"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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While Gold has had a nice recovery off the recent lows and managed to climb back above the psychological resistance level of $1600, it is nowhere near out of the woods as of yet until it can AT THE MINIMUM push back above the resistance level noted in blue on the chart. That comes in near $1625. Technicians will be watching to see if it could then muster enough buying to take it above $1650. There are a fair number of buy stops located above there which market bulls would love to set off. Whether or not gold could reach them is as of yet unclear.
For now the technicals are bearish so many will be looking at rallies as selling opportunities whether for unloading stale and/or underwater long positions or to initiate new short positions.
Bulls are attempting to hold the line here but they have more work to do.
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap
Gold continued falling lower today plummeting over 4% as it failed to hold support near $1650. Once that gave way, it did not take long before it ran the downside stops gathered there which fueled further selling. That selling gathered additional momentum once $1620 could not hold and really ramped up aftter $1600 collapsed.
There has been severe technical damage done to the charts with today's breach of 3 chart support levels. The last line of defense for the bulls to prevent a drop all the way to $1500 is in a band near $1560 - $1535.
One point of slight comfort for the bulls is that the HUI has thus far held suport down near the 500 level. If the Dollar continues heading higher however, it might not be able to keep from succumbing to selling pressures.
Bonds are rallying strongly today suggesting a flight out of the Euro and by consequence risk trades and back into Treasuries and the US Dollar.
Crude oil has been somewhat immune from selling pressure tied to risk aversion trades mainly due to geopolitical tensions involving Iran and fears of a potential closure of the key Hormuz Straits. While many commodity markets have been moving lower the last month or more, crude had staged a big rally off of the $75 level running all the way to $100+ before faltering. It then retreated towards $95 where buyers promptly bid it back higher again. However, they were unable to beat back selling pressure that emerged above the $100 level. That sent longs liquidating trying to snatch profits before they disappeared and emboldened fresh short sellers who were banking on risk aversion trades outweighing geopolitical fears. Today the latter appear to have won out.
Crude is now sitting precariously on a major support level at $95. If it cannot immediately turn around and rebound higher, a technical case for a top in the market will be evident on the chart. The market could then fall towards $90 relatively quickly mainly due to the fact that it was able to withstand the "slowing global economy" theme for so long.
Falling crude oil prices, while being of immense assistance to both consumers and business, would feed further into the psyche being established in traders' minds that a wave of deflation is coming once again.
It would appear that nothing short of a reinvigorated QE program and some sort of stop gap measure coming out of Europe is going to be able to revive this market. Either that or something more sinister involving Iran.
Over the last 14 months, the gold mining shares, as represented by the HUI, have been trapped in a very broad range bounded by 600 on the top side and supported by 500 on the bottom side. The fact that this range has continued for such a long period of time and has repeatedly reinforced itself underscores how important from a technical perspective it is should anything occur which forces a violation of this range.
Having moved down to the bottom of this range in today's session it has of this hour bounced rather strongly off of that level once again. That is reinforcing the significance of the 500 level on the technical price charts and makes it all the more critical that the HUI not close substantially below this level.
A weekly close below 485 - 480 would therefore signify that something significant has changed in regards to investor/trader sentiments towards the precious metals sector as buyers pull back on their bids expecting lower prices. Owners of these shares will want to monitor trading action closely to see how this sector reacts as we move to the end of the year. Odds favor a continuation of the sideways trading pattern but if sentiment sours further as traders fear inaction by the monetary authorities, support levels could give way. We just have to wait and see what the market tells us.
Investors worldwide are making a mad rush towards cash as they seek to become liquid based on their fears of a slowdown in the global economy. There is little confidence that monetary authorities and political leaders in Europe are doing anything substantative to deal with the issues plaguing Europe. Over here in the US, investors are reading the tea leaves from the recent FOMC statement and are expressing disappointment that the punch bowl full of QE is not coming forthwith. Then there is talk about China slowing down as well.
All of this is working to generate visions of the summer of 2008 in the minds of traders as they fear another severe downdraft across a wide spectrum of "risk assets" while watching the US Dollar rally up through technical chart resistance levels.
The result - strong selling across nearly every single commodity futures market with a strong breakdown in the Continuous Commodity Index ( CCI ). It is down at levels last seen in October 2010 and is negative for the year 2011. That chart is signaling deflation is the current fear; not inflation. If it is going to bounce, this level will be where it needs to do so or more losses are in store with a potential move as low as 510 or lower.
It could be that some dovish FOMC members might be looking at the CCI chart thinking that they have plenty of room now to manuever should they be able to convince the rest of the members of the committee that more stimulus is needed. Central Bankers are going to panic if a deflation mindset takes hold and will be forced to act.
Gold is coming under increasing selling pressure as technical chart support levels are giving way. As these levels are broken, technically oriented computer selling is occuring. That, coupled with an exodus of traders to the sidelines ahead of the Christmas holiday, is leading to exaggerated moves as liquidity issues are now impacting trading. That is only going to get worse from here through the end of the year. The one plus is that this same dearth of liquidity can result in sizeable pops higher if some large bids hit the market on any news flashes that might impact trading.
Gold took out the bottom of the tightening triangle pattern yesterday but did manage to close above the critical horizontal support level near $1660. Early in today's session, it briefly violated that level but then moved back above it giving some hope to the bulls that it might be able to stabilize. That proved to be fleeting after the Fed statement hit the markets and off came the risk trades.
Down went the equity markets and up went the Dollar, in a very big way, as it is now trading solidly above an important technical resistance level just above 80 on the USDX chart. The Euro is sinking into oblivion with traders tossing it away and rushing into the Dollar, which they are for now viewing as having a better set of fundamentals than Europe, particularly since the Fed statement did not forecast the end of the world as we know it.
The Euro is now flirting with an important chart support level near 1.3000. Failure to hold there will send it quickly towards 1.2860 with a drop to 1.2680 not out of the question.
Back to the US Dollar - The Dollar has not managed a WEEKLY CLOSE ABOVE the 80 level in more than a year. If it ends this week above 80 and particularly above the blue resistance line shown on the chart, it is going to draw in technically oriented buying and has a good shot at a test of the 50% retracement level coming in at 81. A push through this and the Dollar is going to move to 83.
... is quite simple - Meteorologists still make money even when they are terribly, horrifically, astonishingly wrong. Traders don't. Advice - with all this insane volatility maybe we should become meteorologists!
Hurricane predictors admit they can’t predict hurricanes
Two top U.S. hurricane forecasters, revered like rock stars in Deep South hurricane country, are quitting the practice because it doesn’t work.
William Gray and Phil Klotzbach say a look back shows their past 20 years of forecasts had no value.
http://www.ottawacitizen.com/mobile/story.html?id=5847032
