"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



Thursday, May 8, 2014

ECB President Draghi Talks Down the Euro

Apologies for the lateness of the comments. It has been a busy day.

The big market movement today was in the Euro as Mario Draghi went out to meet reporters following the ECB's meeting. As many of us suspected, he apparently has been getting an earful from disgruntled European exporters and manufacturing interests and proceeded to waste no time in affirming that the ECB would be willing to take action to stave off deflationary pressures in the Eurozone, if necessary, in their June meeting.

Inflation pressures have been persistently low there and that has the Central Bankers concerned. ( Personally I think it is a great thing but I am not a Central Banker ).

That was all that was needed to see the Euro get kicked in the teeth and down she went. I am constantly amazed in this world of fiat currencies, how easy it is for Central Bankers to move their currencies around by just opening their mouths and uttering some words. It is almost like watching a magician utter some magical phrase before he levitates a beautiful assistant into the air.

The Euro, which had been knocking on the door of the key 1.40 level, was bashed lower falling through 1.39 in the process and below 1.385 before managing to bounce somewhat.

Whether Draghi's comments are enough to reverse its uptrend remains unclear for now but for the short term, at least for today, he accomplished what he wanted. If the Euro falls as low as 1.38, it is going to be interesting to see whether or not bulls will come in and buy it there or whether they are convinced that the ECB is going to come in with either an interest rate cut next month or something more potent, such as their own version of QE. The sense I am getting at this point is that it is going to take some economic data releases which show some sort of constriction in the Eurozone due to currency strength before the ECB gets too aggressive. Time will of course tell.

I put up the Euro chart to show the currency's resistance zone which begins near 1.395 and extends towards 1.40. Downside support is slightly above the 1.38 level with another support zone closer to 1.375.



The fall in the currency sparked a bit better reaction to the upside in Euro gold which moved up 0.51% today compared to a mediocre 0.05% gain in Dollar gold.

Gold was rather comatose the entire session, as were the shares. The strength in the Dollar kept it from moving sharply higher but lingering concerns out of Ukraine continue to support it.

Silver did not fare too well as it works closer down to key support near $19 once again.

Friday's have been anything but calm in the precious metals complex as how traders view the geopolitical situation in Ukraine has been the factor that either generates a strong wave of short covering ahead of the weekend or a wave of long liquidation. Neither bull nor bears seem to want to push their luck with that mess going on over there and with neither side knowing for certain whether things are calming down or heating up. I guess it will continue this way until perhaps later in May when we get that vote although Russia seems to be trying to have that postponed or put off to ratchet down the tensions there.

The big mover tomorrow will be in the grains when USDA comes out with another of their reports which are notorious for producing wild price swings across the entire sector. That is due out at 11:00 AM CDT.  We will know what the market thinks of the report about 30 minutes after it is released when the algos are through playing with them. I will give a report on the grains tomorrow.

There is not much else for me to say today so I will leave it at that except to say "Go Spurs".

I don't have a dog in the hunt between the Nets and the Heat.

32 comments:

  1. Cramer just nailed it on his show. (paraphrasing) "Someone who's been screaming "bubble" for the last 60 or 80 percent on the market is wrong. Not just "early", but "wrong".

    And that's one of the worst (ok, not the "worst", but "one of the worst") things about the goldbug industry these last couple of years. Not only do they endlessly permapump the metals in the teeth of a bear market, but all the while warning their suckers, oops, subscribers/readers, to stay the heck away from those illegal, immoral, fattening, manipulated, and bubblishious stock markets.

    Wow. Talk about doubling down on misery. Keep on with the bear market asset class, and compound it all by adding the opportunity cost of missing a generational bull market in stocks.

    Way to go, guys!

    And no, Mark, it's not just that easy punching bag at KWN. Not by a looooooong shot. The entire "goldbug industry" is guilty, guilty, guilty.

    ReplyDelete
    Replies
    1. When you see so many defects from the gold community it must mean that the bottom is in. The fact that the market went up for 5 consecutive years somehow means that it will do the same for another five, and another five, which then would mean another 15 years of bull market. Somehow this logic seems odd, but I can't point my finger at exactly which part of it is wrong. If I only knew how to read the charts...

      Delete
    2. If you can nail it based on sentiment, more power to you. But don't for a minute sit there and say "Sinclair was right", or "Casey was right", or "Turd was right", or "ZH was right", or Russell was right", or "Schiff was right", or "Turk was right", or any of that sort of claptrap. These people haven't been right about ANYTHING, and now you'll have to double your money with them before you get back to even.

      Delete
    3. Abraxas;

      Sentiment in gold is not that bad based on the COT reports because the speculators remain net long in spite of the inability of the metal to go anywhere. As long as these specs remain stubbornly bullish, the sentiment it not poor enough to produce a LASTING bottom in my view. Gold is completely at the mercy of events in the Ukraine right now. Asian buying will keep it propped up but Western based gold demand is falling based on that ETF holdings data.

      I echo Eric's thoughts - just read the charts and go with those. Forget about the self-anointed gurus and other charlatans out there. None of them have been right about anything for more than 2 years now. They have ZERO credibility and have forfeited any respect that was due them. It is one thing to miss a market's direction - after all, we are all human and screw up from time to time, but to remain Johnnie one-notes as a market entered a bear market and to keep up the same crap ( it's all the evil manipulators' fault) is inexcusable.

      Delete
    4. Yes Dan, but I'm afraid I don't see much upside for the stocks either (outside hour-to-hour trading, i.e. gambling). I don't believe in constant manipulation, but what they do, and what their job is perception management, which is not far cry from it. Imagine if they came out and told the truth for 10 minutes only... I guess it would not make any difference in this world of short-term memory span of a goldfish.

      Delete
  2. Granted, it's all about who gets the call on the next big turn correct.

    But the thing is, the permametals pumpers are all completely disaqualified. Just the same as the stock market permapumpers are all disqualified.

    That's the key, and I think Dan will agree, don't be "perma" anything!

    Don't Fight The Tape

    ReplyDelete
  3. USDX already right back inside the trading range.

    That "break below support" was obviously a fakeout move, as gold didn't take off.

    Poor Peter Schiff and James Turk who have been screaming "death to the dollar" for years now must be puking up blood with disappointment.

    The mighty, mighty, U.S. Dollar looks like its hear to stay.

    Possible that the 2010 lows was a "generational low" in the dollar and it will be up, up, and away for years and years now.

    And the 2011 highs in gold was a "generational high", never to be seen again in our lifetimes.

    ReplyDelete
    Replies
    1. Mark,

      What about TSLA, FB, TWTR, AMZN???? Down big recently...

      Delete
    2. Mark, either you're right on the dollar, or Bo Polny is right on the dollar... let the fun begin. One of you will be seriously discredited by the end of the year
      Place your bets everyone

      Delete
    3. Don't tread on me;

      With all due respect, it is not about whose predictions might or might not be correct. It is about reading the tape and following money flows. Mark has been correct up to now; Polny ( whoever the hell he is ) has been completely and utterly wrong for over 2 1/2 years now.

      So what if gold now goes up? Does that vindicate those newsletter hawkers and hucklsters who have managed to lose their victims ( subscribers) so much money by being Johnnie one-notes? No, it does not.

      The perma bull gold community is full of people who have done nothing but financially destroy their followers. That is what the real tragedy is here.

      Trading/investing is not about making guesses and bogus predictions. It is about hard work, objectivity, realism and those unknown virtues in so much of the gold community, modesty and humility.

      "I don't care what gold is doing now; it must go to $2000 by the end of 2014" is the saying of a fool who is in love with himself and not a seasoned professional who reads the voice of the markets.

      Delete
  4. Literally hundreds of "gloom and doom" articles pointing to Russia, Putin, Ukraine, and all the rest, claiming that its the start of something huge.

    My guess is that within 6 months, all will be forgotten and it will be back to normal again until the next "crisis" emerges.

    Remember Greece?

    Check out the outright collapse in bond yields over there.

    And if I recall, the Dow rose nearly 3,000 points on "Greece Fears" in 2010 - 2012.

    Then the Dow rallied another 4,000 points after the "Debt Ceiling and Fiscal Cliff" fears in 2013.

    ReplyDelete
  5. What about Bitcoin man? You were pumping that thing like there is no tomorrow... And it's gone. The stock market did great last year, but is flat this year, and many of the momo names you continuously pump are down big. Market internals are awfull. And the only reason why you invest in it is because the fed has your back.. Well man look out because the fed seemed to have your back in 2001, and 2008, and that did not workout well. Don't be silly get out now with all the money you claimed you made, sit down, relax and count to 10 . Or in your case probably 100. And last piece of advise stop remembering the wonderful times, the punch that puts you down is consistently the one you don't see coming just when you are high and tall and having a cigar... I m a gold bug been making some money not as much as you have, I admit I.ve been lucky with the timing, but I tell you, have been eating humble pie now for the best part of two year now, and believe me never was a fan of many of the websites you despite, I am a contrarian have been in the business for quite some time now dealing with very smart people, and I can tell you that you talk bull shit all the time. That doesn't mean you are wrong, but if you make big investment decisions based on what you preach be very carefull because you made easy money and right now you are way behind the curve in the back of the bus.

    ReplyDelete
    Replies
    1. anon, mark is a big boy; take care of yourself and don't worry about others; leave your emotions at the door; swb

      Delete
    2. Steve trust me I don't worry about Mark, and Im really not emotional, lost my virginity long time ago. I m only making a point about Bitcoin, the momo names that he pumps and are down for the year, and lastly the fact that gdx is up 11% YTD... I see you two are bodies, that's nice.

      Delete
    3. anon, no mark and I are not buddies, but I have to say that his thoughts have been right on, and I do not let his sarcasm get to me like the others here; in fact I like it; if readers can not take the needle, then let them find another playground; btw, I have to think that we are in the 8th inning, not 3rd, as far as stocks go, but I am not going to go broke top-picking, so let everyone go on and on talking their books; it will not be pretty, but it is what it is; swb

      Delete
  6. Very correct Mark; When I was a kid playing ball, we used to talk about relievers who came in to put out fires but instead threw gasoline on the coals, and that is exactly what the charlatans are all about; when is the last time you ever heard one of them say, "I was wrong, "I don't know, I could be wrong, My timing is off; Maybe my whole idea is wrong"? No, you never hear them say anything like that, and that is sad because, like I always say, they really deep down inside have suicide tapes, or in simple terms, they want to lose. What is sadder is they have a real ability to lead lemmings off to the cliff with them, but of course they do not jump with the poor sheeples My major theme going forward is that China is RIP; if I am wrong, why are all the pm bulls not moving to India, China, and Russia? Of course those leaders are all choir boys only looking out for the people, right? lol, lol.

    ReplyDelete
  7. I've owned physical gold from back in the 90's. And was sympathic from the 80's, but just didn't have any money. Saw it go nowhere for decades at a time. When the big break came in April '13 i emailed one of my buddies and said "this bull market is over", and even he didn't believe me.

    Online, for public comsumption, I usually talk in terms of how gold might go nowhere for the next five years. But really in my heart of hearts I think it could be 20 years. I lived through the last one. And all through the whole time all the gold bugs were ranting about the Fed, money printing, China, geopolitics, yada, yada, yada. None of this stuff is new. In fact it's getting really...really...old.

    ReplyDelete
    Replies
    1. Eric; you are very right; they all repeat themselves time after time; none of them have read any history like the Depression, the Roaring 90's, the Nuremburg Trials and so on and so on; today is a real classic, as nobody has gone to prison, and people are surprised? What is classic is the wise guys who claim they know what Putin and Obama are planning next, when in all reality it is being day to day by the ptb and they are not even clear on what they are doing, but that is what it is. For me, I am most comfortable fading the popular thoughts like Climate Change, and Johnny Manziel and yada yada. Take care and like that; swb

      Delete
    2. I dunno. I'm 53, and a family history of heart disease, etc. I don't know that I have 20 years to sit around waiting to be right on metals the next time around. The opportunity costs are too high. I need to make hay while the sun shines.

      Delete
  8. Actually, in 25-30 years reading this stuff, the only new term I've seen added to the lexicon is the "bail-in". I'm sure there were high fives in boiler rooms across the country on that one, since they knew they really had a new buzz word they could add to all their "Free Special Reports", lol.

    I got into a pissing match back at Turd's blog with a guy I used to consider a friend of mine when that Cyprus stuff was going down. He was running around with his hair on fire, largely taking his cue from Sinclair, I think, while I was making fun of it. Well, a year plus down the line, who was right and who was wrong? Gold was 1550-1600 at the time, and had already given up the 200 day avg a month before. I had sold all my miners a few months before that. Then came the 4/15 smash, and Goodnight Irene.

    ReplyDelete
  9. Don't worry Eric. You can always watch your friends get herded like cattle to the next Q & A session, so they can double down on their losing investments.

    I think the real "Acid Test" for the CRB Index tomorrow is the USDA report. If the grains get hit hard, then its down she goes for many commodity groups, including PM's.

    And of course, investors will "celebrate" by trumpeting the theme of no or zero inflation, and big money will once again pile right back into XRT and XLY again.

    ReplyDelete
    Replies
    1. Mark, if I am right and China is RIP and El Nino shows up July or so, we can see much lower corn and bean prices come Labor Day; old bastards like me can remember a $5 bean, and if not for the donkey Bush and ethanol, $2 corn; swb

      Delete
  10. Hi Dan,

    What do we call "inflation" exactly?
    In Europe, here is a recent table of price inflation over the last 10 years regarding mostly food and goods one must buy to live.

    http://i61.tinypic.com/dg3y8k.jpg

    Meanwhile, you can see that over the same period of time :
    - average salary grew...negative of 0,5%
    - salary of the Elysée (our government, ministers, etc...) grew 218%

    What deflation?
    Based on which figures? (I'm referring to shadowstats here of course, but it's close to the same BS in Europe)

    Have a nice weekend :)

    ReplyDelete
  11. Yeah, people still go to those Sinclair Q & A's, amazingly enough. And still go on the blogs and give their breathless transcript, as if they are doing someone a favor.

    Here are the numbers ( in round figures) since Cyprus: You could have made 20% in stocks, or lost 20% in gold. (let's not even talk silver or miners, so as to avoid rubbing salt in the wound). In actual practice, most of the cult members lost the 20% AND missed out on the 20% upside. So they are sitting at .80, while the rest of the world is at 1.20. Now they need to make 50% (.80 up to 1.20) to catch up. In other words, from 1300 gold, they need 1950 (new highs!) to catch up to where the stock players are sitting as we speak.

    The more you factor in opportunity costs, the more horrifying it becomes.

    ReplyDelete
    Replies
    1. Eric, as kids in high school, we used to sneak out of 6th period if it was not our sport season and go over the bridge to Bay Meadows, or down the freeway to Golden Gate Fields and horse around (no pun intended), and it did not take much savvy to see that the touts had as much of a clue as the modern day hucksters at some of our favorite sites, but of course they all are 50 year vets of the mkts, counselors to the rich and famous, and of course when they work for Citi, that is my favorite because that is a whorehouse that should have and could have gone bust 3 times over the last 30 years, but they do have outstanding, unseen before charts, right? hahahaha;swb

      Delete
  12. Canadian Legend John Ing; Please kwn stop the murder, as I have been around since last Wednesday and know nobody who has ever heard of this guy; swb

    ReplyDelete
  13. Its a big circus where the clowns have taken over the tent and it will all end in tears!

    Have a look at this article that tells you all you need to know about the Fed and Wall Street. http://wallstreetonparade.com/2014/05/a-mangled-case-of-justice-on-wall-street/

    You could not make it up and if it was a film you would laugh at the whole idea of this type of event actually happening. No need for conspiracy theorists to peddle anything anymore as it is all happening in reality.

    ReplyDelete
  14. Nothing to say about gold, which is short-term in a no mans land.
    I was bearish just under the 1315 resistance identified on the 2day candlechart, but now near 1290, there is no signal, the bollinger bands are horizontal in a range on the daily time unit between 1270-1320, they are converging on the 2day, they are in a range on the weekly time unit also, and we are in the middle of them, right at the level of the ma20 which is quite horizontal...I see no pulse on gold on all those time units.
    Whether I'd invest on the very long term, whether I would intraday on very short time scales to try to make 20 $ moves, but that's it...yawn.
    Have a nice weekend,

    ReplyDelete
    Replies
    1. The bollinger bands on gold's daily have reached that contraction shape today (squeeze). She looks ready for a big move to begin, possibly as early as noon today, this coming Sunday evening, or Monday morning. Taking into account the ongoing dependency on negative news from geopolitical events to stay propped up and sister asset silver's downward curling, it's not looking good for gold on the long side. If the big move happens, it needs it to be to the upside on large volume if the bulls want a game changer. It looks do-or-die...inflection point.

      Delete
    2. Two different interpretations of the same indicator. I LOVE IT!

      I'll be watching with interest to see which interpretation comes to pass over the next few days.

      Thanks to both of you for posting your thoughts.

      Delete
    3. Andy, in fact there is no contradiction between our two posts.
      Indeed, every market is a cycle going from high to low volatility phases. The Bollinger Bands is one of the many indicators which helps to "feel" the market that way.
      When Bollinger Bands are in a range and those bands are very close to each other, we call it a squeeze, just as Alice did.
      The more prices remain inside a range (even more, a squeeze), the more it accumulates "energy" for the next move, and the more powerful the next move is supposed to be.
      Anyway, that's how I'm interpreting it.
      So, what I said is :
      - at the moment, we are in the middle of a small range, so now there is not much to do.
      What Alice said is :
      - prices within a squeeze indicate that SOON there will be some directional move.

      (Alice, stop me if I'm wrong :))

      I would simply not call the range a squeeze yet, because the Bollinger Bands are still distant of around 50 dollars, but that's a personal point of view. What matter is that the more prices remain in a range, the more likely a strong directional move will ensue, once prices break through the range.

      Delete
  15. In terms of long-term trades, I'll try to follow the theory of the nice example given by the SP500 now on the 2week timescale (see my recent chart, nothing has changed) with a very nice configuration where the Bollinger Bands both go up and the ma20 is forming a nice line indicating the trend.
    Prices are contained within a narrow upwards channel exactly parallel to the line formed by the ma20.
    That's quite interesting.
    Because, "in theory" :), I trade it that way (on this time scale).

    1) buy everytime the prices reach the support area (this week around 1840).
    2) IF prices break through, then :
    a) if they break through by the top, I'll be waiting for a final top for the SP500 and short when it occurs.
    b) if they break through by the bottom, then it is likely that prices will one last time retrace up and reach / break through the top of prices before collapsing. There again, I'll be waiting for the right timing.

    As long as the channel is up in this configuration, and on this time unit, imho the only possibility to trade is to be long SP.

    ReplyDelete

Note: Only a member of this blog may post a comment.