“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"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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Thursday, December 5, 2013

Reversal Day

Yesterday was "Buy Commodities" Day. Today seemed to be "Throw Commodities Away" Day. Just goes to show the day to day vagaries of our markets anymore.

I am not sure what was getting bought today to be honest as the Dollar was down, equities were down and commodities were GENERALLY down. Maybe it was a "Stuff the Money under the Mattress" trade.

Either way, the bounce in gold did not last very long. That is typical of most short covering rallies. They generate lots of excitement, like a flash in the pan, and then burn out nearly as fast as they started.

As stated yesterday, gold's big test will come tomorrow (Friday). That is when we get the latest jobs number. A surprise on the headline number to the upside will more than likely fan the talk about "Tapering" and we all know by now what that means for gold, and it ain't good. The converse is also true however. If the number disappoints, tapering talk will disappear and that should put some weakness into the Dollar and by consequence, strength in gold. Either way, we will see.

Interest rates have been slowly grinding higher. The yield on the Ten Year peaked at 2.873 today. Also 30 mortgage rates registered a ten-week high today according to a report in Barron's. This is the sort of thing that makes attempting to guess what the next move of the Fed is going to be rather difficult.

Every time these longer term rates have been sneaking up and pushing up mortgage rates in the process, it has checkmated the Fed which cannot then sound any sort of hawkish note on the bond buying program lest they end up causing interest rates to spike even higher quite rapidly. That of course would effectively short-circuit any so-called "economic strength".

Back to gold for the moment... it looked to me as if sellers were a bit hesitant to get too aggressive ahead of that payrolls number tomorrow. Selling did take the market down near $1216 but it popped a bit higher after the bears' caution became evident. Watch out however if that number comes in above expectations tomorrow. Bears will be growling in a big way.



The gold shares as evidenced by the HUI surrendered all of yesterday's nice gains, and then some. The sector continues to implode. That is about all that anyone can say about these things right now. Only the most die-hard of long term bulls are left in them at this point.

In looking over a few issues in particular, I noticed that Goldcorp put in a new CLOSING LOW for this leg. It is back to levels last seen in December 2008. ABX is back to levels seen in 2003!  The shake up over there is welcome but they have a lot of work to do, that is for sure. Maybe they will get a decent risk management department as part of their housecleaning. They had better!


Crude oil ran into a wall near $98 today. It has come straight up for more than $6.00 and is taking an overdue breather. Yes, I understand all the bullishness about the new pipeline coming online next year but even at that, there is an awful lot of oil around. Maybe demand is up for this, maybe not. I have a SHOW ME attitude on this one especially given the weak state of the economy.

What's helping crude right now is the frigid weather which is generating a great deal of heating oil usage. Exports of products seem pretty decent as well.

Along that weather line, natural gas prices spiked higher today as well. Seeing nat gas with a "4" handle is taking some getting used to considering that it had not been able to climb through that level for the better part of some 19 months or so starting in July 2011. It briefly kicked through $4.00 early this spring and then promptly collapsed back down towards the $3.25 level. Cheap prices for the clean burning fuel has resulted in a large amount of demand shifting away from coal into this market and now that we have some cold weather, it is catching some buying. If it can climb above $4.50, it has an outside shot at making a try for a "5" handle.

Other than this, not much going on today as most of the major markets are bracing for tomorrow's numbers. That is when we will get the fireworks. There does seem to be some building nervousness which is registered in the VIX. It actually closed above 15 today, the first time it has done that since October 15 of this year. We are definitely seeing some two-way trade in equities as a result, something I might add that we have not seen a lot of this year. Lots of top picking is occurring. At some point the bears will catch it correctly. Maybe that will come tomorrow, then again, maybe not! We just have to wait and watch the price action subsequent to the payrolls number and formulate an approach at that point.

12 comments:

  1. Any strength in the U.S. DOLLAR will certainly weaken GOLD but you have to remember that GOLD and SILVER are handsomely priced now (especially SILVER) for some major SHORT PLAYS for those in the FUTURES MARKETS. You can get more for your money now in the SHORT INTEREST hence I would suspect the SHORT INTEREST is increasing and Dan can verify that. Conversely any WEAKNESS in the U.S. DOLLAR will only strengthen GOLD enough for another nice SHORT SELL entry price. The DOWNSIDE continues VERY STRONG for GOLD and SILVER. This is not an INVESTORS' MARKET. This is a TRADERS' MARKET ONLY! Methinks the only INVESTORS' MARKET is primarily the following:

    UCO
    UNG
    DIA
    QQQ
    SPY
    BRK-A
    BRK-B
    AAPL
    GOOG

    Other than that you might as well go hustle some cash and keep stashin' that cash.

    Has anyone noticed PALLADIUM today? That was an unusual bounce to the upside.

    I'm taking approximately the next 6 months off from trading anything. Not into it right now. Hate the market and just decided to get out more rather than stare at the Wall Street Casino too long. GLTA.

    ReplyDelete
    Replies
    1. Wise choice Unit.
      But hey….take a vacation to Las Vegas…at least you get a good looking girl serving you drinks while you get fleeced.

      Delete
  2. Reversal Day seems like the wrong title for gold. It reversed for less than a day. Something is going on however. I thought today's move down in the dollar and yesterdays move up in gold on a good weekly jobs report may be indicating that people are finally getting wise to all the talk of positive news. They know it is a fraud and that people falling out of the job's market by the hundreds of thousands every month and part time jobs being counted as real jobs is just nonsense. I think the tapering by the FED or the threat of it is such a mixed bag for what they want to do that everyone knows they are a toothless tiger. Something has changed and it is the game they have played since last Sept. Not saying gold won't go back down big tomorrow just that the game's rules are about to be changed.

    ReplyDelete
  3. Concord

    If the news is too good for the economy…the Dow will tank. The fraud is the value of the U.S. equity market, what would the value of the Dow be without the Fed goosing it?
    They know they are creating a bubble of historic proportions, jawboning about tapering is their way of trying to somewhat deflate the bubble or keep it from expanding. There is no where else to turn for yield…this is all going to end very poorly.

    I was reading about the Detroit bankruptcy…what a horror show for the pensioners.
    When I see pictures of Bernanke, Dimon or Blankfein with the smug attitudes and smirks. A few hours in a locked room with an inverted board, towels, jumper cables, magneto and a good supply of water……:) let's see if I still remember 1. Red is positive 2. Black is negative 3. Make sure the nuts are wet.

    ReplyDelete
    Replies
    1. Dean,
      Funny today I was thinking the same thing. With all the destruction and carnage caused by the bank disaster of 2008 not one of these crooks has gone to jail. A more profound statement about a decaying society you could not find.

      Delete
  4. "A surprise on the headline number to the upside will more than likely fan the talk about "Tapering" and we all know by now what that means for gold, and it ain't good."

    If it's a really blockbuster report, I would not be surprised to see gold go up, as it might be a sign of increasing inflation.

    ReplyDelete
    Replies
    1. Unknown;

      Nice call -there certainly does seem to be a bit of that filtering into trading today. Not a whole lot, but it is definitely there.

      Delete
    2. It wasn't quite the blockbuster report I had in mind, but it was close-enough. That could be why it's merely flat on the day instead of going up, however.

      Gold bugs need to be routing for good economic news now, rather than doom and gloom. If gold is to go anywhere, you need rip-roaring good times, with hefty job increases each month and lots of demand-pull inflation to go with it. 200K-300K job additions each month will bring down the unemployment rate rapidly now, putting upward pressure on wages, leading to hefty GDP growth, etc. That's a good inflationary environment, particularly if it spills over into other countries.

      Especially with Janet Yellen - who is well-known to prefer a bit of inflation - at the helm of the Fed, the Fed will get around to raising rates later rather than sooner. This will certainly help foster an inflationary environment. Heck, I might even rescind my call for sub-$1000 gold, unless she proves more hawkish than expected.

      Delete
    3. Unknown;
      Yes, I agree 100% with your thinking here. We need something to shift the Velocity of Money into an uptrend and I do not believe that will occur until people are comfortable spending money and wages are rising.

      As long as the market fears slowing growth or a deflationary type environment, gold will struggle to maintain any rallies.

      Sentiment has to shift in regards to inflation.

      Delete
  5. There is always the possibility that gold miners are actually worth what the market is saying they are worth. Any lower prices on gold and silver, jewelry will be a buy. And what are you guys talk'in bout, SEC nailed Martha Stewart for all to see what happens to inside traders.

    Been doing okay with DUST and NUGT, both seem to outperform the intended x3 of GDM movement.. Wild swings on the opening price and throughout the day makes for good trading. I put less weight into NUGT as I respect the downward trend. Sometimes can get wrong footed but recover quickly by selling and buying back in.

    Market players are only looking for earth shattering news, all current major trends continue up even after pauses or corrections. To overseas investors, US markets look like refuge.

    ReplyDelete
  6. A great man left us yestreday. I wish a joyful and peaceful trip to his unconquerable soul.

    ReplyDelete
  7. Huge opening bounce on strong jobs number and gold green.
    No isn't that different.

    ReplyDelete

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