(The Weekly Digest reproduces the morning capsules made available every morning before the market open in the Real Time Feeds to the paying subscribers.)
WHITE HOUSE ATTEMPTING TO REPLACE SEQUESTER
November 16, 2012
One part of the fiscal cliff is a sequester agreed by the congress. In its sequester, there will be automatic major spending cuts including major cuts in defense. There are reports that the White House is discussing plans to push most of the deficit reduction into 2013 and replace the planned large automatic spending cuts only with small cuts now.
There is a strong possibility that Republicans may go along with this plan. If the plan materializes, expect the market to stage a rally.
Gold futures are at $1713, silver futures are at $32.44, and oil futures are $86.95.
S&P 500 resistance levels are 1358, 1368, and 1380; support levels are 1352, 1348, and 1339.
DJIA futures are up 16 points.
UGLY EMPLOYMENT DATA PROVIDES AMMUNITION FOR OBAMA EMPLOYMENT CONSPIRACY THEORIES
November 15, 2012
Initial weekly unemployment claims came at 439K vs. 388 K consensus. Other than using the word ‘ugly’, there is no other way to describe this data.
This is a leading economic indicator and carries a very heavy weight in our models. This economic series has been improving remarkable in the months leading to the election. Before the election some including ex GE CEO Jack Welch claimed that Obama was conspiring to manipulate the employment data to look better than it really was.
Right after the election, this ugly piece of data will add more ammunition to the conspiracy theories.
In our analysis, such conspiracy theories are completely without merit. However, we must pay attention to these theories because they will further poison the divide in Washington and thereby increasing the probability of a fiscal cliff actually happening.
We are not too concerned about this ugly data as in our opinion this is the result of hurricane Sandy.
Technically markets are oversold and due for a short-term bounce. Unless there is a resolution of a fiscal cliff any rally attempt will be met with selling.
Gold futures are at $1722, silver futures are at $32.66, and oil futures are $86.56.
S&P 500 resistance levels are 1352, 1358, and 1368; support levels are 1348, 1339, and 1330.
DJIA futures are down 40 points.
OBAMA SEEKS $1.6 TRILLION IN ADDITIONAL REVENUES
November 14, 2012
President Obama is seeking $1.6 trillion in additional tax revenue over the next 10 years. This amount is twice the amount Obama was willing to accept back in 2011. Republicans are unlikely to accept this level of proposed tax increases.
Over the coming days, direction of the markets will be determined largely by the direction of negotiations to avoid the fiscal cliff.
The opening bid by Obama shows that the two sides are far apart.
The risk in the markets is increasing. It is important to reiterate that subscribers pay careful attention to the Sugar High Plan.
Gold futures are at $1728, silver futures are at $32.60, and oil futures are $85.38.
S&P 500 resistance levels are 1380, 1400, and 1410; support levels are 1368, 1358, and 1352.
DJIA futures are up 29 points.
GOLD AND SILVER: DIWALI SENTIMENT OVERLY BULLISH
November 13, 2012
Diwali is the biggest festival in India. It is on par with Christmas in America. Diwali is extremely important for gold and silver investors as it is an age-old tradition for Indians to buy gold on or before Diwali.
Bulls have been pinning their hopes on Diwali. The sentiment among investors and jewelers in India is extremely bullish. Predictions of 20% to 25% increase in gold and silver prices in a short time are common place.
The extremely bullish sentiment is not borne out by the facts. Much of the gold in India is bought by Indian women in the form of 22 carat gold ornaments. According to our sources, initial estimates are that women have been buying lighter ornaments this year. In other words, they are consuming less gold.
Traditionally, India has been the largest gold consumer in the world. Indian imports of gold have a major impact on gold prices over the long-term, although in the short to medium-term the gold market is ignoring the supply and demand data.
In 2011, India imported 967 tons of gold. It is estimated that gold imports will fall by 45% this year and next year gold imports may not exceed 550 tons.
Extensive back testing shows that at extreme sentiment is a contrary indicator. In other words, when sentiment is extremely positive, it is a sign that a probability of price reversal is high. Sentiment in India is so bullish that it is in the danger zone.
Sentiment among the momo crowd in North America is also in the danger zone. We are still trying to get a good handle on the real sentiment on gold and silver in China at this time.
Gold futures are at $1728, silver futures are at $32.59, and oil futures are $85.29.
S&P 500 resistance levels are 1380, 1400, and 1410; support levels are 1368, 1358, and 1352.
DJIA futures are down 58 points.
THE U.S. TO OVERTAKE SAUDI ARABIA AS THE LARGEST OIL PRODUCER IN THE WORLD
November 12, 2012
International Energy Agency (IEA) has announced that the U.S. will become the world’s largest oil producer by 2020, replacing Saudi Arabia. Oil imports by the U.S. will continue to fall and by 2030 North America will become an oil exporter.
IEA report carries a lot of credibility. In addition to its impact on oil stocks, it will have a long-term impact on defense stocks. Since the U.S. will not be importing oil from the Middle East it will make little sense for the U.S. to tie up military resources to protect the oil in the Middle East
Gold futures are at $1736, silver futures are at $32.59, and oil futures are $85.73.
S&P 500 resistance levels are 1400, 1410, and 1415; support levels are 1368, 1358, and 1352.
DJIA futures are up 25 points.
