"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 Work is NOW AVAILABLE AT WWW.TRADERDAN.NET



Wednesday, April 3, 2013

Gold, Crude Oil and Copper Break Down

Today's big move lower in gold, coupled with a sharp drop in WTI crude oil and further weakness in the Continuous Commodity Index, could be the beginning of a signal change that the global economy, despite the best efforts of the Central Banks and their unlimited money creation, is entering another period of slowing growth.

Quite frankly, the commodity complex has been signaling deflation for some time now with speculative flows OUT of the base metals and some of the foods. Grain prices are working lower as the high prices brought about by last year's drought have effectively shut off demand while end users wait for much cheaper South American supplies to make their way into the distribution channel.

All the while, against such a backdrop where hard asset prices are falling, the US equity markets have been powering higher and higher. The last report I read stated that they had now reached levels exceeding the height of the Towel of Babel related in the book of Genesis and that it had gotten the attention of the market gods.

It seems as if that disconnect that I spoke to some time back between Dr. Copper and the rest of the CCI, and the US equity markets has been getting even wider; that is, until today. It looks like we might, and I want to emphasize this word "might", be seeing some reality hit these idiotic equity bulls who keep shoving prices upwards no matter what happens in this world.

I was going to post a story on April Fools Day about California experiencing "THE BIG ONE" and subsequently falling into the ocean and disappearing somewhere with Atlantis, and then relate how the "BUY TV" analysts viewed it as wildly bullish because off all the construction work it would create with dirt having to be trucked in to fill in the gaping hole that was left.

Seriously, the way the Cyprus situation was swept under the rug and quickly forgotten about, the complete ignoring of rising tensions involving that nut in North Korea, the manner in which the labor participation rate in this country keeps sinking, (just name some other negative factory) and yet day after day after day seeing a rising stock market to levels that are this preposterous, makes me wonder if the story of the Pied Piper of Hamlin was actually an allegory about today's investor/trader class.

What I find quite noteworthy today is that with all the selling pressure in the commodity complex, along with the  very weak equity markets here in the US and with rising bond prices (falling interest rates), the US Dollar was actually experiencing more selling than buying. That is interesting because even the Japanese Yen is experiencing that same idiotic safe haven buying that we see during these periods when investors get nervous. Normally that pushes the Dollar higher as well since it has been the go to safe haven for some time now. Not today. I do not know what to make of that yet but want to see some further price action the remainder of this week before commenting.  It might be just a one hit wonder.

Also, remember yesterday when I was questioning what crude oil is doing up at these levels given the lack of growth globally and rising stocks at Cushing, not to mention the weakness in the commodity complex as a whole. Well, today it got clocked and is down over 2% as I type these comments. Let's see where it ends the day before drawing too many conclusions however.




The same goes with the S&P 500. Look at this chart...



The S&P just missed putting in a downside reversal because its session high did not exceed the session high from yesterday. Nonetheless, the sell off has been strong and is coming on high volume. We have seen these fake outs before however in this market as we just had one show up on the chart a mere six weeks ago that lasted every bit of a few days before we once again went on to make yet another new high. Maybe this one is for real. We'll see.

Momentum based indicators show a definite loss of upside momentum here but they have been doing that for some time now and yet the market keeps going up. It is almost as if this thing is being shoved higher by some mysterious hand that will not let it fall. If these hedge fund algorithms ever shift into a "SELL" mode in these equities, look out! They are all on one side of the boat in a big way.

As far as gold goes, it either holds here in this support region between $1550 - $1525, or it is going to sink to $1480 for starters. With the gold stocks continuing to stink up the place, gold is losing any help whatsoever from that quarter. Central Bank buys out of Asia and elsewhere have been keeping this floor solid in the gold market so they had better not falter in those purchases or else...

 

 


I am not even going to put up a chart of the HUI at this point as it is simply too ugly. There is a pivot region near 300 and that is more than likely where the pathetic thing is headed unless we see some spark to the gold price.

I will leave you with a ratio chart of the HUI to Gold price. It is now closing in on the 2008 low. Keep in mind, this is AFTER FOUR ENORMOUS QUANTITATIVE EASINGS attempts. What in the world will it take for these stocks to do anything if 4 rounds of QE cannot take them higher? Makes me seriously wonder if some of the gold mining companies are going to survive to be honest.

In the long run such a thing would bring less supply onto the world market which would be supportive for prices moving forward, not to mention allowing those healthy companies which remain to become more profitable. The problem is, how long is the long run going to take to get here......?



7 comments:

  1. Thanks Dan. Appreciate your work.

    ReplyDelete
  2. Hello Dan. Good to see share your Faith publicly. Keep on sharing the truth re: financial markets. We need more Faithful Remnant who courageously share the truth so that at least few who willing to listen will take heed and escape the ravages of unraveling global economy.

    Have learned a lot from reading Armstrong Economics writings + Blog.

    He points out the deleveraging > 2007 Credit Crisis has shrunk
    credit 2 x what the CB's collectively manufactured to slow down deflating Credit Bubble. Thats' why no precious metals rally expected by hyper inflationists.

    As you noted, fundamentally, none of the markets should be where they are. One thing I've learned over last 4 years is that if it doesn't make sense, look for political reasons.

    Increasingly worse decisions the politicians make in trying to 'manage' the economy + markets are making the 'rich' with any meaningful capital to flee the local lunacy created by their government ivory tower academics who have no / little real life market experience.

    What's keeping most of the over priced markets like DAX, Dow + U$ is
    simple really. The falling dominoes have not reached them, yet.
    The rich in falling domino nations are exporting their capital to the nearest 'safe havens'.

    US markets + U$ as it's the least ugliest of the nations in the
    world + U$ is still the reserve currency + most of debt is issued in it.
    China isnot ready to replace U$ as reserve currency with Yuan.

    As you have noted the U$ is poised to continue to rally in rising tide of
    capital fleeing more + more less desirable locales in the world.
    I think Armstrong's prediction of 2015-9-30 high in Dow + U$ + other
    economic parameters will prove to be accurate after some gut wrenching
    volatile sharp corrections and rallys over next ~ 1 yr. If this scenario pans out my opinion is it will be a 15 month parabolic blow off like Nikkei + NASDAQ and most of financial media forecasting Super Goldilocks future for USA.

    There is hope for precious metals but only in long term, after a major correction ~ 50 % of 2000-2011 bull run by 2014 -2015, ~ $ 1000 or
    less, the astute will quietly exit the popular U$ + Dow and buy terribly beaten down precious metals companies at basement bargain fundamentals and ride the 3 rd wave powerful rally as the masses will no longer give the politicians any more chances to make things even worse
    and people begin to lose Confidence in governments en masse.

    Things cycle. Don't stay married to one linear line of simplistic thinking.
    Reality is far more complex. Keeping learning how complicated things are. Then after a lot of effort, the pieces of the puzzle do come together
    for some actionable contrarian moves.

    Noah toiled for 400 years and no one else listened except his wife +
    3 sons + their wives. It is lonely when you choose the 'road less travelled' lot of the times. But it is worth it because it is right.

    Our Lord Chris Jesus showed it all his earthly life. He kept pointing to
    the right path, which was not popular at all. He paid the ultimate price of
    the cruel Roman Cross. Thank Lord God He did. If He didn't none of us
    have a hope. There is no more Arks.

    'Know the Truth and the Truth will set you free.' John 8: 32

    I do hope and pray that more people will study Bible. It's full of cycles
    of economic booms + busts, empires rising + falling and characters that
    Lord God relates who prosper + fail often due to their obedience / disobedience to His Life sustaining + Giving Principles.

    Encourage all of you to read + study Armstrong's work. Yes, he convicted of felony. That does NOT negate his brilliant insightful + far
    reaching analyses.

    ever learning.


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  4. Nice stuff in hard times, thank you Dan!

    Regarding the gold miner - supply issue, my understanding is that (paper trading aside) mine supply has little influence on the price of gold (b/c of existing above ground stock, little industrial value, etc) so miners benefit in high gold times because their incremental supply increases don't affect price so much.

    i thought it was ridiculous when the CEO of AEM (I think) said some time back that the cost to mine gold was something like $1,450 and so that's the floor on gold. Moronic.


    ReplyDelete
  5. Its curious, that if gold is so weak because of a huge supply, then when germany asked for its gold back, why did the US say that they could have only a small portion back in 7 years? Why not just give it back now if there is so much of it?

    ReplyDelete
  6. I just saw the a European bank could not make good on its delivery of gold. Supply?

    ReplyDelete
  7. Employment opportunities for horizontal drilling in Oklahoma is massive. Oklahoma is all about oil and natural gas. Unemployment rate is way below than national average, and it’s because of this industry. Nearly one-quarter of all jobs in Oklahoma are tied to the energy industry. A recent research of the Oklahoma Energy Resources Board shows us the oil and gas industry was responsible for pouring more then $51 million into the state's economy and created jobs for over 300,000 people.

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