"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


Wednesday, October 15, 2014

XLE Rebounds

As you all know, crude oil and its products have been hammered of late. One has to wonder if the Saudis' decision to not reduce output was a deliberate attempt to go after the US fracking industry. Either way, the energy complex has been hit extremely hard over the last six weeks. Just look at the following chart!

The XLE had lost 22% over that time frame before some decent buying finally showed up today which enabled it to close up on a day in which the entirety of the US equity markets were getting clobbered.

Maybe the worst is over for crude? I don't know for sure but I am definitely going to be keeping an eye out on the XLE to see if it shows any upside follow through tomorrow and certainly on Friday.

As I type these comments, crude is down another full dollar to $80.73 in the early overnight trading.

Yet another thing I felt the need to point out and that is related to the reported holdings in GLD. It showed a DROP in the tonnage this afternoon which is really disconcerting if one is a bull. It lends credence to the idea that some are selling gold to keep the margin clerks happy with the equity positions.

Total tonnage fell 2.09 tons from the last reported number and currently sits at 759.14 tons, down 39.08 tons on the year and the lowest level since early December 2008.

Lastly, this is the updated TIPS spread/Gold chart from yesterday. Since then interest rates have fallen sharply (* today ) so it will be interesting to see what numbers we get tomorrow when the update is complete. Notice that gold has been moving in the opposite direction of the spread the last few days, something which is out of the more normal behavior, indicating the  metal is functioning as a safe haven for some.


  1. What are the resistance levels on EUR/USD? I see DXY is under 85 now.

  2. I just can't believe how trader Dan keeps logically coming to the wrong conclusion. He says, the drop in GLD holdings is a bearsh sign?

    First, maybe Dan should note that the GLD does not represent the global gold market. The real gold market is now being priced by the Chinese through the Shanghai market where there is no paper selling of gold. Singapore is coming on line soon and before the end of the year the Comex and London will have little effect on gold prices.

    GLD has been going down and the price of gold has been going up and Dan concludes this is bearish?

    Hey man, the U.S. is no longer the big stick behind gold prices, as much as your charts would like to conclude....

    Eventually, USD paper markets for hard assets will become irrelevant as the world keeps moving away from USD.

    I love the U.S., but they have lost sight of what made the country great. Real work, real production, real creativity and transparency.

    Today it is propaganda, paper markets, illusion and a welfare state?

    1. Megaprophet;

      I always marvel at the both the duplicity and the hypocrisy of dufus heads such as you. You never seem to tire of finding me wrong but you are always here doting on my every post and reading them. Why bother wasting your time if you disagree all the time with me? Get a life and go read something that confirms you in your ignorance.

      Guys like you are a dime a dozen - geniuses until real money is on the line.

      I suppose the build in GLD during the raging bullish phase of gold before it entered its current bear market was a BEARISH sign? Yep - according to you it had to be because declining reported holdings is somehow bullish.

      I get it - in the convoluted and bizarro world in which you are a denizen, up is down; right is left; black is white and sweet is bitter.
      As long as one has that perspective everything makes perfect sense.

      Boy howdy I sure wish I had known you 26 years ago before I began trading - I would be so much wealthier by now and might actually have made it in this business.

      Do all of the serious minded traders and investors here a favor and get lost. We use the charts as our tools. Like it or not, that it what real traders deal with.

      I know - only those who ignore charts are smart, just like you!

      How pitiful a spectacle you present to those with experience in the markets.

    2. @ Megaprophet

      The real gold market is now being priced by the Chinese through the Shanghai market where there is no paper selling of gold

      I think you are woefully misguided here; in respect of the Shanghai Gold Exchange, yes, that is indeed a Spot market for physical delivery, but both the Shanghai Futures Exchange and the Singapore SGX are Futures markets, and in any case, despite apparently record purchases of Gold in Asia over the past 18 months, the price has continued to fall

      Asia is undoubtedly an important market; that does not axiomatically imply that the price of Gold will rise - particularly because, at present, the Supply in Western markets far exceeds demand from Asian investors, and the 2000 tonnes which the Chinese appear to have bought in 2013 is tiny fraction of the amount of above-ground stocks currently available for sale.

      In terms of volume, consider this: the LBMA is also a delivery market, and the net monthly settlement volume in London is around 550 tons of Gold. This figure not only dwarfs the Asian exchanges delivery volumes, but could easily accomodate both the German and the potential Swiss repatriation requests if necessary

    3. Ophelia Balls, I am an Asian guy living in Asia and China just 300 km far away from my home. Please, don't praise China much. I don't understand why gold bugs always worshiping China. Maybe the West lost their hope for their governments so they turn to the East such as yoga,zen, cuisine, Asian girls, gold......Believe me it is not worked. You no nothing about the East. Only US Pacific fleet keeps us civilized. Otherwise we would be killing each other fast. Hitler killed 6 million Jews ? Don't worry we had Mao killed 60 millions. Stalin killed 20 million ? We have Japan killed 50 million Asians. We dwarf those guys in Islamic in terms of killing and the world does not know it. We killing a lot and CNN and BBC did not cover that. So for me , I need US stable and strong. I don't understand why Americas now likes selling out their country. US still the best place for business and investment. The best of the West was having Jesus but unfortunately they abandoned him and that why they crumble

    4. Linh

      Firstly, I am not praising China: please point to anything in my post which suggests otherwise

      Secondly, Vietnamese antipathy towards China is well known, and this is surely not a forum to recite it, any more than to discuss the relative merits of Agent Orange and the Mail Lai massacre; this is a discussion of commodities and investments

      Thirdly, you would be wrong to jump to assumptions that I "no knothing about the East"; I would be delighted to hear how you arrive at that conclusion, and how merely being an Asian makes you an immediate expert on all things Eastern

      Finally, is this really an appropriate forum for discussing religion, the more so as in my own opinion the West did not "have" Jesus (at least not on an exclusive basis), and common theology would have it that, whatever our stance towards him, he has not and will not abandon us. All of us - including Asians. And including Chinese gold investors

  3. CNBC all over oil as WTI gets a 7 handle. Might this be time to look at a longer term trade in shale that has been hit so hard?

    Not sure where the bottom is in oil. If Europe goes into full recession there will still be too much oil on the market.

  4. GC SI took a drop right from 8am ET when premarket stocks reopen, which reminds op-ex is tomorrow, so look out for what pin is happening in GLD SLV JJC etc.

    SI fading from the 20-dma 17.44 and GC not regaining 'the box' above the 1240.2
    june low.

    euro the low o day was the 20-dma touch!

    Ags bottom line: Keep track of ethanol demand stats today, and export sales tomorrow, to see if we’re sparking interest from end users, not just paper traders at these levels. Lots of harvest to bring in yet. weather favorable in 10-day forecast for harvest south/midwest.

    NQ made a new low o year on globex, as europe apparently didn't notice usa unterday bounce.


  5. preliminary open interest for grains: #corn -5324 #soybeans -1460 #wheat -5510 soybean meal +2299 soybean oil -1153

    USDA 120,000 tons of #Corn sold to unknown 14-15

  6. Second tier tire producer sees two years of slow market in Agg and Mining. As they are big fuel users world wide this bodes poorly for crude oil.

    Terrible open. Netflix down 23%. Ouch.

  7. WD Gann wrote about the 90-day trend cycle in a couple of his books. He noted that in commodity markets in particular there is a propensity for a reversal after an instrument has traded steadily lower for 90 days. Technical analysts have since dubbed this the “Gann Death Cycle”. We bring this up now because one of the more important charts out there at the moment is Crude and it is in the 89th day of its decline from the year’s high recorded in mid-June.

    XLE is similar to russell RUT. it's been down so dirty dog long some value players are coming in, plus there are machines that like to squeeze embedded shorts.

    it was hard for silver to look over at HG CL and stay green.

  8. USDA has Australia wheat at 25 MMT, while some local estimates are near 20 MMT.

    in 2015, Brazil will import one million tons of US wheat, says analyst,

    CL trying 81, GC SI following the bubblin'

  9. Fed president Bullard says fed may want to delay QE.

    1. This is a confidence game. Clearly.

    2. Just to give the market a boost. I find this sort of interference pathetically sad.

  10. Great calls Trader Dan! Nailed the top of WTI in the summer, looks like a XLE reversal. Your readers who sold some of their E&P companies then & bought back yesterday/today with tight stops are very pleased indeed.


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