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

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

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Thursday, November 8, 2012

Gold Chart and Comments

Gold continues to stage an impressive recovery off of the spike low which looks more and more like it was a bear trap. Trying to read these markets, both in front of and now coming off of a major election, has been difficult due to the severity of the price movements but it does appear that the buying down below $1700 was of sufficient size and scope that it has forced many a bearish trader to reconsider their bet. Reports continue to come in of strong physical market offtake which limits downside price action and results in enough valued-based buying to absorb speculative selling from either stale longs or fresh shorting.

The market has now pushed into a zone (near $1740) where it is garnering additional selling pressure. However, if the bulls can eat through those offers and push it out past $1750, they stand a very good and very real chance of taking it first to $1780 and then on to major overhead resistance at $1800 once again.

Tomorrow will be a big day as it is the end of a wild week of trading with several events now behind us. This has taken some of the uncertainty out of the market in the minds of some large traders and they are positioning themselves accordingly. A weekly close above $1750 will be very friendly to gold. As long as the market holds above $1700, the sharp spike lower will have proved to been that bear trap I mentioned.

Short term, the re-election of Obama guarantees more of the same monetary policy as there will now be no change at the helm of the Federal Reserve, with Ben Bernanke in position to continue his QE into the foreseeable future.

I should note here that for the second day in a row, even with the just mentioned backdrop, a backdrop which most equity traders dearly love, the US stock markets have not been able to cast off the pall which overhangs the market as a result of the election of perhaps, one of the most business-hostile administrations in modern history.

The S&P 500 has broken down technically having failed to hold important chart support between 1400-1390. It now looks as if it is going to test the 50% Fibonacci retracement level coming in near 1366-1367. A poor close to end the week tomorrow and the weekly chart will look rather ominous. The index will need to manage a close tomorrow back above 1400 to pull the bull's hides out of the fire.

When you throw on top of that, fresh fears about the financial health of some countries in the Euro Zone, it is easy to see why wild-eyed bullish enthusiasm, even with a guaranteed $40 billion a month of fresh funny money, is one the wane. Simply put, stock traders are very cautious as they look ahead to a fresh round of regulatory excess not to mention the fallout from rising tax rates, the institution of Obamacare and the looming fiscal cliff issue in the US.

that has led to a strong "safe haven" ( I cringe every time I write those words when it relates to US TReasury obligations ) into bonds dropping yields sharply lower over the last two days. Bond traders are under no illusions as to nature of any growth that is going to be occuring in the US economy for the foreseeable future. The economy will continue to limp along as it has done now for the last three years with only continued fresh injections of funny money propping up economic activity long enough to endure until the next dose is injected.

1 comment:

  1. The next impulse wave should be very large. While its hard to say when that will happen, the bias is clearly to the downside for stocks


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