good short read - jim sinclair

Saturday, January 24, 2004, 12:13:00 AM EST

Market Summary

Author: Jim Sinclair





European Central Bank Plays a Dangerous Game

Jawboning the euro is a new twist for the European Central Bank which seems like a Class B actor trying to put on a good show. The word in Davos is that the bank has shown the currency speculators a thing or two in the past two weeks.



Yes, it has caused some less-than-professional traders to get whipsawed twice, the last time being today. One week, the rise was unopposed according to financial ministers and the euro goes from 1.25 to slightly under 1.30; the next week the euro was considered too high and a host of European finance ministers yelled for intervention causing the euro to drop from nearly 1.30 to 1.24.

This week the euro recovers and as it moves toward 1.28, the Davos junketeers determine it might be wise to lower rates in Europe to dampen the strength of the euro and back we go toward 1.25.

The only thing we are missing is the President of the European Central Bank publicly wondering why the market in the euro is acting like a hot tech stock on the NASDAQ in terms of the brutality of its up and down moves.

What European Central Bank President Jean-Claude Trichet is apparently ignorant of is that the market will begin to habitualize this sick comedy of contrary statements every other week until statements made by him and his horde of financial elves start falling on deaf ears.

Apparently, he has never heard the story of yelling “wolf” too often. The use of verbal intervention as a monetary tool will - unless real intervention occurs or a reduction in interest rates happens quite soon - lose its punch and power from a market perspective.

We all know the Europeans do not have an Asian state named Japan green-nosing the euro so that the US Fed can maintain its short term interest rates at artificially low levels.

Intervention in the euro would be immediately neutralized by the actions of the US Fed playing the fake 1% short end US interest rate game. Putting it in the plainest possible language: “The way it's being played, European Central Bank-blessed bulls_ _ _ will not float too much longer."

If they keep up this game thinking they are forcing the market into submission, the euro will go to 1.75 so fast that these market midget ministers will get windburns. The market will do payback on the euro big time.

Gold

Meanwhile, all this foolishness affects the gold price which has been behaving manically trying to follow the euro. The net effect of this action is that both the euro and gold will get tired of this nonsense and leave the financial elves of Europe in the dust as they both seek higher prices.

As I’ve noted in the past, the easy money was from $342 to $429. Now we are going to have to work for our pay. For the near future, I am buying the euro as it approaches 1.24 and selling as it approaches 1.28. I will play gold off the euro but right now $405 to $414 looks like a reflection of the euro game.

What a web these spiders have weaved. Mark my words, this gamesmanship, spin and down right fibbing from every corner of the world is going to blow up in their faces before 2005 is finished. This is the beginning of the end here and now. The geniuses from Washington to Timbuktu have begun to believe their own BS and that my friends is truly dangerous.