"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

Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET



Wednesday, March 26, 2014

ECB Chatter Weakens Euro; Dollar Rises

The chatter in the Forex markets today centered around the comments of Bundesbank President Weidman who seemed to be concerned about the low level of inflation in the Euro Zone. Throw in the comments of some other major European Central Bankers and that hit the Euro as talk grew that the ECB was moving in the direction of its own version of Quantitative Easing.

Over here in the US Fed Governor Charles Plosser (head of the Phillie Fed) commented that the hurdle to change course on the Fed's plan to taper was "pretty high". By the way, he was concerned that inflation was currently a little low and that he would actually like to see it creep up a bit! How's that for some candid talk?

This sort of stuff, coming from Central Bankers in the West, along with further weakness in the mining shares, was enough to pull the rug out from underneath those buying gold out of any Dollar weakness concerns. If rates in Europe are not going up anytime soon and if the Fed is continuing its current tapering plans, then Gold has those headwinds to contend with.

if that were not enough, copper prices continued to fall lower today out of worries over the health of the Chinese economy. What really has the market roiled however is that persistent weakness in the Yuan. That makes copper more expensive to purchase for Chinese buyers. In a market already experiencing demand issues, that is not helpful.

There is a bit of chatter however that the economy over there is weakening to the point where the Chinese authorities may soon try to do something to generate some growth. Who knows exactly what that might be but it was enough, at this point, to prevent copper from falling any lower. Copper is holding about last week's spike low near 2.87 for now. I would be concerned if it broke down below there as the odds would increase that silver is not going to hold support down near $19 if that were the case. Silver has become a teenager once again.

Here is the chart of gold. As you can see, the bears have regained control of the market on the short term chart. Notice how the price consolidated the last couple of days near the 38.2% Fibonacci retracement level indicated. Then today, it fell below that and as of now, has not yet recovered.



It did manage to hold above psychological chart support at the $1300 level. Bulls would not want to lose that as it would further shift the sentiment in the market in favor of the bears. If $1300 goes, then look for a test of the 50% retracement level near $1287. Bulls need to recapture $1340 to gain any sort of traction right now. They certainly need some help from the miners which are down over 2% as I type these comments ( basis HUI).

The US Dollar Index needs to clear 80.50 to run out some of the recent shorts. If it does, gold will more than likely be unable to hold support on the downside. We will have to monitor developments in the currency markets to get a sense of whether or not that is going to be the case.

53 comments:

  1. Thanks for the update Dan...would you be willing to share any thoughts you might have on the WTI chart?

    ReplyDelete
    Replies
    1. Stefan;

      I am currently unclear on crude. The weekly shows it at a potential crossroad. If it can take out $105 on a closing basis for the week, it will be friendly. that would set it up for a test of the $110 level. That should be a very formidable level to best unless we see some sort of geopolitical driver or a rip roaring economic data set from somewhere.

      Downside support near 92 is currently intact. It has not had a WEEKLY CLOSE below that level for nearly a year now. If it were to do so, then it could fall into the mid 80's.

      ON the Daily chart, it has resistance just above $100 and then again near $102.50. A strong push past that level gives it a realistic shot at $105 again.

      Support currently is near $97.50; then again at 95.

      It's a bit of a crap shoot right now if you ask me.

      Delete
  2. Looks like the Biotec industry going to lead into 22$$ dropping towards the
    200 dam? Ominous...

    ReplyDelete
  3. Witness the stick save NBI...FUNNY TRYING HARD TO GET ELEVATION....CO.E ON CAPT..SCOTTY DAMNIT MORE JUICE!!!

    ReplyDelete
  4. over at kwn we have another wonderful interview with Turk, who explains everything about nothing once again, but hey, what can you expect from a guy that last traded a mini-silver contract 8 years ago? This is why I keep my airsick bags on one side of the desk and a quart of Grey Goose on the other side. What a donkey! sparks

    ReplyDelete
    Replies
    1. It's getting to the point where all you can look at the stock photo without reading the interview at all:
      QEII surveying gold = manipulation
      Scantily clad woman = miners/gold rocketing
      Quicksilver surfer = silver to the moon (often Leeb quacking on about Chinese photovoltaic demand)
      Bikini Atoll = world headed for imminent destruction

      I myself will read anything with a photo of Penelope Cruz lifted from a Campari ad. Hope they're paying royalties over there.

      Delete
    2. Steve,

      If only these gold bugs had dollar cost averaged into SPY "month in, month out" instead of GLD, they would have their retirement protected by the full force, faith, and credit of "The Powers That Be" and "The Manipulators" and "The Central Planners" and would be sleeping like babies instead of constantly looking over their shoulders wondering about constant bear raids.

      LOL....

      Delete
    3. MDLGTO

      Yeah, I keep looking for a cheap, low grade art poster showing an epic wipeout by a surfer on days when PM's are collapsing.

      Or a flouroescent "The Day After Tomorrow" movie poster at times when GDX is down 8 consecutive days explaining the annihalation of the gold and silver mining industry.

      But none of that. Only pictures of traders screaming on their cell phones, Atlas rockets with the GATA logos, etc.

      And don't get me started on girlie pictures often featured, unfortunately, those girls are now safely encapsulated on somebody's yacht in the Greek Isles, owned by a IMF plutocrat, retired central banker, or Wall St. chieftain who made a vast fortune peddling derivatives.

      LOL...

      Delete
  5. Thanks Dan.
    When the Chinese/Asia real estate bubble fully pops and the scope of all the Chinese corporate debt defaults comes into clearer focus (due to a weaker yuan short term) it seems likely some selling of gold by weaker (or wiser?) Asian goldbugs will take place.

    In my opinion we're poised to see $1200 again UNLESS some persistent geopolitical situation flares up and it keeps golds price bouyant as we saw recently.
    I don't think a market driven volatile bottom in gold has happened yet. The bearish 3 year trend still seems intact and I don't think a QE taper (and the Fed hint of an interest rate hike) or a Chinese bubble deflation is gold price positive in the short term.

    ReplyDelete
  6. GDXJ owners just got "bailed in" at the tune of 25% in 8 trading days.

    That's after they already suffered from a 75% wipeout since 2011, and got a little bounce.

    Meanwhile, SPY is only $2 off world record highs, and IWM off $4 from world record highs, only about 3.5% off of a run whereby investors made 375% on a well-diversified ETF.

    And the usual suspects are screaming about a crash and implosion in the economy and U.S stocks.

    "Any minute now, I swear!!""

    LOL......

    ReplyDelete
  7. If biotech goes. Nasdaq and the funny money IPO thirds with it. Waiting but
    The big short is almost upon us!!!!

    ReplyDelete
  8. GDX/GLD ratio just crashed back below .19, now in the "freefall zone" headed toward's last year's world record lows.

    Total devastation in those miserable mining stocks, now back to depression lows.

    ReplyDelete
  9. Waited going to see if 1300 hols, if not, buy at bottom, best opportunities are shorting all the indexes...like taking money from babies now that the taper is on.

    ReplyDelete
  10. Whoops there goes the banks...gurgling...FB...gurgling..Blotches..gurgling, and...gold stick save bounce

    ReplyDelete
  11. Meant blowtechs..I mean biotechs

    ReplyDelete
  12. Lets see, JPY check, EUR check, Yuan check, LB-?, Peso who cares, Dan you telling us gold wont be a safe haven when the rest of the crappy currencies go down harder. How can that be? I guess the US is still the best of the worst. The Fed and Wall Street are succeeding. Keep corp profits high, stock buybacks, cut employees, keep profitability high, Fed crush alternatives any way they can, have the HFT's create volatility, have the BLS and other government agencies print lies, take all things needed out of CPI and replace with Chinese crap, get the hedgies into to the abyss on mortgage markets by buying up all the cheap properties, have the banks mark their worthless balance sheet to whatever they want, and keep keepin on. It is all grand in the good ole USA, except it is the make believe market. Where is that growth, not coming from the capex expenditures.

    ReplyDelete
  13. As usual, anytime there is bearish action in the stock indexes, gold falls 2x faster and gold stocks fall 4x faster.

    Just like 2009.

    Gold is hands down the riskiest asset you can own. Yes, biotechs and Facebook have been slammed but look how far up they are, most investors still have vast profits.

    ReplyDelete
  14. Well, Dan Norcini is definitely not a Philadelphian. Phillie Fed?! Those of us from Philadelphia say Philly!!! Not Phillie unless we are talking baseball. :)
    See you at Gold Bottom $950. Hope we get there this summer! The sooner we do the Sooner we move Higher...

    ReplyDelete
    Replies
    1. Bob;
      Thanks Bob - I stand duly chastised! :o)

      Delete
  15. What is very funny is how many stock pundits said to buy U.S. stocks and avoid emerging markets.

    Yet emerging markets have been way outperforming the last 10 trading days, with Brazil up 8 consecutive days.

    Bottom line is that the gambling instinct is alive and well, and I guarantee you that over the next 10 years we will see some shocking gains in emerging market indexes.

    And I'm predicting that China will be the biggest stock market bubble ever, as billions of Chinese finally get their iPhones and start gambling on stocks in their own country.

    Anybody who has watched them play Pai Gow at the casino knows what I'm talking about.

    ReplyDelete
    Replies
    1. Good point, when main street truely gets in the investable bracket of income they will gamble hard.

      Will it be in time though? The FED has created crack for credit markets over there. They have some guns in their arsenal but it takes nothing to spook those guys into hoarding cash when they think times are tough.

      The FED nows how to clean that dirty shirt on the floor enough so all the rest look like rags.

      Anyone who says the FED is stupid, is stupid.

      Delete
  16. Mark,
    China has already outplayed the Fed in the credit markets. They will bail out to eternity as well. The real question is: who has capability to absorb all the money? Based on the level of pure potential for growth it certainly aint the good ole US, unless of course all the 1 percenters own everything and need even more. Income disparity will be the driving factor and if you haven't been paying attention because of your cheerleading, then the secret is there is an all time number of people on Food stamps and record unemploynent STILL

    ReplyDelete
  17. Can some one please explain to me the futures market on say... GDX? My question is how can at 4:20 1000 shares be sold for closing price (ie 24.50) and minutes later 5000 shares will sell for 24.28 or something similar... Happens every day. I'm new to this and learning. Appreciate any help :) thanks!

    ReplyDelete
    Replies
    1. these are usually trades that are either out of sequence or late reporting. This happens every day in most publicly traded stocks. The trade probably took place early in the day and was being reported to the exchange after the fact. Don't read anything into it.

      I used to work at Nasdaq for my last job, and this stuff happened all the time, especially on block trades, but this happened to smaller trades as well.

      If you are new at this, i have one thing to advise, stay away from the miners. most suffer from poor management.

      Delete
  18. M Resnick

    Answer:

    Panicked hedge funds who were buying into the "gold to 'da moon!" theme were panicking and selling GLD after hours in huge blocks.

    By the way, anyone notice that TLT is now at 9 month highs? I mean really, everybody and their brother think bonds are dead. Guys like Jimmy Rogers and Kyle Bass keep shorting and getting killed while Bill Gross gets richer and richer.

    There has never been a better climate for investing in paper iou's.

    Just look at the insane low yields offered on German and Japanese bonds, like low interest rates are here forever and ever.

    Anytime there is turmoil in the markets, investors dump gold and run and hide under the apron of rock solid government bonds, the supreme bastion of safety.

    ReplyDelete
    Replies
    1. That is certainly the case. It must be nice to be a bond owner of an entity owing more then 18 trillion. Its a supreme bastion of something, I just dont know what.

      Delete
    2. Mark, I think you are wrong on Rogers and Bass getting killed. Secondly I think you are also wrong on Gross, as his co-boss Egyptian buddy quit recently, and these kind of divorces do not happen when you are beating the mkts and I think the Pimco outflows will testify to this fact. Take care my friend; sparks

      Delete
  19. Thanks! So, since gold is taking a beating... Any suggested sectors to research and invest in?

    ReplyDelete
    Replies
    1. Gold is as good investment as any in my opinion. Perhaps, now is not the best time to go in, but in a month or two it just might be. There are guys here that talk about exact numbers like $1305, $1295, even $950. I have no idea what they are talking about, nor how they come up with these exact numbers. So, i don't listen to them. I come up with my own evaluation of specific shares or assets, and determine when would be an opportune time to get in. Whenever I listened to others as opposed to my own gut/analysis, I regretted it. Dan is one guy whose opinions I found useful to consider. I think he's one of those rare professionals who tell you how they see it. The rest, you just get harmed by, mostly.

      Delete
    2. Abraxas; Levi Strauss made a lot of $ in the California 1849 gold rush by selling jeans and shovels. Can you name any miners that made anything? No, because gold is just gold, nothing more and nothing less. Look at history and see where real $ is made and you will see that it has been in inventions, stock bull mkts, real estate bull mkts and that in the final analysis, gold has under-performed on balance. You can tell it is no good right now because even the pm pumpers have nothing to say but buy physical, buy physical. So what? The most prudent advisors will tell you that a 5-20% allocation is what you should think about. So, how come the pm thumpers and pumpers never tell you what else you can do with your monthly investment allocations? Because they are morons and understand nothing; sparks

      Delete
    3. Steve, I don't disagree with you (double negation?). Only, silver, gold and miners are still as tradeable as anything, if very dangerous. Even bad companies are a good buy if they are grossly undervalued. I don't suggest that the miners or gold are undervalued now, just that once they are, they will be a good buy (like they were June or October last year). I don't subscribe to kwn crap either.

      Delete
  20. One group looking very strong is the banks.

    Another one looking strong is XLE or OIH in the energy sector.

    ReplyDelete
  21. Going to bed everyone and hoping Obama does not have a heart attack and thus saddling us with Corzine's asshole buddy joey biden; sparks

    ReplyDelete
  22. Hello,

    Quick chart as a complement to Dan's analysis on gold.
    I took the 2-week chart which I use occasionally.
    I could spot 2 pitchforks, with an interesting convergence at 1265, which was already a horizontal support / resistance for a long while on smaller time units.
    Maybe we'll meet there next week?
    It's also the 62% Fibo retracement that Dan used on his chart.

    http://i59.tinypic.com/15rxel5.jpg

    Twice I benefited from the upwards move of gold thanks to TA. First, long last july at 1200, then more recently near 1220. But it would be useless to find those entry points if I didn't know when to let go. First time I was completely out when we broke down 1350 level. This time I waited a bit longer because I had only 25% of my long position left, so I sold it entirely under 1310. Once more, I see no point being long gold or silver on my trading account as long as the daily time unit show weakness again.

    On the simple 2-week chart, I can also see how the upper Bollinger Band (again) met prices and made them bounce back before they reached the median of the upwards green pitchfork (median refusal, usually meaning prices will go meet the mlh inf of the pitchfork once more, just as they are doing). Prices went out of the red pitchfork, so the bear trend is clearly weakened on this time unit. As long as prices remain in the green pitchfork, we are inside a bullish trend in this time unit but the median refusal is not a signal of strength. That's why I'm quite neutral for now, and waiting to see if gold manages to remain within the green fork. If it can't, and prices can't even hold 1265, boo...we may see soon another test of the 1180 lows...
    (as usual for new readers, I'm not a professional trader, but sharing my opinion for the sake of discussion on the forum)

    ReplyDelete
    Replies
    1. P.S : as a consequence of this, I'm a strong buyer of gold in the 1265 $ area right now (should we quickly go there, which is not likely)

      Delete
  23. Mark; the top is in for your palladium; sparks

    ReplyDelete
  24. Steve,

    Not so fast, copper is holding up well and I don't see any chart damage in Palladium at all. It's at $764 which is the breakout area.

    How about you go short and I'll stay long, after 3 months we'll see who is ahead, the loser has to buy a $100 gift certificate to Ruth Chris' Steakhouse.

    On the other hand, looks like gold investors are getting "Bre-X'd" again with another horrific collapse. And those poor mining executives, the gold, silver, and coal industry are experiencing depression era conditions, truly a nightmare for those guys.

    Glad I decided to stay in the system and not buy into the "world is falling" camp by taking delivery of gold stock certificates which have cratered 70% in value, lol.....

    ReplyDelete
    Replies
    1. Mark; Steve;

      I am long chickens.... anyone want to bet me that chicken prices are not going to go higher this spring/summer?

      One more thing - No matter which one of you are correct about palladium, don't forget that Duke and Duke gets the commission.

      Sounds like we're a couple of bookies over here.

      Delete
    2. Dan and Mark; if you ever saw the filthy conditions that they raise broilers in, you would never again eat them; give me a porterhouse or wild salmon; sparks

      Delete
    3. Steve, you're revealing yourself to be the 1%. Wild salmon & porterhouse? Little known fact, Silver is known as the chicken of the precious metals complex.

      Delete
    4. I'll admit I'm giddy because I actually managed to relieve myself of a lot of my remaining miner positions at close to the interim high + roll it into DUST.

      Delete
  25. Hilarious OPP offering on ALLY FINANCIAL AKA GMAC. I have competed with ALLY on debt deals only to lose transactions. See they bought all this car and truck paper at very low margins and if need be would Jack up their residual value positions to lower payments. Basically a gov't funded PONZI BANK with the treasury as king PONZI. I would not invest in this VS Ipo with MARKS MONEY.

    ReplyDelete
  26. MORE TOXIC CRAP FROM YOUR GOVERNMENT

    ReplyDelete
  27. White Wolf

    Looks like the "crisis" is over, more than 70% of my Investor's Business Daily stocks are now green, they are buying the dip once again.

    And EEM is making new highs for the move, front-running another epic run up in stocks?

    As far as Ally Financial goes, I predict it will be another "Phoenix' stock that ends up going up 300% in 2 years after the IPO, just like Genworth, Hartford, and all the other "non-bank" financials that were left for dead in 2009.

    And GDXJ?

    Well, another day, another terrifying collapse. MUX as an example, is down over 35% in just 9 trading days.

    I'm surprised we haven't heard of mining CEO's jumping out of windows lately.

    ReplyDelete
    Replies
    1. Mark, Mines don't have windows...
      Speaking of circling the toilet bowl, Kinross is down about 25% from its peaklet. It looks like it will finish the month with its worst close since about 2002. Obviously, having 1/4 of their production from their lowest cost mine in Russia (Kupol) is not so great.

      Delete
    2. Actually I was in a small tad and added a bit, not to the GDXJ but the GDX. I am up about 5%, would have been more but the add near the recent top hurt me. I would add that currently YTD the GDX is up about 10% while the NASTY NASDAQ is about even. Take them appples. As far as your Keynsian Cultism is concerned it only keeps working till it doesn't. All the bubbles have been pumped into the stratosphere. Take that Ally example. Let's see. GMAC blew up, toxic debt and mortgages (subprime). Govt rescue (yeahhh), what do they do. Blow up Ally with subprime auto paper. Then since the Treasury owns 34%, sell now while the portfolio is young. The margins are low, the residual on the vehicles are high (pmts low) and the borrowers are all subprime. Now then get the Big Investment bankers to charge people to buy the IPO at the now recovered highs and see if they can get the Treasury out of the company. Good luck, but if I was you, I really would not invest in it.

      Delete
  28. ok so I am two thirds now in into LSG and MUX … and shaking …. Lets see if it works or I have to run for the door … The way I see it worst case scenario we hit the 50 day ma and overextend to the downside , say 1240 , if that goes … then … too bad

    ReplyDelete
  29. Looks like emerging markets are getting squeezed big time. Millions of hedge funds were short EEM, EWZ, ILF, etc. and long QQQ and IWM and that trade is unraveling quickly.

    Same with those that piled into GLD and GDX and shorted RSX on Ukraine fears, those guys also getting taken to the woodshed.

    Newmont Mining all the way down to $22 while Alcoa is at 52-week highs, offering more proof of the coming boom in the economy with zero inflation risks.

    ReplyDelete
  30. Eric King should have put that picture of the hyrdogen bomb explosion next to a chart of GDX/GLD ratio on StockCharts.

    LOL.....

    ReplyDelete
    Replies
    1. but Mark, you did not see the 7 astonishing gold charts; sparks

      Delete
  31. So I have bought the last third of MUX , I have decided to allocate the remaining third of LSG to MUX , hence , LSG remains completed , and MUX I am 75% in , so I have a bit more powder remaining … in my opinion this things are falling off the bed with no volume today …tomorrow is happy friday , so we shall see … you snooze you loose …

    ReplyDelete

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