Friday, December 9, 2011

Gold Technical Update

Yesterday we were forced to witness a pathetic charade in the halls of a congress that claims to defend freedom.  The citizens falsely and blindly trust that congress will ameliorate markets by honestly seeking answers.  This is not the case.

We will attempt to simplify this situation in an effort to help you understand what has really happened and hopefully help you plan accordingly.

Pretend that your attorney deposits a settlement check from your case into his firm's escrow account on a Wednesday.  The funds may not be distributed for two weeks based on court order but the case will be settled upon receipt of funds.  The escrow account provides both parties with the security and trust needed to enter into a final settlement agreement.  The following Monday, your attorney's firm files for protection from creditors under Chapter 11 of the bankruptcy code.  You had no way of knowing that the prestigious firm of 200 lawyers had entered into a number of risky business transactions and was now insolvent.  This should not impact you though as the law absolutely states that escrow accounts are to be strictly segregated.

Two weeks have passed since you signed the final settlement agreement and funds may now be distributed.  Your attorney informs you that he is unable to locate the settlement funds.  The bankruptcy trustee has notified him that they are trying their best to determine what happened to your funds but at this point there is nothing that can be done.  It appears that the escrow funds were raided in a last ditch effort to back off creditors and hide the squalid nature of the firm's financial decisions.

This is precisely what took place at MF Global.  US securities laws state very clearly that customer funds and company funds may not under any circumstances be commingled.  Now, honest and unknowing clients seek answers as to the whereabouts of nearly $1,500,000,000 in unencumbered cash deposits.  But, there are no answers.  There are only lies and cover-ups offered by bought and paid for spineless politicians.  Jon Corzine is a criminal.  He is a filthy street thug disguised in an overpriced suit that was paid for by trusting account holders at MF Global.  Jon Corzine received a waiver from regulators allowing him to operate without obtaining a current securities license.  

The system is broken.  How long will it take you to understand what is happening?  How long will it take you to stop calling this editor a conspiracy theorist and start looking at the real conspiracy which is stealing your money, your freedom and your future?  It is time to wake up.

When conditions are such that the financial system allows parties to default on contracts at their leisure you must protect yourself.  Remember, when the bankers owe you they default.  When you owe them they get a bailout, paid for by you.  You must insure that you are not in contracts that could leave you stranded in the event of systemic failure.

A reasonable amount of cash should be kept on hand.  Precious metals should be considered as they are the only true asset with no counter-party risk.  Please, do not purchase the most common gold fund pushed by the fascists as you will one day see that the gold they have sold you is not there.

Speaking of gold we must update you as to the technical behavior of the world's only unencumbered asset.  We reached a high in September and have been consolidating for roughly 10 weeks.  As the chart below will show, current support is found in what was resistance dating back to May 31, 2006.

This support should hold, if not $1,530 would be the lowest possible level that we can see.  This is all occurring within the context of a normal consolidation.  The movement in gold has been very structured and stable.  There is not yet any price action that would suggest a bubble or speculative top formation.  Consolidation action can occur in a downward fashion or over time.  Time is a factor in markets that very few understand.  In this case, 10 weeks of pennant formation should be seen as a very healthy consolidation likely in preparation for a move over the psychological $2,000 level.

2 comments:

HCHC said...

What is pennant formation?

KSIR Capital said...

Visually, it looks like a baseball pennant.

Over time a stock can print prices that are lower highs and higher lows. When the extremes on the chart are connected with a straight line a pennant becomes visible.

As the price approaches the tip of the pennant it is building pressure. The farther it advances towards the tip, the more energetic the breakout is likely to be. The direction that the price chooses on the breakout usually establishes a new directional trend.