After wrapping up a week full of economic data in the United States, we now look forward to a fairly light schedule. At this point, most traders realize how insignificant the results of these reports are and they will likely continue to follow the stock indexes with a “buy the dip and enjoy the trip” mentality.

1. Resources for the Independent Trader Blog
Gold Analysis by Brian
Booth: Gold Chart of the
Week
(May 20th through May 24th)

2. Gold Spot (FOREX:XAUUSDO)
@ 21 May 2013 7:14 (GMT)
1389.62
+3.14 +0.23%
Gold Bullion Price
London gold: 0.038kg @ £29,220/kg [9:06:34 AM WAT] Price last updated
at 21/05/2013 09:09:33
"Gold is not bought by people to make money, but by people who have money." In that saying
lies the appeal of gold. That's why around 20,000 tonnes of gold are owned by Indians, and
China is buying as much as they can afford at a rising pace. Emerging nations' central banks
are buying persistently for the same reason the US continues to hold gold.
21 May 2013
Dear Reader,
After wrapping up a week full of economic data in the United States, we now look
forward to a fairly light schedule. At this point, most traders realize how insignificant the
results of these reports are and they will likely continue to follow the stock indexes with
a “buy the dip and enjoy the trip” mentality. Why wouldn’t they? Indexes like the S&P
500 have only spent about a week below the support trendline since the move began in
November of 2012. Even after a string of misses in the middle of last week, the S&P
Futures only pulled back a fraction of the prior day’s move up. And that was only long
enough for the buying to resume and a new high was put in shortly thereafter.
I think this move higher in the stock market is great for those who are courageous
enough to have held long positions over the last several months, but I also think that the
attention on this move up has damaged other opportunities. It is fairly obvious that the
funds supporting this move up are tied to Central Bank injections of liquidity. I believe
the standouts are in this order: the BOJ, the ECB and the US FED.
Take note of the daily charts of the Japanese Yen and the S&P 500. The inverse
relationship of their direction is undeniable. And while it may not be a perfect day-to-day
match, it is clear that when the campaign to crush the Yen was made known in Japan,
the buy switch turned on in the US Stocks. We should also note that the ECB cut rates at
their last meeting, which likely set off further interest in the move up in the US stock
indexes. It really is the only game in town for buyers.
From a big picture perspective, I think it all makes perfect sense. Following the crash a
few years ago, the FED was carrying the experimental torch that is Quantitative Easing.

3. The premise of this experiment is to print fresh money (US Dollars) and purchase assets
like Treasuries to keep interest rates low. Over the past several years, the FED has rolled
in and out of programs that purchase and sell long and short dated Treasuries, and have
surely been involved in other markets as well. But the basis for this experiment was to
keep rates low and control money flow until the United States showed sustainable
growth.
As soon as there were signs of a rebound in sectors like real estate, construction,
consumer confidence etc, other Central Banks around the world began to take note. I
believe that as soon as this experiment of the control of money flow began to show
some positive signs, the FED had to invite others to participate, especially since all major
Central Banks have been borrowing from one another like mad over the last few years.
This would be the only way to have the Dollar begin to recover versus other global
Currencies. This is hugely important for a global balance in Currencies that needed a
break from the Dollar getting slaughtered while other major Currencies outside the
Dollar were trading too high.
And this is not something that only began recently. The ECB and the BOJ (and others)
have been actively driving their respective Currencies lower through programs like QE
for a long time. It had to happen in order to keep a balance in Currencies (affecting
exchange rates and global trade), and also to keep all markets from going haywire as
the FED unwinds their programs and positions that were taken on during QE1 and QE2.
In effect, this has been a perfect way to keep global markets balanced and free from the
major swings that we saw in years past. It was however only recently that the lions
share of the focus and buying went into the US Stock Indexes versus other vehicles, and
out of markets like Gold and Silver that once were the darlings of QE programs. Support
targets for Gold may be a bit lower than last night’s low. I have my sights on the $20
range between $1300 and $1280.
I will be on the lookout this week for a few reports that may be impactful. The FED
Minutes and the BOJ Interest Rate Decision are released on Wednesday. These two
reports should give us all the information necessary to see if the rally continues in stocks,
and the drubbing continues in the Yen. If these two markets reverse, I will be on the
lookout for any markets that seem to be benefitting the most from the reversal. It sure
seems to me that the Precious Metals like Gold and Silver would be a bargain if this
move happens. It would also be a perfect way to keep most traders guessing on the low
tick after a token Sunday night drop to start the week! But I do not plan to do suggest
anything until the stocks correct a bit more than a fraction. Support targets for Gold may
be a bit lower than last night’s low. I have my sights on the $20 range between $1300
and $1280.

4. Thank you for your interest,
Brian Booth
Senior Market Strategist
Longleaftrading.com
bbooth@longleaftrading.com
888.272.6926
Source: With the permission from MarketClub

5. Don’t forget your coffee below, share with friends, and get back to me.
Thanks for reading
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Pierre A Pienaar
Resources for the Independent Trader Blog
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7. Pierre A Pienaar retired in 2011 from business.
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