"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, August 14, 2014

Good Riddance to August Beans

Finally - the August soybean contract has gone the way of history and is outta there, finished, etc. This contract has been the playground for those looking to create some shenanigans in the bean pit for some time now. In the face of a record, bin-busting crop, those who have been holders of old crop beans, have refused to let them go, forcing a huge short squeeze in that particular month that has tended to create all manner of volatility in the soybean market. The dichotomy between an incredibly tight old crop carryover situation and the potential for a massive new crop harvest, has resulted in increased volatility in a pit that is already known for its seemingly random movements.


All of these shenanigans managed to do is to guarantee that S. American farmers are going to move to beans this planting season which will be underway come late September - October. American farmers watching the squeeze occurring in the old crop August beans, have gotten bulled up at precisely the wrong time. It is very difficult to price expected harvest when you are sitting there watching a screen in which the nearby month is soaring in price. The fact is however that we are dealing with two distinct harvests - one from last year and one expected this year. There is a world of difference between the two and farmers here had best be cautious about formulating marketing plans based off of the antics of some large crushers.

Now that the August is off the board, I have to wonder if these same entities are going to try the same game with the September.

My concern is that this game playing is going to move the needle firmly in favor of increased acreage going to beans in S. America at precisely the same time a huge harvest of beans is expected here. If that is the case, the supply of beans could expand quite rapidly driving prices even lower as end users lose the urgency to chase supplies and opt instead of buying hand to mouth as they wait for prices to work lower.

We'll see how this plays out in the days/weeks ahead.

The livestock markets appear to have experienced some heavy short covering today after having been beaten with the proverbial ugly stick. Even at that, the overall weakness across the energy complex, ( gasoline prices are down more than 8 cents a gallon as I type this ) has dragged the GSCI to a BRAND NEW LOW for the current year. As a matter of fact, the index has not been at these levels since  APRIL 2013! We are talking a 68 WEEK LOW!

 
The US Dollar Index continues knocking on the door of that stubborn band of overhead chart resistance. It has thus far been unable to mount two, consecutive daily closes ABOVE that 8155 - 81.60 level but look like it might just be able to do it today. If so, one could expect to see the bulls try to push it out past 81.80 and accelerate it higher.
 
This is why I continue to be concerned over the future fortunes of gold. With the commodity sector swooning lower and with the Dollar firm and threatening an upside breakout, gold is going to encounter headwinds to its upward progress.
 
 
 
Not only that, but the level of nervousness seen in the equity markets is subsiding once more. Here is a  look at the VIX or the Volatility Index. I prefer to call it the Complacency Index.
 
It had been rising over fears/nervousness associated with the Ukrainian mess and other various geopolitical factors but has begun trailing back down once again.

These are all factors which can be considered negative for gold. I mentioned the other day the drop off in reported GLD holdings which now bring the total level of gold held in that ETF to below last year's ending number. In other words, it is now down on the year.

In spite of these negative factors, the price of gold is holding well as are the mining shares, which seem to have found some strong sponsors. Gold however cannot manage to overcome the selling hitting near $1320.

From my perspective, gold is simply not a good trade right now. It is too much of a crap shoot. Chasing it higher given the above-mentioned negatives does not make sense while selling it aggressively is also not easy given the strength in the miners. It is in a sort of no-man's land at the moment and that range bound chart pattern is evidence of this. I for one would prefer to see it break out convincingly one way or the other. For the time being, short-term oriented traders can play that range trade.

Also, along this line, look at the Gold Volatility Index - it is moving lower once again indicating the current sentiment that the range trade is more of what is in store for gold rather than any sort of sharp breakout either way.



Take a look at one more chart... unleaded gasoline. I for one am quite happy to see this!




36 comments:

  1. Hello, I am Eric King and you are about to listen to one of the top financial minds of our time but first some important words from our public gold mining company sponsors that are responsible for paying my bills and supporting my lifestyle…JOINING US NOW, one of the Top people in the World…(Yes, we at KWN only get the best financial minds available. Actually Dan Norcini was/is a legitimate great financial mind but I burned that bridge because he looks at markets for what they Really are and did not have a pro-gold enough bias to stay on board here at Only Gold/Silver Prices Moving Higher World News, I mean KWN)…Doug Casey from November 3, 1980.

    https://www.youtube.com/watch?v=easuUdhW4X0

    The one thing that went through my mind watching this is was he 30/40 years too early on his calls or just plain wrong now as he was back then. If you watch Casey interviews today he states much of the things he talks about with Donahue here with respect to high gold prices, stock market crashes and depressions coming to America. Just as he failed to see the future actions that Volcker took with respect to interest rates and retention of dollar supremacy, he may fail to see some other future actions that the ptb can take in current times to maintain that role on the cusp of another monetary crisis. One thing for sure is that it is not wise to make such bold predictions about the future although these tactics can be quite profitable for some it seems (investment newsletter writers like Casey come to mind). Yes, history repeats itself to an extent but never repeats exactly. There is Always something on the horizon that changes the game and that no one ever sees beforehand. BTW, didn’t know Casey came from a wealthy family, interesting…and that is one sexy Ford Escort at 47:11

    And did anyone see this? I am not a fan of the man but some interesting facts spun off here…

    http://www.businessinsider.com/mindblowing-facts-warren-buffett-2014-8?op=1

    ReplyDelete
    Replies
    1. Doug Casey is one of the great criminal frauds of our time.

      Tell you what, Jasper. You take Sinclair, and I'll take Casey. Let's see which one of us goes broke first.

      Delete
    2. Bob, Jesus you make me really feel like an old bastard with this post. I can actually remember reading this book, along with Jerome Smith, Schultz, Howard Ruff, George Gilder and on and on and on. They all have a few universal arguments that we all can grasp, but at the end of the day, their investment suggestions are typically worthless. Just ask them for an audited 2 year track record of their activities and see where you get. One of the best is the arrogant Belvedere Bullshitter James Dines, who will not even send you a free copy of his most recent letter. I also used to have some respect for Jim Grant, but now, am thinking that he is just another donkey, likeable though in interviews. Like I always say, tell me the price and I will tell you the news. ttyl everyone and good luck

      Delete
    3. Bullshitters indeed.

      On that second link. I own books written by lynch, graham, templeton, soros and the book composed from the buffett annual reports.

      What was i thinking listening to the gold newsletter frauds?

      Delete
    4. Jasper, my favorites are Jeremy discovering that oil was not subject to supply and demand and thus was destined to go much higher, like Matt Simmons of Twilight in the Desert fame. Number 2 is Ray Dalio who when interviewed by Barron's in '08 early said that the subprime situation was not to be worried about and that he was staying bullish stocks. But the all time liar of all time has to be Uncle Warren when interviewed said that there was NO WAY the rating agencies could see what was coming down the road. Excuse me pal, but don't you own more of Moody's than anyone on the planet and you could not see it coming, you lying scum of the earth that msm embraces day in and day out? said my piece

      Delete
    5. Bob , thanks for that link on Casey. It is a wakeup and most thought provoking. Predictions are dangerous but sometimes they do pay off. Casey did predict the uranium bull run in his 1998 Newsletter, of which I have a copy and Dines did predict the internet mania, also in his book written in 1994. Casey also said buy gold in 2000. Maybe it is just broken clocks, they are right twice a day. I subscribe to Russell and he does make bad gold calls and market calls, but Thursday a week ago he said the correction was over due to classic dow non confirmation of the transport. So as I told a friend of mine. I take all opinions and then do my own thinking and make my own predictions. Many thanks for the link, I would never have seen that otherwise.

      Delete
    6. Warren Buffet is the worst kind of wall street scum bag. His down home, aw shucks image sickens me with the hypocrisy. He needs mom and pop JSP to just sit in these hazardous markets so he can make billions off them. Wasn't it a couple of years ago he was talking up exxon stock while BH was quietly selling every share they own. Don't get me wrong, he is working the system as it is designed and doing quite well at it but drop the folksy, hypocritical act. He would be no where without fleecing the 401K's and IRA's of the people who have taken his grandfatherly advice and blindly entered the market. If you are a long term, buy and hold investor you better pay attention when you enter these markets.

      Delete
  2. weekly closes are highly anticipated in the grains as beans get the aug off the board and usda week is concluded: dec corn is working on an outside key reversal week if they can close it high... had new lows in MN+KC wheat and nov beans, can they also make a reversal into the weekly close.
    wheat bulls would like putin problems.

    there is a FSA-usda crop acreage report on beans friday also a crush report, so it will be confirming or non confirming last tuesday usda.
    www.fsa.usda.gov

    wowo dr copper to 3.0865 and crude oil down another 2 buckos... CCI index did manage to get off the low... monday might be interesting as stock mkt op-ex week shenanigans will be over, how about some rotation out of NQ ES and into the oversold items!

    TGIF!

    ReplyDelete
  3. Democracy in action

    Step 1 : Win the Election:

    " Iraq's Shia prime minister has emerged as the biggest winner in the country's first parliamentary elections since the US military withdrawal in 2011,

    http://www.theguardian.com/world/2014/may/19/maliki-coalition-winner-iraq-elections

    Step 2: No, hang on - wait a minute - that was the wrong answer! Out you go, and - in parallel with the reappearance of US Boots On The Ground, let's enforce some "real" democracy - " to pave the way for the first nonviolent transition of power, based on democratic elections and without the guiding hand of American military forces, in modern Iraq’s history.

    http://www.nytimes.com/2014/08/15/world/middleeast/iraq-prime-minister-.html?partner=bloomberg&_r=1

    White is the New Black. and if you don't agree, we'll teargas/sanction/overthrow you

    ReplyDelete
    Replies
    1. I just hope that the Occupy Central jerks in Hong Kong are tuned into this crap - look out for absolute fireworks when Clinton is anointed Queen in 2016, because withing seconds

      - Taiwan will declare independence
      - the CIA will stoke up the Xinjiang / Uighur
      - the HK lot will start demanding "democracy" and
      - the whole South China Sea debacle will blow up

      Ukraine is just the warm-up act for the real fireworks in Asia in a few years time (and the Chinese know it, and are getting ready for the showdown)

      NB: in 150 years of Colonial rule the British never once gave the Hong Kong population any kind of vote - even posting signs on public building forbidding the entry of "Dogs and Chinamen". Even today, neither the USA or the UK choose their President / Prime Minister directly, but have Blair/Brown or Clinton/Bush/Kennedy forced upon them as an either/or choice. The HK lot are being played like a fiddle, when all anyone has to do is switch on their TV to see the value of "democracy" in Ukraine/Egypt/Bahrain/Iraq or any of the other nominally sovereign states which the USA has "helped". And as for the EU - is that a democracy?

      Delete
    2. Zhang I am afraid you are correct.

      Delete
    3. "The EU is not about peace. The EU is about power." - Tony Blair.
      We might have civil war in Europe when the population of its major constituents such as UK, France... are fed up to see that despite making 35% votes at their country's elections, they are not represented at all in Brussels.
      This guy already had a plane accident.
      I wonder if a private angel saved his life and will do it again.
      Meanwhile, he obviously makes a point here, and his 2012 forecast was right given the recent ISIS developements. But who will listen to a guy who gathers a mere 35% of english voters? lol.

      https://www.youtube.com/watch?v=RQGLWl4MTrk

      Delete
  4. Gold pretty well led the way down from 2011 because deflation is real, check most commodities also, GDP world wide really tanking Japan minus 6.8% last Q so much for inflation and tax hikes. Government revenues collapsing in most countries while Government spending is increasing, interest rates still near record lows. Debt up in a major way since 2008 particularly Government and corporate. Two bubbles US stocks and bonds remain. The question remains will Janet do the taper taper? Pretty soon it will be do or die.

    ReplyDelete
    Replies
    1. "Pretty soon it will be do or die."

      where have I heard that before (every day?) "Now more than ever", but it never quite seems to happen .....

      Frankly, I anticipate more "dog days of Summer" until we get to the G20 Summit in Brisbane, Australia in November ( http://www.brisbane.qld.gov.au/about-council/governance-strategy/economic-development/g20-leaders-summit ) at which I anticipate one or two economic fireworks, quite frankly - particularly in relation to the IMF

      I fully expect 2014 to go out with a bang

      Delete
    2. rim, these things can go longer than you would think; myself, I thought ccccccchristmas of '08 was it for the bonds, but I was wrong, so just stay patient on getting short my friend

      Delete
  5. All I can say is that consumers will be celebrating with glee at the huge drop in energy prices the last 3 weeks.

    And don't even get me started on interest rates, pretty soon everything will be financed at zero percent for 60 or 72 months.

    I'm expecting a massive consumer spending orgy.

    ReplyDelete
  6. I remember my first drug high.

    No, it wasn’t from a shady deal made with a seedy character in a bad part of town. I was in the hospital, recovering from surgery, and while I wasn’t in a lot of pain, the nurse suggested something to help me sleep better. I didn’t really think I needed it—but within seconds of that needle puncturing my skin, I WAS IN HEAVEN.

    The euphoria that struck my brain was indescribable. The fluid coursing through my veins was so powerful I’ve never forgotten it. I can easily see why people get hooked on drugs.


    DOES THE GUY NOT REALISE THAT THIS WAS AN INDUCED HALLUCINATION?

    "And that’s why I think silver, purchased at current prices, could be a life-changing investment"

    DOES THE GUY NOT REALISE THAT THIS IS AN INDUCED HALLUCINATION /DELUSION?

    http://www.zerohedge.com/news/2014-08-14/guest-post-top-7-reasons-buy-silver-now

    There IS no "reason" to buy Silver now - "Top" or otherwise - because itbis going to Hell in a Handcart.

    Will fools never stop parroting this "low inventories / Chinese demand / historically cheap / production costs" claptrap?

    ReplyDelete
  7. Most bullish case for Gold:
    1) Equities are leading Gold
    2) higher lows since end of 2013 (1180, 1240, and most recently 1280)
    3) Even though commodity complex is lower, maybe that could serve to support Gold if CPI falls. If CPI falls with lower food and energy prices, what would be the impetus for the FED to raise rates in a deflationary environment? Maybe the Gold market would sniff this out and continue firming up? If the FED does end QE3 in Oct and history repeats itself (post QE1 and QE2), the equity market could pull back again. If so, how will the FED then justify raising rates in 2015?
    4) The Gold market's reaction to Putin's dovish comments were pretty flat today (after the fireworks from the jobless claims data). Unlike crude which got smoked on the Putin statement, gold held its own.

    Seems to be consolidating here between 1305 and 1320. As Dan states "in no mans land".

    ReplyDelete
    Replies
    1. Much of the above has been true for the duration of the bear run in gold.

      Just because gold is underperforming stocks does not mean it will go up. Rather it is a potential for a shift in sentiment.

      The market can stay irrational longer than you can stay solvent. Be careful my friend.

      Or have I missed your point?

      Delete
    2. Mike:

      To clarify the "bullish" case for Gold, gold equities (rather than broad market equities) are leading Gold. See a chart of the HUI:GOLD ratio rise off the January bottom. As Dan recently pointed out normally gold stocks will lead the gold higher (or lower). That was certainly the case with the route in gold equities leading gold down starting in 2012.

      Looks like some of the Ukraine premium was wrung out of Gold this morning, however, if Gold can hold the latest bottom of 1280, would be a "positive" as it would reinforce the higher low from the 2013 low of 1180.

      My only point on the FED actions is that the market seems to have accepted the idea that a rate hike will be forthcoming in 2015. If the FED adopts a more dovish tone after the end of QE3, the market sentiment could all change and this could be positive for Gold. Gold does well when interest rates drop (there is a decent correlation with the 10yr and 30 yr treasury prices and gold). The 30 yr treasury and gold both bottomed at the end of 2013. Right now the 10 year yield has lost support at 2.4%. That was could be a "key" support level. Will likely close below 2.4% this week. If it remains below that level next week, it could indicate even lower rates. The 30 year is back to levels from a year ago. I do not have any open positions in Gold futures now.

      With so much turbulence running through the markets right now, it is and "headlines" driving much of the price action makes for a challenging trading environment for sure.

      Perhaps Dan can shed some light on some of this action in future posts!

      Delete
  8. Gold.

    Here is the risk I'm seeing as long as 1320 is above gold prices...in fact as long as the red line is above gold prices. No wonder bears are hard to beat in this area currently.

    http://i60.tinypic.com/fbg5r7.jpg

    ReplyDelete
  9. Not too bad config on the 5 minutes to try a long at 95.30 so here I am, with a stop loss under the recent lows, hardly 10 cents below :)
    Target at least 96.60, let's see. Very speculative and short term trade for the first half.

    ReplyDelete
  10. Back to my screen...a short limit at 1314 took today on gold because it's last day of the week and see the chart with the red line downwards...stop loss 1323 and target...well I don't have one yet actually, because if gold collapses, it may also be now...so I'll wait and see what to do next with this line.
    My current positions :
    - long light WTI 95.30
    - short gold 1314
    - short (50% left) eur usd.
    Have a nice weekend,

    ReplyDelete
    Replies
    1. You have turned into a great trader. Truly great.

      Delete
    2. Thanks arnie, though I feel uncomfortable with the compliment.
      I'm not a trader, I bet only small amounts, and I'm trying to learn what works from real good traders here and there.

      Delete
    3. Yep , Hubert , you pretty good

      Delete
    4. Short gold and long oil at exactly the right time and profitable in both. People would die to be able to trade like that.

      Delete
    5. By the way, it beats pocket aces by a mile. Or a kilometer.

      Delete
    6. Yes, nice one Hubert. I had a gold sell order but it missed by 2 dollars. Don't forget to take profit, you know the saloon door can hit you in the face.

      Delete
    7. Agreed about the saloon doors Janet.
      To be more precise, WTI was short term target for 50%.
      But for gold, I made the short because it's the last day on the weekly time unit and the red resistance is heading down every week.
      So it's a much longer term bet, close to the red resistance and waiting to see if gold is able or not to break above it.
      So for the moment, I'm just keeping the line, wait and see.

      Delete
  11. I would say the next important level to watch to go long would be 1275 ... we shall see , perhaps you are right , and this thing gets dumped , fundamentals are not with gold at this point in time thats for sure , you never know with this beast . Lets see what Dan " chief Brody " Norcini has to say about this .. You two make a good team !

    ReplyDelete
  12. Double tops are in on XAU, HUI, confirmed by gapping lower this morning. The KWN bulls are caught holding the bag once again.

    ReplyDelete
  13. Back to screen... WTI light, out 50% at 96.61 :)
    Happy of the day!
    Stop loss remains at 95.20 for the remaining long line (95.30).

    I prefer to take 50% quickly, given the strong short-term volatility within those markets. A gain is a gain only when you are out of the market.

    ReplyDelete

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