Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Gold Rises As The Euro Yen Carry Trade Falls Lower Propelling Commodities Lower

|Includes: AUSE, BHP, CEW, DBC, DBV, EWA, First Trust Global Wind Energy ETF (FAN), FXA, FXE, FXY, GLD, JJT, JNK, RZG, RZV, THD, TMV, TYO


The spigot of investment liquidity, was further turned off today August 18, 2010, as the EUR/JPY, traded lower to 109.87, according to Action Forex. This can be seen in a slightly lower FXE:FXY.  Stocks opened lower but closed higher  … commodities opened and closed lower … The 20 to 30 US Government Bond, TLT moved higher. The 10 Year US Government Bond, IEF, closed lower. Bonds, overall appear bearish as do stocks. Gold rose higher to $1,229, continuing its breakout that occurred on August 6, 2010. Thailand, THD, rose 1.7% to 52.77. 

Financial market activity for August 18, 2010

Stocks opened lower and closed higher as seen in the chart of stocks VT, FEZ, DNH, IWM, EEM.

Commodities opened lower and closed lower as seen in the chart of commodities DBC, USO, JJT, DBB

One can review bond performance with the two 300% inverse debt ETFs TMV and TYO, Mortgage Bonds, GSUAX, Emerging Market Bonds, EMB, US Government Bonds, TLT, The US 10 Year Note, IEF, Corporate Bonds, LQD, Municipal Bonds, MUB, California Municipal Bonds, CMF and Junk Bonds, JNK.   

One can view the Yahoo Finance chart of debt, BND, IEF, LQD, EMB, MUB, CMF, JNK and TLT or the Finviz Screener of Debt or the Google Finance chart of BND, IEF, LQD, EMB, MUB, JNK and TLT, or the MSN Finance Chart of BND, IEF, LQD, EMB, MUB, JNK and TLT to view daily bond trading activity.

The US Ten Year Note, IEF,  closed lower at 98.18 in its attempted to climb back up to its August 16, 2010 high of 98.78, which was attained in a nine week rally, rising from 92.3 to 98.78 beginning with the announcement of the EFSF Monetary Authority on June 10, 2010. 

The  20 to 30 year US Government Bonds, TLT, rose higher today to 104.531 after rising parabolically from 101.3 on August 11, 2010.

The spike down in the 300% inverse of the 20 to 30 year US Government Bond, TMV, to 36.16 reflects a tremendous purchase of the US Government Bonds beginning on August 26, 2010 which was likely due to both yen carry trade investing and monetization of US debt by proxy buyers on behalf of the Fed in major trading centers such as London.

The dramatic purchase of US Government Debt, both in IEF, and now in TLT, presents systemic risk as buyers may soon rush to the exit doors and there may not be enough buyers for sellers. The recent rally in debt is an example of the principle of greed and fear driving markets; soon fear will take over and bonds will fall sharply.    

Total Bonds, BND, traded down today at 82.38.  Overall the picture on bonds appears to be a pop up and likely soon coming turn down.

The weekly chart of the major currencies, DBV, compared with the emerging currencies, CEW, DBV:CEW, shows the currency traders have a continuing “state of depression” about the major currencies compared to the emerging market currencies.

Ibrahim Gassambe reports that European markets opened lower and traded lower all throughout the day amid BHP’s, BHP, unsuccessful US$39 billion takeover attempt of Potash Corp, POT.  Energy stocks led the declines after Vestas, the world’s biggest wind turbine maker, reported a quarterly loss and reduced its annual sales forecast to EUR6 billion amid customers’ lack of financing. Vestas plunged 23% … This caused the wind energy ETF, FAN, to fall 3%. Growing lack of financing is the epitome of credit evaporation; whether such be lack of credit from government seigniorage, or lending seigniorage, we are entering into ”the age of end of credit”. 
The chart of the small cap pure value shares, RZV, compared to the small cap growth, RZG, shares, together with the Yen, FXY, and the Euro, FXE,  … RZV, RZG, FXY, and FXE shows that an abiding and unwinding Euro Yen Carry Trade, has been active in debt deflation of the small cap pure value shares relative to the small cap pure growth shares.      
ActionForex in August 11, 2010 article AUD/JPY Candlesticks And Ichimoku Analysis provides the chart of the AUD/JPY from 88.05 to 77.88. I believe this shows an Elliott Wave count of 3 down starting on June 17, 2010 at 80.05; and that an Elliott Wave 3 of 3 down commenced on August 11, 2010. Thus there will be ongoing currency deflation reflected in the fall of Australia, EWA, (which is manifesting a broadening top pattern), Asia, DNH, and Billiton, BHP.  
ActionForex in August 13, 2010 article EUR/JPY Candlesticks And Ichimoku Analysis provides the chart of the EUR/JPY from November 2009 to August 13, 2010 which reflects the fall of the Euro, FXE.  I believe a wave 3 of 3 down, commenced in the EUR/JPY August 11, 2010; these are the most destructive of all waves as they result in practically all wealth.
Charts of the day

The euro yen carry trade, FXE:FXY, closed lower for the sixth straight day.

Stocks, VT, continued its second day of trading at resistance.

Bonds, BND, is trading at resistance for the second straight day

Junk Bonds, JNK, traded unchanged at the apex of a broadening top pattern, and represents a good short selling opportunity.

Tin, JJT, represents a good short selling opportunity as it closed up to resistance after having manifested a dark cloud cover candlestick.   

20 to 30 Year US,  TLT, closed up manifesting a hammer, unable to rise much higher than yesterday.

Gold, GLD, was one of the winners of the day, closing up 0.39%.

TYO closed up for the second straight day.

TMV fell 1.1%

Thailand, THD, rose 1.74%


Disclosure: I am invested in gold coijns