Another Friday - another release of the Commitment of Traders report from the CFTC - let the entrail reading begin in earnest!
A caveat before we begin - the report only covers trading through the end of the combined pit and screen session on Tuesday of the current week. It therefore does not take into account the price action from Wednesday through the close of trading on Friday.
On Tuesday of last week ( 3-25-2014) gold closed at $1311.40. On Tuesday of this week, it closed at $1280 for a loss ( Tuesday - Tuesday ) of $31.60.
Here is what happened over that time period. Hedge funds were big sellers once again - therefore it should come as no surprise to see the price move lower. They bailed out of over 8000 long positions and added over 5500 NEW SHORT positions. The net impact was that they were sellers of some 13,687 contracts.
The other reportables, which include the big floor locals, CTA's, CPO's and other large private traders were also big sellers on the week. Their combined NET SELLING amounted to 4,724 contracts. By the way, this includes both futures and options combined for the funds and this other big group of speculators.
The combined selling of these large specs was 18,591 contracts.
The big commercial category were NET BUYERS on the week as were the Swap Dealers ( WHOOPS - there goes the theory of the evil bullion banks manipulating the price of gold lower). The combined NET BUYING from both these camps amounted to 14,858 contracts.
The balance was made up by the small spec category which were NET BUYERS of some 3,553 contracts.
In other words, we had the biggest speculators in the market selling with the commercial interests buying as price lost that $31.60.
This has been the pattern in gold since early 2001, more than a decade ago.
In some gold bug circles much ado was made about the big open interest drop in gold that occurred early in the week as if it was somehow a hugely significant market event and portended something big was about to happen in the gold market. As usual the hype, while amusing to read, was not based on anything remotely resembling reality. Guess what - April gold was entering its delivery period and many traders who were SPREAD using that month lifted their spreads.
The total number of spreads lifted was - are you ready for this? - 51,299 contracts ( futures and options combined). As you can see, that outnumbers the amount of actual buying and selling of outright positions by more than 3:1.
Remember this the next time some breathless article is written about some big open interest drop, especially if the market is entering a delivery period.
Where do things stand now ( as of this Friday)? As stated in a previous post, gold has had a nice bounce off an important chart support near the $1,280 level. I strongly suspect that the big rally off of $1280 has had more to do with short covering on the part of the hedge funds which stuck on some of those fresh shorts noted above. Without having the actual data in front of me ( we will need to wait until next Friday ( April 11), I would hesitate to be too dogmatic about this, but I would not look for the move over the last three days of this week to be characterized by a wave of brand new, aggressive long positioning.
Gold held where it needed to hold on the charts to prevent another leg lower and that ability to stay firm near $1280 has sparked another round of short covering. Now we need to see where the bulls can take this thing as the new week begins. There should be some overhead resistance centered near the $1320 level and again near $1340. If they can take it through both levels, I think we will see more aggressive short covering again and some new longs coming back in.
The key will be the Dollar and the US interest rate markets. There could also be some safe haven buying of gold if the US equity markets start looking shaky. We did get some of that in the recent past so it would not be unexpected to see it again if the selloff in the equity markets worsens.
Another way of saying this is that the bulls have regained some short term momentum. Whether or not they can capitalize on it is unclear. The charts will make it clear in their own time. In the meantime, stay flexible. Each new piece of economic data, whether from the US or from the Euro Zone or from China, is going to swing prices accordingly. I would suggest no one who is trading take too large of a position because it can reverse on you faster than you can blink. The name of the game right now is to survive. Let the computers chop up someone else besides you! Don't be the one providing them the funds for their extravagant lifestyles. Let them suck it out of someone else - blasted infernal leeches that they are.
As the reader can probably tell - I loathe what these computers have done to my profession. Mindless, unthinking machines ( in contrast to we carbon-based life forms known as discriminating human beings ) shoving markets all over the place, oftentimes without rhyme or reason, is in many quarters hailed as more efficient markets. I don't know whether to laugh in contempt or to weep with sadness over how shortsightedly blind our nation has become.
I have seen enough of the carnage these computer generated price moves can inflict on legitimate hedgers looking to offset risk to have had my complete fill of them. Sadly, it is here to stay and we have to learn to adapt to them in order to survive and prosper.
Saturday, April 5, 2014
Friday, April 4, 2014
"Disappointing" Payrolls Number Spurs Gold Buying
And the number of new jobs created for the month of March is... drum roll please... Disappointing. With the market looking for something north of 200K, it didn't get it. Up started the talk of a halt to any interest rate rise next year.
And with that, gold was off to the races as back down went interest rates with buyers coming back into the Treasury markets. The yield on the Ten Year note fell to 2.737% as I type these comments.
For me, it is really a rather simple concept - gold will move north as US interest rates move south and gold will move south as US interest rates move north. That, for the immediate moment, is what is driving the gold price even more so than the actual movements of the US Dollar.
The Dollar was initially weaker on the employment number news but after traders began attempting to decipher exactly what ECB President Draghi was saying about the lack of inflation pressures over there and the possibility of the ECB's own version of Quantitative Easing, the Euro came under some pressure. That floated the Dollar a bit higher against the Euro but it is basically sitting here doing nothing at the moment.
The strength in the forex markets was more among the Yen ( here we go with that safe haven trade again???) and the Canadian Dollar. The Aussie was also higher. Traders seem to have mixed feelings about the greenback with some yapping about the employment numbers, while disappointing, were not that bad. What to take away from all this? - more uncertainty as once again each piece of economic data will dictate the day to day price action across so many of these markets. There is just not much in the way of conviction.
This is what we get when we have near constant interference from Central Bankers. I have said it in the past and will say so again, the source of so much of the wild volatility we are seeing in the market place these days is Central Bank activity. When the investment/trading world spends most of its time parsing statements from Central Bankers rather than studying real world fundamentals, the result is extreme sensitivity to comments from these monetary masters. Then again, trying to understand the fundamentals in an economic world created by Central Bank actions ( QE/bond buying programs) or government stimulus programs ( think China) is at times an exercise in futility.
Another side note, the much respected analytic firm Economic Cycle Research Institute released their US future inflation gauge numbers this morning. It showed a decline to 103.1 in March from a 104.4 reading in February. Interpretation? There are no concerns about inflation pressures. This is what makes me expect any rallies in gold to attract selling pressure.
Back to the jobs number and the impact on the gold price in today's session. Gold is currently trading up 1.6% at $1305 as I type this. It has surged through psychological resistance at the $1300 and recaptured that handle. Of course, do not look for any talk about manipulation of its price today even though a small drop in interest rates in the US and a weak but relatively stable Dollar hardly justifies a move of this extent in the yellow metal. A short covering rally due to nervous weak-handed bears is pretty exciting but a key factor for SUSTAINED higher gold prices is whether or not NEW LONGS/BULLS want to commit in size to this market. So far that has not been the case. These occasional short covering rallies are exciting and stir up the "gold is going to the moon" talk every single time they occur but as we have seen, they do not tend to last.
Only if gold can generate more new buying than short covering does it have a chance at starting any kind of sustained uptrend. It is still a traders' market and that means short-term oriented guys can work this market and take advantage of the price swings but beyond that, extrapolating about lofty upside price targets is premature in my view.
Incidentally, I am sure most of the readers have seen or are aware of all the chatter about the HFT crowd as a result of that "60 Minutes" interview last Sunday and the subsequent dust up we have all had the pleasure of watching over at CNBC.
Many in the GIAMATT crowd ( Gold is Always Manipulated All The Time) have seized about this story to justify their contention that gold is a rigged market just like they have been saying for many years.
Here is the problem with that rationale - on the surface, yes, it looks like they have been vindicated. But this is important - it is a FAR, FAR cry to rightly discuss the impact from the HFT crowd, a crowd which I feel has no useful purpose whatsoever in our markets other than, like ticks, to suck the juices out of the host and enrich themselves in the process - than - to draw the illogical conclusion that therefore the gold price is rigged by the US government and the Fed and Treasury.
After all, the claim is that every single stupidly named "flash crash" lower in gold is the result of nefarious government forces colluding to artificially shove the price of gold lower and prop up the US Dollar. But, these folks, some of whom I count as friends, always point to the BULLION BANKS, the JP Morgans, the Goldman Sachs, etc. as the forces suppressing the gold price at the behest of the feds. In their mind, they, not the HFT crowd, are the enemy of all common decency. They are the evil market riggers.
The report about market rigging that is currently the talk of trading town is the High Frequency Traders doing their thing, not the bullion banks, but proprietary funds especially those front running orders and getting an unfair advantage in the markets.
I wanted to go on record about that because it seems to me that one cannot have it both ways. Here it is in a logical form:
PREMISE: The gold market is manipulated by the government using their proxies, the bullion banks, especially JP Morgan and Goldman Sachs to regularly "bomb" the gold market lower and artificially suppress the price.
AXIOM: The HFT funds engage in activities that involve front running orders coming into the electronic pit and skimming pennies out of every market and doing so thousands of times over and over again.
CONCLUSION or INFERENCE: Gold is manipulated by the federal government.
Do you see the fallacy in this argument being made by the GIAMATT crowd?
Now, if you want to talk about gold prices getting slammed lower by big orders coming in from hedge fund computers, which do not employ, scale up or scale down tactics but rather are seemingly all in or all out, then we can talk about that but to infer a manipulated gold price based on well-needed exposure of HFT activity is a big stretch. It's more faith than logic.
Back to the charts however...
Notice that gold bounced right near the critical $1280 level. It needed to hold there to prevent a much sharper fall and it has done so. That is what has spooked some of the shorts and why they are furiously covering. At this point, the market is maintaining its strength of the day and looks poised to end up near the session highs ( that could obviously change ) but if it can hold above $1300 to end the week, the bulls will have dodged a bullet and can thank that disappointing payrolls number for bailing them out.
Going into next week, with this strong close, it should set up a test for the next resistance level WITHIN THIS BROAD TRADING RANGE near the $1320 level.
The ADX remains heading lower, again, revealing the lack of a definitive trend in this sideways moving market. While bears recently were able to seize control within this range, the +DMI is threatening an upside crossover of the -DMI signaling the bulls might be back in the driver's seat for a while. Back and forth we go.
More later as time permits...
And with that, gold was off to the races as back down went interest rates with buyers coming back into the Treasury markets. The yield on the Ten Year note fell to 2.737% as I type these comments.
For me, it is really a rather simple concept - gold will move north as US interest rates move south and gold will move south as US interest rates move north. That, for the immediate moment, is what is driving the gold price even more so than the actual movements of the US Dollar.
The Dollar was initially weaker on the employment number news but after traders began attempting to decipher exactly what ECB President Draghi was saying about the lack of inflation pressures over there and the possibility of the ECB's own version of Quantitative Easing, the Euro came under some pressure. That floated the Dollar a bit higher against the Euro but it is basically sitting here doing nothing at the moment.
The strength in the forex markets was more among the Yen ( here we go with that safe haven trade again???) and the Canadian Dollar. The Aussie was also higher. Traders seem to have mixed feelings about the greenback with some yapping about the employment numbers, while disappointing, were not that bad. What to take away from all this? - more uncertainty as once again each piece of economic data will dictate the day to day price action across so many of these markets. There is just not much in the way of conviction.
This is what we get when we have near constant interference from Central Bankers. I have said it in the past and will say so again, the source of so much of the wild volatility we are seeing in the market place these days is Central Bank activity. When the investment/trading world spends most of its time parsing statements from Central Bankers rather than studying real world fundamentals, the result is extreme sensitivity to comments from these monetary masters. Then again, trying to understand the fundamentals in an economic world created by Central Bank actions ( QE/bond buying programs) or government stimulus programs ( think China) is at times an exercise in futility.
Another side note, the much respected analytic firm Economic Cycle Research Institute released their US future inflation gauge numbers this morning. It showed a decline to 103.1 in March from a 104.4 reading in February. Interpretation? There are no concerns about inflation pressures. This is what makes me expect any rallies in gold to attract selling pressure.
Back to the jobs number and the impact on the gold price in today's session. Gold is currently trading up 1.6% at $1305 as I type this. It has surged through psychological resistance at the $1300 and recaptured that handle. Of course, do not look for any talk about manipulation of its price today even though a small drop in interest rates in the US and a weak but relatively stable Dollar hardly justifies a move of this extent in the yellow metal. A short covering rally due to nervous weak-handed bears is pretty exciting but a key factor for SUSTAINED higher gold prices is whether or not NEW LONGS/BULLS want to commit in size to this market. So far that has not been the case. These occasional short covering rallies are exciting and stir up the "gold is going to the moon" talk every single time they occur but as we have seen, they do not tend to last.
Only if gold can generate more new buying than short covering does it have a chance at starting any kind of sustained uptrend. It is still a traders' market and that means short-term oriented guys can work this market and take advantage of the price swings but beyond that, extrapolating about lofty upside price targets is premature in my view.
Incidentally, I am sure most of the readers have seen or are aware of all the chatter about the HFT crowd as a result of that "60 Minutes" interview last Sunday and the subsequent dust up we have all had the pleasure of watching over at CNBC.
Many in the GIAMATT crowd ( Gold is Always Manipulated All The Time) have seized about this story to justify their contention that gold is a rigged market just like they have been saying for many years.
Here is the problem with that rationale - on the surface, yes, it looks like they have been vindicated. But this is important - it is a FAR, FAR cry to rightly discuss the impact from the HFT crowd, a crowd which I feel has no useful purpose whatsoever in our markets other than, like ticks, to suck the juices out of the host and enrich themselves in the process - than - to draw the illogical conclusion that therefore the gold price is rigged by the US government and the Fed and Treasury.
After all, the claim is that every single stupidly named "flash crash" lower in gold is the result of nefarious government forces colluding to artificially shove the price of gold lower and prop up the US Dollar. But, these folks, some of whom I count as friends, always point to the BULLION BANKS, the JP Morgans, the Goldman Sachs, etc. as the forces suppressing the gold price at the behest of the feds. In their mind, they, not the HFT crowd, are the enemy of all common decency. They are the evil market riggers.
The report about market rigging that is currently the talk of trading town is the High Frequency Traders doing their thing, not the bullion banks, but proprietary funds especially those front running orders and getting an unfair advantage in the markets.
I wanted to go on record about that because it seems to me that one cannot have it both ways. Here it is in a logical form:
PREMISE: The gold market is manipulated by the government using their proxies, the bullion banks, especially JP Morgan and Goldman Sachs to regularly "bomb" the gold market lower and artificially suppress the price.
AXIOM: The HFT funds engage in activities that involve front running orders coming into the electronic pit and skimming pennies out of every market and doing so thousands of times over and over again.
CONCLUSION or INFERENCE: Gold is manipulated by the federal government.
Do you see the fallacy in this argument being made by the GIAMATT crowd?
Now, if you want to talk about gold prices getting slammed lower by big orders coming in from hedge fund computers, which do not employ, scale up or scale down tactics but rather are seemingly all in or all out, then we can talk about that but to infer a manipulated gold price based on well-needed exposure of HFT activity is a big stretch. It's more faith than logic.
Back to the charts however...
Notice that gold bounced right near the critical $1280 level. It needed to hold there to prevent a much sharper fall and it has done so. That is what has spooked some of the shorts and why they are furiously covering. At this point, the market is maintaining its strength of the day and looks poised to end up near the session highs ( that could obviously change ) but if it can hold above $1300 to end the week, the bulls will have dodged a bullet and can thank that disappointing payrolls number for bailing them out.
Going into next week, with this strong close, it should set up a test for the next resistance level WITHIN THIS BROAD TRADING RANGE near the $1320 level.
The ADX remains heading lower, again, revealing the lack of a definitive trend in this sideways moving market. While bears recently were able to seize control within this range, the +DMI is threatening an upside crossover of the -DMI signaling the bulls might be back in the driver's seat for a while. Back and forth we go.
More later as time permits...
Thursday, April 3, 2014
Gold Oscillating around a Key Pivot Point
I have mentioned and illustrated how I believe the $1280 level is a key level for the gold market as both sides ( bull and bear ) attempt to ascertain the next move for the yellow metal. See those previous posts for more particulars.
Suffice it to say that most players were unwilling to press their case very hard ahead of a crucial employment report tomorrow morning. All I can say is that it is going to be another one of those "Friday's" in which we can expect to see some fairly wild price action if it is going to be like the previous Fridays on which we have gotten the jobs number from the feds.
There is no sense in posting much of anything up for now until we get that report out of the way and see how the market responds. My own thinking is if the number comes out close to 200K or above, gold will react negatively as the Dollar will probably move higher. The reason - the market will regard the previous employment numbers, that were very disappointing, as being more a function of the severely cold weather during January and February rather than the beginning of a trend which would cause the Federal Reserve to scale back its tapering plans.
I am taking the various Fed governors' at their words, which seem to have been pretty consistent with one another for a change, that it is going to be a high bar to induce the Fed not to procede with their current tapering plans.
When I look at the inflation numbers coming out of the Euro zone ( which are well below the 2% target that the ECB has acknowledged it would like to see ), it occurs to me that a stronger jobs number will feed into the sentiment that higher rates are on tap here in the US long before they will be for the Euro zone. That should, in a normal world, tend to support the Dollar at the expense of the Euro.
The flip side is if we get a much weaker than anticipated jobs number. In that case, we would expect to see the Dollar weaken somewhat and gold move higher as traders would then begin to doubt the Fed's stated intention to taper anywhere near the extent to which is already in the market.
In other words, it will take some sort of strong negative surprise on the employment front to shift the current mindset that the poor numbers the first two months of this year were due a large extent to the inclement and record setting cold weather. If we were to get such a thing, traders might begin to believe that a trend towards weaker hiring is underway and that would be enough to halt any upward movement in the Dollar.
We shall see what we get tomorrow. One thing I can guarantee is that the HFT crowd will be making lots of money off of the rest of us. They are the human equivalent of spotted deer ticks.
Suffice it to say that most players were unwilling to press their case very hard ahead of a crucial employment report tomorrow morning. All I can say is that it is going to be another one of those "Friday's" in which we can expect to see some fairly wild price action if it is going to be like the previous Fridays on which we have gotten the jobs number from the feds.
There is no sense in posting much of anything up for now until we get that report out of the way and see how the market responds. My own thinking is if the number comes out close to 200K or above, gold will react negatively as the Dollar will probably move higher. The reason - the market will regard the previous employment numbers, that were very disappointing, as being more a function of the severely cold weather during January and February rather than the beginning of a trend which would cause the Federal Reserve to scale back its tapering plans.
I am taking the various Fed governors' at their words, which seem to have been pretty consistent with one another for a change, that it is going to be a high bar to induce the Fed not to procede with their current tapering plans.
When I look at the inflation numbers coming out of the Euro zone ( which are well below the 2% target that the ECB has acknowledged it would like to see ), it occurs to me that a stronger jobs number will feed into the sentiment that higher rates are on tap here in the US long before they will be for the Euro zone. That should, in a normal world, tend to support the Dollar at the expense of the Euro.
The flip side is if we get a much weaker than anticipated jobs number. In that case, we would expect to see the Dollar weaken somewhat and gold move higher as traders would then begin to doubt the Fed's stated intention to taper anywhere near the extent to which is already in the market.
In other words, it will take some sort of strong negative surprise on the employment front to shift the current mindset that the poor numbers the first two months of this year were due a large extent to the inclement and record setting cold weather. If we were to get such a thing, traders might begin to believe that a trend towards weaker hiring is underway and that would be enough to halt any upward movement in the Dollar.
We shall see what we get tomorrow. One thing I can guarantee is that the HFT crowd will be making lots of money off of the rest of us. They are the human equivalent of spotted deer ticks.
Monday, March 31, 2014
Gold Nearing an Important Inflection Point
Gold was once again knocked for a loop in today's session as Ukranian issues continue to fade from traders' minds. There is not much to add to my weekend post noting the various time frames on the gold charts but suffice it to say for now, that gold is nearing an important inflection point centered around the $1280 level.
The market is working lower in the range noted within the rectangle with the -DMI back above the +DMI indicating the bears are back in control of the market. The daily chart is not, as of yet, reflecting a trend lower, just a move back down within a broad range.
The stochastics indicator is down in the oversold region so if this market is going to bounce, it had better do so now. If the bears can take it down through $1280 and hold its head down under the level, they run an increasing chance of dropping it back down to another test of $1200. They will first have to crack the $1260 level however as support is layered in approximately $20 levels from $1280 on down.
For the bulls to have a chance at salvaging this mess, they need to recapture $1320 at a bare minimum, especially with the mining shares signaling no help whatsoever at this point.
The grains got a shot in the arm today from the USDA numbers which got corn bulls all revved up on ideas of less acreage going to corn this planting season and more going to soybeans. That and they found some more critter mouths to feed. That did not bother the beans one bit however, ( old crop ) as it was off to the races with them to the upside. USDA found some more export business and plugged it in drawing down that carryover even more.
There is already talk of cooler, wetter weather putting a crimp on the field work and resulting in some delays in certain areas of the Corn Belt. That should tend to push more acreage to beans, especially with soybean prices refusing to break down. Corn (old crop ) topped $5.00 once again to the dismay and frustration of cattlemen and hog and poultry producers who cannot seem to get a break when it comes to lowering their feed costs. Blame it on that damned ethanol, which I am coming more and more to despise. When 4 out of every 10 rows of corn ends up getting burned in our gasoline tanks, no wonder livestock and poultry producers are angry. No worries however, we all end up paying for it at the meat counter. Yep - whatever makes the environmental whackos happy in their quest to counter their boogieman of global warming.
Yellen made some comments today which were in line with her dovish views but traders are convinced, whether rightly or wrongly, that the economic data is going to improve with the warmer weather and that the Fed will remain on track with its tapering plans, her comments notwithstanding.
Hogs did what I expected them to do and that was to believe the Hogs and Pigs report. They did come off the limit down move however so there might be a contingent who are skeptical of that Friday report. I am one of those. We will be back to watching slaughter data and other fundamental inputs to gauge whether or not the pencil pushers over at USDA got it right or not. I am convinced that they will have to issue a revision to the numbers at the end of June when the next quarterly report comes out to bring it into line with the weekly slaughter data.
The market is working lower in the range noted within the rectangle with the -DMI back above the +DMI indicating the bears are back in control of the market. The daily chart is not, as of yet, reflecting a trend lower, just a move back down within a broad range.
The stochastics indicator is down in the oversold region so if this market is going to bounce, it had better do so now. If the bears can take it down through $1280 and hold its head down under the level, they run an increasing chance of dropping it back down to another test of $1200. They will first have to crack the $1260 level however as support is layered in approximately $20 levels from $1280 on down.
For the bulls to have a chance at salvaging this mess, they need to recapture $1320 at a bare minimum, especially with the mining shares signaling no help whatsoever at this point.
The grains got a shot in the arm today from the USDA numbers which got corn bulls all revved up on ideas of less acreage going to corn this planting season and more going to soybeans. That and they found some more critter mouths to feed. That did not bother the beans one bit however, ( old crop ) as it was off to the races with them to the upside. USDA found some more export business and plugged it in drawing down that carryover even more.
There is already talk of cooler, wetter weather putting a crimp on the field work and resulting in some delays in certain areas of the Corn Belt. That should tend to push more acreage to beans, especially with soybean prices refusing to break down. Corn (old crop ) topped $5.00 once again to the dismay and frustration of cattlemen and hog and poultry producers who cannot seem to get a break when it comes to lowering their feed costs. Blame it on that damned ethanol, which I am coming more and more to despise. When 4 out of every 10 rows of corn ends up getting burned in our gasoline tanks, no wonder livestock and poultry producers are angry. No worries however, we all end up paying for it at the meat counter. Yep - whatever makes the environmental whackos happy in their quest to counter their boogieman of global warming.
Yellen made some comments today which were in line with her dovish views but traders are convinced, whether rightly or wrongly, that the economic data is going to improve with the warmer weather and that the Fed will remain on track with its tapering plans, her comments notwithstanding.
Hogs did what I expected them to do and that was to believe the Hogs and Pigs report. They did come off the limit down move however so there might be a contingent who are skeptical of that Friday report. I am one of those. We will be back to watching slaughter data and other fundamental inputs to gauge whether or not the pencil pushers over at USDA got it right or not. I am convinced that they will have to issue a revision to the numbers at the end of June when the next quarterly report comes out to bring it into line with the weekly slaughter data.
Sunday, March 30, 2014
Priorities
With all that is happening as the fallout from the oxymoronically named "Affordable Care Act" increases, with the complete breakdown of a coherent American foreign policy abroad, and with the polls showing a growing majority of Americans believe the country is on the wrong track, out comes our imperious leader with solutions to a real issue that no doubt ranks right up there at the top of those things which the citizenry is most concerned with - YEP - you guessed it... cow farts.
Boy howdy is that real leadership or what?
White House looks to regulate cow flatulence as part of climate agenda
Read more: http://dailycaller.com/2014/03/28/white-house-looks-to-regulate-cow-flatulence-as-part-of-climate-agenda/#ixzz2xSnFUxFX
Boy howdy is that real leadership or what?
White House looks to regulate cow flatulence as part of climate agenda
Read more: http://dailycaller.com/2014/03/28/white-house-looks-to-regulate-cow-flatulence-as-part-of-climate-agenda/#ixzz2xSnFUxFX
Saturday, March 29, 2014
USDA March 2014 Quarterly Hogs and Pigs Report
As some of you know who have read this blog for some time now, my area of expertise in the commodity markets is particularly in the livestock markets, where I cut my teeth as a trader many, many years ago and where I still tend to concentrate my time and energy.
That being said, I wanted to give you a perfect illustration of how our government agencies that distribute data to the marketplace can be consistently wrong and rarely if ever are taken to task for so doing.
Some of you are aware of a virulent disease has been affecting the US hog herd. It is called Porcine Epidemic Diarrhea or PED for short. This virus has a mortality rate somewhere north of 90% on young piglets. Adult pigs can contract the disease, which by the way does not impact the meat in any way or render it unfit for human consumption, but they generally can be treated and recover. The baby piglets however are usually lost however due to fluid loss from severe dehydration and other associated effects of the virus.
Hog and pork prices have been soaring this year as the disease has devastated the herd here in the US. Heading into this report on Friday (yesterday) estimates of losses due to the virus were ranging on average of up to 6%. Other private firms had forecasted losses upwards of 10% with some running as high as 30%.
Here is where things get interesting. The March report from USDA yesterday showed losses no where near the average of analyst estimates. As a matter of fact, the report showed the impact from the disease was not nearly as widespread as most in the industry expected.
The problem is that all of the recent hard data that we have been getting completely contradicts the USDA numbers from yesterday.
At the risk of boring the reader with the data breakdown ( I am hopeful that some of my readers are hog producers however ) here is what the pencil pushers at the USDA gave us when it comes to the various weight categories.
Market hogs under 50 pounds 96%
50 - 119 pounds 97%
120 - 179 pounds 97%
180 pounds and over 95%
A quick guide to interpreting this: this is the percentage of hogs compared to the previous year at the same time. In other words, the number of 50 pound and under pigs is 4% lower than last year at the same time.
Hogs are generally slaughtered when their weight reaches near 270 - 275 pounds ( this will vary considerably but is a good average ). Since it takes time for hogs to grow to this weight, one can generally gauge the available supply of market ready hogs that will be coming in any one period by looking at the weight numbers and calculating the time for the hogs in that bracket to reach maturity.
Now, let's take a closer look at this and see where things go awry with the USDA.
Many of the readers here are precious metals guys and could care less about pigs or cattle or corn or beans, etc. But laying that aside for the moment, if you look at these numbers not knowing anything else, what would you say that the MAXIMUM REDUCTION in the number of slaughter ready hogs is going to be over the next few months according to the USDA? Answer - 5%. If you said this, go to the head of the class. There will be a period during which one could look for the reduction in the number of slaughter ready hogs to be down nearly 3% from last year and another period in which it will down nearly 4%. But the maximum reduction that the market can expect, based on USDA's numbers is 5%.
Here is where the problem begins... this same USDA also issues, every single week, week in and week out, the total number of hogs that are under inspection by USDA inspectors. The report is usually dated two weeks behind us but it is the industry standard for keeping track of the number of cattle and hogs killed for meat production here in the US. It is based off of hard, on-the-ground data
For the first two weeks of March alone, guess where hog slaughter numbers are running in comparison to last year... The first week they were down 5.75%. The second week they were down 7.77% and estimates over the third and fourth week continue to run near 7%! In other words, we are already EXCEEDING the maximum reduction in hog slaughter numbers that USDA just told us to expect in their report this Friday.
What accounts for this glaring difference? Answer - The Quarterly Hogs and Pigs Report is based off a census taken by USDA of various hog producers. It is essentially a snap shot of the industry. USDA contacts various hog producers, both large and small, and surveys them to get their intentions, numbers, etc. and then uses that data to put together the quarterly report. This is crucial - they do not survey every single hog producer out there although they do the best that they can with the manpower that they have. It is a snapshot but it is an incomplete snapshot.
On the other hand, the weekly slaughter data is tabulated from real live data every single week. We know exactly how many hogs were killed on a single given day based off of those reports. There is no extrapolating - it is actual data.
In effect, what we have is a contrast between facts and estimates drawn from incomplete data.
If that were not bad enough, this is the very same USDA that a mere 3 months ago, in their December Quarterly Hogs and Pigs Report gave us the following weight breakdowns:
Market Hogs under 50 pounds 99%
50 - 119 pounds 100%
120 - 179 pounds 100%
180 pounds and over 100%
That report essentially told the market that any sort of impact from the PED virus was going to be minimal. Take a look at the following continuous hog chart and tell me, that USDA was anywhere near to being close as to impact from the disease!
Herein lies the crux of the problem. Hog producers and other commercial interests who need to institute risk management programs to secure profits and mitigate price risk depend on the accuracy of the data being furnished to them by these various government agencies, in our case here, USDA. Any hog producer who three months ago, used the data given them out of the USDA December Hogs and Pigs report to begin implementing hedges for their expected hog production and put on those short positions has been absolutely obliterated as a result. They have forfeited a large profit ( a once in a lifetime profit I might add ) that could have been theirs had the data actually reflected what the true reality of the impact of the disease was going to be. Not only that, they have been met with large margin calls. Failure to meet those necessitated them having to close out the hedge incurring a large paper loss in the process. All this because the data that came out of the USDA was inaccurate. Please note that I am being kind here by employing the word, "inaccurate". What comes to mind is more akin to horse excrement.
So here we are, some three months later than the last USDA report, and that agency has had to come back and issue another revision to try to bring their previous data more into line with the reality of what has occurred on the ground. Never mind the fact that many producers have been seriously harmed financially as a result. Yet for some bizarre reason, this same USDA, issuing another Hogs and Pigs report, with data that is already at odds with other data from within that same agency, is lent credibility by the various analysts and such in the industry. My question is "WHY?"
Had the agency actually picked up something, anything, of the impact that this disease was going to have three months ago, an impact that many of us said was indeed going to be the case, then, and only then, would I lend it some credibility. But for an agency to miss the mark by such a large extent three months ago, to now come out with yet another report, that is at such great odds with the majority of estimates from many other seasoned and experienced traders and analysts, is further proof that the data coming out of it is next to useless.
Some will argue that it is what it is and that the data is what we have to go by until shown otherwise, but that is missing the point entirely. The point being that it is easy for USDA to come back AFTER THE FACT and issue their revisions but that does no good to those who have made marketing or risk management decisions based off of data that has a notorious track record of being so far off of the mark.
One last thing, here is a chart, courtesy of the fine folks over at Urner Barry (drawn from the American Association of Swine Veterinarians ), of the number of reported and diagnosed incidents of the PEV virus. As you can clearly see, the number has increased sharply since the fall of last year. It was in late September/early October that we began to see the incidents of new cases really pick up - Impact from the disease will not be seen until about 6 months later. Look at the huge spike in cases in late January which continued to increase until it seems to have topped out in late February. The case number TRIPLED from the September/October levels.
Again I ask you reader, without knowing much if anything about the livestock markets, if the impact from the disease is not generally felt until about 6 months later, during what time frame would you expect to see the greatest impact on the number of slaughter ready hogs this year? Answer - in the late June - August time frame. However, if we base our view on the data that the USDA just gave us this past Friday, the worst impact from the disease is already behind us...
The reason given is that USDA suggested that more hog producers farrowed their sows during the December 2013 - February 2014 period than the market expected ( + 3%). That may be true, but even if it is, and I have my own reasons for doubting this, it still does not deal with the rapid spike in the number of cases breaking out during the depth of winter ( Tripled the case during the fall) nor does it explain how slaughter can currently be down by 7% already when USDA tells us that 5% is the absolute maximum reduction we can expect.
I suspect that the USDA is going to be once again, way off base with their numbers and that by the time the next Quarterly Hogs and Pigs report is released at the end of June, they will once again be revising their numbers.
We'll come back and revisit this at the end of June - of that you can be sure.
Quod est demonstratum.
That being said, I wanted to give you a perfect illustration of how our government agencies that distribute data to the marketplace can be consistently wrong and rarely if ever are taken to task for so doing.
Some of you are aware of a virulent disease has been affecting the US hog herd. It is called Porcine Epidemic Diarrhea or PED for short. This virus has a mortality rate somewhere north of 90% on young piglets. Adult pigs can contract the disease, which by the way does not impact the meat in any way or render it unfit for human consumption, but they generally can be treated and recover. The baby piglets however are usually lost however due to fluid loss from severe dehydration and other associated effects of the virus.
Hog and pork prices have been soaring this year as the disease has devastated the herd here in the US. Heading into this report on Friday (yesterday) estimates of losses due to the virus were ranging on average of up to 6%. Other private firms had forecasted losses upwards of 10% with some running as high as 30%.
Here is where things get interesting. The March report from USDA yesterday showed losses no where near the average of analyst estimates. As a matter of fact, the report showed the impact from the disease was not nearly as widespread as most in the industry expected.
The problem is that all of the recent hard data that we have been getting completely contradicts the USDA numbers from yesterday.
At the risk of boring the reader with the data breakdown ( I am hopeful that some of my readers are hog producers however ) here is what the pencil pushers at the USDA gave us when it comes to the various weight categories.
Market hogs under 50 pounds 96%
50 - 119 pounds 97%
120 - 179 pounds 97%
180 pounds and over 95%
A quick guide to interpreting this: this is the percentage of hogs compared to the previous year at the same time. In other words, the number of 50 pound and under pigs is 4% lower than last year at the same time.
Hogs are generally slaughtered when their weight reaches near 270 - 275 pounds ( this will vary considerably but is a good average ). Since it takes time for hogs to grow to this weight, one can generally gauge the available supply of market ready hogs that will be coming in any one period by looking at the weight numbers and calculating the time for the hogs in that bracket to reach maturity.
Now, let's take a closer look at this and see where things go awry with the USDA.
Many of the readers here are precious metals guys and could care less about pigs or cattle or corn or beans, etc. But laying that aside for the moment, if you look at these numbers not knowing anything else, what would you say that the MAXIMUM REDUCTION in the number of slaughter ready hogs is going to be over the next few months according to the USDA? Answer - 5%. If you said this, go to the head of the class. There will be a period during which one could look for the reduction in the number of slaughter ready hogs to be down nearly 3% from last year and another period in which it will down nearly 4%. But the maximum reduction that the market can expect, based on USDA's numbers is 5%.
Here is where the problem begins... this same USDA also issues, every single week, week in and week out, the total number of hogs that are under inspection by USDA inspectors. The report is usually dated two weeks behind us but it is the industry standard for keeping track of the number of cattle and hogs killed for meat production here in the US. It is based off of hard, on-the-ground data
For the first two weeks of March alone, guess where hog slaughter numbers are running in comparison to last year... The first week they were down 5.75%. The second week they were down 7.77% and estimates over the third and fourth week continue to run near 7%! In other words, we are already EXCEEDING the maximum reduction in hog slaughter numbers that USDA just told us to expect in their report this Friday.
What accounts for this glaring difference? Answer - The Quarterly Hogs and Pigs Report is based off a census taken by USDA of various hog producers. It is essentially a snap shot of the industry. USDA contacts various hog producers, both large and small, and surveys them to get their intentions, numbers, etc. and then uses that data to put together the quarterly report. This is crucial - they do not survey every single hog producer out there although they do the best that they can with the manpower that they have. It is a snapshot but it is an incomplete snapshot.
On the other hand, the weekly slaughter data is tabulated from real live data every single week. We know exactly how many hogs were killed on a single given day based off of those reports. There is no extrapolating - it is actual data.
In effect, what we have is a contrast between facts and estimates drawn from incomplete data.
If that were not bad enough, this is the very same USDA that a mere 3 months ago, in their December Quarterly Hogs and Pigs Report gave us the following weight breakdowns:
Market Hogs under 50 pounds 99%
50 - 119 pounds 100%
120 - 179 pounds 100%
180 pounds and over 100%
That report essentially told the market that any sort of impact from the PED virus was going to be minimal. Take a look at the following continuous hog chart and tell me, that USDA was anywhere near to being close as to impact from the disease!
Herein lies the crux of the problem. Hog producers and other commercial interests who need to institute risk management programs to secure profits and mitigate price risk depend on the accuracy of the data being furnished to them by these various government agencies, in our case here, USDA. Any hog producer who three months ago, used the data given them out of the USDA December Hogs and Pigs report to begin implementing hedges for their expected hog production and put on those short positions has been absolutely obliterated as a result. They have forfeited a large profit ( a once in a lifetime profit I might add ) that could have been theirs had the data actually reflected what the true reality of the impact of the disease was going to be. Not only that, they have been met with large margin calls. Failure to meet those necessitated them having to close out the hedge incurring a large paper loss in the process. All this because the data that came out of the USDA was inaccurate. Please note that I am being kind here by employing the word, "inaccurate". What comes to mind is more akin to horse excrement.
So here we are, some three months later than the last USDA report, and that agency has had to come back and issue another revision to try to bring their previous data more into line with the reality of what has occurred on the ground. Never mind the fact that many producers have been seriously harmed financially as a result. Yet for some bizarre reason, this same USDA, issuing another Hogs and Pigs report, with data that is already at odds with other data from within that same agency, is lent credibility by the various analysts and such in the industry. My question is "WHY?"
Had the agency actually picked up something, anything, of the impact that this disease was going to have three months ago, an impact that many of us said was indeed going to be the case, then, and only then, would I lend it some credibility. But for an agency to miss the mark by such a large extent three months ago, to now come out with yet another report, that is at such great odds with the majority of estimates from many other seasoned and experienced traders and analysts, is further proof that the data coming out of it is next to useless.
Some will argue that it is what it is and that the data is what we have to go by until shown otherwise, but that is missing the point entirely. The point being that it is easy for USDA to come back AFTER THE FACT and issue their revisions but that does no good to those who have made marketing or risk management decisions based off of data that has a notorious track record of being so far off of the mark.
One last thing, here is a chart, courtesy of the fine folks over at Urner Barry (drawn from the American Association of Swine Veterinarians ), of the number of reported and diagnosed incidents of the PEV virus. As you can clearly see, the number has increased sharply since the fall of last year. It was in late September/early October that we began to see the incidents of new cases really pick up - Impact from the disease will not be seen until about 6 months later. Look at the huge spike in cases in late January which continued to increase until it seems to have topped out in late February. The case number TRIPLED from the September/October levels.
Again I ask you reader, without knowing much if anything about the livestock markets, if the impact from the disease is not generally felt until about 6 months later, during what time frame would you expect to see the greatest impact on the number of slaughter ready hogs this year? Answer - in the late June - August time frame. However, if we base our view on the data that the USDA just gave us this past Friday, the worst impact from the disease is already behind us...
The reason given is that USDA suggested that more hog producers farrowed their sows during the December 2013 - February 2014 period than the market expected ( + 3%). That may be true, but even if it is, and I have my own reasons for doubting this, it still does not deal with the rapid spike in the number of cases breaking out during the depth of winter ( Tripled the case during the fall) nor does it explain how slaughter can currently be down by 7% already when USDA tells us that 5% is the absolute maximum reduction we can expect.
I suspect that the USDA is going to be once again, way off base with their numbers and that by the time the next Quarterly Hogs and Pigs report is released at the end of June, they will once again be revising their numbers.
We'll come back and revisit this at the end of June - of that you can be sure.
Quod est demonstratum.
Weekend Gold Analysis
To begin these comments, let's take a look at the hedge fund positioning in the Comex gold futures through Tuesday of this past week. April gold closed at $1311.40 that day having closed at $1359 a week earlier ( Tuesday, March 18). That is a loss of $48 over the reporting period that the CFTC employs.
In looking at the chart ( a comparison of the hedge fund NET positions against the price of the metal ) you can see what happened. A combination of LONG LIQUIDATION and NEW SHORTING produced a drop of some 18,000 contracts ( futures and options combined ) in the overall net long positioning of the group of traders. The Blue Line is the hedge fund net position while the red line is the gold price.
The result? - Gold moved lower as this group of large traders was selling. Through the end of the week, gold dropped another $17 to settle at $1294 in the April contract, which by the way goes into its delivery period next week.
Here is the Daily or short-term chart.
There are several things to note. First, Bears are back in control of this market on this time frame. Negative Directional Movement is above Positive Directional Movement and the ADX has turned lower and is continuing to move down indicating the break in the uptrend. The recent uptrend that began in January has halted with the market having given up over $100 off its best level of this year.
Second - the "golden cross" which some were touting as sign of a new bull market beginning has been negated as price has fallen below that level of the cross ( the 50 day moving average crossed up and above the 200 day moving average from beneath).
Third - the sloping uptrend line drawn off the late December low has been violated to the downside.
These are all bearish signals.
The one bullish signal on this chart is that the important 50% Fibonacci retracement level of the entire rally from that same December low near $1180 to the recent high near $1392 has thus far held. That level is near $1287. Bulls managed to keep price from penetrating that level for long before it recovered.
On the short term chart, the bears have the clear advantage.
Let's shift to the weekly or intermediate chart. I have included another old, but reliable technical indicator, the Stochastics, because of the nature of the price action on this time frame.
Let's first look at the Directional Movement Indicator. Notice that the ADX line ( the dark line ) continues to move lower indicating a TRENDLESS MARKET. If a market is trendless, that means it is moving sideways. That is exactly what gold has been doing on this time frame. It is essentially meandering back and forth in a very broad range as noted in that green rectangle I have shown. Support down near $1200 and below is intact while resistance near $1400 is also intact. We have what amounts to a $200 range within which gold is working.
What one usually experiences with a market moving within a broad trading range is the perma bulls begin coming out with their "to the moon" price predictions and all manner of wildly bullish scenarios as price works its way up towards the top of the range.
The perma bears on the other hand, begin talking their "price is going to collapse" scenario as the price works it way down towards the bottom of the range.
In other words, the bulls get noisier as price moves higher while the bears get noisier as the price moves lower.
The Directional Movement lines indicate that while the bulls have seized control of the market ( +DMI (blue line) crossed above the -DMI ( red line), they are in danger of surrendering their mild advantage if they do not quickly assert themselves.
I have also noted the Stochastics indicator because this is designed for trendless markets. Note the area within the rectangle on the price chart and look at the action of the stochastic indicator. It has been moving higher generating buy signals as price has bounced off of support at the bottom of the range and generating sell signals as price has stalled out at the top of the range. It is currently in a sell mode .
Lastly here is the monthly or long term chart.
The Directional Movement Indicator shows that the market is moving sideways as well with no clear trend although bears currently have a slight advantage in that -DMI remains above +DMI. Those lines are converging however so the bears will need to reassert themselves sooner rather than later if they are to retain control on this long term frame.
Also, the MACD indicator, while still in a bearish mode, is working on putting together an upside bullish crossover which would generate a buy signal based on that indicator.
Lastly, the sloping uptrend line drawn in red has thus far held. One can see that the $1280 level is a pivot with price working around it on both sides.
The chart is inconclusive at this point. The long term uptrend is still intact near the 38.2% Fibonacci retracement level although both indicators show bearish forces still in control. Bulls are attempting to wrest control of the market from them but have not as of yet managed to do so. A push through this week's high near $1400 will be required to tip the scales in their favor in my opinion. Before that can occur however, $1300 will have to be captured.
We'll see how the battle goes.
In looking at the chart ( a comparison of the hedge fund NET positions against the price of the metal ) you can see what happened. A combination of LONG LIQUIDATION and NEW SHORTING produced a drop of some 18,000 contracts ( futures and options combined ) in the overall net long positioning of the group of traders. The Blue Line is the hedge fund net position while the red line is the gold price.
The result? - Gold moved lower as this group of large traders was selling. Through the end of the week, gold dropped another $17 to settle at $1294 in the April contract, which by the way goes into its delivery period next week.
Here is the Daily or short-term chart.
There are several things to note. First, Bears are back in control of this market on this time frame. Negative Directional Movement is above Positive Directional Movement and the ADX has turned lower and is continuing to move down indicating the break in the uptrend. The recent uptrend that began in January has halted with the market having given up over $100 off its best level of this year.
Second - the "golden cross" which some were touting as sign of a new bull market beginning has been negated as price has fallen below that level of the cross ( the 50 day moving average crossed up and above the 200 day moving average from beneath).
Third - the sloping uptrend line drawn off the late December low has been violated to the downside.
These are all bearish signals.
The one bullish signal on this chart is that the important 50% Fibonacci retracement level of the entire rally from that same December low near $1180 to the recent high near $1392 has thus far held. That level is near $1287. Bulls managed to keep price from penetrating that level for long before it recovered.
On the short term chart, the bears have the clear advantage.
Let's shift to the weekly or intermediate chart. I have included another old, but reliable technical indicator, the Stochastics, because of the nature of the price action on this time frame.
Let's first look at the Directional Movement Indicator. Notice that the ADX line ( the dark line ) continues to move lower indicating a TRENDLESS MARKET. If a market is trendless, that means it is moving sideways. That is exactly what gold has been doing on this time frame. It is essentially meandering back and forth in a very broad range as noted in that green rectangle I have shown. Support down near $1200 and below is intact while resistance near $1400 is also intact. We have what amounts to a $200 range within which gold is working.
What one usually experiences with a market moving within a broad trading range is the perma bulls begin coming out with their "to the moon" price predictions and all manner of wildly bullish scenarios as price works its way up towards the top of the range.
The perma bears on the other hand, begin talking their "price is going to collapse" scenario as the price works it way down towards the bottom of the range.
In other words, the bulls get noisier as price moves higher while the bears get noisier as the price moves lower.
The Directional Movement lines indicate that while the bulls have seized control of the market ( +DMI (blue line) crossed above the -DMI ( red line), they are in danger of surrendering their mild advantage if they do not quickly assert themselves.
I have also noted the Stochastics indicator because this is designed for trendless markets. Note the area within the rectangle on the price chart and look at the action of the stochastic indicator. It has been moving higher generating buy signals as price has bounced off of support at the bottom of the range and generating sell signals as price has stalled out at the top of the range. It is currently in a sell mode .
Lastly here is the monthly or long term chart.
The Directional Movement Indicator shows that the market is moving sideways as well with no clear trend although bears currently have a slight advantage in that -DMI remains above +DMI. Those lines are converging however so the bears will need to reassert themselves sooner rather than later if they are to retain control on this long term frame.
Also, the MACD indicator, while still in a bearish mode, is working on putting together an upside bullish crossover which would generate a buy signal based on that indicator.
Lastly, the sloping uptrend line drawn in red has thus far held. One can see that the $1280 level is a pivot with price working around it on both sides.
The chart is inconclusive at this point. The long term uptrend is still intact near the 38.2% Fibonacci retracement level although both indicators show bearish forces still in control. Bulls are attempting to wrest control of the market from them but have not as of yet managed to do so. A push through this week's high near $1400 will be required to tip the scales in their favor in my opinion. Before that can occur however, $1300 will have to be captured.
We'll see how the battle goes.
Thursday, March 27, 2014
Dollar Rises - Gold Sinks
Same story as yesterday - The US Dollar is gaining some ground at the expense of the Euro and that is undercutting the bullish case for gold.
Geopolitical concerns are still lurking around due to events in Ukraine but as long as the market feels that escalation dangers are limited, safe haven flows into gold are waning.
Gold has now dropped $100 since making a try at $1400 on March 17. That proves the old adage that markets tend to generally fall faster than they go up ( this is not an "always" thing but it does seem to occur more than the reverse). In the case of gold, the market moved up almost entirely on worst case scenarios of WWIII, Russian moves out of the Dollar, a new Cold War, etc. None of these events have panned out exactly as their proponents have suggested they would.
This is the danger inherent in rallies which are predominantly driven by short covering as was being noted here. Once those buyers are run out, who is left to chase the price higher? Gold needed to see FRESH speculative interest coming in from the hedge fund community and it was not getting it; especially after the FOMC gave such a hawkish view on the US economy and proceeded with their tapering plans.
In watching the price action closely during the session, gold managed to claw its way back off the worst levels of the session when the stock indices initially weakened early today. As the equities then moved higher into the plus column, gold began moving lower again. Right now, as I type these comments, the equities are once again weakening a bit but gold is actually moving lower, along with silver I might add.
The HUI was actually higher early in the session but has since then given up its gain and has turned negative. Its losses however have been contained at this point although that could change by the end of the trading day.
Take a look at the following chart of the HUI. Note a couple of things on the Directional Movement Indicator. First, the -DMI ( Red Line ) has crossed back above the + DMI ( Blue Line) for the first time since the month of January. The bears have regained control over the market. Notice also that the ADX line ( Dark Line ) is showing some signs of turning higher suggesting the Potential for a trending move lower. I think we would have to see a downside violation of the 210 level however for this to occur.
I want to also note that much was made on some sites about the so-called Golden Cross, where the 50 day moving average crosses above the 200 day moving average from below. Many technicians regard this as a bullish development. For such an event to actually mean something, it is usually understood that the price of the underlying security ( in this case the index ) must REMAIN ABOVE both moving averages. That has not been the case here with the HUI. It has fallen below both moving averages just shortly after the time the Directional Movement lines reversed signaling the Bears were grabbing control of the market once again. In other words, any bullish signal from that event has been negated.
This underscores the rapidity at which markets move nowadays and especially markets which are driven by geopolitical events. Here is a bit of trading advice - unless you are very fast on the draw and spend significant amounts of time sitting in front of a computer screen watching prices and events, leave markets driven by geopolitical events alone. They are too dangerous for all but the professional traders who can move more quickly than the average screen watcher. Yes, you might miss a great opportunity for a big profit but you also risk suffering from severe losses. Just ask any of the bulls who bought up near $1390 who were just convinced that the West was going to level sanctions on Russia after the results from the Crimea region came in over that weekend a while back.
Also, never base a trade ( or an investment ) for that matter on a headline. NEVER! Let the market technical price action do that for you, AFTER you do some research on your own and not rely on the predictions of some "expert" who makes his or her case about why such and such market is going to the moon.
Remember, markets are based on differing opinions. Some are bullish; some are bearish. But keep in mind that they are just opinions and in that sense, guesses as to how the market might respond to a particular scenario. The only true proof consists of the price action. It either confirms or validates ones opinion or it does not. It really is that simple.
Traders who quickly realize that the market is not accepting their opinion and get out of the way become survivors and experienced traders. Those who want to blame other forces ( manipulators), etc, and whom refuse to get out, become former traders with a lesser net worth.
All that matters in this profession is whether or not you make money; not whether you were "right". You are only "right" if the market confirms you are right. Other than that you are just a guy with an opinion that meant nothing. Period. Humility is a virtue that will serve to protect you long after pride has made fools out of prognosticators who keep serving up one dogmatic prediction after another.
"Put not your trust in princes, in mortal man in whom there is no salvation", says the Psalmist. Wiser words were never recorded.
Here is a Daily Chart of Gold to close out these comments. I have noted the "Golden Cross" on the chart for your convenience. That is the 50 day moving average in green crossing above the 200 day moving average. Note that price has fallen below both of these moving averages, a bearish development. Typically in a strongly trending market to the upside, price will remain above these levels.
Bulls do have a support level within the general vicinity of that cross which comes in at the 50% Fibonacci Retracement Level at $1287. They only missed that by a few dollars today. If the bulls can reverse today's losses tomorrow to close out the week, they have a chance at stabilizing prices here. If not, and if $1287 gives way, there is some light support near $1280. After that, $1262 - $1255 is the next target.
For Gold to get some recent Bears nervous, it will have to regain its "13" handle for starters. If they can manage that, some of the shorts will go ahead and ring the cash register and move back out.
Geopolitical concerns are still lurking around due to events in Ukraine but as long as the market feels that escalation dangers are limited, safe haven flows into gold are waning.
Gold has now dropped $100 since making a try at $1400 on March 17. That proves the old adage that markets tend to generally fall faster than they go up ( this is not an "always" thing but it does seem to occur more than the reverse). In the case of gold, the market moved up almost entirely on worst case scenarios of WWIII, Russian moves out of the Dollar, a new Cold War, etc. None of these events have panned out exactly as their proponents have suggested they would.
This is the danger inherent in rallies which are predominantly driven by short covering as was being noted here. Once those buyers are run out, who is left to chase the price higher? Gold needed to see FRESH speculative interest coming in from the hedge fund community and it was not getting it; especially after the FOMC gave such a hawkish view on the US economy and proceeded with their tapering plans.
In watching the price action closely during the session, gold managed to claw its way back off the worst levels of the session when the stock indices initially weakened early today. As the equities then moved higher into the plus column, gold began moving lower again. Right now, as I type these comments, the equities are once again weakening a bit but gold is actually moving lower, along with silver I might add.
The HUI was actually higher early in the session but has since then given up its gain and has turned negative. Its losses however have been contained at this point although that could change by the end of the trading day.
Take a look at the following chart of the HUI. Note a couple of things on the Directional Movement Indicator. First, the -DMI ( Red Line ) has crossed back above the + DMI ( Blue Line) for the first time since the month of January. The bears have regained control over the market. Notice also that the ADX line ( Dark Line ) is showing some signs of turning higher suggesting the Potential for a trending move lower. I think we would have to see a downside violation of the 210 level however for this to occur.
I want to also note that much was made on some sites about the so-called Golden Cross, where the 50 day moving average crosses above the 200 day moving average from below. Many technicians regard this as a bullish development. For such an event to actually mean something, it is usually understood that the price of the underlying security ( in this case the index ) must REMAIN ABOVE both moving averages. That has not been the case here with the HUI. It has fallen below both moving averages just shortly after the time the Directional Movement lines reversed signaling the Bears were grabbing control of the market once again. In other words, any bullish signal from that event has been negated.
This underscores the rapidity at which markets move nowadays and especially markets which are driven by geopolitical events. Here is a bit of trading advice - unless you are very fast on the draw and spend significant amounts of time sitting in front of a computer screen watching prices and events, leave markets driven by geopolitical events alone. They are too dangerous for all but the professional traders who can move more quickly than the average screen watcher. Yes, you might miss a great opportunity for a big profit but you also risk suffering from severe losses. Just ask any of the bulls who bought up near $1390 who were just convinced that the West was going to level sanctions on Russia after the results from the Crimea region came in over that weekend a while back.
Also, never base a trade ( or an investment ) for that matter on a headline. NEVER! Let the market technical price action do that for you, AFTER you do some research on your own and not rely on the predictions of some "expert" who makes his or her case about why such and such market is going to the moon.
Remember, markets are based on differing opinions. Some are bullish; some are bearish. But keep in mind that they are just opinions and in that sense, guesses as to how the market might respond to a particular scenario. The only true proof consists of the price action. It either confirms or validates ones opinion or it does not. It really is that simple.
Traders who quickly realize that the market is not accepting their opinion and get out of the way become survivors and experienced traders. Those who want to blame other forces ( manipulators), etc, and whom refuse to get out, become former traders with a lesser net worth.
All that matters in this profession is whether or not you make money; not whether you were "right". You are only "right" if the market confirms you are right. Other than that you are just a guy with an opinion that meant nothing. Period. Humility is a virtue that will serve to protect you long after pride has made fools out of prognosticators who keep serving up one dogmatic prediction after another.
"Put not your trust in princes, in mortal man in whom there is no salvation", says the Psalmist. Wiser words were never recorded.
Here is a Daily Chart of Gold to close out these comments. I have noted the "Golden Cross" on the chart for your convenience. That is the 50 day moving average in green crossing above the 200 day moving average. Note that price has fallen below both of these moving averages, a bearish development. Typically in a strongly trending market to the upside, price will remain above these levels.
Bulls do have a support level within the general vicinity of that cross which comes in at the 50% Fibonacci Retracement Level at $1287. They only missed that by a few dollars today. If the bulls can reverse today's losses tomorrow to close out the week, they have a chance at stabilizing prices here. If not, and if $1287 gives way, there is some light support near $1280. After that, $1262 - $1255 is the next target.
For Gold to get some recent Bears nervous, it will have to regain its "13" handle for starters. If they can manage that, some of the shorts will go ahead and ring the cash register and move back out.
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