Operation Twist is coming to an end and swing trading the HUI Index because of it’s end.
It’s the program that took $400 billion in short term debt and amortized it over the long haul is done at the end of June. The Fed called the scheme Operation Twist. Today June 1st, 2012 seemed like the autumn of 2008 all over again but it didn’t come as a surprise to the readers of Swing Trading Forecast. I have been talking about this moment in time for a while now. I’am not going to go into too much depth in this article only because we still have 2 more weeks of the financial markets throwing up all of the excesses the participants indulged in buying over the last year.
You know, the engineers of the financial system are pretty smart, they drive the market up and when the market shows signs of a top, they say “oh, we don’t have to fund you guys any more, however, if the economy needs us, we’ll throw in some dough”.
Well…guess what…when the market show signs of a bottom…guess who’s going to come to the rescue. The almighty FED and another version of Operation Twist or whatever. Here’s a question I have to ask you, when are the central banks going to loose the confidence of the people? That’s the big question.
Did you ever look at a twenty dollar bill and ask your self, what gives this piece of paper value?
There is only one answer, CONFIDENCE. I could put my picture on a piece of paper, put a bunch of graphics on it so that the paper can’t be forged, tell the holders of the paper that it’s backed by all of my assets and good word and if the holders of my “IOU” are confident that the paper will give them value and can be exchanged for good’s and services then it’s worth something.
The CONFIDENCE is lost after I break my word, feed them BS, lose all of my assetts and print more paper “IOU’s”. This is when the holders of my paper currency are going to go to the place where they can get the better deal and punish me with a bad credit rating and higher interest rates on my debt.
When’s the confidence going to be lost?…. I thought it would have happened already. Maybe it’s now, maybe not…I just know the pivot point dates and the patterns.
Look at the HUI Index…now that’s a nice looking chart. For now anyway…things can always change. Don’t worry the price will come down a bit and you’ll be able to get some gold miners. If the Index goes below the 375 area, then the gold miners aren’t a buy quite yet. Based on the action in the chart there is good chance that the HUI Index will hold up.
Look at the chart above. The Russell 2000 is coming in line with the target zone. As you can see the June 15th is the next pivot point and the pivot point after that is July 17th. The trend is down right now and the next pivot point is 2 weeks away, so be prepared for frightening news in the market. There is nothing that goes straight down just like there is nothing that goes straight up forever. I suspect that the central banks are going to come up with something on either of those 2 dates (June 15th or July 17th) we’ll have to see. The target for the Russell 2000 is based on the calculation that I talked about on the previous post, but that is just a guide line and sometimes fails like all indicators that are used today.
Since Operation Twist is coming to an end and there is uncertainty for the future of our financial world expect 2 more weeks of fear on the financial channels. As my regular readers know, I started to pick away at some good quality juniors, It’s been a long time since I’ve been long a gold miner.