"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


Thursday, December 12, 2013

Is it a See-Saw or is it a Yo-Yo

When it comes to gold and silver of late, just pick either one. After the big move higher early this week, gold has now surrendered all of its gains and then some. It is now trading down $4.00 for the week compared to last Friday's close.

The region up near $1260 - $1265 has proved to be a bridge too far at this point. Unfortunately for gold, the move down into support at $1250 - $1245 uncovered not more buying but rather more selling. In other words, the dip buyers did not show up and thus they was nothing to hinder the floor locals and others from reaching those downside sell stops.

So where do things now stand? After what looked like it might be a promising week with the possibility of cementing a double bottom at the $1210 level, gold is back in limbo. Neither side has a clear advantage at this point although the bears remain in control of the market on an intermediate term basis.

Here's how things will likely shape up in the immediate future. Bears need to take out the $1210 level and HOLD PRICE FROM RECOVERING to force another leg lower and set up a quick test of the psychological $1200 level.

Bulls need to take out $1265 and HOLD PRICE ABOVE THAT LEVEL to force another round of short covering and bring in some additional momentum based buying and bottom pickers.
A very uneasy truce therefore exists. I would not expect that to last too long.

One thing I have noted today which makes it prudent not to become too dogmatic either way is the rather decent performance of the mining shares as evidenced by the HUI, which although it was indeed lower on the day, was down only 1% closing in the upper half of its session range. A key bellwether, Barrick, was actually higher on the day.

The question is whether a bottom is in for these miners or not. I am unsure at this point and require additional price action to get a better sense of things.

Something interesting is developing which merits some comments. The S&P 500 ( I monitor the emini when studying this index as it is so liquid) is sitting a mere 11 points about its 50 day moving average. The index has not been below this key technical indicator since the early part of October. It briefly dipped below there for all of three days before rebounding and going on to make yet another all time high.

This market continues to look top heavy to me but it has thus far failed to have any sort of extended correction lower. Dips are eagerly bought. If it were to violate this level on a closing basis, support comes in near 1745 and extends down to 1736. Only if the market were to strongly close below that level do I believe we will see a sharp selloff across the market and could then pronounce an intermediate top. Even at that I would want to see how the market acted if it did close below that level  ( 1736 - 1734). It if popped right back over that then it will probably prove to be yet another bear trap. 

Keep in mind that we are entering the Silly Season as I described it the other day in a post. The dwindling liquidity will set up occasions on which it will not take that sizeable of an order flow to produce some rather large moves. Anything therefore becomes possible as we get ever closer to the Year end.

Some of what took place today was in relation to the news about the budget compromise being brokered in the House. That is expected to pass and then make its way to the Senate, which will more than likely pass it and send it on to the President to sign.

Traders viewed that as one less obstacle in the path of the economy ( remember the last time we had a government shutdown all the talk was about the lack of government spending/paychecks to public employees, etc. would have a slowing effect on the overall economy and thus give the Fed no incentive whatsoever to do any tapering). The thought today was with that out of the way, if the Fed wants to taper, that will not be an issue.

I know a lot of this seems convoluted but it is what it is. Our markets today move all over the place on whims and fancies, but this is their nature.


  1. Dan, the day will come when the FED becomes completely irrelevant, and that day may very well be the 17th; a very wishfull thought, but it will come, by God and the sooner the better; take care and enjoy the family and the Bronco 34-17 victory tonight; sparks

    1. Steve;

      From your lips to God's ears! Let's see if the score comes in near your prediction. Should be a fun one.

      I am going to be very interested in watching market reactions to these Fed FOMC statements nowadays. At some point the market will have factored in a tapering and then move in the opposite direction from most expect them to do once that news comes out. Personally I wish they would and get it over with so that we can go back to trying to trade something fundamental instead of playing: "She loves me; she loves me not" games.

    2. Be careful what you wish for guys.
      The day the Fed becomes there is good news and bad.
      The Good - No more goosed, gamed and manipulated crap in the markets. No more economic bullying on a planetary basis, no more endless war mongering. Gold would probably go ballistic, we would soon fully understand why the Chinese are buying it while we toss it aside as a useless asset. Mark would actually have to apologize for all his Fed cheerleading :) Cowboys from Montana could drag Bernanke, Blankfein, Dimon et al down Wall Street on the end of a rope..and no one would stop them, over even care.

      The Bad - We would all know (including all levels of government) what it means to live within your means (this statement could also be in the good section) This would involve a lot of pain.
      Our children may have to learn to live without the latest iPhone …the horror ! You may actually learn to live with only a 50" flat screen…gasp!
      The Dow would fall to proper valuation….that could be very scary.
      Hard seeing the downside to the Fed becoming irrelevant actually.

    3. I was looking the disaggregate silver COT chart from last week and noticed that the small investors had a relatively high long exposure. That tells me the bottom is unlikely to be in or, put it differently, bears are not willing to give up yet now there're still small fellas for them to rip.

    4. Steve, your NFL game picks are truly abysmal!

  2. Great articals today, thank you for your insight, you are selfless and the best. your friend Steve

  3. >> "Keep in mind that we are entering the Silly Season as I described it the other day in a post. The dwindling liquidity will set up occasions on which it will not take that sizeable of an order flow to produce some rather large moves. Anything therefore becomes possible as we get ever closer to the Year end."

    I'm holding tight for Silver @ 18.60. I thought some year end profit taking in the stock market would take a little off the table in the equities department, and this would correlate to more buying opportunity for Ag and Au.

    PM's seem to be tracking equities for the moment, trading inversely to the USD index.

  4. PM chart reminds me of last year, when gold was bouncing off 1560-1650 before 1560 gave way. I don't think 1180 is the low at the moment and I hope I'm wrong but it does appear like we'll see 1050 or sub 1000 fairly soon unless there is something major that will reverse the trend.

    1. There might be something that can change that. The last time the euro was at 138, the euro bulls lets the bears out of the cage and they took it down to 133, to slaughter the bulls. So maybe they learned their lesson. Dont let the bulls out of the cage. Slaughter them. Gap it above 138 and run it to 140., at least. That could certainly have a very positive effect on gold. But will see if it happens.

  5. Today was all about CBs BIS and Co in support of the failing FIATs led by USD a 79 handle on the USD triggered the XAUUSD FX Gold in the usual overnight raid. So in FX Gold the weak hands are getting shorter, TBTF banks are getting record longer. In real Gold China just grabbing whatever they can, in India last night Gold was $120 premium to London spot. So we have more dollars printed to short FX Gold to support a falling $ because CB balance sheets are under the screw. Same with interest rates more $ printed to keep rates low and preserve CB balance sheets from imploding. Catch 22 in both cases! Exciting times ahead.


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