I Love Class-Action Settlements

I just got $15 in the mail, courtesy of Gemelas v. The Dannon Company, Inc. That's all I'm going to say... for now.

(Also, yeah, I know I haven't posted in seven months. But it's a start, isn't it?)

A Real Update! Part 1

(I was going to post an update on what I've been up to, what I've been listening to, and what I've been reading lately, but I ended up writing a lot more on music than I had planned. I'll post part two of my update in the next few days. That's right; if all goes well, you'll see two posts for April in the first week!)

What I've been listening to lately:

Eluveitie, which is a folk metal band from Switzerland. By "folk metal," think (in this particular case) Celtic music plus melodic death metal. They're pretty decent, but it's sort of hit-and-miss. "Inis Mona," from their album Slania, is an awesome mix of Irish flute(!), bagpipes(!!), hurdy gurdy(!!!), catchy chorus, and the Gothenburg sound, and definitely deserves an A on my list. But strip away the folk instrumentation from a song like "Bloodstained Ground," also from Slania, and you end up with pretty generic melodeath. I like Ensiferum a lot more for folk metal (check out the long but excellent "Victory Song"); they're much better at integrating the folk elements with metal. And if you want straight-up melodeath, then try "Twilight of the Thunder God," probably my favorite Amon Amarth song ever.

Excalion, a power metal band from Finland. I saw one site describe them as "melodic power metal," which sounds sort of redundant, since power metal by definition is very melodic, but in this case, I think it's quite apt. It's archetypal power metal times five, which may or may not be good; needless to say, if you don't like power metal (and it can be terribly grating sometimes, I'll admit), you'll probably hate Excalion. But for me, they're not bad, though sometimes it feels a bit like listening to a Sonata Arctica or Stratovarius knockoff. In fact, parts of "Quicksilver," from their latest album High Time, sound uncannily similar to Sonata Arctica's "FullMoon." (Ha! Looking at the YouTube comments, I'm not the only one who thinks that.)

Mortemia, a Gothic metal band (more accurately, one-man project) from Norway. Morten Veland, the guy behind Mortemia, seems to have a penchant for starting up new bands every so often. He was the frontman for Tristania, one of the best Gothic metal bands around, and then left to start another band, Sirenia, which unfortunately has never equalled Tristania in greatness. (The first two albums were pretty good, though.) With Sirenia having descended into ultra-saccharine poppiness that seems to plague the Gothic/symphonic metal scene today, and Tristania just never the same ever since Veland left, I was hoping for some redemption, especially since Veland said that Mortemia would be in the same vein as Tristania's Beyond the Veil, my favorite album of theirs, but my first impressions are disappointing; I haven't given it a thorough listen yet, so maybe my opinion will change, but it seems more Sirenia than early Tristania, unfortunately. (As an aside, that was an 84-word sentence! Sorry about that.) Not like Sirenia's The 13th Floor, fortunately, but Misere Mortem just sounds tired and uninspiring. You've been doing this for well over ten years; surely you can come up with something more original. Try Tristania's "Tender Trip on Earth" for what Gothic metal should be like.

After getting some HammerFall many, many months ago, I never bothered giving them a serious listen until recently. They're the sort of band that gives power metal a bad name: over-the-top epic sound with soaring choruses, excessive keyboards, emasculated singers, and lyrics about warriors fighting dragons. And after my listen I still think they're way too cheesy for their own good. But tell that to Hutaree, that Christian patriot militia group that's been in the news lately; they set one of their training videos to HammerFall. But as this French news site pointed out, HammerFall is from Sweden. Oops.

Where Did the Bears Go?

Things seem to be moving much more quickly recently. I had originally titled this post "Bad News Everywhere" on March 22, but in just a week, things don't look so bad anymore.

The big news since my last update is that the SPX successfully tested its January high of 1150 and broke the resistance level to set new highs. Unfortunately for stocks, things don't look so good. But in contrast to last week, things have gotten better for the stock market. Last week, there seemed to be a good possibility that the SPX would face a significant reversal; now, while it's likely the SPX will fall back to 1150, it is likely to find support there. In other words, this bull market still(!) has legs. The market had a key reversal day on Thursday, which lends to the short-term bearishness. More disturbingly, sentiment is near record levels of bullishness, which bodes ill for the short-to-intermediate term. Thus, while the intermediate trend is currently bullish (after having broken above resistance at 1150), there are plenty of caution flags that reinforce the belief that this stock market is not for buy-and-hold investors.

And yet plenty of people will be deceived to think that good times are back. The economy appears to be recovering, and people are eager to spend money -- even if the fundamentals are as bad as, if not worse than, 2008, and even if consumers are simply giving themselves more rope to be hanged with. So it may surprise some people that I predict the S&P will rise by another 60 points, to 1233 to be exact, which is based both on an inverse head and shoulders pattern that I mentioned sometime ago from a source I follow, as well as a 61.8% Fibonacci retracement of the S&P's 2007 high. I think this is the absolute ("absolute" being a relative term in this game) highest it will go. If the SPX manages to blow past this number, then the bull market will turn out to be far more powerful than any of us thought -- and it's already shown itself to be a force to be reckoned with. But I think 1233 will prove itself to be a worthy contender at stopping the advance. When might the stock market reach this level? My guess would be within the next two months or so, but when it reaches it is sort of irrelevant; when it gets there, we'll consider our options. In the meantime, we can continue to expect the same slow, relentless drive upwards, punctuated by a minor correction. Close trailing stops on SPY should work pretty well; just remember that the long-term trend is still down.

The dollar actually reached my target of 82, but just barely. With the target reached, the dollar has since declined. It now seems more likely that the dollar will continue to decline from here, at least for the short term. In this case, the intermediate trend is up, but we should expect to see some consolidation from the dollar. In particular, we should pay attention to two numbers. The first is 80, which is approximately where the 50-day moving average is. The second and more important number is 78.25 or thereabouts, as that is both the 200-day moving average and a 50% retracement. I still believe that the dollar will continue to surprise people, but at the moment it seems a decline is in order.

As I mentioned earlier, the situation in gold has cleared up quite a bit recently, and the declining dollar is another piece of good news for gold. The PM sector was formerly quite correlated with the stock market and not as much with the dollar, but lately gold has returned to its usual pattern of being highly negatively correlated with the USD. Since the dollar is likely to fall, this is very good news for gold. RSI and Stochastics are in favorable alignment, and the 50-day moving average is providing support. In addition, the big move last Friday likely marked the bottom. Strong price action in silver also suggests the end of the consolidation is near or has already occurred. Silver and gold stocks have both shown some vigor, and based on their tendency to lead gold, this portends well for gold prices in the near future. Gold has been very quiet lately, but I would not be surprised to see a quick move back to the $1200 level.

Finally, I'd like to comment on something I don't usually mention, US Treasuries. The 10-year Treasury has begun breaking down, as has the 30-year Treasury, which is bad news on several fronts. Falling prices mean rising interest rates, since bond prices and interest rates move opposite of each other. What do rising rates mean? First, rising interest rates will quickly kill any economic recovery. If consumers can't afford 3-4% mortgages and credit cards, there's no way they'll be able to afford a 5% or 6% or even higher interest rate. Second, rising rates are disastrous for the US government. The deficit is already at gigantic proportions, and this is at record-low interest rates. If rates continue to rise, the government will find it impossible to service all that debt. Interest payments will quickly devour the federal budget. Finally, rising rates portend the specter of inflation has returned. Is the deflation/inflation debate about to be resolved? Stay tuned.

Signs of a Golden Spring

So much has changed in only two weeks. I first started writing this update on February 26, when things were looking good for the precious metals market, hence the optimistic title. I put off writing some more until March 6, when I wrote, "Since then, things have deteriorated quite a bit." And indeed, since then, things have deteriorated quite a bit, which was proven this week with gold falling by thirty dollars since I wrote that line. But I'm getting ahead of myself here. Let's start at the beginning.

Since my last update, things have more or less gone as I predicted. Stocks continued falling and actually did reach my target of 1037 before reversing in a bullish hammer candlestick pattern on February 5. However, the correction in the stock market was strong enough that according to almost all of the sources I follow, the intermediate trend has turned bearish. While that doesn't mean the stock market can't keep rising (and in fact, it's been rising for several weeks now), that does mean it has to prove itself before we can say the stock market will post new highs. That being said, the S&P is now inches away from its January 19 high of 1150.45 and is ready to test that high.

Tomorrow is going to be a big day. As I said above, the intermediate trend is bearish. In order to turn that trend bullish, the SPX must break above that high and stay above it for three consecutive days. If it does that, then we can say with a fair amount of confidence that the bull market is alive and well and will continue to rise. (Even though from a fundamental standpoint the stock market is outrageously overextended....) Although volume has been declining -- a bearish sign -- the past few days, volume has been increasing with the new highs, which is a bullish sign. In addition, the Dow is about a hundred points from its January high, meaning it needs to catch up, although it's possible we could have a scenario where the Dow catches up and the S&P posts a new high but fails to hold it for the requisite three consecutive days.

If the SPX does not break the January high (i.e., tests and fails), then it is likely that today's high marks a double top, which is very bearish. The most important support level to look at is around 1115, as that is both the 61% Fibonacci retracement level and the 50-day moving average. Using retracements, the next support would be around 1105, then around 1090. The 1090 level also marks an old resistance/support line. I expect the 1115 level to be relatively strong -- if it breaks easily, then stock bulls better be careful. In any case, no matter how you look at it, it's best to be cautious and see what happens before taking positions on either side of the market.

The PMs also did what I expected, though they did fall a bit more than I had thought. However, in keeping with the title of this post, it's not all bad, as things are looking more positive for gold than they have compared to December or January. Unfortunately, as I said at the beginning of my post, the situation has deteriorated quite a bit. The biggest sticking point is that sentiment is excessively frothy considering the rather lackluster price action we've seen in gold. While it's most likely February 5 did mark the beginning of the next bull leg (and hence likely marked the bottom), gold is going to have to take a breather. The nearest support is $1110, which is where gold is at right now, then $1102, then $1093, then $1080. My feeling is that gold will fall below $1100, as sentiment has not improved even though gold has fallen by over thirty dollars. Fortunately, RSI is neutral, and Stochastics are falling rapidly, suggesting the bottom is not too far way, perhaps a week or two from now.

The situation in silver is similar to gold, but the most interesting thing is that silver has shown relative strength. The PM sector has been highly correlated with the stock market lately, more so than with the USD, which is both good and bad, as I will explain in further detail when I talk about the dollar. However, silver has been particularly tightly correlated with stocks. Stocks have been strong, and so silver has been strong. If the SPX breaks out to new highs, then we should continue to see continued strength in silver. If it bounces off resistance, then we could see a rapid decline in silver to match gold's decline. One worrying aspect is that while RSI is neutral, Stochastics are overbought. Thus, I think there's currently more downside risk than upside risk with silver. With that said, my feeling, though, is that we will continue to see silver leading gold. (As an aside, typically silver underperforms gold at the beginning of a bull wave, then outperforms towards the end. Is silver's current outperformance a sign that we can see a strong bull leg in the future?)

Gold stocks are generally mirroring silver's price action, showing relative strength compared to gold. Similar to silver, Stochastics for HUI are also overbought, and thus the near-term downside risk is greater than upside risk. However, as with silver, I think the strength in HUI/GDX is a good sign for the intermediate and longer terms; during the bull run we saw last fall, gold stocks were weaker than gold, which is the opposite of what we normally expect, and an overall negative sign. If they continue to lead gold, then we should see a powerful bull run in the coming months.

Finally, we come to the USD. The dollar reached the upper bound of my target and since then has been consolidating in a flag-like pattern. Both RSI and Stochastics are neutral. I have a feeling that the dollar will continue consolidating for at least a few more days, but my next target is 82. I'm bearish on the dollar over the long term, of course, but I think for the intermediate term things aren't looking so bad. The intermediate trend is bullish, and a bullish golden cross has appeared on the chart. Interestingly, it's possible that a rising dollar will not have much of an effect on gold. One major issue lately is that it's been unclear whether gold would follow stocks or the dollar. We've gotten some clarity lately, as gold and stocks have been rising in concert in spite of the rising dollar. Of course, correlations can change, as we've seen these past few days, as stocks have kept rising while gold has fallen. Nevertheless, barring a euro currency crisis with Greece in the next few weeks (note that I called out Greece as a "looming problem" before the crisis broke!), I don't expect a strong impact from the dollar on gold.

Since this is a longer post than usual, I'll summarize: stocks are at a critical juncture, gold needs to fall some more but is otherwise building a nice foundation for the next bull run, and the dollar might continue to surprise a few people. The overall theme is to be cautious and let things play themselves out before committing to being long or short the market. After all, in this game, you can always catch the next ride.

Busyness, Tardiness, and Laziness

This blog has been very quiet this month. Unfortunately, I have nothing to offer in my defense other than three excuses:

I've been busy. I've been applying to law schools the past few weeks, which has consumed a lot of my time. However, I now have free time again, which lately I have been using to clear out my insanely clogged inbox and my messy desk (and side table, and table, and boxes) covered in papers. I should start hearing back from schools in the next month or two. Hopefully it will be good news. It's time to leave Saginaw.

I've also been tardy. Most of my applications were due in the first half of this month, but I'm writing this in the second half of the month, so I'm late. I do have a few blog ideas though. I plan on putting up an investment update very soon (the sooner the better, since investment information depreciates rapidly), and I have a few drafts of economic issues I want to comment on as well. Maybe I'll talk about some non-economic stuff too.

And I've been lazy. Some of these posts take a long time to write, at least an hour or two, a few more like three hours. And yet whenever I'm finished writing them, I feel good. I guess it's like exercise, or having your teeth cleaned: You really should do it, and you'll feel better afterwards, but it's just something you want to put off till another day. Maybe I'll be better about this in the future. Maybe I'll even post on a schedule. Hey, we can all dream, right?

A New Era

...for credit cards, that is. Well, sort of. As of today, the Credit Card Accountability Responsibility and Disclosure Act comes into force. Among other things, banks will now have to offer 45 days' notice before changing terms(!), payments have to be applied to the highest-interest balance first(!!), and banks can no longer retroactively raise interest rates on credit card balances(!!!). Shocking, I know, that this bill got passed in the first place. For someone who doesn't carry a balance, though, this doesn't really affect me, other than the threat from banks that they'll start paring back rewards programs -- which they were already doing anyway -- and start charging annual fees to make up for lost revenue -- but won't, because they would then lose all their customers.

Now if only we could get some sort of financial reform passed....

Memories of the Panic of '08

For investors grown complacent by the steady grind upwards in stocks, the dramatic fall these past few days has certainly been a wake-up call. In the past three days, the Dow has fallen over 500 points. Gold is down $40, and the US dollar is surging. The impact in the news that these declines have been generating is somewhat reminiscent of September and October 2008. Is this going to be the beginning of the big fall? While I've been saying for a long time now that the stock market will eventually test and fail the March low of 666 in the S&P, until we see a decisive break downwards, I'm not holding my breath.

I've been bearish on the stock market for a long time now, even though the stock market hasn't been willing to oblige. At the very least, however, it did need a breather; the last correction was back in October. The SPX is down a little over 5% from its high, but a healthy correction often sees a 10% decline. In that case, we could see the market decline to around 1035. More realistically, I would look at 1070 first, which would match better with the previous decline, which was 6.5%, and forms a support level based on a trendline from the two previous lows.

Suppose the market bounces off 1070 and begins yet another rise. What could we expect then? One source claims a long-term reverse head and shoulders target of around 1200-1230, around 15% higher from 1070. I'm slightly skeptical of the justification used for this target (mostly because the volume doesn't really confirm), but we should keep an open mind. And if support at 1070 fails? Frankly, this market has been so (suspiciously) powerful that I won't become bearish until something dramatic happens. If the market breaks through the 200-day moving average, currently at 1007, then I'll reconsider, but until then, I'm begrudgingly bullish on the stock market, at least for the medium term.

Though commentators have been concentrating on everything from disappointing earnings to uncertainty surrounding Ben Bernanke's reappointment as the cause of the recent decline, perhaps the driving factor in my mind is the US dollar, which recently broke out of a flag formation and is surging upwards towards a target of 80-81. This has triggered a sell-off in commodities such as oil and gold, and consequently led to the stock market decline. Considering that we are only about halfway to the target (the dollar is currently at 78.23), I expect more pain ahead.

The recent dollar rise has certainly been the major factor in gold's decline, but gold has been consolidating since its peak of $1225 in early December. Gold is now down about 10% and is likely close to the bottom. However, there's still some room for it to fall, as both RSI and Stochastics are not yet into oversold territory, and it may be another week or two before gold finishes its correction. Bear in mind that though gold has entered into a seasonally weak period, winter overall is gold's strongest season. By the end of its run, gold should post an intermediate top much higher than the recent high of $1225.

Like gold, silver has been consolidating since its early December peak, though its movements of course have been more volatile. Currently at $17, I expect silver to fall a bit more from here, perhaps down to $16.50 or $16 before beginning its ascent. By the end of its run, possibly in April or so, it should easily take out its December high of $19 and perhaps even take out its 2008 high of $21.

Finally, gold stocks, as represented by the Market Vectors Gold Miners ETF (GDX), which is very similar to the AMEX Gold Bugs Index or HUI, have so far suffered a 23% correction from the December high. Stochastics have just entered oversold territory, and RSI at 34 is close to oversold as well. One source claims that the PM sector will likely take a breather of at least a few days before declining some more, and personally, it seems like GDX is serving as a leading indicator. Today, while GLD and SLV both fell, GDX actually slightly rose. GDX is currently at $43.79, but it might need to fall to around $42 or so before it can begin the next bull run.

Gold sentiment got a little too frothy in the past few weeks, but the current correction (which is merely the second part of the larger overall correction) should serve to bleed out bullishness. Gold stocks seem to be slightly ahead of the pack, leading the decline, so we should pay attention to GDX to see when the PM sector will renew its ascent. Silver is lagging gold both financially and temporally and has more to fall, but towards the end of the next bull run, it should begin to outperform gold, as it usually does before intermediate tops.

As noted above, the target for the dollar is 80-81, but I'm still bearish on the dollar over the long run. In the intermediate term, though, we should not discount the fact that the US dollar is still the world's reserve currency. If there is another financial crisis (and there are many looming problems to choose from: Greece, Japan, the UK, Spain, to name a few potential currency crises), we could see a repeat of the Panic of 2008, with a flood of money into the "safe haven" of the USD, causing a surge in the dollar index and Treasury prices and a collapse in stocks and commodities. If that should happen, and it will again one day, all bets are off.