"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


Friday, October 3, 2014

Jobs Reports Sends Dollar Soaring

It is quite entertaining reading the barrage of emails that regularly hit my inbox detailing over and over and over, the certain demise of the US Dollar. More often than not, it is the usual gold bug chatter about China buying up all the world's gold to make the yuan the new global reserve currency. If not that, it is the regional trading agreements bypassing the Dollar which are going to certainly knock the greenback from its throne.

Such things may or may not happen but the point is we have a huge throng of perma gold bulls who continue hanging on to their gold as they have been told that "any day now it is going to launch higher and one does not want to miss the bull move by not having a position".  "Once the Dollar goes", so the chatter states, "gold is going to skyrocket".

Based on today's surprisingly strong jobs report, that day is going to be postponed for a while longer.

Here is a look at the chart of the US Dollar.

Note it has run to the resistance zone I have drawn in on the chart. It is already well past any remaining Fibonacci retracement levels drawn off the June 2010 peak meaning that it is on track for a test of that level up near 89 if it can convincingly clear the 87 level.

We'll see if it can manage that but for now, those who have wrongly bet against the Dollar are not looking especially wise at the moment. I wonder what happened to "Mr. Massive Gold buying is taking place". He is especially looking more and more comical with the passing of each week.

Please understand those charlatans who keep up with their nonsense have opened themselves up to the scorn that they rightfully deserve among fair-minded and objective people who are trying to read and decipher today's very challenging financial markets. It is one thing to misread a market. We all do that including yours truly as we are all mere mortals at best. However, to persist day after day, week after week, month after month, year after year, with the same utterly discredited rubbish and unverifiable reckless claims, misleading many innocent and sincere people, is simply inexcusable. There comes a time to admit one has been wrong, apologize to those who have been misled and simply go away  or close down the various propaganda sites. Maybe then their victims can get on with their lives and try to recoup their losses having learned a valuable, but extremely expensive lesson that they will never forget as long as they live here on this globe.

There is an old traders' adage that goes something like this: "The first loss is the best loss". What it means is that once you realize that a trade or an investment has gone sour, you get out - the sooner the better. That first loss, taken early rather than later, leaves a welt but it does not end up obliterating you. Oh that some had learned this lesson and ignored all the "opinions" from the many self-proclaimed experts.

Shifting back briefly to the currency front for a moment - it all goes back to interest rate differentials. The strong jobs number has lent further credence to those who are expecting the Fed to move on the interest rate front sometime next year. Yesterday we heard from the ECB and Mr. Draghi that interest rates in the Eurozone are not going anywhere ( except maybe even lower if that is possible) anytime soon. By the way, the notion that the Euro would be higher were it not for the sanctions imposed on Russia is a canard dreamed up by those who cannot read a price chart nor have apparently been listening to Mr. Draghi who has been making it abundantly clear for some time now that Europe wanted a lower currency.

Here is the Euro chart. It is falling through chart support levels like a hot knife through butter at this point. There looks to be some mild psychological support near the 1.240 level but more serious support does not materialize until closer to 1.2273 or so. If it goes through that, it is going to 1.2000.

more later... busy morning...


  1. Thanks for the update Dan.
    Yep...up, up and away...goes the USD!

    There's nothing I can add that I haven't already said about the cheerleaders that you just touched upon.
    If the folks in those audiences haven't or can't see by now that they've been mislead or kept distracted by someone else's obsession with their gold and silver idolization then they never will.

    Those who believe they're still being loyal to their cherrleading captain at this point are probably stuck in a state of disbelief and shock at this point.

    And why is the term "loyalty" ever even being brought up like some type of allegiance is necessary or a pre-requisate at all???
    What does loyalty have to do with anything???

    Egotistical and misleading self interest is why and the inability long ago by some to simply admit that they're best intentions (and theories) were WAYYY off.

    1. DPH;

      Exactly correct -
      Loyalty is reserved for our families, friends, nation and our dogs. It has no part in a sound trading or investment strategy unless it is loyalty to an unbiased and hard-nosed analysis of the market.

      That is why I refer to some of these people as part of a gold CULT. Cults require an unbending, unthinking loyalty to the leadership.

      the gold cult devotees are blindly following their "leaders" to their own financial ruin.

  2. Imagine someone with a passive gold hedge. Today, they could have bought another two ounces with a full contract short. Same market value, more ounces.

    New lows coming. It's bloody, a slow bleed. My P&Es were up on average 20% by mid summer. That is all gone. I sold out more before the drop further.

    It really says something that the commods are tanking like this. The global economy is really slowing here. Wow!

  3. Getting close to $1180. Next week could be historic for Gold. Another Black Monday? $1k Gold and $15 Silver handle soon? Oh my...

    1. Maybe, but if you look at charts, including the gold bear market in 1975-76 as well as the one in 1996-1999 and the one in 2012-2013, usually you need a counter-trend short-term rally. This one could move gold back up to 1240. So, I'm thinking more like November and December that the final washout occurs that takes us to 1,000. Let's see.

    2. 1200$ is a big number and people usually set stop loss at 1185$.So no way to pull back above 1200$

  4. Hi Dan, great commentary as always. There are very few wide ranging triple bottoms in markets, so the current gold set-up is extremely bearish with a high chance of a break toward 1,000. However, nothing goes in a straight line, so we may get a 2-3 week bounce here. October seems to be the last chance for the gold bugs to go to cash, but as we know they're holding on for dear life and will ride this down into the final capitulation. What's really sad is that some of them will then probably sell gold below 1,000 and buy stocks. You cannot change human nature!!

    1. They will need to learn. When gold reach 1900$, even in the bull market, correct to 1000$ not fat fetched

  5. I haven't been paying attention to markets as long as many here so I have a question. In the past it seems a strong dollar was a negative for the markets. Why not now? Am I wrong to think that the fed will step in and try to stop this dollar rally relative to other major currencies. How can we export our way to prosperity with a strong dollar?

    1. Hi Gene, you had a strong dollar from 1981 - 1985 and the stock market boomed. Also in the late 1990s. And then there are times where the stock market does well under a weak dollar, such as 2003 - 2007. There are no fixed relationships. I have a degree in economics and I (partially) toss it out the window when investing.

      We are in an environment of rotating currency depreciation, but the Fed is not going to be able to stop the strong dollar if in fact the current cycle is ending with a deflationary sequence somewhat similar to 2008. Strong chance that the dollar may stay strong against the Euro and commodity currencies in quarters ahead. The Yen is a wild card and could actually strengthen and wipe out the shorts if we have serious deflationary pressures mount along with commodity and equity market sell-offs.

      Consider the following trades for Q4 and Q1: spread short Euro / long Yen. short Gold. Short commodities. Long dollar generally.

    2. I think a stronger USD is exactly what they want.
      It accomplishes many things right now...including putting pressure on the rouble.
      Regardless of the much hyped recent direct yuan/rouble trade that bypasses the USD has it occurred to the USD bashers that China probably isn't real crazy about a weakening rouble and getting 40 of them to 1 USD at this point.

      As long as the economic sanctions are applied to Russia the longer (and higher) the USD stays strong ( while oil weakens...on purpose to some extent) the more it hurts Russia and the rouble.

      I could be wrong but that's how I see it.
      In that scenario, gold and silver and the markets continue to slide as QE and POMO end by Nov. 1

      China wants a stronger USD, not a weaker one and Russia is a slave to oil prices and everyone knows it.

      The USD hits 90 at some point because of it.

  6. - out 1/3 of my short position in gold at 1290.
    - still short 1/3 eur usd, keep position target 1.22
    - still short silver
    - SP500 : added 1 short CFD 1952, stopped out 1260. Better luck next time :)

    1. good call on lightening up on your short gold position here. Look to add the short back on if we get a nice 2-3 week counter-trend rally in gold.

    2. After the full moon , SP usually up. Before 1 week of serial month, SP usually up. Seasonally, SP up from mid to the end of Oct.The action on Thursday could be classified as a bull spike. Finally SP just bounces from a weekly trendline and monthly trendline as well as Welles Wilders 7 week Volatility Stop (this stop support very well since 2013). Iam afraid Sp would make an all time high soon

    3. Last but not least, SP USUALLY goes up after NFP for more 1 to 2 days when the reading (payroll and unemployment) better than expectation. 2000 could be reached next week

    4. Linh, it's absolutely possible that we do so, with the last daily candles we had yesterday and today, and are quite bullish in terms of construction on the daily time unit.
      I can try a short sometimes because I know that on the smaller time units, I'll probably have the resistance holding and a beginning of a correction, so that I can put a stop loss very close and then back to the level I entered. It doesn't mean I don't realize I'm countertrend on the slower time unit, or that I think my chances are more than 50%. Sometimes they are less than 50% but my risk reward ratio is so good that I go for it.
      Tired this evening, hard week. Going to bed, good night.

    5. Take a rest and we will prepare for next week with FOMC minute. I love to short SP500 too and struggle to find a good entry for that

  7. just bought gold GC Z14 at 1194, looking for 1230 target. Anyone else trading this using the previous 4 or 5 bear markets over the past 40 years as analogs?

    1. No but I like your strategy. It seems it takes 4 to 5 tests at key support/resistance levels until they are violated (on g&s).

    2. Smooth, Just my opinion, but if you are playing gold to the downside then you should be selling rallies. Going countertrend - assume gold goes now to 1150 and then bounces to 1200. You would possibly sell your position at a loss and then probably re short just before the bounce . One loss could lead to another. That is the risk of going countertrend. A strategy could be to lighten up your short position here and add again if it bounces from here. If it continues down at least you still in on the trend. My point is to decide on the main trend and try not get shaken out by thinking you can pick bounces. The big money decides on when it is going to bounce not us small fish. Hope you take this in the spirit intended and I wish you all the best with your trading. I am not a pro trader but you did ask for others opinions.

    3. Technically, I don't see gold could bounce up far 1240$.Right now, 7-day Welles Wilder Stop stands at 1225 and the weekly Stop 1258.Those stops very strong. 1180$ already touched twice on June and Dec 2013. Gold just breaks out from a range which the bottom range is 2003 and upper 2040. If gold went far to 2040, it would violated the breakout and it would be a reversal move and not a pullback then going down further as you prefer. Lastly, 1200$ is to be a strong resistance. If you want to short, using Volatility Breakout Technique, wait for gold consolidated then place a sell stop accordingly. Any short or any long this time not recommended after a large move at a significant level.The optimized price for short was 1280-1320 already passed

  8. Jim Sinclair here. Gold will trade at 50,000 as the dollar goes into hyper collapse phase. There is no other way. YOU MUST GOTS. get out of the system now. Take certificate delivery in your name; don't hold securities in street name. Physical gold only, stored carefully in your anal cavity.

    1. I remenber those times, when Dans charts and comments were published on jsmineset site.... Seems like centuries ago....

    2. Can I stuff my ass with TRX certificates too?


  9. Dan's comments about a surprisingly strong jobs report say it all.

    But then again its better to have a 5 handle on that unemployment rate when going into the mid term elections for a better chance to win.

    And just in time the unemployment number goes under 6%

    Same as the 2012 elections, the unemployment rate went under 8% just in time too.

    If these numbers are real then how can interest rates be at 0% 200 year lows?

    Might be more than just the gold charlatans out there selling nonsense.

    1. 3-4 weeks ago I commented on this blog that GDXJ and the GDX had to catch up relative to the gold price (based on my looking at the 1 year charts). My trade was to short GDXJ and not the metal for more leverage. Gold was 1340 and HUI was 220 and GDXJ was fluctuating at the 38-39 level.

      Dan, your analysis since then has kept me in the (short) trade . Thank you for being there to guide me.

    2. Yes thank Dan for bearish view on gold. Based on TIPS spread. COT this time worthless , every people reading COT combine with seasonal, they concluded gold must be up. Me is among of them and Dan offers a counter view which proved to be very good

  10. Aplogies if this comes in as double post but, I am mystified as to how strong employment numbers can be defined as people simply dropping out of the workforce? Total number of people out of work is at an alltime record.

    If everyone who is unemployed simply quit looking for work, would we have full employment and a zero unemployment rate?

  11. I mostly agree with you Dan. But how can you trade a job report number that everyone and their brother knows is a fabrication??? I don't know how anyone can trade the markets today effectively which all the interference with gov't and the central banks. I know many of traders here in the Chicago area who are getting out of the business because how difficult it has become to make money consistently. Good Luck to you.

    1. Jeffrey;

      They are indeed some tricky and difficult markets, especially with the computerized trading that knows nothing of finesse when it comes to order placement. Sadly, they are what they are and we have to learn to adapt to them. I too know some guys who are getting out for the reasons you mention above.

      I look at it this way - Central Banks are just another input we need to factor into our analysis when looking over the charts and the price action. Used to be we could just study fundamentals and watch the technical price action but CB activity now is with us for a while.

      That being said, there is a line of thinking that what we are witnessing in the job market is structural in nature. In talking to folks in different industries that I know, they seem to be saying the same thing - the lower wage jobs that can be outsourced or offshored are going there. Here, in the US, there are some excellent opportunities, especially in the oil sector but it requires specialized degrees or experience which some folks do not seem to be willing to undergo.

      It is sort of like the horse and buggy manufacturers of yesteryear. Their industry died out because of structural changes and people learned to make and repair automobiles instead.

      Health, bio and pharmaceuticals, oil and nat gas, ag, etc.... are all solid fields but many still do to college and get these general business degrees or liberal arts degrees and then cannot find work.

      Maybe a change in the administration in 2016 will see some better growth in more solid paying industries.

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    3. The markets want to believe there is a recovery Jeffrey and the
      F-Tv guys try to sell it.

      Economic lift off is coming for years now they keep saying to keep people believing and buying.

      The F-Tv guys are like the opposite of the KWN guys.

    4. The job numbers are beyond bogus! We now have the lowest labor participation rate in 38 years. And while the paper price of metals goes lower, the actual demand for physical is red hot, including more than 1.1 million Silver Eagles sold by the U.S. Mint on Oct. 1. Sales in September were also robust with more than 4.1 million Silver Eagles sold!


  12. Laughter is truly the best medicine. If, and only if, you have idle time on your hands, check out Kitco and Goldcore in their mad dash to the bottom of the sewer with KWN, and, at the wire, it is ...................

    Seriously, these spinmeisters have no shame, no shame.

    Good weekends to all !

  13. It looks like support around the 1190 area is holding today. I wonder if that means there is a bounce coming that will take it above the 1200 level Monday or possible Tuesday?

    OR...could the metals be on the verge of a meltdown?

    Debtor day after Thanksgiving is a ways off yet...so it would surprise me if we would have some kind of a meltdown right now. Just my opinion.

  14. Um
    Maybe check KWN again and read
    Yamadas peice that's says the gold bull market is over.
    And Tom fitzpatricks peice saying the dollar will rally.

    dan why would you erase my posts from your gold peice??
    Afraid of lil old me??

    1. paper puppet;

      I delete posts from gold cult members.
      in regards to KWN - posting an occasional piece from a sound analyst does not make up for the amount of worthless crap and wild sensationalism that it is noted for. It is one of the prime pushers of "MR Massive Gold buying" that famed "insider" with secret knowledge of the gold market peddling an exorbitantly priced newsletter along with one Mr. Turk ( a big short squeeze is coming any day now I swear) along with the rest of the dead wrong "experts" who cannot read a simple price chart.

      As far as any of the rest of your posts - here is my motto:

      "Do not speak in the hearing of a fool for he will despise the wisdom of your words" Proverbs 23:9.

      Those who post here regularly have good points to contribute. Gold cult members are not welcome.

      I have had enough of their vile, hateful, and despicably insulting emails in my inbox to last a lifetime so if you wonder why I have no patience with any of you people, consider that. I have never encountered a more wickedly, willfully blinded people in my lifetime and that is saying something. They are in love with a piece of yellow metal and spend the entirely of their lives looking for reasons for it to rise higher so that they can bow down lower and worship it more.

    2. Paper
      It's the way you disagreed.
      If you go to someone's house and insult him don't expect to stay for dinner.

      If you want to make more posts like your previous ones either start your own blog or find a host who likes that stuff.

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  17. I don't know if any "major" supports will hold in this environment.
    Long term units bollinger bands are giving way here, and they were not on the way before during last reversals.
    It means contamination of the trend to the longer time units, and the trend is bearish...so if most monthly time units become bearish too, with diverging bollinger bands, your nice 1180 support on gold will be destroyed just as 300 copper, 88 wti, 1.27 on the euro usd, etc...
    If volatility increases and the trend keeps going, it might even accelerate some more.
    My target on eur usd is 1.2230 for now, 16.40 for silver (based on a pitchfork weekly time unit but daily, we are on a support right now at 16.72 heading down as well).
    One thing I'm sure : I'm not going bullish in this HELL before I see a bounce on smaller time units, some kind of sign that e are bottoming, which for now I see absolutely nowhere, on the contrary...market is oversold but we are still breaking through support levels like butter.
    1180 could very well give way immediately, that's why I sold only 1/3 of my position.
    Have a nice weekend,

    1. P.S : SP500 right now on the top of a short term slightly downwards channel (can see it on 4h or 1h candles), plus MACD starts to cross down on some units like 30 minutes...check this level, this might be a short term top. In any case, the fast and furious reversal at 1926 appears like the smallest dent in the crazy uptrend on the 2 week time scale whose last candle is ending this evening. The base of this channel was about 1945, and on monday will be even higher. Closing that high, above 1960, doesn't make the short break so serious at all, more like a bear trap before the candle was completed. But...as the channel was briefly broken anyway, I'll keep watching more and more the base of the channel, seeking for additional weakness.

    2. PPS : it can be an interesting spot to short, around 1970 on the technical resistance on prices, with a stop loss just above near 1974 and divergences on the fast time units such as the 15 minutes (divergence MACD and MACD crossing) especially if it propagates to the 1 hour.
      I'm not suggesting, just saying "à priori" this is how I trade, waiting for a good risk/reward ratio under a resistance which could induce a reversal IF this reversal is being announced / confirmed on the faster time units (here 1 hour then 15 minutes time frame).
      That's why it is interesting to have access to a free trading platform for fast time units.
      You can ask to open one for free to many providers, it's the demo platform of their real one, provided that they hope to make you become a real customer.
      Regarding the trade, I'm not saying what I'm doing because since I'm working again, I can't post regularly to update my situation or my most recent trades. Ok, have a nice weekend for real now :)

    3. Hubert,

      Yea, 1180 support might give way...possibly soon.

      Dan and guys like you are the chart readers...I'm trying to learn charts from this site...trying

      It's just that sometimes if there is a smash coming it sorta ties in with an upcoming holiday...and it even could be another country's holiday...

      Thanks for the input.

    4. It is interesting to see you and me conflicting in terms of SP500 but glad to see your comments everyday

    5. Shem, I'm trying to read charts as well and learn.
      I'm far from being an expert at reading charts and T.A, though I haave now good notions and I somehow at a lucky streak of successful trades recently.
      It's still very hard for me to "guess" where the market will go, and I owe my small gains to a tight money management rather than to exact forecasts. Don't doubt yourself because I wrote something which seems to contradict your own analysis because it could as well be me being wrong :)

  18. It's official.

    The XAU has now broken all records for one of the longest and deepest bear market depressions ever recorded.

    39 months.

    The tech crash from the 2000 highs in March only last 36 months: March 2000 to March 2013.

    The recent 2009 market crash from October 2007 to March 2009 last only 18 months.

    In fact in 38 months, the S & P 500 was within a stone's throw of the 2007 recovery highs, meaning that anyone who hung on were made whole in just over 3 years.

    Here we are over 3 years later in the XAU, and many stocks are still down 70% - 80% with no chance of recovering whatsoever.

    Very sad.

    And yet none of the "acclaimed experts" on KWN were able to predict one of the biggest bear markets ever.

  19. UUP closed up for the 8th consecutive week.

    Each week the volume has been stronger and stronger.

    Today's weekly close on 12.5 million shares traded was the biggest volume ever.

    Clear proof that economy here in the U.S. is on the cusp of an epic boom, validated by today's jobs report.

    All the naysayers like Gerald Celente who have been screaming about a depression and a "Mad Max" world must now be doubled over, clutching his stomach, and puking up blood.

    Same with Peter Schiff, Eric Sprott, etc. who are battling huge redemptions daily and are essentially in a forced liquidation mode.

    And obviously, the Chinese and Russians who were accumulating gold at the expense of holding U.S. dollars for their foreign reserves have suddenly realized that they made a huge error, and are now unwinding those positions.

    That's basically 18 months worth of "accumulation" over $1,200 which are now in a losing position, and are now just beginning to get peeled off.

    1. "realized that they made a huge error, and are now unwinding those positions."
      I don't imagine chinese people unwinding their long physical positions, no matter what the price in dollar terms is at a given time. You should ask Lan about that one :)

    2. This is what may happen to gold soon...if I watch the Cdur on the weekly/monthly time scale.


      Sure...this is the time to accumulate into weakness...sorry, I prefer to wait for a bounce and if gold showss strength, then maybe it will be time to buy. But now? I remain short. Maybe I'll even add up with a short stop under 1180.

    3. Russia already prepare for oil scenario at 60$. So gold 800$ not far fetched

  20. love your posts Dan, you are always my first read once the market has closed, always covering the most relevant sectors (to me) , and with a very clear and unbiased analysis...i am looking forward to re-entering gold related assets, but i will defintely wait for the trend to curl/change...for that, the stock market will probably need to fall, deflation fears need to reverse and dollar needs to come down, i reckon gold at $1179 (we are basically there now) will give way before this happens....thanks again Dan.


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