"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, June 12, 2014

Crude goes One way; Copper goes the Other

I hope you enjoy paying high prices at the gasoline pump because they are back on their way once more.

Take a look at the following chart and you will see what I mean. This resurgence, ( completely avoidable) has sent crude oil prices soaring and that means that the products are following right behind.



I have noted an area of resistance on the chart near $3.10 - $3.11, which if bettered, will send gasoline to a test of last July's high just above $3.15.

Here is the issue before us - rising energy prices often confuse traders because many have come to regard them as evidence of inflationary pressures. The problem in this economy is that it is so weak, so fragile, that rising energy prices will act in the exact opposite fashion - they will serve to depress growth and drive the price of key commodities lower.

Here is an updated chart of our pal, "Dr. Copper".



Can you see what it is saying? I have made some notations on the chart detailing the fundamental news that has been the driver of each move lower recently.

Today's Iraq news was interpreted as bearish for global growth because of the surge in energy prices and the "tax effect" it will have on growth in general. 


The move lower in copper was affirmed by the sharp drop in interest rates as the yield on the Ten Year fell  below 2.6% after it had been managing a slow but steady climb out of the ceiling near the 2.40% level late last month.




Stocks in general also responded to the Iraq developments by selling off. All three indices that I follow, the Dow, the S&P 500 and the Russell 2000 were down around .6%.

The HUI was one of the exceptions as the gold sector had a nice day.

The index broke above the resistance level near 218-220 and has now extended into the former range trade that was marked by a top near 228-230 and the bottom near 218-220. Let's see if this index can push up to the top of that former range and possibly breach it or if it stalls out and retreats lower. Near term momentum is now with the bulls and as long as the ISIS is on the move and succeeding, gold and these shares should find some decent buying support.


I want to continue to keep a close eye on the Copper market. If that thing breaks down, it could spell some real trouble coming our way. Higher energy prices could very well squash any nascent recovery dead in its tracks.

By the way, this is just one reason in my mind that should convince American citizens that it remains imperative we fully develop our own bounteous supply of domestic energy sources. That includes building that Keystone pipeline to bring Canadian crude ( our stable friend and neighbor to the North) down to our refineries along the Gulf Coast. Frankly I am weary of having the price of gasoline held hostage by events that transpire in that most volatile and backwards regions on the planet ( the Middle East). Far too many who live there are caught in some sort of time warp and seem to revel living in 8th century AD conditions and thinking. One has to pity some of the younger folk there in particular who have seen the freedoms that the West currently enjoys and might not ever live long enough to experience them. What a tragic waste of human potential.



29 comments:

  1. Mark, I do not know who is lamer, Eric King himself or his touts. Ben Davies is nobody and what was his greatest call? It is funny, but the farther away we get from '87 or whatever watershed moment, the more guys called it, right? Kind of like Mickey's blast out of the old Washington ballpark, or the one that was still going up when it hit a light standard at the old Yankee Stadium. They were all 600 feet at least, I swear!! hahahaha

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  2. Looks like copper and silver strayed from their recent correalation as it's done before at times.

    Tough to say why that might've happened today but given the thinness of the market some sudden short price swings are likely as you've also stated.

    Regarding oil and price increases....I filled both my cars up today after noticing a several cent rise and thinking how it'll be a dime higher in a week.
    I'm still paying high $3.70's where I'm at.
    I guess it's better then $4 or....$8!
    Imagine that.

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    Replies
    1. Dark Purple; $3.90-4.30 depending on where you want to get hosed here in Reno/Tahoe/Sparks. Up to $5 in off the beaten tracks in deserts and coastal Cal. Take the bullshit taxes out and the price would be far less, buy hey, just saying

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  3. it has to be one of the greatest (worst?) jokes on the world that the most vital item for a modern society is so abundant in the mist screwed up part of the world. makes you wonder

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  4. but you also have to ask if the ME would be this screwed up now if they had never any petroleum.

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    Replies
    1. Good point. Probably still living in tents and herding animals.

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  5. huge drops in platinum/palladium today as well....what significance is there in that?

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  6. About that Iraq/Iran angle I spoke of :-/

    Iraq Update: Jihadists Seize 2 More Iraqi Towns; Close To 30 Miles Of Baghdad; Iran Rushes To Help

    zerohedge.com

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    Replies
    1. The notion that Iran/US could become allies seems ludicrous to me.

      IF that were to happen, which I doubt, I'd be shocked and I'd have question my overall viewpoint on some things.

      That's a big IF but you never know. We live in extreme times and stranger things have been known to happen.

      How close will the U.S. or Iraq allow Iran to get near (or into) the BILLION DOLLAR + "Green Zone" the U.S. established there?

      I'm pretty sure we'll find that out.

      Delete
  7. Hello,
    I'll be on holiday and probably away from internet for a week, so I won't be trading very much.
    Just a few remarks :
    - gold seems to follow the Fibonacci retracement levels of 1180-1435 quite precisely. The levels are 1240 - 1278 then 1307. Let's see what happens at 1278...
    - Eur Usd also bounced on the 1.35 Fibo retracement level of the 1.0 - 1.50 wave.
    SP is correcting as Sakata series were warning about...well with my lonely (but winning :) one CFD short contract lool, I'll be waiting for 1870 to get out of my trade (if we ever make it) as I won't monitor anything next week. Mark, wish me luck please and see you next week :) My stop loss is back at 1950, I won't risk losing more than a penny on my short trade on SP500.

    Have a nice week...

    ReplyDelete
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    1. This comment has been removed by the author.

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    2. there is no such thing as a 1.35 Fibonacci level and, for your selected Hi-Lo Range the key pivot points are

      0.618: 1338

      0.382: 1277 (recent high)

      0.239: 1241 (recent low)

      0.146: 1217

      interestingly, Dan often refers to the start of the Bear phase as having occurred in the mid-1500's, and this is confirmed by the 1.382 oveshoot of your chosen range at 1532; put another way, if the total Bear trend is from 1532 to 1180, then the .239 retracement of this comes in at 1264 and the 0.382 at 1314

      two harmonically consistent trading bands are therefore apparent from 1240 - 1277 and from 1264 - 1314. we were locked into the higher range from 26th March to 27th May, and have yet to break out of the lower band which we entered at the start of June. within these ranges everything is pretty much noise without offering any clear indication of trend

      for those of you listening at home in Black & White, the 1.382 overshoot of the current down trend would target a band somewhere between 1083 and 1045

      to be honest, this reassures me in the opinion I have held since the rally petered put last September that for the time being the only meaningful numbers in Gold are 1000, 1500 and 2000

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    4. Footnote about Fibonacci harmonics

      if you take the 6 month HiLo range as 1388 - 1189, then 0.382 = 1265 and 0.618 = 1312, indicating a band which is pretty much consistent with the upper range we experienced from end-March to end-May

      note that the lower range we are currently bound by is way down in the lower orders of the Fibonacci sequence (i.e. below 0.618) and it is therefore way way too early to be talking about any kind of rebound at this stage - IMHO we would need to see 1314 and then 1338 taken out convincingly before numbers north of $1500 became even a remote possibility. Mind you, if your 1435 Hi was breached on an uptrend, than the 1.618 overshoot would target 1593, which would be very much into "Game On" territory

      Who knows? I sure as hell don't - I'm just hanging on in there, trying to discipline myself not to panic (i.e. until we get to 1000), not to be greedy (i.e. once we get to 2000) and not to care too much below 1500. I am certainly not "backing the truck up" and "stacking at these (manipulated) bargain prices"

      Confession: in March I bought the Friday-before-the-Crimea-Referendum-High around 1385, so what do I know about anything?

      Delete
  8. Btw, at the moment Bo Polny correctly identified 1240 as the low in gold, then the bounce...and I receive a nearly daily email inviting me to subscribe. I'm still counting. Problem with them is they are right 50% of the time, wrong 50% of the time, but are good at making you forget the times they were wrong, to focus only on the times they are right :) Anyhow, 1240 was the support area and indeed a 77% Fibonacci level of the "last chance" for the bulls.
    Bo Polny also forecasted that after a rise in june, gold will reverse and double bottom at 1240 during summer. Let's see if he's right on that one too, or if he will make a 50% correct forecast again :)
    Too bad for now for Armstrong, who said that a monthly close under 1251 on the futures (end of may) would trigger an additional decline. We are now flirting with 1280. So what, Martin, your model couldn't forecast ISIS? I'm troubled... though he is worth reading, he is not able to forecast 100% prices nor price moves and directions, dor anyone else imho, no matter how much IA they put in the balance.
    Only important thing to my point of view is to spot potential areas of reversal to take advantage of a good entry level and make some regular profits on the long term.

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    1. Hubert, you are ruining all the insider trading cases. It will now be the Hubert defense. You buy silver and it immediately goes up $3. You sell copper and it immediately goes down 20 cents. The defense will be, I am only doing what Hubert does. Truth is, you really have this trading down pat.

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    2. there is no such thing as a 77% Fibonacci level

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  9. Gundlach: Gold $1500 by Dec?

    "
    It's one thing to say gold is going higher. But, when Jeffrey Gundlach, manager of the $49 billion DoubleLine, says he thinks gold could hit $1,500 per ounce by the end of this year, that's something people pay attention to.

    In a webcasted presentation called "Penny For Your Thoughts", Gundalch noted the 96 percent reduction in the U.S. dollar's purchasing power since the Federal Reserve Bank was established a century ago, likening the end of the gold standard to the silver debasement of the Roman denarius from 64 to 270 AD. During the question and answer period, Gundlach said he thought gold could move to $1,500 this year.

    The last time gold was at $1,500 was in April, 2013. Gold traded at $1,260 per ounce on Wednesday.

    "

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    1. last year I was responsible for risk management of an investment fund totalling well in excess of $600 billion; does that make my views 12 times more credible than Gundlach?

      if so I am here to tell you that I have NO IDEA where the Gold price will be at the end of this year, other than that it will go up and down, but not necessarily in that order

      over the long run - decades - I am confident in Gold as a store of value; if you are looking for a 20% return in 6 months, put it all on Black and cross your fingers

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    2. what is your name and what is or was the name of the fund?

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    3. Why is that important if I am telling you I don't know anything?

      Well over 400 funds, by the way (and very, very little metal in them)

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    4. Ultimately, because you know Gundlach's name and the name and the size of his fund, do you think that makes it any more or less likely that Gold is going to $1500 by December?

      If so, then my name is Mr I Am Right, my fund is the "Gold could be anywhere in December, quite frankly, I haven't got a clue" SICAV and all you need to know about its size is that it will probably be within +/-5% of its current value by the end of this year

      So, that's settled it. My dog is now bigger than his dog, and COMEX will respect this fact and will trade aimlessly for the next 6 months in accordance with my strict instructions not to break out of the $1,000 - 2,000 range. I am THAT good! - when I express a modicum of anonymous uncertainty, the entire commodities market goes into headless-chicken mode and stops listening to any Lesser Mortals

      apologies for the sarcasm, but why do you feel the need to personalise this? My 3+ decades of professional experience may be an essential credential if I want to attract clicks on KWN, but on Dan's site I am happy to be just another guy with his own parochial views, and if I can get it right even 51% of the time, I'll take that to the bank abnd call it a success. Who I am is totally irrelevant to that equation

      Delete
  10. Posted comment and saw notification:

    Your comment will be visible after approval " by whom ?

    Censor ship started ?

    ReplyDelete
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    1. This comment has been removed by the author.

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    2. By, Dan. I was censored yesterday, so this will be my last post.

      Delete
  11. Hubert, are you vacationing with Armstrong? Or applying for the non-existent spell-check position? Unlike Dan, he seems to know everything about the entire world. His latest post is about Sweden and their real estate problems. Sorry Marty, but there are just a FEW cities around the planet with greater than Sweden's 10m population, so why on earth do you not focus on Ukraine or Iraq??? Everyone have a good weekend

    ReplyDelete
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