I mentioned last week when I first put this chart up that the bears were being frustrated in their efforts to break the metal down below this strong buying zone noted. We are now seeing the signs of that frustration as the newcomers are starting to cover.
Now that the bulls have cleared that $1585 - $1587 level, it is essential that they prove their mettle if prices retreat back down towards this area. That will signal that the bulls have regained the short term initiative from the bears.
I would look for fiercer resistance at the next resistance zone where the "16" handle will emerge. Not only is that a psychological resistance level but it is also a technical one. If the gold bulls can take the price up and through this level and maintain the price ABOVE this level, we should see a run towards the late February peak up near $1620.
I want to again note here that gold put in another strong day in terms of the major currencies such as the Yen, Pound, Euro and Swiss Franc. It continues to display strength across a wide variety of currencies, which is always good for a bullish cause.
The other thing of note - the HUI regained its losses from late last week after it put in that huge upside reversal on Wednesday. It once again encountered selling pressure as the various stocks that comprise this index rose to their last week highs. This is showing up on the chart near the 360 level. I need to see this index CLEAR 372 and do it with authority to prove to me that this is indeed a lasting bottom in the mining sector. I am of the opinion that if it does this, the gold and silver charts will both show markets that are taking out their respective overhead resistance levels.
Remember, it has been the shares which are dragging on the metals; if those shares are done going lower as it appears that they are, then it is going to be difficult for the bears to beat the actual metals down any longer. Keep in mind that there is a very large, multi-year high, hedge fund short exposure in gold. That position will be vulnerable if the bulls can continue to peel off the weaker-handed shorts that have tagged along for the downside ride. There are significant stops above this market that if breached, will provide some nice upside fireworks.
As usual, the key will be whether the bullion banks emerge as sellers on any rallies. They have been using this downdraft to cover their previously built short positions and have reduced that significantly. Are they content to leave that as is or are they looking to rebuild it? We shall see. One thing is for certain however; those hedge fund computer algorithms are not going to ask any questions if the bulls can take out the overhead resistance levels that trigger the buy signals on those infernal machines of theirs. They will be buying back at the same speed that they have been selling for some time now.
Seen This? Two new redeemable PM ETFs!!!
ReplyDeletehttp://www.forbes.com/sites/kitconews/2013/03/12/focus-proposed-van-eck-gold-silver-etfs-would-allow-redemptions-of-metal/
Trader D-
ReplyDeleteTell me if this is a naive comment but TA looks so carefully at the bulls/bears keeping price at certain levels but I'm not sure anything is done without the BB's approval. After all, at 7:03 EST someone bought over 5600 contracts which is what drove the price up to the new level. My theory is that this level has been sustained today merely because the BBs have chosen not to direct an equally proportionate sell off yet. Couldn't they just be setting bulls up for a steep sell off later this week once the other side convinces themselves that this is a new support level and pull the rug out from under them?
I've seen too many of these instant, large lot sales that drive price a certain direction and an equal response the other way. On those days it just seems like the BBs are toying with everyone and blowing out both buy stops and sell stops.
BTW, I would appreciate your perspective on a very specific dynamic related to these large lot sales. The trades today at 7:03 EST drove price $8.50 but there was a net difference of -2107 contracts purchased at the bid volume. Does this have any significance or what does it say about the way that these contracts are being purchased? My take is that these are all shorts that must be purchased at market prices and therefore drives up the price while they seek to fill 5600 contracts instantaneously. They have taken out the buy stops on other short traders who also beleive that the market will go down all the while collecting short contracts for themselves. Once there are fewer shorts that are in the market and everyone is on the buy side they are going to smash prices down again to make themselves a tidy profit. Do I have this completely wrong or backwards? Thanks for your help, Ham Sandwich.
great commentary Dan! you're like an athlete who is down on the field playing the game, and then heads up to the media booth afterwards to give the play by play!
ReplyDelete"They have been using this downdraft to cover their previously built short positions and have reduced that significantly. Are they content to leave that as is or are they looking to rebuild it?"
ReplyDelete...
"Couldn't they just be setting bulls up for a steep sell off later this week once the other side convinces themselves that this is a new support level and pull the rug out from under them?"
Yes, these are the questions I have myself.
I guess, as I'm not a short term trader on gold, it leads to the most important question : how confident do BB feel about breaking the strong support zone at 1530-1550 area?
Hedgies are record short, but as Jim mentionned, the game can go on as long as it works (it being prices dropping even more).
Strong buying comes mainly from Central Banks for now.
Would they always be there to defend that level?
Because bears must know that there are a number of stops under that zone...yummy.
If I were a Central Bank, why would I hurry up to buy at 1550, instead of waiting for more slaughter and buy at 1500 or 1480? Maybe because the demand is so strong, between Russia, China, S.Corea and bros.
But for now, the support holds...so as long as it does, I'll make the most of it and use it as my best friend :)
Hubert Du Haut:
DeleteRemember, South Korea bought last month, which is kind of a poke in the side to the other central banks on the bid. China, South Korea, Russia and on and on... These central banks are not necessarily buddies. They're in competition for Western gold and the difference between buying at $1450 or $1560 doesn't really amount to a hill of beans. What *IS* important to each of these nations is that they get to the level of gold holdings they see as necessary to survive the coming transition into a new global reserve currency system. Geopolitics and time-frames beyond a couple of years trump technical analysis and the short-term. The mainstream and Western financial interests can moan all they like about the so-called new bear market in precious metals. It's all just silly noise. We're dealing with some of the biggest macro trends possible: geostrategic positioning -- and nothing is going to change that until such time as said nation states have reached their accumulation goals.
--
Eric Dubin
Another day, same old story
ReplyDeleteCrude, gold, gasoline, all bombed on the day.
XRT, RTH hitting another record high and the Dow is up 8 straight days for another record.
Investors are still scared and fleeing emerging markets, any and all resource stocks, many still piling into bonds just in case of an equity market selloff.
Travel and leisure stocks like hotel and airlines going completely nuts today while the XAU gets grounded and pounded again.
Simply amazing acrobatics by Bernanke, the market is pricing in the greatest consumer spending frenzy ever recorded.
I mean really, look at DJTA and XAL, total moonshot runs.
If Peter Schiff and James Turk had recommended levering up and going in whole hog on the Travel and Leisure stocks last year, they would be driving around in Bentleys and Maybachs sipping whisky while fending off repeated requests for exclusive interviews on CNBC and Bloomberg.
Just as there are off budget items and tow sets of books to choose when reporting deficits, spending and debt,
ReplyDeletea bullish case for the economy is readily at hand from amongst two competing, essentially contrasting sets of options.
The main stream media is not describing risky, ephemeral assets such as the ever-changing Dow whose components are substituted like football players when they underperform, by upstart, fresh meat.
They are pretending to describe risky, ephemeral assets, ascribing those of hard assets to "snake oil" alternatives in which they have a vested interest and hidden agenda.
If today's markets were not supported this way by "recovery" chatter throughout the day, and gold and silver were acknowledged or recognized for just a moment, the words "risk", "fraud" and "failure" would come to life, rather than being tools of deception and injustice.
Should financial statistics deviate one moment from the spin,
the insolvent, bankrupt system would soon be unresponsive to HFT's, quants, shadow banking, dark pools of liquidity, off-balance sheet accounting, war chatter or political theatre, to infinity or not. Interest rate swaps, credit default swaps and mortgage backed securities have been Fed fare at the grand monetary smorgasborg. Cyber feast, sovereign debt the main entree, masking an epic culinary constipation.
So there are no lack of reasons why sentiment in the precious metal sector is dragging along the floor.
The technical picture is similarly drawn, with extremes in many cases not seen in a generation, or more.
The fundamental outlook for PM's combines all these elements and more, traditionally rallying most when least in popular favour.
It appears that gold has once again staved off another mauling, but wow, the HUI continues to struggle. History continues to be made with the XAU/S&P; and HUI/S&P. Dan, you even must be a bit shocked at how hard this divergence has been and how long it has lasted. A beating for all time. Like a sinkhole where you fall through and just can't seem to climb back. Still hanging on. I refuse to commit more but am calling up some re-inforcements as the troops on the front will hold the line while; while the fresh troops are licking their chops to get into the fray. Very, very, soon!!! Go Miners
ReplyDeleteI feel like the guy in Monte Pythons "Holy Grail"..It's just a flesh wound, what are you a sissy,come on" beat me some more.
ReplyDeleteBut I still feel "strongly" that it is time to "strap in" a deck chair and "hook" this bottom, fight the fish all the way to the surface. This V bottom boat will bring in one heckuva load all the way to market. Cheers!!!
ReplyDeleteBoatman?? Are you "setting some chum yet" ?
ReplyDeletewell op-ex friday hasn't been kind to gold lately... this is because there are so many perma bulls on the metal they have plenty of GLD SLV calls to expire worthless..
ReplyDeletethe last low of year on gold around 1555 was made on uber high volume like 250k contracts on all months, so yest. gold went up on 130k contracts...today a higher high on 132k contracts(that don't fly!)... every low of year this year or late last year low of move has been on high volume like 250k... and every low has finally been smashed thru on high volume yet again..
gold needs a retest of 1555 on lower volume, then spring up (gonna be difficult for gold to do it, maybe 1500 is needed to clean it out)... gold was up 12 years in a row this is probably good for it to stay red 5 months like it has.
cheers!
Will not make it that low, but, Tennesee Whiskee to yah..I kinda hope so,so when the troops arrive, then, it just might just help a faster buck, but, what the heck..I have plenty of time.
DeleteThe senate has claimed the Jamis Dimon and JPM lied to the senate about a derivative bet being hedged!!! Remember Blythe Masters saying there was no bet on silver??? We now know they lie, even uner oath!!! But Eric Holder says they are too big to prosecute.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteAppears to me that everything that has been done by the FED has been to create the appearance that the TBTF Banks balance sheets are not exposed and to create the wealth effect for the 10%. The statement that he will keep printing until the U3 number is below 6.5% is an outright boldface lie. We will see soon as the CPI starts creeping up. They will manage the BLS and the CPI rather than manage the banks. His banks are his system. He will refuse to do anything but print. Sad really we are no longer an operating capitalist country, rather a centrally banking planned one.
ReplyDeleteDan,
ReplyDeleteSo I read again the enormous short positions by he Hedgies. What gives with this? Why are so intent on kicking the living S out of Gold? Why dont they just leave us alone? Why? Please tell me.
@WW
ReplyDeleteMaybe the shorts just do it to make a lot of money?
When someone buys a long contract, someone else must sell a short contract, and vice-versa, as the COMEX is a zero sum game.
So, if they flood the market with short bids at the right time when it is going up, the price will go down until enough bulls start buying or they pull their bids.
They can then cover their shorts at a lower price by buying calls, and bank their profits.
As the price rises enough because they have stopped bidding for shorts, they cover their calls by shorting again, and bank their profits.
Wash, rinse, and repeat over and over.
At least until it fails to work at some point.
Is this market manipulation, or just smart, profitable trading?
Hey, the money game is what it is. However, just because somehting works does not make it just. If there is collusion that comes out and I am juror, then maximum penalty against everyone who colluded. Free markets should allow the investor to feel confident in making investments based upon fundamentals, t/a, and their opinion going forwared on how that plays out. Guys like Corzine, Dimon, Blanfein, Central Banks, CFTC, Holder, Obama, if found in their contempt for blatant manipulation, then I hope I can find my way onto a jury. If not, and when the matrix destroys all signs of capital formation into viable market driven successful free market enterprise then their is no market nor capital formation. That is what is going on. Hey, I am up, though, I would be much wealthier had I stopped investing based on fundamentals. So be it. When up, bet everything you have in profits and that which you can afford to lose. I hope the shorts get SQUEEZED.
ReplyDeleteGold ended the week down about $58 after another two weeks of wild trading. As we pointed out in our last update money continues to flow into the equity market as many stock markets have hit new highs or are near all time highs.
ReplyDeletegold IRA investment