Please click on the following link to listen in to my regular weekly radio interview with Eric King on the King World News Weekly Metals Wrap.
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Saturday, October 8, 2011
Thursday, October 6, 2011
Gold - Brent Crude Oil Ratio
While not a perfect measurement of gold mining profitability, this ratio does allow us a look into how the final product of a gold mine, (gold), is doing in relation to one of the single largest expenses involved in mining, namely energy. The higher this ratio, the better for mining companies.
HUI- Daily observations
Gold stocks are closely tracking the broader stock markets moving higher once again on further news out of Europe - this time it was some package of European Central Bank loans that were supposedly being put in place to provide liquidity to European banks who cannot seemingly get loans at what they consider a decent rate of interest in the real market. No worries - the government will loan them the money.
Here we go again - once more we see the unholy alliance between government and business when it comes to "too big to fail banks". Pity the poor mom and pop shops who never had a rich sugar Daddy when they ran out of money and could not obtain loans at a decent rate of interest.
That had the equity markets overlooking the mediocre unemployment report which once again came in over the psychologically significant 400K level. Now we turn our focus to the payrolls number which have been whispered to come in near 60K tomorrow. We'll see. I guess what this means is that if we get 65K, a good portion no doubt coming from that bogus computer Birth/Death model, it will be off to the races for stocks on the "great news" for the economy. The Matrix had nothing on this generation.
Back to the gold mining stocks - they have spiked off the 490 level just as the S&P 500 spiked off the brief foray below the critical 1100 level, a level which infuriated the central planners as it had the market in official bear market territory.
The HUI has now run exactly to the resistance level that comes in near the 540 level. This level needs to be cleared and held to set the sector for further gains. If that occurs, then the big test will be at the 50% Fibonacci retracement level of the recent decline. That is near 560. This level will bring in some sizeable selling so if the bulls can absorb all of that and take it through it, then we have something going.
On the downside, if the equity markets implode tomorrow on the payrolls number then we will probably see selling hit the mining shares which will first test today's low near 520 to see if that will hold. If it does not, back down towards 500 it will go.
Right now, we are all held hostage to the day to day news.
Gold bullion itself managed to push past psychological resistance at $1650, a plus, but until it convincingly clears $1680, it is still rangebound.
Silver must take out $32.50 and hold it to give it a chance at $34. Above that, it begins to trend.
Here we go again - once more we see the unholy alliance between government and business when it comes to "too big to fail banks". Pity the poor mom and pop shops who never had a rich sugar Daddy when they ran out of money and could not obtain loans at a decent rate of interest.
That had the equity markets overlooking the mediocre unemployment report which once again came in over the psychologically significant 400K level. Now we turn our focus to the payrolls number which have been whispered to come in near 60K tomorrow. We'll see. I guess what this means is that if we get 65K, a good portion no doubt coming from that bogus computer Birth/Death model, it will be off to the races for stocks on the "great news" for the economy. The Matrix had nothing on this generation.
Back to the gold mining stocks - they have spiked off the 490 level just as the S&P 500 spiked off the brief foray below the critical 1100 level, a level which infuriated the central planners as it had the market in official bear market territory.
The HUI has now run exactly to the resistance level that comes in near the 540 level. This level needs to be cleared and held to set the sector for further gains. If that occurs, then the big test will be at the 50% Fibonacci retracement level of the recent decline. That is near 560. This level will bring in some sizeable selling so if the bulls can absorb all of that and take it through it, then we have something going.
On the downside, if the equity markets implode tomorrow on the payrolls number then we will probably see selling hit the mining shares which will first test today's low near 520 to see if that will hold. If it does not, back down towards 500 it will go.
Right now, we are all held hostage to the day to day news.
Gold bullion itself managed to push past psychological resistance at $1650, a plus, but until it convincingly clears $1680, it is still rangebound.
Silver must take out $32.50 and hold it to give it a chance at $34. Above that, it begins to trend.
Wednesday, October 5, 2011
Gold still stuck in a range
Gold has thus far found willing buyers on forays down below the $1600 level. So far, so good. However, it is still effectively range bound until it can at least push past the $1680 level topside. It ran into resistance near $1650 in today's session but has been holding relatively firm as we enter early Asian trade this evening. Downside support is indicated on the chart in the region bounded by the solid red lines.
It seems everytime we get the least whiff of more bailout or rescue talk coming out of Europe, up go the Equity markets, most of the commodity markets and of course, gold. That happens mainly because down goes the Dollar and up goes the Euro. Quite frankly there is nothing more disgusting to a trader than sitting around waiting for some fresh fundamental news to come out of some monetary official's mouth because you never know what the hell words of "wisdom" that they are going to come up with next, which words I might add will either immediately sink your trading account into the netherworld if you guessed incorrectly or make you look like a veritable wizard.
If it is the latter you can wait by your phone for a call from Jack Schwager to include you in his next sequel to Market Wizards where you can pontificate about your expertise and what you look for in a market when the truth is you just happen to be one lucky SOB.
On the other hand, if you guessed it wrong, they have another category of book that they can include your name in. It is called, Famous Trading Recipes, under the heading of Road Pizza, because that is what you will look like if you were on the wrong side and could not run quickly enough to prevent yourself from becoming steamrolled by eighteen gazillion hedge fund managers whose computers all hit the market at the same moment in time.
Seriously, we are back to trading whatever the hell is coming out of Europe next. Who knows what the final package, if any, will look like. All I do know is that once again, just about the time every technical indicator on the planet turned to the sell side in the S&P 500, with headlines flashing the official entry into a Bear Market, up goes the S&P as if nothing happened once again punishing all the short sellers for their impertence in daring to sell stocks in the financial markets of the US. Tsk, Tsk, boys - did you not know that such activity is unpatriotic at best and treasonous at worst?
Truth be told the monetary authorities of both Europe and the US are terrified of the price charts and probably watch them more closely than we traders. They simply cannot have them casting off belittling signals as to the health of the economy.
Chalk up the rally in the gold shares to this huge short covering squeeze that hit the broader markets. No matter what the real reason is, the fact is that from a technical chart standpoint, the HUI needed to move higher immediately after yesterday's shellacking and it did. It climbed back over the 520 level so if it goes out to end the week above this level, that will be considered a major victory for the bulls. It will need to get its rear end above 540 to get anything of note going to the upside.
The Dollar retreated from the 80 level once again on the USDX but that will not matter if Europe fails to come through and deliver on their stability mechanism. By the way, I love the fact that we have an Exchange STABILIZATION Fund here in the US and they have a STABILITY mechanism over there. Call me a purist but since when did the damn government have the right to interfere in any markets to make them more "stable". My view is that ALL of the instability currently in these markets is being caused by the government. If they got the hell out of the way we would actually have a TREND and it would be a STABLE one. The only problem for them is that the trend would be DOWN. That is something that these meddling clowns cannot tolerate. That is where the instability is coming from (traders trying to guess what these fools are going to do next).
So whatever you do, do not call the current system in place in our financial markets CAPITALISM. This has nothing to do with capitalism and everything to do with Statism and Central Planning. I bet we would have already seen this entire mess cleaned up by the market if the central planners and meddling busybodies had not stuck their noses into it.
That is my soap box rant for today.
Tuesday, October 4, 2011
HUI Weekly Chart needs to improve - very soon
I am focusing in on the weekly chart to provide a bit of a longer term perspective as today's action (Tuesday) has put the HUI in very dangerous technical territory from which it must recover before the week is out in order to prevent a deeper sell off.
I have drawn in TWO support lines on the chart which have proven to be of significance to this index. The upper line comes in near the 520 level and the lower line near the 500 level.
When the HUI broke down below the first line in today's session, it immediately fell down to the next line or lower support level before bouncing. This lower line is now critical.
I have drawn in TWO support lines on the chart which have proven to be of significance to this index. The upper line comes in near the 520 level and the lower line near the 500 level.
When the HUI broke down below the first line in today's session, it immediately fell down to the next line or lower support level before bouncing. This lower line is now critical.
The HUI has had only ONE WEEKLY CLOSE below the 500 level the entirety of this year. That was back in June when it closed out the week at 496. The following week saw it close back above the 500 level which in hindsight proved to be the confirmation that a bottom was in for the sector. Perhaps that was a precurser of what we can expect this time around. Let's hope so.
You will note on the chart that over the course of this current year, there have been several other weeks during which the HUI had pushed down below the 500 level but by the end of the week, it had recaptured it.
We will need to see the index close the week above this lower line to prevent a deeper setback in the sector as a whole.
Note that the WEEKLY MACD is now in a bearish mode meaning that most likely rallies are going to be sold unless we see this indicator reverse to the upside.
The bulls have their backs to the wall and are going to need to stand their ground and dig in if they are going to be able to thwart this lastest effort at leaning on the shares. I would breathe a sigh of relief if the index can close OUT THE WEEK ABOVE the 520 level.
One final thing - the HUI/Gold ratio collapsed today taking it down to a new low for the year. It is now at levels last seen way back in March 2009 when gold was trading nearer to 930 - 940. Astonishing! Wait until some of these gold mining outfits release their quarterly numbers. I find it hard to believe that there is not going to be some very large profits being generated in this industry.
One final thing - the HUI/Gold ratio collapsed today taking it down to a new low for the year. It is now at levels last seen way back in March 2009 when gold was trading nearer to 930 - 940. Astonishing! Wait until some of these gold mining outfits release their quarterly numbers. I find it hard to believe that there is not going to be some very large profits being generated in this industry.
Monday, October 3, 2011
S&P 500 once again nearing 1100
As you can see on the following chart, other than the day on which it made a spike low and pushed sharply off the break below the 1100 level, the S&P 500 has not since managed to move back below this critical level. Each time it has threatened to do so, it has been resuscitated ( I believe thanks in part to the Exchange Stabilization Fund folks).
Today it has pushed below that 1100 level briefly but has popped up. How this thing closes today is going to be interesting. If the ESF rushes back in and props it up and prevents a CLOSE below this level, it will likely bounce, even if the bounce is small because techicians will point to the stability above the support level and how that is being reinforced. If it fails, no technician of any sound judgment is going to be able to make a bullish chart argument and the market is going to head lower first towards 1050 and possibly towards 1000 if that fails to hold.
Today it has pushed below that 1100 level briefly but has popped up. How this thing closes today is going to be interesting. If the ESF rushes back in and props it up and prevents a CLOSE below this level, it will likely bounce, even if the bounce is small because techicians will point to the stability above the support level and how that is being reinforced. If it fails, no technician of any sound judgment is going to be able to make a bullish chart argument and the market is going to head lower first towards 1050 and possibly towards 1000 if that fails to hold.
Gold probing upside resistance
Gold is garnering strength from overnight news that Greece looks to miss its debt reduction target. This is causing further fears about the well-being of Europe in general and is bringing in selling across the global equity markets.
What is noteworthy about gold in today's session is that it is making this move towards overhead chart resistance with the Dollar knocking on the door of the 80 level on the USDX. The European currencies, the Euro, Swiss Franc and British Pound are all under pressure today as are the commodity currencies. The result - gold is moving higher in terms of all the major foreign currencies, even the Yen, which is garnering its usual mindless safe haven bid.
Euro gold seems to be finding willing buyers down near the 1200 level.
As far as the technical chart picture for gold in US Dollar terms: Note the downtrending price channel delineated in red on the chart. Gold is now challenging the lower side of this channel after having dropped out of it recently. That is a very encouraging development. Also, that lower channel trendline meets up with horizontal resistance coming in near the $1660 level. That is what makes this level signficant. If gold can hold its gains here, it should be able to push back towards the formidable $1680 level. Above that we get $1700 back in play.
Asian buyers stocking up ahead of the festival season are no doubt keenly watching these developments. If they think that the hedge funds are going to come back in and take prices higher, they will buy at current levels ahead of them. If they believe that the mindless managers will dump more gold, they will take their chances and step back and let price come to their buy orders.
It is also not hurting gold to see the HUI continue rebounding further away from the 520 level, especially witnessing the selling hitting the broader S&P 500. That level thus far is holding like a rock on downside probes. The longer it holds, the more short covering we are going to see on the part of frustrated bears. Evidently, buyers see value in the shares at those levels. This index needs to clear 550 on a closing basis to rattle some of the fresh shorts whose short covering should then take the index towards resistance near 570.
What is noteworthy about gold in today's session is that it is making this move towards overhead chart resistance with the Dollar knocking on the door of the 80 level on the USDX. The European currencies, the Euro, Swiss Franc and British Pound are all under pressure today as are the commodity currencies. The result - gold is moving higher in terms of all the major foreign currencies, even the Yen, which is garnering its usual mindless safe haven bid.
Euro gold seems to be finding willing buyers down near the 1200 level.
As far as the technical chart picture for gold in US Dollar terms: Note the downtrending price channel delineated in red on the chart. Gold is now challenging the lower side of this channel after having dropped out of it recently. That is a very encouraging development. Also, that lower channel trendline meets up with horizontal resistance coming in near the $1660 level. That is what makes this level signficant. If gold can hold its gains here, it should be able to push back towards the formidable $1680 level. Above that we get $1700 back in play.
Asian buyers stocking up ahead of the festival season are no doubt keenly watching these developments. If they think that the hedge funds are going to come back in and take prices higher, they will buy at current levels ahead of them. If they believe that the mindless managers will dump more gold, they will take their chances and step back and let price come to their buy orders.
It is also not hurting gold to see the HUI continue rebounding further away from the 520 level, especially witnessing the selling hitting the broader S&P 500. That level thus far is holding like a rock on downside probes. The longer it holds, the more short covering we are going to see on the part of frustrated bears. Evidently, buyers see value in the shares at those levels. This index needs to clear 550 on a closing basis to rattle some of the fresh shorts whose short covering should then take the index towards resistance near 570.
Saturday, October 1, 2011
Trader Dan on King World News Weekly Metals Wrap
please click here to tune in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap. We will be discussing the technical posture of both gold and silver as well as some significant developments in the Commitment of Traders Report.
http://tinyurl.com/3bsokd4
http://tinyurl.com/3bsokd4
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