“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"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


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Friday, July 18, 2014

Gold Continuing to Closely Track the TIPS spread

Here is an updated chart. Note how the pair is moving almost exactly in unison. As inflation expectations subside, gold prices move lower. As they increase, gold prices move higher.



Incidentally, for those tracking the Euro currency, it bounced off of support near that stubborn 1.35 level once again. I find that most remarkable given the more hawkish tone of the Fed of late in regards to interest rates and the continued lackluster performance of the overall Eurozone economy.

39 comments:

  1. Once again, we are witnessing and experiencing in real time the most glorious period ever in financial market history.

    Dow still over 17,000, shucking off any and all problems in the Middle East and the plane being shot out of the sky.
    Bird Flu didn't matter
    Greece didn't matter.
    Portugal and Italy didn't matter.
    Arab Spring didn't matter
    Fukishima didn't matter
    Egypt didn't matter
    Syria didn't matter
    Sequester didn't matter
    Fiscal cliff didn't matter
    Tapering didn't matter
    California drought didn't matter
    Ukraine didn't matter
    Slow GDP didn't matter
    Iraq didn't matter
    Gaza strip doesn't matter
    And airliners blown out of the sky doesn't matter

    And despite massive monetization, nationalization of GSE's, multiple QE programs, gigantic expansion of the welfare state, and infinite borrowing and trade deficits....

    There is no inflation, and no threat of rising interest rates.

    Zero
    Nada
    Zip

    Economists will be marveling at this period in financial history for the next 75 years.

    Future central bankers will be studying the Bernanke/Yellen playbook for decades, and will use the exact same strategy to fight any and all bear markets or financial crises in the future.

    Truly extraordinary times we live in.

    Stay in the system, as we are now in the "Guilded Age"

    ReplyDelete
    Replies
    1. Yep...I canned my financial adviser. Who needs to analyze financial data when all you have to do is buy?
      Blog sites and forums like this are also history. Why bother trading ? why use technical chart analysis and COT reports? all useless.
      I am sure that even Dan is beginning to see that his skills are no longer relevant.
      Some time ago Rick Santelli summed it up nicely. He said being a trader used to require skill and hard work. They used to spend hours studying and analyzing financial reports...no more ! We are free from such nonsense, all that matters is what the FED is going to do. It is amazing..they plan to cease QE but still keep interest rates low...a miracle.
      Take Marks advice...go all in !! no need to protect yourself.
      Your friends and loved ones will thank you someday.
      Life in the "guilded age is wonderful"

      Delete
    2. Dean;

      Technical analysis is essential for surviving and prospering in these markets, more than ever now that the computer age has come.

      I would disagree with your assumption however about the relevance of my skills. Good traders learn to adapt to market conditions as they change. It is extremely difficult and challenging work but it must be done if one is to be successful. What choice do you have if you do not adapt? Your career as a trader is over if you do not.

      You are referring to the equity markets no doubt when you speak of Rick Santelli's comments ( I like and respect him very much) but there are other markets out there besides stocks.

      Soybeans, wheat, corn, cattle, currencies, hogs, sugar, crude oil, etc.... those all trade on their own set of fundamentals.

      If trading/investing were easy, everyone who tried it would be wildly successful and rich beyond their dreams. It has never been easy. That is something that only those who have lived in and survived in the profession understand. Those who boast about how they never miss a trade and are always on the right side of the market are liars. This profession is full of egotistic, self-lovers who sing their own praises. Ignore them - they are full of crap.

      Delete
    3. Thanks Dan
      My comments were meant as sarcasm but there is some truth there.
      I am sure you understand Rick's frustration with the shenanigans that currently dominate the markets (mostly equity).
      Santelli took a hit the other day from Steve Liesman who smuggly pointed out that Santelli has been wrong about pretty much everything. Out of the two men who do you think really knows the market best ?
      Santelli's anger is justified, as a trader he knows that what the Fed is doing is wrong and cannot go on forever (despite the opinions of others here) it is nothing but smoke and mirrors, he also knows (and I believe him) that all of this will end very badly.
      Don't get me wrong...I own US equities and have done very well, the trick will be knowing when to get the hell out.

      Delete
  2. It's because the French support the Euro :)
    Vive la France!

    ReplyDelete
  3. Gold bouncing up and down on those fibonacci levels, now testing back 1307 and making bulls and bears crazy :)

    ReplyDelete
  4. Thanks Dan.
    It seems most of the major currencies and their related treasuries are stuck in a Goldilocks centrally planned trading range that benefits almost everyone no matter what the news or market data brings to bear.

    It's going to take a major ECB monetary stimilus announcement and/or a US rate hike to shake the FX/Treasury markets up and break the currencies out of their sleepwalk.
    For now, the currency war seems to be in a lull where all the
    "combatants" are also uneasy allies because they've managed (through necessity) to achieve an equilibrium that doesn't rock their collective boats or economies too severely.

    My guess is that when the last leg of the QE Taper ends the Fed doesn't take long afterwards to minimally raise rates or at least to aggressively talk about that prospect.

    Goldilock's gets a rude awakening when the US QE Taper ends and rates eventually go up in a "surprise" rate hike.

    Can the Fed end the QE Taper and simultaneously raise rates?
    I don't know but it wouldn't surprise me if it happened. But I'm pretty sure it'll shock the folks who adamently deny a rate hike as even being possible.
    Get ready, it's coming.

    QE to infinity is just someone's marketing slogan, that's all.
    Rates will go up...as will the USD.

    ReplyDelete
  5. Gold failed to break through 1337, which started a consolidation.
    Gold first broke 1307 but the mlh inf of the pitchfork upwards at 1290 stopped the fall, which is good for bulls.
    Gold then went through 1307 on the upside and is now testing 1307 anew as a support, which is good for bulls as long as it lasts.
    Gold tested the solidity of closer supports than 1240, i.e 1290 and now 1307 on the way down.
    Those supports give some levels for bulls.
    Still, gold doesn't seem to find enough strength to re-test the 1337 level immediately.
    Conclusion : short-term I'm neutral and guess gold is testing its next move within the 1307-1337 range. Of course, the week is not completely over yet.
    It found a resting zone between the red resistance going down at1335 and the green mlh inf going up at 1290. This area forms a consensus between bulls and bears. We may rest for a while and bounce crazy within this area. I probably will try to take a new position on gold if prices get close to 1290 going up (next week already 1300) and 1235 going down (see previous chart on previous line).

    ReplyDelete
  6. Thanks Dan

    My comments were meant as sarcasm but there is still some truth there.

    I am sure you can understand Santelli's anger and frustration with the shenanigans that he sees dominating the markets.
    Many will point out that Steven Liesman nailed it the other day when he smuggly pointed out that Santelli has been dead wrong about pretty much everything.
    Between the two men who do you think really knows the markets best ?

    Santelli knows that what the Fed (and other central banks are doing) will no doubt end very poorly for everyone, they are creating nothing more than the illusion of wealth.
    Yes, I own US equities and have done well, I am not a trader so knowing when to get the hell out will be the tricky part.

    ReplyDelete
  7. Hello again...ok gotta risk a bit to win a bit :)
    1307 seems to hold.
    Those fibo levels seem to mean somerhing.
    mlh inf will be on monday on 1300 $.
    The 1240 support level was too far for bulls to break 1337. But now they are testing 1290 and 1307 as closer support levels which seem to be holding.
    So I'm trying a bit of long order on gold here at 1308, because once more a stop loss can be put so close that the loss would be minimal for me, so why not try? It's probably too early, but I'm on a gambling mood since I won my bet on Germany last week :)
    stop loss under the mlh inf of monday morning.
    Have a nice weekend,

    ReplyDelete
  8. Hubert, got a hunch and bet a bunch, huh? Have a good weekend!!

    ReplyDelete
    Replies
    1. my gambling mood once more taking over my trading discipline :)

      Delete
  9. Wonder why stocks are so strong? Check out gasoline futures. COMPLETE UTTER COLLAPSE.

    ReplyDelete
    Replies
    1. Stocks are strong because they are backstopped by the Fed.
      It is a no brainer to buy US equities right now...you know that the Fed will step in to buy to prevent any serious corrections.

      Delete
  10. This comment has been removed by the author.

    ReplyDelete
    Replies
    1. I'm not sure this contains any anomalies but it sure does contain some absurdities...

      http://www.tfmetalsreport.com/blog/5951/mh17-and-mh370-what-are-the-odds-whats-the-fallout

      Delete
    2. OMG. I thought I had seen it all. That is just over the top batshit crazy. Every time you think that site can't get any worse...it does.

      Delete
    3. This comment has been removed by the author.

      Delete
    4. Alex Jones talks about a fight going on for people's minds but he never mentions the fight going on within people's own minds.
      When a person is suspicious of everything, including their own suspicions, they're lost.

      Maybe they should just stick to monitoring (NSA-lite) other people's private mesages "just in case" someone is plotting or talking against them. Ha!

      The PM blogosphere seems to be shrinking and the pools of thought and fresh subject matter is getting shallow and harder for some to panhandle from.

      Have a great weekend everyone...off to a street festival!

      Delete
  11. Brit

    When the news first broke the headline was Airliner Shot Down by Rebels.
    They even stated the type of ground to air missile that was used, I am surprised they did not mention the serial number.
    How did they know that so quickly ?
    The false flags are getting sloppy.

    ReplyDelete
  12. Looks like a 1999 - 2000 repeat setting up.

    DBC was poleaxed today with grains and gasoline plunging to new lows, sending the DBC ETF under March, April, and June lows.

    Which means the possibility of a 1999 - 2000 situation whereby commodity prices across the board completely implode and investors dump them and turn around and buy stocks instead.

    XRT and IWM both completely erased yesterday's losses with ease, and every money manager now sitting in cash will have to buy the DIA and SPY breakout which could occur next week.

    I don't think I've ever witness such "economic nirvana" like this, where stocks are soaring to new highs on mediocre economic news, interest rates still smashed at 40+ year lows for 6 consecutive years, and collapsing commodity input costs.

    In a nutshell, a perfect storm for the "Gloom and Doomers".

    ReplyDelete
    Replies
    1. Mark...sigh...your economic nirvana has nothing to do with economic news of any sort.
      The FED is buying equities (either directly or indirectly) to create the illusion of economic recovery.
      http://www.investopedia.com/articles/economics/09/1970s-great-inflation.asp
      Read your history. Once inflation started in the 70's it took 20% interest rates to stop it and it took over 8 years. I remember the "Nirvana" back then...when the party stops it can be sudden and very unpleasant.
      And for God's sake stop reading the people you hate! Just sit back and watch your wealth grow.

      Delete
  13. Mark from a TA perspective gasoline futures just filled the gap from Feb. Energy is expected to go much higher with war tensions, thus so will gasoline

    ReplyDelete
  14. Ladies, the crude is 4 years into a sideways pattern bounded by $75-$115. There is no break-out or collapse, but I would think that something has to give sooner or later. The longer the sideways, the bigger the ultimate break-out. Good weekends to all.

    ReplyDelete
    Replies
    1. agreed. With lower highs and higher lows as well, so a decreasing volatility and prices looking for an equilibrium point, maybe around 100 $?
      The only strong trend market I noticed within the few markets I'm monitoring has been SP500, with a strong straight trend upwards.

      Delete
    2. The pattern in crude is tightening up... The only ? in the SP500 is the negative divergence on the RSI and MACD over time (both daily and weekly charts). The neg divergence is showing up in the DOW and Nasdaq charts as well. One has to wonder how much longer it can go on without a correction that lasts for more than a day or two?

      Delete
    3. Hi Trinity,
      SP500 is still within my red alert area between 1950 and 2000.
      But you have to be very swift to short the SP500 and dodge the upwards reactions at the moment.
      Sooner or later, a stronger correction will occur, but when?
      Coulc be next monday. Could be next year. I hope I'll be there to ride the big wave down when it finally comes :)

      Dexter.

      Delete
    4. Agree Hubert! Also anticipate the day when the expectations of higher interest rates come into play and thy start to move up- it will be time to short the Euro and the long bond. The euro short may happen before that. A couple trades for the ages!

      Delete
  15. Dan- Your work on the tips spread/gold chart shows a deflationary mood. Looking at the silver/gold ratio (you posted that chart a couple weeks back), it is holding pretty firm and hasn't moved back down. If the "deflation" trend spills over to silver, could one expect the Ag/Au ratio to fall back down as inflationary expectations subside? Maybe there is a viable spread trade here between the metals....

    ReplyDelete
    Replies
    1. Nice to see that gold reacts to inflation expectations, rather than inflation itself :)

      Delete
  16. Gold, weekly time scale.
    I can't monitor prices realtime, so I can't enter in most efficient price levels, such as 1290 given by the mlh inf upwards, as it would need a confirmation that the support is holding when hit on the shorter time units.
    Being a trader on gold nowadays needs to be a full time activity :)

    http://i60.tinypic.com/xlwm7n.jpg

    ReplyDelete
    Replies
    1. I mean I can't monitor prices all the time.
      When I can, it is realtime :)

      Delete
  17. Hubert, you trade with good discipline. check out the long term bean charts, as I think there is lots more downside potential here. Weather is fine and hedgies are bailing as they know there is more to be made in bull mkts, like I think may be developing again in energy and pm.

    ReplyDelete
  18. Very interesting how commodities of every stripe, race, and color are getting slammed, yet gold is very resilient.

    S. African miners shaping up a good cup and handle formation, upward moves out of these can be explosive.

    I think that every commodity hedge fund manager is now getting ready to bail out of energy, grains, meat, etc. and will be piling into gold and silver as the only outlier commodity class that is still going up.

    No doubt, due to the fact that industrial demand for PM's is accelerating, and at the same time, the global production of food and energy is also going vertical, pushing those prices down.

    It will be a perfect environment for gold miners, collapsing input costs and rising metals price.

    Let's see what happens.

    ReplyDelete
    Replies
    1. Mark- As Dan's chart indicates, inflation expectations are reflecting the lull in commodity prices. Hard to say if gold will continue to buck the overall trend in commodities. It seems oil and gold are holding up better but maybe due to the geopolitical tensions? You wonder where those prices would be this week without the Malaysia airlines fiasco and the terrorists firing rockets into Israel.

      Also copper is quietly moving lower this week- seems like it got jarred on the China data that came out this week.

      After looking at Dan's chart on lean cattle posted this week, I am looking at the bounce up in cattle prices this week in the backdrop of overall weak commodities -(the Oct contract bounced this week to about a 65% fib retracement from its recent low) as a potential shorting opportunity.

      Oil went into deeper backwardation the last couple days after falling steadily for the last month (oil is "normally" in contango). if geopolitical tensions start to wean a spread trade may also prove to be profitable by short near month/long longer dated contract. This trade has been profitable but lost some ground after the bigs news this week.

      No doubt if oil prices fall, will be good for the PM producers (all else being equal) because it is such a energy intensive business.

      Delete
  19. Gerald "Angry Man" Celente is at it again.

    Poor guy missed one of the greatest stock market rallies ever recorded, so now he has another excuse to bash the bulls and the business media.

    Hey, I got a lot of respect for the guy, a smart businessman.

    Probably makes more money selling his Trends newsletter to thousands of frightened blue hairs than he could have made investing in S & P 500 stocks, LOL....

    Another "Enterprising Carnival Barker" making huge amount of money peddling fear.

    ReplyDelete
  20. Armstrong in today's comments on his site talks about some problems ahead next for the stockmarket. We'll see.

    ReplyDelete
  21. Mark, you may have me beat on the platinum, or was it palladium bet, but you are wrong to call gasoline collapsing. It is in 38 month sideways pattern from $2.50-$3.50. Currently undergoing another hard shake-out, but collapse, no, not hardly. I value the weekly charts most strongly. Have a good weekend!!

    ReplyDelete
    Replies
    1. "Oil's resiliency during a bearish phase could produce unexpected strength during the next bullish phase." - Eric de Groot


      http://edegrootinsights.blogspot.fr/2014/07/review-of-oil.html

      Delete

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