"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

Trader Dan's free work will soon be available at www.traderdan.biz

Monday, March 25, 2013

Euro Loses 1.29 Support Level

It is my opinion that last week the European Central Bank was quite active in the Foreign exchange markets defending the Euro and preventing the breakdown below the 1.29 level. Watching the price action, and this is from the perspective of a long time trader, there was no fundamental reason I could see for the Euro to experience intraday rallies of the magnitude that it was seeing, based on the deteriorating conditions surrounding Cyprus. It was if some magic hand was pushing it back up and away from the 1.29 level on any approaches there with enough force to take it all the way through 1.30 and then some.

Today, based on the earlier comments of the Dutch Finance Minister, that support zone collapsed on very large volume. I have no doubt whatsoever that it was this event that set Mr. Dijsselboem scurrying back to the microphones to disavow what he so arrogantly announced previously during the trading session, to wit - that the arrangement made with Cyprus would henceforth serve as a "template" for dealing with problem banks in problem Eurozone nations.

While he may backtrack and attempt to spin those earlier comments, which were quite clear I might add, the damage has been done as the proverbial cat is now out of the bag. Regardless of the subterfuge and deceitful backpedaling, it is now abundantly clear that the monetary officials in the Eurozone regard taxpayer deposits as, in actuality, belonging to the state.

As usual, we are now witnessing the resort to the typical left leaning claptrap about "only the wealthy" being forced to contribute to the savings of the banks but that begs the question that any sane individual would be asking under such conditions, "Why the hell should I as a depositor be the least bit concerned about the safety of my life's savings in any bank?" After all, that defeats the entire reason for depositing money in a bank in the first place. If the banks cannot be trusted, and if the government officials are all to willing to raid, confiscate, steal, the money of the depositors in order to bail out the unholy nexus between the banks and the government, how in the world can that inspire the least bit of confidence in the banking sector anywhere in the Eurozone that similar issues exist?

What we are witnessing is the rotten stench of decaying balance sheets brought on by years and years of overspending. As long as there were enough banks willing to buy that government debt, the party and the recklessness could go on. However, Mr. Market has a way of eventually bringing reality home to even the most obtuse of individuals and that is precisely what has now happened.

Quite simply - who in their right mind would be willing to buy the bonds of these troubled nations? And more precisely, whither goest Cyprus at this point? It's economy is a wreck and in my view will continue to be so into the foreseeable future. It's economy was based primarily on banking and tourism. At this point, who would want to travel there other than those wanting a bird's eye view of the trainwreck and as for banking.... that goes without saying.

While gold is certainly being capped above the $1610 level, it is continuing to attract dip buyers on trips down towards support at $1585. It ran down there earlier today only to encounter sufficient buying to propel it back above the $1600 level. Clearly that in itself, while not an outright victory for the bulls, is a defeat for the bears who no doubt were shocked by the severity of the buying pressure that came into the market.

Bulls still need to clear $1620 to force some of these shorts out of the market. It might be tough to do that as long as the capping operation is ongoing but my guess is that it will take a tremendous amount of physical gold sales to continuing holding the price down.

As usual, the gold shares once again were of no help to the actual metal. I read a report today somewhere that stated if gold were to fall as low as $1,000, many of the entities involved in gold mining today would no longer be viable. The way some of these shares are acting, they already no longer look viable, truth be told.
It should be noted that the party in the global equity markets, brought on my near endless conjuring of "money" into existence by the Central Banks primarily of the West, has been handed a citation by the police and told to tone it down as the neighbors are complaining of the noise. Obviously this is a no-no to the best laid plans of mice and men, those being the monetary officials who I would lump under the category more of mice than men, since I consider them despicable Cretans and parasites. That means all the stops must be pulled out to keep Cyprus afloat and assuage any rising concerns among the investor class.
The entire thing boils down to keeping this ephemeral confidence from waning one iota. It is all about illusions, perceptions and subterfuge.


  1. What I love here is the terminology used. One word says it all : "template".
    We are all but numbers in an excell sheet for these bureaucrats.
    This is how they see the world, the people, the crisis : a huge excell sheet which they can erase and reconfigure at will.

  2. My observation over the years is that gold gets clobbered during any so called economic crisis. Gold has held up relatively strong compared to the past.

  3. Dan,
    At least their is some "hope" with the potential for a rebound in the Miners. Still a 5 day increase on the ^HUI. I cannot believe that their exists much more room in a short miners long gold trade left. For that matter what do you think of the long SPX short miners trade.
    Seems to me that both would be pushing their luck to get in big on that trade now. I am holding miners and am down a bit over 10% on my last entree smorgasborg and feeling fat as a pig.If Gold does get above 1620. I am holding out hope. Look at that, I can even have a "HOPE & CHANGE" MOTTO. CHANGE on the gold charts and hope the Miners finally follow.

  4. "Regardless of the subterfuge and deceitful backpedaling, it is now abundantly clear that the monetary officials in the Eurozone regard taxpayer deposits as, in actuality, belonging to the state."

    I can't believe for one minute that most states in Europe would seriously consider that a viable course of action. Cyprus, which is an extremely small nation which also serves as an offshore tax shelter, might be able to get away with it (and then, only on the very wealthy, such as Russian oligarchs). But if, say, the governments of Spain or Italy even merely said it was *an option,* the reaction would be so violent and severe, no government which merely suggested it would last long. And while leaders in Span and Italy can be stupid, they're not *that* stupid, especially after today's events. I can't really take that very seriously.

    1. This latest "deal" to bail out the Cypriot banking system was crafted such that it would not be "necessary" for the sovereign governing body of Cyprus to "approve" it. This is an important part of the "template" going forward in the Eurozone. Why should the governments of Spain and Italy be bothered to approve or even mention any new banking system rescue "deals" when they will be crafted and imposed by the same Eurocrats who just proposed to crush the sovereignty of Cyprus? Believe it or not, one of the primary purposes of the EU project is to destroy the sovereignty of its member nations. That's REALITY and if you don't have a lot of money in a Spanish or Italian bank you can dismiss it without any risk of personal financial consequence. However those with actual skin in the game may choose to give this reality a very serious consideration.

  5. Dan. Thanks for the steady dose of sanity.

    I read the WSJ article too... If gold went down to $1,000 a number of producers would go out of business. So about a 38% decline in the underlying commodity would make the producers unprofitable. That's like saying, "If WTI goes down to $57, a number of oil producers (Canada) would go out of business." One might add, for long?

  6. If Europeans with any amount in banks care about this, they will withdraw most of the funds and hold cash or trade into metal or another commodity. If that happens, bank's capital bases will shrink, forcing fractional reserve lending to unwind.

    While logically I think that should happen, I guess it won't happen. The majority of funds will stay in the banks.

  7. Hi Dan,

    Light at the end of the tunnel??

    "Insider buying of gold stocks surges to multi-year highs"

    Darcy Keith

    The Globe and Mail

    Published Monday, Mar. 25 2013, 5:39 PM EDT


  8. Hello Dan,
    The only story to follow from now on is a very simple one: What is going to be the reaction of the Cypriots... IF there is none -and it looks like this is what is going to happen because savers with less than €100K will keep their saving !!!- this will be a "fait accompli" and the "template" will be used again. However the next time it happens -Eurocrats stealing depositors money- they will take money from savers with less than €100K (let say above €50-75K) because it is going to happen in a bigger country like Spain or Italy... The wheels are spinning and the only action possible for the citizens is to go down to the streets, burn one or two buildings belonging to the banks AND the EU . This, I am sorry to say, is the only way to stop the madness. When this is done you will see what I said would happen in my blog. more than 2 years ago- POLITICIANS will fight for their survival and will crush the BANKERS in order to stay in power. We are now moving to the final chapter of the saga... the most dangerous one.

    By the way, I read some replies from readers saying that the depositors money belong to the banks and should be used to avoid bankruptcy... They say: Better losing a small % rather than the whole money... I say to them: start looking for a strong rope... and if you can not find one, they will SOON be available- FREE OF CHARGE- in a bank's branch near you, compliments of our elite.

  9. Just a bit surprized that with what is going on the buyers of gold dont have enough power to take out 1620. It should be a layup right now.

    1. i've pretty much capitulated..certainly lost hope. definitely feel like taking my profits on the bullion off the table: gold unable to keep its head above $1,600 despite Cyprus, QE 3 going on for over 1/2 a year and all indications that it will continue to do so. the feeble commentary is that options expiry will be hard on gold, but after that... not doubt the excuse for today will be end of quarter window dressing. so what does the 'catalyst' have to be? i couldn't think of stronger ones.

      The HUI is only 5% above its 52 wk low. Junior gold miner stock holder would be happy for a mere 10% haircut offered by Cyprus. All the talk of Banksters and Socialists really no different than the SCUM boards of the junior miners that keep ratcheting down options strike price for executives as stock price plummets.

  10. gold getting it's usual end of quarter producer selling..

    copper stock in london and asia now getting alot of ink as a reason for the HG decline... silver stocks at comex highest since 1997 another good reason for the SI move.

    wow the gold bugs again trumpeting a bank run and the end of currency... well nobody will give them anything for their gold in that case (perhaps throw the bricks thru windows to steal some food?)

    more likely precious metals would fall along with everything else (a la 2008) in a contagion.

    even more likely the world will muddle thru like always!

    1. More likely that now everyone know that all accounts in banks over the insured limits are subject to risk. Thats trillions of dollars that will need a home. Who would sell gold here knowing that?

  11. Does anyone have insight into a time when ETF's failed? What would happen to the producers of Gold, WHEN the Gold ETF's fail? How would the process unwind? Would one day you wake up and you have all these claims, the next day, 10 cents on the dollar, 1 cent on the dollar?
    Would not the "gold in the ground" become instataneously more valuable?
    Is there any precedent of prior Real Estate ETF's failing?

  12. It's Thursday, quarter end, and the "Master and Commander" Ben Bernanke is playing the market like his predecessor, The "Maestro".

    Anybody look at grains today? Smashed to new lows.

    Gold? Chain-sold so that the Bond Vigilantes stay buried in their graves.

    S & P 500? Ah, new record highs, led by the usual suspects: Retail, hotel and leisure, airline stocks, etc.

    10-year yield? Now set to close at below 2% for the 11th consecutive month, a new world record since the 1950's.

    With cheap money flowing, zero inflation worries, small snafus like Cyprus snuffed out within days, Ben has placated the investor class as usual.

    Now we'll have 3 days of headlines spewing forth the new highs in stocks and how that means nothing but blue skies ahead for the "Resilient Consumer".

    Truly a incredible achievement by the Fed. And most of us just sit here in front of our screens, slack-jawed in amazement.



Note: Only a member of this blog may post a comment.