Market Movers 9/1/11

Forthe week of Aug 31, 2011

To view Anne Franklin’s media updates, click links below.

Video: 8-29-11
Equities Rally into Unemployment Number Anne Franklin, Price Futures Group

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First Business – Trader Talk: 8-29-11

http://www.firstbusinessnews.com/videos.php?video=ba704de9044f4dd39f74c19a4e3f96ed

ECONOMIC OVERVIEW

Metal Magic – Last week gold and silver held their support levels at 1700 and 3900. The sell-off provided opportunities for entering new or adding to already existing positions in these markets. As I have said before, these are trending bull markets and as such, I looked to buy on pullbacks and sell on overbought strength. Is there about to be a run on physical gold depositories?? The developing world and in particular the Asians are firm on holding gold and platinum when it comes to money. About 40% of the world’s population is Asian. Three big institutions have pegged gold to reach as high as $2500 within one year. Volatility in gold stems from the ETF’s and the gold futures market in the form of margin calls. Central banks hold gold as the ultimate currency. Looking at our technical work, we are a stone’s throw from $2000 in gold. Silver has been and still continues to be the laggard, but don’t under estimate the potential for silver too. Some analysts have targets at $100, but I prefer to keep my target conservative and would be happy to re-visit the highs around $50.00. Target levels and risk management are an important part of our trading model. This will allow for traders to manage positions accordingly with their level of risk exposure. We also participate in option based trades and they can be a viable substitute for the futures contract. Lower equity traders should consider options to help manage overnight risk. For more information on trading models and strategies, please feel free to contact my office at 312-264-4364 or email me at afranklin@pricegroup.com.

Gold ~ Daily

Silver ~ Daily

Bill Gross of Pimco, the world’s largest bond fund, admits he was dead wrong on the bond market. I must say that I think it’s nice to see someone own up to their failures as much as their triumphs. Now he has stated that he believes buying bonds is the order of the day. Do I think buying bonds at these levels is smart? Hmmmm, not so much. If I look at the weekly Bond chart below, I would say the risk is on the wrong side for being a buyer. It is becoming ever more difficult to keep a good market up, so to speak. We are at levels never seen before as a result of pure manipulation. At some point they will figure out that the ‘safety’ offered by government bonds is now a phantasm and when they do, you can be sure their awakening will be felt across the world.” – Grant Williams. How many hat tricks does the FED have? The equities believe it may have at least one more. Chairman Bernanke indicated at the Jackson Hole meeting that he wants to do more QE. I think it is abundantly clear he believes the Fed needs to do it as soon as operationally possible. He said QE 3.0, without really saying it. The markets, seeing the added schedule for the September meeting and interpreting the likelihood of heavy discussions, have gotten the message. But there is a huge downside to waiting, and Bernanke knows it. The financial crisis grows while the economy is sliding further into contraction. Time is not on his side. His main concerns are unemployment and slowing growth coupled with a waning consumer confidence. On Friday, the all-important Unemployment Report will be released. At this point, the expectations are for 75K Non-Farm payroll, Private 100-110K and a core of 9.0- 9.1%. These numbers may change in the next day, but if they come in worse…watch out below!!! It would not bode well for the equities. Today the S&P 500 Index reached the 1230 retracement level almost to the penny, so it has built in a little cushion for Friday’s numbers.

30-year Treasury Bond ~ Weekly

S&P Index ~ Daily

The Euro FX has struggled to maintain strength. It briefly breached above the notable 145 level and then proceeded to close below. It has since extended its losses to around the 143.50 level. September 7^th has become an important date as the German constitutional court will decide on Berlin’s participation in Eurozone bailouts. Germany does not want to hold the proverbial bag on these bailouts and everybody knows it. The IMF’s new chief, Christine Lagarde indicates that the global financial system is on very thin ice and vulnerable to the slightest shock. “Europe’s lenders are already reeling from a share price collapse since the debt crisis spread to Italy and Spain, threatening to overwhelm Europe’s bail-out fund and leave banks exposed to sovereign defaults. Shares of Intesa SanPaulo, Credit Agricole and Commerzbank are all below the extremes seen during the panic in March 2009. Europe’s inter-bank market is effectively frozen and EMU banks have lost access to America’s $7 trillion (4.3 trillion) money markets. Lenders have parked €126bn (112bn) at the European Central Bank for safety rather than risk exposure to peers.”The eurozone economy ground to a halt in the second quarter, tightening the noose on EMU’s weaker states and their banks. Julian Callow from Barclays Capital said Europe is already in ‘industrial recession’ and risks tipping into outright economic slump. ‘The recent slide is eerily reminiscent of the pattern during the third quarter of 2008,’ he said. Europe has a fractured society in the sense that they can’t get behind a common initiative to solve this problem. I talked about the Euro being in a tight range and it keeps getting tighter. The resistance is still at 145 and support comes in at 142. A significant break in either direction with a close outside those levels will give this market direction.

CURRENT TRADES

Upon Request – afranklin@pricegroup.com

Once a trade is closed out, it will no longer appear under the weekly “New Trades”. It will be added to a summary of all open and closed positions, which is sent as a timely email update to subscribers. To subscribe, please email afranklin@pricegroup.com or call 312-264-4364.

TECHNICAL OVERVIEW

In addition to using long-term fundamentals and economic data to determine risk parameters and target levels, Market Movers also uses technical indicators for the trade recommendations entry. This information includes the weekly levels for all of the markets.

*All markets are subject to change. For daily updates on a select group of markets, which include S&P, NASDAQ, 30-yr Bond, 10-yr Note, Euro, Australian Dollar, Gold and Crude Oil, please email afranklin@pricegroup.com or call 312-264-4364.

Questions? Ask Anne Franklin today at 312-264-4364

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