Saturday, December 31, 2011
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
Friday, December 30, 2011
Silver ends DOWN on the Year
First of all I would like to publicly thank one of my readers, "Silverwood", for noting that I erroneously reported in an earlier post that silver had ended the year 2010 at the $28.00 level. I mistakenly used the LOW for the month of December 2010 instead of the closing price which on the front month futures contract was $30.93.
Based on that price, Silver is ending DOWN on the year 2011.
Note on the following chart that it has retraced 50% or half of the entire rally made from the lows in 2008 which marked the bottom during the eruption of the credit crisis and the inception of the Federal Reserve's Quantitative Easing program. That rally took it all the way to $50 before it then promptly collapsed.
Bulls would have preferred to see it close the year ABOVE that 50% Fibonacci retracement level near $29.30 but alas, it could not do so after staging a decent bounce off of this week's low near $26.
A period of base-building in a sideways trend would benefit this market as many players are simply too worn out from its wild swings up and down to mess with it right now. Silver is a seductive lover which promises all manner of satisfaction only to then break your heart with its fickleness. If it can settle down some and grind sideways ABOVE $26 for some time, then we should start seeing some confidence towards it on the part of more investors outside of the dedicated silver bulls.
If you note on the chart the line marked "SUPPORT" in dark red. That line comes in near $26.30 and extends down towards $26.15. THREE times over the last year it has held price and attracted sufficient buying to take the price higher. IT MUST HOLD in order to prevent a drop all the way down towards $22 - $21. If the bulls can take price back above that 50% retracement level near $29.30 and preferably put a handle of "3" in front of the price once again, then I think silver will be okay and attract some new buying as well as minor short covering.
In order to get a sustained uptrend going however, it is going to have to convincingly clear $35.50. If risk trades come back into vogue early next year, then this should be a relatively easy matter for the bulls to accomplish. If however risk aversion is still the order of the day, then this market is going to struggle.
Based on that price, Silver is ending DOWN on the year 2011.
Note on the following chart that it has retraced 50% or half of the entire rally made from the lows in 2008 which marked the bottom during the eruption of the credit crisis and the inception of the Federal Reserve's Quantitative Easing program. That rally took it all the way to $50 before it then promptly collapsed.
Bulls would have preferred to see it close the year ABOVE that 50% Fibonacci retracement level near $29.30 but alas, it could not do so after staging a decent bounce off of this week's low near $26.
A period of base-building in a sideways trend would benefit this market as many players are simply too worn out from its wild swings up and down to mess with it right now. Silver is a seductive lover which promises all manner of satisfaction only to then break your heart with its fickleness. If it can settle down some and grind sideways ABOVE $26 for some time, then we should start seeing some confidence towards it on the part of more investors outside of the dedicated silver bulls.
If you note on the chart the line marked "SUPPORT" in dark red. That line comes in near $26.30 and extends down towards $26.15. THREE times over the last year it has held price and attracted sufficient buying to take the price higher. IT MUST HOLD in order to prevent a drop all the way down towards $22 - $21. If the bulls can take price back above that 50% retracement level near $29.30 and preferably put a handle of "3" in front of the price once again, then I think silver will be okay and attract some new buying as well as minor short covering.
In order to get a sustained uptrend going however, it is going to have to convincingly clear $35.50. If risk trades come back into vogue early next year, then this should be a relatively easy matter for the bulls to accomplish. If however risk aversion is still the order of the day, then this market is going to struggle.
Thankful for Gas Shale
One of these days the politicians are going to wake up and realize that America is sitting on so much natural gas that we could kiss the Mid-East and its problems goodbye if we actually took steps to convert to a larger use of this valuable "home-grown" natural resource.
Wouldn't it be nice to be able to ignore the mullahs in Iran as demand for the only thing they have to sell of any value evaporates up into smoke.
Look at this price chart of natural gas and see what American ingenuity and technology can do when once it is unfettered and allowed to thrive. I for one am thankful that it does not cost a small fortune to heat one's home or generate the electricy produced during the summer when we are running air-conditioners to cool our homes. Imagine what we could do if we had more and more cars, buses, trucks, etc, running on natural gas or LNG.
Wouldn't it be nice to be able to ignore the mullahs in Iran as demand for the only thing they have to sell of any value evaporates up into smoke.
Look at this price chart of natural gas and see what American ingenuity and technology can do when once it is unfettered and allowed to thrive. I for one am thankful that it does not cost a small fortune to heat one's home or generate the electricy produced during the summer when we are running air-conditioners to cool our homes. Imagine what we could do if we had more and more cars, buses, trucks, etc, running on natural gas or LNG.
US Dollar looks to squeak out a Winning Year
The Dollar is being sold down today in the year's last trading session as bulls book profits and window dress their accounts after the nice run higher over the last two months in the greenback.
This is allowing the commodity complex in general to rally and is benefitting both gold and silver.
Reading too much into one day's trading action at this time of the year is generally not wise. Volume is simply too low to validate any moves and with liquidity quite low, it does not take much in the way of order size to move these markets around. Also, some of the pit locals particularly are fond of separating traders from their money in this kind of holiday trade.
That being said, the Dollar has managed to finish the year of 2011 on a positive note, even if barely. It is hardly a ringing endorsement of the greenback however as it was more a "get the hell out of the Euro" trade than anything. Risk aversion and a flight to cash were the main culprits behind the Dollar's rise, especially over the last few months. Fundamentals cannot be said to be strong for the Dollar, not when we are running over $15 trillion in federal debt and are at 100% on the Debt to GDP ratio. If that were not bad enough, the president just asked for ANOTHER $1.2 TRILLION in additional spending limits.
Getting a read on things as we head into the New Year is a bit tricky since the same problems that have plagued Europe still remain and China, while still growing, is slowing down a bit. The US economy is working along a bottom and while recent economic news has shown some signs of stability and extremely modest growth, the idea that the economy is going to expand at a rate fast enough to do much if anything to cure the ailing jobs picture or even put a dent in the federal debt is wild and wishful fantasy. The US economy has bottomed out but that is a far cry from signaling halycon days are ahead.
It does help to put things in perspective however and that is what the long term monthly charts are good for. This chart is hardly a vote of confidence in the US Dollar which has declined 30% over the last ten years as of the end of this year. While recent Dollar bulls may be congratulating themselves for making a wee bit of money this year, try telling one's kids and grandkids that their future looks rosy based on this chart.
As we start the New Year next week, the Dollar has a chance to extend the rally of the last two months if it can better the initial resistance level near 81.40. That would set up a push to 83, which if the Dollar can take this out, would pave the way an eventual run towards 89 - 90. Much depends on the state of mind of traders regarding risk and whether they are willing to commit capital that is sitting on the sidelines or to continue keeping their powder dry and hoping for signs of improvement in the global economy as a whole.
This is allowing the commodity complex in general to rally and is benefitting both gold and silver.
Reading too much into one day's trading action at this time of the year is generally not wise. Volume is simply too low to validate any moves and with liquidity quite low, it does not take much in the way of order size to move these markets around. Also, some of the pit locals particularly are fond of separating traders from their money in this kind of holiday trade.
That being said, the Dollar has managed to finish the year of 2011 on a positive note, even if barely. It is hardly a ringing endorsement of the greenback however as it was more a "get the hell out of the Euro" trade than anything. Risk aversion and a flight to cash were the main culprits behind the Dollar's rise, especially over the last few months. Fundamentals cannot be said to be strong for the Dollar, not when we are running over $15 trillion in federal debt and are at 100% on the Debt to GDP ratio. If that were not bad enough, the president just asked for ANOTHER $1.2 TRILLION in additional spending limits.
Getting a read on things as we head into the New Year is a bit tricky since the same problems that have plagued Europe still remain and China, while still growing, is slowing down a bit. The US economy is working along a bottom and while recent economic news has shown some signs of stability and extremely modest growth, the idea that the economy is going to expand at a rate fast enough to do much if anything to cure the ailing jobs picture or even put a dent in the federal debt is wild and wishful fantasy. The US economy has bottomed out but that is a far cry from signaling halycon days are ahead.
It does help to put things in perspective however and that is what the long term monthly charts are good for. This chart is hardly a vote of confidence in the US Dollar which has declined 30% over the last ten years as of the end of this year. While recent Dollar bulls may be congratulating themselves for making a wee bit of money this year, try telling one's kids and grandkids that their future looks rosy based on this chart.
As we start the New Year next week, the Dollar has a chance to extend the rally of the last two months if it can better the initial resistance level near 81.40. That would set up a push to 83, which if the Dollar can take this out, would pave the way an eventual run towards 89 - 90. Much depends on the state of mind of traders regarding risk and whether they are willing to commit capital that is sitting on the sidelines or to continue keeping their powder dry and hoping for signs of improvement in the global economy as a whole.
Thursday, December 29, 2011
Gold Daily Chart
Gold, as with Silver, managed to bounce right where it needed to in order to prevent a deeper drop. It uncovered buying down near the $1,535 - $1,530 level, an area where we learned after the fact, that Central Banks had been buying back in September.
Bulls are digging in here so one can only hope that their conviction remains firm enough to take the price out of the danger zone and back above the $1,600 level. Such an event would trigger some sizeable shortcovering among the weaker-handed bears.
Failure to hold today's low sends the market almost immediately down towards $1505 - $1,500.
Last see what we get in trading tomorrow to end the day, week, month and year. Currently we are seeing buying coming into the Asian session. No doubt some of this is shorts ringing the cash register to go out on a winning note for the week.
Bulls are digging in here so one can only hope that their conviction remains firm enough to take the price out of the danger zone and back above the $1,600 level. Such an event would trigger some sizeable shortcovering among the weaker-handed bears.
Failure to hold today's low sends the market almost immediately down towards $1505 - $1,500.
Last see what we get in trading tomorrow to end the day, week, month and year. Currently we are seeing buying coming into the Asian session. No doubt some of this is shorts ringing the cash register to go out on a winning note for the week.
Silver holding at critical $26 level
Silver has been the on the receiving end of the risk aversion trades and as noted in a previous post has been badly lagging gold in terms of performance.
It ended last year (2010) at $28.01. As of this writing, it is currently trading near $27.74, down, but just barely on the year. Compare that to Gold which is currently trading near $1547, and remains up for the year at about 8% or so.
This being said, Silver had held on the charts exactly at the former spike low near the $26 level which it made after plunging from near $45 in late September of this year. This is a key level which needs to hold to prevent deeper losses which could threaten to take the metal down closer to $21 - $20 before it would bottom. Today's performance by the bulls, in bringing the metal sharply off its session low, is an outstanding effort. However, to get out of the woods and move past the danger stage, they now need to take the price ABOVE $30 and hold it there. That would confirm a bottom on the chart. It would not however confirm a bull trend is about to emerge but only that the severe selling has run its course. To get a solid uptrend signal, the grey metal woudl need to take out $35.50 on a weekly closing basis.
We'll see what we get in tomorrow's trading session to end the year. Perhaps the bulls can push the metal into the plus column for the year. That would take a close over $28. Let's see if they are up to the challenge.
It ended last year (2010) at $28.01. As of this writing, it is currently trading near $27.74, down, but just barely on the year. Compare that to Gold which is currently trading near $1547, and remains up for the year at about 8% or so.
This being said, Silver had held on the charts exactly at the former spike low near the $26 level which it made after plunging from near $45 in late September of this year. This is a key level which needs to hold to prevent deeper losses which could threaten to take the metal down closer to $21 - $20 before it would bottom. Today's performance by the bulls, in bringing the metal sharply off its session low, is an outstanding effort. However, to get out of the woods and move past the danger stage, they now need to take the price ABOVE $30 and hold it there. That would confirm a bottom on the chart. It would not however confirm a bull trend is about to emerge but only that the severe selling has run its course. To get a solid uptrend signal, the grey metal woudl need to take out $35.50 on a weekly closing basis.
We'll see what we get in tomorrow's trading session to end the year. Perhaps the bulls can push the metal into the plus column for the year. That would take a close over $28. Let's see if they are up to the challenge.
Commodity Complex heading for a Losing Year
During the outburst of "Liquidfidous" ( a response induced by overexposure to Central Bank created liquidity), the commodity complex had experienced back to back years of outstanding gains. The years I am referring to of course are 2009 and 2010. Alas, since the watering hole has dried up, the drain has apparently opened beneath the commodity complex as a whole resulting in a losing year for this particular asset class.
It is currently down about 11.3% from its closing levels of 2010 as speculative money flowed out of the complex when traders became convinced that another round of QE was not forthcoming right away. April marked the high water mark for this sector as traders anticipated the end of the QE2 program on time a mere two months later. From that point, the complex has been unable to mount any impressive rallies and has been in a slow grind lower.
You can see on the following chart however that the move lower has brought the index into the 38.2% Fibonacci retracement level from the low made in 2008, from which it did manage to bounce higher although the move has thus far not been very impressive. It is an understatement at this point to say that the hot money crowd is more concerned with slowing global growth and the backwash from the European Sovereign Debt issues and downgrades than it is with any inflationary outbreak. In such an environment, cash becomes king and that is why we are seeing the Dollar rally and Treasuries holding near record highs.
If the complex can attract enough interest however at the start of the New Year, and manage to claw its way back abovce the 600 level, there is a chance we have seen the worst for commodity prices overall. This would benefit the silver market which has fallen down to major support at 26 in today's trade.
If however we see a continuation of this deflationary mindset when trading commences next week and the index falls below the recent low, it could be a rough ride for the next few months in this complex as there really is no substantial chart support until we reach the 50% retracement level down near 507 - 500. If prices were to somehow breach that level and fail to quickly recover, the economy would be in serious, serious trouble.
Central Bankers are no doubt monitoring all of this and have certainly been discussing potential actions should things go from bad to worse. They probably feel that they now have more room to act seeing that prices of both food and energy have fallen well off their previous peak levels thereby eliminating the inflation fears that accompanied the first rounds of liquidity injections.
Next year should certainly prove to be very intersting indeed.
It is currently down about 11.3% from its closing levels of 2010 as speculative money flowed out of the complex when traders became convinced that another round of QE was not forthcoming right away. April marked the high water mark for this sector as traders anticipated the end of the QE2 program on time a mere two months later. From that point, the complex has been unable to mount any impressive rallies and has been in a slow grind lower.
You can see on the following chart however that the move lower has brought the index into the 38.2% Fibonacci retracement level from the low made in 2008, from which it did manage to bounce higher although the move has thus far not been very impressive. It is an understatement at this point to say that the hot money crowd is more concerned with slowing global growth and the backwash from the European Sovereign Debt issues and downgrades than it is with any inflationary outbreak. In such an environment, cash becomes king and that is why we are seeing the Dollar rally and Treasuries holding near record highs.
If the complex can attract enough interest however at the start of the New Year, and manage to claw its way back abovce the 600 level, there is a chance we have seen the worst for commodity prices overall. This would benefit the silver market which has fallen down to major support at 26 in today's trade.
If however we see a continuation of this deflationary mindset when trading commences next week and the index falls below the recent low, it could be a rough ride for the next few months in this complex as there really is no substantial chart support until we reach the 50% retracement level down near 507 - 500. If prices were to somehow breach that level and fail to quickly recover, the economy would be in serious, serious trouble.
Central Bankers are no doubt monitoring all of this and have certainly been discussing potential actions should things go from bad to worse. They probably feel that they now have more room to act seeing that prices of both food and energy have fallen well off their previous peak levels thereby eliminating the inflation fears that accompanied the first rounds of liquidity injections.
Next year should certainly prove to be very intersting indeed.
Wednesday, December 28, 2011
Silver unable to sustain price rallies
Silver has become the victim of the deflationary mindset trade with RISK AVERSION leading to a significant outflow of speculative money from the grey metal. I have said repeatedly that Silver will not go anywhere as long as INFLATIONARY FEARS are NOT foremost in traders' minds.
Note the following Gold/Silver ratio chart which details this exact thing. This ratio began moving in favor of Silver only after the Federal Reserve first announced and then began its Quantitative Easing programs back in late 2008. You can see the line beginning a steady decline as Silver appreciated at a faster rate than Gold during rallies as well as holding its losses to a minimum compared to the Yellow Metal during any setbacks in prices for both metals.
Not until the Fed confirmed the ending of the QE2 program and traders began worrying about a slowdown in the amount of liquidity being supplied to the markets did this ratio begin to reverse and move in favor of gold. Another way of saying this is that during any sort of DEFLATIONARY mindset, gold will hold its value much better than silver, which is still being viewed as a risk asset instead of as a monetary metal by the bigger players.
As the line of the ratio now advances, one can see that as long as traders are concerned over a slowdown in overall economic growth, whether from conditions in Europe or even from a slowdown in Chinese growth to a lesser degree, the trend is higher for this ratio.
Not until or unless the trading community becomes convinced that concerted CEntral Bank activity to supply further additional liquidity is imminent, will this ratio reverse and Silver begin to outperform gold to the upside once again.
Note the following Gold/Silver ratio chart which details this exact thing. This ratio began moving in favor of Silver only after the Federal Reserve first announced and then began its Quantitative Easing programs back in late 2008. You can see the line beginning a steady decline as Silver appreciated at a faster rate than Gold during rallies as well as holding its losses to a minimum compared to the Yellow Metal during any setbacks in prices for both metals.
Not until the Fed confirmed the ending of the QE2 program and traders began worrying about a slowdown in the amount of liquidity being supplied to the markets did this ratio begin to reverse and move in favor of gold. Another way of saying this is that during any sort of DEFLATIONARY mindset, gold will hold its value much better than silver, which is still being viewed as a risk asset instead of as a monetary metal by the bigger players.
As the line of the ratio now advances, one can see that as long as traders are concerned over a slowdown in overall economic growth, whether from conditions in Europe or even from a slowdown in Chinese growth to a lesser degree, the trend is higher for this ratio.
Not until or unless the trading community becomes convinced that concerted CEntral Bank activity to supply further additional liquidity is imminent, will this ratio reverse and Silver begin to outperform gold to the upside once again.
HUI on Target for a Losing Year
The mining stocks are on course for a losing year, one which has been extremely disappointing for those who bought the shares in anticipation of higher gold and silver prices, only to see that take place but then having to witness the spectacle of the shares themselves lagging poorly over the last 12 months. Between Hedge funds playing that infernal Spread trade and "Risk Aversion" related selling, they could not get anything going.
Toss in the fact that more and more those looking for leveraged exposure to gold and/or silver, can buy the ETF's directly, thereby eliminating exposure to such variables as poor management, strikes, nationalization fears, environmentally-related litigation issues, risking input costs, and it seems that the shares are falling out of favor with the hot money crowd. Something will have to change on this front next year to see this sector attract consistent buying. Dividends might help somewhat but whatever it is, management is going to have to get creative to engender "value" in the eye of the big-monied investment crowd. Either that or sit there and watch the money flow into the ETF's and away from their companies.
Taking a look at the weekly chart, one can see where the HUI ended the year of 2010 and where it is currently trading. It is now down 15.4% for the year.
Quite frankly the chart looks extremely heavy right now as the buying that has been appearing for more than a year down near the 500 level and just below has seemingly evaporated. It could be a case where those buyers are simply unwilling to add to losing positions before the year end for the sake of dressing their books as much as possible and are waiting for the start of trading next Tuesday in the New Year to start accumulating again. Let us hope so because if they do not, and the HUI cannot get back inside that more than year long trading range, the gold shares are going to drop where we could potentially see this index down near 440 before any buying emerges.
You will notice that for the entirety of this year, any dips in this index below 500 have been of the nature that they are SPIKE LOWS. That means the shares sell off sharply but then rally back during the course of the week to end the week well off the low that was just made. We still have TWO TRADING DAYS left for the mining shares to climb higher and thus negate some of the ensuing technical damage that is going to take place is they do not, but the bulls had better perform HERE and NOW.
While volume is very, very low and trading is thin, it tends to exaggerate movements in price. Still, the price action is horrible as the index is now 56 POINTS above the level at which it ended the year 2009! If it cannot get back up inside that trading range between 500 and 600 right away, I see no chart support until near the 460 level initially followed by 430.
Long term holders of these shares need to be very vigilant to monitor developments down here.
Toss in the fact that more and more those looking for leveraged exposure to gold and/or silver, can buy the ETF's directly, thereby eliminating exposure to such variables as poor management, strikes, nationalization fears, environmentally-related litigation issues, risking input costs, and it seems that the shares are falling out of favor with the hot money crowd. Something will have to change on this front next year to see this sector attract consistent buying. Dividends might help somewhat but whatever it is, management is going to have to get creative to engender "value" in the eye of the big-monied investment crowd. Either that or sit there and watch the money flow into the ETF's and away from their companies.
Taking a look at the weekly chart, one can see where the HUI ended the year of 2010 and where it is currently trading. It is now down 15.4% for the year.
Quite frankly the chart looks extremely heavy right now as the buying that has been appearing for more than a year down near the 500 level and just below has seemingly evaporated. It could be a case where those buyers are simply unwilling to add to losing positions before the year end for the sake of dressing their books as much as possible and are waiting for the start of trading next Tuesday in the New Year to start accumulating again. Let us hope so because if they do not, and the HUI cannot get back inside that more than year long trading range, the gold shares are going to drop where we could potentially see this index down near 440 before any buying emerges.
You will notice that for the entirety of this year, any dips in this index below 500 have been of the nature that they are SPIKE LOWS. That means the shares sell off sharply but then rally back during the course of the week to end the week well off the low that was just made. We still have TWO TRADING DAYS left for the mining shares to climb higher and thus negate some of the ensuing technical damage that is going to take place is they do not, but the bulls had better perform HERE and NOW.
While volume is very, very low and trading is thin, it tends to exaggerate movements in price. Still, the price action is horrible as the index is now 56 POINTS above the level at which it ended the year 2009! If it cannot get back up inside that trading range between 500 and 600 right away, I see no chart support until near the 460 level initially followed by 430.
Long term holders of these shares need to be very vigilant to monitor developments down here.
Tuesday, December 27, 2011
Long Term Gold Chart Views
Unless we get some sort of unexpected fundamental news such as an eruption of tensions in the Straits of Hormuz or some sort of economic news pertaining to sovereign debt-related downgrades, etc., gold looks to go out rather quietly for the year. Trading conditions are EXTREMELY THIN and volume is practically non-existent signifying the lack of interest on the part of the speculative community to take on any positions of size before the year's end in gold, or for that matter, much of anything at this point.
Traders seem mostly content to ride what they have into the New Year and reassess things when the full contingent of traders will be back at the start of the New Year. This trader is doing the exact same thing. Quite frankly, these last few months have been so extremely volatile that any sort of break from the incessant up and down, up and down, up and down, is most welcome. Why bother subjecting oneself to any more of the madness than is absolutely necessary. After all, the markets are not going anywhere and will be sitting there waiting for us all next year.
That being said, let's take a quick summary of where things stand for the yellow metal as we draw near to the end of this year.
The long term monthly chart shows gold in a very strong uptrend, with price still contained within the upchannel drawn off the low made back in late 2008, just as the Fed undertook its QE1 program and began providing liquidity to the markets.
Note I have shown two different sets of Fibonacci retracement levels to provide some perspective. The first set shown in RED, details the entire move going back nearly a decade. You can see that the retracement back lower in price, has not even reached the minimum 23.6% retracement level shown in red ($1480 - $1475). In other words, the price dip after reaching $1900 has been rather negligible on the long term chart.
Even if we start with the low made in 2008, the market has just breached that minimum 23.6% retracement level but remains well above the next level of 38.2%. Theoretically, gold could correct as far down as $1450 and still remain in a strong uptrend.
That being said, there are some warning signs on this same chart that should not be overlooked. Taking a close up of the same chart but narrowing in on the more recent months, one can clearly see the DOUBLE TOP formation near the $1900 which was confirmed by the BEARISH OUTSIDE REVERSAL MONTH pattern.
That signal occurs when a market goes on to make yet a new high but then fails to extend its gains and begins selling off. The sell off takes the market BELOW the low from the previous bar or candle thus forming a bar that has a HIGHER HIGH and a LOWER LOW. This is a very negative pattern that will dominate the chart UNLESS OR UNTIL the HIGH OF THAT BAR is taken out decisively. This is currently what we have going on in gold.
What bulls need to be concerned about would be a DOWNSIDE PUSH BELOW the horizontal RED support line labelled, "critical support". Were that to occur, price would then be on target to drop back down towards the former support levels noted on the first chart shown above. That comes in below $1500 beginning near $1480 and extending lower towards $1450. Failure there would see gold possibly drop as low as $1300 before gaining any traction.
If you note the second chart below, the one detailing the entire move from $250 to $1900+, you can see that its 38.2% retracement level (SHOWN IN RED) comes in at $1290. Meanwhile the upper chart shows a 50% retracement level coming in near $1310. Between the two of these points, we could expect chart support to emerge, should prices indeed drop this low.
So much for the bearish scenario. In order to get something going to the upside, bulls need to target and then take out the failed attempt to extend back towards $1900 which occured last month (November) when gold could not push past $1800 after a strong rally off of the $1550 level took place. That failure was the signal for market bears to become more aggressive and those longs with profits wishing to book them to do so before they vanished. The combined selling has led to a fairly substantial sell off as we moved through the month of December and head for year's end. If, and that is a big "IF", bulls can take out $1800, there is little in the way of chart resistance showing up until we get back to the recent all time highs near $1900. If the market can take out this level, and I expect a FEROCIOUS fight from the bullion banks to prevent this as they full well know the implications of a breach of a former all time high, then gold will see a handle of "2" in front of it very, very quickly, before the month of January 2012 is out with solid potential to reach $2100 sometime in February.
As always with markets, only time will tell. Everything else is mere speculation.
Traders seem mostly content to ride what they have into the New Year and reassess things when the full contingent of traders will be back at the start of the New Year. This trader is doing the exact same thing. Quite frankly, these last few months have been so extremely volatile that any sort of break from the incessant up and down, up and down, up and down, is most welcome. Why bother subjecting oneself to any more of the madness than is absolutely necessary. After all, the markets are not going anywhere and will be sitting there waiting for us all next year.
That being said, let's take a quick summary of where things stand for the yellow metal as we draw near to the end of this year.
The long term monthly chart shows gold in a very strong uptrend, with price still contained within the upchannel drawn off the low made back in late 2008, just as the Fed undertook its QE1 program and began providing liquidity to the markets.
Note I have shown two different sets of Fibonacci retracement levels to provide some perspective. The first set shown in RED, details the entire move going back nearly a decade. You can see that the retracement back lower in price, has not even reached the minimum 23.6% retracement level shown in red ($1480 - $1475). In other words, the price dip after reaching $1900 has been rather negligible on the long term chart.
Even if we start with the low made in 2008, the market has just breached that minimum 23.6% retracement level but remains well above the next level of 38.2%. Theoretically, gold could correct as far down as $1450 and still remain in a strong uptrend.
That being said, there are some warning signs on this same chart that should not be overlooked. Taking a close up of the same chart but narrowing in on the more recent months, one can clearly see the DOUBLE TOP formation near the $1900 which was confirmed by the BEARISH OUTSIDE REVERSAL MONTH pattern.
That signal occurs when a market goes on to make yet a new high but then fails to extend its gains and begins selling off. The sell off takes the market BELOW the low from the previous bar or candle thus forming a bar that has a HIGHER HIGH and a LOWER LOW. This is a very negative pattern that will dominate the chart UNLESS OR UNTIL the HIGH OF THAT BAR is taken out decisively. This is currently what we have going on in gold.
What bulls need to be concerned about would be a DOWNSIDE PUSH BELOW the horizontal RED support line labelled, "critical support". Were that to occur, price would then be on target to drop back down towards the former support levels noted on the first chart shown above. That comes in below $1500 beginning near $1480 and extending lower towards $1450. Failure there would see gold possibly drop as low as $1300 before gaining any traction.
If you note the second chart below, the one detailing the entire move from $250 to $1900+, you can see that its 38.2% retracement level (SHOWN IN RED) comes in at $1290. Meanwhile the upper chart shows a 50% retracement level coming in near $1310. Between the two of these points, we could expect chart support to emerge, should prices indeed drop this low.
So much for the bearish scenario. In order to get something going to the upside, bulls need to target and then take out the failed attempt to extend back towards $1900 which occured last month (November) when gold could not push past $1800 after a strong rally off of the $1550 level took place. That failure was the signal for market bears to become more aggressive and those longs with profits wishing to book them to do so before they vanished. The combined selling has led to a fairly substantial sell off as we moved through the month of December and head for year's end. If, and that is a big "IF", bulls can take out $1800, there is little in the way of chart resistance showing up until we get back to the recent all time highs near $1900. If the market can take out this level, and I expect a FEROCIOUS fight from the bullion banks to prevent this as they full well know the implications of a breach of a former all time high, then gold will see a handle of "2" in front of it very, very quickly, before the month of January 2012 is out with solid potential to reach $2100 sometime in February.
As always with markets, only time will tell. Everything else is mere speculation.
Saturday, December 24, 2011
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen in to a holiday abbreviated edition of the Weekly Metals Wrap over at King World News.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/12/24_KWN_Weekly_Metals_Wrap.html
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/12/24_KWN_Weekly_Metals_Wrap.html
Friday, December 23, 2011
Gold chart
Gold is stuck in a broad trading range between $1550 on the bottom and $1750 on the top. In the abscense of any fundamental news, it will more than likely end the year within this range.
MERRY CHRISTMAS to all of my valued readers
Compliments of my good buddy JB Slear over at Ft. Wealth Trading, here are Jim Sinclair, myself and JB doing our version of a holiday greeting.
Tuesday, December 20, 2011
Gold - 4 Hour Chart
While Gold has had a nice recovery off the recent lows and managed to climb back above the psychological resistance level of $1600, it is nowhere near out of the woods as of yet until it can AT THE MINIMUM push back above the resistance level noted in blue on the chart. That comes in near $1625. Technicians will be watching to see if it could then muster enough buying to take it above $1650. There are a fair number of buy stops located above there which market bulls would love to set off. Whether or not gold could reach them is as of yet unclear.
For now the technicals are bearish so many will be looking at rallies as selling opportunities whether for unloading stale and/or underwater long positions or to initiate new short positions.
Bulls are attempting to hold the line here but they have more work to do.
For now the technicals are bearish so many will be looking at rallies as selling opportunities whether for unloading stale and/or underwater long positions or to initiate new short positions.
Bulls are attempting to hold the line here but they have more work to do.
Saturday, December 17, 2011
Trader Dan interviewed on the King World News Weekly Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap
Wednesday, December 14, 2011
Gold Chart and thoughts
Gold continued falling lower today plummeting over 4% as it failed to hold support near $1650. Once that gave way, it did not take long before it ran the downside stops gathered there which fueled further selling. That selling gathered additional momentum once $1620 could not hold and really ramped up aftter $1600 collapsed.
There has been severe technical damage done to the charts with today's breach of 3 chart support levels. The last line of defense for the bulls to prevent a drop all the way to $1500 is in a band near $1560 - $1535.
One point of slight comfort for the bulls is that the HUI has thus far held suport down near the 500 level. If the Dollar continues heading higher however, it might not be able to keep from succumbing to selling pressures.
Bonds are rallying strongly today suggesting a flight out of the Euro and by consequence risk trades and back into Treasuries and the US Dollar.
There has been severe technical damage done to the charts with today's breach of 3 chart support levels. The last line of defense for the bulls to prevent a drop all the way to $1500 is in a band near $1560 - $1535.
One point of slight comfort for the bulls is that the HUI has thus far held suport down near the 500 level. If the Dollar continues heading higher however, it might not be able to keep from succumbing to selling pressures.
Bonds are rallying strongly today suggesting a flight out of the Euro and by consequence risk trades and back into Treasuries and the US Dollar.
Crude Oil breaking down alongside of the metals
Crude oil has been somewhat immune from selling pressure tied to risk aversion trades mainly due to geopolitical tensions involving Iran and fears of a potential closure of the key Hormuz Straits. While many commodity markets have been moving lower the last month or more, crude had staged a big rally off of the $75 level running all the way to $100+ before faltering. It then retreated towards $95 where buyers promptly bid it back higher again. However, they were unable to beat back selling pressure that emerged above the $100 level. That sent longs liquidating trying to snatch profits before they disappeared and emboldened fresh short sellers who were banking on risk aversion trades outweighing geopolitical fears. Today the latter appear to have won out.
Crude is now sitting precariously on a major support level at $95. If it cannot immediately turn around and rebound higher, a technical case for a top in the market will be evident on the chart. The market could then fall towards $90 relatively quickly mainly due to the fact that it was able to withstand the "slowing global economy" theme for so long.
Falling crude oil prices, while being of immense assistance to both consumers and business, would feed further into the psyche being established in traders' minds that a wave of deflation is coming once again.
It would appear that nothing short of a reinvigorated QE program and some sort of stop gap measure coming out of Europe is going to be able to revive this market. Either that or something more sinister involving Iran.
Crude is now sitting precariously on a major support level at $95. If it cannot immediately turn around and rebound higher, a technical case for a top in the market will be evident on the chart. The market could then fall towards $90 relatively quickly mainly due to the fact that it was able to withstand the "slowing global economy" theme for so long.
Falling crude oil prices, while being of immense assistance to both consumers and business, would feed further into the psyche being established in traders' minds that a wave of deflation is coming once again.
It would appear that nothing short of a reinvigorated QE program and some sort of stop gap measure coming out of Europe is going to be able to revive this market. Either that or something more sinister involving Iran.
HUI is bouncing from the bottom of its year long range
Over the last 14 months, the gold mining shares, as represented by the HUI, have been trapped in a very broad range bounded by 600 on the top side and supported by 500 on the bottom side. The fact that this range has continued for such a long period of time and has repeatedly reinforced itself underscores how important from a technical perspective it is should anything occur which forces a violation of this range.
Having moved down to the bottom of this range in today's session it has of this hour bounced rather strongly off of that level once again. That is reinforcing the significance of the 500 level on the technical price charts and makes it all the more critical that the HUI not close substantially below this level.
A weekly close below 485 - 480 would therefore signify that something significant has changed in regards to investor/trader sentiments towards the precious metals sector as buyers pull back on their bids expecting lower prices. Owners of these shares will want to monitor trading action closely to see how this sector reacts as we move to the end of the year. Odds favor a continuation of the sideways trading pattern but if sentiment sours further as traders fear inaction by the monetary authorities, support levels could give way. We just have to wait and see what the market tells us.
Having moved down to the bottom of this range in today's session it has of this hour bounced rather strongly off of that level once again. That is reinforcing the significance of the 500 level on the technical price charts and makes it all the more critical that the HUI not close substantially below this level.
A weekly close below 485 - 480 would therefore signify that something significant has changed in regards to investor/trader sentiments towards the precious metals sector as buyers pull back on their bids expecting lower prices. Owners of these shares will want to monitor trading action closely to see how this sector reacts as we move to the end of the year. Odds favor a continuation of the sideways trading pattern but if sentiment sours further as traders fear inaction by the monetary authorities, support levels could give way. We just have to wait and see what the market tells us.
Commodity complex dealing with Deflationary Concerns
Investors worldwide are making a mad rush towards cash as they seek to become liquid based on their fears of a slowdown in the global economy. There is little confidence that monetary authorities and political leaders in Europe are doing anything substantative to deal with the issues plaguing Europe. Over here in the US, investors are reading the tea leaves from the recent FOMC statement and are expressing disappointment that the punch bowl full of QE is not coming forthwith. Then there is talk about China slowing down as well.
All of this is working to generate visions of the summer of 2008 in the minds of traders as they fear another severe downdraft across a wide spectrum of "risk assets" while watching the US Dollar rally up through technical chart resistance levels.
The result - strong selling across nearly every single commodity futures market with a strong breakdown in the Continuous Commodity Index ( CCI ). It is down at levels last seen in October 2010 and is negative for the year 2011. That chart is signaling deflation is the current fear; not inflation. If it is going to bounce, this level will be where it needs to do so or more losses are in store with a potential move as low as 510 or lower.
It could be that some dovish FOMC members might be looking at the CCI chart thinking that they have plenty of room now to manuever should they be able to convince the rest of the members of the committee that more stimulus is needed. Central Bankers are going to panic if a deflation mindset takes hold and will be forced to act.
All of this is working to generate visions of the summer of 2008 in the minds of traders as they fear another severe downdraft across a wide spectrum of "risk assets" while watching the US Dollar rally up through technical chart resistance levels.
The result - strong selling across nearly every single commodity futures market with a strong breakdown in the Continuous Commodity Index ( CCI ). It is down at levels last seen in October 2010 and is negative for the year 2011. That chart is signaling deflation is the current fear; not inflation. If it is going to bounce, this level will be where it needs to do so or more losses are in store with a potential move as low as 510 or lower.
It could be that some dovish FOMC members might be looking at the CCI chart thinking that they have plenty of room now to manuever should they be able to convince the rest of the members of the committee that more stimulus is needed. Central Bankers are going to panic if a deflation mindset takes hold and will be forced to act.
Tuesday, December 13, 2011
Gold drops through $1660
Gold is coming under increasing selling pressure as technical chart support levels are giving way. As these levels are broken, technically oriented computer selling is occuring. That, coupled with an exodus of traders to the sidelines ahead of the Christmas holiday, is leading to exaggerated moves as liquidity issues are now impacting trading. That is only going to get worse from here through the end of the year. The one plus is that this same dearth of liquidity can result in sizeable pops higher if some large bids hit the market on any news flashes that might impact trading.
Gold took out the bottom of the tightening triangle pattern yesterday but did manage to close above the critical horizontal support level near $1660. Early in today's session, it briefly violated that level but then moved back above it giving some hope to the bulls that it might be able to stabilize. That proved to be fleeting after the Fed statement hit the markets and off came the risk trades.
Down went the equity markets and up went the Dollar, in a very big way, as it is now trading solidly above an important technical resistance level just above 80 on the USDX chart. The Euro is sinking into oblivion with traders tossing it away and rushing into the Dollar, which they are for now viewing as having a better set of fundamentals than Europe, particularly since the Fed statement did not forecast the end of the world as we know it.
The Euro is now flirting with an important chart support level near 1.3000. Failure to hold there will send it quickly towards 1.2860 with a drop to 1.2680 not out of the question.
Back to the US Dollar - The Dollar has not managed a WEEKLY CLOSE ABOVE the 80 level in more than a year. If it ends this week above 80 and particularly above the blue resistance line shown on the chart, it is going to draw in technically oriented buying and has a good shot at a test of the 50% retracement level coming in at 81. A push through this and the Dollar is going to move to 83.
Gold took out the bottom of the tightening triangle pattern yesterday but did manage to close above the critical horizontal support level near $1660. Early in today's session, it briefly violated that level but then moved back above it giving some hope to the bulls that it might be able to stabilize. That proved to be fleeting after the Fed statement hit the markets and off came the risk trades.
Down went the equity markets and up went the Dollar, in a very big way, as it is now trading solidly above an important technical resistance level just above 80 on the USDX chart. The Euro is sinking into oblivion with traders tossing it away and rushing into the Dollar, which they are for now viewing as having a better set of fundamentals than Europe, particularly since the Fed statement did not forecast the end of the world as we know it.
The Euro is now flirting with an important chart support level near 1.3000. Failure to hold there will send it quickly towards 1.2860 with a drop to 1.2680 not out of the question.
Back to the US Dollar - The Dollar has not managed a WEEKLY CLOSE ABOVE the 80 level in more than a year. If it ends this week above 80 and particularly above the blue resistance line shown on the chart, it is going to draw in technically oriented buying and has a good shot at a test of the 50% retracement level coming in at 81. A push through this and the Dollar is going to move to 83.
The Difference between Meteorologists and Traders
... is quite simple - Meteorologists still make money even when they are terribly, horrifically, astonishingly wrong. Traders don't. Advice - with all this insane volatility maybe we should become meteorologists!
William Gray and Phil Klotzbach say a look back shows their past 20 years of forecasts had no value.
http://www.ottawacitizen.com/mobile/story.html?id=5847032
Hurricane predictors admit they can’t predict hurricanes
Two top U.S. hurricane forecasters, revered like rock stars in Deep South hurricane country, are quitting the practice because it doesn’t work.William Gray and Phil Klotzbach say a look back shows their past 20 years of forecasts had no value.
http://www.ottawacitizen.com/mobile/story.html?id=5847032
Monday, December 12, 2011
Gold Breaking down out of its triangle formation
Gold has broken down through the bottom uptrending support line in its triangular consolidation pattern but thus far is holding horizontal support near the $1660 level. Failure to hold this level will send it down towards $1620 initially followed by a test of $1600 should that fail to stem the decline.
A rebound back above $1680 is needed to reinforce the support level at $1660.
The breakdown in the Euro following disappointment over the events in Europe this past weekend has sent the US Dollar strongly higher this morning and that is pressuring many of the commodity markets in general. The CCI, or Continuous Commodity Index, has moved to a new low for the year signaling investor fears of a slowing global economy and thus a dampening off of demand for many commodities in general.
Crude oil will need to stay above the $95 level to prevent a double top from forming on that chart.
A rebound back above $1680 is needed to reinforce the support level at $1660.
The breakdown in the Euro following disappointment over the events in Europe this past weekend has sent the US Dollar strongly higher this morning and that is pressuring many of the commodity markets in general. The CCI, or Continuous Commodity Index, has moved to a new low for the year signaling investor fears of a slowing global economy and thus a dampening off of demand for many commodities in general.
Crude oil will need to stay above the $95 level to prevent a double top from forming on that chart.
Saturday, December 10, 2011
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
http://tinyurl.com/bpc7y5j
I also want to note here that I am not posting any silver, gold or HUI charts for Friday seeing that all remain mired within very broad consolidation patterns but are constricting in range. Until something changes in that regards, there is not much worth commenting on as far as the price action goes. We are waiting for something to trigger a resolving of this sideways ranging trade.
http://tinyurl.com/bpc7y5j
I also want to note here that I am not posting any silver, gold or HUI charts for Friday seeing that all remain mired within very broad consolidation patterns but are constricting in range. Until something changes in that regards, there is not much worth commenting on as far as the price action goes. We are waiting for something to trigger a resolving of this sideways ranging trade.
Thursday, December 8, 2011
HUI range constricting
The mining sector, as evidenced by the HUI, remains mired within its now more-than-a-year long trading range which is bounded on the top by the 600 level and supported on the bottom by the 500 level. Going back into November of 2010, all rallies have eventually failed to hold for long above the top of this range. There were only two weeks in which the index was able to pull off that accomplishment but it then failed and failed very large at that. It collapsed over 85 points in a single week which dropped the index back down to the bottom of the range.
This needs to be kept in mind as we look at the daily chart which is detailing a pattern showing a tightening congestion as it moves into the end of the year. Normally one looks for a breakout of this type of coil and then a strong trending move in the direction of the breakout. However, before such a trending move could occur, we would need to see the breakout from the current constricting coil actually extend beyond the boundaries noted on the weekly chart. In other words, the breakout must have enough force behind it to not just take out the top of the downsloping trend line of the coiling pattern but push past the horizontal resistance line near 600 on the weekly chart if these mining shares are going to start a strong trending move higher.
The flip side of course is that a breakout of the lower upsloping trend line of the coil would have to extend deeply past the bottom of the larger trading range near the 500 level to suggest a trending move to the downside in these stocks.
The summary of all this is that we are still stuck in a very broad, year-long consolidation phase in the mining sector shares with some potential to resolve this stalemate depending on how the market views the efforts of the various Central Banks in dealing with the current sovereign debt crisis. Other than that, it is as much fun as watching paint dry.
This needs to be kept in mind as we look at the daily chart which is detailing a pattern showing a tightening congestion as it moves into the end of the year. Normally one looks for a breakout of this type of coil and then a strong trending move in the direction of the breakout. However, before such a trending move could occur, we would need to see the breakout from the current constricting coil actually extend beyond the boundaries noted on the weekly chart. In other words, the breakout must have enough force behind it to not just take out the top of the downsloping trend line of the coiling pattern but push past the horizontal resistance line near 600 on the weekly chart if these mining shares are going to start a strong trending move higher.
The flip side of course is that a breakout of the lower upsloping trend line of the coil would have to extend deeply past the bottom of the larger trading range near the 500 level to suggest a trending move to the downside in these stocks.
The summary of all this is that we are still stuck in a very broad, year-long consolidation phase in the mining sector shares with some potential to resolve this stalemate depending on how the market views the efforts of the various Central Banks in dealing with the current sovereign debt crisis. Other than that, it is as much fun as watching paint dry.
Up and Down we Go - where we stop nobody knows
Yesterday gold was anticipating a stronger policy response coming out of the upcoming meeting in Brussels dealing with the sovereign debt crisis in the Eurozone. That brought buying back into a host of markets as well with equities rallying and the risk trades back on in full force. Today? Well, that was yesterday.
Once current ECB President Draghi basically squashed the idea of large bond purchases by the ECB, the market promptly threw away everything it put on yesterday totally reversing the risk trades as disappointment that the liquidity punch bowl was not going to be spiked as strongly as most were expecting took hold.
This madness will continue as long as uncertainty remains with traders seizing on every single bit of news to cram gobs of money into the markets or yank those same gobs back out again.
At some point it will resolve itself one way or the other but until it does, up and down is the order of the day. Perhaps something will come out of that meeting in Brussels tomorrow but who knows at this point.
As it now stands, gold remains mired in its coiling pattern. Notice how the downtrending upper resistance line is holding rallies in check.
Once current ECB President Draghi basically squashed the idea of large bond purchases by the ECB, the market promptly threw away everything it put on yesterday totally reversing the risk trades as disappointment that the liquidity punch bowl was not going to be spiked as strongly as most were expecting took hold.
This madness will continue as long as uncertainty remains with traders seizing on every single bit of news to cram gobs of money into the markets or yank those same gobs back out again.
At some point it will resolve itself one way or the other but until it does, up and down is the order of the day. Perhaps something will come out of that meeting in Brussels tomorrow but who knows at this point.
As it now stands, gold remains mired in its coiling pattern. Notice how the downtrending upper resistance line is holding rallies in check.
Wednesday, December 7, 2011
Gold chart continues to show the tightening coiling pattern
Gold seems to be anticipating some sort of monetary stimulus and/or agreement out of the upcoming Brussels meeting this Friday in Europe to deal with the sovereign debt crisis in the Eurzone. For that matter, so too do the US equity markets which are grinding higher.
Failure to come up with some sort of market pleasing action or agreement on the part of these finance ministers will send the equity markets on a very sharp trip lower out of disappointment. On the other hand, any agreement reached will put a firm bid beneath those and engender buying in the Euro, at least for the short term.
The latter will see the Dollar move lower and should bring on the risk trades pushing both gold and silver higher. It might be enough to take gold out of this coiling pattern to the upside. It will need to at least better the $1765 level and hold above it to give us a shot at a test of $1800.
Keep in mind that no matter what they come up with, it is NOT GOING TO SOLVE the longer term, deep-seated structural issues. Conjuring up a mechanism/(s) to shore up the debt of nations who are hopelessly mired into a socialistic style system that has addicted a good portion of their citizenry to endless government handouts merely puts the proverbial bandaid on a growing cancer. When push comes to shove, loaning money to nations who have bankrupted themselves by this sort of lunacy solves nothing. It may and probably will buy a bit of extra time but there is no way out of this except by purging the debt, something no politician or monetary authority seems inclined to do. They can devalue the currency but buyers of the debt will understand that game and will demand higher interest rates to compensate them for currency risk, a guarantee of slower economic growth as it will act as both a drag on the economy and raise the cost of servicing any new debt obligations.
Failure to come up with some sort of market pleasing action or agreement on the part of these finance ministers will send the equity markets on a very sharp trip lower out of disappointment. On the other hand, any agreement reached will put a firm bid beneath those and engender buying in the Euro, at least for the short term.
The latter will see the Dollar move lower and should bring on the risk trades pushing both gold and silver higher. It might be enough to take gold out of this coiling pattern to the upside. It will need to at least better the $1765 level and hold above it to give us a shot at a test of $1800.
Keep in mind that no matter what they come up with, it is NOT GOING TO SOLVE the longer term, deep-seated structural issues. Conjuring up a mechanism/(s) to shore up the debt of nations who are hopelessly mired into a socialistic style system that has addicted a good portion of their citizenry to endless government handouts merely puts the proverbial bandaid on a growing cancer. When push comes to shove, loaning money to nations who have bankrupted themselves by this sort of lunacy solves nothing. It may and probably will buy a bit of extra time but there is no way out of this except by purging the debt, something no politician or monetary authority seems inclined to do. They can devalue the currency but buyers of the debt will understand that game and will demand higher interest rates to compensate them for currency risk, a guarantee of slower economic growth as it will act as both a drag on the economy and raise the cost of servicing any new debt obligations.
Monday, December 5, 2011
Gold loses battle for $1750- needs to push through $1765
The failure by Ol' Yeller to extend past $1750 has tripped some of the shorter term technical indicators into a sell mode. As you can from looking at the blue downtrend line, Gold cannot seem to extend past this line. The positive is that it is also holding the uptrending red support line with the result being a tightening pattern or almost a type of coil that is forming.
Gold bulls need to watch this carefully as a failure to hold above $1650 will send the metal very quickly towards the $1600 level where it must find active buying to prevent a deeper setback in price which could potentially take it first towards $1550 and even towards the $1500 level should it fail to hold there.
A push back through $1765 turns the chart pattern friendly with only a closing push through $1800 allowing for the resumption of a strong uptrending pattern and a test of the all time high.
All eyes in gold are on Europe for the time being as its fortunes are tied to developments there. If the European ministers meeting in Brussels this coming Friday come up with a plan that assuages fears of investors/traders in regards to the sovereign debt crisis there, gold should extend to the upside as the market will move towards the risk trades again. If they disappoint, gold is going to be fighting some very strong headwinds as the Dollar will rally and possibly take out strong resistance near the 80 level on the USDX.
Gold bulls need to watch this carefully as a failure to hold above $1650 will send the metal very quickly towards the $1600 level where it must find active buying to prevent a deeper setback in price which could potentially take it first towards $1550 and even towards the $1500 level should it fail to hold there.
A push back through $1765 turns the chart pattern friendly with only a closing push through $1800 allowing for the resumption of a strong uptrending pattern and a test of the all time high.
All eyes in gold are on Europe for the time being as its fortunes are tied to developments there. If the European ministers meeting in Brussels this coming Friday come up with a plan that assuages fears of investors/traders in regards to the sovereign debt crisis there, gold should extend to the upside as the market will move towards the risk trades again. If they disappoint, gold is going to be fighting some very strong headwinds as the Dollar will rally and possibly take out strong resistance near the 80 level on the USDX.
Euro Sliding Lower - Surrendering Gains
The morning euphoria tied to news of proposed deficit cuts in ITALY and news that both Germany and France had agreed to push for changes to the EU treaties in regards to tighter budget and deficit rules for member nations has given way as news hits the trading floor that ratings agency Standard and Poors is placing both Germany and France on review for a potential downgrade.
Other AAA rated European nations are also going to be placed on review. Once put on review, any downgrade could occur within 90 days.
Gold and Silver were both hit hard on the newsflash.
Other AAA rated European nations are also going to be placed on review. Once put on review, any downgrade could occur within 90 days.
Gold and Silver were both hit hard on the newsflash.
CFTC moves on the heels of the MFGlobal debacle
While definitely late, the CFTC is moving to bring some much wanted scrutiny and overdue regulation to the futures industry in regards to segregated customer accounts.
Here is the story from Reuters:
Here is the story from Reuters:
CFTC approves rule on protection of customer funds
WASHINGTON | Mon Dec 5, 2011 11:21am EST
(Reuters) - The U.S. futures regulator approved on Monday a rule that puts tighter limits on how brokerage firms can use customer funds, a measure that the now-bankrupt MF Global had encouraged the agency to delay.
The measure was finalized by the Commodity Futures Trading Commission by a 5-0 vote. The rule was initially proposed by the CFTC in October 2010.
Sunday, December 4, 2011
Crude Oil market could show some fireworks this week
As trading takes place in the Asian session, the US equity futures market are solidly higher as risk appetite returns on news coming out of Italy that a proposal to cut some 30 billion euros worth of debt is in the works. While the commodity futures markets are not particularly excited about this, the stock world surely seems to be taking it as a harbinger that something is going to come out of this Friday's meeting in Brussels which has the potential to provide a healthier environment for the risk trades.
One market that is certainly reacting higher is the Crude oil market which is solidly above the $100 barrel level (WTI) and is threatening its former recent top near the $103 level. One of two things now happens - it either fails at this level sparking a round of long liquidation with talk of a double top emerging or if the risk appetite is strong enough, it takes out $103 in convincing fashion and kicks another leg higher on the price charts.
If it is the latter, here comes the fallout to the consumer from this liquification game being played by the monetary officials and political leaders. Rising energy prices cannot be separated out from a general round of risk trade money flows. If the bureaucrats and money masters want to stave off the deflationary implications of a meltdown in the sovereign debt markets, then they MUST BE FORCED into accepting surging energy prices which will certainly have a negative impact as far as growth goes on the overall global economy.
We are looking at the CATCH 22 scenario once again.
If traders suspect on the other hand, that nothing is going to come out of this Friday's summit, then crude oil will move lower reflecting the disappointment of the market that the punch bowl is not going to be spiked any further.
One market that is certainly reacting higher is the Crude oil market which is solidly above the $100 barrel level (WTI) and is threatening its former recent top near the $103 level. One of two things now happens - it either fails at this level sparking a round of long liquidation with talk of a double top emerging or if the risk appetite is strong enough, it takes out $103 in convincing fashion and kicks another leg higher on the price charts.
If it is the latter, here comes the fallout to the consumer from this liquification game being played by the monetary officials and political leaders. Rising energy prices cannot be separated out from a general round of risk trade money flows. If the bureaucrats and money masters want to stave off the deflationary implications of a meltdown in the sovereign debt markets, then they MUST BE FORCED into accepting surging energy prices which will certainly have a negative impact as far as growth goes on the overall global economy.
We are looking at the CATCH 22 scenario once again.
If traders suspect on the other hand, that nothing is going to come out of this Friday's summit, then crude oil will move lower reflecting the disappointment of the market that the punch bowl is not going to be spiked any further.
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
Friday, December 2, 2011
Registration of Shares
Dear Folks:
Please refer all inquiries in this matter to Jim Sinclair as this is not my area of expertise. I am a commodities guy and not an equity guy.
Thanks,
Trader Dan
Please refer all inquiries in this matter to Jim Sinclair as this is not my area of expertise. I am a commodities guy and not an equity guy.
Thanks,
Trader Dan
A First Step in the Right Direction
Fox Business is reporting that the former head of MF Global has been subpoenaed to testify in front of a Congressional House Panel
Here is their lead in to the article:
Here is their lead in to the article:
Thursday, December 1, 2011
Bank of Korea purchases Gold
Dow Jones is reporting that the Bank of Korea has announced that it has increased the amount of gold in its reserves for the second time this year.
The report states that they purchased 15 tons in several batches last month. The last purchase was back in June for a total of 25 tons.
It now has 54.4 tons in reserve. Even with the purchases this year, it still has only 1% of its total foreign exchange reserves in gold. The former amount was a mere 0.7%.
We do not know the actual price at which these purchases were made but there is no doubt in my mind that they occured on forays down into the zone near the $1600 level. This level has seen strong buying by assorted Central Banks for some time now and I see nothing that would cause this to change anytime soon.
The fact is that many of the banks that have been accumulating gold are doing so to both diversify their reserves and to provide confidence to investors world wide .
As traders/investors this is valuable information for us as it points to very strong downside support in gold with sizeable accumulation occuring among a group of market participants who are not buying the metal only to try to flip it for some sort of short term gain. They are buying because they see value in the metal at these prices.
The report states that they purchased 15 tons in several batches last month. The last purchase was back in June for a total of 25 tons.
It now has 54.4 tons in reserve. Even with the purchases this year, it still has only 1% of its total foreign exchange reserves in gold. The former amount was a mere 0.7%.
We do not know the actual price at which these purchases were made but there is no doubt in my mind that they occured on forays down into the zone near the $1600 level. This level has seen strong buying by assorted Central Banks for some time now and I see nothing that would cause this to change anytime soon.
The fact is that many of the banks that have been accumulating gold are doing so to both diversify their reserves and to provide confidence to investors world wide .
As traders/investors this is valuable information for us as it points to very strong downside support in gold with sizeable accumulation occuring among a group of market participants who are not buying the metal only to try to flip it for some sort of short term gain. They are buying because they see value in the metal at these prices.
Wednesday, November 30, 2011
Monthly Gold Chart - Closing Price Only
I still marvel when looking at these charts at those who continue to denigrate gold and particularly those who deny it is a safe haven.
While we all know that the official government CPI numbers are a fantasy, it is still rather interesting to see where gold has run into overhead resistance based on this inflation adjusted chart.
While we all know that the official government CPI numbers are a fantasy, it is still rather interesting to see where gold has run into overhead resistance based on this inflation adjusted chart.
Crude Oil prices - Collateral Damage
Once again the WTI crude oil market is testing the psychological $100 level. After mounting a huge rally over the last two months that took price from down near $75/bbl to over $100/bbl, crude prices retreated as fears surfaced concerning the ongoing crisis in Europe. While tensions with Iran have kept prices from tanking, it is a given that crude oil was not exempt from risk aversion trades and fears of an overall global financial slowdown.
However, as traders have begun anticipating action by the Central Banks to deal with this crisis, crude has floated back up again. Today's spiking of the punch bowl by the Fed and its cohorts at 5 other Central Banks, has driven crude back above the $100 level.
I find this quite fascinating because this is exactly the same thing that forced the Fed to eventually try to backpedal on its QE efforts earlier this year and pull the plug back in June when QE2 was due to expire. Bernanke and company realized that the cost of providing this liquidity binge was a weaker Dollar and surging energy prices. Only when the pain at the gas pump became large enough to elicit howls of complaints from voting constituents did we see Congressional leaders start complaining about the Fed. Prior to rising energy prices and soaring food prices, most of these leaders were silent enough especially as the same liquidity bursts kicked the price of US equities higher. After all there is nothing that most politicians love better than to see the DOW going up while they are in office.
What we are going to be carefully monitoring is how crude oil prices move in the days and weeks ahead. Any moves by the Central Banks to keep the liquidity crisis from becoming a full-blown solvency crisis are going to drive crude oil, along with the rest of the commodity complex, higher. What happens if crude then moves back above $115 barrel and looks like it is going to mount an upside breakout? Will rising energy prices undercut any so-called "growth" in those economies being targetted by these Central Banks?
Once again, we are back to what was said way back when the Fed first started up its QE program - they cannot selectively move equity prices higher and improve the economy WITHOUT also getting a sharp rise in commodities, including food and energy. Hedge fund money flows are not selective - they buy everything in sight and there is nothing the Fed or any other Central Bank can do to prevent this. One way or the other, there is going to be fallout - either failing banks, falling prices, rising unemployment or surging prices, particularly energy and food once again.
However, as traders have begun anticipating action by the Central Banks to deal with this crisis, crude has floated back up again. Today's spiking of the punch bowl by the Fed and its cohorts at 5 other Central Banks, has driven crude back above the $100 level.
I find this quite fascinating because this is exactly the same thing that forced the Fed to eventually try to backpedal on its QE efforts earlier this year and pull the plug back in June when QE2 was due to expire. Bernanke and company realized that the cost of providing this liquidity binge was a weaker Dollar and surging energy prices. Only when the pain at the gas pump became large enough to elicit howls of complaints from voting constituents did we see Congressional leaders start complaining about the Fed. Prior to rising energy prices and soaring food prices, most of these leaders were silent enough especially as the same liquidity bursts kicked the price of US equities higher. After all there is nothing that most politicians love better than to see the DOW going up while they are in office.
What we are going to be carefully monitoring is how crude oil prices move in the days and weeks ahead. Any moves by the Central Banks to keep the liquidity crisis from becoming a full-blown solvency crisis are going to drive crude oil, along with the rest of the commodity complex, higher. What happens if crude then moves back above $115 barrel and looks like it is going to mount an upside breakout? Will rising energy prices undercut any so-called "growth" in those economies being targetted by these Central Banks?
Once again, we are back to what was said way back when the Fed first started up its QE program - they cannot selectively move equity prices higher and improve the economy WITHOUT also getting a sharp rise in commodities, including food and energy. Hedge fund money flows are not selective - they buy everything in sight and there is nothing the Fed or any other Central Bank can do to prevent this. One way or the other, there is going to be fallout - either failing banks, falling prices, rising unemployment or surging prices, particularly energy and food once again.
Fundamental Spark for Silver and for Gold?
Today's actions by the Fed, in concert with 5 other Central Banks, plus the move by China to lower bank reserve requirements 50 basis points, the first time they have done so in three years, has provided today's fireworks across the commodity and equity marks. It is RISK ON time once again for the hedgies.
I mentioned in my analysis of the COT report yesterday, that the metals needed some sort of fundamental spark to break them out of their respective trading ranges. Perhaps we have that, at least for today, in the form of easing of liquidity concerns. That is unclear to me at this point since this really does not do anything to address the structural issues leading up to the sovereign debt issues. It is simply keeping a liquidity crisis from becoming a full-blown insolvency crisis.
This might explain why after the initial blast higher in the markets on the euphoria around the Central Bank actions, that the markets have not been able to continue adding to their early session gains. Traders are maybe having second thoughts about all this. I know I sure am. While it will temporarily help ease lending concerns, it still does not address the sinking value of all that sovereign debt on the books of the big European banks, nor of that on the books of some US banks. It seems to me we are going to have to see a very clear, unambiguous signal that Germany is going to go along with a large role for the ECB and maybe even a Eurobond market before traders will get more aggressive to the upside.
Regardless, silver has been able to capture its first line of technical chart resistance centered near the $32.50 level. This is its first visit back to this level in a week's time. That has served to reinforce the support level that formed just below the $31 level. For this market to now get anything going to the upside, it is going to have to first convincingly clear $33.50 and then exceed $35. Only then will it have a shot at anything more than a return to the top of its recent trading range.
Charts to follow later....
I mentioned in my analysis of the COT report yesterday, that the metals needed some sort of fundamental spark to break them out of their respective trading ranges. Perhaps we have that, at least for today, in the form of easing of liquidity concerns. That is unclear to me at this point since this really does not do anything to address the structural issues leading up to the sovereign debt issues. It is simply keeping a liquidity crisis from becoming a full-blown insolvency crisis.
This might explain why after the initial blast higher in the markets on the euphoria around the Central Bank actions, that the markets have not been able to continue adding to their early session gains. Traders are maybe having second thoughts about all this. I know I sure am. While it will temporarily help ease lending concerns, it still does not address the sinking value of all that sovereign debt on the books of the big European banks, nor of that on the books of some US banks. It seems to me we are going to have to see a very clear, unambiguous signal that Germany is going to go along with a large role for the ECB and maybe even a Eurobond market before traders will get more aggressive to the upside.
Regardless, silver has been able to capture its first line of technical chart resistance centered near the $32.50 level. This is its first visit back to this level in a week's time. That has served to reinforce the support level that formed just below the $31 level. For this market to now get anything going to the upside, it is going to have to first convincingly clear $33.50 and then exceed $35. Only then will it have a shot at anything more than a return to the top of its recent trading range.
Charts to follow later....
Tuesday, November 29, 2011
Commitment of Traders reports confirms effects of Risk Aversion trades
This past week's COT report was delayed until Monday (yesterday) on account of the Thanksgiving holiday. It does however confirm the market price action in both gold and silver which are currently stuck in no-man's land experiencing range bound trade with firm resistance on rallies and good support on dips.
Simply put - speculative interest in the metals has dampened off considerably as more and more traders/funds move to a cash position and lower their overall exposure to the commodity sector in general (risk assets). This is particularly evident among the general public, the small spec category, which have fled both silver and gold. In the case of gold, this category of traders is now holding the smallest net long position since February 2010. They have also cut their net long exposure to gold about 44% since the peak made back in March of this year.
The big hedge funds continue to draw down net long exposure as well. This is not a recipe for higher prices.
While the reports indicate that a thorough cleansing process of both metals has been underway, it also confirms why neither market can currently get anything sustained to the upside. There is simply not enough speculative interest to push prices sharply higher at this time. Something will have to change on the fundamental front that triggers a strong desire on the part of the speculators to bid up the prices of both metals.
Keep in mind, there is nothing bullish about COT reports which show a fall off in speculative demand. Our modern markets are driven by money flows and money flows come from speculators. Until and unless they come into a market in a sustained fashion, prices will not be able to escape pressure related to commercial selling. The only thing "bullish" about this week's reports is that they do show plenty of room for this sort of speculative interest to build ONCE SOMETHING TRIGGERS THAT BUYING INTEREST. Until it does, neither one of these markets will be able to escape the range trade that currently holds them in check.
One other thing - a large part of the fall off in open interest in both metals is due to spread trades being taken off. Those are primarily a function of speculators playing differentials between various contract months. The fall off in the number of spreads also confirms the waning speculative interest in both markets.
Lastly, Silver continues to see the Swap Dealers increasing the size of their net long position. You've got to go back to April 2009 to see anything resembling this size exposure to the long side in silver by this category. That is rather interesting. This category is difficult to decipher because they can be putting on positions for clients, trading for themselves or hedging private contracts. But it could be that this is the reason silver has thus far been able to consistently bounce off the $30 support level. The Swap Dealers seem to be pretty comfortable with long side exposure in the metal down there. My guess is that if and when silver prices do eventually mount an upside breech of overhead resistance and begin a trending move higher, these traders will be selling out longs, booking profits and then moving back to the short side in a more conventional pattern for what we are accustomed to seeing with this group.
Simply put - speculative interest in the metals has dampened off considerably as more and more traders/funds move to a cash position and lower their overall exposure to the commodity sector in general (risk assets). This is particularly evident among the general public, the small spec category, which have fled both silver and gold. In the case of gold, this category of traders is now holding the smallest net long position since February 2010. They have also cut their net long exposure to gold about 44% since the peak made back in March of this year.
The big hedge funds continue to draw down net long exposure as well. This is not a recipe for higher prices.
While the reports indicate that a thorough cleansing process of both metals has been underway, it also confirms why neither market can currently get anything sustained to the upside. There is simply not enough speculative interest to push prices sharply higher at this time. Something will have to change on the fundamental front that triggers a strong desire on the part of the speculators to bid up the prices of both metals.
Keep in mind, there is nothing bullish about COT reports which show a fall off in speculative demand. Our modern markets are driven by money flows and money flows come from speculators. Until and unless they come into a market in a sustained fashion, prices will not be able to escape pressure related to commercial selling. The only thing "bullish" about this week's reports is that they do show plenty of room for this sort of speculative interest to build ONCE SOMETHING TRIGGERS THAT BUYING INTEREST. Until it does, neither one of these markets will be able to escape the range trade that currently holds them in check.
One other thing - a large part of the fall off in open interest in both metals is due to spread trades being taken off. Those are primarily a function of speculators playing differentials between various contract months. The fall off in the number of spreads also confirms the waning speculative interest in both markets.
Lastly, Silver continues to see the Swap Dealers increasing the size of their net long position. You've got to go back to April 2009 to see anything resembling this size exposure to the long side in silver by this category. That is rather interesting. This category is difficult to decipher because they can be putting on positions for clients, trading for themselves or hedging private contracts. But it could be that this is the reason silver has thus far been able to consistently bounce off the $30 support level. The Swap Dealers seem to be pretty comfortable with long side exposure in the metal down there. My guess is that if and when silver prices do eventually mount an upside breech of overhead resistance and begin a trending move higher, these traders will be selling out longs, booking profits and then moving back to the short side in a more conventional pattern for what we are accustomed to seeing with this group.
Monday, November 28, 2011
Risk on - Everything got fixed overnight
Talk about potential IMF loans to Italy had everyone feeling slap-happy in today's trading session, especially seeing that the finanical world did not come to an end over the US Thanksgiving holiday weekend.
Back on came the risk trades; up went the equity markets; up went the commodity markets in general and down went the US Dollar.
Both gold and silver moved higher with silver leading the way in this "risk environment".
If you note the gold chart below, it ran to $1720, the next resistance level noted on the chart, where it then encountered some selling pressure which kept it from getting too far out from that level. I would like to see this market stay above $1725 for at least one bar before thinking it can mount a run back towards $1750 with its first stop on that journey near $1735.
Gold did manage to claw its way back above the upper tine of the bearish pitchfork which should now serve to support the market on any dip lower IF THIS MARKET is going to have a shot at turning the psychology a bit friendlier. For that to occur, it seems to me we are going to see some sort of fundamental spark which would undercut the recent strength in the US Dollar. Traders may be selling the Dollar today but that could all very quickly reverse if today's euphoria turns sour.
Simply put - there is no clear cut trend in gold, or for that matter silver right now as far too much depends on perceptions involving conditions across the Eurozone.
Wax on - Wax off - Risk on - Risk off. That is the story once again.
Back on came the risk trades; up went the equity markets; up went the commodity markets in general and down went the US Dollar.
Both gold and silver moved higher with silver leading the way in this "risk environment".
If you note the gold chart below, it ran to $1720, the next resistance level noted on the chart, where it then encountered some selling pressure which kept it from getting too far out from that level. I would like to see this market stay above $1725 for at least one bar before thinking it can mount a run back towards $1750 with its first stop on that journey near $1735.
Gold did manage to claw its way back above the upper tine of the bearish pitchfork which should now serve to support the market on any dip lower IF THIS MARKET is going to have a shot at turning the psychology a bit friendlier. For that to occur, it seems to me we are going to see some sort of fundamental spark which would undercut the recent strength in the US Dollar. Traders may be selling the Dollar today but that could all very quickly reverse if today's euphoria turns sour.
Simply put - there is no clear cut trend in gold, or for that matter silver right now as far too much depends on perceptions involving conditions across the Eurozone.
Wax on - Wax off - Risk on - Risk off. That is the story once again.
Saturday, November 26, 2011
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen in to my radio interview with Eric King on the KWN Weekly Metals Wrap.
Wednesday, November 23, 2011
Happy Thanksgiving to my American readers
We do indeed have much to still be thankful for in this wondrous land of ours.
The Wall Street Journal has a fine tradition of reprinting some wonderful reading each and every year in honor of our Thanksgiving holiday. May I suggest taking a bit of time to read these two fine articles and reflect on the sacrifices made by those who came to these shores more than 400 years ago and by those who looked upon what they had created years later and recorded their thoughts.
http://online.wsj.com/article/SB10001424052970204323904577037921612867912.html?mod=WSJ_Opinion_AboveLEFTTop
The Wall Street Journal has a fine tradition of reprinting some wonderful reading each and every year in honor of our Thanksgiving holiday. May I suggest taking a bit of time to read these two fine articles and reflect on the sacrifices made by those who came to these shores more than 400 years ago and by those who looked upon what they had created years later and recorded their thoughts.
The Desolate Wilderness
A chronicle of the Pilgrims' arrival at Plymouth, as recorded by Nathaniel Morton.
http://online.wsj.com/article/SB10001424052970204323904577037920016916462.html?mod=WSJ_Opinion_AboveLEFTTopAnd the Fair Land
'For all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators
http://online.wsj.com/article/SB10001424052970204323904577037921612867912.html?mod=WSJ_Opinion_AboveLEFTTop
Gold weak but holding support - for now
Gold has now gone down and visited the critical support level near $1680 three times in the last three trading days, each time managing to recover as it attracted quality buying and rebounded. Considering the weak action in both the HUI and in silver, and of course strength in the Dollar, this is encouraging but overall the market is acting rather poorly.
Until this market can manage to regain its footing above $1725, it is in a precarious position. I got the distinct impression that many traders did not want to go home short over a long holiday weekend period (many are taking off until Sunday evening) due to concerns over what may great them come Sunday evening/Monday morning of next week.
The Dollar is on course to end this week on a very strong note barring any changes in the fundamental picture in Europe. That will lead to further weakness in commodities in general. Now that the failed German bund action has sent shock waves through the markets in general and chatter continues to grow that France is next on the downgrade list, the US Dollar is seeing strong inflows as money comes out of Europe. One has to wonder if the Asians are dumping Euro-based debt and gravitating towards Treasuries.
At some point in this crisis, gold is going to stop following the general commodity sector lower and will trade as a safe haven but it is going to continue to experience computer selling from hedge funds and index funds which benchmark against the various commodity indices. It should be noted however that gold is holding much better than silver or the CCI in general. This is due to its function as a safe haven. Were it not for that, it would be getting sold down more severely due to the mad rush for cash currently underway.
Note the various support levels and resistance levels I have noted on the chart. The failure at $1800 is very evident now that we have had some time to put in some more trading bars on the chart. Rallies are being held in check by the downsloping dark blue line of the pitchfork. Support has been established below $1680 with some spiking down towards $1665 producing some decent ricochetting back above $1680. Failure to hold these lows established this week should let the market fall down towards the downsloping red line which parallels the upper tine of the pitchfork.
Until this market can manage to regain its footing above $1725, it is in a precarious position. I got the distinct impression that many traders did not want to go home short over a long holiday weekend period (many are taking off until Sunday evening) due to concerns over what may great them come Sunday evening/Monday morning of next week.
The Dollar is on course to end this week on a very strong note barring any changes in the fundamental picture in Europe. That will lead to further weakness in commodities in general. Now that the failed German bund action has sent shock waves through the markets in general and chatter continues to grow that France is next on the downgrade list, the US Dollar is seeing strong inflows as money comes out of Europe. One has to wonder if the Asians are dumping Euro-based debt and gravitating towards Treasuries.
At some point in this crisis, gold is going to stop following the general commodity sector lower and will trade as a safe haven but it is going to continue to experience computer selling from hedge funds and index funds which benchmark against the various commodity indices. It should be noted however that gold is holding much better than silver or the CCI in general. This is due to its function as a safe haven. Were it not for that, it would be getting sold down more severely due to the mad rush for cash currently underway.
Note the various support levels and resistance levels I have noted on the chart. The failure at $1800 is very evident now that we have had some time to put in some more trading bars on the chart. Rallies are being held in check by the downsloping dark blue line of the pitchfork. Support has been established below $1680 with some spiking down towards $1665 producing some decent ricochetting back above $1680. Failure to hold these lows established this week should let the market fall down towards the downsloping red line which parallels the upper tine of the pitchfork.
Silver continues to be at the mercy of the risk trades
Silver rallied yesterday on news about a proposed IMF plan to aid Europe. That took equities higher, the Dollar lower and the metals up for the ride. Today that is yesterday's news as the pitiful German bond auction sent investors fleeing out of everything they bought yesterday and rushing back into the Dollar once again.
Down goes silver, crude oil, copper and just about everything else on the planet.
All you need to know about silver is contained in the following two charts. The first is the Continuous Commodity Index. The second is Silver. Note how eerily similiar the two charts are.
This is the reason that I keep saying that silver is not going to go anywhere until the sentiment towards "RISK" and towards "INFLATION" changes. As long as traders are seeing the sovereign debt crisis in Europe as worsening and eventually causing a contraction in global economic growth, they are not going to be piling into silver as they did back during the days of the Federal Reserves' Quantitative Easing program.
Silver does however continue to find buying on dips into the region near $30 which is becoming a critical chart support level. As long as buyers see value in this area it should remain well supported as they will accumulate the metal during such bouts of price weakness. If the European contagion begins to worsen, this level could become vulnerable.
As investors rush back into the Dollar, it is poised for another trip to the 80 level on the USDX. If it manages a weekly close above this level, it is going to be rough going for the commodity complex. If it traders become convinced that even Germany is going to succumb to the contagion spreading across Europe, the Dollar is going to move through 80 like a hot knife through butter. If on the other hand a change of sentiment towards Europe emerges, 80 will prove to be a formidable resistance level.We will have to see where events lead us.
Note that both longer term moving averages, the 50 day and the 100 day, are now moving higher in conjunction - a bullish sign.
Keep in mind that even though the Dollar has its own set of problems, and that set is very significant, right now it is NOT THE EURO, and that is what has money flowing back into it.
Down goes silver, crude oil, copper and just about everything else on the planet.
All you need to know about silver is contained in the following two charts. The first is the Continuous Commodity Index. The second is Silver. Note how eerily similiar the two charts are.
This is the reason that I keep saying that silver is not going to go anywhere until the sentiment towards "RISK" and towards "INFLATION" changes. As long as traders are seeing the sovereign debt crisis in Europe as worsening and eventually causing a contraction in global economic growth, they are not going to be piling into silver as they did back during the days of the Federal Reserves' Quantitative Easing program.
Silver does however continue to find buying on dips into the region near $30 which is becoming a critical chart support level. As long as buyers see value in this area it should remain well supported as they will accumulate the metal during such bouts of price weakness. If the European contagion begins to worsen, this level could become vulnerable.
As investors rush back into the Dollar, it is poised for another trip to the 80 level on the USDX. If it manages a weekly close above this level, it is going to be rough going for the commodity complex. If it traders become convinced that even Germany is going to succumb to the contagion spreading across Europe, the Dollar is going to move through 80 like a hot knife through butter. If on the other hand a change of sentiment towards Europe emerges, 80 will prove to be a formidable resistance level.We will have to see where events lead us.
Note that both longer term moving averages, the 50 day and the 100 day, are now moving higher in conjunction - a bullish sign.
Keep in mind that even though the Dollar has its own set of problems, and that set is very significant, right now it is NOT THE EURO, and that is what has money flowing back into it.
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