muted CapX spending muted during the whole recovery companies have less cost effective spare capacity. What does it all mean? Stagflation will be the new macro-econ buzzword by the end of the year
Will stocks care? I don't know, they have been impervious to all sorts of negative news so far. However, if gold/silver and other inflation hedges catch a bid, the money will come out of the broader averages.
I have both "trading" shares and "core" shares. I tend to sell "trading" shares when I sense a good move is coming to an end and/or if relative strength gets over 70.
Ultimately, I'm looking or gold to get to $2500-$3000/oz-perhaps as high #$%$000, but I probably won't be able to hold that long. Silver would get to $50-$60/oz. If I'm correct and patient enough all the silver/gold stocks I own will be up 10X+ from current prices.
With BO's defacto isolationist foreign policy positions-power will continue to abhor a vacuum with forces negative to US interests filling those vacuums. IRAQ produces about 3 mbpd, so with the loss of Mosul, southern oil fields come under risk as IRAQ's central government implodes. Syria and Iran situations continue to move against US interests, so I give it a 20% chance that Mideast oil disruptions could push world oil prices up $10/barrel (Brent to $120, WTI to $115) sometime later this year. Should that be the case, world consumers will be hard pressed-with official measures of inflation moving higher and GDP growth slower-stagflation. Not a good backdrop for stocks, but good for NA based oil and gas assets and gold/silver.
Look for conflicts in Ukraine, Syria and Iran to continue to be a battle between the US and Russia. I took gains on some of my small cap tech in recent days.