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September 08, 2009

Confidence?
by Gary Tanashian

Does it make you confident that not only the US, but global authorities will do and say anything to keep hope alive? To keep 'the rally' alive? It's only currency after all, and it's global.

Get your ducks in a row and get out of a conventional mindset if you still have such a construct. These people [G20] mean business and this is not Business 101 that you learned in school.

"Investors reacted positively to the weekend announcements from finance officials at the Group of 20 summit in London, which acknowledged some improvements in economic growth but warned recovery was not sustainable without continued help from governments in the form of deficit spending, low interest rates and efforts to expand the money supply.

"It will come as a relief to markets that G-20 central bankers and finance ministers agreed that it was too early to begin withdrawing massive fiscal, monetary and financial support," said Mitul Kotecha, analyst at Calyon."Stocks rise after G20 say stimulus will stay --AP

Separately, here are some thoughts regarding just one of the devaluing currencies, the USD, excerpted from NFTRH49 - to go with the chart at the left:

Make no mistake about it, the great stock rally remains nothing more than a dollar devaluation rally; a would-be dollar devaluation story at that. Why 'would-be'? Well, since I began writing publicly in 2004 I have been calling the USD (and US Treasuries for that matter) intrinsically worthless garbage. We know this. The dollar denominates a formerly great nation that has long since eaten its productive seed corn and attempts to manipulate its vast resources in paper with the result being that an un-payable black hole of debt has literally been dug... to China.

But just as the inherent value in gold sometimes has little to do with whatever the price action may be at any given time, so too does that dynamic apply to the dollar. The inherent lack of value in a Federal Reserve Note NEVER correlates to the price action. If it did, it would be registering at zero, or some mind boggling negative number. As long as humans persist in their belief in the current debt based paper system however, the price is a thing quite separate.

So, that said, the dollar has so far refused to break down from a symmetrical triangle of its own as the gold sector did recently to the upside. Remember that sym-tri's are continuation patterns. The dollar should have broken down this week. It did not, and as long as this remains the case it is considered a bearish divergence to the party goers that would celebrate its devaluation in price terms.

For effect, the purple (S&P 500) line shows conclusively that the broad market does not like a strong dollar. Not one little bit.

So, to wrap up we end with the question is this it? Is this the devaluation that lets the cat out of the bag and ignites inflationary fears for real, sending gold and commodities into the stratosphere? Or will we get our next and possibly final (for this cycle) deflation impulse first? Our long held critical level of 78 remains intact. Therefore, the possibility of severe asset liquidation coming soon remains intact as well. At some point the 2 or 3 bulls left in the dollar might yet have their turn to party.

Gary Tanashian
http://www.biiwii.com/

Disclaimer: biiwii.com does not recommend that any trading or investment positions be taken based on views expressed on this site. If you speculate or invest it is suggested that you consult a financial advisor qualified in your area of interest.

Copyright © 2005-2009 Gary Tanashian

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