Deepcaster’s following Forecasts for Gold, Equities, Crude Oil & the U.S. Dollar for December, 2007 and the First Quarter of 2008 illustrate well the interplay among Interventionals, Technicals and Fundamentals.
For Technical Analysis devotees, of which Deepcaster is a qualified one, a very significant event occurred on Wednesday, November 21, 2007, the day before Thanksgiving.
The market drop that day precipitated an official Dow Theory Primary Trend Bear Market Signal. It was the first such signal since September, 1999.
The Dow is now “officially” in a Bear Market.
Even if one is not a devotee of Technical Analysis, such signals are important. That is because many investors are indeed Technical Analysis devotees. And that fact and the perception of that fact can and does influence market realities.
While only a few technical indicators have a basis in the natural world, some do. Fibonacci retracement levels, for example, tend to reflect wave behavior. And they do also affect the behavior of markets and market participants much of the time.
Many market participants believe in the power of technical analysis, therefore technical analysis is powerful.
Regarding the Wednesday, November 21st bear market signal, technical analysts hastened to add that bullish rallies are not only possible but also probable within a primary trend bear market. We agree.
Moreover, as Deepcaster has pointed out, there is strong evidence that technical patterns are at times used or created as “lures” or pretexts by The Central Banker Cartel*, to implement their perceived policy agenda (see Deepcaster’s November, 2007 Letter). Thus Technicals are an important, but not necessarily determinative, factor in Deepcaster’s Forecasts.
And Interventionals are important for themselves because they reflect the implementation of the Fed-led Cartel’s monetary fiscal and political policies.
Finally, regarding Fundamentals, in spite of intervention and in spite of the technicals fundamentals eventually assert themselves. (Otherwise they would not be “fundamentals” i.e. fundamentally determinative.) But, of course, the key is “eventually when?” Whether in a week, in a month, or in years, depends on the market, the circumstances, and The Intervenors.
So, before we set out our Forecasts we shall summarize the “fundamentals” of the U.S. economy as of the end of October, 2007.**
· Real GDP was decreasing at about a negative 2% annual rate.
· Real Consumer Price Inflation was increasing at over 11% annualized
· Real Producer Price Inflation was increasing at over 6% annualized
· Real M3 Annual Growth (money supply) was increasing at over a 15% rate
· Existing and New Home Sales and Housing Starts were down over 20% each, year over year.
Finally, consider that U.S. Government debt has now exceeded $9 trillion as of October, 2007 and downstream unfunded liabilities are in somewhere in the excess of $45 trillion. The fundamental picture is not very bright.
Regarding Gold, it has recently approached and begun its retreat from the $850 record set on January 21, 1980. An equivalent Gold price in today’s inflation-adjusted dollars would $2283 per ounce based on 10/07 CPI dollars and over $6,000 an ounce in terms of October, 2007 alternate inflation-adjusted dollars.**
The foregoing gives some indication of the extent of the loss of purchasing power of the U.S. Dollar during the Greenspan-led Fed years.
One result has been the impoverishment of the American Middle Class. Another has been a vast wealth transfer to International Finance.
Thus, let us consider the Fundamentals, Technicals and Interventionals upon which our Forecasts for Gold, Equities, the U.S. Dollar and Crude Oil for both December and the First Quarter 2008 are based.
December 2007: Even though we got a Dow Theory Primary Trend Bearish Signal on Thanksgiving eve 2007, in short-term, that is over the month of December, 2007 the likely trend for key (but see below) U.S. Equities indices is up. Key indices are approaching close to their lower Bollinger Bands, markets are oversold. Thus we expect to see a bounce in the Equities Market going into the end of the year. But, given the now-dominant Bear Trend, we do not see any of the indices exceeding their mid-October, 2007 highs.
Caveat 1) The NASDAQ is weaker than the Dow, S&P or Russell 2000 and, assuming it bounces, we would expect to see the bounce take longer to develop or to develop from a lower level, and to be less robust.
Caveat 2) Precious Metals and Crude Oil shares may not bounce as much, and may in fact decline (see Gold & Crude Oil sections below).
1st Quarter 2008: After the anticipated bounce of December 2007, we expect all the
Equities Markets to deteriorate further in the 1st quarter of 2008 for several reasons.
First, the fundamentals are terrible, the Sub-Prime and Collateralized Debt Obligation and credit market “freeze-up” problems are far from solved – they are massive and their ripple effect is spreading.
Moreover, the aforementioned U.S.’ multi-trillion dollar, and increasing, national debt and unfunded downstream liabilities tend to put a ceiling on U.S. Equities values when measured inflation-adjusted dollars.
Technically, the fact that we have a Dow Theory Primary Trend Sell Signal indicates that over the intermediate to long-term, therefore the primary trend for Equities should be down, and that includes in the 1st quarter of 2008.
Finally, regarding The Interventionals, there is evidence that The Cartel* would like to see a gradual takedown of the Equity Markets. For several weeks the Repo Pool has been topping and showing signs of beginning to decrease slightly – – this is usually a sign that the Dow and other major indices are being taken down.
December 2007: The fundamentals and long-term technicals for Gold are roaringly bullish for December, so much so that we need not even recite them.
The danger is in the Interventionals. We believe The Cartel has too much to lose to allow Gold to exceed by very much the January 1980 $850 high (although it might throw in a spike over $850 to lure more longs into a trap).
Were Gold to rally much above $850 it would likely cause many more investors and speculators to pile in on the long side, a development which we believe The Cartel would not see in its interest.
Therefore, though the price of Gold is already eroding as of the date of this Letter, we forecast that Gold will continue to be taken conclusively down in December 2007. We expect that the Gold takedown will be associated in the Big Media with one or two pretexts: either the announcement of the sale of up to 400 tons of IMF Gold into the market for developing country debt relief, and/or an announced major step toward settlement of Middle East tensions as a result of the late November 2007conference in Annapolis, MD.
1st Quarter 2008: While the fundamentals and long-term technicals for Gold will remain
roaringly bullish, the Takedown which we forecast to continue in December, 2007 we also forecast will continue into the 1st quarter of 2008. As The Fed-led Cartel lets the air out of the Equities markets, it cannot afford to allow investors a “go to” avenue of escape. Therefore, Gold and Precious Metals bullion and share prices should continue their decline into the 1st quarter of 2008.
December 2007: Crude Oil has been extremely bullish for some time now, approaching $100/barrel mark. We have for some time thought that this bullishness is overdone (in the short-term) because worldwide above-ground supplies of crude are actually quite ample. For the long run, of course, consumption exceeds discoveries by a wide margin.
Moreover, the Technicals indicate a “double top” has been made and a downtrend breakout has occurred.
This is consistent with a pattern of a declining Equities trend. The Cartel likely does not want Crude Oil or the other strategic commodities to be a “go to” asset as Equities decline. This Crude takedown will likely be accomplished through the some $6 trillion in derivatives reported by The Bank For International Settlements – The Central Bankers’ Bank (www.bis.org>statistics>derivatives>Table19) as being devoted to commodities.
Here too, we expect that the Takedown of Oil would be accompanied by some pretext, quite likely the “successful” Middle East conference begun the last week of November in Annapolis, MD.
Crude Oil should continue it downtrend in December, 2007, absent some genuinely unexpected (i.e. not manufactured) geopolitical event.
1st Quarter 2008: Since we expect the Equities Market and Gold to be taken down in the 1st quarter of 2008 so there will be no retreat (except Treasury Securities) for those escaping the Equities markets we expect that Crude Oil too will continue to be taken down into the 1st quarter of next year on what we expect will be its long march back to the $50s (eventually, in a matter of months) or perhaps even below.
THE U.S. DOLLAR
December 2007: It is clear that the fundamentals of the U.S. Dollar are terrible and
worsening. The U.S. economy is slowing with worse to come. The U.S. trade deficit, downstream unfunded liabilities, foreign ownership of U.S. Treasury Securities and U.S. Assets, and national debt are increasing.
Moreover, interest rates which could be used to prop up the U.S. Dollar are declining in the U.S. This spells bad news long-term for the U.S. Dollar.
However, in December, 2007 the U.S. Dollar is due for a bounce both technically and fundamentally. We expect such a bounce to be accompanied by the announcement of substantial progress in the Middle East peace conference or by The Fed refusing to lower rates at its December 11 FOMC meeting.
Such a bounce would be “enforced” by the over $40 trillion in derivatives reported by the BIS as devoted to the Foreign Exchange Markets (see www.bis.org>statistics>derivatives>Table19). Therefore, we Forecast that the bounce which began in the last week of November, 2007 will continue into December.
1st Quarter 2008: Expect the bounce to continue into 2008 with the U.S. Dollar ultimately reaching 82 to 84 on the USDX. As we approach the end of the first quarter, we will likely see the U.S. Dollar perhaps beginning to weaken again, consistent with its horrible fundamentals and technicals and its planned (we believe) demise – – see Deepcaster’s view of The Cartel’s End Game in the June, 2007 Deepcaster Letter (“Profiting From the Push to Denationalize Currencies and Deconstruct Nations”). Indeed, the evidence indicates The Cartel is implementing an End Game which involves the ultimate destruction of the U.S. Dollar and its replacement by the Amero (see Deepcaster’s November 2007 Letter).
The End Game would also involve the dissolution of the USA into a new Regional State: the North American Union (NAU) of the (former) USA, Mexico and Canada. One sign among many of this plan is that the Big Media appears to be psychologically preparing the public for this by largely discontinuing the use of “United States” or “USA” in its broadcasts. Instead, “America” has largely replaced “U.S.” or “USA” in the public media. See Deepcaster’s June, 2007 Letter entitled “Profiting From the Push to Denationalize Currencies and Deconstruct Nations” containing substantial evidence and a “Cartel rationale” for moving to implement a North American Union.
In any event, Deepcaster’s goal is to help you make money and preserve wealth along the way.
November 28, 2007
*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Central Bankers to read Deepcaster’s November, 2007 Letter containing a summary overview of Intervention entitled “Market Intervention and Data Manipulation – – Consequences & Forecast for Gold, Crude & Equities and The Cartel End Game” at www.deepcaster.com/Latest Letter. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.”