Priceless irony.

It proves Americans, especially us East Coasters, aren’t the only ones with size-management issues.

As the markets sink under their own weight today, I cannot help but think much the same is taking place on Wall Street. The equities market can only hold so much fat before it gives up support and comes crashing down.

I rarely use technical analysis as a primary analytical tool, but I will use the help of charts and lines to back up my opinion and help find out exactly where trouble may lie in the road ahead. Just like we don’t drive by staring at a roadmap, we can’t invest solely on the charts. But when you’re lost, there’s nothing like a quick glance at a map.

When I wrote to TFN Strategic Trader members this morning, I told them to watch the action of the S&P 500 closely. The key index hit the pivotal 1,150 mark yesterday and almost immediately turned the other direction.

It is a sign that investors need to prepare for a correction. We are seeing the front end of the action today as the markets give up more than 1% of their value.

If you are a frequent reader of Notes, the action is no surprise.

Only an economic fool believes massive government spending, bailouts and increased regulations will lead to a sustained rally.

There is no way current valuations will hold unless we get two things, more jobs and more credit. Everywhere I look, companies are begging for loans and laying off more employees.

Get this. Over the last decade, for every dollar this country saw in GDP growth, we took out $6.02 in additional credit.

Now that that credit has dried up and, even worse, has left massive holes in corporate balance sheets, there is no way we are going to realize higher valuations until we either restore credit or shake out all the marginal players.

According to the front page of my local newspaper, the latter is happening quicker and quicker. Just today we lost another major employer and a local restaurant. Even worse, a local school district is figuring out how to close a $200 million budget gap now that it has raised taxes as far as it legally can.

It’s the same kind of story all over the country.

It’s evident that investors are pulling their money out of stocks and putting it back into the safety of the Treasury market today as the yield on the 30-year plunged by double-digit proportions.  As much as investors hate America’s borrowing habits, Uncle Sam remains one of the strongest protectors of assets.

Until that changes, we aren’t going anywhere.

*** Don’t think the news out of JPMorgan Chase (NYSE:JPM) is any indication that we are on a path to recovery. This bank and its Wall Street brethren are raking in profits as the markets re-inflate after the credit bubble collapsed.

In fact, they’d love to see it pop once again as they hedge away their risk and profit no matter which way the market swings.

As long as they are covering all sides of the trades and have Washington chasing its regulatory tail, we are going to see these financial smartypants raking in huge profits and walking away with mouthwatering bonuses.

But their profits don’t say anything about small-town America’s ability to prosper. Instead, Wall Street’s profits show how volatile and dangerous it is to be trying to make a buck in this country.

If JPMorgan is making money, somebody else is losing it.

That’s why it’s great to be a contrarian investor. We don’t get fleeced with the herd.

Theo Casey (The Right Side, UK):
While you were sleeping, gold hit another record high.

At last count it was at $1179.

So, while my heart tells me it’s time to take some money off the table, my head tells me that’s not the right side of the trade.
The gravity-defying gold rush is still on. If you already own some, you’re golden so to speak. If you don’t own any, read on to learn a few ways to take part in the rally that everyone’s talking about.

But first, a confession…

Given the many twists and turns in the gold market, I must admit that I’ve taken my eye off the ball. It’s not often that one asset finds friends among so many different investors groups.

I’m used to investing in a stock with a strong retail following. Or a derivative contract popular among traders. Or a fund gathering a lot of IFA interest. With every investment I make, I try to identify its key demographic… and stalk it relentlessly.

I find the people that count and listen to them, quiz them and track their activity to get the inside scoop. By mixing detective work with good old fashioned fundamental analysis, I aim to get the story behind the figures.

This is what I’ve been trying to do with gold.

On top of the generic case for gold…

It’s the one currency that cannot be devalued, hence the most valuable in a time of competitive devaluation by the UK, US, etc.

…I have been looking for the leading lights on the gold market and following their cues.

The exhausted gold detective

As I say, there have been too many cues to follow…

Click here for the rest of Mr. Casey’s insights on the run-up and run-to Gold, at Fleet Street Invest, UK.

Porter Stansberry explains the forces behind the current rally The Daily Crux

America is running out of rope The Market Ticker

The world financial system’s Achilles’ heel The Daily Reckoning

Roubini on a U shaped recovery Naked Capitalism

Larry Flynt calls for a national strike The Huffington Post

Look for an X shaped recovery Real Clear Markets

The risk of double dip recession rising Financial Times

What the stress tests didn’t predict NYT

Good day… And a Terrific Tuesday to you! Well… Let the Data flow begin! And let Big Ben Bernanke’s “green shoots” wilt under the bright summer sun! Not that I want to see the U.S. in economic muck, but come on! He was banging the drum for these “green shoots” when they simply looked like weeds to me, and I just think for him to say those things when I believe he knew better was wrong… Very Wrong!

I came in this morning, and turned on the currency screens to see that the dollar has taken a step back for the 4th consecutive day VS the euro. The single unit is up to 1.41 again, as it makes those probes out beyond the 1.35-1.40 trading range we’ve had in place now for some time. Yield demand is what’s driving the dollar downward, and while the euro doesn’t exactly have a “yield differential” to the dollar, the thing to remember, as I always tell you… The euro is the “offset currency” to the dollar. So, just by nature of the crosses to other currencies, the euro benefits whenever the dollar is sold.

So… If Yield Demand is what’s beating the dollar up like a rented mule (no animals were hurt here, just a saying… ) Then the “high yielders” should be doing the beating… And as I look at the currency screens, that’s what I see! The Aussie dollar is trading above 81-cents, kiwi above 65-cents, rand is 7.75, and the Brazilian real which has to fight with the Central Bank for every inch of gain VS the dollar, is holding its own right now… A month ago, I was telling you about the gains VS the dollar since March 1st… Well, an updated look at the 3-month gains tells us that the move against the dollar has continued… Albeit with several steps backward along the way!

Shoot Rudy! Even the beaten and left for dead Mexican peso has rebounded in recent days as the “other” high yielders drag the peso along for the ride.

4 months of gains VS the dollar doesn’t exactly qualify this move as a “trend”, which is normally associated with long sweeping moves. This does look as though it could become a “trend” though, as it has all the qualities of a long sweeping move, just concentrated in a 4-month span… Like, when a “trend” is in place, it’s not a One-Way street, there’s volatility within the trend… And we’ve certainly experienced that! Personally, even if this does turn into a long sweeping downward move for the dollar, I would just say that it’s a return to fundamentals, and not a new trend… Simply a return to the underlying weak dollar trend that began in 2002, and saw a pause in 2005, and then another one from July 2008 to March of 2009…

OK… Remember when I made such a BIG DEAL out of China and Argentina agreeing to swap currencies in trade settlement and remove dollars from the equation? I told you then that China was trying to gain a wider acceptance for their currency, the renminbi. And… That China had locked up Southeast Asia with similar agreements, which led me to believe that since they had traveled to South America, that Brazil could be next in line… And, the rumors began circulating…

Mom… He’s doing it again! Yes… China and Brazil have agreed in principle to remove dollars from trade settlement, and replace them with renminbi and reals respectively! This follows up what I told you about 10 days ago, and that is that China had become Brazil’s number one trading partner, knocking the U.S. down a notch. So… If that’s so, it’s not like we’re talking small sums of money folks… No, this is the BIG KAHUNA for China, and that not so big kahuna for the U.S. / dollar…

So, while China claims to be on the dollar’s side, and “see’s no alternative currency”… They are working to get their own currency in the mix… Looks like it’s all a “plan” to me, folks… Before we know what hit us, renminbi will be everywhere!

But… Still manipulated as to it’s value VS the dollar by Chinese officials. So… Don’t think, for now any way, it could all change though, that you should sell everything you own and go out and buy truck loads of renminbi… I think you would find yourself to be a bit disappointed… That is, unless you have time on your side… Time is on my side, yes it is…

I got a HUGE kick out of my friend, The Mogambo Guru, reading his weekly letter on the Daily Reckoning site (www.dailyreckoning.com) I’m looking forward to catching up with the Mogambo in Vancouver in 3 weeks time. We keep missing those opportunities to meet up, with first my cancer, and then his stroke… But, there we will be together, two of the biggest smart alecs you’ve ever met in your entire life… I need to see if he’s up to going on the road with me to do a two-man show! HA! Any way… The thing I was going to talk about was that the Mogambo, told his readers yesterday, that in his latest visit to John Williams’ web site: Shadow Stats, he was surprised to see that inflation is really running at 6%, which is quite different from the stupid CPI the Gov’t tries to shove in our faces of -1.3%! Here’s the Mogambo…

“As for inflation, his calculation of the Consumer Price Index “reflects the CPI as if it were calculated using the methodologies in place in 1980,” which I note is back when inflation was a measurement of the change in prices of things that you buy, and not, as it is now after the villainous Alan Greenspan and Michael Boskin came up with their ludicrous “hedonic” measurements of inflation with which to disguise it.”

And… He also found that unemployment, which I tell you all the time is very, very, very, and maybe one more very, understated by the BLS, is… At 20%… 1 in 5 are unemployed…

So… Thanks to the Mogambo, and John Williams for giving us data that backs up what I’ve been spouting off about!

This morning, Norway got the data flow going early with Norwegian retail sales surprising to the upside in May, rising 1.9%! The experts had forecast a -.2% decline… This rise in May gives brings the year-on-year figure to a negative -1%, which still sounds bad… But much better than what was forecast… -3.2%!

Norway seems to be just sailing along, out to sea, without any wind in its sails, not joining the other Commodity Currencies like Aussie, kiwi, and South Africa and Brazil… I think that won’t last too much longer… You see, Norway had a governor put in its currency when it’s neighbor, Sweden experienced bad times due to the Latvian banking crisis… So, as more and more miles of road get put between the thoughts of Latvia and Sweden, the better it will be for Norway… That… And… Getting Oil’s price back to the rally mode!

Canada is another currency that is not gaining along with the other Commodity Currencies, even with Oil moving higher again… Here’s the diff… Those other Commodity Currencies all have YIELD! While Norway and Canada do NOT! However, having said that, I just don’t see these two energy driven currencies wallowing around in the mud too much longer. Playing catch-up with Aussie and the rest of the bunch will be difficult though, and the “other” Commodity Currencies have such a big head-start!

OK… Time for the data set-up for today…

The S&P/ CaseShiller Home Price Index for April will print this morning, and is expected to show a decline of -18.6%, which those that wear rose colored glasses will say, “Hey, Chuck, that’s down from previous declines”… To which I will respond… Yes, it is… But, not much… And if you chart out the monthly prints you’ll see that it hit the low of -19.01% in Jan… February’s print was -18.67, and March’s print was -18.7%, you’ll have to agree with me that the move to “down from previous declines” has been quite slow, eh? And… At this pace it would take until 2011 before we got back to 0% YIKES! So… While you’re wearing those rose colored glasses you might, just might, want to dig deeper into the data before you start sounding the “all’s clear horn”!

We’ll also see Consumer Confidence, which, because of the better times in stocks, is expected to inch upward to an index number of 55.3 VS 54.9 in May… While this data is more like what I believe it should be, it’s still higher than I would think… But then, so are stocks!

And… Then there was this… Recall last week, when Big Ben Bernanke gave his impression of Sgt. Schultz, when asked about pressuring Bank of America (BOA) to take over Merrill Lynch, claimed he “knew nothing”! I thought that he had thrown former U.S. Treasury Sec. Paulson under the bus… Well, today, Paulson will appear before the same committee that’s looking into this mess, that BOA Chairman Ken Lewis claims to have happened. I wonder what Paulson’s thinking after hearing Big Ben last week? I guess we’ll find out today!

It’s the last day of June, my younger brother David’s birthday… David was born when I was nearly in high school, while my youngest brother, Mike was born while I was in high school! Anyway… What I was going for with the last day of June, before my mind wandered, was that it will close the books on the 2nd QTR… And soon enough, we’ll begin to see earnings reports for the quarter… Should be interesting…

Currencies today 6/30/09: A$ .8140, kiwi .6520, C$ .8675, euro 1.4125, sterling 1.66, Swiss .9255, rand 7.7435, krone 6.3955, SEK 7.6630, forint 193, zloty 3.1555, koruna 18.3360, yen 95.80, sing 1.4465, HKD 7.7499, INR 47.90, China 6.8305, pesos 13.12, BRL 1.9565, dollar index 79.64, Oil $71.67, 10-year 3.48%, Silver $14, and Gold… $940.75

That’s it for today… Whew! What spanking by the Giants last night! OUCH! It’s bad enough to get shut-out on two hits, but when the other team hangs 10 on you… Like I said, OUCH! Now that’s going to leave a mark! Tomorrow, we turn the page on the calendar to July, which means the All-Star Game is almost here! I’m as excited as a kid at Christmas for this… You’ll have to look for me at the Home-Run Derby, and All-Star Game… I’ve got some primo tickets right at the end of the visitor’s dug-out (3rd base line), 2nd row! Now, you know why I’m so excited! Well, that’s enough of that… Mary and Suzy Q are here, so that must mean that I’m late! So… Let’s make this Tuesday Terrific, eh?

Souce: A Week Dominated By Data

Our memory of the recent rally was on kicked-off by a bogus memo from Citigroup CEO Vikram Pandit about profitability, followed by a load of baloney from stress test regulators about banks’ health.

“People also are beginning to question whether the economic fundamentals are strong enough to justify continued gains,” continues the WSJ. This has got to be one of the most naïve sentences ever written. The 40% rise in stocks since early March never had anything to do with a 40% increase in economic fundamentals. The economy is collapsing (albeit at a slightly slower pace than before).

Stocks rose because the same “irrational exuberance” that got us into trouble in the first place caused investors to ignore economic fundamentals and pile into equities on the basis that the government wouldn’t let any more failed companies go bust. At no point during this rally did economic fundamentals improve. Economic news was simply less bad than before.

The following three indicators should make it patently clear to investors that stocks are in trouble.

1. There has been a consistent drop in trading volume going back to April. Average daily volume for all NYSE stocks hit a record of 7.21 billion shares in March (much of which was thanks to program trading by Goldman Sachs on the bank’s principle account). That fell to 6.42 billion in April… and 5.14 billion in May. This is below the average of 6.15 billion shares traded a day in 2009. In a true bull market, trading volumes tend to rise as more and more investors pour into stocks.

2. New stock issuance hit a record in May. This has dramatically increased supply at the same time that demand (as measured by trading volume) is falling off.

3. Senior corporate officers are net sellers, not buyers. This inside selling is inconsistent with a real bull run.

Here at Notes we have repeatedly stated that there has been money to be made in the recent upswing but that investors better be nimble to avoid the inevitable bull trap. We repeat this warning again today. If you are investing in equities, keep a close eye on events. Right now, you’re money is sitting in dangerous quicksand.

The beginning of the end for the stock market rally is finally here, says Payout Trader editor and technical analyst Charles Delvalle. Charles has been predicting a sell-off for quite some time. Here’s what he has to say on the subject:

After staying above the 20-day moving average since March 12, the Dow finally broke under it on June 16. Four days later, the Dow is trying desperately to stay above its 50-day moving average.

This signals an end to the shocking display of strength the market has shown in recent months.

Typically market bottoms are not V-shaped. They are usually W-shaped or form a reverse head-and-shoulders pattern. For example, after the last bear market the Dow formed a reverse head-and-shoulders pattern before signaling the start of the following multi-year bull run.

Let’s be clear. The “green shoots” hysteria in the mainstream media was designed to boost consumer and investor optimism and to send stocks higher. (Remember, the mainstream media needs large corporations – their advertisers – to succeed as much as Washington does.) The “green shoots” rarely indicated that the economy was improving. More often than not, they simply signaled that things were getting worse more slowly.

For readers taken in by the “green shoots” meme, it may surprise you that the Fed’s recent Flow of Funds report – which tracks the country’s financial flows – shows that credit conditions actually got worse in the first quarter of 2009.

As underground investor Dr Martin Weiss points out, “This directly contradicts Washington’s thesis that the government’s TARP program and the Fed’s massive rescue efforts began to have an impact early in the year.”

Weiss, of MoneyAndMarkets.com, says, “ The credit market shutdown actually gained tremendous momentum in the first quarter. And although it’s natural to expect some temporary stabilization from the government’s massive interventions, the first quarter was SO bad, it’s impossible for me to imagine any scenario in which the crisis could be declared ‘over.’”

Here are the facts Weiss has compiled about credit conditions in Q1 2009:

1. We witnessed one of the biggest collapses of all time in “open market paper” – mostly short-term credit provided to finance mortgages, auto loans, and other businesses. Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $662.5 billion.

2. Bank lending went into the toilet. Even in the fourth quarter, when the meltdown struck, banks were still growing their loan portfolios at an annual pace of $839.7 billion. But in the first quarter, they did far more than just cut back on new lending. They actually took in loan repayments (or called in existing loans at a much faster pace than they extended new ones! They literally pulled out of the credit markets at the astonishing pace of $856.4 billion per year, their biggest cutback of all time.

3. Meanwhile, nonbank lenders pulled out at the annual rate of $468 billion, also the worst on record.

4. Mortgage lenders  pulled out for a third straight month. (Their worst on record was in the prior quarter.)

5. And consumers  were shoved out of the market for credit at the annual pace of $90.7 billion, the worst on record.

6. The ONLY major player still borrowing money in big amounts was the United States Treasury Department , sopping up $1,442.8 billion of the credit available – and leaving LESS than nothing for the private sector as a whole.

This is all very bad news indeed for the economy. And if it’s been reported in the mainstream media, we have yet to see it.

Well… The trading theme remained in place yesterday, but this time it was reversed. For those of you new to class, or any of you who have been playing horse hooky, the trading theme that has gripped the markets since August is: The deeper, darker, and more dangerous the U.S. economy and financial meltdown, including the credit market’s locked status, the dollar gets bought… If there is any sign of light to all this mess, the dollar gets sold, for whenever the markets get their minds off the mess, they are reminded of awful fundamentals for the dollar.

So… Yesterday, the stock jockeys must have read the Pfennig and seen that I called for a 50 BPS rate cut from the Fed… (now don’t get me wrong here… I’m against a rate cut, as: 1. it debases the currency further and 2. it will fuel, along with money stimulus going on, future inflation pressures… But! This is what I see the Fed doing, no what I would like for them to do, which would be nothing. They just cut rates 50 BPS last month, that rate cut hasn’t even filtered into the economy yet, why not wait-n-see, and not put that pressure on the dollar and inflation?

OK, I really got off on a tangent there… As I was saying, the stock jockeys read the Pfennig and noticed a call for a 50 BPS rate cut, and the stocks were off to the races! 600 points later, the Dow was looking perky… And all through the day when stocks were rising, and the overall feeling in the markets were upbeat… The dollar got sold, along with Japanese yen! This trading theme is so prevalent now that one could make some real dough if they were smart enough to trade this thing… But that’s not our bag… Really, I’m telling you that’s not my bag! (Austin Powers on a Wednesday morning, yeah baby!)

So… A currency rally that really had some meat and potatoes to stick to your bones! Stock markets around the world were strong overnight too, so maybe, just maybe, this rally can have a two-day run, and then… Who knows, right? Well… Maybe the shadow knows, and he tells me that the deep, dark, dangerous days (my poetry teacher would be proud of that alliteration!) for the U.S. are still in the cards… So be careful out there! Oh, and this just came across the screens… U.S. stock futures are down this morning, which doesn’t bode well for the stocks or the currency rally!

Consumer Confidence here in the U.S. for this month, fell to an all-time low… I saw that and said, “well it’s about time!” Not that I want gloom and doom for the U.S., I just happen to know that we already have it, and kept wondering what U.S. Consumers were so upbeat about! Well, they aren’t any longer… And wait till they get the news that the Credit Card Companies are curtailing the issuance of credit cards… Uh-Oh! If these guys that send pre-approved credit cards to grade school kids, (not really, it’s an exaggeration, but not a stretch!) are pulling back the reins, then you can be sure that they are feeling the pinch of losses from credit cards…

The Pfennig first told you that the next crisis would come from the Credit Cards… Well, it think we’re about to see it unfold right here in front of us, which is NOT exactly what beleaguered banks need right now… Or the economy for that matter!

In other news… The S&P/CaseShiller House Price Index fell once again in August (that seems like eons ago, isn’t there a way to get this data quicker?) to the tune of -16.6%! OUCH! That’s going to leave a mark! And the overall price index has fallen 20% since July 2006… The real problem though is the report indicated that the inventory of unsold homes remains very large, and that will put further pressure on prices…

You may recall me mentioning Bill Fleckenstein from time to time in the Pfennig… The most recent mention was with regards to he book: Age of Ignorance at the Fed, Greenspan’s Bubbles… I talked about it for months, as it gave me a great inside look at how badly Big Al Greenspan screwed up the economy we are now faced with. Anyway… Mr. Fleckenstein is an outspoken defender of short selling… And was interviewed by Bloomberg regarding his stance. I like his stance… Short selling is part of the fabric of the markets, and was put there for the bears… Short sellers are not jackals, hyenas, vermin or vultures, they are simply bears… How can the Gov’t ban this, and call the market “free”? Anyway… Way to stand up for what you believe, Bill Fleckenstein!

OK… I’ve sat on the sidelines too long on this next subject, and it’s time to get off the bench and get into the game… The Amero…

I know that there are people out there claiming they have Ameros, and that they were minted in Denver, and that the U.S. has shipped them all to China for holding until which time the U.S. can’t pay its bills any longer and calls for a “force majeure”, thus making the dollar worthless, and introduce the Amero. The Amero is supposedly the North American Union of the U.S., Canada, and Mexico, and that it will be back by Silver, thus the reason for the physical silver shortage…

OK… You have to ask yourself this question, if you are a believer of all this… The U.S. dollar is the reserve currency of the world, and by having the reserve currency, they are allowed to run up such huge deficits and the world doesn’t bat an eye! Why would they jeopardize this arrangement? Why would the U.S. give up the reserve currency of the world? I’m sorry, but I can’t get my arms around the Amero story…

But! If you are so inclined to believe in the Amero story, then you’ll want to make certain that you convert dollars to currencies now, before it’s too late!

OK… I’m joshing just a bit there, but in reality that’s the case… If that’s what you believe, then you had better get your dollars converted before the Gov’t proclaims them to be worthless.

Alrighty then… Back to reality (for me at least!, if you’re an Amero believer, then that’s OK!), and the reality right now is watching the euro add on to gains made yesterday! The single unit has gained 1/2-cent while I wrote about the Amero! Of course, I just put the kiss of death on the euro’s rally, by mentioning it! UGH! I seem to be a bit snake bitten lately… But, Shoot Rudy, at least I’m here to be snake bitten!

Regarding the Fed rate cut announcement this afternoon… I’ve said that I believe the Fed will cut 50 BPS, bringing rate to 1%… There is currently a 20-30% chance they could go 75 BPS… Talk about raising the “everybody out of the water flag”! That would really bring Halloween early to the markets, as they would have the bejeebers scared out them by a 75 BPS rate cut! I’ll stick to, and the Fed had better stick to 50 BPS, as if that’s not enough already to bring about memories of Jason or Freddie Krueger!

Norway’s Norges Bank, which did NOT participate in the coordinated round of rate cuts on October 8th, but then did cut 50 BPS a week later, is expected to shave another 50 BPS rate cut at their next meeting… But, I wouldn’t bet the ranch on that rate cut, based on their resistance to joining in the rate cut party earlier this month.

Norway’s krone has rallied along side the euro, and I would not like to see a rate cut from the Norges Bank…

The Bank of Japan (BOJ) announced last night that they are “mulling over” a 25 BPS rate cut this week… But come on! Since when does the BOJ tell us what they are “going to do” ahead of time? I would say they did this to jawbone the yen lower… I wouldn’t go betting strongly that the BOJ will cut rates this Friday at their meeting. Their jawboning did help yen to weaken yesterday, along with the trading theme.

And those wild and crazy guys over at Citgroup are talking up euros again… Recall, about a month ago when these guys issued a report showing charts that indicated the euro was about to take off against the dollar? Well… They’re Baaaaaacccckkkkk…. This time, they’ve tempered their call regarding euros, and it sounds a whole lot like they’ve been reading the Pfennig! Let’s listen in to see what they have to say now… “We believe the euro’s move lower against the dollar has been driven by a strong anti-risk bias that has benefited the yen and the dollar. Today’s improvement in commodities, equities, the rise in yields and emerging market improvements suggest a short-term respite that could send the euro back above 1.30 in the near term.”

That’s the trading theme in a nut shell right there! Glad to see them come around to the Pfennig’s way of thinking! But… If a spanner gets thrown into the works, and the deep, dark, dangerous clouds begin to gather over the U.S. economy again, those improvements seen yesterday will be wiped out in a NY Minute!

OK… A quick check of Economic releases today… Oh, here’s one… Durable Goods for September will print today… Recall last month’s print was awful at -4.5%… This month’s report should remain in negative territory, but probably not as awful as the previous month.

And… Then the Big Kahuna of them all… The FOMC rate announcement that will come right after lunch time today… Fed Funds are already trading at 1%, so, the announcement of 50 BPS is expected by everyone at this point! Should be bad for the dollar, but then… Will the current Trading Theme’s grip be too tight?

Currencies today 10/29/08: A$ .6460, kiwi .5750, C$ .7925, euro 1.2810, sterling 1.6020, Swiss .8715, ISK (no quote), rand 10.22, krone 6.7075, SEK 7.7210, forint 199.50, zloty 2.83, koruna 18.77, yen 96.75, baht 34.90, sing 1.4940, HKD 7.72, INR 49.71, China 6.8485, pesos 12.9590, BRL 2.1675, Dollar Index 85.45, Oil $66, Silver $9.27, and Gold… $748.66

Source: A Currency Bounce…

Platinum moved higher at the open of the New York session, then plateaued, trading sideways for most of the day and ending at $2031/oz., up $18. For the week, platinum eased 1.8%.

Silver bottomed at $16.25 in London, caught an updraught through the first hour of New York trading, but then stayed dead flat for the rest of the day, closing at $16.51/oz., up 7 cents. For the week, silver skidded 5.7%.
(Click here for charts)

Precious metals fanciers were probably breathing a small sigh of relief as the objects of their affections staged at least a tiny rally at the end of a dismal week.

In fact, they may well have been jumping with joy, since the usual suspects, a rising dollar and falling oil prices, both moved against them yesterday.

Julian Phillips, of Goldforecaster.com, sees the government dollar jawboning as all important at the moment.

“The gold and silver price is weakening,” Phillips wrote, “in the face of a slightly stronger $ standing now at $1.5318, on the top side of the trading range it has been in for some weeks now. Will it break upwards?

“The Administration is placing huge pressure on all relevant people to make it rise, while the fundamentals don’t support such a rise. Secretary Paulson is behind the bulk of the pressure, so the market is looking expectantly to the G-8 meeting this weekend.

“If the support for the $ were visible and fundamental the $ will rise, but until then the future of the $ remains in question.

“Gold and silver, now in their quiet season, are sitting on support now and strong support at that. Investment demand is sitting on the sidelines waiting for good reasons to buy, which are there, but these fear a change in the $ now.”

And in political news, Congressman Ron Paul ended his quest for the Republican presidential nomination, a campaign that raised tens of millions of dollars in the face of a near-total mainstream media blackout, and that acquainted millions of voters with the value of gold as money, and with the critical need for monetary reform in the U.S.

Source: Gold Ends Week on Mild Upnote

The rally comes despite heavy writedowns from Swiss banking giant UBS.

The uncertainty about the markets’ direction reflected the fact that stocks rose after another round of bank writedowns and capital-raisings – developments that might have been expected to send prices lower.

However, UBS added to the previous session’s 12 per cent advance sparked by news of the departure of its chairman. The Swiss bank said Marcel Ospel was standing down in the wake of $19bn of new writedowns and plans for a SFr15bn ($15bn) rights issue. Its shares rose a further 0.4 per cent to SFr32.9 on Wednesday.

In New York, Lehman Brothers, the US investment bank locked in a battle with short-sellers betting on its demise, surged 18 per cent after it said it was increasing Monday’s $3bn capital-raising by $1bn.

Forget the big bank, says Steve Sjuggerud. Small banks are where the profits are at.

“The good part about the small banks is, they generally stick to their knitting – taking deposits and then making loans. They simply earn a spread… They charge more interest on the loans they make than they pay out as interest on their deposits.

“Small banks are generally not like the big banks. Big banks do try to get fancy, with derivatives trading, massive leverage, and such.”

Read on at Dow Jones MarketWatch.

“No matter what you think, now is the time to buy,” says value investor Chris Mayer.

“At the beginning of recessions, investors tend to continue buying the stocks that were acting well when the economy was growing. That means momentum stocks, or stocks that have gone up. But as you get into the recession, people start to think about valuation again. Momentum stuff starts to not make sense.”