"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, October 5, 2011

Gold still stuck in a range

Gold has thus far found willing buyers on forays down below the $1600 level. So far, so good. However, it is still effectively range bound until it can at least push past the $1680 level topside. It ran into resistance near $1650 in today's session but has been holding relatively firm as we enter early Asian trade this evening. Downside support is indicated on the chart in the region bounded by the solid red lines.

It seems everytime we get the least whiff of more bailout or rescue talk coming out of Europe, up go the Equity markets, most of the commodity markets and of course, gold. That happens mainly because down goes the Dollar and up goes the Euro. Quite frankly there is nothing more disgusting to a trader than sitting around waiting for some fresh fundamental news to come out of some monetary official's mouth because you never know what the hell words of "wisdom" that they are going to come up with next, which words I might add will either immediately sink your trading account into the netherworld if you guessed incorrectly or make you look like a veritable wizard.

If it is the latter you can wait by your phone for a call from Jack Schwager to include you in his next sequel to Market Wizards where you can pontificate about your expertise and what you look for in a market when the truth is you just happen to be one lucky SOB.

On the other hand, if you guessed it wrong, they have another category of book that they can include your name in. It is called, Famous Trading Recipes, under the heading of Road Pizza, because that is what you will look like if you were on the wrong side and could not run quickly enough to prevent yourself from becoming steamrolled by eighteen gazillion hedge fund managers whose computers all hit the market at the same moment in time.

Seriously, we are back to trading whatever the hell is coming out of Europe next. Who knows what the final package, if any, will look like. All I do know is that once again, just about the time every technical indicator on the planet turned to the sell side in the S&P 500, with headlines flashing the official entry into a Bear Market, up goes the S&P as if nothing happened once again punishing all the short sellers for their impertence in daring to sell stocks in the financial markets of the US. Tsk, Tsk, boys - did you not know that such activity is unpatriotic at best and treasonous at worst? 

Truth be told the monetary authorities of both Europe and the US are terrified of the price charts and probably watch them more closely than we traders. They simply cannot have them casting off belittling signals as to the health of the economy.

Chalk up the rally in the gold shares to this huge short covering squeeze that hit the broader markets. No matter what the real reason is, the fact is that from a technical chart standpoint, the HUI needed to move higher immediately after yesterday's shellacking and it did. It climbed back over the 520 level so if it goes out to end the week above this level, that will be considered a major victory for the bulls. It will need to get its rear end above 540 to get anything of note going to the upside.

The Dollar retreated from the 80 level once again on the USDX but that will not matter if Europe fails to come through and deliver on their stability mechanism. By the way, I love the fact that we have an Exchange STABILIZATION Fund here in the US and they have a STABILITY mechanism over there. Call me a purist but since when did the damn government have the right to interfere in any markets to make them more "stable". My view is that ALL of the instability currently in these markets is being caused by the government. If they got the hell out of the way we would actually have a TREND and it would be a STABLE one. The only problem for them is that the trend would be DOWN. That is something that these meddling clowns cannot tolerate. That is where the instability is coming from (traders trying to guess what these fools are going to do next).

So whatever you do, do not call the current system in place in our financial markets CAPITALISM. This has nothing to do with capitalism and everything to do with Statism and Central Planning. I bet we would have already seen this entire mess cleaned up by the market if the central planners and meddling busybodies had not stuck their noses into it.

That is my soap box rant for today.


  1. Couldn't agree more... Well said.

  2. Hey, Dan -
    I appreciate your chart insights, especially the ones regarding the COT.
    You are maybe not so less-than-serious with your account of what earns a trader fame and fortune. After all, it's the trader's choice as to what to focus on, but my guess is that, out of all the possibilities, the only one that really counts is the one that goes against the crowd.

  3. Dan -- thanks bunch for very insightful comments you have here. I am a trader myself as well and now attending a conference here in UK to understand European fund managers and public in general. And, let me tell you this much, I am not impressed a bit, at all.

    In US, we are a capitalist society and politicians for better or worse listen to the what the markets has to say. After speaking with fellow traders and investors here, I am convinced that in Europe things does not work that way at all. First, it is a socialist continent at heart. Second, apparently, inlike US, the smart students become politicians and they do have higher weight than does the traders / investors community, whether through their salaries, pay packages, or the respect they get. Further, i am literally told by some very smart guys here that, politicians literally does not give a rat's a$$ to markets and indeed they want to see the market go much much lower so that they can push their agenda more easily. One being, uniting the all Europea and its tax collection scheme such that in the last minute after that expected and hoped for market crash, politicians will dully step in, and say to PIIGS that see you need our help and to do that, e need to consolidate tax collection at which stage Germans and French take over those agencies across the continent to push for it.

    Well, take it as whatever the rumor is in Europe, but this is what I get from the folks here. Further, they say that, right wing people and politicians are garnering a lot of traction that social fabric of the whole continent is heading for dangerous territory.

    That said, I really gave up on Europeans and do not try to make sense of what they do other than keeping my shorts on the banks and high yield credits in EU zone while buying with both hands every time gold tests 159x level.

    All in all, whst we are dealing with is not a rational, US style investor base, and they do not give a heck to what the market says, apparently, till the very last moment.

    I guess, it will continue like this for awhile and we might not see major push up in gold but for those investors with medium and long term horizon in their mind, it might be great opportunity to accumulate.

  4. Maybe I am a long term gold mining stock guy and feel a little inkling that this thing may turn up on fundamentals. More Money is going to be poured in Euroland to patch up the LARGE BUILDING PROBLEM THERE WITH A FINAL decision for Greece. Spain and Italy's bonds look settling a bit. The news probably points to what a Government man would say is ORDERLY Defalut for the Greeks then Fire wall the Italian and Spainiards. Euro up, dolla down.

    On the other hand, a recent post from Zero hedge shows us just 400 billion left for budget in US. Hell what is the number on Obama's jobs bill 450 Billion. MMMM better start negotiating and increase in the debt ceiling or christmas becomes a battle of wills. Thanks Dan. Appears on fundamentals, with some strong technical steadiness, we might just see all signals point to more money hitting the streets on both sides of the pond. Would this not start an explosion upwards?

  5. Bravo Dan!! Rant on my man! Everything you say is true, and frustrates me beyond belief.
    The inmates are running the asylum.

  6. I agree we no longer have capitalism in the USA. It is my hope that the current system is on it last legs, because I believe it is unsustainable. I do not think the central banks can go on printing money forever. I just hope I make the right investment decisions to come out of this debacle with my capital intact.

    Thanks for a great, truthful post.

  7. The ECB is not going to print Euros to bail everything out. They are not that stupid.

    That is still gold positive. Gold bugs focus too much on the quantity theroy of money.


  8. A wee dram of the bottle, there Dan? Just kidding, but not entirely. Nice rant, however I think you are spot on. Yesterday's late session in the equities looked just a tad suspicious. Today's continuation? I don't know. All I know is that I have some close stops on recent mining positions.

    PS: First comment from me, but I just want to tell you that I very, very much appreciate your market comments. Thanks tremendously.

  9. "All in all, whst we are dealing with is not a rational, US style investor base, and they do not give a heck to what the market says, apparently, till the very last moment."

    As opposed to rational US investors, who would never do a stupid thing like investing in companies who lend money to poor people to buy homes they couldn't ordinarily afford. Oh, wait...

  10. I, too, rely on the charts...and the messages telgraphed through them. I am particularly fond of Trader Dan's interpretation of daily numbers. Kudos to you Dan!

    But, I buy and sell on the fundamentals.

    It's buying season.

  11. As Chris Powell put it so well: "There are no markets anymore, just interventions..."

    Dan, thank you for your insights :^)

  12. Dan, Such a sad state of affairs. I was taught the "invisible hand". Now, I know what we have is the most corrupt nation of governance since 1776, roman empire, facism, etc. I wish for yesteryears. Really, it started years ago. You cannot let politicians off the hook with CRAZY monetary policies, importing cheap labor to decrease wage inflation (hell who cares what the meaning of ILLEGAL), utilize SEC to cover up Barclays PLC's algo BS. It is all BS. I believe we do not change until we hit a major wall. The T Bond market. This forces IMPLOSION. Steve could not do apple today unless he sat in a DC office and offered up bribes. We have a corrupt DOJ head, a corrupt SEC head, a corrupt President, an aligned Treasury and Central Banking system, and finally a controlled media. We are going to pay a price and their is no question in my mind we live in unprecedented times for the US (Not historically). Another degrading system. Long Gold, mining stocks, long on the devaluation of dollar and all currencies except those of small strong currencies with free markets. Others will cave into our constant devaluation theories until...BOOM.

  13. you just delivered a piece for history books yet to be written!

    these markets are like having the lunatics asylum being turned inside-out: sane, rational people are now being treated by inmates.

    And you elegantly pointed out what really is cause and whats effect with regards to "stable markets and stuff".
    I will post this on Facebook as a note on my profile, because that is exactly what I am constantly trying to get into peoples heads when I tell them about "speculators" and scapegoats alike.... its usually quite hard a job, so thanks for making it more easily explainable - because even to completely brainwashed morons, this should appear as some very simple truth...!!!

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  15. My take on the ("new invisible hand"):

    "The plan" is to devalue the dollar, this is evident, and it's half of a convoluted scheme steeped in the belief that a steadily weakening dollar is needed in order to create wealth. This malarkey has gone on almost a decade, since gold was $450 +/-.

    The other half of the scheme is the use maximum leverage. Since there is no money in our land of milk and honey, those with money can buy an asset for little or no money down, and at super low interest.

    Then, it’s the waiting game until congress over-respond to the weakening dollar, and homelessness, unemployment, foreclosures and all the other bad stuff, and the stellar elected representatives and the FED will stoke the fires of inflation by printing money, lot's of it, and this in turn increases asset values.

    Ergo: the creation of wealth. It’s ridiculous, it's not American, but it works; its capitalism gone awry.

    It’s time to buy gold and silver.


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