The MasterCharts: October 2011
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Wednesday, October 26, 2011

Chart of the Day: MF Global gets hit; Yield jumps to 18%

Chart of the Day

MF Global gets hit; Yield jumps to 18% on Moody's downgrade...

read the article below from zerohedge.com:

Will Goldman Be MF Global's Executioner With Terminal Collateral Calls, As Yields Explode?

Tyler Durden's picture [1]


We all know the news by now [12]: "MF reported its biggest quarterly loss ever yesterday, after having its credit ratings cut a day earlier by Moody’s Investors Service on concern that the broker won’t meet earnings targets and may not be able to manage investments in European sovereign debt. The company’s shares fell 48 percent. “It’s aggregated risk,” said Richard Repetto, an analyst at Sandler O’Neill & Partners LP. The positions in Europe, the further downgrade potential and the quarterly loss, combined to discourage investors, he said." Here is where it gets worse: "Analysts at KBW Inc., led by Niamh Alexander, wrote in a note yesterday that the Moody’s downgrade and lower earnings could cause a ripple effect on the company, raising borrowing costs and triggering collateral calls. “It also exposes MF to collateral calls of up to $5 million,” the note said. “We believe it could also prompt lenders to reduce financing, clients to withdraw assets and trigger the need to recognize losses on certain bilateral over- the-counter and off-balance sheet transactions." Well, judging by the bond yield chart below, MF is done (further confirmed by WSJ reports that the company has hired restructuring expert Evercore Partners). The only question is whether that ever so handy uber collateral puller, Goldman Sachs, so critical in the extinction of AIG and Dexia, will be the party responsible for the death of MF Global? Considering who the current head of MF is, and his "key man status [13]" in the prospectus of the company's recently bonds (which are plummeting today), we somehow doubt it.

[14
Will Goldman Be MF Global's Executioner With Terminal Collateral Calls, As Yields Explode?

The MasterMetals Blog

Tuesday, October 25, 2011

US consumer spending: Hard times | The Economist

US consumer spending

Hard times

Oct 25th 2011, 14:33 by The Economist online
How the economic slowdown has changed consumer spending in America
AMERICANS are spending less on clothes and eating out and more on household fuel bills and healthcare, according to data from the Bureau of Labour Statistics. Between 2007 and 2010, average annual consumer spending per unit—defined as a family/shared household or single/financially independent person—fell by 3.1% to $48,109. Average prices over this period have risen by 5.2%, so real consumer spending has fallen by almost 8%. The recession and economic slowdown have reduced buying power and consumers are tightening their belts in many ways, though spending on women’s clothes (and belts) fares slightly better than men’s. There are some positive health effects to be gleaned from the data. Real spending on tobacco products fell by 23%, probably because the price of a nicotine fix has risen by 46% between 2007 and 2010. Similarly, people are spending more on fruit and vegetables (up by 9%) and less on sugar and sweets (down by 6.5%). During the good times of 2003-06 consumer spending rose by 8.2%. In that time, Americans boozed more and bought more cushions: spending on alcohol and household furnishings increased by 19% and 13% respectively. Contrast that with 2007-10 when spending on these items fell by over 16%.


US consumer spending: Hard times | The Economist

Monday, October 10, 2011

Gold Price Set to Drop into Aggressive Accumulation Zone

Gold Price Set to Drop into Aggressive Accumulation Zone

Commodities / Gold and Silver 2011 Oct 09, 2011 - 09:30 AM
It now looks like we were a little too bullish in the last update, for the way gold has acted over the past week suggests that another sharp drop is imminent before the dust finally settles on this reactive phase, that it likely to take it to or some way below its recent panic lows.
On gold's 4-month chart it is now apparent that a bear Pennant has been forming since the panic bottom, with the weak upside volume portending an imminent breakdown and steep drop. A reader pointed out to me during last week that gold's panic lows occurred in thin trading on the Hong Kong market, and for this reason we do not have to factor in the tail of the hammer candlestick when deciding where to draw the boundaries of the Pennant. The measuring implications of this Pennant call for a drop at least to the vicinity of the intraday lows of the Reversal Hammer and possibly somewhat lower towards the $1520 area - at this point the decline should have completely run its course and we will be looking to buy aggressively. If we look carefully we can see that a small "bearish engulfing pattern" has formed in gold over the past 2 trading days, implying that breakdown from the Pennant and the expected steep drop that will follow is imminent. A reason why this next drop should end the decline is that gold is already deeply oversold as shown by its MACD indicator, and it will of course be even more so after this impending decline. Those interested in going long gold investments in the near future should "keep their powder dry" but stand ready to wade in big time if gold drops into the bright green "aggressive accumulation zone" shown on our chart.


Other reasons why the imminent sharp drop expected should mark the end of gold's reactive phase are to be seen on its 1-year chart. On this chart we can see that a decline to or below its recent panic lows will take it deep into strong support near to its rising 200-day moving average, the classic point for a major reaction in an ongoing bullmarket to end.


Still another reason for the reaction to terminate with this final drop are gold's now strongly bullish COT chart on which we can see that Commercial short and Large Spec long positions have dropped back to relatively low levels - the lowest for a long, long time.


There is certainly plenty of light at the end of the tunnel for gold over a longer time horizon, and not just that which arises from its own COT charts. The COT charts for the dollar are strongly bearish, with the Commercials going heavily short, and they are also going heavily long the euro. This implies that the current state of extreme crisis in the Eurozone should ease soon and the euro rally sharply, and the dollar fall heavily - which suggests that european leaders may scale back their bickering soon and cooperate sufficiently to ease the crisis with generous helpings of QE, which will of course be bullish for gold and silver. Our euro fx COT chart below shows the big long position in the that the Commercials have built up.


Although the big Commercial short position in the dollar is a harbinger of doom for the current strong dollar rally, it looks on its 3-month chart like it has a bit of life left in it yet. The long-legged doji candlestick that formed on Friday implies that it will turn higher again next week and maybe make new highs.


Bearish price action in both copper and oil on Friday suggests that they too will turn down this coming week.
By Clive Maund
CliveMaund.com
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© 2011 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.
Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.
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Gold Price Set to Drop into Aggressive Accumulation Zone :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

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Thursday, October 06, 2011

Fed Is 4 Times More Efficient At Selling Government Bonds Than The US Treasury... With A Taxpayer-Funded Twist


Fed Is 4 Times More Efficient At Selling Government Bonds Than The US Treasury... With A Taxpayer-Funded Twist

Fed Is 4 Times More Efficient At Selling Government Bonds Than The US Treasury... With A Taxpayer-Funded Twist

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