"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



Friday, September 20, 2013

Return of the Status Quo

Gold has now surrendered half of the gains that it put on as a result of Wednesday's FOMC announcement that the TAPERING was on hold. It is currently trading at 1337 as I type these comments.

While the US equity markets are a bit weaker, the S&P 500 is still sitting firmly above the 1700 level. Interest rates on the Ten Year are near 2.75% while the grain markets are imploding lower and crude oil continues to drop off its best post-FOMC announcement levels.

In short, we are pretty much back to where we were prior to the FOMC. Why do I say this? Simple - this morning Fed governor Bullard managed to do what many in the Fed have been doing since May of this year, namely, jawboning the markets and setting them up for another possibility of tapering later this year. What has it been, 2 days since we got that FOMC press release and here we already are talking about starting the Tapering once again. Good grief! This is like some sort of sick version of the movie  "GroundHog Day".

It seems as if these people simply cannot restrain themselves from yakking away whenever a microphone is present. I do not know about some of you, but I get the distinct impression from watching these events unfold that the Fed literally has no earthly idea what to do next. They would like to start reducing the amount of bond buying but understand that they cannot, given the current economic conditions. So they talk about it perhaps to comfort themselves or even persuade themselves,  that they really are being responsible stewards of the nation's monetary policies and are aware of the inherent dangers in a near-endless barrage of money printing. The truth is that the Fed is trapped in a net of their own making and I think some of these governors realize it. Maybe some of them are making speeches as a sort of CYA strategy just in case history is not kind to them. They can point to their various speeches and say: " Hey I was out there making a case for ending this QE stuff. Don't blame me!"

As I have written repeatedly this week, these QE programs have managed to take on near immortality simply because the job market in this nation is so pathetic that many consumers simply do not have the confidence or financial wherewithal to taken on new and large loads of debt. Velocity of Money keeps moving lower, not higher and thus the driving force needed to generate strong, upward price pressures in the economy is not there. With wages flat and many working at part time jobs, where is the force going to come from to propel economic activity in this nation strongly higher?

IN a debt based system, more and more, larger and larger, amounts of debt have to be taken on for the economy to grow. It is difficult to do that if consumers are afraid to spend with the same reckless abandon as they did during the boom years. Remember when re-financing was the coolest trick in town - turn your house into a giant ATM machine and use the savings from the lower rates to go and buy that new ATV or Jet-ski? Those days are long gone so if the consumer cannot tap their home equity and wages are going nowhere, where is the cash going to come from?

Maybe the Fed should just skip this nonsense about buying MBS's and Treasuries and just send checks to every tax paying household in the US to the tune of $85 billion each and every month? I don't know about you, but I think this money would get directly injected into the economy a helluva lot faster than it does by sitting in the reserves of the big banks or in the equity markets.I guarantee you that if I were to receive a nice, big, fat check from the Fed each and every month, I would have my ATV upgraded to a woodgrain dash and chrome wheels. Heck I would buy a new Polaris RZR just for fun! A nice COBALT boat would somehow find its way into my establishment also!

Obviously I am being facetious here but I think my point is made - most of this new money being created by the Fed is not moving into the system.

What ails this nation cannot be fixed by Fed action only; it requires STRUCTURAL REFORMS, and we are not going to get that while the current administration remains in office. It really is that simple.

At this point in time, seeing that inflation is not a serious concern of most market participants, it is going to take an issue dealing with CONFIDENCE to take gold sharply higher into a sustained uptrend. Remember gold is an asset that pays no interest; therefore it must appreciate in value if it is to be of any benefit to those who buy it as an investment. That means we must have all of the elements in place that are required to drive the price of gold higher.

First and foremost among those is CONFIDENCE, especially in the currency of a nation. A loss of confidence in a nation's currency results in rising prices as the currency's loss of value is reflected in that area first. This is why I keep coming back to the commodity complex as a whole... we must see a broad-based upward move in the commodity complex before gold will find strong, SUSTAINED, new speculative inflows. Currently we are not getting that.

Perhaps at some point this will change - we will try our best to note that if it does. As far as I am concerned we are essentially in uncharted waters and all of us are trying to use the wisdom and experience we have gained from the past to decipher how this mess is going to end. It is certainly a challenge to say the least.





43 comments:

  1. Dead cat bounce in PM's. We're going lower Jim. Hopefully silver holds 22 and gold holds 1300

    ReplyDelete
  2. Problem:

    Fed is whipsawing most markets with "Taper On", "Taper Off", "Taper On" nonsense.

    FX and metals traders getting wiped out

    Solution:

    Buy the Internet and social media stocks with no earnings such as: AMZN, FB, P, NFLX, PCLN, etc.

    Or better yet, buy the new IPO's coming out today:

    FEYE up 113% on the first day of trading.

    FUEL up 93% on the first day of trading.

    And then there is Twitter coming up next week...

    LOL...

    ReplyDelete
    Replies
    1. This comment has been removed by the author.

      Delete
    2. only short term unexperienced traders will get wiped out, running after prices, like buying above 1365 two days ago.
      Solution :
      - trade on longer time units, where these "taper on" "taper off" news are just noise.
      - on short-term time units, don't stay in position when the FOMC is coming :) Get out, wait and come back later.

      Delete
  3. Tanzania Royalty Exploration down 21% since Wednesday's highs.

    Ouch.......

    ReplyDelete
    Replies
    1. bearish take on your boy Sinclair's Tanzania 3 wks ago in Barron's; Van Eck probably has to puke 7m shares; you are also right that pm traders are getting regularly castrated; swb

      Delete
    2. Mark;

      I need to ask you to please stop singling out my friend Jim Sinclair's stock for criticism. If you want to make comments about the juniors that is fine but I do not want this message board to turn into a forum where his stock his savaged for any reason.

      That is not the purpose of this board.

      Delete
    3. Well yes, but it was also up 30% from monday to wednesday. The stock held up fine given the GDX dump.

      The stock was jerked all over the place since March due to a lack of liquidity. No buyers and no sellers no shares available to short.

      Weirdest stock around truth be told. I have a love hate relationship with the stock. Today I'm in love again.

      Not sure well see any production in 2013 though...


      Delete
    4. Like gold, what doesn't kill that Junior will make it stronger.
      It's a classic case of not knowing one's own strength. When it does it'll look like an awkward freak scarier than The Hulk. Think what that will do to those whose paper chain is no stronger than their weakest link.

      Delete
  4. House voted to DEFUND OCare. Not that it will go anywhere, but it is a start. The fact that people still have CONFIDENCE in the USD AND FED says a lot about the state of affairs in our country. Sometimes, I feel like the only straight guy in a gay bar.

    The pope has made some outrageous statements, and the world is in a debt mess. Senators (and top admin officials) like Graham and Kerry just want to start wars. They are looking for any excuse.

    Has ANYONE asked Obama about the food stamp crisis?

    Has anyone asked Obama about the REAL unemployment numbers?

    Has anyone asked Obama why DC and Chicago continually see mass gun-related murders (on time scale) even though they have BY FAR the strictest gun laws?

    Has anyone asked about which gun was ACTUALLY used in Newtown?

    Has ANYONE followed the trail of the $85B the Fed is spending every month? Where does it end up? IMO, it ends up int eh banker's hands as they NEED it to help with the derivative mess they have started.

    Has ANYONE asked why some old guy in Newtown had a bunch of kids show up on his front lawn (during school hours) and it took him over 45 minutes to call authorities?

    IMO Ben Bernanke is probably a true American that doesn't want to see us collapse. He is faced with the political conundrum our politicians have created. I wish he would just outright tell the American people this is what we get for electing those people we have elected. This is what we get for getting too comfortable with lies and deceit.

    I just don't get it. But Jim Sinclair, even though his calls have been awful lately, is right about cutting out counterparty risk and he is right about becoming your own central bank with a hobby farm. Timing is not possible with the "jawboning".

    ReplyDelete
  5. Regional Banks green today, KRE up from $26 to $36 this year.

    GDX getting killed again, $55 to $25 in a year, worse % drop than the QQQ crash in 2001.

    Just a reminder to "Stay in the System" where the Fed has your back.

    Don't get bamboozled.

    Stay with the uptrend in U.S. stocks.

    And do not dare make the horrific mistake of taking direct possession of your gold mining shares which have been cut down by up to 65% already this year.

    ReplyDelete
    Replies
    1. You sound like a government/Wall St. shill. Am I close?

      Delete
    2. Mark is a very smart guy who seems to have a real axe to grind with gold but more directly its leaders or promoters as he calls them.

      I have to agree that the gold community with its knee jerk enthusiasm and full speed ahead everytime we get a good day or two seems delusional, which Mark spends way too much time sniping at with his sarcasm. As much as I don't like what he says he has been right and how much better would we have been off with being in the general stock market and out of gold. But ten years of being bailed out by a strong gold market every correction, we got complacent and believed what happened could not happen. And it did.

      Mark is still a gloater and shows little grace with his very carefully composed posts designed to irritate. I would never do it. But the guy is right and is just telling the facts. He has to know more people here are in gold than not yet he revels in miserable days like this. I listen to what he has to say and have to say the FED has outsmarted us to this point. When this turns is my concern as two more years of this will drive me batty and push me to sell and be out of when gold finally makes it move. That would be hard to take.

      Delete
  6. Fed, BOJ, BOE, ECB and all the rest caught between the devil and the deep blue sea; like the man said, "just let us liquidate the hell out of everything and let prices clear". Sure, times would be tough, but any kind of return to a true and free mkt would be 100% better than the scummy, crony, fascist, polluted cess pool we find ourselves mired in; just saying, swb

    ReplyDelete
  7. New record closing highs today for:

    Tesla
    Facebook
    Shutterstock
    Lifelock

    Who needs gold when you can make 200%+ in one year with social media and other Internet "Glam" stocks?

    Oh, by the way, DUST was up 17% in one day, another screamer being driven up by the HedgeHogs.

    I'm sure we'll get an earful this weekend about how the "Central Planners" are knocking down gold, and "Any Minute Now!", the whole financial system is going to implode, and we better load up now because of the Chinese, Russians, yada, yada, yada......

    LOL...

    ReplyDelete
    Replies
    1. @mark - quite a few juniors down by that degree so it's not really sporting to call out TRX. Might actually be a blessing being out of GDX...

      of course, this type of volatility will never spread beyond the miners & emerging markets, right? as Everyman know knows that the Fed won't let the indices fall.

      Delete
    2. This comment has been removed by a blog administrator.

      Delete
  8. "Maybe the Fed should just skip this nonsense about buying MBS's and Treasuries and just send checks to every tax paying household in the US to the tune of $85 billion each and every month?"

    Dan, maybe we should ALL send a letter to Helicopter Ben asking for a check for our individual share. He could save postage by just having choppers fly over our houses (if we still have one) or the homeless camps and simply drop the money on us. Then folks could run down to the local Apple store and stand in line for their new iphone (probably number 6 by then!)

    Cedric
    goldtradercommentsaugust2010.blogspot.com

    ReplyDelete
    Replies
    1. Cedric;

      Great idea.... Maybe we could run on down to Big R and get them over there buddy!

      Delete
    2. Hi Cedric,

      Wow.. that will be great but rest a sure the inflation will shoot through the roof..

      Good one but very dangerous...

      Cheer

      Delete
  9. http://jessescrossroadscafe.blogspot.ca/2013/09/gold-daily-and-silver-weekly-charts_20.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+JessesCafeAmericain+(Jesse's+Caf%C3%A9+Am%C3%A9ricain).

    ReplyDelete
  10. There were massive volumes in many gold shares today. GDX did 96 million shares. Can anyone briefly explain how this situation came about? And why such a massive beating took place on quadruple witching? Bullard jawboning could not have been the answer.

    We need to remember his comment that they were so close to tapering is bs. The governors voted 9 to one in favor of not tapering one dime. In the face of knowing what the expectations were. The FED got scared a big daddy wall street got mad because they were embarrassed and chose to bluff the market once again. And as Mark would say it worked but to what end its continued fraudulence.

    ReplyDelete
  11. http://www.lewrockwell.com/2013/09/greg-hunter/war-could-implode-the-financial-system/ Ex-GS banker lady not saying Keep calm and carry trade on...

    ReplyDelete
  12. I suppose there are 2 sides to every issue, only I just dont get the bearish case for gold other then that it is trading below some resistance levels. Thats the case. I think those that are long gold or those who bought on this last rally, and sold out today, will regret it for the rest of their lives.

    ReplyDelete
  13. A note on the Gold / GDX since June bottom it's up 16.0% versus DOW June low up 6.25% and there's plenty of QE pumping up the DOW. Also GDX 50DMA is below and moving up to cross the 200DMA, with the DOW the opposite 50DMA closing in to move below the 200DMA for what it's worth. Better to take the dive from the first floor than the top floor!

    ReplyDelete
  14. Golds typical Friday move down again in the after real market, London PM fix at 1349.25 that's the price Gold actually settled at. TBTF again plumbing for shorts and going further long Gold in the thin paper markets, also Asia absent this past 2 days with the moon festival.

    ReplyDelete
  15. Hello everybody,

    Dan, about your question "why the Fed communicates like this", my feeling is :

    1) They know for sure they can't taper.

    2) All the fuss about taper has one goal : help the dollar and symetrically of course, hit alternative safe havens such as gold. The end game is : help the dollar be strong, help the interest rates stay low, manage the huge US debt and deficit as long as possible.

    So, they do it over and over and over again...until one day it doesn't work anymore.

    3) They also know that this one day will come. And they are preparing themselves for it. They'll be mostly out of the system when it happens. They'll have a lot of physical gold stored outside the western banking system. Mere people will pay through inflation, confiscation, defaults. Gold prices will go up when they have enough of it. They'll get even much richer than now. Then we'll create a new monetary system, where the dollar will not be the only world reserve anymore, and they'll invest in something else. As you said : Wash, Rince, Repeat. No need to explain who is "they".

    ReplyDelete
  16. Thanks rlm, your "Moon festival" is illuminating!
    Markets are full of lunar ticks.
    They can go full moon speed ahead or be naked shorted.
    All attempts at photo documentation result in overexposure.

    ReplyDelete
  17. I just read an article in which Buffet was praising Bernanke how such a wonderful job he did with the QE. In the same article it was also mentioned that the price of Berkshire Hathaway doubled since 2009 and Buffet's personal wealth increased by 50 %.
    Now we already knew that the QE is very beneficial for him and his like-minds but does this means that Bernanke made a wonderful job for the economy and larger population?
    Buffet might be confusing the personal benefit with the benefit of the whole system...

    ReplyDelete
  18. "Most of this new money being created by the Fed is not moving into the system."
    Bernanke is not stupid he exactly must knows that too.
    But if he knows that the QE is not helpful for the wider economy why is he doing it?
    Maybe for the same reason why Buffet is praising Bernanke for QE the owners of the FED are just as happy to pocket huge amount of money in the process.
    Sounds crazy I know but why is 85 billions dollar created each months if it has no benefit to the economy whatsoever?
    Well actually what can be any crazier at all than the Federal Reserve Bank of the world largest economy is owned by private investors?

    ReplyDelete
    Replies
    1. Kris,

      The controllers of the printing press 'QE' CBs and TBTF banks are here to help us 'THEMSELVES' and will continue until they are thrown in jail. As Hubert mentioned above that Zero percent money will 'IS' finding it's way into hard assets, using shorting in commodities and no doubt short selling of stocks and the like. It will continue until they own a large slab of the worlds hard assets. The only spanner in the works is China and Russia who are buying hard assets around the world also, so the race is on China and Russia have hard currency and trade surpluses the west have to print 'QE' to stay in the race. Gold is enemy numero uno of QE backed FIAT that is why it gets whacked constantly by the QE peddlers, it is the canary int he coal mine.

      Delete
  19. Hi Dan,

    "It seems as if these people simply cannot restrain themselves from yakking away whenever a microphone is present."

    I do not agree. I believe this is all by intention. They have been playing this for almost five years and still the markets do not recognize the game:
    Throw on the printing presses and simulatanously claim that they could be stopped very soon.
    To me this game became obvious, when they announced QE4ever with 85 bn per month while claiming that it could be stopped very soon. Then I recognized that it's all about the management of inflation expectations.

    "Obviously I am being facetious here but I think my point is made - most of this new money being created by the Fed is not moving into the system."
    With all respect I do not agree, Dan.
    The FED is buying the treasuries and therefore giving the bondholders that sell the bonds, this new money. This money is not used to make loans and create more credit money, but it is used to buy "what goes up". Therefore it was so important for the FED, to manipulate gold down, because otherwise equities wouldn't have been the only game in town.

    It's really that simple. But once the markets begin to recognize the central bankers game, that the FED cannot stop QE, then a hell will brake loose. They better be successful for ever now!

    ReplyDelete
    Replies
    1. Hi end,

      I fully agreed with you... I thought I was one of the few who figure this out....

      Sneaky as it is ..

      Cheer

      Delete
    2. Endzeit;

      When I say that the money is not moving into the system I mean the general economy. Most of it is either sitting in the "excess reserves" account at the Federal Reserve or is going into the equity markets. In other words, it is benefitting the big banks and Wall Street in general but not the populace at large which is watching its standard of living falling off the cliff while the equity markets make one new record high after another.

      I find it ironic that the Socialist in Chief, who prides himself on redistributionist policies and is the so-called "champion of the little guy", is presiding over a situation in which the Wall Street players are reaping enormous, once-in-a-lifetime profits while the little guys are becoming poorer and having their standard of living implode.

      Delete
  20. Seems that gold can't sustain any rallye. As with Syria and now with NO TAPER, the only thing I saw was a short-term rallye due to short-covering. As Dan said, where are the bulls? I'm once more disappointed by the drop back to 1325.
    WEEKLY CANDLE CHART.

    http://i41.tinypic.com/25p7bxf.jpg

    - we are in this simple red bearish pitchfork. I'd feel more confident if we break the mlh sup.
    - the MACD 9 20 7 is getting close to its propagation axis, and starts to reverse near it...not good.
    - another indicator a friend trader gave me the other day (I’ll keep its name, the CDUR) is starting its cycle going down. It's a cyclical indicator, but it means that usually when it goes down, the pressure on prices is down on that price unit. So now is not a great time for bulls in terms of cycles on this time unit. In short CDUR is an indicator to follow the strength of a trend, its « momentum ». If we are in a bull trend and then prices only correct laterally when CDUR goes down, it’s pretty good. Else, be careful.
    The median of the red weekly pitchfork and the lower Bollinger Band still give a possible target of 1220 $ 

    On the daily time unit, there is a support at 1300 $ (price) down to 1285 (squeeze of Bollinger Bands on the 2 day candle chart). So maybe that area will prove solid enough to hold.
    Conclusion : I'm neutral. There is support on a daily time unit but the weekly time unit looks to me rather bad . Short term is a mess because of recent FOMC news and scissors. Otherwise, prices are fleeting between support (1285-1300) and rĂ©sistances (1375), so I will wait outside to see what happens.

    Imho if you trade, it's better to wait for the real opportunity than to "play" too much. Most of the time, trading means waiting and watching for the opportunity, not gambling crazy at each new candle. Dan is monitoring several markets covering all commodities. Means monitoring numerous market and wait for the best opportunity on some of them. There won't be an opportunity to trade every day in the gold market. I’ve done nothing since my profit taking above 1400 and then sell stop just under 1350 most of my remaining position. Wait and see for me.

    ReplyDelete
    Replies
    1. Hubert du Haut;

      Very good analysis Hubert...did you get the email I sent to you?

      Delete
  21. P.S : on the bright side, seems it was 3 witches day this friday. So I'm watching the 1300 $ support zone with a lot of interest. That's where we were when Fed "surprised" people (lol) by not tapering. If we have a trend reversal to the upside, seems to me that the minimum is that this area holds!!

    ReplyDelete
  22. Hi,

    I think we can't draw any conclusion on the price action on day we have option future expire...

    The price zoom from 1300 -1370... meaning there is more short ( small trader side) then short get cover or liquidated then new long established then got liqudated on Friday...

    in trading there is only 2 side , right or wrong.. there is no'if'

    the movement of the market is making market more difficult to time... and i think it is because people who is trading is put their stop loss further away from their cost... that is no good for trader... and betting that trader is getting more loss then gain.

    JP mogan need to pay fine for manipulation and i betting that they will trying to cover their loss by taking from the market...

    Sometime I try to warn by posting position in the open blog,it is not doing me any good cause it will make me loss opportunity...anyway... since it is dan policy of no posting position here...I respect that..



    Cheer and take care..




    ReplyDelete
  23. This comment has been removed by the author.

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  24. The volumes in GDX (96 million) and other gold shares were enormous. TRX alone did 9million, many others did massive volumes. What does it mean going forward? Considering Bullard made a wishy washy statement what precipitated this even bigger movement down just two days later?

    ReplyDelete
    Replies
    1. These volumes were related to the index rebalancing. Taking TRX for an example, funds that were short the share against the index covered when the stock got deleted from the index. Stocks that were added to the index were manipulated all over the place too before the index bought large volume at close.

      Delete
  25. This bond buying plan is running perfectly. Even better than anticipated - from the globalists' point of view. They need to consolidate as much wealth as possible by the end of the decade when they get their thermonuclear war to wipe the slate clean.

    Why is it running so well? They have convinced us that they are stupid and do not know what they are doing. Dan is right in one sense, the only way inflation, velocity, and the economy can pick up, at least in nominal terms, is to give the people the money. But as long as the money stays in the financial shell, the globalists can pick up all the assets with this printed money and not be noticed. Like Bush, Sr. said, Trickle down theory, is trickle up reality - into ever righter, whiter, and tighter hands.

    The only way to make money is to buy and sell at a profit. Gold contracts are the best way. BTW - professionals trade gold from the short side 90% of the time - as I do. Price adjust more quickly on the down side, than from the long side. Plus the dumb money goes long and are easily scared. The dumb money doesn't know how to short. Jim Cramer talks about how to buy buy buy... Booyah!

    I waited Thursday evening for a spike to about 1370 to raise the basis on my short position to scalp from. it never even came close. First warning... It drifted to 1363, and flatlined all session and low volume - even for Hong Kong open at 9pm ET - second warning.

    I trade in New Mexico, which makes the time zones and my sleeping patterns even more of a pain (the mountains out here are beautiful from my window, where I trade for a living).

    The home run hitters trade futures, so they can trade 24 hours a day. The best action and setups take place while the average person sleeps. When I saw that for 4 hours Thurs-Friday overnight, gold could not regain 1360, despite watching it try time and time again, I knew it was going to be a bad day (good day for me). And rode 4 short dec contracts down, until I peeled off 2 when the fed mouthpieces started to talk at about 1335.

    I kept 1 into the weekend and bought the third back at 1328. Upshot - The official 1360 wall has now become the official 1325 floor. Look for a Sunday Night early lift, before any selling that may resume. If 1330 is taken out I may go long, depending on how early that number is taken out in the Sunday overnight session. If it takes hours and/or doesn't, look for the selling to resume. Gold and copper has actually held up the best post-FOMC announcement. Not only have I made money on this round trip, but have once again raised the cost basis on my physical - up to about 1800.

    If you want to make money in gold you need to trade like gold - 24 hours a day.

    ReplyDelete

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