This past week, stocks moved down sharply on Monday in reaction to increasing concern about an impending financial crisis brewing in Spain. Stocks erased that move Thursday on hope that the ECB would move in to fix the problem. Friday, stocks logged a 2% gain for the week on more hope. The bottom line is that things are very bad in Europe, but investors believe that bad news has driven the ECB to act. They believe that action will hold back the growing crisis. The VXO fear gauge ended where it started the week in very complacent territory—not bad considering Spain is on the ropes.

The sell-off began Monday in Asia (down about 2%), proceeded to Europe (down nearly 3%), and on to the U.S. which moderated losses to about 1% on moderate volume. This time, the worry centered around Europe and especially Spain. Fear caught fire jumping at one point by over 25% before calming down to less than 8% increase range. Despite the increase, the VXO index value settled out at a rather tame 17 level.

Tuesday, stocks continued their slide. Asia and Europe dropped about 0.5%. Spanish, Italian, and Greek bonds each jumped upward as the U.S. Treasury bond rates set record lows with the ten year closing at a 1.40% rate. U.S. stocks declined about 1% on moderate volume. After the close, Apple released a quarterly report that indicated a chink in its armor. The iPhone sales figures had contracted significantly as the Apple smart phone market share declined. The report showed great numbers for the business, but they came in well below lofty expectations.

Wednesday, stocks fell in Asia about 0.5%, perhaps in reaction to the the Apple earnings report. In Europe and the U.S., stocks moved about 0.5% higher on more bad news is good thinking. New home sales figures for June collapsed by more than 8% in June. That news took some of the steam out of stock prices, moving them back to flat in Europe and the U.S. on moderate volume. Facebook gained over 3% for no particular reason. After the close, Whole Foods Market, which nose-dived Monday, issued a solid quarterly report.

Thursday, Draghi moved stocks higher with more central bank jawboning. The monotonous mantra of “we stand ready” to blah, blah, blah is getting sickening. Anyway, markets in Asia had already closed before the statement but still supposedly rose (about 0.5%) because of hope that central banks will again come to the rescue. As the referenced link notes, stocks in Europe had been trading lower until the Draghi announcement.

Afterwards, it was “risk on” and “off to the races,” powering stocks to a net rise of nearly 3%. Italian and Spanish 10-year government bond rates tumbled 6%, but still closed over 6% with Spanish rates settled at nearly 7%  Of course, we know the power-bokers will hold the EU and Euro together at all costs.This is not news.

Economic news in the U.S. was positive. Unlike Wednesday, now good news is good. Obviously, someone is working overtime to assure this market stays above 1333 on the S&P 500 Index. To me, 1300 looks like a more important technical level, but time will tell.

Whole Foods Market and Agnico-Eagle both roared upwards nearly 10% Thursday after solid earnings reports. Bucking the trend, Facebook slid over 8% in anticipation of having to actually report numbers related to earnings and business performance. The broad U.S. market stampeded upward almost 2% on moderate volume. Precious metals miners also exploded upwards.

Friday, stocks in Asia registered more than a 1% gain on follow-through from the Draghi statements. Italian and Spanish 10-year government bond rates dipped a bit more—moving below their 6% and 7% thresholds respectively. Gold had a strong day climbing over the $1625 per oz level also in expectation of more central bank tampering with the markets. Stocks in Europe rose nearly 2% on more hope.

The U.S. GDP numbers came in pretty bad actually, but that didn’t matter. U.S. stocks continued their relentless stampede higher—rising around 2% on more hope. That move exceeded the upper Bollinger Band for the S&P 500 Index on moderate volume. The 10-Year U.S. Treasury Bond rate collapsed nearly 10% in one day to close at 1.55%. Facebook continued its slide, closing at 23.70. It’s getting there but has much father to fall.

The cost of gold production continues to rise even as the upward price movement of precious metals has declined from. Here’s an article that lists the total cost of production in the range of $500 per ounce. I’m not sure if that includes cost of the mining property itself. Here’s an article that elaborates on the bond bubbleand recommends being liquid with U.S. dollars and just a bit of gold as insurance. As followers of my website know, I’ve been suggesting a cash position since May 5, 2011.

Filed under: Investment

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