Earlier this week gold scored a low near $1210 before violently reversing on an "out of nowhere" short covering rally. Today, the initial reaction of the metal after the payrolls number was to plunge right back down towards $1210 again. However, it then staged another violent reversal higher on very strong volume. This action has gotten my attention.
As a general rule of trading - a market that fails to move lower AND STAY LOWER on what is considered bearish news is a market that odds favor having bottomed - at least temporarily. Again, with so many computers running our markets nowadays, one has to be careful with generalizations but this sort of price action is noteworthy nonetheless.
Another interesting thing - the mining shares are also moving higher along with the broader equity market this morning. They are not up by much but they are certainly not going down for a change.
Yet another thing - the Japanese Yen is also sharply lower. That currency has tended to be a reflection of trader sentiments towards risk at times. During times of risk aversion; check that - during times in which traders are fearful of SLOWING ECONOMIC GROWTH - the Yen has been the recipient of strong money flows. The Yen is now moving lower.
Another thing - Copper is moving higher.
Another thing - the VIX just collapsed lower today with the index thus far down some 8% as I type this. The fear/concern/worry from earlier this week apparently just evaporated.
Could it be that there are some incipient signs that the market sentiment is shifting towards one in which it really does believe that the economy is actually improving enough to see some actual stronger growth? The case is not yet clear. What is fogging it for me is the price action in the long end of theTreasury market. Were it not for that today, I would nod in the affirmative to the question I just posed; however, interest rates are moving lower ( not by much but they are lower) in today's session. That does not quite fit in with an increasing rate of growth sentiment.
Putting in a temporary bottom does not necessarily also mean and uptrend is about to resume. Just take one look at the corn market as a recent example. It stopped moving lower, temporarily, but has not been able to develop any sort of lasting move higher.
One thing I do know - gold has been an easy one way bet as far as a trade goes for some time now. Short rallies and make money as the price drops. The easy money might be over, at least for now... let's see how this thing closes today before getting too dogmatic however.
By the way, JP Morgan continues to be the large stopper for December gold during its delivery period. They are gobbling up all the issues.
One other item to note - silver is lagging gold today. That is not what one would expect to see if the "improving economy" theme was becoming much more widespread. Lots of variables to consider as traders.
It is really unfortunate that the Commitment of Traders report due out later today will not include the price action from Wednesday and from today. Both days experienced these violent reversals. I would love to get a bit of a better look inside the market but sadly we will not get that until next week. By then it is too late to do us any good. This report really needs to be more timely but under the current setup the CFTC simply does not possess the financial resources/wherewithal to be able to generate something that up to date. Also, the brokerage firms do not have the manpower either to keep their reports to the CFTC that timely also.
I will get something up later on today after the dust settles. We can take a look at the closes and go from there.
"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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