Monday, October 3, 2011

Morning Update/ Market Thread 10/3

Good Morning,

Equity futures are sliding again over the weekend and this morning. Key support now is at 1101 on the SPX. The dollar is rising with the Euro falling, bonds are rising, oil is falling below what was support, gold is regaining some of its luster, silver is higher, and food commodities are breaking down beneath key support levels.

The Manufacturing ISM for September and Construction Spending for August are released this morning at 10:00 Eastern. The highlight of the week will be the Employment Situation report this Friday.

Last week produced the fifth month slide in a row on the S&P, the last time that happened was in 1981, it didn’t even happen during the 2007/2008 crisis.

Below is a chart of oil, at $77 it is well below the neckline of the obvious Head & Shoulder pattern. The target now for oil, without intervention of course, becomes $45 a barrel:

Gold bounced off the first area of uptrending support. Note again today we have equities lower, but gold higher:

Regardless of the deflationary wave, gold will, in my opinion, still outperform other paper investment including the dollar in the long run, although the dollar will benefit from deflation in the short term. Remember, the crux of the problems are MONETARY, it is all about WHO controls the production of money. As long as the impossible math still exists, gold is one good place to be. I would get cautious if $1,480 breaks to the downside, and I would change my outlook IF large scale debt defaults are allowed to take place. That is key, as when large debt defaults occur, it will make the impossible math less impossible and that will take the pressure off gold – but they need to be wide scale, not just Greece. So, look for that if you own gold – in this case I would not sell the rumor of default, I would wait to sell the actual news – don’t let the criminals shake you into a mistake.

Keep in mind that October is seasonally one of the worst months for equities. Yes, it’s a crash month, but then again we’ve already been sliding for the past five months. Crashes do happen from oversold conditions… it is definitely a time to be careful one way or the other. Of course my very best recommendation is not to play in the criminals’ “markets.” Doing so only feeds them with fees if not directly your capital.

Other events are playing out with people across the nation protesting the banks and large corporations – appropriately so, they are close to target, but not yet at critical mass. Critical mass is coming, and it will come all the sooner if the banks keep up with their “whoa is me” song and dance to justify idiocy such as sticking debit card users with a monthly fee. You want to see a run on a bank, that seems like a great way to start one, and it’s a great way to increase demand for actual dollars – hmmm, almost like a plan.

Banks in Europe are under severe pressure again. The prospect of defaults will send shock waves around the world and cross defaults. Those who are most in power will use it as an opportunity to consolidate their power. The “Fed” will remain involved and despite what they say will continue to provide swaps and liquidity into that situation, do not be fooled by their balance sheet, they only show what they want you to see.