The Gold to silver ratio is changing

The Gold to silver ratio is changing

In the past we saw silver prices rise faster than gold prices. But that meant that there was just speculation not concerns over currency losses. Now you can see gold finally rising and breaking free of other precious metals. It means currency fears are beginning. But even so, the price is driven by emotions and the emotion fear was high yesterday. So Jim Cramer was wrong again yesterday. He just began recommending gold as an investment when gold is at a relative high and at a resistance level. Jim Cramer is 180 degrees out of sync in his advice and flip flops every week or two on whether things are getting better or worse. Yesterday he was extremely pessimistic just when we had one of our last buying opportunities before the market advances again. Yesterday he finally realized that China has a real estate bubble. We have been warning about Asian bubbles for some time. But when everyone else begins worrying and even Jim Cramer panics like he did yesterday… you know that now is the time to get back into the equities markets and to take profits with gold.


World Markets:
We believe the worst of the current market decline is just about spent. Volume on this last decline was still quite low showing the decline lost momentum. Yesterday the market tested some people dearly but bounced right back. The data looks like the next bullish cycle has already begun.

People knew about the USA housing bubble back in 2006 but it took until late 2007 for the US housing decline to become evident and for the stock market to even begin to react. It could be some time before the problem hits China because they have almost a 50% savings rate so they can afford higher housing payments for some time and they have an extreme housing shortage not a glut.

Economic Calendar

This Week
Yesterday:
US Net Long-term Treasury International Capital (TIC) Flows rise to $140.5B in Mar vs. $47.1B in Feb. The 90.7 Billion increase is an impressive rebound from the last two months which showed a combined decline of -8 billion. The increase was the highest since April 2008. It seems in June the flow of funds back into the dollar resumed after some moves out in prior months.

The NY Empire State Manufacturing Index recorded a figure of 19.11 in May compared to a reading of 31.86 the month prior. Any positive value is still goodness but the decline in the number was more than expected.

May 18
Building Permits Apr
Core PPI Apr
Housing Starts Apr
PPI Apr

May 19
Core CPI Apr
CPI Apr
Crude Inventories

May 20
Continuing Claims
Initial Claims 05/15
Leading Indicators Apr
Philadelphia Fed


Market Outlook May 18, 2010
The markets yesterday tested investors risk tolerance to shake out the weak hands. That probably was the best opportunity to buy we will see for the next two or three months.

With last weeks trading gaps closed a gradual advance to near previous highs could occur in from 4 to 8 weeks. The average investor (who cannot use volume) thinks the bull market had successive highs and held above the necklines during the declines. They therefore expect the next market high will be higher than the last one. That is what the average investor thinks.

The average investor will expect a new high but we expect this time the raw price history as well as the volume corrected history will both fall short of a new high. Our volume adjusted NYSE price information will not likely even come close to its previous high. That advance should happen probably over 4 to 8 weeks. Then we expect a 1 to 2 week downward market plunge. The average investor will expect that decline to be supported at the previous lows. We however expect that resistance will be like butter cut by a hot knife perhaps with inter-day low averages as bad as before. The Chinese and Indian industrial shakeout problems should become clearly visible to Jim Cramer GE/MSNBC/Pravda by then as well. When they panic, the new market lows that are likely this summer will probably end up being the best buying opportunities of this year.


World Markets

Asian markets were up last night, Shanghai up 1.4%, Hong Kong up 1.2%, India up 0.2%, and Japan up 0.1%.

European markets are recovering today in the range from 1.2% to 2.2% this morning about half way through their day.

US pre-market futures are up decisively this morning by about 0.7%. With last weeks gaps now closed the market downside risk is reduced significantly and the market shook out the weak hands yesterday.