“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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Monday, January 27, 2014

US Stocks fade from highs on emerging market worries

The S&P 500 gave up its gains over renewed concerns with emerging market currency/credit issues this afternoon but neither the Japanese Yen or the Swiss Franc seemed to catch any sort of safe haven bid as they were doing last week. Neither did gold when the dust finally settled. Even the bond market moved lower today.

It was thus a very strange day seeing interest rates actually rising in the face of sinking stocks. If there was a safe haven today, it was the US Dollar all by itself as nothing else seemed to be moving higher besides the Australian Dollar and the British Pound.

Frankly I have no idea what was going on in some of these other markets so I am not even going to try venturing a guess. Just chalk it up to one of those days where not too many folks were very sure of exactly what they wanted to do.

One thing that many folks were sure of however was to sell the liquid energies, especially heating oil. That has been driven sharply higher on the severely cold weather engulfing the middle and eastern parts of the US, but some forecasters apparently took a bit of the severity out of the cold and that forced some profit taking by longs and some fresh shorting as well. The exact same thing occurred in the natural gas market today. Both these energy sources have been benefitting from the sharp cold but the first sign of more normal weather patterns/temperatures coming and more longs will be heading for the exits. The forecast models are always fickle ( as any grain trader and he will show you the scars from being on the wrong side of a "flip" in the forecasts ) so they might just as well show more cold tomorrow that is more bitter than today's models.

I have some friends up here who are burning as much firewood as we can in order to do our fair share to help our fellow citizens to the east which are getting the brunt of this walrus weather. If we can force enough fossil fuel fumes into the air, we should be able to kick up the global warming enough to warm things up for ya'll over that way. Hang in there and give us some more time to let the smoke plume move east.

I have posted up a very short term gold chart ( 4 hour) to note the resistance and support levels. I want to add here that volume in the February gold contract is going to be shrinking as we draw nearer the delivery process so it will not be long before I switch over to the April contract for analysis purposes.



Gold has obviously failed at its first attempt at $1,280. That was a big number on the way down so it makes technical sense to expect it to be a big number on the way up. The setback initially found dip buyers into the support band noted near $1255 but then failed eventually dropping below the zone in late trading as the gold miners failed as well.

There might be a bit of psychological support near $1,250 for gold but more substantial support actually lies closer to $1,245 or so. If that fails, expect gold to retest $1,235 - $1,230.

For the bulls to generate any more excitement on the upside they now have a solid barrier up near $1,280 that they will have to better.

The FOMC will add more uncertainty to the market this week ( as if we did not have enough of that already to contend with) so do not be surprised at some pretty large swings in price as traders react with the usual calm and measured demeanor that marks our profession ( this last part is pure sarcasm as everyone knows that there is no calm, measured demeanor left anywhere in the trading world nowadays).

31 comments:

  1. I doubt the Fed will do anything stupid now that we are experiencing a "mini-panic" in equities, engineered by the Wall St. thugs intentionally to drive down interest rates and smoke commodities, like natural gas, down 7% on the day.

    Once interest rates are sufficiently low and people start talking about deflation scares, the Fed will starting buying ES futures soon enough and create another meltup like they did in 1998 after the Russian crisis.

    ReplyDelete
  2. Dan, gold broke 1260 horizontal resistance, the down sloping trend line from the $1920 2011 high, and also the down sloping trend line from the August $1420 high. Even with where the price sits right now at 1256 and change right above the trend line from August, are these resistance breaks bullish developments for the metal? Or does it only mean that gold is in a range trade instead of a downwards trend. I have read other places how this is very bullish, but I don't really trust much of what I read anymore after the past 2.5 years in the metals. I'd love your opinion on this, thanks!

    ReplyDelete
    Replies
    1. Adam;

      It broke that $1260 resistance level but has fallen back below it which is short term negative. I want to see how it is going to react to this week's FOMC theatrics to get a better sense of what is next.

      The emerging market thing is what is providing support as some are getting nervous about equities with all this uncertainty in the background. That is bringing some buying into gold but the shares are not signaling all is well with gold either.

      I mentioned on my weekend chart wrap that the bulls had seized the short term advantage but the weekly chart is still bearish. that means rallies are going to be sold. That is what happened today at $1280 especially as there did not seem to be much safe haven demand for the usual suspects for some reason.

      I tend to not pay as much attention to sloping trendlines as some might do but I do note them. I am more of a horizontal support and resistance guy as there are a lot of false signals in today's markets due to the nature of the computer buying which can take price up through trendlines or down below them before reversing right away.

      Personally I would not carry too large a position in gold right now - either way because of all the confusion and uncertainty surrounding the emerging market issues and the FOMC. it really could go either way.

      There are better opportunities in other markets in my view.

      Delete
  3. JP Morgan had the largest one-day withdrawal of gold EVER. JP Morgan had 321,500 (exactly 10 metric tons) withdrawn from its Eligible category on Friday.

    JP Morgan lost 22% over its total gold stocks at the Comex in ONE DAY. Total gold inventories at JP Morgan declined from 1,459,027 oz the day before, to 1,137,527 oz.

    Also 32,150 oz of gold withdrawn from Scotia Mocatta’s Eligible inventories.

    There seem to be only 357,139 oz of Registered Inventories gold at the Comex. February is a big delivery month and therefore look out for cash settlements...

    From Economic Policy Journal

    ReplyDelete
  4. Perhaps of interest is that april gold is trading at a discount to february.

    ReplyDelete
  5. Dan,

    Equities are up a lot, so a lot of traders/investors say it's time for a decline. Until capital flow reverse, probably driven by a reversal of expectations, equities could concentrate even further. The US has recorded a couple of phase transitions in the last 200 years. I'm watching SP 500. If the upper channel, once previous resistance, becomes support, probabilities favor continuation. Continuation and acceleration pull in the public into stocks. After that, talks about the plateau of prosperity. It's still too early to call that, but phase transition while extreme dangerous are profitable. Stock prices tend to double during the last year.

    As for gold, watch for bullish setups in the juniors. It's Wyckoffs old trading method of analyzing force at support/resistance. I doubt the run is over, but leveraged money flows implies outflows for now.

    Have a good one!

    E

    ReplyDelete
    Replies
    1. ouch...
      - "Stock prices tend to double during the last year."
      - "As for gold, I doubt the run is over"

      I'd better be careful, if I'm contrarian here...
      (damn, I am! :))
      SP500 reached and bounced spot on at the 1780 target (I love TA for its precision sometimes), cf chart.
      Imho anything under 1815 is weak.
      If we can't muster enough strength to close about 1815 soon, I'm anticipating a new attack of 1780.
      The weekly time unit gives an idea of the potential target, should we accelerate down under that area (1770-1780).
      If 1860 had to be the highs, the Fibonacci retracement levels would be beautifully positionned to match the previous supports and resistances during the ascencion.
      I will try to see what happens around 1810-1815 if we go there...may be tempted to short the SP500 if it meets trouble on the way up. 1790 is very weak.

      http://i57.tinypic.com/2mzjz2x.jpg



      Delete
    2. Hubert - careful that you don't take the opposite side of a contrarian's view!

      Delete
  6. Another hellish and terrifying year for gold in 2014 as GLD and SLV are blowtorched once again in advance of the Fed meeting.

    Looks like the Germans, Chinese, and Dubai investors are selling bullion in droves, driving the price lower and lower.

    As Dan says, more sellers than buyers, its quite simple.

    ReplyDelete
    Replies
    1. Another terrifying day for AAPL investors, especially those who bought at $700 with promises from MSM that it would be a slam dunk $1000 + stock….LOL !!!

      Delete
    2. Who is selling gold, Mark? And on the off chance you can produce anything concrete who is the buyer? I am interested in physical gold, not paper.

      Delete
  7. I've bought back 1/3 at 1250 exactly, which I was expecting for today as the low of the day.
    Must be this area, to respect my first line of supports, i.e the daily downwards resistance which became support in my chart, plus the middle of the body of the daily upwards marubozu of last week.
    So it's a good level for prices to bounce imho if they shoud do so.
    Else I'm afraid they would retrace down towards the upwards daily ma20.
    Especially, I can't allow any losses as long as the longer term trend is down (weekly)

    I'll post a chart of silver later on. Can't from where I am now.

    ReplyDelete
  8. Ah shucks….I feel so bad about these events.

    http://www.dailymail.co.uk/news/article-2547343/Former-executive-Deutsche-Bank-hanged-Kensington-home.html#ixzz2ri5n0dex

    ReplyDelete
    Replies
    1. "Mr Jain and co-chief executive Juergen Fitschen said in an internal memo: ‘He was considered by many of his peers to be among the finest minds in the fields of risk and capital management."...
      "Our thoughts and condolences are with his wife and family at this time"
      well...wealth doesn't make one happy.
      What about 1940 Livermore?
      "“My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. "
      Men need more than successful capital management to be happy...

      Delete
    2. Why a suicide by a nobody is newsworthy is telling our our era. It gives us a glimpse, I suppose, how the .1% live. Or how our (or UK, EU, & US anyway) bailout tax dollars were spent--like a tour inside the bowels of the Hoover Dam (just no water & power for the Western States): "See, dear, our bailout money didn't just vanish, these people have beautiful homes in all the cities you need to know about!" Or perhaps it offers us a shot of prime schadenfreude--"See honey, money doesn't buy you happiness."

      Trader Dan - Thank you for all the actionable, objective information you provide your blog readers.

      Delete
  9. Silver is about to choose a direction.
    As long as it hasn't, I don't see a big opportunity.
    Bollinger bands are flat, volatility is low, prices don't respond to cycles (on this daily time unit).
    We could be forming a flag, ouch then, down from 23 to 19, so if we break down under 19.40, then confirmed under 19 (horizontal support longer term), well, target may be (20.5-(23-19)) = 16.5 $.
    On the other hand, breaking through 20.30 will be a first good sign, to be confirmed above 20.60 then finally the top of the range near 20.80.

    http://i60.tinypic.com/149yuf6.jpg

    ReplyDelete
    Replies
    1. (here is the explanation of a flag in one simple chart. Silver may be forming a bear flag now).
      http://www.ikonfx.com/forexblog/wp-content/uploads/2012/03/Forex-Chart-Flag-and-Pennant.jpg

      Delete
  10. So the Central Bankers Wizardry stick saves the Nikkei and Abe is still alive at the cost to the Turkish people. Wow, lets see how this all plays out, but to me, it is all a FARCE!!! Eventually the "Suicide King" will get them when they draw one too many times. For now, they sure did jack the Japanese PRIMED, and it goes on. Draw another card. How would you like to be short the Japan stock market, and long the pair trade USD/TRY. How about that Deustch Banker who just hanged himself at 58. I wonder how much of the Derivative mess he built up? I bet he is dead due to a no speakee policy. It is still brewing and getting a bit frothy now.

    ReplyDelete
  11. Wolf

    Hanging is far too quick and merciful.
    I will feel no sorrow for any bank exec, wall street exec etc etc.
    Their surviving families will never feel the bite of hunger or poverty…at worst they may lose the use of the corporate jet….cry me a river.
    Not one of these people will be missed by anyone, anywhere.

    ReplyDelete
  12. Dean,
    I believe at some point we all pay for transgressions. Both dead bankers may or may not be awful people. My suspicions are quite like yours. Their families are either heartbroken or relieved. I would rather be poor with health rather than a dead man who made a lot of money but sold his soul.

    ReplyDelete
  13. Turkey raises rates to the stratosphere that's right growth is so strong that's what you do... wanna buy a nice flat in Istanbul? Perhaps get a small loan to expand your business? Borrow to invest in the stock market?? margin anyone? Grab a chair lets watch its gonna be fun

    ReplyDelete
  14. ES futures soared on the Turkey news and lifted even further after Obama's speech while gold and silver remain under pressure, still mired at 2-year lows with no hope in sight.

    Way too many guys were calling for a major crash after the big selloff last week.

    Even guys like Richard Russell are delusional enough to believe we are still in a primary bear market, even though so many sectors and indexes have far surpassed the 2007 highs.

    Amazing times and amazing pundits.

    ReplyDelete
    Replies
    1. Mark:

      So what's your best guess for the next two calendar weeks? I'll keep it simple:

      DJIA going back above 16,000 but get read for another 300 point or more rollover next week after the FOMC news is digested.

      As for GOLD: I'll guess it's going to go up and test $1,300. Not sure what to think after that but I'll put a price target of $1,300 on it.

      Oil is going to climb too because Obama is out to destroy the world's largest producer and also penalize the consumer with higher taxes.

      The state of the Union of our Soviet Socialist Democracy is deteriorating however very few are truly aware of it. But God bless America right?

      Go read www.newsunit.net

      At least I've bashed the GOLD and SILVER pumpers long enough now. You might like that.

      Delete
  15. So far, so good...
    The lows of gold were indeed 1250 at the moment.
    Now we are working again against the horizontal 1268 resistance level (Head and Shoulders).
    The ma20 daily is going up, now near 1245, close to latest bottom at 1248 and allowing a stop loss to be raised up every day.
    Now I'm simply sitting on my long position, waiting to see what happens.
    If gold crashes from there, no pb, I'll still make a profit.
    It it decides to break upwards, well, I'll be quite happy on that trade.
    I'm not trying to guess which way it will go.
    The only nightmare would be a quick run to 1240 to kill all the stop losses and then back up with a vengeance towards 1300, as I'm not realtime behind my screen, so they can get me that way today, with the silly FOMC news. We'll see if I receive a giant saloon door in my face or not...

    ReplyDelete
    Replies
    1. Good luck Hubert! My guess is that the Algos are going to round trip through buy stops / sell stops between SoU and Fed so that as many pockets as possible can be picked.

      Delete
    2. Back to flat with a small long profit.
      If a H&S are forming I'll wait for a trend before taking a small bite long or short.
      Been back and forth so much "trying" to stay in phase I had a short hedge in yesterday, had a sell of it in all afternoon but forgot to cancel it. It sold first thing this am!

      Delete
  16. All this tapering talk is so foolish. Its like a guy who smokes 10 packs of cigarettes a day and then says he is cutting back to only 9. Pretty insane. Whats important is to make Hubert quite happy. !!!!

    ReplyDelete
  17. Another hellish and terrifying year for equities as XRT and XLY are blowtorched once again in advance of the Fed meeting.

    Looks like investors are selling equities in droves, driving the price lower and lower.

    As Dan says, more sellers than buyers, its quite simple.

    ReplyDelete
    Replies
    1. lol Dean :) :)

      Anyway, quite interesting, SP500 indeed moved towards 1815, but very weakly...I was waiting with a short order at 1810 but it didn't even get there, and I'm not behind the screen to fine tune my orders, so I missed that last train.
      Still and for the record, I went short SP 500 later on at 1785 $.
      I have a stop loss just above that price at 1787, you could see why on a chat with 1 hour candles.
      We are pretty close from the end of the day, and we are still in the 1770-1780 area BUT a close under 1780 will be a sign of weakness imho. I don't care now anyway, my stop loss is there, all I mean is I wanted to try a short, because IF 1770 should fail tonight, and especially if we close at or under 1770 today, wow...yummy yummy, I think there is some chance that we see a good big deep collapse on the SP.
      This is a personal advice and I'm not encouraging anyone to follow this or go short, especially not if they are not trading and watching the markets. I was short because I put a stop loss at a very reasonable distance, and also pushed by the frustration of having missed the silly 1810 $ mark.
      Now I guess in a week Mark will boast again and say, see, SP500 is back at 1850 :), so, yes, I put a stop loss very close.
      But my target down is far, far, faaar away, so I love that kind of trade :)
      Have a nice day,

      Delete
    2. P.S : divergences now on the 15 min, 5 min... :( 1770 may hold and prices bounce back violently up.
      So once more, not saying here that prices will break through 1770, only that if I'm wrong, I lose 3 points, if I'm right...I'm targeting at least 30 points, so...let's gamble.

      Delete

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