"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 free work will soon be available at www.traderdan.biz

Friday, June 27, 2014

Tracking Gold Shares

The gold shares, as evidenced by the HUI, ended the week on bit of a lower note ( as I type these comments up ).  Sellers emerged up near the week's high but dip buying was also evident. There appears to be an uneasy truce between both camps with the index not making much progress in either direction.

In looking over the chart and trying to get a read on the sector from the chart, I have noticed what appears to be an attempt to form what we technical analysis geeks refer to as an "Inverse" Head and Shoulders Pattern. I tend to only put any faith in these patterns when they appear after a PROLONGED move lower ( the same goes for the opposite pattern  - the Head and Shoulders Pattern - on a prolonger move higher). Even at that, I much prefer to see these patterns validated by a breach of an overhead horizontal resistance level rather than a breach of the neckline. More often than not, the neckline breaches these days only lead to markets entering consolidation patterns, rather than extended trending moves. That is why I personally prefer to wait for a horizontal resistance level to be taken out before getting too dogmatic about things.

Take a look at the chart and you will see the pattern noted. I have drawn in the neckline, which comes in closer to the 250 level. That level could be bettered confirming the pattern but would not necessarily denote the beginning of a sustained, strong uptrending move. Note that there are THREE overhead horizontal resistance zones, the last of which, the gap region, should prove to be quite formidable.

For a sustained strong upside trending move to begin, the gap would have to be taken out. If not, the odds would favor a broad sideways pattern, or a trader's market, with the top of the range being confirmed depending on how the index responds when it nears the horizontal lines noted on the chart.

The bottom of the range would be first at the right hand shoulder which just so happens to be at the round number 200, which is both psychological and technical support.

Here's what we can say from an analysis of this particular chart - For the pattern to remain friendly, the 200 level needs to remain unbroken on any possible setbacks in price ( that is the Right Shoulder). That would keep the pattern moving sideways to slightly higher as it is currently doing.  If that 200 level were to give way, you would then have to say that the pattern has changed back to being slightly unfriendly with price movement sideways to slightly lower.

If the first level of horizontal chart resistance noted near 260 is taken out, the bulls should be able take this index up towards 280. Above that lies the gap region.

By the way, the chart picture and analysis for the juniors as evidenced by the GDXJ is very similar to the HUI. It has horizontal resistance near 45. Above that is also a gap starting near 52 and extending up to 55.

Given the situation in Iraq and recent rash of dovish comments by some heads of the various Western Central Banks, gold is continuing to draw decent buying support here in the West. Throw in a case of some shaky equity markets, and some traders/investors are buying the metal as a safe haven. I remarked yesterday how fascinating it was to see gold finding friends here in the West while losing a few friends in the East ( for now). Western oriented investment demand for gold is what had been missing for the yellow metal for the last number of years. Gold's friends will be happy to see it returning even if it is not at levels previously seen. At least it is there! Compared to being non-existent, anything is a big improvement!


  1. http://finance.yahoo.com/blogs/talking-numbers/bollinger--here-s-why-gold-is-going-higher-231157465.html

    John Bollinger is liking the Gold action.

  2. What action? We have been flailing around, unable to take out 1320 for more than a week now

    With all that's going on in the World - including the takedown of the Bulgarian banking system http://www.bbc.com/news/business-28052535 after they agreed to recommence work on the Russian South Stream gas pipeline yesterday http://rt.com/business/168552-bulgaria-southstream-eu-legislation/ - the lack of upward momentum is beginning to make Gold look a bit heavy

  3. Addendum re. Bulgarian geopolitics http://www.euractiv.com/sections/energy/bulgarias-government-collapse-over-south-stream-302702


    This is the World we live in; expect more of the same, coming soon to a town near you

  4. This comment has been removed by the author.

    1. It looks like investors started taking some profits before the wkend. in gold/silver around 3:00 EST
      $1320 and $21 weren't held and given the quickly blossoming situation in and around Baghdad (US armed drones circling ABOVE Iranian/Shiite troops near the Green Zone(what could possibly go wrong there!?!) it appears significant geo-political events aren't enough for gold or silver to catch a bid or slow the profit taking around $1320/$21.
      Not a good sign going forward imho.

      Regarding Baghdad...expanding on my thoughts regarding an eventual US (and Saudi Arabia of course) /Iran confrontation happening in Iraq, Baghdad/Green Zone specifically.
      Picture this....Baghdad isn't just being encircled by ISIS, it's also being occupied from within by potentially thousands of Iranian troops/Iranian special ops etc not to mention many thousands of al-Sadr/Mahdi fighters who recently pledged to fight us if the US comes back to the "rescue".
      Now picture this...the Green Zone is completely surrounded more or less at this point even if it's only in a soft/vulnerable way at that point.
      The US supposedly sent in about 300/400 special ops advisors ( or possibly more) in Iraq and Baghdad.
      Imho, the odds of the US sending lots of troops into Baghdad is miminal unless a drastic shift in current Obama administration policy changes. The $500 million he just asked for might signal change but its too early to say just yet.
      With armed drones overhead the Green Zone (and probably helicopters over the embassy at some point) its not hard to imagine a somewhat chaotic situation where tensions and armed conflict between the US and Iranian ground (and air?) troops and/or Mahdi Army fighters occurs and they eventually engage US planes/drones/helicopters/troops etc.
      I don't see Iranian troops or the Shia Sadr mercenary army being friendly to large numbers of US troops when TSHTF in and around an encircled Baghdad.
      I'm not sure how this plays out but my guess is that the fall of Baghdad is inevitable and the Green Zone is eventually evacuated OR heavily defended in order to keep a US footprint there.
      I'm not sure that's possible unless the US and Saudi's (and Egyptians?) establish a no fly zone around Baghdad that includes lots of boots and serious equipment on the ground in order to accomplish that.
      My question would be will the Iranians allow a massive build-up on the ground to take place and how long will they or the Mahdi Army allow armed US drones, helicopters or planes to buzz over Baghdad and the Green Zone.

      Given the US's recent history of not being shy about using drone strikes and given the probability that 24/7 fighter jet/drone coverage of Baghdad and the GZ has been ongoing since the USS George H.W. Bush showed up I'd be pretty uptight and worried if I were Iranian troops or Mahdi Army fighters around that GZ and Baghdad itself.
      What happens when a US drone or helicopter gets shot down over Baghdad? Nothing good.
      All the ingredients are there and the proximity of numerous and different kinds of "hostiles" so close to each ( or ABOVE all of them) is a recipe for confrontation at some point.
      The line between ally, friend and enemy combatant is fuzzy in this one. If a significant number of Iran Air Force assets take to the air above Baghdad and a significant number of like assets and troops enter Baghdad it'll make "Shock and Awe" look like tame in comparison.
      If you're the US and you have the USS HW Bush (and all the accompanying formidible support vessels) at your disposal (plus all the other US assets in the area) there is little doubt they are locating, identifying and softly targeting any build of Iranian or Sadr troops of forces within and Baghdad "just in case".
      The Iranians realize this of course but how long or to what extent do they allow the US or Saudi's to become entrenched in and around Baghdad?
      I guess at some point we'll find out but my gut tells me it won't take long before we know.

    2. DarkPurple, let me play Devil's Advocate for a moment. >9/11, the Russians and Iranians immediately bellied up to the bar and offered their services and so forth to Cheney and his lap dog. Some time later the Pakistanis offered up Bin Laden but the lap dog said, "no, he is more valuable to us alive than dead, according to Dick". Also, do not ever forget that Iran was the first democracy in the Middle East and the Brits and Yanks overthrew it and installed the Shah in '53. 26 years later blowback showed up. At this point I do not know what exactly is happening over there, but one thing I can say for sure and that is that the military/industrial complex is just licking their chops as war is fomented all over and profits continue soaring. Pretty Goddamn Sad.

    3. Yep Steve, it's complicated, yet simple at the same time.
      And people think the Chinese are patient? The US has been setting up regimes and then tearing them down even if it takes decades to do so. (ie. Egypt/Hosni Mubarek)

      I trust that they're doing the exact same thing with Maliki only several years into his rule. What a mess.
      It looks to me that the resultant power vaccuum in Iraq could't help but draw Iran into it the past couple years.

      I guess we'll find out one way or another if Iran has been drawn into the US web of retaliation that has the 1979 Iran/US Embassy hostage crisis at it's center or if the overall loss of Iraq and the Green Zone to Iran turns into the greatest US foreign policy/military/intelligence snafu in US history.

      Losing Iraq completely to Iran would be a blight on US history in general and Obama because it's on his watch.
      As you saw with G. W. Bush after 9/11, they didn't hesitate to settle an old score with Saddam that was 20+ years in the making.
      Patience is a virtue and it's essential to execute significant and strategic regional moves over time like we've witnessed over there.

      Either Iran is entrenched over there (they are) for the long haul or they're being set-up (by virtue of filling Iraq's vaccuum and being spread too thin in doing so while Iraq is being swarmed by hostile Sunni's) by a very patient and vengeful US who is on the cusp of scuttling the Iranian nuclear talks by virtue of continually upping their demands on Iran.

      A significant chapter in humankinds history is about to be rewritten in the land of the Tigris and Euphrates where old blood/tribal feuds are part of the equation also.
      The US, unless they've lost complete control or influence in MENA, are exploiting those old tensions to help achieve their main goal....Assad's fall and to weaken Iran considerably one way or another.

      One or both seem possible.

    4. I can be sure of one thing. The result will not be good.

  5. MNKD's Afrezza approved by the FDA today. Good news for diabetics. Congrats to billionaire Al Mann and shareholders. Crazy action on the stock today...


  6. Bob,

    Congrats to you, my friend!!!! I sold 100 Jun 27 $10 puts two weeks ago for .45... I was crapping bricks 20 minutes before market closed!!!!!

    Would you be willing to chat offline? rockeye118@hotmail.com


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