"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 free work will soon be available at www.traderdan.biz

Monday, December 16, 2013

Market Comments 12-16-2013

I mentioned in a post last week that I am beginning to wonder if we are seeing a shift in sentiment towards "growth" in the economy. What is needed in gold, and especially in silver, is for investor sentiment to begin looking away from the "growth is steady but sluggish" theme to one of "growth is picking up and with it, so are the chances of inflation".

Today we had the US Industrial Production numbers. This is a gauge or measurement of the output of US manufacturers, utilities and mines. It registered a 1.1% increase from last month's number, the biggest jump in a year.

That seems to have sparked a move higher in silver which then yanked gold higher. I noticed that Copper was higher as well.

Equities went on a tear higher today as once again the thinking in regards to the QE thing shifted yet again. Today the thinking was that the Fed will hold pat on this month's meeting and will do nothing until March at the earliest so as to not jeopardize the recently improved economic data.

That in turn undercut the US Dollar and thus we seemed to get a binge of commodity buying. Crude oil, gasoline and heating oil, all rallied higher. The metals were all higher. Soybeans moved higher. Coffee and sugar went higher. There were some commodity futures markets that moved lower today but the majority of the sector saw steady inflows.

Whether this is a shift in sentiment towards the sector in general is still up in the air. Part of what makes deciphering all this even more tricky is the fact that these moves are now occurring in the middle of the Silly Season. Market liquidity is shrinking as traders square their book, closing out positions as we move to the end of the year. That allows for excessive price swings in both directions on relatively small-sized orders as more and more air pockets, both above and below the markets, are encountered.

Back to gold - it confirmed that it has entered a range trade for the time being as that uneasy truce between bulls and bears that I mentioned last week continues. The range is defined on the bottom near $1220 and on the top up near $1250 with short covering related spikes pushing prices up towards $1265 before the selling re-enters. Until this range is violated, in either direction, gold is marking time.

It seems to be unwilling at this point to make a decisive break in either direction more than likely due to the time of the year. As mentioned above, many traders are simply not all that willing to establish sizeable positions as the calendar is about to shift. They will wait until the beginning of the New Year before moving back into some of these markets in size. That is why I stated last week and wish to restate here for the sake of emphasis that reading too much into the day to day gyrations in these markets is not wise.

Tax considerations are also at work and trying to unravel that knot can be fruitless most of the time.

I have noticed that as I type these comments, silver has once again been unable to maintain its footing above the $20 mark. It is back to being a teenager once again. For the bulls to have any sort of chance of generating some upside fireworks in the silver market, they will need to get at least past the $21.25 level.

The S&P 500 is stuck between the 50 day moving average and the 10 day moving average. It is basically in the business of whipsawing traders right now.


  1. Hey Dan,

    A phase transition in stocks, a transition from climbing the wall of worry to "only fools don't own stocks", is a (growing) possibility. My computers continue to show concentration of capital towards the safety of the center. I still don't see a reasonable comparison previous US phase transitions, most notable 1900-1903, 1927-1929, 1998-2000, but it's still quite possible from 2013 to 2016. If it happens, it will be driven by global money flows pouring into the US. This will push up stocks a lot more than ‘experts’ think would be possible today.

    This only happens if stocks breakout relative to all currencies. I follow cycle concentrations of the stock to gold ratio to gauge this breakout. The push in stocks could leave gold and silver as the temporary ugly sister that everyone forgets about. This doesn't mean the end of either, only a temporary change of human behavior which usually runs until a crash. After the crash, the ugly sister will get a lot more attention.

    Take care,


    1. Eric;

      Hey there buddy! Great to hear from you. It has been a while.

      Thanks for the excellent comments. They are most appreciated.

      Your statistical analysis is second to none. The first time I even heard the words, "Z Score" was from you!

      Merry Christmas to you. Keep the posts coming along.

    2. Hi Eric!
      Thanks for coming and making this forum more and more interesting to follow!!
      Quality brings quality, let's hope it keeps going on that way :)

      A quick mail to notice that the pitchfork is still holding, yet the blue resistance keeps prices from heading towards the median.
      I'm neutral as long as we are between upwards mlh inf and blue resistance. I'm flat.

  2. The price action in consumer discretionary stocks priced in virtually every currency can only be described by one word: EXTRAORDINARY


    The price of GLD in any currency you can think of is utterly horrid, with many the exception of the Yen.


    Bernanke can be applauded by creating the biggest global boom in consumer spending in every country, and doing it by printing insane amounts of confetti.

    And with no inflation consequences whatsoever.




    Anyone who bet on hyperinflation and the defeat of the U.S. consumer suffered losses that can only be described as catastrophic. Almost to the point that many investors who hung on to those themes this long are unlikely to recover.

    1. Mark

      Whatever will you do when Ben is gone?
      You will have to transfer of Deity/God status to Janet…do you feel the same way about her?
      When you say no consequence whatsoever….do you mean forever and forever more?….as in we can all buy XRT/XLY and forever be financially set?

    2. China will keep the the US consumer drip feed going as it continues to buy GOLD not Comex Gold, mines, farmland, real estate etc. China is happy to watch US and world consumers like pigs at a trough, checkout your shops at Christmas see what isn't made in China. In the long run it will be idiots buying bubble stocks at sky high valuations which will evaporate like a f.... in the wind, and consumers buying Chinese goods, all fueled by another kick start bubble created by the FED to claim a mythical recovery. China will then allow it's currency to appreciate backed buy Gold and buy the assets it hasn't already got hold of. So western consumers go crazy with debt and spending the bearded man prints $ like crazy China sits back and converts crap into hard assets repeat GOLD not Comex Gold, mines, farmland, real estate etc. As the Chinese say 'We live in interesting times'

  3. I don't know about no inflation consequences whatsoever …. you seem to be absolutely sure , I am just a bit cautious , if this is the case … then that means not only not tapering but also expanding further , if thats the case I just can't see natural resources not moving higher , and by consequence precious metals , or anything else for that matter .

  4. Okay…yet another Armstrong rant (he will not reply to my emails)
    Yet another post by Armstrong with yet another passionate follower gushing about how Martin saved him from Gold in 2011 and went all in Dow and is now richer than he ever imagined….blah blah blah. He also slams any entity that does not post his analysis and predictions. This is not the behaviour of a totally healthy mind.


  5. "That is why I stated last week and wish to restate here for the sake of emphasis that reading too much into the day to day gyrations in these markets is not wise."

    Dan, if a daily candle is not enough, which minimal time unit are you using to detect a possible trend change? Weekly candle?
    Thank you :)

  6. Wow, gold looks about ready to smash through support and head towards $1,100, validating more deflation in key input prices.

    While XLY is still pinned at world record highs, reflecting the resilience and unflappable nature of the U.S. Consumer.

    Exactly on the course which Yellen wants, for the greater good.

    1. Sounds like the Bernanke Fed is working it's magic again.

      Dean - Go Marty go!

      Come on he was riduclued and written off as an ameateur analyst for 2 years now it's his turn to have some fun, it's that simple. Those who listened were saved from total and utter carnage, no exaggeration.

    2. I don't remember Armstrong being ridiculed. He was wrong through most of 2011 and then was dead right.

    3. "Saved From Utter Carnage"

      Yep, hands down the best advice ever.

      Many retirement accounts were saved by those who heeded the advice of those who said to stay with the consumer and avoid gold.

      Imagine the horror today on the faces of those who took delivery of their gold share certificates and wasted time and money attending Q & A seminars listening to gloom and doom forecasts.

    4. Armstrong the anti-spell check grammatical butcher; But of course he knows everything about nothing, right? sparks, of course

    5. He was riduculed on JSmineset. Jim never referred to him by name but clearly made reference to him, saying he was trying to sell his ECM computer model for $20 million.
      Well after the great gold melt down sales must have went through the roof.

      While other gold bugs (cough Jim Will... cough) said he was let out of jail so he can bash and talk gold down! As absurd as that sounds.

    6. The guy was always respected especially his opinions on gold. Sinclair claims he and others helped him get out of jail. One thing you cannot deny is Armstrong is a bigger egomaniac than anyone we have seen in the gold community. He will be right until he is wrong and then he will be like all the rest. Gold did have a parabolic rise in 2011 and Sinclair and Russell refused to acknowledge it. So the shoe shine guy was not talking about gold as he did in 1980 as sign of a top, they missed it and gold did peak and I was one who listened because I had been listening to Sinclair for nine years and for nine years and he was right and then he was WRONG! Just like Armstrong will be.

    7. Don't think you have your timing on the facts straight. They all loved him, and Sinclair even said he was the greatest economic mind of all time - or something along those lines.
      Until, he said gold will decline to 1150 after peaking in 2011, before resuming any uptrend.

      THEN he lost all his gold bug friends.
      And I don't know about who helped him get out of the slammer or what parties were involved. And if it was the gold community, which is unlikely, why did they leave him there for 7 years, he was almost done his term anyway.

    8. One even said he was almost beaten to death several times.

      Like what does that mean, so he finally submitted and decided ok I'll get out there and bash gold down because what I say the market will do!?!

      How would someone even get info like that.

    9. You know much more about it than I do. Armstrong is a smart along with being disgraced jerk. Doesn't mean he wasn't correct. He saw the peak and I wish I had to. He will be wrong somewhere down the line and probably behave much in same way Sinclair has. Saying I was wrong just can't happen.

    10. Wrong again Concord....when Armstrong is wrong down the line he'll just blame it on the computer, it wasn't his opinion :)

    11. There you go. You were smart to see he was right. Give yourself the credit not Armstrong. I was not. And believe me in retrospect I was stupid.

  7. Dow guaranteed to go up, commodities guaranteed to go down.
    Has everyone forgotten what happens when you blindly follow a guru?

    This is the same old same old, right down to bloggers displaying a religious "it can only go up" fever.
    Yes, I do own US equities but I still sleep with one eye open.

    But hey…go all in…this time is different…right?

  8. A couple of other things - Yen seems to have stopped going down, flash crash in S&P futures (maybe they are moving from gold), bonds stopped going down, Vix moving up, European stock markets moving lower.

    Not sure what it all means but things are changing.

  9. This is what I am curious about.
    Bernanke threatens taper, yet they are (supposedly) the largest buyer of bonds. All analysts agree that government bonds are doomed.
    If this is true, how on earth would they prevent interest rates from rising at a rapid pace…without the Fed buying government bonds?

    Interest rates stay at zero because Ben "said so" ?

  10. Re the pera- bulls and permanent-bears. Even a broken clock is right one a day. Twice if analog.

    Thank you Dan for the sound analysis.

    1. Perma-bulls and perma-bears!
      Dang Spellcheck

    2. Looks like when the Fed speaks tomorrow, we will see a true "terrifying collapse" in gold as it breaks huge support levels, verifying the continued vicious bear market in commodities

      Meanwhile, rabid buying interest returns to the Russell 2000, as tapering will have zero impact on the trajectory of the U.S. economy.

    3. Mark how can you be so sure.

      What will the market reaction be if they announce taper....but not starting till March?

    4. Mark has a job to do Prophet. He doesn't care.

  11. Mark is on Ben's forward expectations plan(ting) committee.

  12. Consumer, industrial, banking, and semiconductor sectors still very strong, no sign of weakness whatsoever.

    If Tapering were to have a adverse impact on stocks, these sectors would be underperforming right now, like gold.

  13. http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/17_Absolutely_Shocking_Developments_In_The_War_On_Gold.html

    I am not a fan of any particular website, nor prognosticator, but thought this story could be on to something. It sort of answers some questions I file away in my mental file drawer. They could be wrong answers, but worth a look.

    In order to get gold down to 1,000 on COMEX, the globalists are going to need a lot of physical. After the traditional holiday season, where demand falls, the time is right to make the attempt....

    1. Another knock down will be a good chance to put more cash to work and sector rotate out of some DOW stocks into Gold and Gold equities. Drip feed and average in, counter intuitive but patience will be rewarded.

    2. Sinclair, Armstrong, Prechter, etc, etc, You guys still do not get it; these are letter writers, not players; the answer is in Sparks, Nv and the answer is; there is no answer, so have a sensational holiday season and enjoy your families and your health; swb

    3. Steve;

      Jim Sinclair is not a letter writer as Armstrong and Prechter are. He is the CEO of a mining company and was once a large gold trader. that puts him in a different category altogether. One thing I can say about my friend Jim is that he educated a large number of people about the role of gold. many folks had not even been around the when the bull market in gold ended back in 1980. It then went into a 20 year bear market with an entire generation of investors clueless about what it was and what its role was. Jim helped fill that void.

      Merry Christmas to you and a Happy New Year - that is assuming we can get past this afternoon's FOMC statement in one piece!

  14. We all know who is in control, it is the western central banks.

    After QE2, the central banks realized that they have to control the paper price of Gold to control the markets.

    Since QE3 and QE4EVA have been announced the paper price of Gold has been monkey hammered while equities are on a huge bull run.

    We are at point where my neighbours and co-workers are telling me which stocks to buy.

    This manipulation will end, just like the manipulations ended in 1999 (internet stocks), 2008 (Housing Bubble).

    The next manipulation will be the Bond Bubble in 2017-2022. This manipulation will be the grand daddy of manipulations. And nobody will claim to have seen it coming (i.e. politicians, TV folk, financial planners).

    When this manipulations ends, and the music stops playing, there will be only one chair left to sit on and that is the GOLDEN CHAIR!


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