“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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Tuesday, January 14, 2014

And... the next Day

Here we go again - another day of yo-yo action from the day before...yesterday the sky was falling as Goldman noted stocks were expensive. Today... everything is okay once again and all is well with the world. I had the feeling that we were going to see another one of those bear traps in the equity markets. It basically boils down to the fact that if you have any profits from playing the S&P from the short side on a daily trade, TAKE THEM, while you can because the perma bulls are simply not going to stop buying every single dip. Why not? They keep getting rewarded for doing. Pavlovian? YEP!

With that, those safe haven trades that were scurried into yesterday... well, they are yesterday's news. As Yoda might say; "No longer needed, are they".

Down went the Japanese Yen and down went the bonds and up went interest rates. The Dollar ticked higher and with the combination of all the above, plus the more important fact that gold failed precisely at the bottom of the resistance zone noted on the chart, down went the yellow metal. Traders who had been long and played the short term recovery, wasted no time in bailing out once they realized that the market was not going any higher.

While the market has retreated from its first try at that very tough overhead resistance level, it is holding support near $1,244 - $1,240. I am noting that volume has picked up as the price has retreated whereas yesterday it was comatose in the gold pit.


If this support level gives way, I am most anxious to see how the metal reacts as it nears $1,225 - $1,220 again. If it bounces up and away from that, it would be constructive and would tend to confirm that recent bottom. If nothing else, it would at least set up a range trade for the short term with the big specs probably bidding it up to see if they can recapture $1240 - $1244.

I am unclear on what the next move or direction will be at this juncture. My position is very small consequently as I think any trader who wants to bet the farm on gold's next move is masochistic. You have to respect the larger term trend and that remains lower with the bears still holding the edge in this market but bulls are trying to flex their muscles.

Asian demand had better hold firm. I am going to be watching closely to Chinese demand once buyers have secured their inventories ahead of the Chinese New Year festivities. That demand has been strong but it was also very price sensitive. My concern is that once the festival buying is over, value based buyers are not going to be in a hurry to chase prices higher but will rather wait to see how sales were and whether or not to restock immediately or wait a bit for prices to recede.

It is unfortunate for the friends of gold that the gold mining shares are sinking once again, in spite of the stronger equity markets. GG is getting hurt by that takeover bid of theirs. I hope the hell they know what they are doing. Management in this gold sector scares the hell out of me.

20 comments:

  1. Dan, 28 months and counting on the copper to hold $3; I think it is the key to a lot of what we are all thinking and watching. The Chinese made the $2.20 top in cotton and the $4.40 top in copper and if and when the red metal breaks $3, it oughta go just like the gold did when it broke $1550. The news of course will be slowing economic conditions in the U.S., Europe, Japan, China, or all of the above; that is all; sparks, nv

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    Replies
    1. Answer to that : if we remain in this triangle (can't break upper resistance), odds are down statistically speaking (descending triangle). So this area near 3.40 is important...
      http://i40.tinypic.com/24pmfer.jpg

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  2. yes those guys from GG must be crazy … why the hell they would they buy Osisko … beats me … They should hedge themselves at these prices for the next couple of years , and with the rest of the money buy a nice position in MU …

    ReplyDelete
    Replies
    1. Well, it doesn't seem like the worst purchase. I don't follow Osisko, but a quick glance at their operations & financials makes them look like a good target: 1. Canadian Malartic is producing & has extensive reserves 10 million p&p 2. Other Osisko resources aren't bad (also in Canada & Mex) 3. Financials aren't bad--a bit too much debt, but not bleeding cash + actually had positive free cash flow Q3.

      Theoretically, you're supposed to buy when things are unloved. It's certainly better than Kinross buying Tasiast mine in Sub Saharan Africa, adjacent to a civil war zone for $7.2 Billion for 8 million p&p reserves in 2010 + had to bring it to production themselves. So GG bought a better resource in a better jurisdiction for 1/3 the price.

      Gold mining executives aren't stupider than those in other industries, they just have a harder business.

      Delete
    2. MDLGTO my post is loaded with sarcasm … sorry I wasn't more explicit … I am 100 % with you

      Delete
  3. Dan, thanks for the update.

    I notice that you do not use sloping trendlines for support resistance and only use horizontal support/resistance lines. Why is this?

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  4. Is there any way to find what caused gold to drop $10 in very short period of time today? Hedge fund dumping? Inability to break overhead resistance? Ze manipulation? Or to rephrase the question: Who sold?

    ReplyDelete
    Replies
    1. 10$ move in gold in a low volume market with few orders is "noise".
      Why look for explanation for every small move in gold?
      10 $ is nothing.

      Delete
  5. Can some of you figure this out? What's really going on here and what could develop as a result of this. Looks like Rick Santelli might mention this on CNBC.

    This report needs a thorough review:

    Chicago commodities broker concerned about GOLD and SILVER

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    Replies
    1. If they are waiting for the regulators or the Fed , to do something about it , they better find themselves a good spot in the sun and a nice chair because nothing is going to happen … only until something explodes they will then panic , as they do … in the mean time , all this charts are pretty predictable on the downside , expect a sell of in gold , silver every time prior to big pomo days etc … in the same way the broad markets find a bid … Today BIG pomo day … this trade is so old now , I m surprised still goes on , but then again what is rational these days … Only advise don't touch comex unless you are non stop on top of it , and keep buying physical …

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  6. All I see before us is deflation...how can the dollar get weaker? Strong dollar suggests weak commodities, including the PMs. This recent bounce from 1180 to 1255 was a nice little bear trap. Nothing suggests that the downtrend in metals is broken. Dan, given miners are already so depressed, would you expect them to outperform gold (ie, drop less rapidly) if 1180 gets taken out on the weekly/monthly?

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  7. The Forest and the Trees.

    As Gold swings wildly back and forth between 1190 and 1255 ( = or -) the Gold stocks appear to be making higher highs and lows ? A potential non-confirmation ?

    Only geniuses and liars can pick exact bottoms ( to paraphrase a sage whose name I cannot remember with my first cup of coffee) --averaging may be the way to go for us mortals ? GDX, GDXJ, IAG, KGC,

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  8. Looks like another horrific gap down in GLD and GDX this morning.

    The "Catastrophic Collapse" continues in the PM mining industry.

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    Replies
    1. What are you smoking ? GLD is down and GDX and GDXJ are smartly up !!

      Delete
  9. Bank of America exploding to new highs on 3 x normal volume.

    Morgan Stanley also surging, helping push the XLF to clear to new highs.

    Paper pushing rules, as the TBTF banks are outperforming everything.

    Oh, well, back to the drawing board for Jim Willie, LOL....

    ReplyDelete
    Replies
    1. Who's Jim Willie? I know who BRK/A is. I also know who's behind JPM, GS, WFC, BAC, F, GE, GOOG, AAPL, MON, PM, PFE, LLY, BMY, and a few others.

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  10. Yep, Apollyon in complete control here.

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  11. something fishy going on … full force pomo thrust pedal all the way down … and the market not hitting new highs !? … want my money back … lol … oh well the day is long

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  12. Mark,

    You would've been right for the past 5 years staying in the system but your continued cheerleeding to buy the market right now is foolish. Stocks have made their big move. There is not much upside left. Anyone who didn't buy stocks over a year ago missed the boat unless one is short term trading. I'd rather buy miners and physical gold right now that are dirt cheap and providing the buying opportunity of a lifetime. I still think gold has further downside but it is still in a secular bull market and its fundamentals are intact. Stock fundamentals and corporate earnings are deteriorating. You are advocating to buy high and sell low. Buying gold miners is buying low atm

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  13. http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/01/Edwards%20Chart.jpgH
    Very interesting to see how long this divergence can keep the spread. Just plain dumbfounded.

    ReplyDelete