Another European Domino

I am not going to spend much time providing the details of the events unfolding in Cyprus since the readers of this site are all well aware of those by now.

I do wish to note a couple of things however.

First - We are watching the inevitable effects of the experiment in socialism when it reaches its logical conclusion. When generations are either taught or have it implied to them that they can allow their governments to run up ruinous levels of debt and yet suffer no consequences whatsoever, they have little to no incentive to throw out the political leaders who hold the actual purse strings. The cradle to grave policies of the nanny state are not sustainable over the long haul. The reason is clear - politicians make promises to pay that they cannot keep. Eventually there is not enough money to cover the promises and the government is forced to borrow to the point that it can no longer afford to pay the rate of interest that creditors demand to compensate them for the risk.

We all know that the proposal to confiscate up to 9.9% of the savings accounts of those who have worked hard to amass that money is nothing more than government sanctioned THEFT. Spare us the insults of calling it a "tax" and thereby seeking to justify this reprehensible policy. People use banks because of one reason and one reason only - TRUST. Take that away and you have destroyed the foundation of the banking system.

Put yourself in the place of an average European citizen who is watching this debacle unfold before their eyes. Would you feel the least bit secure if you had now been awakened to the fact that your government's leaders had spent the nation into bankruptcy and were suggesting that as part of the solution to their folly that those same fools who ran up the debt in the first place now be permitted to raid your personal savings account to somehow solve a problem of their creation? What would you do in their situation? I tell you what I would do; I would immediately begin transferring money out of banks in any of those nations which had been on the receiving end of bailouts from the ECB and the IMF. I would move that money into gold and would not think twice about doing it. If those deposits are no longer sacred, then what is to prevent futures politicans from raiding them whensoever they please?

Once again we have collusion between the financial elites that run the monetary system and the big banks. I have nothing but scorn and contempt for these large banks who gorged themselves on various government bonds and are now in the position of watching their balance sheets go to hell in a handbasket as the value of those bonds plummet. What really makes my blood boil however is that these banks have adopted a mentality that they can go running and screaming like spoiled children to their respective political leaders to use the PUBLIC's MONEY to save them from their own damned stupidity and greed.

Excuse me, but I was once naively of the opinion that the banks existed to make loans to the public. Apparently that is no longer the case - now the banks exist in order to see money taken from their depositors to save their own rear ends for buying debt that no one in their right mind would have purchased.

I do wish to add however, that even though I am disgusted at this unholy alliance between the big banks and the monetary masters, the people in these respective nations do bear some culpability in this matter; they are not without any blame whatsoever. Last time I checked these people vote and they voted to put enough politicians in power to continue spending. As long as the people keep putting the same kind of irresponsible, short-sighted lackeys into positions of power, why should they expect these leaders to change their ways. Those who would ruin their own nations for the sake of short-term political gain deserve to be unceremoniously thrown out of office.

By the way, America, are you watching what is happening here because we are following in the same trajectory as many of these Euro Zone nations.

On gold - the flight to safe haven was on display today with that buying strong enough to propel gold through the psychological $1600 level. Watching it soar throught that level overnight during the Asian session was noteworthy because at one point, a wave of fierce selling came out of nowhere and took the price all the way back down to below its Friday settlement price. The dip did not last long - if you blinked you missed it - but it was very obvious that someone was trying to cap the price and prevent the metal from moving even higher.

All day long the move higher was being resisted by a strong overhead seller. My guess is that this is not hedge fund selling but rather selling originating from the official sector. I also noted today that the Euro, which was slammed down in Asia at one point today moved all the way back up to above the 1.30 level. The manner in which it did so looked very peculiar to me.

I hate to say that the ECB was involved when I have no proof of this but it was very odd to see anyone at all anxious to buy that currency for any reason today given the ramifications of the Cyprus mess. Maybe, just maybe, the monetary masters were out in full force today attemping to prevent a meltdown of their dearly beloved Euro. I simply have no other explanation for the midday move higher in the Euro off its worst levels.

I want to add here that their best efforts notwithstadning EURO GOLD soared higher adding 1.5% today. It is near 1237 euros as I write this. As a matter of fact, gold took off today in terms of all the major currencies again. This is continued evidence to me that gold is getting some serious attention by those who are growing increasingly disconcerted with the policies of the Western Central Banks and their respective finance ministers/leaders.

The chart below notes that various levels that have technical significance for gold. It will take a push through $1620 to really begin a short covering process in earnest. I noted in my KWN Weekly Metals Wrap interview that the hedge fund short position was the largest on record. Some of that began to come off today. There still remains a large number of those shorts however.

Ideally, gold will stay ABOVE $1600 but at the very least, it should remain above $1585 or so to suggest that it has entered yet again into a new and higher trading range.

Once again the useless gold mining shares did nothing to aid the upward progess of the actual metal as they were weak all day long and ended closing down on their lows. No wonder no one wants to own the damned things. As far as providing any decent returns on investment, they suck. What else can I say...

Currency traders had best prepare to go another week without much sleep. Sigh... maybe we can get some ingenius inventor to come up with a pill that provides the human body with the same benefits of getting a decent 7 - 8 hours worth of sleep in a night. I know I will be the first in line to sign up for that...

Trader Dan Interviewed at King World News Markets and Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King over at KWN Markets and Metals Wrap. We'll be covering the Commitment of Traders report in depth this week laying it out against the price action in the metals. We will be providing some insight into why the metals are moving in consolidation patterns noting key technical levels that need to be taken out for some additional strength to be seen.

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2013/3/16_KWN_Weekly_Metals_Wrap.html

Gold Clears Initial Hurdle

Gold put in some strong gains in today's session clearing its first overhead level of resistance in the process. Since the beginning of the month of March, it has not been able to clear $1585 - $1587 as it attracted selling on approaches to this region. Buying in today's session was strong enough to absorb the offers that emerged in a rather easy fashion which is a bit surprising to me considering the duration of this resistance zone. I would have expected shorts to put up a bit more of a fight up here. That they did not has to be rather disconcerting if you are a bear as it illustrates that they are wavering in their conviction of lower prices ahead.

I mentioned last week when I first put this chart up that the bears were being frustrated in their efforts to break the metal down below this strong buying zone noted. We are now seeing the signs of that frustration as the newcomers are starting to cover.

Now that the bulls have cleared that $1585 - $1587 level, it is essential that they prove their mettle if prices retreat back down towards this area. That will signal that the bulls have regained the short term initiative from the bears.

I would look for fiercer resistance at the next resistance zone  where the "16" handle will emerge. Not only is that a psychological resistance level but it is also a technical one. If the gold bulls can take the price up and through this level and maintain the price ABOVE this level, we should see a run towards the late February peak up near $1620.

I want to again note here that gold put in another strong day in terms of the major currencies such as the Yen, Pound, Euro and Swiss Franc. It continues to display strength across a wide variety of currencies, which is always good for a bullish cause.

The other thing of note - the HUI regained its losses from late last week after it put in that huge upside reversal on Wednesday. It once again encountered selling pressure as the various stocks that comprise this index rose to their last week highs. This is showing up on the chart near the 360 level. I need to see this index CLEAR 372 and do it with authority to prove to me that this is indeed a lasting bottom in the mining sector. I am of the opinion that if it does this, the gold and silver charts will both show markets that are taking out their respective overhead resistance levels.

Remember, it has been the shares which are dragging on the metals; if those shares are done going lower as it appears that they are, then it is going to be difficult for the bears to beat the actual metals down any longer. Keep in mind that there is a very large, multi-year high, hedge fund short exposure in gold. That position will be vulnerable if the bulls can continue to peel off the weaker-handed shorts that have tagged along for the downside ride. There are significant stops above this market that if breached, will provide some nice upside fireworks.

As usual, the key will be whether the bullion banks emerge as sellers on any rallies. They have been using this downdraft to cover their previously built short positions and have reduced that significantly. Are they content to leave that as is or are they looking to rebuild it? We shall see. One thing is for certain however; those hedge fund computer algorithms are not going to ask any questions if the bulls can take out the overhead resistance levels that trigger the buy signals on those infernal machines of theirs. They will be buying back at the same speed that they have been selling for some time now.

NO FEAR

Remember when those two words were popping up all over the place, whether on T-shirts, Bumper Stickers, Skate Boards, etc.? It was like so many other fads that have come and gone although it is apparently back in vogue, at least when it comes to the lemmings that the Fed has piped into piling back into equities.

Take a look at the Complacency Index as I like to call it or the "Fear Index" as others have dubbed it- the Volatility Index. It reached levels in today's trading session not seen since April 2007, that is a month shy of SIX YEARS AGO!

Wall Street hasn't a care in the world and apparently the sky is the limit for the equity indices. And I used to think Wall Street loved Easy Al (Alan Greenspan)! They are so in love with Uncle Ben (Ben Bernanke) that I think we are going to see them start naming streets after him in New York's financial district.

I have said it before and will say it again, you cannot fight the tape on this rally in the equities. Everything we ever learned about being able to print your way to prosperity is obviously utterly wrong; the modern day alchemists have proved that not only that it is, but that every age/generation that has ever come before us completely missed the mark.

The Central Banks have managed to create an environment in which Bear markets are a thing of the past, never to be witnessed again in our lifetime. And Yes, Virginia, there really is a Santa Claus...

Trader Dan Interviewed at King World News Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Markets and Metals Wrap.

http://tinyurl.com/advjr6t

 

Gold in some Foreign Currency Terms

By request...

The spike lower in EuroGold below 1200 seems to have been a relatively short-lived phenomenon, for now. You will note that in terms of the Euro, gold has been in a steady downtrend since October of last year with the trend more defined since November.

This is a possibility that it has broken this downtrend but one day does not a new trend make. We need to see CONFIRMATION. For a bare minimum, I would need to see Eurogold trade through the 1240 level and maintain its footing ABOVE that level. I would feel extremely confident that a near term bottom is in if price could climb past 1250.

Sterling gold is displaying a wedging pattern and has not performed as poorly as EuroGold of late. This is due to the extreme weakness in the British Pound which has has trouble lately on the crosses as further weakness displays itself in the British economy. The BOE is engaged in its own bond buying program and there is chatter that it may not be sufficient to lift the economy out of its doldrums over there.

You might notice that Sterling gold does not remain below the 1000 level for any length of time. It is very similar in that sense to Euro Gold and I might add, to US Dollar priced gold in reference to the $1570 - $1560 level.

I would need to see Sterling Gold above 1110 - 1120 to feel that it is going to challenge its all time high near 1180.

Lastly, Yen Gold - what more need be said - it is on a strong tear higher as the Yen has been the whipping boy of the crosses. The new Japanese government is determined to stave off the deflationary funk that has gripped its economy for decades and to that end, is going to create boatloads of yen if necessary. The currency is devaluing against nearly every single currency out there, not to mention gold. I would look for the all time high in this "cross" to be taken out by summer.

Gold Chart plus Comments

I am pressed for time right now but wanted to get some charting out there for the readers. I apologize for the lack of "stuff" this week but a trader's life can be busy at times.

As those who have been regular readers of this site know quite well by now, I have been very cautious in regards to gold for some time now. When a market continues to violate one chart support level after another, it is never a bullish sign, no matter what all the self-proclaimed experts are pontificating whether it be some backwardation nonsense chatter or "bullish COT" reports.

I have said it before and will say it again, speculators, particularly the large ones, aka, hedge funds, are what drive markets nowadays. When they are selling, it is never bullish. The only time it is bullish is when they are loading up on the short side and a market is not breaking down through support levels.

We might have just reached that point. I want to emphasize, "might" because I need some further confirmation from the price action. What I am seeing however is a market that keeps entering a zone that I have marked, "STRONG BUYING ZONE" and every time that it does, it does not stay in that zone for more than three hours time.

Note the following 60 minute chart and you can see that the moves lower into this zone generate high volume buying in which price tends to spike off of the worst levels rather than closing each bar down on the lows. That is an indication of heavy buying by some very strong hands.

We have had three occasions now since the first of this month that this level has held rock solid. it is evident that the bears have been unable thus far to break the price down through the bottom of this zone.

What I want to see to feel more confident is an upside breach of the top of this trading range that REMAINS ABOVE this level for at least 4-6 hours, preferably a day. I believe that if this occurs, we will begin to see some of these hedge funds start to cover.

If gold can get back above $1600, it will suggest that a bottom is in. The flip side is of course if this support level gives way. Let's hope it does not.

One last thing, gold was VERY FIRM today in terms of nearly EVERY SINGLE MAJOR CURRENCY. Whether it was Yen gold, Euro gold, Sterling Gold, Swissie Gold and even Aussie Gold and Loonie Gold, the metal was higher even as the US Dollar was sharply higher. That is very noteworthy. In the past I have spoken to the idea that if gold is moving higher in terms of most of the other major currencies besides the Dollar, the chances of the bears breaking it down sharply in US Dollar terms is greatly diminished. The opposite of course holds true; if the metal is higher in US Dollar terms only while it is moving lower in terms of these other majors, the rally is not going to last much longer.

What today's move is signaling is that gold is trading as a currency again and not so much as a Dollar related issue. Again, I would like to see additional confirmation of this besides just in the Yen (Yen Gold is on a tear higher). It is still a fact that regardless of talk about early cessation of the QE3 and QE4 programs, many of the Western Central Banks, and I am including Japan here in that sense, are employing their own versions of QE or have adopted monetary easing policies. While speculators are busy being enamoured of stocks, it is not being lost on gold as to what these Central Bankers are all doing to their currencies. Never in the history of mankind has so much paper currency been created simultaneously. It is a wonder that we are already not using the stuff to heat our houses instead of wood!

Let's see what next week brings us. At least the HUI has stopped going down for now!

Strong Finish to HUI

After what must no doubt seem a near eternity to many, there is finally a sign of life in the mining sector. A BULLISH ENGULFING pattern appeared on the daily chart today. This is a pattern that is generally valid after a prolonged downtrend. It also is much more reliable if overall volume is good. So far we have both ingredients in place judging from some of the actual miners today.

There are two things I am looking for at this point. First - I want to see this index close strong on FRiday of this week and not puke out over the next two days. Second - I would also like to see it push through 370 on a weekly closing basis within another week or so.

Aggressive traders/investors can wade into the water on select shares PROVIDED that they use sound money management techniques. That means this - if this week's low gets violated - GET OUT. Don't stand around arguing why the market needs to go up. GET OUT! You can always get right back in if the market action subsequently dictates it is okay to do so.

Longer range, more conservative oriented investors would probably want to see that weekly close above the 370 level to prove that this is anything more than a dead cat bounce and actually has some legs to it. One day wonders are becoming way too frequent nowadays due to the nature of computer algorithmic trading so some confirmation is warranted for those who like to see some follow through before making a move.

I am noting that the indicator has turned higher from an extremely oversold level but it has not yet generated a buy signal. The index will need to add to today's gains to trip it into a buy mode. Also, I like to look at previous peaks in the indicator to see if those can be bettered. Remember, a trend that has been a long time in the making is sort of like a gigantic cruise ship. It takes a while to turn. The same sellers who have been pushing these shares relentlessly lower will be looking for a place, a level, at which they can sell any rally UNLESS THE MARKET PROVES THAT THE TREND HAS TURNED.

Keep that in mind...