"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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Tuesday, July 23, 2013

Late Session Surge in Gold Conquers 50 Day Moving Average

The strong rally in gold was yesterday stopped dead at the key 50 day moving average. Many of the big funds closely track this average. If they are short, they tend to sell against it; it they are short and price exceeds it, more often than not, they will cover. Additionally, if they are long, you may see them adding to existing longs.

Throughout most of the session day, gold was consolidating its recent gains. There was some chatter that some physical market demand, notably out of China, had eased off and that had some short-term oriented longs booking profits after realizing some nice gains. That selling, combined with some fresh short selling was serving to hold the metal in check throughout most of the session. Late in the day however, as the mining stocks caught another gust of wind higher, the metal surged upward breaking the 50 day moving average.

In the process, it also pushed past a band of overhead horizontal chart resistance. You can see that on the chart below.

This is getting interesting. We have both of the shorter term moving averages (10 day and 20 day) now moving higher in sync. The 10 day has not yet completed a bullish crossover of the downtrending 50 day moving average but barring a collapse in the price, looks to soon do that. That has not occurred since last July, which was the last time we witnessed an UPSIDE CROSSOVER of the 10 day above the 50 day. Stay tuned on this one as it could possibly happen this week. That would trigger some further fund buying.

Just like they led the metal to the downside, the mining shares are currently leading the metal to the upside. Gains have been very strong the past few days in the sector as shorts are being forced out and new buyers are coming back in.
That breach of the gap region noted on the chart sent the bears scurrying for cover yesterday and to further compound their misery, bulls pushed them up some more. The result has been a new gap above a previous gap which was a heavy resistance level. That is a bullish sign.

for the sector to begin a trending move to the upside of some duration, it will necessitate further gains but particularly a push past 290 where pretty good selling pressure can be expected. For the short term however, the bulls are back in control while bears are regrouping looking for a fresh spot at which to try selling again.

As long as the US Dollar is the whipping boy of the Forex markets, as it has been of late, bears will have their work cut out for them. We might very well be seeing the market shift back to focusing on the budget battle once again in the US. The government will be up against its borrowing limit soon and that means more of the usual crap that comes out of Washington. You know what I mean:

"we cannot cut anything because it will slow down the economy or put people back on the streets without any food or shelter, blah, blah, blah and more blah".
Meanwhile, my kids and yours will be the ones paying for all this profligacy and vote buying. As a matter of fact, my grandkids and yours will be paying for seeing that it is the size that it is.

At least those who own the mining shares can breathe a bit of relief that their net worth has stopped declining and has actually reversed somewhat.

The grains were whalloped today, as they should have been. The bulls in there have been killing the crop every damned day with too much rain, not enough rain, too cold, too hot,. etc,... meanwhile the crop looks to be improving with the return of milder weather and more moisture during the key pollination stage. Soybeans in particular were whacked pretty hard today which might have put a bit of pressure on silver. Still, the grey metal managed to keep its footing above the $20 level meaning that we should see some nervous shorts the next few days. For silver to get something more positive going, it will take a closing push through $22.50 at a bare minimum. At least it has stopped going down. Now if we could just get rid of the damned annoying radio commercials about how the price is going to double and skyrocket before you can blink....


  1. every day that goes by and month ago lows are not violated strengthens the bull case for sure and we must remain patient; agreed beans and corn headed south big time; and finally, like you say, once the Sinclair and von Greyerz outlandish calls go away the better; you know, for a couple bright guys, I do not think they know the ramifications and implications that go hand in hand with $500 silver and $50,000 gold because if we ever go there I do not want to be around in that kind of hyperinflationary nightmare; just saying in Sparks, Steve

  2. This needs to be said. The world didnt fall apart after gold hit 1900, so getting back to 1900 could happen without any massive inflation or world changing event. Will just have to see what happens after that time.

  3. Thanks Dan.
    It is interesting that gold did not jump much after crossed the 50 DMA resistance level like it did after crossing 1300. Would have expected more significant short covering there.
    The shorts does not seems to be too concerned about it. Why?

    Wonder how much Sinclair, Greyerz and the other pseudo gigabulls are getting from the gold miners for keep repeating the same old crap?
    Easy money.

  4. "Now if we could just get rid of the damned annoying radio commercials about how the price is going to double and skyrocket before you can blink...."

    totally agree with you there, Dan!

  5. "an UPSIDE CROSSOVER of the 10 day above the 50 day...could trigger some further fund buying"

    Thanks a lot for all those clues. They help me a lot consolidate my own toolbox of indicators, and are very valuable coming from an experienced trader!

    I'm still very careful as long as prices don't close above 1350 $.
    Here is the 2-days chart.
    In purple, the Fibo retracements of the 750-1950 move.
    One can see how we bounced down and up like on a stairway.
    So...1348 $ is precisely the resistance fibo level, and that's where prices bounced down yesterday.
    Also, it is the median of the Andrew's fork.

    I certainly don't have half the understanding you have about how hedge funds react on some indicator such as ma50, so I'm more blind in making my trading d├ęcisions.
    That's why I'll still wait to see 1350 $ clear to consider that the sky is more blue on the long-term as a bull :)


    Have a nice day and thanks you for the various clues about what is really important to monitor or not.

  6. Thanks for the commentary Dan! Was curious why silver needs to get all the way to $22.50 for us to get excited when the 50 DMA is just above $21. Wouldn't a close above this level be a huge step in the right direction?

  7. Looks like that 10 Year is starting to creep again. Appears to have taken the short term reverse dead cat drop, and ready to spring up, up and away.


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