“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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Thursday, October 30, 2014

Weekly Gold close setting up to be Important

In looking over this intermediate term chart, and surveying its current bear market, I have noticed that since its peak near $1900 some three years ago, the metal has only ONCE managed to CLOSE out the week BELOW $1200. See the arrow.....



The close this week will therefore be critical in determining whether or not we are going to be more downside follow through and another test of the key $1180 level or if we are going to sit and grind sideways for a while longer yet.

Based on what I am seeing in the gold mining universe, I would say the odds favor a close below this level but I am not dogmatic about it. As noted yesterday in my comments on the gold shares, based on the ratio of the HUI to Gold, either gold remains OVERVALUED in relation to the shares or the shares remain undervalued in relation to the price of the metal.

I still am leaning towards the metal remaining overvalued especially as there as of yet seems to be no sign that the bloodletting in that sector is through. There remains a lot of die-hard gold bugs who are enduring some tremendous paper losses in their mining share portfolios. Look at the HUI - it is mere about 10% away from hitting the 2008 low! That is six years of whatever gains anyone might have had in that sector that have gone up in smoke. What is such a tragedy is every single bit of it could have easily been avoided. All that was necessary was to tune out the assorted hucksters, charlatans, stock peddlers, etc and just read the chart.



I do think that if we get that weekly close below $1200, the bears are going to be emboldened to go after that triple bottom ( which rarely hold ) near $1180. There is a MOUNTAIN of sell stops sitting there. They know it and can smell them.

35 comments:

  1. SPX tests the 2000 round number!

    boost seen from japan govt pension fund saying will go $40bil or so into foreign stocks, out of japan govt bonds.

    Weaker rouble brings Russian wheat back to export markets, hmmmm must be spelled 'rouble' not ruble haha
    http://www.reuters.com/article/2014/10/30/wheat-russia-idUSL5N0SP25K20141030

    GC when last at 1250 the gold bug chittering reached a one month high din, and Dan wrote a post 'gold rally stalling' more or less. chaaaaaaaaachinga!

    that's why Dan is da man!

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  2. http://monetary-metals.com/guest-post-why-is-gold-mining-such-a-crappy-business/

    ReplyDelete
  3. Back home.
    My buy order for 1/3 at 1198.50 is executed. Order was there because of the inf Bollinger Band. I keep the remaining short position and will reinforce short stop if we break the famous 1180 area.

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  4. Agreed with Dan da man :)

    Every bounce from 1180 leads to lower and lower tops : bearish.
    Plus, the bulls are cooked now, like a chicken : I mean psychologically speaking, think about it, every time we bounced back down to this 1200 area, we heard them scream "buy more, it is a great time to accumulate!"...So wait a minute, didn't you buy and accumulate already last time we hit 1200? Yes? And you buy more? Yes? You buy more at every bounce on 1200? But...then tell me what is the size of your long gold position now? I guess it's huge by now, after 3 bounces, right? So what happens when 1180 fails? Boom. Panic. Terror. Sell stops. No thanks.
    I bought back on 1198 because of Bollinger and it is the last support on the way, so maybe it can stop the bleeding.
    But the closer we get to 1180, the harder it will be to defend.
    I'll be on the short side if 1180 breaks, adding up to my current position for sure.
    Let's see.

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    1. I think you got a precursor the bottom falling out in gold with the HUI breaking through support around 180. AUY & GG are (were) probably the only miners held by mainstream institutions/funds. Morningstar even had a piece two days ago about how GG & AUY were becoming value plays. Then both missed earnings and AUY is down 17% on the day on 5x avg. volume (AUY lowered its dividend).

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  5. In response to the Loser Drones over at ZeroHedge: Markets are only "broken" when they are going against you.

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    1. This comment has been removed by the author.

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    2. INDEED! BTW - ZH is run by a guy who was banned from trading because of insider trading ....

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  6. Dan -

    I do not care if gold goes up or down from here. But I have a question for you. The S&P 500 has gone from the mid 600s to close to 2000. There has to be a point where if the stock market is going to continue to go up, that it eventually takes gold up with it. It would not make sense for something to get so ridiculously overvalued in relation to another asset class. When would that time be in your humble opinion?

    ReplyDelete
    Replies
    1. - can you rationally define overvalued. When does it start? Why?
      - do you think markets are rational?

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    2. If you really believed that you wouldn't follow t/a, because you regard it as a tool of predictability, and therefore something rational to guide you.

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    3. Fundamentals count as some companies have been smashed this quarter after reporting softer numbers while others have played financial engineering games to keep the appearance of growth.

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    4. Here is my definition of overvalued. http://www.advisorperspectives.com/dshort/updates/Market-Cap-to-GDP.php

      We are right up there with the dot com bubble.

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    5. jmsvett;

      I cannot remember who said it but here is the quote:'
      "Markets can remain irrational long after you are insolvent".

      Keep in mind that all of that money created by the Fed has to go somewhere. It is not sterile and just not sit there but it ends up chasing yield. The only place throwing off a decent yield is equities. As long as that is the case, the US stock market can keep chugging merrily along.

      It will go up until it doesn't. I know that is not much of an investment strategy but it is the new reality we are dealing with in these markets.

      I tell you what is going to be REAL interesting is how the markets react this next Tuesday evening, Wednesday morning if the Republicans do what is expected and win control of the Congress.

      The markets might love it because they could see it as some sort of check on the anti-business admin that we currently have. Not sure if they can do much of anything but the reaction of the markets is always fun to watch.

      Based on what I am seeing of that HUI/Gold ratio, gold is going lower yet.

      Delete
    6. That was the much-maligned Keynes who said that. A real live trader who also took his lumps.

      http://www.maynardkeynes.org/keynes-the-speculator.html

      Delete
  7. In my humble opinion normally one refers to one's own humble opinion, not someone else's.

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  8. Assessing the road kill after the close:

    GDX down 7%
    GDXJ down 8%
    GG down 13%
    AUY down 17%

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    Replies
    1. Dead Skunk in the Middle of the Road-Loudon Wainwright

      https://www.youtube.com/watch?v=Uu5hzc2Mei4

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    3. Wow...those are some ugly numbers! :-0

      I wonder how low GDX will be allowed to plummet before they consider a reverse split. Maybe $13-ish?

      It'll be interesting to see how they deal with the bad optics that a low share price tends to convey imho.

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    4. I think they did GDXJ when it hit single digits. Who knows, maybe it will hit again.

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    5. Think that is bad - wait until Gold goes all the way to $700 or $800

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  9. Higher mining costs, along with higher taxes on the miners by the host country means less profits. The reduction in the HUI/GLD ratio is partly based on this for sure. In other words, the shift in the ratio is structural and not totally unexpected. It's been developing for years.

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    1. WillyDog-Add to this constant write downs to PP&E for deposits that were un- economic at 1,600, 1,400 and now 1,200 gold.

      One imagines the whole house cleaning thing needs to take place--miners will keep writing down to $1,000 gold. Along the way a lot more will drop from sight. A few big miners with core assets that break even well below $1,000 will survive--but in the meantime they will put their marginal assets on care & maintenance.

      By the way, I would guess that the last bull run in miners was facilitated by the opening up of geographies previously un-minable due to politics--So miners were doubly blessed by increasing gold prices and new mines in former Soviet bloc, China, Mongolia, et. al.

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  10. as Dan indicated in his last Ags titled post, soymeal been fairly 'crazy'. what would be said if SPX went +30% in a week like soymeal did!?

    cme raised margins on soymeal last nite, and today soymeal had some cancellations on the export report:
    Soymeal sales of 147,800 metric tons were up considerably from the prior week, but there also were nearly 124,000 in cancellations, possibly an indicator high prices are turning buyers away.

    soymeal made a contract low oct 1st and came within 3 of the contract high today .. same month wowo!

    jan soybeans have been doing 'alternation' which for the pattern continue will be green friday: last friday was a big down day, then monday a big up day, then tuesday threw the finger closing 30 off the high o day, then weds big up and today down.

    tonite CME raises margins on Euro FX, E-mini NASDAQ, Nikkei 225.

    (CME Daily Livestock Report) Strong demand for US beef in Asia continues to underpin the US beef market..

    TGIF!

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  11. Thank Dan for excellent point of view about gold. All the guys who try doing swing with long bottom trouble now. I don't know what your software but mine reading on ADX already up to 25.30 for today Thursday so a bearish trend technically already begins. DI - DI + cross over happened on Oct 23 with ADX standing at 29. It was legitimate. The High of that day (1245$) is a key resistance. Daily MACD has crossed down on Oct 28. If trend confirms, the target will be 1050$. Usually, the price of gold fills the gap between previous level of swing high and next swing low but I saw gold not filled between 970$ and 1046$. I think gold will touch that gap sooner or later.My 2 cents

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    1. Linh...I hope you didn't find my remarks about the asian market as denigrating them.
      I meant it in context to what the shills have been pumping for years that hasn't happened "yet".

      Delete
  12. It'll be interesting to see what happens in gold or silver when the asian markets open up.
    I won't hazard a guess but I'd be surprised if it traded sideways for much longer like it has been the last several hours given the action we saw today.

    All of this much ballyhooed asian demand the last several years generally hasn't seen the asian markets make any significant upwards price movements except maybe around 1:30-2:00 a.m (EST) but not that often.

    The asian markets being a disruptive force and a monkey wrench in the London/NY markets is still a non-factor.

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  13. http://www.etf.com/sections/blog/23667-value-trap-underneath-gold-miner-fund-gdx.html?fullart=1&start=3

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  14. The first quarter of 2015 awaits for the final low in the metals. Should be marked by mergers and acquisitions with banks trying to position to scoop up some of the carnage.

    Anyone following Armstrong's emails? It's uncanny how his targets get hit or float close around them. Sure he has more than one target during the day but confirmation is what is hit for telling the next move. He has been saying for years that Euroland will fold then Japan and any escaping monies will nest in the US markets until the US defaults but that is still years away. He likes the S&P more than DOW this time around so it would be buy the dips on the way up to newer highs as money looks for a parking space.

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    1. I think his stock index calls are much more nuanced than that.... they are contingent on levels, like any other cyclical-based TA. In particular, the phase transition could happen soon (which means the USA would face economic death by 2016), or else the phase transition in stocks is deferred for a couple of years (but that requires new lows in stocks first - soon), in which case the economic death of USA is deferred a few more years until after the phase transition ends.

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    2. Also, his preferred asset class is real assets like real estate and diamonds, not stocks. Why? Because of the urgent need of anyone in the West to get off the grid. The US and Euros are heading towards taxing and stealing all your stock profits - and perhaps all your financial assets that they're now tabulating.

      Delete
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  16. Look at the Monthly too.... probably will close at its lowest level since yr 2010!

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