"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


Tuesday, May 7, 2013

HUI - Lack of Buyers

Sellers continue to dominate in the gold and silver mining sector as evidenced by the inability of these shares to get any sort of updraft from the now daily repetition of new all time highs in the broader US equity markets.

As you can see on the chart below, the HUI simply cannot get anything going to the upside. There are two overhead resistance levels noted on this daily chart. One has proved so formidable that the latter one has not even been in danger of being tested.

The GAP1 region occurred back when we got what amounted to a $200 downdraft in the price of gold itself. This gap formed between 300 and 280. The HUI did manage to run up about halfway into the gap before the selling intensified knocking it right back down again for its impertinence in daring to poke its head up slightly. As long as the HUI cannot clear this first gap, the gold shares are going nowhere to the upside.

I have included a chart of silver today which is in a 4 hour format as it shows the nature of the recent price action quite well. Notice that silver was in a congestion or range trade from the second through the third week in April. Rallies were capped on approaches towards $24 while dips towards $22.50 were bought. The last week of April, silver managed to forge a bit higher of a range with the metal pushing past $24.50 before attracting selling but securing buying on approaches back towards $23.50 - $23.25.

Silver bulls would not want to see this metal breach the bottom of this new range as that would allow bears to take it back down towards the former congestion range bottom once again. On the other hand, if the bulls can take out $24.50 and keep the metal close to that level, they have a good chance of notching the range up a wee bit more with support moving up to $24. Whether that can be done remains to be seen. Much will depend on the attitude of hedge funds and index-related funds towards the "global growth" trade.

Please note that I have provided some commentary to Eric King over at King World News which will be posted later on today sharing my thoughts towards the stock market rally. Be sure to look for those when you get a chance.


  1. Unfortunately, Bernanke, Draghi, and Uncle Abe now have a complete stranglehold on virtually all markets.

    Higher and higher stock prices led by retail and consumer plays.

    Inflation totally dead with the CRB Index stuck in the mud, and the TIPS spread is now negative, meaning the multi-trillion bond market is now expecting zero inflation risks the next 10 years.

    Massive printing can continue indefinitely to fund more food stamps, EBT cards, and disability payments to drive consumer spending up.

    And luxury spending is going through roof as the top 1% crowd is gaining fabulous wealth by investing in all non-gold related financial speculations.

    Bernanke must be laughing uncontrollably at all the experts who predicted financial collapses, end games, turning points, Peak Oil, and all the rest.

    He has successfully obtained control of all currency, stock, and commodity markets via jawboning threats, crisis manufacturing, and an almost daily running of the bears.

    This episode will certainly go down in history as the most incredulous ever, not even the most ardent bulls like Ralph Ancampora or Laslo Birinyi could have ever dreamed of a scenario of rocketing stock prices, cheap money, and zero inflation that lasts forever.

  2. Traders are very bearish...


  3. I just read your KWN commentary. .
    "when investors can plow cheaply borrowed money into formerly risky investments and leverage those bets up, knowing that they are backstopped by the CB’s, you have all of the ingredients in place for a catastrophic market event. "

    Also, "Who needs a “haven” if they believe there is no storm?"

    Wow, To be honest, those gave me goose bumps. God help us all, indeed.

  4. "I mentioned at the time that I believe rallies in copper should be sold "

    Dan, does it mean you are shorting the rallies in silver as well? (strong correlation between both metals).

    I will tell Petunia! :)
    Anyhow, if we break 23.40, on a daily basis I also see two potential targets, 22 $ (symetry), then 19 $ (flag)

  5. Dan, you frustrated market bear! :)
    This is Cassandra's curse.
    How frustrating, isn't it?

    "...you have all of the ingredients in place for a catastrophic market event.
    In short, nearly the entirety of the investing world is all sitting on the same side of the USS Titanic, the floating juggernaut of steel, which “God Almighty could not even sink”. No one saw the iceberg then, and those few who see it now are quickly dismissed as frustrated market bears, rather than voices of reason and sanity."

  6. I guess I must agree with Mark (first comment)
    Here I have been trying to invest wisely, I have been heavy in cash waiting for a pull back in the DOW to get some bargains....NOT!
    I have been wanting to buy in since the DOW was at 13200...by broker keeps telling me to be patient and wait for a correction...ahem.
    I also feel your disgust with this whole thing Dan, but I am really starting to believe that general equities will simply continue to inflate without a care in the world.
    I have steadfastly held on to my Gold and gold related items...and I am beginning to realize that I could have simply thrown a dart at the S&P and made a nice tidy return...no corrections, no pull backs, no manipulated suppression of price.
    Here is my uneducated guess....the DOW will continue to climb...day after day...week after week...month after month. There will be no correction, wanna buy on dips? you better be quick, a dip is now anytime it pauses for an hour or more.
    It will do this until a catastrophic collapse happens, the only trouble is that this collapse is probably years away.
    The Central Banks are winning, how can this fact be denied right now?
    For the time being we really can print our way to prosperity.. I am tired of fighting the FED, being a contrarian etc etc. I have done nothing but lose money or gain nothing in Gold mining shares, Oil shares, Ag...you name it...I could have retired by just buying HOG and Disney.
    Sour grapes...you bet!..lessons learned...lots....never invest using fundamentals!!
    This is a Casino...treat it like one.

    1. "the collapse is probably years away"...well that's the big question. Maybe it's months away indeed.
      But what do you do with your long positions when it happens?
      Will it be a fast flash krach?
      How much will the market lose in one hour?
      What if it happens overnight and you are long?
      What even if you are a day trader but the volume is so small that your stop loss is executed 10% below your price?
      It's ok if you took the train earlier, probably, if SP was around 1400, you have some margin, but to go long now? This thing can decide to collapse at any time, but it's my own humble opinion...yet I would only do some day trading into this, I wouldn't keep my long positions over weekend or overnight. Thanks Cyprus for the reminder.

  7. A lot of people hurting, that shouldn't be. My last comment was will meet again at 1900. But in the vain of the manipulated move from 1540 to 1315, why cant the bulls manipulate it back above 1540 just as quickly? Why get slaughtered? The bears haven't got the gold to deliver, so demand delivery. Even silver. 50 to 22. That's almost insane. No it is insane. I don't see why more time is needed to heal anything. You get punched, you punch back. Until 1540, its a knockout, but for the wrong guys. It should be easy, with 17 trillion and 0% rates and counterfeiting forever, so to the gold bulls, just do it.

  8. Is it even possible for the DOW to collapse or correct at this time?
    We have now been told that the FED is buying equities, other central banks are buying equities.
    It will end up like the bond market...if it appears that a correction is coming the CB's will step in and buy.
    At this stage I cannot imagine even the thought of shorting any US equity....can you?

  9. It is Thursday, at lunch time.

    Bernanke and the boys are having cocktails right about now, looking at their iPhones:

    S & P 500 over 1600? Check.

    10-yr. yield under 1.90%? Check.

    Gold under $1,500? Check.

    CRB Index under 300? Check.

    TIPS Spread negative? Check.

    XLY setting another new, world record high? Check.

    All systems go.

    1. Yep, and they trotted out Plosser to state that they could pull the plug at anytime with no problem.

      They are probably calling the PPT to hammer the HUI, GDX, GDXJ, and the XAU, maybe pile into the double and triple shorts just to ensure there is no exhuberance that could carry the HUI over 300.
      Lets face it, they will continue to do this until they don't, which it will come from some unseen unfathonable event, like war. Or Japans bond market starts an avalanche.

      Other than that carry on Ben and the Boys. Everthing is fine.

      Yep Mark all under control as usual, nothing to see here.

  10. I agree...da boys on Wall Street will have their way.
    In case you all missed it...the DOW was actually down around 10 points this morning...I'm serious..I saw a red bar on my screen...this was quickly reversed and it resumed it's unstoppable rise.
    I am angry because I missed my 10 minute window to actually buy a dip.

  11. No way...there was a red color on the Dow. You sure? PPT must have been in the bathroom. Looks like the dxy jpy trade rescuing the fed from any pm oil levitation.


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