Wednesday, August 10, 2011

Market Update

Posting an opinion of where markets are headed before a Fed announcement is always a risky move.  We predicted that there were only two outcomes possible in advance of yesterdays planned news release.  There would be another bond buying program announced which would spark a rally, or the failure to announce one would result in continued fierce selling.  Some readers were seduced by the 400 point rally manufactured at the end of trading yesterday.  We were not.

The indexes will continue to fall.  Many readers are asking how low they will go.  Does it matter?  They will fall until another bond buying program is announced.  The next likely opportunity for that will be the Jackson Hole Fed meeting.  Until then, expect markets to fall and continue falling.

The banks are insolvent.  Small bankers are still unaware that the banking system is a cartel and if you are not in it operating is very difficult.  This statement is still labeled as a conspiracy theory.  What many well educated members of society label as heretic behavior is merely our choice to remain solvent.  The loss of capital means we would no longer be capitalists.

Clearly, Possible Outcome 2 was the correct choice yesterday.  Hopefully you took our advice and used the 400 point shadow rally as an opportunity to get out of mainstream equity positions.  You probably did not though so here is our next bit of advice to surely be discarded.

Something very important happened today, many mining stocks decoupled from the indexes.  Shares on average rose in the face of 500 more points to the downside for the Dow 30.  This tells us clearly that there is relative strength in the mining shares.  The selling has pushed them to the point that the value of their metal in the ground is severely undervalued.
This chart shows that the gold miners are beginning to rise in the face of major market weakness.  When shares show relative strength they are signalling that they will lead the next general market advance.

The next few weeks is an excellent time to build a position in quality mining names.  If your broker is not capable of making any statement that does not involve something negative about gold please contact us for more information on available research products.

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