As a matter of fact, very few commodities were in the green today - just about everywhere one looked, it was lots of RED on the screen. The reason - hard to say for certain but with the Dollar up more than 1/2%, it would have taken some pretty firm fundamentals in these individual markets to shrug off the macro-related selling. As it was, any market whose fundamentals were weak, was especially prone to a bout of selling today.
Gold simply had no reason to move higher today against those headwinds. As can be seen on the chart below, it is working its way down into a chart support region. If it holds here, the bulls can claim a sort of moral victory given the strength in the Dollar and the continued weakness in the Commodity Sector, especially the grains and crude oil (think food and energy and then think no inflation issues there).
Tomorrow, Friday, is the usual "no fun" day for gold as it tends to get whacked a lot at the end of the week for some reason. This is however a seasonally strong period for the metal so it might be able to dodge a bullet. We'll see. Right now the short term momentum is with the bears after the failure at chart resistance. The probe lower is meant to uncover whether or not the bulls are hanging around or not.
here is one of the commodity sector - the Goldman Sachs Commodity Index. There is certainly nothing in this chart that would indicate the least bit of fear in regards to rising commodity prices. If you want to know why silver puked today, just study this chart - silver is joined at the hip with the broader sector.
By the way, gold failed to extend much past the 50 day moving average and has instead plunged back below this key level. This is one of the reasons the selling is now coming back in once again. Hedge funds see that failure as another sell signal. It is going to be up to Asia to put a floor in this market once again.
Dan, do you think Asians are keen to put a floor in for gold price or would they simply be content to just let the market take it down and keep aggressively buying like they have been over past several months? I don't really know but it just seems that gold price only moves when it hits NY Nymex although there are odd occasional spikes in the wee hours via the NY Globex away from the Asian market so who knows who is actually buying or selling there. I've always wondered the role of creating the Globex other than controlling the market after NY markets close....would there be another reason as 5 years ago it didn't exist and markets simply closed between NY and Sydney metal market opening....its always just puzzled me, or does that mean I'm suspicious.
ReplyDeleteSprott's blog shows details on Chinese gold buying that indicates huge appetite so wonder if even they have a hand in moving gold price down? One thing you mentioned recently that I think everyone would agree is that when US$ strengthens, gold gets whacked. Why the US$ is currently getting stronger when even the Fed is nervous, US unemployment is up/job numbers are weak and no taper on the horizon is beyond me. Smoke and mirrors or a fundamental I'm missing?
Chuck;
Deleteon the Dollar - I think it is still a case of which nation out there has the best chance of seeing interest rates rise. When the US Treasury market moves lower and rates rise, it tends to support the Dollar. I for one do not believe the US is in any shape to handle rising interest rates but the market looks at the alternatives and the Dollar gets voted on by a sort of default. In other words, all the apples are rotten but the Dollar is the least rotten apple for the moment. Sentiment can change rapidly but for now, that seems to be the case.
Asia can put a floor in the gold price but it can never run it higher. That is not the way the physical market operates. It works on the idea that low prices are good for physical offtake. As the price works higher, the physical demand tends to wane as buyers wait for prices to move lower again. In other words, they tend to buy low. Only in the West do higher prices stimulate more buying among the investment class. they buy higher and buy higher yet! Backwards but it is the way that our markets operate anymore since it is all about computerized buying or selling which is all about momentum.
U.S. Dollar is surging in Asia as we speak. Seems like every sovereign wealth fund and hedge fund in the world is dumping commodities of every race, stripe, and color and using the proceeds to buy U.S. stocks, ergo, the huge demand for dollars.
ReplyDeleteJust look at the shellacking the grains took today. Virtually everything in the supply chain except for health care costs is collapsing, sending profit margins to the moon.
This explains the outlandish performance of the retail and consumer ETF's such as XRT and XLY, despite a horrible mood. All I can say is that institutional investors are obviously anticipating "the greatest consumer spending orgy of all time" in 2014 - 2015, thus, they are running these consumer stocks up to the moon.
At the same time, they are betting that $1 trillion increase in the deficits each year can be sustained indefinitely, come hell or high water, because there is ZERO risk of inflation. Because if inflation were to actually occur, as it attempted in 2010, then all Bernanke has to do is to start jawboning and the Algo/Igor/Robos will instantaneously dump all their anti-dollar investment holdings and the CRB Index will enter an immediate bear market of unknown duration.
Never before in modern history has Central Banking been so easy, so predictable, that speculators are able to profit handsomely from it and everybody who has a trading account an become rich.
Truly extraordinary times we live in.
Sounds Easy Mark
DeleteDoes this mean everyone and anyone will be permanently rich?
Example: an unemployed person is low on cash, he collects a bunch of pop bottles and cashes them in...still not enough money. Simply take your bottle money to a broker and buy some consumer discretionary stocks and voila ! within a week or so you have doubled your money !
The best part ? this is not the least bit inflationary !
We truly do have extraordinary times ahead of us.
@mark,
Deletewhat's your source for: "Virtually everything in the supply chain except for health care costs is collapsing, sending profit margins to the moon."
Here's the data I have on the blue chip consumer companies (from Morningstar:
PG: 2004 & 2005 operating margin 19%, 2013 17.3%. 2004-5 gross Margin 51%, 2013 49.3%
WMT: 2005 operating margin 5.9%, 2013 operating margin 5.9%
AMZN does better-2005 gross 24%, 2012 26.2% (net sucks, though)
KO peaks at 2006 operating margin 66.1%, 60.3% in 2012.
This comment has been removed by the author.
ReplyDeleteDan - just found a really nice chart. The 8hr chart for gold. Draw a line from the Feb 2013 high through the end-August high and set the moving average at 50. Both the moving average and trend line provide strong resistance (then support). One to watch. Given that the gold price just tapped the trend line but couldnt break through, another reason to sell me thinks.
ReplyDeleteJohn;
DeleteThanks - I tried it but Esignal cannot run back to February on an 8 hour basis. It goes back to June and then blanks out....
I am watching to see how gold handles itself down here near $1305, which is a support level. So far it has bounced and that is holding but the weakness in the gold shares is a concern. If they do not bounce as well, it is not a good sign. the day is yet young however.
Hello,
ReplyDeleteSo...buy 1340, sell half 1346, sell half 1340, buy half 1334, and I'm just out now at 1325 completely, since we closed the day under the ma50, which was the second condition of my "stop loss", as mentionned this weekend.
All this for a small loss, a few pips plus commission if I sum it up.
My problem in the first place is I bought much too high and missed the rallye signal on the median of the weekly pitchfork and the mlh inf of the monthly pitchfork, both at 1250 $. I was angry with myself, because it was the real entry point which I spotted much too late, not having watched the monthly time unit as I should.
Never mind, not much hurt and the proof to me once more that better wait for a real support / resistance than try to gamble in this swamp area above 1300 $.
So I'm totally out for now, with a small loss due to my recent agitation.
Good trades out there,
hey Hubert Du Haut,
Deletesorry- you may have answered this before in a previous post, but was curious, do you trade forex gold (XAU:USD) or futures?
Cheers!
Hi Jim,
DeleteNo, small amount, small account, small lines, CFDs only :)
But not only gold, fortunately :)
Hubert...oh well. Some you win some you lose. I can't believe how quickly the price has fallen. I almost excited my short at $1358 (bought at $1270) with the aim of buying in again (short) at $1400. Then yesterday at $1330 I was thinking about adding to my short but thought I'd wait for a bounce to $1340. Now ($1315) I'm scared of adding to my short! Waiting for $1330 or $1245 before I add another short. Don't like trading in the middle of the grey area.
ReplyDeleteyes, my opinion is worth what it is worth (see from last days that I'm far from making only winning trades lol, but at least losses are minimal when I'm wrong), but now I smply see :
Delete- resistance at 1360 area = 62% retracement Fibo level of 1430-1250.
- support at 1290 area = mlh inf of the upwards pitchfork you can see on a daily or weekly time unit, with the last pivot points.
So, support 1290+, resistance 1360+
I don't do anything in between.
Beyond that, the real game field is imho within the Range shown by the Bollinger Bands on the 3day time unit, i.e rather 1275-1410+
I don't even make a comment as long as nothing changes while prices drift once more inside the 1300+ area.
Good Morning: 8:00 A.M. E.T.
ReplyDeleteLooks like the GOLD and SILVER charts are poised like an OLYMPIC DIVER ready to launch of the platform and go STRAIGHT DOWN.
$1312 and $21.79 as I'm typing here. Couple that the the US DOLLAR INDEX now moving forward above 80 at 80.60 according to FINVIZ. I'm not sure what month contract that one is because the numbers vary from various sources. Can someone tell me why the numbers on FINVIZ are different from say that of NET DANIA and so forth?
Looks like the trend is your friend (or your enemy) depending how you slice it. If you choose to stay with the trend then BUY STOCKS, BUY THE DIPS, and if you have a reason to trade GOLD and SILVER then keep on shorting along with JPM.
Gold by the way looks like the $1,200's are in for an obvious visit. And I'm actually expecting a US DOLLAR RALLY in here and much lower for the METALS COMPLEX.
In the meantime It's time to watch the NYSE and NASDAQ CASINO for more adventures as they have some serious volume compared to how thinly traded GOLD and SILVER has become.
One CAVEAT about ordering PHYSICAL GOLD or SILVER. Had a friend order recently that reminded me that the DEALERS upon your order entry put in a SHORT FUTURES CONTRACT immediately to sort of hedge your order. So I think there's a devil in the details here that when people order their PHYSICAL GOLD the market is met with SHORT POSITIONS.
Someone should investigate this and correct me if I'm wrong but perhaps this community of "KEEP STACKIN'" is causing the market to be shorted even more? Wouldn't that be something? The more they buy the more it's knocked down. Hmmmm.....?
Admittedly I don't know the market very well on the inside but I'm open to any suggestions and explanation as to how this all works.
GLTA and keep stackin' cash.
The News UNIT
www.thenewsunit.com
It's curious how many comments here are showing an attitude based on expectactions of what the market will do next, or reading a trend, when Dan insisted several times on the fact that one should put expectations away when trading, and that he still was neutral regarding gold market evolution.
ReplyDeleteAside from that, I don't see a trend now or any obvious reason that gold should be headed towards 1200 rather than 1400, as the weekly bollinger bands are converging and show but one thing : a lack of trend, indecision, and a decrease of volatility. My personal interpretation, anyway.
Yep that's what they showed too just before gold took a big nose dive April - June.
DeleteStackers, Preppers, Peak Oilers, and "GOTS" people are getting obliterated this morning.
ReplyDeleteMeanwhile, those who have believe in the U.S. consumer are scoring once again, as The Container Store IPO is now up 99% on the first day of trading, XRT once again probing world record lifetime highs.
Gasoline prices are falling like a brick, which means RV manufacturers are booming, evidenced by the fantastic performance in names like Winnebago.
I can't remember any other period in trading history where those who shorted gold and went long the U.S. consumer made so much money in such a short period of time.
The way oil is falling, and Europe is rapidly deflating we could be on the cusp of a commodities bust.
ReplyDeleteDUST up 10% in the first hour of trading
ReplyDeleteAll the U.S. Dollar haters must be coughing up blood this morning. UUP has gone virtually straight up the last 48 hours.
ReplyDeleteAnd just imagine the huge tax cut coming for the consumer once gasoline gets back down to $2.00/gal before next summer.
@Mark. I love the data errands you send me on. $2- retail gas hit that for 2 months in dec '08-jan '09, and before that in Feb '05. But heck, we can dream of a deflationary death spiral now, can't we.
DeleteEnergies puking and barring an end of day reversal up, lots of sell signals will be generated; btw, one of the best technicians out there is Louise Yamada and she has spotted the death cross for commods; swb in sparks
ReplyDeleteThat wouldn't include gold cause it's not a commodity, it's money. Ask Mike Malloney.
Deletelol hahaha
DeleteI saw the yamada piece...she's one of the other good KWN commentators...but even i can spot a death cross! looks like the dollar is going to break up above 50dma, not good for commodities either (I was amazed how well copper had been doing until now...)
DeletePenultimately-bought & sold DUST this am...no brainer for a quick hit after ABX announced more dilution to finance Pascua-Lama.
Finally-I feel it necessary to counter Mark's agitrop to SiS (stay in system). While I continue to have assets in & trade, I'm seeing a lot of capital controls...I have had the direct experience of having a U.S. Bank ask where a large transfer was going in Mexico (to buy land) and require proof of the asset value before approving...This was unheard of last year and certainly five years ago.
I guess Dan Duvall moved on to greener pastures, and Peter Mickleberg is now responsible for grabbing the fire extinguisher and putting out the fax machines fires at jsmineset which catch fire and go ablaze on days like this.
ReplyDelete"But Jim, you promised!!!".......
Buy your glam stocks and enjoy yourself Mark. Your obsession with Jim Sinclair is pathological. You never stop. Believe it you have an audience of one here.
DeleteMark;
DeleteI know Dan Duval well and he is a class act. I have no idea what might or might not have happened nor do you or anyone of the rest of us for that matter.
Knock off the personal attacks or I am going to drop the hammer on you and kick you off the board from posting. I am serious about this as I will not tolerate that sort of crap.
I am trying to run a top notch site here that attracts judicious and insightful comments; we do not need snide remarks.
Looks like the Fed is playing its game. Drive the market down to stop bubble talk and jawbone until the ten year gets near three per cent and help the dollar until their bluff is called.
ReplyDeleteJust passing along another URGENT message about a silver shortage from GoldSilver.com:
ReplyDeletehttp://createsend.com/t/r-7D8E802D076289882540EF23F30FEDED
Good time to load up. You can thank me later.