USDOLLAR – Weekly Wedge Break Could Trigger Freefall

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The War on Cash is About to Go into Hyperdrive

The global Central Banks have declared War on Cash.
Historically, one of the safest things to do when the markets begin to collapse is to move a significant portion of your holdings to cash. As the old adage says, during times of deflation, “cash is king.”
The notion here is that cash is a safe haven. And while earning 1-2% in interest doesn’t do much in terms of growing your wealth, it sure beats losing 20%+ by holding on to stocks or bonds during their respective bear markets
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Hungry People Golden Hope

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Money Museum exhibit features Olympic games memorabilia – Colorado Springs Gazette

Money Museum exhibit features Olympic games memorabilia
Colorado Springs Gazette
"The Olympic Games – History & Numismatics," a new exhibit at the Edward C. Rochette Money Museum at the American Numismatic Association, will showcase about 300 objects, including coins, medals and other Olympic memorabilia from the ancient to …

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Barber Dime Values and Prices

Looking to see how much your Barber Dime is worth? This page lists coin values and prices for Barber Dimes minted from 1892 until 1916. The values listed here are what you can expect a dealer to pay you for the coin. Prices listed are what you can expect to pay to a dealer to buy the coin. View full post on About.com Coins: What’s Hot Now

Data Points to S&P 500 Losses and a Gold Price Surge

A massive shift in Gold and S&P 500 sentiment warns that further losses are in store for the US Dollar and global stock markets.

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Panic! Horror! That’s why this gold ETF has doubled – CNNMoney

Panic! Horror! That's why this gold ETF has doubled
CNNMoney
Precious metals tend to do well during times of financial stress. Google "gold fear" and you get about 142 million results. That's 7 million more than what you get by searching for "Beyonce Super Bowl!" There is the perception that gold and silver will

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Stock Market Gap Down…

The SPX Premarket is down below the Wave A low at 1828.45. The Elliott Wave pattern has morphed into another A-B-C, due to overlap in the Wave structure. What we are looking at is a hybrid Wave pattern that I have not seen before…but it is consistent and repeating. There is not enough time to complete an impulse down to the bottom of Wave (3). However, there is enough time for a Wave C. It appears that a gap down open is in the cards.
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CSNS Convention to Include Newman Numismatic Portal Program – CoinWeek (blog)

CSNS Convention to Include Newman Numismatic Portal Program
CoinWeek (blog)
Len Augsburger, Project Coordinator for the Newman Numismatic Portal, will be joined by Wayne Homren, a Past President of the Numismatic Bibliomania Society and Editor of the E-Sylum electronic newsletter, in giving a program at the 77th Anniversary …

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USD Ready to Run, SPX Lay in Wait for Yellen

USD has been offered aggressively as rate hike expectations have been kicked lower by markets. The next two days will offer Ms. Yellen’s response.

Talking Points:

The news front over the next two days will likely be dominated by Ms. Yellen’s twice-annual testimony in front of Congress. Today she speaks with the House of Representatives, and tomorrow the Senate.

– Ms. Yellen’s already provided her prepared remarks (summarized below the first chart), and at 10 am ET, she will read that to Congress. After that, she will take questions, and this is where the volatility may get interesting.

– The US Dollar is at the same pennant support that we mentioned last week after catching a bounce on Thursday and Friday. USD can put in some major moves on the back of this testimony, as the recent bout of USD weakness has been driven by decreased rate hike expectations. If Ms. Yellen counters this by taking a hawkish tone, watch for USD strength.

There is one really big news item on the calendar for the next two days: Janet Yellen’s twice-annual monetary report in front of Congress. Today begins with the House Financial Services Committee, and tomorrow Ms. Yellen will be speaking in front of the Senate Banking Committee.

Like most Fed events, this will begin with prepared remarks from Ms. Yellen (discussed below the first chart) and this is where the market will get the Fed’s take on the current state of the US economy. After that, she’s open for questions and this is where events can get really interesting as members of Congress can basically ask her whatever they want and she’s in a position where she will probably respond. This is quite a bit different than normal Fed meetings with press conferences led by reporter questions. Congressmen (and Congresswomen) represent voters, and with hot-button issues like the economy, we’ll often see vociferous news-worthy types of loaded questions directed towards Ms. Yellen that, frankly, can be hard for anyone to answer. Any stumbles are caught on tape and replayed and replayed.

There is one gigantic question on investors’ minds, and fully expect this to be the object of focus throughout this two-day testimony; and that is how aggressively the Fed is looking to raise interest rates.

There is a gigantic disconnect right now between market expectations and the perception of Fed expectations. In the most recent dot plot matrix, the Fed indicated that they may be looking at four rate hikes throughout 2016. Markets never really bought that, and at the beginning of the year we were looking at 2 hikes expected by markets, and by now that’s all the way down to zero with the expectation for that next hike all the way out to 2017. So there has been a growing disconnect between these two numbers and given the state of the global economy with some very legitimate concerns in Asia combined with continued challenges for commodity prices, the Fed’s continued hawkishness has become somewhat of a concern.

But as we’ve gotten more and more indications of softness in data out of the US, combined with the plethora of peripheral issues developing around the economic world, investors have priced out those rate hike expectations from the Fed. This is somewhat of the expectation that the Fed will continue doing what they’ve been doing over the past five years, which is basically bending monetary policy in response to stock prices. This could explain the late-session ramps that we’ve seen in US stocks over the past two days, and the US Dollar has just moved back down to support in the bull pennant that we identified last week.

USD Ready to Run, SPX Lay in Wait for Yellen

Created with Marketscope/Trading Station II; prepared by James Stanley

Ms. Yellen’s prepared remarks (released at 8:30 AM ET):

Ms. Yellen provided another balanced statement, although she did avoid the question of a rate hike in March. Ms. Yellen talked up employment as a strong point while also saying that the bank expects inflation to remain subdued because of further declines in energy prices.

Ms. Yellen did mention foreign economic developments posing a risk to US growth, and specifically cited declines in the Reminbi’s exchange rate as posing uncertainty around China’s exchange rate policy and, in-turn, economic projections.

She also mentioned that conditions in the US have become less conducive for growth citing equity market declines, credit bifurcation (higher rates for less credit worthy borrowers, less impact for more credit worthy) and further appreciation of the US Dollar.

This is somewhat of a similar hat tip provided by Mr. Dudley last week, in which he mentioned the threat of a strong US Dollar potentially pulling the US Economy into recession. We discussed this concept in the article;The Real Bain of Equity Markets is a US Dollar problem.

Basically, in a world where most Central Banks are trying to deflect capital flows, being the one major Central Bank looking at a rising rate regime will attract considerable capital flows. Those capital flows mean more demand for US Dollars, which means trouble for American exporters. That stronger dollar makes American production less competitive, both internationally and in the US. So, even if the US is recovering and doing well, if the rest of the world is weakening their currency, well, eventually, that strength in the Dollar will probably pull the US into recession along with the rest of the world.

On the other hand, there is a very legitimate need for higher interest rates for pension funds, retirees and near-retirees. The initial market response to negative rates in Japan hasn’t been very positive, as the Nikkeispiked down to another new low last night.

Response to Negative Rates in Japan Not a Positive For Equities So Far

USD Ready to Run, SPX Lay in Wait for Yellen

Created with Marketscope/Trading Station II; prepared by James Stanley

The Volatility Will Likely Start Just After 10:00 AM

This is when Ms. Yellen begins speaking in front of Congress. She’ll start off by reading the testimony that’s already been released that I’ve summarized above. After that, she’s open for questions. There isn’t much that she can really say here that’s out of band with the testimony. She can’t tell the future, hopefully Congress knows that.

The market response to the next two days’ worth of questions will be telling. It’s not likely that she’s going to commit to rate hikes in front of Congress on national television, and it’s also unlikely that she’s going to back down. For that we’re probably going to have to wait until March (next Fed meeting with a press conference). But she will likely try to hedge her statements to keep flexibility on the Fed’s side.

As for trading this – these events can be tough. Volatility can pick up throughout the event, and moves can reverse really quickly if one misstep or misstatement is perceived by markets. This is like trading news for any other major announcement, only this one can last for a couple of hours over the course of a two days.

There are two primary ways that traders can attempt to counter this: 1) Longer-term horizon. Go out to a longer time frame, use a wider stop and a smaller position size so as not to take on too much risk on any one ‘idea.’ 2) Use tighter stops on shorter-term momentum-based approaches. This one can be tough because if no smooth trends develop, the scalper can end up getting whipped around in such an environment.

As for longer-term setups; we discussed the S&P last week as it was trending higher in a bear-flag formation. Since then the bear flag has been broken to the down-side, catching support at 1,827. But, in anticipation of this morning’s event, we’ve seen some pullback in the S&P that’s brought price action up to a potentially new lower-high, and this resistance has come in at the 76.4% retracement level of the most recent major move (taking the 2,082 high to the low at 1,810). The last four-hour bar setup as a Doji, which makes for a bearish harami pattern. But perhaps more enticing – if this current 4-hour bar closes below 1,857, we’ll have anevening star pattern: This can be a really attractive bearish reversal pattern in what’s been a strong down-trending market. That can be a compelling longer-term setup that can offer an attractive risk-reward.

USD Ready to Run, SPX Lay in Wait for Yellen

 

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The Marvelous Pogue Family Coin Collection, part 14: Successful Third Auction Given Uncertain Market Conditions – CoinWeek (blog)

The Marvelous Pogue Family Coin Collection, part 14: Successful Third Auction Given Uncertain Market Conditions
CoinWeek (blog)
In some cases, collectors eagerly compete for individual rarities, and, in others, dealers buy them for inventory. Rarities are not commodities, and the moods, personal schedules, and perspectives of coin buyers affect bidding by collectors, especially

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Gold Price Surges 3.2% To $1,241/oz As Deutsche Bank, Stocks Fall Sharply

Gold has surged over 3% today on increased safe haven demand as stocks and in particular bank stocks see sharp falls. German shares have nose dived again and German colossus Deutsche Bank has fallen over 8%.
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USD/CAD Technical Analysis: CAD Bulls Face Critical 100-DMA (Levels)

The 1000+ Pip Drop in USD/CAD was not due to Oil bouncing, which could awaken the doves at the Bank of Canada.
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Through the Looking Glass on Interest Rates

On January 29th, Japan’s central bank governor, Haruhiko Kuroda, announced that the Bank of Japan would introduce a Negative Interest Rate Policy, or NIRP, on bank reserve deposits held in excess of the minimum requisite. The European Central Bank, and central banks in Switzerland, Denmark and Sweden have already partially blazed this mysterious trail. The banks have done so in order to weaken their respective currencies and to light a fire under inflation. Swiss national bonds now carry negative rates out to maturities of eleven years, meaning investors must lock up funds for eleven years to receive even a small positive nominal return!

There are economists and investors to whom these policies seem logical. After all, if low interest rates are good, wouldn’t negative rates be better? Many have argued that the ‘zero bound’, or the point past which rates can go no lower, is simply the same type of archaic thinking that brought us the gold standard and moral hazard.

These contemporary economists like to suggest that markets should become comfortable with negative rates and accept that they have an important role to play in the “science” of modern finance. But this analysis ignores the fundamental absurdity of the concept.

Money has a time value. Funds available today are worth more to the owner than money available tomorrow. I would imagine that, if asked, 100% of people would choose to receive $10,000 today rather than the same sum a year from now. Many might even pay for the quicker delivery. Even if we allow for the unlikely possibility that real deflation exists, and that consumers are therefore making sensible decisions in deferring purchases, life is uncertain and consumers are impatient. That’s why banks have always had to offer interest to savers to lock up their funds on account. Paying for the privilege of not spending one’s money is a completely new development in human history, and one that I believe is at odds with fundamental concepts of economics and psychology.

The ECB, as did the Bank of Japan (BoJ), cited economic stimulation as its main reason for negative rates. These sentiments were recently cited in a blog post by former Fed President Narayana Kocherlakota where he urged his former Fed colleagues to bring rates into negative territory. The logic is that people and businesses would refuse to pay to keep their money on deposit, and would instead withdraw those funds to spend and invest. However, zero percent interest rates do not appear to have had this affect. The money may, in fact, have been spent, but the growth never materialized. So will the dead horse we are beating suddenly get up if we beat it harder? Apparently so.

Only eight days before taking the dramatic and highly debatable step to trigger negative rates, Bank of Japan President Haruhiko Kuroda had assured his Parliament in Tokyo that such a policy was not even being considered (Reuters, 1/21/16). But less than six days later, after attending the World Economic Forum in Davos, his position had changed. Did private discussions with world leaders in Davos convince him that a serious international recession and credit crisis would unfold unless all central bankers could fire all available weaponry?

After the financial crisis of 2008, the U.S. Fed and the Bank of England (BoE) followed the lead of Japan to experiment with QE and ZIRP, even though those policies never delivered a recovery to the Japanese. The Fed and BoE unleashed stimulation with unprecedented vigor at home and then urged acceptance by other central banks. In essence, a huge global debt crisis was to be cured, or at least postponed, by even more international liquidity based on massive debt creation and the socialization of bank losses.

Much of the massive synthetic liquidity created by the QE experiment was funneled into financial assets. This diverted business investment away from job-creating investment in plants, equipment and employment. Wages remained stagnant and consumer demand and GDP growth were disappointingly flat. According to data from the Bureau of Economic Analysis, expansion of real U.S. GDP growth between 2009 and 2015 averaged 1.4 percent per year or less than half the average rate of 3.5 percent experienced between 1930 and 2008.

Meanwhile, ZIRP has caused mal-investment along with an unhealthy reach by banks and investors for high yield, but riskier investments. This became most obvious in the high yield debt market, which now is being hit hard by the fall in oil prices.

Negative interest rates mean that borrowers are paid to borrow. This serves as a powerful inducement for companies to borrow up to the hilt to buy other companies, to pay dividends that are unjustified by earnings levels and to invest in financial assets. Often this includes buying back their own corporate shares thereby increasing earnings per share, the share price and linked executive bonuses.

For savers, negative rates discourage savings, stifling future business investment and consumer demand. However, central banks hope that discouraged savers will instead be lured into spending on consumer products and create short-term economic growth albeit at the price of future growth.

Negative interest rates mean that lenders have to pay borrowers and that depositors have to pay banks to keep and use their money. One does not require a PhD in economics to recognize this as an unnatural distortion that will create more problems than it solves.

If individual and business depositors draw down their balances, the deposit base of banks will fall as will the velocity of money circulation. This will not only discourage lending, but, through reverse leverage, cause bank liquidity problems. Should banks with loans to high-yield companies and emerging market nations, especially those hit by falling oil prices, see their loans become non-performing at the same time as deposits are falling, a potentially catastrophic banking crisis could threaten. Since the Financial Crisis of 2008, over $50 trillion dollars of new debt have been added globally to the levels that precipitated the banking crisis in the first place.

Negative interest rates act effectively as a hidden tax funneled directly to banks. They are inherently unhealthy. Currently, they could indicate also a measure of unease among two of the four most powerful central banks. If so, that could well escalate. Depositors should be aware acutely of the hidden risks to their deposits. Already, nations with looming bank liquidity problems, such as Russia and many in Africa, are increasing their levels of bank deposit insurance to reduce potential political unrest.

Readers know that we have felt for many months that the U.S. is far from ready for interest rate increases. We are of the opinion, now echoed by others, that the U.S. will see zero and possibly even negative interest rates before it experiences a one percent Fed rate. This does not bode well for our future.
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EUR/SEK Jumps as Riksbank Cut Rates Further Into Negative Territory

The Swedish Krona plunged after the Riksbank decided to cut the Repo rate to -0.50%, and is prepared to do more if necessary

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