"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

Wednesday, July 30, 2014

Strong GDP reading Fans Fears of Interest rate move from the Fed

Today's stronger than expected Q2 GDP number ( 4% compared to expectations of 3%) has ramped up selling in the longer dated section of the curve. The long bond is down over a full point as I type these comments. The Dollar is also benefitting, particularly against the Yen today, as forex traders are buying it and selling the rest of the majors. Talk has now shifted ( at least for today) firmly in favor of higher interest rates coming to the US before any of the other industrialized nations.

Take a look at the daily chart of the US Dollar ( USDX). Note that the greenback has run right into the zone of heavy chart resistance pictured on the chart. That resistance zone is a function of a downside gap made all the way back in September of last year. The gap has served to cap the Dollar's upward movement for nearly a year. Seeing it challenged today is therefore something that should not be ignored. If the Dollar can punch through this level on a closing basis today, and then repeat it tomorrow, we should see some additional buying come in.

The ADX is showing a decidedly bullish chart picture with the bulls firmly in control of the market. The indicator itself is above 30 and rising - evidence of a strong bullish trend. If that resistance zone does give way as noted above, this thing could turn into something stronger on the intermediate term charts. Above 81.60 there is resistance at 82 and again near 82.50.

Here is the chart of the long bond. It seems to have reached its zenith near the 139 level. Today's GDP number was simply too much for the market to extend any higher. We have a ceiling now at this level for the time being meaning it will take some sort of safe haven event to kick the ceiling down or some very bad economic news from somewhere. The indicator is turning down and getting ready to confirm the negative divergence that was created recently. We'll have to see whether the bonds are setting up a range trade or whether this is the start of a longer lasting downtrend. It is far too early to assert the latter with any dogmatism.

Copper is benefitting from the stronger GDP number.

Hog prices continue to reel from traders reassessing the overall impact from the dreaded PED virus. Record heavy weights are offsetting most, if not all, of the impact of the disease on the slaughter numbers. I mentioned repeatedly over the last few weeks for hog producers to get some hedge protection on expected Q4 and Q1 2015 production while record prices were being seen. I hope some of you hog producers out there took that to heart. I have similar concerns about the cattle at this point. Cattle producers are basking in record profits right now but these things do not last forever. Do not be penny wise and pound foolish. Get some hedges in place on expected future production while you can. Do not wait until you HAVE TO get the protection. Speculators - I am speaking to producers right now.

Bean prices are giving up the gains from their recent rally that was due to heat and dryness talk. Bulls talk that up every season so that is not new. The forecasts however are showing some rain entering the mid-West next week and with no searing hot temperatures anywhere in there, growing conditions remain very good for the majority of the crop. Yes, there are some areas where the crop deteriorated slightly ( I noted that on my Monday  take on the USDA Crop Conditions ratings) but those small pockets cannot detract from the fact that the majority of the crop is still in very good shape.

Look at what continues to happen in the overall commodity sector...

It is showing a loss on the year at this point. Simply put, those investing in commodities as an asset class this year, particularly those looking for inflationary pressures to show up, have been on the wrong side of the complex. Now of course that could change but the fact is that while overall economic growth globally has been okay, it has not been strong enough to power the sector higher. Demand is not there as it once was. We'll have to see if growth can pick up from current levels.

A stronger Dollar threatening to move into a sharper uptrend and falling commodity prices do not augur well for higher gold prices. As stated here yesterday, it is geopolitical events that are keeping gold above the $1280 level right now.


  1. the breathless and explosive predictiions at our favorite site just continue to make me shake my head in disbelief. Are they really saying these things with a straight face?

    Dan, you are in synch it appears from a macro standpoint. I don't even think the $ has to break out, but only to trade range wise up here at the higher end while the other fiats break gradually lower. It is all a dirty game, but it is what it is.

  2. Hi all,

    I'm on only one trade now, so I'll focus on it : short Eur-Usd.
    My target of 1.3375 was hit today, it corresponds to the beginning of the support zone you can see on the chart below (blue lines).
    Conclusion : I'm taking a quick 1/3 of my profit now, out 1.3375, and I keep the 2/3 remaining hoping we'll reach 1.3150 eventually. My stop loss is trailing above the ema15 daily, so now it's Aaaallll good already, whatever eurusd does.
    I like that way to trade : no stress on capital. Maybe I win less than optimum, but I save my nerves and this is priceless :)

    SP500 (and GOOGLE...) : dang...roger are about to stall...this time? Should I short, should I not...aarrh...Dan, are you short yet? :) no no, ok, don't tell me.
    Good trades to all.

    Chart Eur Usd daily.


    1. Any thought on the Ruble, Dan?

    2. Hubert;

      I've been short the Euro for a while now but not the equities. Every time I have tried that I have ended up either losing money or barely making a small profit. I have essentially given up trying to short the equities at this point although I am closely watching for any signs that they might be undergoing a steeper correction.

    3. Jasper;

      I did have a thought on the Ruble but then it passed as soon as my alarm clock rang! Seriously, I do not trade it but I would guess it is not doing very well.

    4. After a 4% GDP announcement the stock market reaction was short lived. Shouldn't we have expected a more sustained rally? Maybe because the market is anticipating a interest rate move that is more likely? It is hard to see the start of rate hikes coming after the Fed removes life support in October. Would say there is as good of chance of seeing another round of bond buying (QE4) as a move in interest rates in 2015... Time will tell!

  3. There is obviously a "Black Swan" rogue wave hitting the commodity complex, as DBC is plunging yet again to a new low for the move.

    No doubt, several commodity funds whose managers were reading KWN and jsmineset and going long crude futures because of "Ukraine this, and Ukraine that" are now getting AMARANTHED.

    Note how IWM, XLY and XRT are hanging tough, no selling whatsoever in those ETF's today as the resilient consumer gets another "tax cut".

    Gold also doing well, as a 4% GDP is going to trigger huge demand for jewelry and other industrial applications.

    Poor Richard Duncan, author of "The Dollar Crisis", who in 2002, predicted that--and I quote--"Within a few years, the U.S. government will no longer be credit worthy" is scratching his head wondering what the heck happened 14 years later, now that the 10-yr. is at 2.5%.

    But my all-time favorite is Jerome Smith, who FORTY-YEARS ago predicted "The Coming Collapse of the Dollar", and Hyper Super Duper Inflation, any minute now, he swore.

    Well, now we know what that miserable prediction is playing out.

    Best advice has been to stay in the System.

    1. No, Harry Schultz is the biggest favorite of mine.

  4. CORN seems to be bottoming and the weather can't get much better. Small long position hoping for some combination of bad weather, good feed demand or ???? Stop set close so no stress.

    1. California Mike; of course talking my book, but the corn is basically made; it will maybe hang in there for 2 more wks as the beans are made and then it is Katy Bar the Door as we break again real hard into early harvest; finally the farmers will start to unload and we make ultimate bottom Thanksgiving

    2. Glad I have close stops set.

  5. Dan, what's the deal with oil?

    1. dfly;

      Pull up a chart of unleaded gasoline and then one of heating oil. Demand for the products is not good right now. Crude oil can be tricky at times because on any given occasion, depending on what is going on in the world and where it is going on, it can have a geopolitical premium built into it. How much of its price is that premium is very difficult to say at times. With the products so weak, it is moving lower reacting to the demand side of the equation. The fall is typically not a good demand period for the products as it is essentially the end of the summer driving season ( gasoline demand falls off) but too soon for heating oil usage as the weather is not cold enough. Gasoline stocks are ample right now while distillate stocks are the highest since September of last year.

    2. Thanks Dan. What numbers are providing support and resistance for crude oil in the short-term here?

    3. Crude futures still dropping after hours, now a "99'r".

      One of the biggest, steepest, fastest one day declines of the year.

      Gas Buddy gasoline prices are now falling off a cliff on virtually all the charts.

  6. The bottom could fall out in oil because despite prices going nowhere now for 3 years, there are still too many Peak Oil Pumpers out there who have goaded and convinced the hedge funds that "Any Minute Now!, We Are Going To See $150 Crude and HyperInflation!"

    Poor "Big Mac" Williams at Shadowstats must be fencing off millions of angry blue hair subscribers demanding a refund.

  7. Wonder when General Jim is going to post a chart of USDX with the comment:

    "The Story Will Unfold Here"

    Unfortunately, no sign of any such reference so far.

    Just more of the same "Putin this, Ukraine that, U.S. is a Ponzi Scheme", yada, yada, yada........

    And the bingo parlor "blue hairs" hanging on to every world are rapidly going broke.

    1. Its sad how much damage an egomaniac charlatan can do. Jim likes the adulation so much he just cannot stop destroying the very people that trust and rely on him.

    2. He is too busy holding Q&A sessions to manage TRX. If he can't make a mine run he should cut back to care and maintenance, zero out the G&A until he gets a buy out.

      Sorry to be so far off topic.

    3. Exactly. All the blue hairs who piled their retirement into TRX are now facing a lost decade of investing.

      Whereby a simple investment in dollar cost averaging into the S & P 500 would have had them set for retirement, for even those who continued to dollar cost average during the 2009 crash made out great.

      And even riskier speculators who piled everything into QQQ, well needless to say they are now set for life.

    4. Dan is there really fear of the Fed raising interest rates?

      It seems the Fed moved the goal posts yet again today on rate hikes.

      The Fed seems to be financing the national debt to keep the deficit down now.

      Each 1% interest rate hike adds potentially 180 billion dollars to the deficit and debt.

      Is it not the other way around, the Fed fears having to hike interest rates?

    5. Didn't Jim try to pawn off TRX a few years back? Thought I remember seeing something on JSmineset along the lines of "I'm always by my phone ready to negotiate"

      If I'm correct that didn't bode much confidence for where he honestly thought gold was going. He also mentioned something about miners becoming utility companies like in the 1950's and 60's. Maybe when there was a gold standard?

      Anyone else remember something similar.

    6. Where oh where are Howard Ruff and Joe Glanville when we really, really need their pearls of wisdom?

    7. Just a remark here :
      - Sinclair never pushed anyone to buy his TRX stocks on his blog.
      - He was right for years about gold rising and anyone who bought gold initially below 1300 $, that is not so long ag, is still making a profit.
      - TRX is his company after all, so let him manage it as he wants.
      - It's thanks to Jsmineset and KWN that some of us here including me heard about Dan and his blog.
      - Sinclair also always advocated for no leverage on gold and caution for bulls never to get greey with leverage.

      Let's just leave those people with their convictions where they are, I don't think they deserve to be described as devil incarnate all the time, even if events seem to show they are not angels either. I guess the point has been made by now.

    8. P.S : for me the example of a real dishonest ass...e would be the super analyst Bo Polny. Because he keeps advertising his BS for money. Or people like Turk who always shouted that gold would rise to the moon, knowing that his GoldMoney company would make a nice profit from commissions every time a new customer bought some gold or silver. I'm not as hard with Sinclair or some of KWN people, whose actions are, imho, motivated by sincere convictions, not hypocritical lies aimed at making profit by all means.

    9. Hubert. Nonsense. Jim was jumping up and down promising people a final and enormous payday on mineset when he did the private placement in 2011. Why do you think jsmineset us called jsMineset?

      Jim was telljng people trx would be producing in 2013 at 250 dollar priduction cost. This is false and misleading information which is illegal.

      During 2014 agm the hype was trx will be producing in september 2014. Guess what its not going to happen.

      i can give dozens of examples why one cannot trust sinclair about anything.

      I have seen you defend sinclair many times but its also clear that you never really did due diligence.

      10.000 shareholders lost on average 50.000 while jim was promising protection in "good gold shares" and lying about pretty much everything.

    10. Jasper, I have indeed no idea about TRX.
      All I can remember is I don't reckon TRX being mentioned, advertised on jsminet, nor Sinclair using jsmineset to make readers buy TRX stocks.
      Then of course, jsmineset is an advertising platform for Bo Polny, which can make one question a lot of things about the integrity of the whole site.
      But simply, can we write about something else?
      As I mentioned, the point has been made several times.

  8. Joe Granville passed away last year I think. I remember one thing about him, he correctly called the 2003 bottom in stocks and told people to load up on the riskiest stocks possible, lol... Turns out he was exactly correct.

    1. I remember '81 WHEN he came with his all out SELL signal at the dead nuts low; Prechter the same, as he had stk and bonds going to hell in a handbasket

  9. Quietly announced with gdp print was that PCE up to 2.3% from 1.4% in first quarter. Seems most are blind to this rising inflationary indicator. I am buying inflation hedge stocks and metals here as I expect inflation to continue to accelerate. E may have one more rally left in stocks but a pullback is definitely on the cards as market is rolling over for sure.

  10. Eur Usd updated.
    I'd like to see it move upwards towards 1.3480 where I may once more add up to my short position after takin 1/3 profit at 1.3375 yesterday.
    Today theh lower support line is at 1.3350, it corresponds to a horizontal support level on my chart as well and was my initial target. If we go there today, talk about being nervous and getting out of the market too quickly :)


    I hope I'll find a spot to add up to the short position soon, but the bearish trend seems to be flank spead ahead since we broke 1.35...

  11. Gold : rather bearish picture.

    Daily :
    - we hit very quicly the ma20 and went all the way back down.
    - ma20, ema15, bollinger bands are all heading down
    - Fibo 1307 level could not be breached and still acts as resistance
    - descending wedge still in place.
    - macd heading down, no sign of reversal

    Weekly time unit :
    - CDur reversed down in the middle of its upwards cycle.
    - mlh inf support of the upwards pitchfork now at 1305 about to be breached (must wait close of friday though, as we are a mere 10 $ below)

    Probable target to be tested short-term : 1270. I'm not going short for 20 or 30 points on gold. Fed up with the saloon doors of this metal.

    Crazy gold bugs had better hope that Putin starts the nuclear world war III if they want prices to rise and become rich beyond words in their radioactive coffins.

  12. Gold getting slammed right now.

    As usual, the gloom and doomer gold bugs rooting for a market collapse are actually cheering for their own demise.

    Because in any crisis, the first item sold is always gold, which is hands down the riskiest of all asset classes due to its very high beta and severe underperformance the last 3 years.

  13. Even when stocks are bad, gold and miners are worse. The punishment continues for the end-of-the-world crowd.

  14. not that it is a good timing indicator, but it does give one a feel for the real world vs. the broken and convoluted stk and commod mkts. check out the BDI/S&P log charts over the last 5 yrs. the trend is your friend, UNTIL it ends, and they all do.


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