(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers.)

MIDDLE EAST ON THE VERGE OF A CEASE FIRE

November 21, 2012

Violence in Gaza and Israel escalates as both parties are reportedly on the verge of a cease-fire.  Historically an escalation in fighting happens just before a cease-fire.  The reason is that both parties want the most advantageous position at the time of cease-fire.

The oil markets are presuming no escalation beyond Gaza and Israel.  However, gold and silver momo crowd is predicting an all out war.  The momo crowd is not to be trusted as their analysis has consistently been false.  A cease-fire may also give a boost to the stock market.  As we stated yesterday, American stock market is up against stiff resistance.

Chinese stock market is showing signs of bottoming.  Indian and Malaysian markets are showing signs of another up-leg.

Gold futures are at $1726, silver futures are at $33.07, and oil futures are $87.73.

S&P 500 resistance levels are 1400, 1410, and 1415; support levels are 1380, 1368, and 1358.

DJIA futures are up 4 points.

HOUSING STARTS RISE TO A FOUR YEAR HIGH

November 20, 2012

The U.S. Department of Commerce reports that the housing starts rose to a four-year high in October.  October’s housing starts came at 894K vs. consensus of 840K.

It is encouraging to see this unexpected strength in spite of hurricane Sandy.

New building permits are a leading indicator of housing.  For October building permits totaled 866K vs. 870K consensus.

The foregoing numbers show that the housing market continues to form a bottom.  This is also a reason to be optimistic on the U.S. stock market in spite of several major issues such as fiscal cliff.

Yesterday’s big rally has relieved the oversold condition in the very, very short-term.  Any further upmove will have to be on fundamentals and not on technicals.  The stock market is approaching an area of stiff resistance.

If the market can overcome the resistance at 1410 to 1415 in S&P 500, the probability of the market reaching an all time high in the near-term will significantly increase.

Gold futures are at $1731, silver futures are at $33.08, and oil futures are $88.90.

S&P 500 resistance levels are 1400, 1410, and 1415; support levels are 1380, 1368, and 1358.

DJIA futures are down 9 points.

GOLD RISES ON POTENTIAL REMOVAL OF UNCERTAINTY

November 19, 2012

On the weekend President Obama made optimistic remarks in Bangkok  about resolving the fiscal cliffs.

If Obama is right, it will remove a major uncertainty from the world markets.

The momo crowd has seized on the potential removal of uncertainty and has been aggressively buying gold since Obama’s remarks.

Traditionally gold and silver have been a hedge against uncertainty.  If gold was following its traditional pattern established over hundreds of years, it would have gone down on potential removal of uncertainty.  However, lately gold and silver have been under the control of the momo crowd which behaves contrary to the traditional role of gold.

History has taught us that whenever an asset class becomes controlled by the momo crowd, and the momo crowded claims that it is different this time, it almost never ends well.  This is the reason behind our cautious stance towards precious metals at this time.

Obama’s remarks are vague.  No one expects him to talk down the U.S. economy.  However, as usual, the momo crowd does not dig deep.

Stock futures are also up on optimism arising out of Obama’s remarks.

The overseas markets are higher.

Gold futures are at $1730, silver futures are at $32.86, and oil futures are $86.26.

S&P 500 resistance levels are 1380, 1400, and 1410; support levels are 1368, 1358, and 1352.

DJIA futures are up 90 points.

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