Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
http://tinyurl.com/6mhsjvf
Saturday, March 31, 2012
Wednesday, March 28, 2012
Goldman Sachs issues "Buy" on Gold; Gold drops lower
Interesting recommendation by Goldman and even more interesting to see the market reaction in gold today. Can you say that someone is particularly overjoyed by the opportunity to take that recommendation?
By the way, Goldman is echoing the remarks from Chairman Bernanke the other day and repeating what my interpretation of those remarks were in this week's comments entitled, "Pass the Juice Please".
Goldman's views in summary can be translated as follows: Gold market weakness has been tied to the fact that the markets were expecting "REAL INTEREST RATES" to rise in light of the recent economic data showing improvement in the US economy. However, the economic recovery is not strong enough to allow for higher rates and that coupled with Bernanke's comments that acccomodative monetary policy will be required for the foreseeable future means that gold has overreacted to the downside.
Goldman is looking for another round of QE which will pressure the Dollar and thus drive gold prices higher.
Rest assured that the hedge fund long liquidation and fresh short selling of today is being met by solid buying from Goldman's customers.
Also, I find it EXTREMELY TELLING that the bond market cannot seem to get much going to the upside today given the fact that the broader equity markets are swooning and the US Dollar is currently higher as the risk aversion trades come back on.
By the way, Goldman is echoing the remarks from Chairman Bernanke the other day and repeating what my interpretation of those remarks were in this week's comments entitled, "Pass the Juice Please".
Goldman's views in summary can be translated as follows: Gold market weakness has been tied to the fact that the markets were expecting "REAL INTEREST RATES" to rise in light of the recent economic data showing improvement in the US economy. However, the economic recovery is not strong enough to allow for higher rates and that coupled with Bernanke's comments that acccomodative monetary policy will be required for the foreseeable future means that gold has overreacted to the downside.
Goldman is looking for another round of QE which will pressure the Dollar and thus drive gold prices higher.
Rest assured that the hedge fund long liquidation and fresh short selling of today is being met by solid buying from Goldman's customers.
Also, I find it EXTREMELY TELLING that the bond market cannot seem to get much going to the upside today given the fact that the broader equity markets are swooning and the US Dollar is currently higher as the risk aversion trades come back on.
Gold being held in check at $1680
While Gold has been able to punch through this critical resistance level, it has not been able to HOLD ABOVE it. This is must do in order to kick it up and out of its current malaise. Once it does so, it should make a run at $1720 - $1725 in relatively short order.
Monday, March 26, 2012
Pass the Juice Please
In news this morning that most of the gold community was completely expecting I might add , Chairman 'Easy Money Ben' Bernanke announced this morning that he was concerned whether economic recovery was strong enough to sustain itself without supportive and accomodative monetary policy. Translation - near zero interest rates will remain as far as the eye can see.
Talk about messing with the heads of the Fed Funds Futures traders - they are getting beat to death by this Fed. Every single time they start anticipating a rise in the short term interest rates based on economic data releases, some one or more of the Fed governors comes down from his or her ivory tower and squashes the idea that the economy is sufficiently on the mend. Out through the front door goes the notion that these insanely low interest rates are finally going to be begin lifting.
I have said it before and will say it again - the FED IS TERRIFIED OF RISING INTEREST RATES. Do not forget these two reasons:
1.) the entire "recovery" has been fueled by an ultra low interest rate environment in which short term money is basically free for those who want to borrow it and then leverage it up for speculative trading purposes. (Think a rising stock market which has all the feel of another speculative bubble).
2.) the US federal debt is at banana republic levels and any, I repeat, any rise in interest rates, will suck more of the incoming federal revenue into servicing the cost of this debt (paying the interest on it), leaving less for the spendthrift class to buy votes with.
Bernanke and company cannot afford to have a stock market that stops moving higher because if and when it did, the entire facade of an economy on the mend would come crashing down with it.
The monetary masters have reversed the entire reason for a rising stock market from one driven higher by solid underlying fundamentals to one being rammed higher by lots of JUICE. I am reminded of that scene for the original version of the hit movie, "The Matrix", where Neo and Trinity go to resuce Morpheus from the clutches of agent Smith where they are asked what they are going to need to pull off the stunt. "Guns, lots of Guns", comes the answer.
"Juice, lots of Juice" -
Talk about messing with the heads of the Fed Funds Futures traders - they are getting beat to death by this Fed. Every single time they start anticipating a rise in the short term interest rates based on economic data releases, some one or more of the Fed governors comes down from his or her ivory tower and squashes the idea that the economy is sufficiently on the mend. Out through the front door goes the notion that these insanely low interest rates are finally going to be begin lifting.
I have said it before and will say it again - the FED IS TERRIFIED OF RISING INTEREST RATES. Do not forget these two reasons:
1.) the entire "recovery" has been fueled by an ultra low interest rate environment in which short term money is basically free for those who want to borrow it and then leverage it up for speculative trading purposes. (Think a rising stock market which has all the feel of another speculative bubble).
2.) the US federal debt is at banana republic levels and any, I repeat, any rise in interest rates, will suck more of the incoming federal revenue into servicing the cost of this debt (paying the interest on it), leaving less for the spendthrift class to buy votes with.
Bernanke and company cannot afford to have a stock market that stops moving higher because if and when it did, the entire facade of an economy on the mend would come crashing down with it.
The monetary masters have reversed the entire reason for a rising stock market from one driven higher by solid underlying fundamentals to one being rammed higher by lots of JUICE. I am reminded of that scene for the original version of the hit movie, "The Matrix", where Neo and Trinity go to resuce Morpheus from the clutches of agent Smith where they are asked what they are going to need to pull off the stunt. "Guns, lots of Guns", comes the answer.
"Juice, lots of Juice" -
Saturday, March 24, 2012
HUI - deeply oversold and nearing support
The mining shares have been absolutely obliterated over the course of the last couple of months as their longsuffering owners can all too sadly attest.
The carnage however has dropped the index deeply into oversold territory on the weekly price chart. If you notice the chart carefully, this particular indicator which I have tweaked a bit to optimize it to the index, is now nearing levels seen only TWICE since the entire bull market began. Not only that, it is also nearing an important Fibonacci retracement level of the rally that began off the 2008 low before peaking last fall.
Between the extreme undervaluation against the price of bullion and the broader S&P 500, we should be nearing a turning point on this sector within the not too distant future. They have not yet flashed a buy signal but are getting close.
The carnage however has dropped the index deeply into oversold territory on the weekly price chart. If you notice the chart carefully, this particular indicator which I have tweaked a bit to optimize it to the index, is now nearing levels seen only TWICE since the entire bull market began. Not only that, it is also nearing an important Fibonacci retracement level of the rally that began off the 2008 low before peaking last fall.
Between the extreme undervaluation against the price of bullion and the broader S&P 500, we should be nearing a turning point on this sector within the not too distant future. They have not yet flashed a buy signal but are getting close.
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.
http://tinyurl.com/76qub7j
http://tinyurl.com/76qub7j
Thursday, March 22, 2012
Slowing Global Growth was the Theme Today
Overnight news out of China and out of Europe detailing slower than expected growth was the catalyst that served to upset the apple cart of the equity market bulls in today's trading session. It also led to further hedge fund selling of commodities in general with the result that it even took crude oil lower. Copper was clocked for nearly a 2% loss on the trading day while Silver was actually down nearly 3% at one time during the session.
Silver has broken down below both the 50 day and the 100 day moving averages on the Daily chart as the chart is decidedly bearish in this time frame.
The weekly chart shows that since 2009, either the 50 WEEK or the 100 WEEK moving average have served to provide buying support on this time frame. Now that the 50 week has been violated, the next line of support comes in near the 100 week at the $30.15 - $30.00 level. If this does not hold, it will drop back towards the heavy blue line shown on the chart below $27.
The market has traced out a series of LOWER HIGHS with a horizontal support zone near the $26.54 - $26.00 level. No doubt many a would-be silver buyer is looking, longingly I might add, for the metal to move towards that level once again so that they can become active.
Silver has broken down below both the 50 day and the 100 day moving averages on the Daily chart as the chart is decidedly bearish in this time frame.
The weekly chart shows that since 2009, either the 50 WEEK or the 100 WEEK moving average have served to provide buying support on this time frame. Now that the 50 week has been violated, the next line of support comes in near the 100 week at the $30.15 - $30.00 level. If this does not hold, it will drop back towards the heavy blue line shown on the chart below $27.
The market has traced out a series of LOWER HIGHS with a horizontal support zone near the $26.54 - $26.00 level. No doubt many a would-be silver buyer is looking, longingly I might add, for the metal to move towards that level once again so that they can become active.
Gold has a better looking chart pattern than silver currently does in my opinion but that is due to the fact that some are still buying the metal as a safe haven out of geopolitical jitters or currency market woes and suspicions regarding the health of such. It did break down below the $1640 level in today's session dropping into the $1620's before the buyers showed up late and took it back through that support level by the close. This region has now held gold for the last two weeks so it has taken on quite a bit of significance as far as the technical analysis of this market goes. Bears would ideally love to take it through here and run the downside stops as they dream of the $1600 level. It would be helpful to the bulls' cause if India were to re-emerge down here.
You might recall that during last Friday's KWN Weekly Metals Wrap it was pointed out that the metals both look "Heavy" on the charts right now. I will not feel better about gold until I see it back ABOVE $1680 and Silver until it can climb back above $32.50 for starters.
About the only good thing that can be said about the horrific looking chart of the HUI is that it held above this week's low even on a day during which the global equity markets were experiencing some selling pressure. Yes, it closed down on the day but it apparently attracted some decent buying down at this week's lows again. If the bulls can take this thing back above 475 - 480 by tomorrow afternoon's closing bell, you might say that they have achieved a moral victory. As beat up as this sector has become, it is a marvel that anyone is left to sell the miners at these insanely undervalued levels.
If this were not bad enough to have one standing out on the window ledge by now, the following two charts might just do the trick. The HUI compared to the S&P 500 ratio, which gives us a measure of how the mining sector has been doing against the broader stock market in general, has now reached levels last seen in 2009 - nearly three years ago to be exact.
Also, the HUI to Gold ratio continues to plummet and is now within striking distance of where it was last seen all the way back at the depth of the credit crisis of 2008 just prior to the inception of the first round of Quantitative Easing. It is also at the same level it was back in February 2002.
Incidentally, for those who love inflicting further pain and discomfort upon their persons - this is the definition of a masochist - the price of gold in February 2002 was $297/ounce and the price of silver was $4.95 - $5.00. In the depth of the credit crisis in the summer of 2008, gold was trading at $680/ounce while silver was trading $9.75 - $10.00.
While the HUI is obviously trading at higher levels than since then, those who bought gold and silver shares in an effort to provide a safe haven for their wealth from the ravages that they saw coming many years ago, would have been much better off had they simply bought the actual metals instead. To say that the mining shares have underperformed and disappointed is too mild of a word. One more apt would be that they have "crushed" their owners expectations and left a very bitter and deep wound upon them; a wound I might add that I am beginning to seriously question if it can ever be healed again.
CEOs need to somehow find a way to bring "value" to their particular shares and convince those who bought them that their investment in into the company was a worthwhile one and a desirable sector into which to park the fruits of their hard labor. They had better get busy.
Tuesday, March 20, 2012
Commodity Mauling Time
Funds are hammering nearly every single individual commodity futures market lower in today's session for some reason, a reason as to which I am still attempting to discover. There does not seem to be a safe haven, or "risk off" trade occuring in any large degree mainly because the bond market is trading nearly unchanged while the US Dollar is only up very slightly. Stocks while lower today have moved off of their worst levels of the session but the bloodbath is continuing across the commodity sector.
Evidently the computer algorithms have their panties in a wad and are jettisoning a large portion of their hedge fund owners' commodity holdings. The only commodity that I can curently find that is not lower today is the cocoa market. Too bad - maybe we could at least have eaten some cheaper chocolate as a consolation for what they are doing to the gold and silver markets.
Take a look at the following chart of the Continuous Commodity Index or CCI. It has not been able to recover from the hit it took after the FOMC fired their now infamous verbal intervention gun at the sector not long ago.
As stated here previously, the Fed wanted to entice the hedge funds out of the sector and into the equity markets and were hugely successful in so doing. You might also remember the "economy is doing better and does not need any QE3 only a period of continued low interest rates until late 2014", remarks. That was pretty much the short-term nail in the coffin for the sector as a whole based on the price action since then. Rallies are being viewed only as selling opportunities with the proceeds then being funnelled into the equity markets where they can make some gains, especially in time for the end of the quarter statement mailing time.
Gold is still holding above support near $1640 but is looking heavy currently. Bulls need to keep this level intact to prevent a drop to $1620 or lower. Until they can push it back above $1680, the new shorts are going to remain quite complacent and very confident. Should there be an upside surprise that takes it through that level, a large number of buy stops will be set off.
The flip side is that sell stops are building below $1640 - $1635. Floor locals are going to try to make a run at those especially if the fund selling does not let up any.
Silver took out support at $32.50 today as it continues its recent pattern of a large sell off followed by a couple to three days of short covering and consolidation only to experience another round of strong selling pressure. Spec longs are fleeing the Comex Silver market. It is currently sitting just above a layer of important chart support from a technical perspective, which if it fails, will see the market drop quite rapidly down towards the $30.25 - $30.00 region.
Evidently the computer algorithms have their panties in a wad and are jettisoning a large portion of their hedge fund owners' commodity holdings. The only commodity that I can curently find that is not lower today is the cocoa market. Too bad - maybe we could at least have eaten some cheaper chocolate as a consolation for what they are doing to the gold and silver markets.
Take a look at the following chart of the Continuous Commodity Index or CCI. It has not been able to recover from the hit it took after the FOMC fired their now infamous verbal intervention gun at the sector not long ago.
As stated here previously, the Fed wanted to entice the hedge funds out of the sector and into the equity markets and were hugely successful in so doing. You might also remember the "economy is doing better and does not need any QE3 only a period of continued low interest rates until late 2014", remarks. That was pretty much the short-term nail in the coffin for the sector as a whole based on the price action since then. Rallies are being viewed only as selling opportunities with the proceeds then being funnelled into the equity markets where they can make some gains, especially in time for the end of the quarter statement mailing time.
Gold is still holding above support near $1640 but is looking heavy currently. Bulls need to keep this level intact to prevent a drop to $1620 or lower. Until they can push it back above $1680, the new shorts are going to remain quite complacent and very confident. Should there be an upside surprise that takes it through that level, a large number of buy stops will be set off.
The flip side is that sell stops are building below $1640 - $1635. Floor locals are going to try to make a run at those especially if the fund selling does not let up any.
Silver took out support at $32.50 today as it continues its recent pattern of a large sell off followed by a couple to three days of short covering and consolidation only to experience another round of strong selling pressure. Spec longs are fleeing the Comex Silver market. It is currently sitting just above a layer of important chart support from a technical perspective, which if it fails, will see the market drop quite rapidly down towards the $30.25 - $30.00 region.
Saturday, March 17, 2012
UP and UP she goes - where she stops nobody knows
I am becoming more and more convinced that the US Monetary Authorities have engaged in a process which is resulting in the formation of another bubble, this time once again in the US equity markets. Think back over the last decade+ and what we have seen occur in the US financial markets beginning at the height of the stock market bubble that popped in 1999.
From that point on, we have had a real estate market bubble, then a commodity market bubble, then a bond market bubble and now once again we are seeing the formation of a stock market bubble. Think back to that first popping of the equity market bubble in 1999 and to the subsequent popping of each successive bubble that has inevitably followed (as surely as the dusk follows the dawn I might add)
as a result of their short-sighted policies - what has been their response? More of the same!
Interest rates were successively slashed to insanely low levels with the effect of PILFERING the retirement earnings of our senior citizens and those who are dependent on fixed income investments. An entire segment of the population has been robbed of a decent rate of interest on their life's savings as a result of these vultures masquerading as economic wise men.
The VICTIMS of the official monetary elites ( and yes I use the term 'victim' because that is PRECISELY what they have become in this game of madness) have been forced into scouring the land looking for a place, a sector, somewhere, anywhere - that they can hope to obtain some sort of decent yield from a SAFE, CONSERVATIVE INVESTMENT with which they can fund their last few years on this earth. Instead, many of them have been forced into joining the marauding band of wild-eyed speculators known as the hedge funds which scour the land raping and pillaging various sectors in succession looking for that precious and rare commodity known as 'Yield'.
And what pray tell have we witnessed our monetary lords and barons doing for the last ten years as far as policy? - why nothing else but managing the fallout from the popping of each successive bubble. Bubbles, which I might add, they themselves have created by employing the same prescriptive medicine, ad infinitum, stupidly looking for a different result each time they experiment upon us. One gets the distinct impression that our financial system is becoming a FRANKENSTEIN ECONOMY - the creation of madmen who cannot see what they have loosed upon the world.
The following chart of the S&P 500 tells the story of yet another bubble forming, once again in the world of equities. Yet this is a bubble being DELIBERATELY BLOWN by the Fed in the hopes that this ever-expanding balloon will engender a corresponding increase in consumer confidence in turn inducing an increase in consumer spending in the process - spending which must occur to lift the economy out of its doldrums.
Once upon a time - a long, long time ago - in an ancient bygone era, during which primitives ruled, men naively believed that a rising stock market was the RESULT of a thriving economy. Nowadays, this is no longer true - instead there is a new religion that has grown to supplant the ancient one. This new religion, complete with its priestcraft of Central Bankers and well connected adherents, has professed a NEW CREED - one designed to drive out any vestiges of the old one. This new creed believes that if the stock market can be MADE TO RISE, the THRIVING ECONOMY will then follow. In other words, cause and effect have been reversed.
What is then required to validate this creed is to induce, cajole, herd, or otherwise force through eliminating alternatives, speculative money flows into the equity markets. Once stocks rise, opinion then turns and with opinion turning, crowd behavior then follows.
With that in mind, observe the latest chart of the S&P 500, a broad representative of the US equity markets. Note how well the speculators are being herded into the equity markets once again seeing that there is no hope of obtaining yield in a near zero interest rate environment - where else is all this money that has been created by the Bank of England, the Bank of Japan, the Fed, the European Central Bank, going to go? Even the PBOC and the Bank of Brazil are getting into the act.
Think back to 1999 and the conditions existing in the economy as far as employment and real estate goes - consider the US budget situation back then and compare that to where it has degraded now. The latest FOMC release informed us that the economy is showing moderate improvement but still faces enough challenges that it requires interest rates to remain near zero for more than a year and a half (late 2014). And yet the S&P 500 is merrily charging higher headed directly in a straight line back to the same level it was prior to the debacles that we have seen first when stocks imploded in 1999 and then again in 2008.
Yes, indeed, stocks have become the only game in town due to the machinations of these plotters and schemers who control monetary policy and attempt to influence crowd behavior. Welcome to the Brave New World of Central Planning.
From that point on, we have had a real estate market bubble, then a commodity market bubble, then a bond market bubble and now once again we are seeing the formation of a stock market bubble. Think back to that first popping of the equity market bubble in 1999 and to the subsequent popping of each successive bubble that has inevitably followed (as surely as the dusk follows the dawn I might add)
as a result of their short-sighted policies - what has been their response? More of the same!
Interest rates were successively slashed to insanely low levels with the effect of PILFERING the retirement earnings of our senior citizens and those who are dependent on fixed income investments. An entire segment of the population has been robbed of a decent rate of interest on their life's savings as a result of these vultures masquerading as economic wise men.
The VICTIMS of the official monetary elites ( and yes I use the term 'victim' because that is PRECISELY what they have become in this game of madness) have been forced into scouring the land looking for a place, a sector, somewhere, anywhere - that they can hope to obtain some sort of decent yield from a SAFE, CONSERVATIVE INVESTMENT with which they can fund their last few years on this earth. Instead, many of them have been forced into joining the marauding band of wild-eyed speculators known as the hedge funds which scour the land raping and pillaging various sectors in succession looking for that precious and rare commodity known as 'Yield'.
And what pray tell have we witnessed our monetary lords and barons doing for the last ten years as far as policy? - why nothing else but managing the fallout from the popping of each successive bubble. Bubbles, which I might add, they themselves have created by employing the same prescriptive medicine, ad infinitum, stupidly looking for a different result each time they experiment upon us. One gets the distinct impression that our financial system is becoming a FRANKENSTEIN ECONOMY - the creation of madmen who cannot see what they have loosed upon the world.
The following chart of the S&P 500 tells the story of yet another bubble forming, once again in the world of equities. Yet this is a bubble being DELIBERATELY BLOWN by the Fed in the hopes that this ever-expanding balloon will engender a corresponding increase in consumer confidence in turn inducing an increase in consumer spending in the process - spending which must occur to lift the economy out of its doldrums.
Once upon a time - a long, long time ago - in an ancient bygone era, during which primitives ruled, men naively believed that a rising stock market was the RESULT of a thriving economy. Nowadays, this is no longer true - instead there is a new religion that has grown to supplant the ancient one. This new religion, complete with its priestcraft of Central Bankers and well connected adherents, has professed a NEW CREED - one designed to drive out any vestiges of the old one. This new creed believes that if the stock market can be MADE TO RISE, the THRIVING ECONOMY will then follow. In other words, cause and effect have been reversed.
What is then required to validate this creed is to induce, cajole, herd, or otherwise force through eliminating alternatives, speculative money flows into the equity markets. Once stocks rise, opinion then turns and with opinion turning, crowd behavior then follows.
With that in mind, observe the latest chart of the S&P 500, a broad representative of the US equity markets. Note how well the speculators are being herded into the equity markets once again seeing that there is no hope of obtaining yield in a near zero interest rate environment - where else is all this money that has been created by the Bank of England, the Bank of Japan, the Fed, the European Central Bank, going to go? Even the PBOC and the Bank of Brazil are getting into the act.
Think back to 1999 and the conditions existing in the economy as far as employment and real estate goes - consider the US budget situation back then and compare that to where it has degraded now. The latest FOMC release informed us that the economy is showing moderate improvement but still faces enough challenges that it requires interest rates to remain near zero for more than a year and a half (late 2014). And yet the S&P 500 is merrily charging higher headed directly in a straight line back to the same level it was prior to the debacles that we have seen first when stocks imploded in 1999 and then again in 2008.
Yes, indeed, stocks have become the only game in town due to the machinations of these plotters and schemers who control monetary policy and attempt to influence crowd behavior. Welcome to the Brave New World of Central Planning.
By the way, does anyone else beside me, see the similarity in the chart patterns of both the Crude Oil market and the S&P 500?
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, March 16, 2012
Trader Dan visits Turdland at the TF Metals Report Site
Yesterday my pal, Turd Ferguson, the owner and proprietor of TF Metals Report site, was gracious enough to do one of his now famous podcast interviews, with yours truly as his latest victim ( excuse me - that was a typo Turd - I was supposed to write 'guest' :o) ).
Seriously - the interview was a lot of fun for me personally but more importantly, we both hope it is helpful to those who are perhaps interested in some of the pitfalls that would-be traders face as they attempt to navigate through today's wildly volatile markets.
We covered quite a bit of ground about trading in general as well as sharing some personal thoughts about the problems facing the United States as we move forward into the future.
Stop by Turd's site and check out the interview when you can or click on the following link which will take you directly there.
http://www.tfmetalsreport.com/podcast/3537/tfmr-podcast-15-trader-dan-norcini
Seriously - the interview was a lot of fun for me personally but more importantly, we both hope it is helpful to those who are perhaps interested in some of the pitfalls that would-be traders face as they attempt to navigate through today's wildly volatile markets.
We covered quite a bit of ground about trading in general as well as sharing some personal thoughts about the problems facing the United States as we move forward into the future.
Stop by Turd's site and check out the interview when you can or click on the following link which will take you directly there.
http://www.tfmetalsreport.com/podcast/3537/tfmr-podcast-15-trader-dan-norcini
Thursday, March 15, 2012
Gold holding near $1640
The Yellow Metal attracted some short covering and some buying related to bargain hunting in today's session as apparently buying was of sufficient size to convince some of the shorts that the market was through going down for right now. After a drop of $85 in a few days, some decided that it was time to ring the cash register and grab a few profits.
It looks like a few light stops were run once the market took out $1660 but after those were filled, price retreated a bit lower and is currently below that level.
For me to become convinced that a short term bottom is in this market, we will need to see the price close back through the $1680 level once again. You might remember from yesterday's charts posted over at King World News within my recent interview, the 200 day moving average comes in very near that level.
For the time being I am hesitant to read too much into a single day's action.
The Dollar is moving lower today and I want to see whether or not this is a one day wonder or if it is going to try to mount a push back towards 82 on the USDX.
The S&P 500 continues on its near one-way trek higher scoring another fresh 52 week high in the process. I do not know about you, but I for one am glad that it was so easy to fix everything ailing the US economy by keeping interest rates near zero. I am waiting for the day when the Fed announces it is going to distribute checks to all taxpaying citizens in the amount of $10,000 each as part of its efforts to combat deflationary pressures.
The HUI continues getting beaten up as it is lower on the day even while the rest of the equity market leaves it in the dust. The sector is so undervalued against the broader market that it screams for someone to buy it but the discouragement is so strong that hardly any want to touch the miners for fear of further losses. The ratio of the HUI to the S&P 500 touched a nearly three year low today!
Silver
It looks like a few light stops were run once the market took out $1660 but after those were filled, price retreated a bit lower and is currently below that level.
For me to become convinced that a short term bottom is in this market, we will need to see the price close back through the $1680 level once again. You might remember from yesterday's charts posted over at King World News within my recent interview, the 200 day moving average comes in very near that level.
For the time being I am hesitant to read too much into a single day's action.
The Dollar is moving lower today and I want to see whether or not this is a one day wonder or if it is going to try to mount a push back towards 82 on the USDX.
The S&P 500 continues on its near one-way trek higher scoring another fresh 52 week high in the process. I do not know about you, but I for one am glad that it was so easy to fix everything ailing the US economy by keeping interest rates near zero. I am waiting for the day when the Fed announces it is going to distribute checks to all taxpaying citizens in the amount of $10,000 each as part of its efforts to combat deflationary pressures.
The HUI continues getting beaten up as it is lower on the day even while the rest of the equity market leaves it in the dust. The sector is so undervalued against the broader market that it screams for someone to buy it but the discouragement is so strong that hardly any want to touch the miners for fear of further losses. The ratio of the HUI to the S&P 500 touched a nearly three year low today!
Silver
Wednesday, March 14, 2012
Bond Collapse Continues
Much to the chagrin of the Federal Reserve, bond traders are taking that FOMC statement from yesterday and taking no prisoners as they literally hammer the long bond into submission. I find it a bit ironic (to be honest I am gleeful about it) that the Fed, which continues its attempts to manipulate hedge fund behavior by herding them into the equity markets, has opened an enormous can of worms and awakened the heretofore comatose bond vigilantes as an undesirable chain reaction to their "peachy" statement about the state of the US economy.
Bond traders are already moving the Fed Funds Futures to indicate interest rate hikes in early 2014, and not the latter part of 2014 as those minutes revealed yesterday. Worse, the yield on the Ten Year has spiked. It started off the week at 2.04% and ended today at 2.27%. As for the long bond, forgettaboutit; it was absolutely pummelled today now having dropped over 3 1/2 points the last two days.
What has happened is very simple - the happy talk about the US economy coming out of the FOMC minutes has traders jettisoning safe haven trades and even short term Treasuries in favor of the bull train leaving the station in the US equity markets. The problem? The last thing that the Fed and the US government needs or wants is a rising interest rate environment.
Oh sure, they can stand a bit of a move higher, but if any of this begins filtering into the mortgage market and the cost of home mortgages, autos, etc. begins moving higher, it will nip whatever nascent recovery there might be in the bud. And don't forget - there is that pesky "LITTLE" issue of the US national debt which will cost more federal tax revenue to service in a rising interest rate environment. Remember, even with its more upbeat assessment of the US economy yesterday, the FOMC certainly did not suggest that the recovery was robust or was it healthy. What they basically said, if I might paraphrase, was that it was showing modest improvement but was not out of the woods.
Doesn't matter - the bond market is focused on the "modest improvement" part and is interpreting that, either rightly or wrongly, that the Fed is not going to be doing any QE in the immediate future. After all, if things are supposedly so firmly on the right track, why the heck does anyone want to be in a "SAFE HAVEN" Treasury when everything is peachy keen, particularly if those paper IOU's are paying out squat.
The Fed has basically undercut it own low interest rate policy by giving investors the greenlight to sell bonds in order to deploy those funds into the equity markets. See what happens when you engineer a stock market rally?
I suspect that the Fed is going to be getting increasingly nervous if this sell off in the bonds, particularly the long end, continues unabated. Let's see how far the bond bears will push them.
By the way, I am not posting any gold or silver charts today as Eric King over at King World News, was gracious enough to interview me on both markets today asking about the technicals on the metals. You can find charts there with my usual annotations where support and resistance can be located. Here is the link to that particular interview:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/14_Norcini_-_Rough_Day_for_Gold_%26_Silver,_But_Heres_Good_News.html
Bond traders are already moving the Fed Funds Futures to indicate interest rate hikes in early 2014, and not the latter part of 2014 as those minutes revealed yesterday. Worse, the yield on the Ten Year has spiked. It started off the week at 2.04% and ended today at 2.27%. As for the long bond, forgettaboutit; it was absolutely pummelled today now having dropped over 3 1/2 points the last two days.
What has happened is very simple - the happy talk about the US economy coming out of the FOMC minutes has traders jettisoning safe haven trades and even short term Treasuries in favor of the bull train leaving the station in the US equity markets. The problem? The last thing that the Fed and the US government needs or wants is a rising interest rate environment.
Oh sure, they can stand a bit of a move higher, but if any of this begins filtering into the mortgage market and the cost of home mortgages, autos, etc. begins moving higher, it will nip whatever nascent recovery there might be in the bud. And don't forget - there is that pesky "LITTLE" issue of the US national debt which will cost more federal tax revenue to service in a rising interest rate environment. Remember, even with its more upbeat assessment of the US economy yesterday, the FOMC certainly did not suggest that the recovery was robust or was it healthy. What they basically said, if I might paraphrase, was that it was showing modest improvement but was not out of the woods.
Doesn't matter - the bond market is focused on the "modest improvement" part and is interpreting that, either rightly or wrongly, that the Fed is not going to be doing any QE in the immediate future. After all, if things are supposedly so firmly on the right track, why the heck does anyone want to be in a "SAFE HAVEN" Treasury when everything is peachy keen, particularly if those paper IOU's are paying out squat.
The Fed has basically undercut it own low interest rate policy by giving investors the greenlight to sell bonds in order to deploy those funds into the equity markets. See what happens when you engineer a stock market rally?
I suspect that the Fed is going to be getting increasingly nervous if this sell off in the bonds, particularly the long end, continues unabated. Let's see how far the bond bears will push them.
By the way, I am not posting any gold or silver charts today as Eric King over at King World News, was gracious enough to interview me on both markets today asking about the technicals on the metals. You can find charts there with my usual annotations where support and resistance can be located. Here is the link to that particular interview:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/14_Norcini_-_Rough_Day_for_Gold_%26_Silver,_But_Heres_Good_News.html
Tuesday, March 13, 2012
Platinum regains its premium to Gold
For the last six months or so, platinum has been trading at a discount to gold. This is a rare occurrence as one can see from a glance at the monthly chart going back to 1990. Only in 1991 did platinum trade at a discount to the price of gold. Late last year and early into this year, an ounce of the white metal was over $200 cheaper than an ounce of gold!
This came about due to fears that the global economy would slow down as European sovereign debt woes sent out a type of contagion rippling across the planet. Auto sales especially would be hit and since platinum is heavily used in catalytic converters, ideas spread that demand for the metal would falter.
If you notice however, platinum has been steadily gaining ground against gold as investors began anticipating Central Bank liquidity injections to deal with the pesky debt issues plaguing Europe, not to mention an ultra low interest rate environment which was intended to spur both borrowing and lending and by consequence, growth.
It also did not hurt that a major strike in an important platinum mine popped up cutting off supply from the world market.
This is another one of those combination indicators that can be used to gauge investor sentiment towards the global economy in general. As long as traders feel that there is little to fear as impediements to growth, they will bid this spread higher in favor of platinum.
This came about due to fears that the global economy would slow down as European sovereign debt woes sent out a type of contagion rippling across the planet. Auto sales especially would be hit and since platinum is heavily used in catalytic converters, ideas spread that demand for the metal would falter.
If you notice however, platinum has been steadily gaining ground against gold as investors began anticipating Central Bank liquidity injections to deal with the pesky debt issues plaguing Europe, not to mention an ultra low interest rate environment which was intended to spur both borrowing and lending and by consequence, growth.
It also did not hurt that a major strike in an important platinum mine popped up cutting off supply from the world market.
This is another one of those combination indicators that can be used to gauge investor sentiment towards the global economy in general. As long as traders feel that there is little to fear as impediements to growth, they will bid this spread higher in favor of platinum.
Complacency Index hits 45 month low in today's trade
I like to term the VIX or the CBOE Volatility Index, the Complacency Index, because it is an excellent gauge of whether or not traders are complacent or fearful. The higher the reading, the more fearful or worried they have become. The lower this index reads, the more complacent or careless they generally are.
One has to go back a period of 45 MONTHS (June 2007) to find investor psychology at these levels of complacency in regards to the broad stock market as indicated by the S&P 500. I should point out that this was one year prior to the credit meltdown of the summer of 2008. It would currently seem that hardly anyone on the planet is the least bit concerned about the level of the US equity markets due to the enormous amounts of Central Bank supplied liquidity.
I intend to keep posting this index at regular periods to keep an eye on this as I believe investors are growing very careless in regards to the potential for an apple cart upsetting event.
Something about this just does not "feel" right to me. While one cannot argue with the tape, or in this case, the charts, the fact that all of the woes tied to the enormous amounts of indebtedness in the West have essentially been papered over, is extremely disconcerting.
One has to go back a period of 45 MONTHS (June 2007) to find investor psychology at these levels of complacency in regards to the broad stock market as indicated by the S&P 500. I should point out that this was one year prior to the credit meltdown of the summer of 2008. It would currently seem that hardly anyone on the planet is the least bit concerned about the level of the US equity markets due to the enormous amounts of Central Bank supplied liquidity.
I intend to keep posting this index at regular periods to keep an eye on this as I believe investors are growing very careless in regards to the potential for an apple cart upsetting event.
Something about this just does not "feel" right to me. While one cannot argue with the tape, or in this case, the charts, the fact that all of the woes tied to the enormous amounts of indebtedness in the West have essentially been papered over, is extremely disconcerting.
Gold crashes through support at $1680
With the mass exodus out of safe haven trades today and into stocks, gold is being sold off with the idea of taking those funds and plowing them into the equity markets to catch the rising tide.
The result of this long liquidation has been a breach of a very important downside support level near $1680 on the charts. The market is holding within the support zone noted that extends down past this level but it will be critical to the metal to hold today's low and last week's low if it is to prevent a further bout of long liquidation that could very quickly take it down to $1620 or even lower.
Keep in mind that the short term oriented traders are now looking at getting long the broader equity markets, particularly tech, and are thus reducing exposure to gold. It is going to be a challenge for the metal to maintain its footing as long as the "GET LONG EQUITIES" mentality is in vogue.
The Dollar is a bit higher today but that is not the main driver for gold in this session; rather it is the theme of getting long equities that is dominating. The Fed has been successful, FINALLY, in herding the hedge funds and other large institutions into equities and they are going to ride this bull as long as they possibly can. Those fearing contagion effects from European Sovereign Debt woes have been overrun by the sheer amounts of liquidity being provided.
As it stands now, even the massive build in overall US indebtedness is no where remotely near the forefront of traders' minds.
The result of this long liquidation has been a breach of a very important downside support level near $1680 on the charts. The market is holding within the support zone noted that extends down past this level but it will be critical to the metal to hold today's low and last week's low if it is to prevent a further bout of long liquidation that could very quickly take it down to $1620 or even lower.
Keep in mind that the short term oriented traders are now looking at getting long the broader equity markets, particularly tech, and are thus reducing exposure to gold. It is going to be a challenge for the metal to maintain its footing as long as the "GET LONG EQUITIES" mentality is in vogue.
The Dollar is a bit higher today but that is not the main driver for gold in this session; rather it is the theme of getting long equities that is dominating. The Fed has been successful, FINALLY, in herding the hedge funds and other large institutions into equities and they are going to ride this bull as long as they possibly can. Those fearing contagion effects from European Sovereign Debt woes have been overrun by the sheer amounts of liquidity being provided.
As it stands now, even the massive build in overall US indebtedness is no where remotely near the forefront of traders' minds.
S&P breaks out to new 52 week high while Bonds plummet
Last week I posted a chart of the S&P 500 wondering if a top was in this market. Apparently not, said the bulls, who have proceeded to take this market higher for the last 5 days in a row. Today they took the price to a new 52 week high. Isn't it amazing what a "bit" of Central Bank supplied liquidity can get ya?
Unfortunately for the Fed, bond traders are not being particularly cooperative today as they are slamming the long bond lower, particularly as they digest the day's FOMC statement which repeated, once again, the committee's intent on keeping short term rates extremely low until late in 2014!
Money is thus fleeing out of the longer term Treasury market and plowing into stocks as investors are all gleefully leaping onto the equity bull train before it leaves the station without them. With extremely low yields as far as the eye can see and the Central Banks papering over all that ails the global economy, traders are being herded into stocks, which is exactly where the monetary authorities want them to be!
Money has also been flowing out of the gold market today as safe haven trades involving gold are being taken off as well. Apparently the theme today is "GO FOR THE GROWTH". Copper is certainly acting as if traders are convinced the global economy is back on its feet and blue skies lie ahead.
I should note that the Dollar is moving higher today not based on the risk aversion trades (the Japanese Yen is getting blasted lower which would not be the case if the risk aversion trades were back on) but rather on the idea that the US economy is going to be stronger than Euroland or Japan.
The bond breakdown is extremely significant in my opinion. A while ago I posted a MONTHLY CHART of the LONG BOND detailing some technical action. I am reposting that same chart with the current action now charted. Whether the monetary authorities like it or not, long term interest rates have begun rising. If they close the week out below the technical support levels noted, momentum players will begin taking on short positions in an attempt to drive the bonds even lower. There are an awful lot of players on the LONG SIDE of the bond market who have been counting on the Fed to put a floor in this market. It is going to be one nifty trick for the monetary masters to keep the equities soaring higher and preventing the bonds from falling apart.
Unfortunately for the Fed, bond traders are not being particularly cooperative today as they are slamming the long bond lower, particularly as they digest the day's FOMC statement which repeated, once again, the committee's intent on keeping short term rates extremely low until late in 2014!
Money is thus fleeing out of the longer term Treasury market and plowing into stocks as investors are all gleefully leaping onto the equity bull train before it leaves the station without them. With extremely low yields as far as the eye can see and the Central Banks papering over all that ails the global economy, traders are being herded into stocks, which is exactly where the monetary authorities want them to be!
Money has also been flowing out of the gold market today as safe haven trades involving gold are being taken off as well. Apparently the theme today is "GO FOR THE GROWTH". Copper is certainly acting as if traders are convinced the global economy is back on its feet and blue skies lie ahead.
I should note that the Dollar is moving higher today not based on the risk aversion trades (the Japanese Yen is getting blasted lower which would not be the case if the risk aversion trades were back on) but rather on the idea that the US economy is going to be stronger than Euroland or Japan.
The bond breakdown is extremely significant in my opinion. A while ago I posted a MONTHLY CHART of the LONG BOND detailing some technical action. I am reposting that same chart with the current action now charted. Whether the monetary authorities like it or not, long term interest rates have begun rising. If they close the week out below the technical support levels noted, momentum players will begin taking on short positions in an attempt to drive the bonds even lower. There are an awful lot of players on the LONG SIDE of the bond market who have been counting on the Fed to put a floor in this market. It is going to be one nifty trick for the monetary masters to keep the equities soaring higher and preventing the bonds from falling apart.
One last chart - yes, you did just dream that the US underwent a credit crisis - relax - everything that led to that has been fixed!
Monday, March 12, 2012
Market Complacency is on the Rise
The following chart is of the CBOE's Volatility Index, or the VIX as it is generally referred to by traders and investors. It is used to gauge investor sentiment in general. Sharp spikes are evidence of RISING FEAR associated with global or domestic economic concerns while low readings indicate a relative state of complacency among investors. In the past these spikes higher have proved to have been good buying opportunities since they have heralded the onset of Central Bank LIQUIDITY MEASURES to combat deflationary headwinds.
While this indicator is generally not very good for picking tops (notice how long it remained mired below 15 during 2005 - 2007) it does serve to show how quickly Central Bank actions have eased investor worries. Notice the periods during which QEI and then QEII were underway and how that monetary easing sent the index lower. Investors were willing to ignore all the deep-seated structural issues ailing the Western economies (DEBT, DEBT and MORE DEBT, low employment, falling real estate prices, rising costs, etc.) as long as the Fed was keeping the money spigots open. NO WORRIES MATE - the FED HAS OUR BACK was the motto.
It will be interesting to see how this index responds as we move further into the year and as events unfold. It is generally true that there is a lull before the storm - we'll see.
A Ho-Hum Day
The gold market seems relatively quiet in comparison to some of what we have been treated to over the last couple of weeks. Some traders are probably welcoming the break to see if they locate their stomachs after last week's wild ride.
Sellers surfaced near the $1720 resistance level noted on the chart preventing gold from continuing to build on last Friday's rebound off the $1680 level. It fell below psychological support at $1700 but has moved back above that level here later in the session, although not by a lot.
The reaction to the late Friday ISDA news has been somewhat muted with some risk aversion trades being seen in today's session. I am noticing however that many of the commodity markets seem to be managing some late session bounces. It seems that at least for today, shorts appear unwilling to try pressing many of them any lower.
The same thing is being seen in the S&P 500 pit with early session weakness giving way to some short covering and light buying although the market still remains lower on the session.
Bonds were up nearly one full point but have given up the brunt of their gains, remaining slightly higher as we head into the after hours.
One gets the impression from the price action across a larger number of markets that neither the bull nor the bear camp is willing to push their case too hard today.
Sellers surfaced near the $1720 resistance level noted on the chart preventing gold from continuing to build on last Friday's rebound off the $1680 level. It fell below psychological support at $1700 but has moved back above that level here later in the session, although not by a lot.
The reaction to the late Friday ISDA news has been somewhat muted with some risk aversion trades being seen in today's session. I am noticing however that many of the commodity markets seem to be managing some late session bounces. It seems that at least for today, shorts appear unwilling to try pressing many of them any lower.
The same thing is being seen in the S&P 500 pit with early session weakness giving way to some short covering and light buying although the market still remains lower on the session.
Bonds were up nearly one full point but have given up the brunt of their gains, remaining slightly higher as we head into the after hours.
One gets the impression from the price action across a larger number of markets that neither the bull nor the bear camp is willing to push their case too hard today.
Saturday, March 10, 2012
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.
http://tinyurl.com/84fdpwh
http://tinyurl.com/84fdpwh
Friday, March 9, 2012
Gold Charts and some comments
Extreme volatility was the name of the game (ONCE AGAIN) in the gold market in today's session as it was reacting to all manner of crosscurrents.
First there was the payrolls or "jobs" report which took the market lower only to be met with news of the rating agency Fitch's downgrade of Greece to "restricted default" which seem to send the shorts into quite a frenzy in their efforts to cover and get out. Their buying took the market up off the lows bringing it back to unchanged on the session at which point fresh money came into the market keeping the price in the plus column for the remainder of trading. The result was that gold ended the day higher by nearly $13.
What is more significant is that the bulls were able to close out the week on a positive note after what amounted to a horrendous start to the week. Not only that, but price managed to recapture the psychologically significant "17" handle once again. All in all, a very good performance for the metal.
Take a look at the following chart and you can see that gold bounced precisely from the level it needed to on the technical chart, namely the $1680 level. Price spiked down through this level earlier in the week but the selling seemed to dry up, or at the very least was met with strong buying which appears to have been more of the case.
I would not be the least bit suprised to learn in next week's Commitment of Traders report that a rather sizeable block of bullion bank short positions were lifted this week. Now those traders will no doubt be selling back into this latest rally once again so we will need to see what we get early next week in Monday and Tuesday's price action to surmise the extent of their activity in the gold market Wednesday through Friday of this week.
The level near $1720 is the next resistance region on the chart. That is what stands between gold and another test of $1740. The latter zone is what held the price in check on the way higher earlier this month so before this market can hope to get another shot at $1750 or higher, the bulls will have to dispatch with that.
So far the downside support in gold seems to be very solid. Very active buying was seen at this week's lows. Should gold return to near this region next week for any reason, we will have to watch to see whether the same buyers become active once again. As long as they do, the market will hold. The longer it does so, the more the odds favor another period of sideways trade rather than any steeper selloffs or a more extended period of price weakness.
I should point out here the massive rally in the Dollar that took place today sent it on a close through the 80 level basis the USDX. It is pretty difficult to argue with the price chart which looks very strong right now. If the Dollar can continue to push through the resistance level shown, it stands a very good chance of making another run back towards 82 where it should encounter a decent test of its strength. A push past 82 that can be sustained for more than one session, will be very noteworthy.
Technicians will note that it managed to stay above the 50 day moving average; a bullish sign.
By the way, something that should not go unnoticed in today's session is the fact that with the Dollar up over 1%, gold was higher. What that means is that it moved higher in terms of the most if not all of the major world currencies. Euro gold pushed back above the 1300 level notching solid gains on the day as did Yen gold as well. This kind of strength in the gold market is indicative of a lack of confidence in paper currencies nearly worldwide. And why shouldn't there be any confidence when Central Bankers are all beating each other to death in terms of seeing who can keep interest rates lower than the next guy.
Even Brazil has had to join in this "debauch thy currency" movement with many of the opinion that the Chinese are preparing for the same with theirs.
The HUI managed to once again close out the week ABOVE the 500 level after trading down below it earlier in the week. Apparently the same buyers in the gold shares who have been doing so for the last year and a half, are still accumulating various gold shares on these bouts of weakness. The gold shares, while attracting good buying down here, have not been able however to extend their recent rallies. They are acting as if they are still looking for a catalyst but one thing is becoming more clear - those who are buying them are very strong hands.
It would take a weekly close below that support line shown to indicate that this band of powerful buyers has had a change of sentiment.
First there was the payrolls or "jobs" report which took the market lower only to be met with news of the rating agency Fitch's downgrade of Greece to "restricted default" which seem to send the shorts into quite a frenzy in their efforts to cover and get out. Their buying took the market up off the lows bringing it back to unchanged on the session at which point fresh money came into the market keeping the price in the plus column for the remainder of trading. The result was that gold ended the day higher by nearly $13.
What is more significant is that the bulls were able to close out the week on a positive note after what amounted to a horrendous start to the week. Not only that, but price managed to recapture the psychologically significant "17" handle once again. All in all, a very good performance for the metal.
Take a look at the following chart and you can see that gold bounced precisely from the level it needed to on the technical chart, namely the $1680 level. Price spiked down through this level earlier in the week but the selling seemed to dry up, or at the very least was met with strong buying which appears to have been more of the case.
I would not be the least bit suprised to learn in next week's Commitment of Traders report that a rather sizeable block of bullion bank short positions were lifted this week. Now those traders will no doubt be selling back into this latest rally once again so we will need to see what we get early next week in Monday and Tuesday's price action to surmise the extent of their activity in the gold market Wednesday through Friday of this week.
The level near $1720 is the next resistance region on the chart. That is what stands between gold and another test of $1740. The latter zone is what held the price in check on the way higher earlier this month so before this market can hope to get another shot at $1750 or higher, the bulls will have to dispatch with that.
So far the downside support in gold seems to be very solid. Very active buying was seen at this week's lows. Should gold return to near this region next week for any reason, we will have to watch to see whether the same buyers become active once again. As long as they do, the market will hold. The longer it does so, the more the odds favor another period of sideways trade rather than any steeper selloffs or a more extended period of price weakness.
I should point out here the massive rally in the Dollar that took place today sent it on a close through the 80 level basis the USDX. It is pretty difficult to argue with the price chart which looks very strong right now. If the Dollar can continue to push through the resistance level shown, it stands a very good chance of making another run back towards 82 where it should encounter a decent test of its strength. A push past 82 that can be sustained for more than one session, will be very noteworthy.
Technicians will note that it managed to stay above the 50 day moving average; a bullish sign.
By the way, something that should not go unnoticed in today's session is the fact that with the Dollar up over 1%, gold was higher. What that means is that it moved higher in terms of the most if not all of the major world currencies. Euro gold pushed back above the 1300 level notching solid gains on the day as did Yen gold as well. This kind of strength in the gold market is indicative of a lack of confidence in paper currencies nearly worldwide. And why shouldn't there be any confidence when Central Bankers are all beating each other to death in terms of seeing who can keep interest rates lower than the next guy.
Even Brazil has had to join in this "debauch thy currency" movement with many of the opinion that the Chinese are preparing for the same with theirs.
The HUI managed to once again close out the week ABOVE the 500 level after trading down below it earlier in the week. Apparently the same buyers in the gold shares who have been doing so for the last year and a half, are still accumulating various gold shares on these bouts of weakness. The gold shares, while attracting good buying down here, have not been able however to extend their recent rallies. They are acting as if they are still looking for a catalyst but one thing is becoming more clear - those who are buying them are very strong hands.
It would take a weekly close below that support line shown to indicate that this band of powerful buyers has had a change of sentiment.
Tuesday, March 6, 2012
Trader Dan on King World News
This afternoon, Eric King of King World News interviewed me to get my thoughts on the day's market action. You can read that interview in its entirety by clicking on the link below.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/6_Norcini_-_Gold_%26_Silver_Smashed_as_Bullion_Banks_Cover_Shorts.html
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/6_Norcini_-_Gold_%26_Silver_Smashed_as_Bullion_Banks_Cover_Shorts.html
HUI down but bounces from support
Once again the HUI has managed to attract significant buying down at the lows signifying that the same buyers who have been busy accumulating gold shares for the better part of the last year are still apparently willing to add to their holdings on these dips lower in price. As long as this index closes the week ABOVE that lower red line, we remain within a range trade.
Has the S&P 500 topped out for now?
The S&P 500 wiped out three week' worth of gains in today's session plunging through several support levels on the price chart. On the way higher, the level near 1350 had been serving as selling resistance and held the rally in check until it finally managed to break through that level three weeks ago. Today, the former resistance level, now turned support, failed to hold the decline in check.
I have set the chart in a KAGI Format as it is a better style in which to locate various chart resistance and support levels in my opinion. You can see the significance of 1350 rather easily as well as 1362 - 1365.
When using this chart format to analyze a market in an uptrend, the RED LINES, which indicate sellers are dominating, should hold WITHIN THE LENGTH OF THE BLACK LINES. The latter refer to periods when the bulls are in command. Notice since December of last year, this has been the case. One can clearly see the impact that EXPECTED LIQUIDITY supplies from the Central Banks has had on this market since that time period.
This looks like the first REAL CHINK in the armor of the bulls in some time. If they are able to immediatey halt the decline and take price back through 1350, they will have dodged a bullet and will be able to talk up today's selloff as just another reaction in an ongoing bullish trend. If not, the odds will favor a deeper decline with a drop down towards the 50 day moving average near 1320 should the next layer of support near 1342 - 1340 fail to stop the bleeding. Were this last level to give way on a closing basis, the red line would drop below the last BLACK LINE and signal additional selling should be expected.
Let's see whether or not the market has factored in a worse case scenario regarding Greece and a China slowdown or whether there is yet another shoe to drop. The verdict is therefore still out but one thing is certain - the onus is on the bulls to perform right away.
I have set the chart in a KAGI Format as it is a better style in which to locate various chart resistance and support levels in my opinion. You can see the significance of 1350 rather easily as well as 1362 - 1365.
When using this chart format to analyze a market in an uptrend, the RED LINES, which indicate sellers are dominating, should hold WITHIN THE LENGTH OF THE BLACK LINES. The latter refer to periods when the bulls are in command. Notice since December of last year, this has been the case. One can clearly see the impact that EXPECTED LIQUIDITY supplies from the Central Banks has had on this market since that time period.
This looks like the first REAL CHINK in the armor of the bulls in some time. If they are able to immediatey halt the decline and take price back through 1350, they will have dodged a bullet and will be able to talk up today's selloff as just another reaction in an ongoing bullish trend. If not, the odds will favor a deeper decline with a drop down towards the 50 day moving average near 1320 should the next layer of support near 1342 - 1340 fail to stop the bleeding. Were this last level to give way on a closing basis, the red line would drop below the last BLACK LINE and signal additional selling should be expected.
Let's see whether or not the market has factored in a worse case scenario regarding Greece and a China slowdown or whether there is yet another shoe to drop. The verdict is therefore still out but one thing is certain - the onus is on the bulls to perform right away.
Huge Exodus out of RISK TRADES in Today's session
Hedge funds algorithm's are going beserk on the sell side today with the result that most of the commodity futures markets are getting slammed lower. There are very few exceptions to the selling with Soybeans, Cocoa and Natural Gas are the few commodities holding up.
The metals are getting hit particularly hard with both silver and gold violating downside support levels on the charts. As can be expected, gold is holding much better than silver in a risk aversion environment.
Once again the catalyst for all of this is the situation involving the Greek debt bailout plan. Markets are worried that things are not going as the central planners were hoping.
The metals are getting hit particularly hard with both silver and gold violating downside support levels on the charts. As can be expected, gold is holding much better than silver in a risk aversion environment.
Once again the catalyst for all of this is the situation involving the Greek debt bailout plan. Markets are worried that things are not going as the central planners were hoping.
Monday, March 5, 2012
Silver clinging to Support at $34
Risk off trades were in vogue today after news came out that China reported that expected growth in their economy would be slowing a bit. That was all that was needed to bring out the sellers in both the equity and commodity markets.
Silver fell below pyschological round number support at $34 but then recovered, only barely, by the end of the trading day. It is clinging to support above this level as I write this.
There is a band of stronger support as one drops down towards $33 which will be tested unless the market can keep its footing above $34.
It is still trying to repair the technical damage inflicted from last Wednesday's bear raid which forced an outside reversal pattern on the daily chart. Thus far this selling that we are seeing seems to be drying up as it does move below $34 but any further negative global economic news will see that selling reappear once again.
Gold dropped below $1700 at one point but value buying took it back above this level. Just as with silver, it is going to have some work to do in order to repair the technical damage it suffered last Wednesday. Chart painting is more effective in these modern markets because very few fundamentally based traders are still around anymore. Alan Jackson had a terrific hit song entitled, "GONE COUNTRY" which contains a line that says: " the whole world's gone country". Well, the whole world has gone technical analysis when it comes to trading. Therefore chart painting has to be respected for the technical signals its gives off. Value based traders can still take advantage of this but they need to be careful.
There seems to be a bit of a tug of war between those who are reading the recent US ECONOMIC DATA as encouraging and those who are looking at a recession in the Euro Zone coupled with slowing Chinese growth prospects eventually spilling over into the US. We will see which side wins out in this battle - the bonds were even conflicted today - first rising on the slowing growth news and then sinking lower to close the day as the equity market recovered from its worst levels of the session.
Not too much definitive to say therefore until we get a clearer picture.
Silver fell below pyschological round number support at $34 but then recovered, only barely, by the end of the trading day. It is clinging to support above this level as I write this.
There is a band of stronger support as one drops down towards $33 which will be tested unless the market can keep its footing above $34.
It is still trying to repair the technical damage inflicted from last Wednesday's bear raid which forced an outside reversal pattern on the daily chart. Thus far this selling that we are seeing seems to be drying up as it does move below $34 but any further negative global economic news will see that selling reappear once again.
Gold dropped below $1700 at one point but value buying took it back above this level. Just as with silver, it is going to have some work to do in order to repair the technical damage it suffered last Wednesday. Chart painting is more effective in these modern markets because very few fundamentally based traders are still around anymore. Alan Jackson had a terrific hit song entitled, "GONE COUNTRY" which contains a line that says: " the whole world's gone country". Well, the whole world has gone technical analysis when it comes to trading. Therefore chart painting has to be respected for the technical signals its gives off. Value based traders can still take advantage of this but they need to be careful.
There seems to be a bit of a tug of war between those who are reading the recent US ECONOMIC DATA as encouraging and those who are looking at a recession in the Euro Zone coupled with slowing Chinese growth prospects eventually spilling over into the US. We will see which side wins out in this battle - the bonds were even conflicted today - first rising on the slowing growth news and then sinking lower to close the day as the equity market recovered from its worst levels of the session.
Not too much definitive to say therefore until we get a clearer picture.
Sunday, March 4, 2012
US Dollar compared to Comex Gold Chart
The chart I am presenting is due to a special request from a reader that I put one together. It is an interesting method of seeing in visual form the steady decline in the value of the US Dollar against Gold.
A careful inspection of the chart will reveal that there are certain periods during which the price of gold has moved higher while at the same time the US Dollar index was moving higher. It is during those intervals when the gold price has risen strongly when priced in terms of the various major world currencies that comprise the USDX.
The following chart is a picture of America's decline. As much as it deeply saddens me to say it, the US Dollar chart looks absymal.
A careful inspection of the chart will reveal that there are certain periods during which the price of gold has moved higher while at the same time the US Dollar index was moving higher. It is during those intervals when the gold price has risen strongly when priced in terms of the various major world currencies that comprise the USDX.
The following chart is a picture of America's decline. As much as it deeply saddens me to say it, the US Dollar chart looks absymal.
Saturday, March 3, 2012
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.
http://tinyurl.com/7u3mq82
http://tinyurl.com/7u3mq82
Friday, March 2, 2012
Bonds and other assorted topics
Please see the following charts for some comments on the US long bond market - in my opinion this is the SINGLE MOST IMPORTANT MARKET ON THE PLANET.
The weekly chart is very interesting as it shows a market that has the POTENTIAL (not there yet) to be developing a ROUNDED TOP FORMATION. That pattern is an especially reliable one because it indicates a SLOW but STEADY SHIFTING OF SENTIMENT occurring over a generally longer period of time as the realization slowly dawns on traders that the fundamentals are shifting in the other direction. This formation will not be validated unless we get a strong breach of downside support.
I have noted two of the nearest Fibonacci Retracement Levels where support for the bonds might arise. These areas will bear watching if for some reason the Federal Reserve cannot sustain its "PROP UP THE BONDS" operation.
DO NOT FORGET - the one thing most dreaded by the Fed in addition to the US Treasury Department is rising long term interest rates because of the mathematics involved in servicing the gargantuan and disgustingly pathetic level of US debt. Interest payments on the US debt are going to be consuming a larger and larger share of future government revenues in the months and years ahead. At some point, it will break the back of our nation. Thus the necessity of the Fed playing around in that market artificially suppressing the rate of interest at the long end of the curve.
I am strongly of the opinion that this reason was the SINGLE LARGEST DETERMING FACTOR behind Wednesday's orchestrated hit of the commodity sector and particularly the precious metals. Bernanke and company have categorically and continually dismissed all critics of their near-zero interest rate policy as engendering inflation by dismissing those concerns with statements to the effect that inflation is "modest, contained, temporary, etc."
They must continue this charade if they are to keep the bond market from collapsing to the downside with the subsequent onset of a rising interest rate environment. Bond traders have thus far been prevented from aggressively pushing on the short side of this market due to direct Federal Reserve involvement in that market. Should there be any shift towards an inflation bias that takes hold among those who trade or hedge in this market, those forces would overwhelm Fed efforts to artificially push it higher (yields lower).
A rising gold price strikes at the very heart of their supposition that inflation is subdued and there are little if any consequences arising from a policy that by its very nature is one which debases a currency. That is why this messenger (gold) must be discredited if the FED itself is to RETAIN ANY CREDIBILITY.
To witness a $100 drop in the price of gold within a few hours time and to have it explained by analysts who should know enough about market action to explain it as "disappointment in the lack of an imminent QE3" is laughable were it not so utterly wrongheaded. As stated in Wednesday's column, the Fed must not have commodity prices surging higher while they pursue a policy that has never failed to weaken or undercut the "value" of any currency whenever or wherever it has been plied.
When the Fed gives the hedge funds the green light to shove Equity prices higher after promising no hikes in interest rates until the latter half of the year 2014, they "expect" the hedge funds to be "well behaved" and not to jam a goodly portion of that hot money as well into commodities but rather direct their fire power into the equity world at which point the politicians and monetary authorities can bask in the accolades of the vast majority of what has become a dumbed-down citizenry who think that a rising stock market signifies a healthy economy.
Most distressingly to the Fed, the hedgies are not being compliant servants but had the audacity to chase the commodity complex higher and begin pushing not only energy but food prices higher once again, not to mention the bellwether metals complex. Were that to continue unabated, the bond market, which was crushed on that Wednesday and then on Thursday, would see buying support beneath it evaporate. Hence a pause or a time out was necessitated in the commodity complex rise which the Fed managed to secure by week's end based on the CCI.
Stay tuned as we are witnessing what I am coming ever more strongly to believe is the end game for this horrible experiment gone awry.
The weekly chart is very interesting as it shows a market that has the POTENTIAL (not there yet) to be developing a ROUNDED TOP FORMATION. That pattern is an especially reliable one because it indicates a SLOW but STEADY SHIFTING OF SENTIMENT occurring over a generally longer period of time as the realization slowly dawns on traders that the fundamentals are shifting in the other direction. This formation will not be validated unless we get a strong breach of downside support.
I have noted two of the nearest Fibonacci Retracement Levels where support for the bonds might arise. These areas will bear watching if for some reason the Federal Reserve cannot sustain its "PROP UP THE BONDS" operation.
DO NOT FORGET - the one thing most dreaded by the Fed in addition to the US Treasury Department is rising long term interest rates because of the mathematics involved in servicing the gargantuan and disgustingly pathetic level of US debt. Interest payments on the US debt are going to be consuming a larger and larger share of future government revenues in the months and years ahead. At some point, it will break the back of our nation. Thus the necessity of the Fed playing around in that market artificially suppressing the rate of interest at the long end of the curve.
I am strongly of the opinion that this reason was the SINGLE LARGEST DETERMING FACTOR behind Wednesday's orchestrated hit of the commodity sector and particularly the precious metals. Bernanke and company have categorically and continually dismissed all critics of their near-zero interest rate policy as engendering inflation by dismissing those concerns with statements to the effect that inflation is "modest, contained, temporary, etc."
They must continue this charade if they are to keep the bond market from collapsing to the downside with the subsequent onset of a rising interest rate environment. Bond traders have thus far been prevented from aggressively pushing on the short side of this market due to direct Federal Reserve involvement in that market. Should there be any shift towards an inflation bias that takes hold among those who trade or hedge in this market, those forces would overwhelm Fed efforts to artificially push it higher (yields lower).
A rising gold price strikes at the very heart of their supposition that inflation is subdued and there are little if any consequences arising from a policy that by its very nature is one which debases a currency. That is why this messenger (gold) must be discredited if the FED itself is to RETAIN ANY CREDIBILITY.
To witness a $100 drop in the price of gold within a few hours time and to have it explained by analysts who should know enough about market action to explain it as "disappointment in the lack of an imminent QE3" is laughable were it not so utterly wrongheaded. As stated in Wednesday's column, the Fed must not have commodity prices surging higher while they pursue a policy that has never failed to weaken or undercut the "value" of any currency whenever or wherever it has been plied.
When the Fed gives the hedge funds the green light to shove Equity prices higher after promising no hikes in interest rates until the latter half of the year 2014, they "expect" the hedge funds to be "well behaved" and not to jam a goodly portion of that hot money as well into commodities but rather direct their fire power into the equity world at which point the politicians and monetary authorities can bask in the accolades of the vast majority of what has become a dumbed-down citizenry who think that a rising stock market signifies a healthy economy.
Most distressingly to the Fed, the hedgies are not being compliant servants but had the audacity to chase the commodity complex higher and begin pushing not only energy but food prices higher once again, not to mention the bellwether metals complex. Were that to continue unabated, the bond market, which was crushed on that Wednesday and then on Thursday, would see buying support beneath it evaporate. Hence a pause or a time out was necessitated in the commodity complex rise which the Fed managed to secure by week's end based on the CCI.
Stay tuned as we are witnessing what I am coming ever more strongly to believe is the end game for this horrible experiment gone awry.
Gold Chart comments
The Daily Chart is pretty clear as to the larger resistance and support levels. Those remain the same as they had been previous to the strong upside moves on Monday and Tuesday of this week. The sell off was contained on the downside by the same level support that has held for over a month now. Value buyers continue to surface near and just below the $1700 level. Reports of very strong increases in physical offtake are surfacing out of Asia on such dips in price.
This buying is not of the nature that it chases prices higher; that requires the momentum crowd (hedge funds in particular) many of which were run out of their long positions on Wednesday's rout. For that crowd to come back in, gold will need a return TO AND THROUGH the $1750 level.
Last week I posted a weekly chart detailing the BULLISH FLAG OR PENNANT FORMATION which had developed. I also gave a price projection based on that pattern noting that this pennant would remain in force unless we got a move in the price that TOOK US BELOW THE BOTTOM OF THE FLAG. That did occur with this week's outside reversal pattern so the price projection from that flag is no longer immediately in effect.
What we have now on the weekly chart is a powerful upside formation clashing with a powerful downside formation. The fact that gold did spike through the bottom of that flag only to recover above $1700 is encouraging. It looks to me like we have a setup that is more conducive to a consolidation type trade (sideways movement) rather than the setup for a sustained downdraft. The longer gold holds above $1680-$1690, the better the odds become of this becoming a new base from which the next leg higher will commence.
Note that the moving averages I like to use to get a sense of the prevailing trend (10, 20, 40 and 50 week) are all moving higher indicating that the weekly trend still remains up.
Price did come down and touch both the 10 week and the 20 week moving averages and bounced from there. The 50 week moving average has seen only one close below it in the time frame shown but immediately recovered the following week. The 40 week moving average (dotted line) has also served as a support level on several occasions. It was not reached in this week's sell off. The only reason I would become the least bit concerned about a longer correction being in store for gold were it to get TWO CONSECUTIVE WEEKLY CLOSES BELOW THE 50 WEEK MOVING AVERAGE.
In short, the longer term trend is up.
Silver retreats from Resistance but holding Support
Silver bulls could not take the metal through the resistance zone near $35.50 so the market has now retreated lower as longs take profits and some new shorts sell against that level. Support remains down near the $34 level and the spike low from Wednesday's wild takedown.
Thursday, March 1, 2012
S&P 500 keeps marching higher - shrugs off downside reversal
Yesterday the S&P 500 give a hint that it might be forming a sort of interim top as it shot to a brand new 52 week high only to move steadily lower throughout the rest of the session closing below the preivous day's low. That constitutes a downside reversal day on the price chart, normally a powerful bearish signal.
Once again, as has often been the case in this market, once the liquidity spigots are wide open, no downside followthrough was seen. Early in the overnight session there was some light selling but nothing heavy. Today, this market is once again working on testing yet another new 52 week high. The session is not over yet so we might still see some late selling efforts but no matter if that does show up, the perma bulls once again have prevailed in this one way market.
Note on the bond chart the market dropped to the bottom of the 4 month old trading range and is trying to bounce. My guess is that the crony pals of the Federal Reserve, the primary dealers, are buying furiously to try to prevent long term interest rates from getting away from their control.
Once again, as has often been the case in this market, once the liquidity spigots are wide open, no downside followthrough was seen. Early in the overnight session there was some light selling but nothing heavy. Today, this market is once again working on testing yet another new 52 week high. The session is not over yet so we might still see some late selling efforts but no matter if that does show up, the perma bulls once again have prevailed in this one way market.
(I wish to interject here that no matter how high the US stock market might run and how long the rally lasts - you will be fortunate if you ever hear the word, "OVERBOUGHT" pronounced by the talking heads, whom I might add are always SWIFT TO PRONOUNCE GOLD AND SILVER OVERBOUGHT. It seems that the stock market can never become overbought since that is equivalent to some sort of financial blasphemy). Nope, overbought is a one way term reserved for the gold and silver markets by these yahoos.
I am noting however that the bond market is showing some heavy selling pressure in today's session. Whether that too will last is anyone's guess, particularly with the Fed through its primary dealers fooling around in that market and working to artificially distort interest rates.
What the dishonest Fed is trying to do is convince the investment/trading community that the economy is in decent shape and is moving in the right direction ( here is their subliminal message - GO AND BUY STOCKS; GO AND BUY STOCKS; GO AND BUY STOCKS), so that they can get their rising stock market and pull up consumer confidence, but is not in good enough shape to have long term interest rates begin a steady climb. That would be a gigantic NO-NO. "OH, it is good but not that good". Subliminal message repeats - GO AND BUY STOCKS BUT DO NOT SHORT THOSE BONDS.
If this bond market breaks down, it would signify a change in psychology among the interest rate community and illustrate the need for a new subliminal message crew from the Federal Reserve.