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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Markets Kicking and Screaming, Gold Bottom in Place

Stock-Markets / Financial Markets 2012 Jul 19, 2012 - 02:31 AM GMT

By: HRA_Advisory

Stock-Markets

With summer doldrums well and truly upon us markets have been drifting lower on low volume and trying to hold their May lows. Most metals and certainly gold have performed better and seem to have bottoms in place.

After such a long bear run it's not likely we will get a huge bounce during the summer when so many are trying not to think about the market. Not every stock is falling however. As we note in the updates there are three companies on the HRA list that have been getting a lot more attention from traders and several others that are getting traction based on results to come. That isn't much but it is an improvement. We don't know yet how "real" any of these discoveries are, but new finds are the shortest route to renewed investor interest in the sector.


Major markets have not been cooperating thanks to debt issues that won't go away soon. There are plenty of headwinds still but commodity prices, though lower, are all at levels that make them hard to pin the blame on for weak markets.

This is still about sentiment. It's not likely most economies will generate strong enough numbers to rock the markets. If things calm enough new discoveries may be able to help the juniors themselves and we're pinning our hopes on that for the time being.

It's been an eventful month in Europe, and we don't just mean the Euro 2012 Cup (Congratulations to Spain on a great win). The EU held its 19th summit since Greece fessed up to it's debt problems. There were no expectations it would produce anything momentous since the 18 before it hadn't. The markets were taken by surprise when, for once, the European political class managed to do something almost decisive.

This meeting followed the latest US Fed meeting where the decision was made to extend and somewhat expand "Operation Twist" and keep US long term yields low. Not that the market needs much help in that regard. Traders have been so spooked and piling into the US debt market in such numbers that rates are already miniscule.

That central bank meeting followed two other events that went the way the markets wanted but produced no lift whatsoever. First up was an agreement by EU members to lend Spain up to 100 billion to help shore up its banking sector. EU creditor nations managed to prove one again that they didn't get it. The way the announcement was handled and the strings attached to the loans meant the markets quickly gave the deal a thumb's down.

Things were salvaged to some extent by good news on the Greek election. Pro bailout parties prevailed this time, though the margin of victory was thin. There is now a three party coalition in Athens though almost all of the cabinet comes from the leading New Democracy party.

Although the pro bailout forces won, their fear of losing to charismatic leftists meant they were also selling the idea the debt deal would be rewritten. Greece has indicated it wants a two year extension on the deadlines to reduce its deficit to 3% of GDP. Creditors are not pleased but the new timeline is probably actually a best case scenario with a collapsing economy. Creditors tsk tsking won't change that.

Markets reacted badly to all the news above. It's probably for the best that it did. Europe is an amalgam of fiscally prudent and fiscally idiotic states. Until Europe reduces its debt load to something manageable---if that ever happens---the opinions of fiscally strong countries are the only ones that really matter. Those governments are the ones that can afford to undertake major new initiatives or underwrite joint debt. It's been clear since the crisis erupted that creditor countries will only act when the market forces them to.

By Eric Coffin
http://www.hraadvisory.com

    The HRA – Journal, HRA-Dispatch and HRA- Special Delivery are independent publications produced and distributed by Stockwork Consulting Ltd, which is committed to providing timely and factual analysis of junior mining, resource, and other venture capital companies.  Companies are chosen on the basis of a speculative potential for significant upside gains resulting from asset-based expansion.  These are generally high-risk securities, and opinions contained herein are time and market sensitive.  No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned.  While we believe all sources of information to be factual and reliable we in no way represent or guarantee the accuracy thereof, nor of the statements made herein.  We do not receive or request compensation in any form in order to feature companies in these publications.  We may, or may not, own securities and/or options to acquire securities of the companies mentioned herein. This document is protected by the copyright laws of Canada and the U.S. and may not be reproduced in any form for other than for personal use without the prior written consent of the publisher.  This document may be quoted, in context, provided proper credit is given. 

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