As a trader, the way we look at this sort of market and interpret the price action is one in which there appears to currently be a lack of willing sellers. In other words, there is not enough overhead offers to absorb the steady bids coming into the market on the heels of the index fund rebalancing which is occurring to start this new year off.
It looks to me like some would-be shorts are sitting back and observing the price action and waiting to see when the index funds are going to be finishing up before they come back in more aggressively. After all, if a bunch of investment money is going to automatically be flowing into a market, irrespective of the fundamentals, why fight it? Just let them bid it up and then move back in when the buyers have balanced their holdings.
The biggest thing that this current rally has going AGAINST it, is the lack of strong volume. It tells me that no one is in a particular rush to buy the metal other than the index funds. The other thing is that the mining shares are struggling to add to their gains today. Some of them have gone into the red. Thirdly, crude oil and the products are both sharply lower along with the Goldman Sachs Commodity Index. If there are any inflationary pressures at work across the general commodity sector, I sure cannot see it based on what I am seeing in the futures markets.
There does appear to be a bit of safe haven buying that is continuing today. Just like in yesterday's session, when the equities were moving lower, both the US Dollar and the Japanese Yen, safe haven currencies these days, moved higher, so too that is continuing right now as I type these comments.
I do not know exactly how high these index funds are going to take the gold price before their buying needs are finished up but they have managed to draw in some fresh buying from other specs and in the process taken out some overhead resistance levels on the chart. These are more easily seen on the 4 hour chart which I am including below.
Note the declining volume as the market "MELTS UP". The resistance zone near $1220- $1225 has been taken out but the next one up near $1242-$1245 remains untested at this point. I am interested in seeing if there will be enough index fund buying next week to set up a test of this level or if the bulk of their buying will be done by the close of trading today.
I would need to see the metal move and stay above that uppermost resistance zone I have noted on the chart to become bullish
Also interesting to observe will be the reaction out of Asia to this upward price push. Gold has effectively gone up $60 from its recent low near $1180. One wonders if this will stymie some physical buying from that corner of the globe as they wait for a retreat in price or if some buyers who had been holding back waiting for lower prices will throw in the towel and come in and commit some funds to replenish inventories that have been drawn down by the strong demand out of Asia.
Well I'll brake the ice here with this blast from the past:
ReplyDelete"Gold remains vulnerable to a collapse although not instantly. A monthly closing beneath 1532 will signal that a drop to the mid-1100 zone is likely. The Goldbugs have already been banning together to try to make sure no one listens to anything I have to say. They remain bent of BUY AND HOLD and are against the idea of trading. If gold declines, it is a plot rather than the absence of analysis. They respond no different than any other group who try to shut down everything that disagrees with their views the same as government. As they say, the truth will set you free, but first it will piss you off." - Jan 26 2013 - MA
http://armstrongeconomics.com/2013/01/26/8652/
Armstrong has echoed a similar message lately about US equities where a substantial correction could occur…..anybody listening or selling ??
ReplyDeleteIf it does correct we will no doubt have to once again endure Armstrong slapping his own back and crowing on about the fools who didn't sell.
Buy and hold is not unique to Goldbugs…equities…real-estate…all the same mantra.
Interesting about Dan's comments on the melt up, not having enough willing sellers. You do eventually run out of sellers, how many sellers can there still be after such a major washout?
I think it's the onslaught of shorts that will take gold to meet it's final bottom if I remember correctly what Marty was saying.
DeleteNot really sure how the dynamics of that work, but light volume, not many sellers - but also not many buyers, it might work in a waterfall "take down" scenario?
Also gold up $15 usually gets the miners roused, but instead they turned down today. This is usually (not always of course) a good indicator gold is topping in this rally.
DeleteI remember this article from Armstrong. Honestly, when it came out I thought he accidentally ate some funny mushrooms. Gold in the mid 1100 area, ha!
ReplyDeleteIt turns out, I was the one who was consuming the mushrooms ... I must admit I never liked Armstrong's style, nor his political views, but this call turned out to be right on the spot. Hopefully he is right about the new highs (even though they are to come post 2015).
By the way, you are not the Prophet Elijah Muhammad, are you? If so, I resent what you did to Malcolm.
No, Prophet Elijah from the Christian Bible - I was best known for Mount Carmel.
DeleteLets face it NO one knows where the bottom is, but like any asset turn around it will, safest to invest long term. I know this site refers to Trader Dan it's his site and I have no reason to doubt Dan's ability but for most people trading particularly in Gold precious metals is a nightmare with Algos running stops at both extremes to leave as few participants as possible on the next big move. The best way to play this pullback is to allocate non-leveraged non-demand funds and set buy points say down to $800 if you wish. If Gold finally turns at $950 sure you will not be fully invested but the upside will still be massive when equilibrium returns as it does in any asset. So a plan of allocation, patience and rolling with the punches will work in the long run. Obviously a part allocation to Gold stocks has potential for a big move considering current Gold stock valuations see http://www.gotgoldreport.com/2014/01/generational-lows-in-for-mining-shares-establish-long-term-positions-now-or-soon.html#more
ReplyDeleterlm;
DeleteThat is very sound advice for those with a longer term view of the dollar and who can use some "non-demand" funds as you term them ( very good term) to acquire some ACTUAL metal, not mining shares, not ETF, not Comex futures, etc. to protect themselves against any coming currency devaulations. Some who read this site get offended at me because I can be bearish on gold but that happens no matter how many times I write and tell them that I have to wear TWO DIFFERENT HATS as a trader. I do have a longer term hat which tells me that it is only prudent to own physical gold and the best way to do that is to buy it when the price falls and do so on a scale down buying program.
Hi Dan,
ReplyDeleteI had to change account as I've changed country and Google is bothering me.
You wrote that Large Specs are still net long, so they still have firepower to go short gold and push prices down further.
But are they going to increase their risk to do so?
I mean, as long as Large Specs and other investors decide to arbitrate their global position in the market by decreasing their long positions in gold and increasing their long position in stock markets, their global leverage and amount of cash invested in the market remains the same.
But if they should then go more short to finance more long positions in the stock markets, then it is two positions that they would have to take, both of them could go wrong. Short is a position, with a risk. Adding to a short position is the opposite to decreasing to a long position in terms of increasing/decreasing one's position in the market.
So, maybe it's one thing to arbitrate and decrease long position in gold to finance more positions in the stock markets, but maybe they won't cross the Rubicon and go short gold after that?
Hello,
ReplyDeleteWhile it is possible that Mr. Armstrong will be correct regarding his gold call, I think it's worth bearing in mind that, at least from my vantage point, he has no understanding of the gold market. He does not, for example, understand, or, perhaps, refuses to accept that the market for paper gold and that for the metal itself are two separate animals and that the movements of the former have little to say about the condition of the latter. Most importantly, the former (paper) ultimately needs the latter but the later most definitely, does not need the former. I wonder what nonsensical comments would usher forth from Mr. Armstrong's if someone pointed out to him that not only does the world not need a paper gold market, which is a fairly recent invention designed to prop up the now terminal dollar based international monetary and financial system,but, more pertinently, the world doesn't need gold mining. There's plenty of above ground physical. It's the flow that's issue, and that is gearing up to be be a very big problem, not the the stock.
Hi Archer.
DeleteI think you need to do some research on Martin Armstrong. He WAS a gold bullion dealer
I don't know how old you are Gary, but I was party to conversations with Martin Armstrong, under a different handle, when he used to comment on the (now long since) defunct Long Waves Forum. This was well before his rather unfortunate experience with the legal system against which he periodically rails.
DeleteAs for gold bullion dealers, all I can say is they are not all alike, and the ones I have known have, by no means, been overly well versed in the gold market writ large. I stand behind my comments on Mr. Armstrong's shortcomings which, were I of a mind to, I could easily expand on.
he is just a letter writer; sparks
Deletehttp://i40.tinypic.com/f8h04.jpg
ReplyDeleteThe potential detected thanks to the divergence MACD on the daily time unit and the Sto on the weekly time unit is being validated.
True, volumes were weak, so I'm impatient to see the beginning of next week.
I think there is a horizontal polarity zone resistance / now support on the 1220 $ area, and I might play it in order to target 1300 $ short term.
The long-term time units are still bearish (horrible marubozu on the yearly, qarterly time units, 2months time unit also ugly with Inf Bol Band reversing own) BUT there is a bit of sun on the shorter time units, i.e daily and weekly where at least prices bounced where expected to.
Let's see if the engines stop and prices stall again or not.
CDurs are well oriented too, so I'd watch the 1220-1225 area to confirm it became a support, and if so, would probably go long gold on the short term (aiming at 1300 mainly, maybe a nice extension to 1400+, that's all).
On the long term time units, it seems to me that the 1440 $ area has again been reinforced in significance. It is the middle of the body of the yearly marubozu of 2013. 1420 was the middle of the one of Q2 2013. So this area is critical : as long as we remain under it, to me, the trend is bearish on gold on the long term.
Of course, it doesn't keep me from buying on the smaller time units, if the occasion occurs.
Have a nice weekend,
PS : to be precise, the support area daily is in 1215-1220 rather than 1220-1225, the polarity level being imho 1215.
DeleteThe point is that if we go back to test those levels and they hold, I can put a long order with a stop loss close under my feet.
When are the US going to demand Japan that they get some assistance??
ReplyDeleteThis is a planetary problem, not a private company's (Tepco) nor a national (Japan) problem. Both are total incompetent and liars.
Does anyone care about this on the West Coast?
You are going to fry first!...
http://nsnbc.me/2013/12/30/tepco-quietly-admits-reactor-3-melting-now/
Stories around the web are referencing a Dept. of Health & Human Services procurement order for 700,000 packages of 20 Potassium Iodide (KI) Tablets to be delivered before Feb 1, 2014.
Deletehttps://www.fbo.gov/index?s=opportunity&mode=form&id=5cd0c1800435272c80ad292aeb9d1ba7&tab=core&tabmode=list&
Don't worry…haven't we been told by someone that no matter what happens Bernanke's Fed and the American Consumer will triumph and overcome ? Wealth and happiness for all ?
DeletePotassium Iodide is ONLY for radioactive Iodine in the system and it ONLY protects the thyroid gland. It has NOTHING to do with nuclear radiation from Fukishima…
Deletehttp://www.bt.cdc.gov/radiation/ki.asp
Radiations are lethal there, and contrary to Ukraine, they won't find a few hundred heroes in japan ready to sacrifice their lives to save the rest of the world. Lying to "volunteers" about the dangers of radiations is not an option anymore.
DeleteNate- Obviously the Iodine won't protect from ocean radiation. Actually Fukushima did spew out traces of radioactive iodine, this was primarily through airborne fallout (found as far away as New Hampshire after the accident)--though not in harmful levels in the US. By the way, 700,000 packages wouldn't even protect a fraction of the infants & pregnant mothers in the Western US.
DeleteNews sources, such as they are, give very little thought out commentary. I think people see the modeling of the water-borne plume and assume it is the big problem. Modeling by the Helmholtz Centre for Ocean Research in Kiel predicted that 'radioactive' ocean water wold reach the US West Coast 5-6 years after accident, doubling the amount of radiation. This is the thing--They projected peak radiation of 10 Becquerels / cubic meter of sea water in 1st two years, then dropping off. This is NOTHING. Radiation levels in the Baltic Sea, due to Chernobyl & nuclear power plants ringing the Baltic is over 125 Becquerels / cubic meter! The Irish Sea is also a hot spot, due to atomic material processing, at over 50 Bq/Cubic Meter.
It is Reactor 3 and a possible explosion that is scary.
By the way, here is a pretty clear analysis of the danger thus far to the West Coast of ocean radiation (executive summary--not very):
Deletehttp://deepseanews.com/2013/11/true-facts-about-ocean-radiation-and-the-fukushima-disaster/
That of course assumes that data provided by TEPCO & government agencies is correct.
Dericilict boats have been washing ashore on the west coast all spring and summer.
DeleteHubert
ReplyDeleteVery scary stuff…but hey…the Dow will probably rally another 2000 points as a result. I know..not funny…but very sadly true.
Keep in mind there is no such things as conspiracies to control us or to keep the truth from us….that is nonsense that only Goldbugs spew.. so the whole radiation thing is probably no big deal…..right?
Well..maybe I exaggerate…the Dow will merely "shrug" off the bad news.
ReplyDeleteThe Dow only "shrugs" now.
BitCoin already back up to $1,000.
ReplyDeleteChinese and everyone else are clamoring for BitCoin on dips, not gold.
BitCoin has already doubled off the $500 low print a few weeks ago, yet gold barely moves off the lows.
Irrational exuberance anyone?!
DeleteBut we didn't hear you about bitcoins on all the way down ;)
DeleteMark
DeleteSell all your US equities and buy Bitcoins…easy money…right?
Hi Dan,
ReplyDeleteA remark from a colleague of mine about watching volumes for gold on futures contracts.
He says he doesn't pay much attention to volumes on forward markets, because 90% of gold transactions are negotiated by over the counter agreements.
Do you agree with this position?
Have a nice day,
Hey speaking of Fukushima above did anyone notice how JS posted Martin Armstrong's article on it on his Mineset website?!
ReplyDeleteI couldn't believe it either and had to check it twice but it's there. Wonder if they made up and are buddies again. That would be great and maybe a way for JS to apologies for previous mud slinging at Marty.
lol, is it the gold bug's version of soap opera?
DeleteSome follow reality shows
Some follow the english royal family
Some gold addicts follow Jim Sinclair's life and his buddies :)
Armstrong also recently posted that himself and Jim Sinclair only disagree on timing and reasoning (in reference to gold)
ReplyDeleteThis sounds like more of an apology from Armstrong to Sinclair.
- why did Armstrong even mention JS ?
Who ever said they quit being buddies?
Which side of the curtain do you think JS resides?
I suspect that there is much more to Jim Sinclair than what we think.
Make fun of him all you want…I will not.
They all want our money, Dean / Prophet. 750 dollar for Armstrongs miner newsletter. 1500 dollar for a princeton conferrence. TRX shares currently go for 1.82 dollar. Jim once owned 25% of the company.
ReplyDeletei love it … what a joke comex is … you have to laugh … it really is the tail that wags the dog
ReplyDelete