“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, March 13, 2014

Dollar Weakness Continuing

Do you not find it odd to say the least, that the US Dollar has not been able to garner any support in the form of safe haven buying related to the deteriorating crisis over in Ukraine? For how many years have we seen the greenback as the "Go-To" currency during times of financial or geopolitical crises.

Remember 2008? How about the European Sovereign Debt Crisis? How about that rush INTO the Dollar when the idea of a Fed tapering first began to surface.

What happened to all of that?

It sure makes me wonder if part of the issue is tied to the Obama administration's handling of its foreign policy issues.



One thing for sure is occurring however - Treasuries are getting a firm bid out of safe haven plays. That is dropping interest rates and appears to be undercutting the Dollar although one does wonder how a rush into Dollar-denominated Treasuries is not Dollar supportive. There are so many new and different developments in these markets anymore that attempting to understand them all is proving to be an exercise in futility.

What I do know however is that this persistent Dollar weakness, is providing a strong floor of support in the gold market.

In the past, when we did get a general round of Dollar selling, almost as if in inverse lockstep, the commodity sector would march higher as the weakness in the currency would trigger a big macro trade across the sector.

This is not occurring. Copper continues to sink lower and lower and while crude oil is managing a bit of a bounce today, the products are both weak. Individual commodity markets are powering higher ( Coffee, Hogs, Cotton) but the broad-based buying in the sector is lacking. You can see this in the relatively weak performance of silver compared to gold. Silver is following copper today and acting like an industrial metal rather than a monetary metal ( you never know what you are going to get with schizophrenic silver from day to day).

I am very closely monitoring this Dollar chart however. The market is poised right above an important chart support zone near the 79 level basis USDX. If that goes, I expect to see gold reach the psychological $1400 mark.

The ADX is now rising along with the Negative Directional Movement Indicator ( RED LINE) showing the bears are currently in control of the market and a trending move is looking more likely. Again, that will require the support zone to give way but unless the bulls make a firm stand here, they are going to cede complete control of the market to the bear camp.

The HUI looks like it woke up from its slumber of yesterday. It has finally managed to clear 250 which is a real positive. I need to see this index power above 280 for starters to conclude that a stronger bullish uptrend is developing. Still, one has to be happy for the long suffering mining sector bulls who have been mercilessly pummeled for so long. At least their portfolio balances are finally moving higher.

We'll have to see what develops further over in Ukraine but for now, it has certainly spooked equity bulls and that is sending money flows into both gold and Treasuries for the time being.

This Dollar weakness is troubling, very troubling...

27 comments:

  1. Dan, what you say makes all the sense in the world, in that things do not add up, let alone make sense. I know everyone hates KWN, but there is a fine interview with Stockman there now. He, to me, makes a lot of sense, and importantly, has been both in government and, in private equity. I read his book and he now has a website as of this week. Maybe I am wrong, but ignore his thoughts at your own personal peril, sports fans; sparks of course

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    1. Steve- Good to keep an open mind. I thought the bit about sales from the SPR was interesting. Clearly economic warfare to neutralize largest/2nd largest (depending on whose figures) oil producer. SPR wasn't even drawn down in preparation for Iraq war. Obviously the playing field has changed a bit now that USA produces 50% more oil per day than it did in 2008. I'd say most blatant political use of reserve was in 2000 election season--releases to dampen oil/heating oil prices in Northeast. But as you mentioned, a lot of good that did the Dems as Bush stole the election anyway. Here are previous releases from SPR, from Wikipedia:
      1991-Gulf War I
      1996-97 Deficit reduction
      July–August 2000 - 2.8 million barrels Northeast Home Heating Oil Reserve.
      September–October 2000 -response to a concern over low distillate levels in the North-eastern U.S.
      2005 - Hurricane Katrina sale
      2011 - Arab Spring sale - 30 million barrels

      Delete
  2. Been a Stockman fan because of his understanding of the real issues. We might now be entering the FOURTH TURNING.

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    Replies
    1. Wolf, I read that book also and I think they are right; sparks

      Delete
  3. Thanks for the insights Dan.

    Do you have any comments on the nickel price chart which is looking a lot stronger?

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    1. MarkW;

      I do not know the fundamentals of nickel and thus cannot comment on it. I do find that odd however... some metals like palladium and platinum had been moving higher based off of the unrest involving Russia as it is a HUGE producer of both. It could be that nickel is a similar story but again, I am unsure.

      Delete
    2. Thanks Dan

      The biggest fundamental reason why nickel is on the move is because Indonesia had banned the export of unprocessed nickel ore in January and once the large Chinese stockpiles of ore are exhausted (late 2014?) could cause the loss of 20% of the worlds nickel supply as many Chinese NPI plants are forced to close.

      My question was really just about how the chart was looking.

      Delete
  4. Just curious how the manipulation theorists are explaining this blatant lack of manipulation in the gold market. Are the PTBs waiting to lure as many flies as possible? Are these PTBs unable to produce and dump these paper gold certificates in sufficient quantities? Is the demand from China so strong in the physical market that the PTBs are ashamed to manipulate the prices further?
    I am sure they will resurface with their theories as soon as gold drops $10 next time.

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    1. Abraxas;

      Excellent points....As long as gold goes higher - all is right and orderly in their minds - gold cannot move lower because that is an evil and wicked thing.

      Don't hold your breath waiting for any talk of manipulation while gold is moving higher. As soon as we see any sort of sharp move lower, don't worry - their voices will be screaming again.

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    2. This sure looks like manipulation to me! BTW has anyone seen this "vomiting camel" chart pattern before? ;<)

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    3. Doesn't hurt that every major newspaper in the world has carried the story of gold manipulation first reported out of Germany and now mainstream by the likes of even Bloomberg. Makes it a little more difficult with the world now watching however Dr. Paul Roberts insists the naked shorting is continuing. What does he know as Dan's credentials are vastly superior...lol

      Delete
    4. Got it Right;

      Yes, DOCTOR Roberts obviously has traded futures for most of his adult life and thus has much more understanding of the futures markets than we professional traders.

      Guess what smart ass - he puts his socks on like anyone else and like anyone else, has an opinion, an opinion which has not been verified by either the Commitment of Traders reports or the general wave of hedge fund algorithm selling that periodically is seen in every single futures markets here in the US.
      One last thing - "EVERY " major newspaper ( wow - I guess you can name them all for us if requested ) might have reported on the London PM Fix and the ALLEGED price fixing irregularities. that is a FAR, FAR cry from the futures markets.

      When DOCTOR Roberts can explain to us how soybeans, hogs, wheat, cotton and copper can all experience strange, wild swings in price during the Asian session and how that process can be explained by the evil monetary authorities manipulating those markets, then I shall gladly sit and his feet, and yours, and proclaim how wonderful your wisdom is.

      In the meantime genius, here is a news flash for you - every single futures market on the US exchanges has NAKED SHORTING every single day.

      Try not to chew any gum while you take that in because I would not want to see you hurt yourself while having to actually engage a brain in the process.

      I will leave your idiotic post up here for the regular readers ( most of whom are either aspiring traders or actual traders) to serve as an example of what one-dimensional thinking looks like and how it is to be avoided if one is to be successful in this very difficult and challenging profession.

      Delete
    5. Successful? LOL I loaded up on miners on July 1st 2013 and some up are up 300%. We nailed the bottom. Unlike you who changes his tune every 2 days as to why gold will move. In Toronto you are known as Toilet Seat Dan. Up and down every 5 minutes. Enjoy those boot lickers who agree with you everyday.

      Delete
    6. Got it Right;

      The cackling hen syndrome - always a tell tale sign of rookies.
      I always enjoy the hyprocrisy of readers such as yourself who insult the host repeatedly, mock the views here and denigrate the blog but simply cannot help themselves by continuing to come and read and even post. Apparently diving into commode bowls is a favorite past time of some of the rapid perma gold bulls.

      I am happy for the notoriety in Toronto. Too bad I do not make any money from my Toronto fame like so many of the gold bug web site with their "click on my webpage and make me lots of money from my advertisements" clowns.

      Delete
    7. Got it right,

      Even if you "loaded up" on the miners, as you claim you did, you are, and will forever remain a loser. And, you know it. Please, tell us more on how successful you have been, Mr. Loser.

      Delete
  5. Dan, you are so right on the money regarding new and different developments. I don't think that I've ever seen a day when gold is up, silver is down but GDX, GDXJ and SIL up so big. Have you?

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  6. Out of 50% silver at 22.20...can't break above the downwards resistance short-term and dragged down by copper.

    No strength to comment anything else, news are too depressing...
    wish you a nice evening,

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  7. If, a big if Hubert, the US takes this escalation further (I don't think PUTIN) is backing down. Gold as a safe haven could continue its ascent. Just saying if stocks can levitate beyond any reasonable reasonable PE ranges due to the ever future just around the corner highs....certainly GOLD as a safe haven during currency crashes, wars, and crashing worldwide trade.

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  8. Dan, could the dollar's weakness be a result of Putin's threat to dump its dollar holdings and encourage the rest of the world to do the same if the US imposes sanctions? Looks like China and India have allied themselves with Putin.

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    1. Mad Max;

      My take on that is it would be the same as cutting off your nose to spite your face. What do you think would happen to the value of their reserves if they all decided to dump them at the same time? answer - look out below.. the problem is you are talking about their "reserves" which is another way of saying their nation's wealth.

      In effect, they would be responsible for impoverishing themselves as such a large percentage of many of these nations still hold an inordinately large chunk of that wealth in the form of Dollar denominated holdings.

      Delete
  9. Hey anyone seen Mark today? Seems as if Miners are on fire.

    GDX now floating above 10MA, having cleared both 50 and 200 quickly.
    And todays action: Up over 2% + all three HUI looking at some resistance but Dan's 280 target is a sweet one.
    Three days in a row: $GDX trades ~3.2million shares in last 3min of the day (8% of daily volume)...to the upside

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  10. Think this article may just shed some light on where equities may go.

    NEW YORK (MarketWatch) -- J.P. Morgan U.S. chief equity strategist Thomas Lee has departed from the firm, according to a source familiar with the situation. Lee was considered a bullish strategist on the markets and had predicted the S&P 500 SPX -1.17% would reach 2,075 by the end of 2014. The move came as a surprise to investors as Lee had been with the firm for more than 15 years. No word yet on where Lee will land next.

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  11. Check all the flights out of NY area the exodus may have begun. If these articles start en mass and the flurry of Currency Trader and Soverign Bond Traders suicides increase, then I will be assured of the next move in Stocks.

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  12. Thanks for the shout out to miners' holders Dan. I can't tell you how long I have been waiting for 280. I have had so many fingers burned so many times, I have no stomach to enter the market again with remaining funds. When you are 100% certain, can you bear me in mind, I need to get my averages down!

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    1. lids;

      I can only surmise, and hope, that you are not completely invested (100%) in the mining sector. Even if you are concerned about the overall debt situation and the QE's and all that, it is never wise to put all of your eggs in one single basket. Diversify my friend.

      Do your research, both fundamentals and technicals, and invest accordingly.

      Delete
  13. I wonder how these hedge fund guys decide from day to day whether silver is going to be a currency, a precious metal, and industrial metal or a lead balloon. If you know, please tell me.,

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  14. Although clearly out of phase the shape of the dollar and gold curves are remarkably similar.

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