"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, November 26, 2013

Holiday Trade in Many Markets

About this time of the year, many market participants who trade professionally begin to scale back and lighten up on positions as they look to take some time off from the day to day warfare in the pits. Typically, that means lower trading volumes on certain days oftentimes resulting in some pretty wild swings in price as the liquidity dries up. Floor locals look forward to this time of year as many of them can make some very big gains as they play in the sandbox while some of the larger bullies are no longer present. Stop hunting becomes a favorite pastime.

Do not be surprised therefore if we manage to see some strange, sometimes inexplicable price action. Deciphering some of this can be challenging at times as the thin volume makes price movement somewhat dubious due to the exaggerated nature of the swings.

Gold has moved higher over the last two days bouncing from $1225, which is a bit higher than where I had pegged support ( $1220 - $1215). After spiking as high as $1257.80, it quickly encountered a round of selling which knocked it well off of that level. As I type these comments, it is up $1.00 from yesterday's pit session close.

Meanwhile, silver clawed back over the $20 level and did what we expected it to do, namely elicit more selling. Copper also moved lower. Both metals continue to be sold on rallies.

I have already written some comments on the mining shares ( HUI ) but suffice it to say, expecting gold or silver to mount any strong rally on a day in which the mining shares are further getting beaten with an ugly stick is foolhardy. Another near 3% drop in the HUI puts it just a hairbreadth away from psychological support at the 200 level.

Since the shares have been prescient when foretelling the decline in the gold price, odds favor further weakness in gold to end the week. Much depends on how active the physical market is. Don't forget that gold deliveries for the December Comex Gold contract will begin shortly.

In looking at the price chart I still do not see anything at this point that would be considered to be the least bit bullish. Momentum continues moving lower with many indicators still not at extreme oversold levels. The ten day moving average ( noted on the price chart ) has tended to hold gold rallies for last month or so meaning that we are reaching a potential inflection point once again.

 Also I have noticed that the rallies in gold continue to be driven mostly by short covering which means that they will be limited in duration. You get a spike higher on some decent volume which measures the urgency to exit shorts whereupon the market then proceeds to drop down and begin a leg lower all over again.

What I can say at this point is that this week's low near $1225 had better hold or gold is going to test that support level I have noted above. If that fails, I can see it moving below $1200. At that point we will have to wait to see where more bargain based buying surfaces in sufficient quantity to absorb what is surely going to be momentum based selling by hedge funds and other large speculators.

Pressure in crude oil, even in the face of stronger products, weakness in the grains and bean markets today, was offset by a bit of strength in some of the softs and livestock markets with the result that the commodity complex was a mixed affair today. That is why gold did not do all that much nor did silver. Outside cues were mixed as well.


  1. Bitcoin 975

    Now if only the "acclaimed experts" were pushing that thing.

    They would be CNBC and Bloomberg rock star heroes.


  2. Mark

    Still trying to figure out an easy way to buy a Bitcoin.
    Do you have any?

    With the volatility I do not see how it can be used in commerce right now. I have been told that they will hit $30k. If that is the case then everyone will buy and hoard them.
    Imagine you are a retailer who accepts Bitcoin, how would you price items to account for the wild swings in value?
    Interesting concept but it looks a little wild west right now.

  3. I think for the first time ever, I read someone who said, don't worry about the price of gold, because it is insurance. For me, its not an insurance market, it is a real market. Like soybeans or oil or even stocks. I buy gold because I want to profit from it. When I lose on it, its a real loss. Its not an insurance loss. Its real. If it was insurance, where do I make a claim to get back the loss. The problem with saying it is insurance, is that the circumstances that should make gold go up, and thereby justifying the "insurance" are already happening. So its not acting like insurance, just a market, like any other. I am long gold for good reasons, but one of them is not insurance. So that was very disturbing to read.

    1. This comment has been removed by the author.

    2. If you don't like the GOLD INSURANCE POLICY we have three other PLANS to offer you depending on the coverage you need. They are:
      1) The SILVER plan
      2) The PLATINUM plan
      3) The PALLADIUM plan

      It just depends what your needs are. Thank you.

    3. In the words of Mark, the stock insurance plan would have worked very well.

    4. Arnie

      The stock market plan is hindsight. Don't forget that even Mark has admitted he still holds gold.
      The game is not over yet, this is a vicious correction..not the end.

  4. Arnie:

    I have to agree with you on that one. Don't worry about the price of anything just worry about how much of it you have in ounces. Right now I'm stacking fishing lures which are also measured in ounces.

    Actually fishing lures have done quite well for me by accident. I have a box of them I'm going to sell now to a collect just after a few short years they have tripled and quadrupled in dollar value. Wow!

  5. Thanks to all the participants of this blog!
    I find it more and more interesting.
    It is a refreshing exception to see a blog where various people share different points of view and have a constructive debate about it, versus the many "guru like" blogs consisting of a community of readers only seeking for a mirror of their own thoughts to comfort them in their initial belief.
    It is sure easier that way.
    I hope every point of view keeps being represented here :)
    Have a nice day,

    1. Thank you and happy thanksgiving all.

    2. Have a blessed Thanksgiving and may all your investments and trades be prosperous ones.

  6. Hilarious.

    Best performing sectors have been the financials.

    I mean really, check out the "Too Big To Fail Banks", up 40% this year.

    Even if you had your 401(k) plan "bailed in" with a 20% haircut, you are still 20% ahead of where you were last year.

    Jim Willie must be looking at the charts of WFC, BAC, MS, etc. aghast, wondering what hit him....


    1. Mark

      Why do you read those guys?, they only irritate you. I always look at the author behind the headline, I won't even waste my time on 98% of the articles (GW being one of them)

    2. Dean, you ask why he reads this guys? It is like the air he breathes. You have used the word yourself. Troll!

  7. Actually, I have noticed that the gold pumpers who mention price targets etc. seem to be diminishing, this is a very good thing.
    There is a chorus of $1000 down to $400 predictors but the "$2000 any day now price super rocket" nonsense seems to have almost been reduced to a trickle.
    Even the "this is the bottom" callers have been more or less silenced.
    All of this is good news actually…the market must be cleansed of the charlatans before we can recover.
    If gold did start to turn right now…no one (including me) would believe it. I would probably sell every rally.


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