-- Posted Monday, 24 May 2010 | | Source: GoldSeek.com

By Gene Arensberg       Esse quam videri – To be rather than to seem. 

Stand by, stay hunkered down, but get ready to reenter – maybe soon too.  

“Concerns of a full blown credit crisis have probably diminished some but cannot be ruled out.” – U.S. Global Advisors, Friday May 21. 

ATLANTA – In our last full Got Gold Report two weeks ago (May 9) we hauled out the caution flags because of the ominous signals then showing in the data, charts and ratios we follow closely here at GotGoldReport.com.  The subtitle of that report said, “Rig for heavy weather and hope we don’t get it.” 

Well, we got a crazy sell-everything-now type typhoon and then some since then.  Big, harsh moves down on the Big Markets (the DOW down more than 750 points), gold off nearly $70 from its pinnacle and $55 this week alone, silver manhandled about $1.67 lower this week, the HUI down 55 points or 11.4%, and the list just keeps on bleeding.

We just wonder now whether we are about to enter the eye of the storm or the eye wall itself.  Meaning, we cannot yet see enough confirmation in the data to give us comfort to set up on the short-term trading long side of our beloved precious metals – just yet.  No matter how much we are itching to do just that. 

We will pick up this theme in just a moment, but first, here’s this week’s closing table: 

Longer term we see nothing which undermines the secular bull market thesis for gold metal. 

The conclusion of the introduction of the last full report two weeks ago read:

“Frankly, we do not like some of the signals we are seeing in the markets just now.  Markets are over-reacting.  The smell of panic is present, and like it or not the proper thing to do under such uncertain circumstances is to haul out the caution flags, tighten stops on most short-term equity issues, and take precautions and downside option “insurance” for the stocks we intend to hang onto even through a hurricane.”   

While we are glad to have foreseen the carnage coming in our own research here, and to have shared it with all of you ahead of time, we do not take any satisfaction from it when there is still a chance of the world spiraling into another full-blown banking crisis or currency crisis vortex.

No one wants that.  No one wants full blown financial or social chaos except maybe radical lunatic terrorists or the credit default swaps sharks that just got banned from naked selling them in Germany, perhaps.  Now even they have to have some skin in the game if they want to sell “doomsday” all day long – jacking up the CDS spreads without very much capital in a Soros-inspired rigged casino game with far reaching consequences.

We would not at all be surprised by an announcement of a world-wide ban on some synthetic credit derivatives and maybe even a total ban on all credit-related equity short selling before too long – especially if this current crisis doesn’t catch the proverbial tree root on the side of the abyss – soon. 

Politicians can do some really weird, stupid stuff in a crisis, can’t they?  You know, like passing 40% mining income taxes down-under, or blaming speculators and “greedy short sellers” for taking advantage of the complete mess those same politicians have put all of us in.  “How dare those, spit, choke, gag, “spec-cu-la-tors” attempt to make money by exposing how dangerous and precarious a condition we elite leaders have put our country’s financial condition in! – Why, that’s criminal!”      

What is criminal is that the voters have neglected their duty to elect responsible adults to power.  Choosing instead glad-handing Big-Spendaholics with the financial literacy of a 15-year old.  (We do not wish to disparage teenagers with that remark, they are just young, which, unlike willful ignorance, is not a sin.)  We suspect strongly that is changing quickly now here in the U.S. – along with a rapidly growing awareness on the part of Americans as to the ongoing theft of their labor and wealth by the elitist rulers that over-promised, over-spent and woefully misrepresented the consequences of their collectivist actions. …  (Mournful sigh.)    

*** 

We could go on and on along those lines, but that’s not what this report is about today.  This report is more focused on what we are seeing in some of the indicators we follow closely, indicators we think affect the gold and silver markets. 

At any rate, we suspect, (or maybe we just hope really hard?), that this particular crisis is not as dire, not as imminently dangerous as the one which we all faced in late 2007 and into 2008 -- at least not yet.  Before we say why, let’s get on record that even if we do not believe that we are heading right off “E.U. Cliff” and into the “Euro Abyss,” we do think that the odds of another world wide bank-collapse contagion developing have escalated; it wouldn’t take much of a nudge to tip the balance and therefore that notion demands we adopt a fully cautious, much more careful, and often a hedged approach looking ahead. That’s for the time being, both from the long side and the short side, as both can be equally treacherous in times of high or extreme economic uncertainty - when the chances of government meddling and intervention are also exceedingly high. 

As for why we don’t think we have gotten to the 2008 level of crisis yet, as always we listen to the counsel of several very respected, sage observers with literally more than a hundred years of market experience between them. 

For what it is worth, and understanding that no one has a functioning crystal ball, the consensus among the sages is that this particular “economic challenge” differs from 2008 in several material ways.  They collectively believe that the world is now in better shape than it was going into 2008 and therefore should be more resilient.  They collectively believe that the current situation is bad, it could get worse, but they each feel that an interim solution will ultimately be adopted for the issues in Europe, if for no other reason than there really is no non-chaotic solution ordained in the Maastricht Treaty to provide for dissolution of the E.U.  In essence, it is actually easier and will likely lead to less bloodshed, to keep the status quo than not to. 

The amount of cross-debt exposure to European banks is so large (to them, but not to the entire world) that, for German Chancellor Angela Merkel this is the Eurozone’s “Paulson Moment.”  (As in the moment when Hank Paulson got key Congressional leaders into a room and literally scared them into passing TARP 1.)    

Then, of course, armed with that counsel, we look carefully at our own charts, data and ratios for confirmation of the ideas we are hearing, before making up our own mind how best to position – (or maybe not to position at all sometimes).

In the last report two weeks ago, we said:  “What we worry most about under these unsettling conditions is a mad, indiscriminate rush to liquidity fueled by real panic, similar to the events which occurred in 2008 and again in March of 2009. We fear that the events in Europe are like a pile of tender waiting on a spark...”

That is precisely why we added the notes we did then in the linked graphs at the end of that report.  The notes called for tight stops and defensive action.  Those who heeded that call are now glad they did.  Those who didn’t can now learn from the experience.

So now what, what are some of the indicators showing us this week?    

This Week’s Radar Screen  

The Got Gold Report – the full report – is published biweekly.  Between reports we communicate more regularly on the GGR web log, so it pays to stop by once in a while to catch the latest offerings. 

The purpose of the Radar Screen is to briefly summarize our positioning for the gold and silver markets, and also to highlight a few of the dozens of indicators, ratios and graphs we keep in constant touch with at Got Gold Report.  Long-time readers know we update most of the Got Gold Report linked charts each week, even the weekends when we don’t publish the full report.

For a little while longer, readers need only pull up the last full report (even this one) and click on the chart links on “off weeks” to see any updated comments.  Changes are almost always completed by 6:00 pm EDT on Sunday evening (except when Monday is a holiday) and occasionally during the week itself as events unfold.  The chart links are always at or near the bottom of the reports.   

Pretty soon now, however, all of the chart links will have to change as we have transitioned to our new permanent web home, which we are proud to say is up, functioning and gaining lots of new readership at www.GotGoldReport.com.

Stopped on Gold

Back to this week’s Radar Screen:  We returned to the gold bullish camp on February 5, with gold then in the $1,050s.  We were patient and cautious, slowly moving our stops up first to the $1,080s, then near $1,105.  Five weeks ago we moved our trading stops up to the $1,120 equivalent immediately following the SEC v Goldman news.  Three weeks ago we opted to raise our gold trading stops up to the $1,156 level, then up to $1,180.  A week ago we bumped them up slightly in the midst of all the panicky pressure in all markets to the $1,184 level which was just under that week’s low print.

We reasoned that instead of tightening up stops to maximize profits last week, we wished to allow for more than normal volatility.  But even $65 from gold’s high print was not enough wriggle room when Thursday of this week opened.  On Thursday, May 20, our stops were tripped and we hauled to the sidelines on gold.  The trade was double digit percentage profitable (12+%) but less than we had hoped for – this time. 

We will have more about our positioning in the linked charts below and on the web log later this coming week, but for now we are on the sidelines with our short term gold and silver ammunition, but as we like to say, we are like a bird dog on point waiting for a re-entry sign. 

This week’s Radar Screen is going to be briefer than normal due to unexpected, last minute travel.  We plan to keep readers updated on the blog later this week, however. 

Moving along, here’s this week’s short-term trading chart for gold:     

Having cut a marginally higher high, gold is in a kind of forced retreat, but already nearing several promising areas of implied support.  Moving on from here we will continue to tentatively mark the high $1,150s as potential support for gold with resistance now near $1,250 – until proven otherwise on both counts.  Depending on what happens in the quickly changing news world, we can make a good technical case for a quick reentry with gold in the $1,150s, and maybe just a little higher, but we are reluctant to make that official just yet.  Not without knowing what the early week news and political reactions to it are in advance.    

Please see the linked charts for information on silver this week. 

As usual, much of this week’s commentary is contained in comments inserted in the actual linked charts below, and we will be adding additional “intel” to the “blog” often going forward, so, on to other business. 

The above is an excerpt of the full Got Gold Report web log update.  To continue reading please click on this link: 

And thank you for doing so. 

Disclosure: The above contains opinion and commentary of the author.  Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure:  The author and/or his family currently holds a long position in SPDR Gold Shares, net long  iShares Silver Trust, long the following “Vulture Bargain Hunter Stocks” mentioned in this report or within the last year: Timberline Resources (TLR), Paragon Minerals (PGR.V), Forum Uranium (FDC.V), Odyssey Resources (ODX.V), Terraco Gold (TEN.V), Hathor Uranium (HAT.V),  Gold Port Resources (GPO.V), Bravo Venture (BVG.V), Millrock Resources (MRO.V), Atna Resources (ATN.T), Riverstone Resources (RVS.V), Constantine Metal Resources (CEM.V), Canadian Shield Resources (EXP.V), Rye Patch Minerals (RPM.V), Golden Predator (GPD.TO) and currently holds various other long and short positions in mining and exploration companies. The author receives no compensation from any company mentioned in this report with the following exceptions:  Canadian Shield is a sponsor of www.gotgoldreport.com.   To contact Gene use LLCCMAN (at) AOL (dotcom).  

A land developer, professional numismatist, self-taught bullion trader and investor since 1980, Gene Arensberg analyzes technical and fundamental developments in the precious metals markets.  In 2000 Gene started sharing his own market research with fellow traders and fund managers.  Those email reports evolved into his popular Got Gold Report, a biweekly look at important indicators for gold and silver published on the web. Gene’s more in-depth market reports, insights and trading ideas are available at www.GotGoldReport.com.

-- Posted Monday, 24 May 2010 | Digg This Article | Source: GoldSeek.com

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