“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, February 13, 2014

Old Yeller makes it above $1300

It has been a while since we have seen a "13" handle in front of Ol' Yeller, three months to be precise! Gold has managed to stay firm and avoid any strong bout of profit taking. Dips are being eagerly bought and retracements are very shallow. Shorts are grudgingly now giving up the ghost while some new longs are pushing into the path of least resistance. I get the distinct impression from watching the recent price action that this looks a lot like reluctant short covering on the part of some more enduring bears who are getting out, not in a panic but methodically as the market refuses to break down.

So far the combination of short covering ( dominant feature) and new buying has taken the metal through the $1300 level and right smack dab to the 200 day moving average. If the bulls can gore their way through that, I do not see much chart resistance until near the $13215 region. Beyond that lies $1350 - $1360.

The ADX is very strong and rising in a steady fashion indicating the presence of a good uptrend underway. The break above $1275 seems to have kicked this particular indicator into a bullish posture. Positive Directional Movement is strong. The market still looks overbought to me but momentum is with the bulls and until they see some sort of halt or blockade to further upward progress, there is not much in the way of incentive to force them to book any profits at this point.

Downside support remains near $1275 - $1270.


The drivers for gold appear to be what they have been for a while now - falling longer term rates on Treasuries which are contributing to weakness in the US Dollar. The USDX started off this month near 81.40 and has fallen practically every day this month hitting a low near $80.30 as I type these comments.

As long as the Dollar is struggling, the commodity complex as a whole is getting a bid as we are seeing further signs of our former macro trade in which hedge funds/index funds and assorted large traders are buying tangibles on the heels of Dollar weakness.

Emerging market concerns continue to underpin the gold price as well although Goldman had an excellent note out today that I saw running on the wires about fears of a slowdown in jewelry demand from the far East (Indonesia, Vietnam, etc,) if this credit/currency issue were to intensify.

Thus far gold has been serving as a sort of currency refuge but one wonders how price sensitive or not, gold buying from that corner of the world might be impacted were those regional economies to begin experiencing any economic slowdown coming as a result of all this.

The gold shares had a very nice day today as more and more buyers are showing some interest in the sector now that the gold miners look to have finally gotten the message of the market and gotten their respective houses in order. It took the snot getting beaten out of their stock prices to wake up the rather sloppy management that has been plaguing many of these companies. They now appear to be taking a hard look at the expense side of their books.

Not much more to say about this market for now as time constraints are harassing me and truth be told, there is no fresh economic news at this point. Crude oil remaining above $100 ( WTI), soybean prices soaring and more commodities showing signs of having bottomed out, gold is getting a wind at its back as the Goldman Sachs Commodity Index is closing in on its late December high near 642. If this index shows an upside breakout, rest assured gold will be moving up right along side of the overall sector.

If the index hits that resistance zone and retreats, look for profit taking pressure to show up in gold.

21 comments:

  1. hi Dan,

    Great update, thanks a lot.
    I'd just complement the analysis through the fibonacci ratios point of view.
    Until now gold is climbing the stairs of the fibonacci retracements of the downwards move 1435-1180 quite nicely.
    I bet on those retracements to anticipate a target of 1307 should 1277 be broken, and we just reached it.
    Those fibonacci retracements are mainly concerning the daily time unit, which is a bit oberbought now, with prices already above upper bollinger band. Plus we are in contact with the ma200 as you mentioned, so ideally we would have gold making a pause here, maybe retracing back down as far as the previous fibonacci level near 1280 area.

    At the same time, the weekly first fibonacci retracement level of 1805-1180 move is at 1327. It coincides with the upper bollinger band of this time unit heading down.
    The daily 62% Fibonacci level is at 1337, so pretty close.

    With all that, my "everything is going on as planned" scenario would be for gold :

    1) to stop at 1307 and bounce back down a bit during a few days, but not under 1277 area.
    2) then to attack once again 1307 next week, break through it and make a try towards 1327 by the close of the week, with maybe even a peak as high as 1337 intraday during next week.

    If gold behaves like that, especially if it confirms the 1277 and 1307 Fibos once more, I would definitely take some profits next week if we get into the 1330 $ area.

    I'm tempted to make some profit now already at 1307 but I'm not a day trader : I'm not monitoring prices often enough to try and play a pullback towards 1280, as there is no guarantee that we'll head back down there. If I monitored more closely such time units as the 30 minutes, 2 hours...maybe I'd give it a try. But on my time horizon, trading within a 25 $ interval is not satisfying. So I'll wait for 1330 to unload a bit more.

    Silver : well, we are about to break that range 19.00 - 20.50 it seems :) and the target of the balance is the symetrical horizontal range, somewhere near 22, correct?

    Reminder of my positions :
    Gold : long 75% of my initial position taken at 1220, with a few buy/sells in between.
    Silver : long 50% of my initial position taken at 19.10 (with a stop loss just under 19 and a 50% profit above 20.10, I love that trade :) :))

    Have a nice day all!

    ReplyDelete
  2. http://i60.tinypic.com/rrppnn.jpg

    The chart with daily / weekly time unit.

    ReplyDelete
  3. Dan -

    I get it. Dollar down, gold up. But oil and copper are down. And these emerging market issues have been with us for a while.

    Is there something more systemic in your humble opinion?

    Something does not seem right. Or is gold being bid up quickly and can fall very quickly, too.

    ReplyDelete
    Replies
    1. jmsvett;

      I get the impression that since many of the commodity markets have stopped moving lower that there are some money flows coming out of equities ( not in a large way but some) and that those are moving into the commodity sector as some are picking bottoms based on the idea that the Yellen-led Fed is going to be super dovish. It looks more like that carry trade mentality where there was active commodity sector buying.

      I say that based on the rally in the GSCI.

      One of the things that I have been pointing out, ( at the risk of getting some of the gold bugs weary of me ) is that gold was not being manipulated lower over the last few months but rather that it was merely reflecting the lack of upward price pressure on commodities. WE had corn making 30+ month lows, beans were down, wheat was down, coffee was down, sugar was down, and even crude was moving lower along with gasoline. There was no inflation in things tangible.

      That has changed and oddly enough, the frigid weather had a lot to do with it as it ramped up demand for heating oil, natural gas and kicked gasoline prices higher as refiners had to meet additional distillate demand. Now that commodities are moving higher,alongside of a weaker Dollar and lower interest rates, gold has several of the factors needed for an upside move.

      This is one of the things that provokes my disdain for some ( not all ) of the Gold is always manipulated all the time, all day long, every time there is some flash crash, crowd. The entire commodity sector was falling out of bed and sinking like a rock and yet somehow we were supposed to believe that gold should be moving higher in that sort of environment! That was just bizarro land thinking.

      What gold is doing right now makes perfect sense to me as the commodity sector is moving higher. Note that silver is leading gold - that also makes sense in an environment in which traders are watching commodity prices move higher.

      Hope this helps some.

      Delete
  4. just to sync with jsmineset : "the manipulators are now on the long side".
    Quite an important statement here.
    Not "they will be" anymore. They are.
    If true, then gold is not going down anymore.

    And, you gotta love this one :

    " Gold is to the dollar like sunlight is to a vampire."
    Ciga Bill Holter.
    Yes, I like the comparison very much :)

    ReplyDelete
    Replies
    1. Hubert;

      Thanks for all the recent posts. Just some FYI - Based on the most recent COT reports, the bullion banks and swap dealers ( the usual culprits blamed for gold manipulation) are NET SHORT; they are not on the long side.

      Now they may be in some other venue (Shanghai, London? ) but they are not in New York.

      Once again, there has been no manipulation of the gold price lower in recent months contrary to what many of those who love blaming a lower gold price on this theory. As I stated in an answer to one of our posters here, commodity prices had until just recently been sinking like a heavy stone - there was no reason for gold to rally in a deflationary environment especially since the Dollar was moving higher. It has only been this month that the Dollar has been weakening and that is why Gold and the other commodity prices are moving higher. It has NOTHING To do with the "manipulators" being on the long side. Who is on the long side is the SPECS... that is what always happens when their computers bring them back to the buy side. They will buy until upside momentum stalls out.

      Have a great weekend!

      Delete
    2. Who takes the manipulator stuff serious these days. Its getting a little old. And they all have something to sell. Newsletters advertisements goldshares. Dont pay attention to walking around conflicts of intrerest.

      Delete
    3. This looks like blatant manipulation! :<D
      (HT- Kid Dynamite)

      Delete
  5. I'm long right now but not sure for how much longer. Yellen tapering the taper (June) on likely soft data and the probability of a strong dollar rally (to strengthen the deflation trend; to emerge on capital flight from the peripheries) don't bode well for ol' yeller. Remember the abysmal year-end close for the metals...we're not out of the woods yet...

    ReplyDelete
  6. Hubert -

    I do not think that gold can only go up. But maybe you are right.

    Here is my thoughts. Emerging market countries are going down. That would mean the commodity super cycle is going away. Commodities are linked to emerging markets. We then have an environment like the 1990's of disinflation.

    ReplyDelete
    Replies
    1. in any case...the alarm bell will be 1280 not holding and prices going down under the ma20.
      I have an upwards support under my feet, with a nice profit even if it breaks.
      I prefer to wait and see if we can make it up to 1330 within 2 weeks :)

      Delete
    2. Maybe 1330 today? This seems like pure speculation/hysteria.

      Delete
    3. Just a bit of short covering and hedge fund algorithms tightening the rack a little. You're right though, it could hit $1330 today. Very positive week for gold.

      Delete
  7. Maybe I am full of crap, but I think that once these credit crises are resolved, and they are resolved relatively quickly, I can see goldman sachs view of $1050 gold.

    I realize in such an environment Yellen can be more accommodative, but that does not fly in this environment. The commodity super cycle is dead.

    Ok - everyone tell me what I am missing?

    ReplyDelete
    Replies
    1. jmsvett,
      My heart and my wallet tell me you're wrong and my brain tells me you might be right. Unfortunatelly, overal deflationary environment is prevailing and that is usually not good for gold.

      Delete
  8. Lots of physical GOLD and now even SILVER buying reported in Dubai, various Arab nations, The Middle East, and the Far East. It used to be that these cultures would be hoarding U.S. PAPER DOLLARS but although that desire still remains in part there is a new craving for GOLD and SILVER amongst these savers in those regions. Jim Sinclair knows more about the details of this. Will he write about it soon?

    www.newsunit.net

    ReplyDelete
  9. Re: Gold Stocks. I have not posted for long time; now that many trend followers are jumping on the train after it has left the station ( example : Wycoff of Kitco,etc) its time to take a few chips off the table.
    Several weeks ago I recommended: KGC, IAG, SA, HL,etc.
    Sold half KGC yesterday since it crossed above 200 day mov avg earlier this wk. Kept IAG and SA awaiting Gold solidly crossing and staying over its 200 day ( probably today, Fri) hoping it will pull IAG to around $4.60 and SA to around $9.50 ( at which point I will sell half of those ).
    Aside: slowly averaging into ACI every time it gets to $4 + or - 15%; thermal coal inventories at utilities lowest in over 7 years ( not ANR which is more met coal centric ).
    ( proab

    ReplyDelete
  10. "If the bulls can gore their way through that, I do not see much chart resistance until near the $13215 region" Yeah, that's what I like to hear Dan!

    Thanks for the great blog!

    ReplyDelete
    Replies
    1. If Dan meant near the $1321,5 region, then it was a Sniper's shot!! :)
      Should go to Sotchi for the triathlon :)

      Delete
  11. Looks like equities and commodities moving higher in 2014 because of a weaker dollar? Not entirely buying the move higher with non- financial assets. Too soon to determine if mass sentiment will change any time soon. If you want a nice spec play in the meantime take a look at mknd. Big announcement coming in April.

    ReplyDelete