“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


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


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


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Tuesday, January 10, 2012

Gold clears initial resistance hurdle

There has been a band of overhead chart resistance centered between $1630 - $1620 that has been keeping gold in check for the last few weeks. Gold has been probing this level for the last couple of days and has been unable to convincingly push past it. Today that all changed as gold charged higher in the very early hours of European trading. While it has been stymied in New York from furthering its overnight gains (no surprise there), it has also been attracting additional buying above $1630. As long as this buying continues, gold will have sufficient momentum to launch an attack on the $1650 level.

A large number of traders are watching the 200 day moving average to see how the metal handles itself here. The longer it holds ABOVE this level, the more nervous the shorts are going to become. From a technical perspective, a market in a bearish mode should not be able to push through this level but should fail near or at that level and then begin retreating in price. This average comes in near the $1629 level which reinforces the horizontal resistance levels noted on the chart. You will note that gold is trading above both these levels as of this hour.




If this market can continue higher tomorrow and take out $1650, we will see $1680 in very short order as shorts begin exiting more earnestly while buyers sitting on the sideline observing its performance will grow emboldened. That will bring the open interest up as hedge fund money returns more strongly.

Downside probes should meet up with valued-based buying above and just slightly below the $1600 level. Only a failure there will see the metal retreat deeper back towards $1575.

The Dollar is setting back a bit from its recent 52 week high but remains above both its 10 day and 20 day moving averages. The weekly chart is positive but does show a level of chart resistance just shy of the 82 level which is exactly where it is currently stalling a bit. Dollar bulls need to clear this level before the week is out if they hope to take the Dollar up towards 83.50 - 84.00.


The HUI is rising alongside of both gold and silver today as there is a general bid into equities across the board. The equity guys are anticipating better economic numbers coming out of the US and seem to be dismissing any concerns related to European sovereign debt issues for the time being. That will help keep the miners moving higher but I am noting the fact that they not been able to extend their gains from the opening hour of trading today. Sellers are emerging but the buyers have still been continuing so both sides are currently stalemated heading into the last hour of trading. We will see which side blinks first.

Note that the index still remains below the 50 day moving average although it is well above the bottom of the 15 month long trading range down near 500 - 490.


5 comments:

  1. Great analysis Dan, this helps me as far as timing and the such goes. I am long heading into Friday, and timed my purchase right at the 1:30 crimex fix bottom today, and have a 1/4 position working on the long side. The bulls were defending 1630 quite nicely today, but weren't interested in even trying to push it up to 1640, which was a bit discouraging. The action seemed tepid, and range bound.

    Once again, I fear a cartel raid after S&P Friday though, which could lead to a reversal in the general markets and commodities. Everybody has completely forgotten about those clowns, but it's a perfect excuse for the cartel to put the hammer down large. They do seem intent on defending $30 silver, so that tells me that they are still lurking in the wings.

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  2. "If this market can continue higher tomorrow and take out $1650, we will see $1680 in very short order".
    Hi Dan, this is the only part where I would disagree a bit, I think you underestimate the importance of previous ma 150 (or ma175 on the futures market) which has been a very accurate support for the last 3 years on gold.
    I'd say a pull back towards this support, now at 1665, is quite natural, and only above it would I feel more confident that the trend is reversing.
    I'm going to sell a bit of gold around 1665, which corresponds also to the high bolinger band, and I wouldn't be surprised if gold reverses its courses after testing this level.
    As usual, market will tell :)
    HAve a nice day,

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  3. Come on silver bulls.. Push it up baby! We got those cockroaches on the run now!!

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  4. The price action and volume seems too strong for the 1:30 crymex beatdown today. Looking for a breakout to 1650/30.50. Any effort to front run the 1:30 beatdown may be a buying opportunity.

    BTW, what is up with platinum? Short squeeze?

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  5. chinese buying ahead of their new year is helping i am hearing.

    ReplyDelete