Adding to the general lack of enthusiasm for gold at this time is the lackluster performance of the mining shares which continue to act as an anchor on any upward movement of the yellow metal.
Looking forward into next week, if gold is going to generate some more excitement, it is going to have to break through this week's high and convincingly clear the $1340 level. If it can do so, you will see some hedge fund short covering. If it stalls here near this level, watch for further long liquidation and some more new short selling to emerge. If the bears can change the handle from "13" back to "12", $1280 will come back into play at the lower portion of the recent trading range.
In looking over this week's Commitment of Traders report, we saw a reduction in the net long position of the hedge fund community of nearly 8,000 contracts. Most of that came from long liquidation ahead of the FOMC with a smaller contribution by the addition of some 2500 new short positions from the hedgies. That FOMC statement gave the bulls some fodder but it was a sort of two-edged sword.
One edge was clearly its dovish tone which suggested that interest rates will stay near zero for longer than many market participants were led to expect by the same Fed. The other edge was the clear concern expressed about the lack of inflationary pressures. The Fed, along with the ECB I might add, is clearly worried about deflationary issues. When the Central Bank expresses its concern over the lack of inflation in the economy, it is certainly not a ringing endorsement of a stronger gold price.
Along that line, the PPI numbers that came out today were quite a shock to the market as the number for March came in at a rise of 0.5%. The result was another set of headwinds to buffet gold as traders interpreted that data as evidence that the Fed could actually accelerate its bond buying program and any interest rate hike. Those are negative for gold especially when the market had just gotten the Fed's comments about the lack of inflation a mere two days earlier!
JP Morgan's earnings numbers set the negative tone for the overall stock market today. The broad selloff in equities was one of the reasons that gold did not break down as sharply as some might have expected. The Dollar showed some buoyancy today on the heels of that PPI number but not enough to set it up for a sharp rally.
All in all, it was a day in which volatility in the currency markets and in gold, was relatively mild by comparison to recent days.
Such was not the case in the grain markets, where news of Chinese rejection of corn shipments roiled that market with some spillover being seen in the soybeans. Apparently the Chinese are balking on imports of biotech corn. Reports indicate that China has rejected 1.45 million metric tons of US corn since mid-November. The reason? They claim it contained an unapproved variety of corn which was developed by the Swiss seed maker Sygenta. The variety is called Viptera. Also involved is another variety Duracade.
The National Grain and Feed Association, in a report circulated among its members, expressed the concern that pollen drift ( through the wind ) will make it unavoidable that the variety will impact corn shipments into China. Obviously big US grain shippers are worried. At least for today, that seem to supercede the latest USDA carryover numbers that we got this week.
A quick comment on the S&P 500. I mentioned in a post yesterday that an important support zone on the weekly chart was between 1830 - 1820. The market closed below that level today which puts it in a negative posture as we move into next week. Defensive plays in stocks were in vogue today. We'll see next week if that continues or whether the bulls use the sell off as another opportunity to buy back in. One thing is for certain - the aura of inevitability about a seemingly perpetually rising stock market, took a hit this week. Now we wait for the next batch of earnings reports and the next bit of economic data releases.
Enjoy the weekend... time for some meat on the smoker. Then again, with its high price right now, maybe cheerios are on the menu.
Dan,
ReplyDeleteI have been reading the various pundits most off the day and it seems everybody is nervous/bearish the markets. On the other hand, the majority of so called precious metals experts are frighteningly bullish as usual saying the end of the global monetary system is nigh. This makes me think we will have a nice rally in the markets this coming week with more downside in the metals/commodities. If the majority is always wrong then that's what should happen. Thanks for the insight as usual my friend.
The market is still pretty bearish on PM's. The markets need to rally though.
ReplyDeleteTaylor,
ReplyDeleteExactly.
Every headline from every major financial news blog is now calling for a meltdown/crash. I counted at least 8 headlines on MarketWatch telling everyone the bull was over. Even Yahoo Finance was full of bearish discussion.
And the usual suspects like Marc Faber now says "crash worse than 1987", yada, yada, yada.
Today we saw pretty much non-stop put/call readings all morning over 1.30, with an opening print of a whopping 1.42.
Last time a saw that the market turned around within days and went straight up, virtually erasing all of the decline in short order.
My suspicion is way up, particularly since emerging markets are showing no sign of weakness, Greece is able to float new bonds with ease at 4.75%, corporate and junk bonds acting well, etc.
So get ready for a vicious rally early next week.
Mark, I guess it's the herd mentality and sheep will follow each other right into the hands of the butcher. Glad to know I'm not the only person on this blog that thinks this way.
DeleteSpeaking of sheep.. "You can sheer a sheep a hundred times but you can skin it only once." -Amarillo Slim Preston
.
Thanks again Dan.
ReplyDeleteGold gets a short term bump past $1320 when Russia enters E. Ukraine to protect Russians from a Kiev threatened "terrorist" suppression crackdown in the eastern regions.
They're massed at the border in large numbers for a reason.
As far as the S&P500 goes, it's bound to correct at some point in the near future as it approaches 1900....just like gold did at that level.
Many people will assume that 2000 is a given and they'll stay in the market a bit too long. Human nature.
Having said that, I'm looking to buy some puts on something soon or short it via ETF's maybe. I'll have to pay closer attention to some of the trades I hear mentioned on here and look into them.
The COT report sounds pretty lukewarm and a tad bearish. Nothing new there.
This comment has been removed by the author.
ReplyDeleteDrudge Report Headline: "Stocks Continue Collapse"
ReplyDeleteCasey Research featuring "Meltdown America"
Gerald Celente also calling for major financial firm to go down, maybe Pimco.
Yahoo Finance telling people to brace themselves for more tech carnage.
Merrill Lynch calling for 15% correction
Paul Farrell at MarketWatch says "economy is collapsing"
In fact, the roar of the bears rivals the decibel level found at the Super Bowl.
Mark,
ReplyDeleteMaybe your new friend Yellen will start up the printing presses again.
Concord, Yellen has no reason to ramp up the QE until the dollar strengthens dramatically. The FED is getting it's way right now with the dollar weakening while they are tapering. It should be the other way around as tapering is dollar bullish. We have a global currency war going on and the ECB should be the next central bank to ramp up the printing presses.
DeleteJohn,
DeleteI don't claim to understand this with any clarity, the taper in this falling market will become a crashing market come April 30. The market either saves itself before the next tapering or it will be a disaster. What I would like to ask you being a strong believer in Armstrong is he says the market going much higher. I see nothing about the stockmarket on his site so I am wondering what he thinks.
Concord,
DeleteIt's hard for me to speak for Martin but I am familiar with his reasoning for the US markets going higher. With the EU considering a bail-in and always in the hunt for higher and higher taxes, and with so much turmoil going on in the world right now. He says that capitol with flee various countries and park in the most liquid safe-haven being US treasuries and markets. I wouldn't get to worked up over a 4% sell-off in these bi-polar markets, and I very seriously doubt that Yellen will do anything. Remember, the Dow was at over 14,000 and fell 7,500 points before they started the bail-outs. That would be more than a 60% drop from current levels. I'm sure Martin will give an update on the current situation soon so have a few beers and try to relax a little. Nobody ever said investing was easy my friend. GL
It seems likely the scenario I posted above is going to happen.
ReplyDeleteOne governments definition of demonstrators (or freedom fighters) is defined by the other govt. as terrorists (or rebels).
It's the exact opposite right now of when the previous Ukrainian President was in the process of being overthrown before he fled. The more things change the more they remain the same.
Kiev is in a catch-22 right now. Damned if they respond and damned if they don't as they watch province after province melt-away and turn into Russian territory after each local/regional referendum vote passes just like Crimea.
If Kiev (NATO) decides to crush the demonstrations you'll see a Russian shortly thereafter....and some false flag snipers or police taking out demonstrators like the Kiev ptotests. That's all the pre-text that Russia will need...even if it was them doing the shooting.
Russia Tells Ukraine It Won't "Accept" Force Against Demonstrators
Submitted by Tyler Durden on 04/12/2014 - 11:11
Ukraine may have drawn its own red line overnight by saying it will send "special forces" into the latest east Ukraine city captured by "pro-Russia separatists" as we just reported, but Russia wasted no time in explaining how it would deal with it. Bloomberg cites Russian foreign minister Lavrov who stated that, "Russia Won’t Accept Ukraine Force Versus Demonstrators.
Zerohedge.com
The split is already done.
DeleteThe question is : will it be civil war Yougoslavia like or peaceful Tchecoslovakia split.
If Russia had legitimacy in Crimea, then they have the same legitimacy regarding the most eastern provinces in Urkraine, as pro-russian there, russian speaking population, etc... can be found in the same proportions (majority of people) and 85% of them were supporting Yanukovitch.
Best scenario now would be that Russia integrates eastern Ukraine as well, and that everybody simply recognizes this as long as Russia doesn't expand further west, towards territories where it suddenly has no more legitimacy.
The a new "Ukraine" would emerge, split of its eastern and Crimean provinces, but with still a chance to handle things peacefully and take side with the West.
I suppose this country should never enter Nato alliance nor accept US military bases on its ground (that would be Cuban crisis reverse for Russia).
Anything else is smoothly and slowly leading us to war.
Totally weird and funny in parallel.
Because of a book about 7777 (Pierre Jovanovic) associated to a number of destruction and last pope, I counted that the pope will be 77 years, 7 months, 7 days revolved on 24 to 25 / 07 / 2014/
25/07/2014 gives 7/7/7
Born at 21h00, it gives 7+7+7
Until now, just funny coincidences, then for a laugh I had the stupid idea to write "24 july 2014" on google to see what result it would give me.
It's at this time I was amazed to read as a search result : "opening gates of Hades".
For a curious weird thing, it is the top I could think of.