"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



Friday, May 23, 2014

Copper Prices working Higher

In looking over the recent Commitment of Traders report, one can observe the steady migration of the hedge fund community from off of the short side of the market to the long side. That change in sentiment is reflected on the copper price chart. The red metal has rallied some $0.30 pound in two months.



It would appear that traders are keying off improving economic data here in the US ( today is was new home sales which rose 6.4% in April from March). There also is optimism that Chinese manufacturing might be stronger than originally anticipated. The last factor is shrinking inventory levels in the LME warehouses. Today, the amount of copper in storage there fell to the lowest level since September 2008.

These three factors were enough to prompt some remaining shorts to head for the exits as well as to entice some new buyers. Here is the takeaway however as far as I am concerned.

Copper is one of the best economic indicator around. ( I think crude oil is the other). As such I believe it tells us a great deal about what investors are thinking in regards to the prospects of the overall global economy. A rising copper price should therefore not be ignored, any more than a falling copper price should. When one combines that with the fact that crude oil prices remain stubbornly above the $100 level, in spite of the large amount of shale oil being produced here in the US, it should at least make one hesitant to become too pessimistic about the health of the economy moving forward.

Copper has managed to move into a resistance zone on the price chart. That big sharp drop lower in price that occurred back in March this year is still dominant on the price chart however. I would like to see this market clear the top of that drop zone to feel that copper is sending a firmer " All Clear Ahead" signal. We will watch  this closely, along with crude oil

24 comments:

  1. Ding, Ding, Ding, Ding

    SPY new high

    GDX/GLD plummeting to new lows for the move

    General Jim's TRX plunging to fresh, new low of $1.89

    CIGA's gotta love that!

    ReplyDelete
  2. Does anyone else see the elephant in the room? Yes that is right the 17 trillion in debt where the debt ceiling now appears to be the debt floor!!

    I keep seeing comments that it is different today and it is an economic miracle. It is like the emperors new clothes and one day someone will point out the obvious, i.e. the emperor is naked and all hell will break loose!


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  3. Dan
    You note an important milestone. Dr Copper and Dr Oil may be telling us the world economy is about to change for the better. I sure hope so.

    Now to burn some expensive gasoline to get up I5 and burn some red meat.

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  4. Yes, Mike, the naysayers have been dead wrong for 5 years. Virtually every crisis was an opportunity to buy stocks.

    Iraq, Afganistan, Greece, Portugal, Italy, Fukishima, Egypt, Cypress, Ukraine.

    Stocks pretty much shucked all of it off and powered higher, while gold was liquidated.

    Anyone remember General Jim harping on H1N1 Bird Flu? Turned out to be a whole lot of nothing.

    And 155 articles written about Ukraine, Russia, Putin, etc. will also turn out to be a non-event.

    The economy is like a coiled spring, once it starts recovering we will see the greatest global boom ever recorded. 6 years is a long time, lots of pent up demand and people are sick of being fearful and scared.

    Stay in the system.

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  5. Could someone explain in a clear way how QE is not counterfeiting? It certainly seems like it is.

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  6. All commodities starting to look strong, a continuation of the trend from the start of the year. If the US economy is starting to recover then all that QE may start to make its way out of reserves and into mainstreet. If that happens look out for inflation and velocity of money to rocket. With many BRICS countries starting to move away from the USD this could be a triple whammy as dollars come home. I mean Belgian reserves ballooning really???? War is almost inevitable as the fascist oligopoly tries to maintain reserve currency status, distract domestic attention from the crumbling status quo and deal with expansionist China. Seems to me that inflation protective investments are now in order.

    Re the gold manipulations it is clear that TPTB are in the market either directly or by proxy on an ongoing basis. To believe anything else is simply naivety of the highest order, or stupidity, when it is clear corruption is rife and many govt reps have sold their souls for profit . That ZH article about Biden junior joining a Ukraine gas co. at board level makes me sick with the implications, almost like the news that George Bush's bro was in charge of security at the WTC on 911. The Barclays case is also obviously only the entrance to the rabbit hole. All this crap about junior traders being sent to the gallows and no one senior being involved. Right, yeah, as if.......and I live on Mars.

    The only issue is how much and WHEN the banksters are active in the previous metals.I have noticed that the metals are not being whacked as often as historically at the London open, only now as the US joins the fray, take from that what you will. I also note the ECB and other Central Banks signed cooperation agreements over gold. Hey listen you can either decide to see these signs or not, it is up to you. What is sure is that being long precious metals and miners, without a hedge since 2011 has been a suckers trade. Being long blue chips was the trade to have, now I am not so sure but if the economy ramps up...?

    Dan keep posting your valuable analysis, your views and opinions add much colour and clarity to what is happening. Keep up the good work!

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    Replies
    1. Let's be clear about a few things here; although I too nurture a deeply-seated suspicion that markets are manipulated for other-than-commercial reasons

      1. This is not evidence of it. This guy was acting due to illicit greed and fraudulent intent, not in accordance with some government diktat or collusive agreement

      2. On the day in question, the spot price of Gold was already below the strike price of the option; he took illicit steps to keep it there, but he was not the cause of the downward price movement; in fact, in the 4 months following his fraud, the price of Gold rose $250

      3. Barclays at the very least tolerated this mode of conduct, if not tacitly incentivised it via the bonus structure - and I am willing to believe that any number of other banks. However, there is no suggestion that this was directional, and the same degree of lax oversight and distorted moral values would have prevailed whether the guy had gone long or short

      4. Maybe the FCA is lying and this is all a big cover-up. Maybe they should have publicly disembowelled him and fed his entrails to the dogs, rather than just fined him £96,000 and made him unemployable for the foreseeable future. Maybe there is more dirty laundry to come. But this incident is clearly NOT the "hallelujah" moment the conspiracy theorists have been wet-dreaming of, because it was the Regulator who picked it up, punished it through due regulatory process, and published its findings. The London Fix is not a fit for purpose price-discovery mechanism, and can clearly be gamed. However, that is a million miles from saying that it is The Evil Empire / The Cartel / TPTB behind this (and every other incident)

      Delete
  7. Hi all,

    Once more very little time, so I'll save my boring long posts for another day :)
    Copper : still within its descending triangle formation, as long as below 3.20.
    Silver : still within descending triangle (shorter term chart than copper)
    Gold : range bound daily 1280-1310, now I can call it a bloody squeeze.

    Way out can be up or down, I don't see any signs allowing me to be sure or take a position right now.

    Hey Dan, this weekend, ok, ok Ukrainian elections but European ones as well.... depending how much the anti european parties will gather, that could also influence the markets and the Euro Dollar prices :)

    Have a nice weekend,

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    Replies
    1. Hubert;

      Thanks for reminding us about those other elections. have a great weekend my friend.

      Dan

      Delete
  8. Regarding SP, there should be a strong area of resistance first at 1950 then extending up to mainly 2000.
    I'll watch as usual for signs of weakness if we reach those prices.
    Meanwhile, I'm totally staying out of the way of the bulls led by Fast and Furious Mark :) It's all yours, Mark, you won't have my money as a short for now :)

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  9. Dan. Have you seen the recent news that a trader in London has been found guilty of rigging gold prices? No doubt this poor sucker was fed to the wolves with much high powers behind it.

    http://www.zerohedge.com/news/2014-05-23/caught-red-handed-what-gold-manipulation-looks

    Anyway, the "mini pukes" as they call them "or flash crashes" as you call them are real. Perhaps you might be a little less dismissive when gold bugs talk about flash crashes that in particular happened last year day after day at seemingly identical times and often overnight.

    There is no doubt now that these flash crashes are real. This doesn't of course mean that every time the price drops sharply manipulation is the reason. I'd say that it looks likely the many times it has crashed on no news there's a good chance it's this kind of practice going on.

    This is exactly my point about using this kind of high frequency naked selling on the backdrop of falling commodity prices that allowed "the cartel" to push gold back from $1790 when QE3 was announced all the way to $1550 and below that key level, which then led to the mass exodus of the spec. money all the way down to $1,180 ish destroying gold's technicals

    Like you say it doesn't really matter why the market is in bear phase, it currently is and the smart money exited when this became obvious which is why you tell everyone not to get in the way of the market as the market is always right.

    I think the point is though that this bear phase isn't just to do with fundamentals, it's a mixture of a lot of things, one of which is this manipulation which has greatly exaggerated the drop in price that would have happened in a free market in my opinion.

    I'm guessing you won't be excited about gold till it rises above the $1,550 level again which is where it broke down over a year ago. Do you own any out of interest?

    ReplyDelete
    Replies
    1. Dominic;

      I have to ask you a simple question - "where I have written that the misnomer, "flash crashes" are 'not real'?

      I see such things all the time in assorted commodity futures market and have written as much. I guess you missed this for some reason.

      What I am saying, and I thought I made it very clear in my recent post, is that I reject the idea that these sharp selloffs are caused by an evil, nefarious gold cartel, with the sole purpose of knocking the gold price lower at the secret bidding of the government. That is what the most vocal gold bugs are constantly asserting.

      I attribute them to hedge funds, HFT's ( who can get the ball rolling ) and large independent traders who take advantage of periods of low liquidity to shove the market in the direction that they are positioned.

      I reject the idea that every time gold falls sharply lower that the feds are ultimately behind it and that the gold cartel is at work. That is utter nonsense in my view.

      By the way, high frequency traders DO NOT establish trends. They are in and out so fast that you cannot blink. Hedge fund, who take positions in markets based on momentum establish trends.

      I am trying to tell you that if one trades for a living in the futures markets, and sits in front of a screen, day in and day out, watching the price action throughout the entire trading session of an assorted basket of commodities, one will see that the kinds of sharp, swift, "out of nowhere" price action is a common occurrence nowadays. It is NOT CONFINED TO GOLD.

      more on the following post

      Delete
    2. Dominic;

      Part 2:

      One last thing - no amount of manipulation can REVERSE a trend driven by solid fundamentals. Gold rose relentlessly higher during its recent bull market because the fundamentals at that time dictated being long. The so-called "gold cartel" were heavy sellers during this phase and while they oftentimes were able to induce periods of sharp falls in price when the upside momentum stalled out, the price always rebounded and worked higher because Speculators wanted to own the metal.

      When the fundamental support begins to fade away, the price began to drop. It is not that complicated Dom. Now many large hedge funds and institutions that are Western based are simple NOT interested in tying up investment capital in the metal at this point. That is why the price is falling - look at what has been happening in the equity markets during the time the price of gold has been falling when it broke support at $1530. Can you see where the money flows are going? It has nothing to do with the government trying to drive the price of gold lower at this point - it is all about big money managers and such allocating capital away from the metal in search of better returns.

      To answer your last question - look at the gold chart that I post regularly here - can you see the range it is trading in? If gold breaks out from the topside of that range, that is something that as a trader I have to pay attention to and respect. within this very broad range are smaller, shorter-time frame period ranges as well.

      and I do believe that every investor should own some gold during this time of unprecedented Central Bank activity in the markets. There is a tremendous amount of debt in the system and there are certainly fault lines that are susceptible to cracking so for insurance reasons, one should most definitely own gold.

      It does not take a lot of gold to protect one's wealth if things were to deteriorate. Each person has to figure out their own risk tolerance and based on their own view of things, decide what percentage of their total wealth that they want to put into gold.

      I believe it is, and it certainly has been, for any investor to put 100% of their wealth into gold and/or gold related stocks. This they call, "being all in". They might be all in but they are all broke as well. Many of these folks are the ones that are hoping, praying, wishing for chaos and ruin to engulf us all so that their gold price can soar higher and they can become fabulously rich in the process but that is not investor Dom - it is wild-eyed fanaticism with a gambler's mentality backing it. Sort of like going to Vegas or Reno and "betting the whole wad on number 7".

      Use some discretion, stay objective, keep an open mind to investment opportunities in different sectors while you own your gold and you will be just fine.

      Good success to you.

      Delete
    3. Dominic;

      Part 3;

      I think I did not make myself clear enough near the end of my response above labeled "part 2".

      I was trying to say that any investor who puts 100% of their money into gold and/or gold related stocks is incredibly foolish because now they can no longer having the least bit of objectivity. They are married to their choice which is a fatal thing to do as an investor or as a trader. think of trading capital or investing capital as a tool. You use it to create something. that "something" is return on investment. If you tie up the tool so that it is not busy creating "something" you are losing opportunity to employ that tool constructively.

      Delete
    4. Dan (part 1)

      By flash crashes I was referring to the "evil, nefarious gold cartel, with the sole purpose of knocking the gold price lower at the secret bidding of the government".

      Ask yourself, why wouldn't they do it? As you keep saying, gold is the anti dollar and the one thing suppressing the gold price achieves is that it buys the dollar time. Gold is the true tell with the mainstream "press-titutes" telling everyone that everything is fine yet the common man on the street is suffering from lowering standards of living.

      Why is it you trust the government so much? At the moment no one, not me nor you can prove who is behind these flash crashes. You say they are hedge funds or rogue traders. You say this because you see them operating in all markets. Well I don't have your level of expertise but all i can say that for pretty much the whole of 2013 i would watch the gold price regularly day in day out. I lost count the number of times i witnessed these flash crashes. Are there any other markets out there that seem to suffer them to this extent?

      We know the Feb operates in the gold market. Numerous first hand accounts and actual documented evidence shows this. Indeed you yourself admit to suppression. So why can't these "evil forces" as you put them be responsible for a good number of the flash crashes?

      You say these HFT do not establish trends. Maybe not when you look at one or two rogue hedge funds or traders. But let me say this. Pretend you are the US Governent and you see gold heading back towards $1,800 and you know that technically, $1,800 means $2,500 should resistance be broken. You also know that you are about to be forced into a printing a huge amount of dollars and this will continue to inflate the dollar. You don't want gold at $2,500 because then markets really would potentially panic out of the dollar so what do you do?

      I know, hit gold so hard when QE3 is announced it actually crashes. Then hit it day after day, week after week until you crush sentiment.Imagine what people would say if gold actually moved lower after announcing more QE!! Well if that can't make it rise what will? A lot of spec. money chasing profits were ready to exit and they did.

      You manage to take it down to $1,550 with commodity prices falling and flash crashes happening on a daily basis and overnight. Then one day you unleash almost a years supply of gold in a second selling gold through it's major support levels and letting the technical selling bring gold in to an official bear market.

      When gold was around $1,600 my mate always used to say: if gold is being manipulated then why not destroy it? The government could surely do this if they wanted. Well in my opinion this is exactly what happened in 2013. We have a smoking gun, we have a motive and we have entities with deep enough pockets to carry this out. Just look at the recent press with the silver fix and the gold fix, both of which are on their way out because they are rigged. The Germans know what's going on and they don't want anything to do with it, probably because they have been told they have to wait 8 years to get their gold back which has all long since been sold.

      Dan the reason folk are so passionate about gold isn't just because they might be underwater. It goes to the heart of the shameful political fascist type governments we seem to breed these days where policy seems to be driven by the best interests of the big corporations and the average man on the street has been forgotten. I live in the UK and have a wife who is American. What happened to the American dream from the last century. I think it's such a shame that the principles your great nation were built on seem to almost be forgotten.

      Delete
    5. (Part 2)

      Gold is the ultimate tell in terms of what the governments are doing to their currency's and economies and i guess a lot of people are fed of being treated like sheep and constantly told lies. It isn't just about trying to make a buc for a lot of people. Maybe a free gold market would be a good thing because it would force governments to act more responsibly?

      I respect your advice to people on here because you have a lot of experience and not many people get the chance to learn from guys like you. I guess I'm just more cynical than you. For me the US government will operate in the gold market and do everything it can to destroy sentiment and it has done a very good job. Perhaps some of the gold bugs do themselves no favours by sounding fanatical and never admitting when they made the wrong call because now no one believes them even though they may well be right.

      We will probably never agree on this but I am at least happy to admit I've made a lot of bad calls when it comes to precious metals. Despite me having differing opinions to you I learn a lot from this site and welcome a different perspective. You are so right when you say people lose money by being bloody minded and unable to admit when got a position wrong. The markets are always right after all! Good luck to you.

      Delete
  10. Even though Silver is semi-precious ( half precious / half industrial like Cu) is it a non-confirmation that Silver has not moved up atleast 15% if Cu has move3d up 30% ? I thought they were loosely joined at the hip ?

    Have a great Mem day weekend ( not the weekend to think about PMs )

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    Replies
    1. Wolf - happy Memorial Day to you as well.....

      silver is like a bi-polar patient ( meaning no disrespect to anyone who suffers from that serious problem ). It is moody. One never knows what silver wants to be on any given day. Some days it wakes up and decides that it wants to be a precious metal. Other days it arise and morphs into an industrial metal. It is both.

      There are therefore times when it will be more strongly influenced by gold and other times by copper, nickel, aluminum, etc.

      Delete
    2. Dan, that post a few days ago by Kiddynamite was outstanding, and I would hope that the long and wrong perma pm bulls would read it and stop attacking you and Mark, and yes, yours truly. They and kwn all keep pounding the same table with the same, same, same arguments. Do they not know that we are not trading the yesterdays mkt, BUT the futures mkt? I guess more than a few of them need to go broke a few times in order to grow up.

      As far as the red metal goes, for the last 3 years all rallies get weaker and shorter. For me, $3.50 is the big picture number to watch. Long term, Mongolia+Afghanistan+Minnesota = Much lower prices, but of course we can not trade off long term fundamentals.

      Last but not least, why do the gold pumpers never talk about the $147 hedge fund orchestrated crude prices of '08. Myself, if we ever re-opened new Coastal California productin and the Eastern Seaboard, we could really have some downside fireworks. So much for Hubbert's Peak, huh? Take care all and have a good Memorial Day weekend.

      Delete
    3. steve;

      copper always fascinates me because its signals are so accurate. If it does get above $3.20 and hang in there, then I will have to pay some more serious attention to it as far as the overall global economic picture. Right now the talk is growth, not sharp, rapid growth, but steady and very slow, generally speaking. A sharp rise in the price of copper would make me question that.

      on the crude oil front - that soaring crude price was a perfect textbook case of hedge funds and big speculative interests pouring money into the commodity sector ( hard assets ). they overpowered everyone on the short side. I do well remember all that peak oil chatter back then. Wasn't it from a guy named Simmons? man was he wrong, wrong, wrong. but a lot of guys bought into his theory and lost a lot of money when the price imploded lower.

      Delete
    4. Twilight In The Desert by Matthew Simmons of Houston was the '05 book and a great and very plausible read and in it he had crude going to $180, if memory serves me correct. He is dead now, but his main argument was that Saudi had not been audited for years and that production and reserves and so forth were all over-stated. Only time will tell.

      Delete
  11. Seems the rally in crude this week was the knee jerk response to the lower than expected inventories reported by API on Tues and confirmed by EIA on Wed...But who knows what is really happening here - inventory levels can fluctuate allot from week to week. We are at resistance and if Ukraine elections are not disrupted, could see a sell off. Will be interesting to watch.

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  12. INDIAN BENCHMARK open flat with a slight negative bias. Investors booked profits in oil and financial shares. Jubilant Life Sciences subsidiary will receive over Rs 860 crore funding from IFC, a member of the World Bank Group, to strengthen its generic drug manufacturing facilities.
    Bullion Tips

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