That pretty much sums up the market's reaction to the announcement of a new set of "sanctions" unveiled by the current administration against Russian President Vladimir Putin and Russia over events in Ukraine.
Sellers in gold wasted no time in declaring their view of the "strong message" ( note sarcasm here ) being sent to Russia proceeding to knock it back down below the $1300 level.
Further aiding the move lower was the heavy selling in Newmont and more weakness in Barrick over the announcement that any merger between the two was off the table for now.
The Yen also moved lower signaling the absence of any safe haven play as bonds also moved lower. Equities are moving in and out of positive territory as I type these comments. Safe havens are on hold, at least for today. There remains a great deal of volatility with short term technical factors dominating trading today.
I mentioned last Friday that I do not believe gold has much upside here because at this time I do not see events in Ukraine spreading outside of that region. If the market felt like those events could be a harbinger of more to come, gold would be much stronger. That it is not, is evidence enough that while the situation remains tense, most do not see it spreading beyond that region. Rallies in gold are therefore attracting selling even as dips lower are attracting buying from some due to the ongoing geopolitical developments. As stated so many, many times here now, buying gold due to geopolitical events is extremely risky. You have no idea what might or might not happen and thus it is entirely a crapshoot. That is not trading; it is not investing either for that matter; it is gambling. If you want to gamble, head to Las Vegas or Reno - at least they have some great looking showgirls while you are losing your money.
Corn continues to attract buying as traders are concerned over the slow start to planting this year. Also, the cool, wet conditions have raised concerns about poor germination of those crops which have been seeded. Soil temps are not warm enough and the market wants to see more sunshine.
This past Friday's Cattle on Feed report was considered friendly to the market as it caught some by surprise who were expecting to see larger numbers moving ahead. Feeder cattle continue to make all time highs as most small specs are caught on the short side and are getting squeezed out in a brutal fashion. How some of these guys paying the kinds of prices that they are for feeders are going to be able to make any money on them is a big mystery to me but that does not seem to be impacting things at the moment. Hogs are bleeding out of some the premium in there as traders take a "show me" attitude towards the slaughter numbers and the impact from the PED virus.
Crude oil continues weak in today's session further retreating from the double top near the $105 level.
Silver has once again attracted selling as it neared $20. It remains stuck in a narrow range between that level and $19 on the bottom.
Monday, April 28, 2014
Friday, April 25, 2014
Safe Havens Boost Gold
Once again, it is back to tracking events in Ukraine when it comes to gold. Traders are running away from risk and into the usual safe havens ( gold, bonds and the Yen).
This is going to be the scenario until something changes over there so get used to it. As I mentioned yesterday, it is basically a crap shoot. Those who expect the events to get worse are buying gold; those who expect them to be more contained are selling the rally. Both sides are utterly dependent on what happens next but more importantly, what is PERCEIVED to be the course of events.
Personally I do not see a lot of upside for gold here because the situation, as tense as it is, has not thus far spread to anywhere outside of Ukraine. In that sense, while it is not insignificant, it is not likely to have much impact ( other than the short term market gyrations associated with geopolitical events ) on regions outside of that immediate area. It certainly is not going to move the Fed one way or the other when it comes to Tapering plans or interest rate policy. As mentioned many times here, that will be completely dependent on subsequent US economic data releases.
This is the reason that gold is struggling to maintain the "13" handle in spite of the escalation in tensions. If the bombs start going off in earnest or we get larger scale shooting or conflict, gold will be bid higher but many traders do not see this thing moving beyond Ukraine at this point.
What we have seen is a bout of sharp, short-covering from speculative interests who had been pressing the metal from the short side. They are standing aside and allowing events to unfold further before coming back in to sell in size. That is allowing an air pocket above the market and price is moving in the path of least resistance which for now is higher.
I would caution those who are looking to buy the metal here. Just be careful - geopolitical events are very tricky - you might hit it big and then again, you might not. Whatever you decide to go, no matter which way, long or short, do not be slow on the draw if need be. You can never anticipate when events on the ground will change and flip the market in the other direction.
As a trader you do not always need to be in the market. Sometimes the sidelines is the proper place. Let others chop each other up while you wait for the trend to re-establish itself after the excitement lifts. I have made it a habit never to chase gold over geopolitical events because one never knows how those will turn out. If you own some physical gold, you can be content with that but do not chase it higher if you are a trader. Even if you miss out on a move, the structure of the market becomes too unstable and that sort of thing is asking for disaster in these highly leveraged futures now that computers are doing the brunt of the trading.
I am noticing that crude is getting hit hard today. We have large supplies of the stuff but some are unsure how to trade it due to the geopolitical concerns. For now the bears are flexing their muscles. Gasoline is a bit weaker today but the stuff has moved up some $0.50/gallon since mid-January this year much to the chagrin and frustration of consumers who were relishing the lower prices back then.
Moo-Moos and Piggies parted ways today with hogs going down and cattle going up. Packers have been able to move the higher priced beef for now while pork demand has hit a temporary lull it would seem. Consumers are going to learn quickly, if they have not done so already, that beef prices are at record highs. Again, I look for relief later this year but the summer grilling season is going to suck.
Corn continues to draw buying from those playing up the cold, wet planting season weather. There is no doubt that planting is running behind normal. Most expected it to do so given the intensity of the cold winter and the fact that some of the Great Lakes were frozen over. The big question is whether or not we will have a good growing season regardless. Some chatter that El Nino will help out the crop is around but it is a bit early to bank on that. For now, the bulls are in charge of the corn market. They were certainly back to playing " the US is going to run entirely out of old crop soybeans" theme in the bean market once again today as May hit the magical $15.00 level. We'll see if China begins any cancellations in earnest and whether or not imports from S. American begin to really take off.
I will get a chart up later for both gold, the COT stuff and the mining shares. I do not know whether or not the COT data will show the hedge fund short covering that has been occurring this week. My guess is that it will not, at least not in size because the big move from down below $1280 did not come until events flared up over in Ukraine on Thursday, two days after the cutoff point from the CFTC. Same goes for silver - hedge funds have been playing it increasingly from the short side and the combination of a stronger durable goods number, plus the psychological support from a higher gold price no doubt sent a fair number of shorts scurrying to cover but that occurred after Tuesday of this week. In other words, do not read too much into today's COT data. With what happened on Thursday, it is interesting but far too dated to give a clear read on how things stand here at the end of the week.
Considering the move higher in gold and its ability to recapture a "13" handle, the miners look rather lackluster at the moment. Maybe that will change by the closing bell. The HUI continues to trade down below both its 50 day moving average and its 200 day moving average, not exactly a glaring example of a big market endorsement of the sector. There is value-based buying at work in the sector but the momentum crowd is MIA.
The US stock markets are getting hit with some selling ahead of the weekend as traders are nervous holding long positions over the weekend in which anything can or might happen. Caution/prudence dictates standing aside, especially if you have some decent profits. I suspect that a fair number of money managers/institutions are welcoming this move lower in the broader equities. Valuations have not been cheap keeping many from buying. Their problem has been that they do not want to miss the move up but are hesitant to buy when many issues are trading up so close to chart highs. The setback will allow some strategic positioning to begin taking place.
So far, 1880 - 1890 on the S&P has proven to be a bridge too far for the bulls. Its session low at 1853 is right about even with the 50 day moving average. The 100 day comes in near 1830 which also corresponds closely to the mid-March swing low at 1823. If the 50 day does not hold it, I would look for prices to drift down towards that level to see if the market can uncover some buying there.
More later...
This is going to be the scenario until something changes over there so get used to it. As I mentioned yesterday, it is basically a crap shoot. Those who expect the events to get worse are buying gold; those who expect them to be more contained are selling the rally. Both sides are utterly dependent on what happens next but more importantly, what is PERCEIVED to be the course of events.
Personally I do not see a lot of upside for gold here because the situation, as tense as it is, has not thus far spread to anywhere outside of Ukraine. In that sense, while it is not insignificant, it is not likely to have much impact ( other than the short term market gyrations associated with geopolitical events ) on regions outside of that immediate area. It certainly is not going to move the Fed one way or the other when it comes to Tapering plans or interest rate policy. As mentioned many times here, that will be completely dependent on subsequent US economic data releases.
This is the reason that gold is struggling to maintain the "13" handle in spite of the escalation in tensions. If the bombs start going off in earnest or we get larger scale shooting or conflict, gold will be bid higher but many traders do not see this thing moving beyond Ukraine at this point.
What we have seen is a bout of sharp, short-covering from speculative interests who had been pressing the metal from the short side. They are standing aside and allowing events to unfold further before coming back in to sell in size. That is allowing an air pocket above the market and price is moving in the path of least resistance which for now is higher.
I would caution those who are looking to buy the metal here. Just be careful - geopolitical events are very tricky - you might hit it big and then again, you might not. Whatever you decide to go, no matter which way, long or short, do not be slow on the draw if need be. You can never anticipate when events on the ground will change and flip the market in the other direction.
As a trader you do not always need to be in the market. Sometimes the sidelines is the proper place. Let others chop each other up while you wait for the trend to re-establish itself after the excitement lifts. I have made it a habit never to chase gold over geopolitical events because one never knows how those will turn out. If you own some physical gold, you can be content with that but do not chase it higher if you are a trader. Even if you miss out on a move, the structure of the market becomes too unstable and that sort of thing is asking for disaster in these highly leveraged futures now that computers are doing the brunt of the trading.
I am noticing that crude is getting hit hard today. We have large supplies of the stuff but some are unsure how to trade it due to the geopolitical concerns. For now the bears are flexing their muscles. Gasoline is a bit weaker today but the stuff has moved up some $0.50/gallon since mid-January this year much to the chagrin and frustration of consumers who were relishing the lower prices back then.
Moo-Moos and Piggies parted ways today with hogs going down and cattle going up. Packers have been able to move the higher priced beef for now while pork demand has hit a temporary lull it would seem. Consumers are going to learn quickly, if they have not done so already, that beef prices are at record highs. Again, I look for relief later this year but the summer grilling season is going to suck.
Corn continues to draw buying from those playing up the cold, wet planting season weather. There is no doubt that planting is running behind normal. Most expected it to do so given the intensity of the cold winter and the fact that some of the Great Lakes were frozen over. The big question is whether or not we will have a good growing season regardless. Some chatter that El Nino will help out the crop is around but it is a bit early to bank on that. For now, the bulls are in charge of the corn market. They were certainly back to playing " the US is going to run entirely out of old crop soybeans" theme in the bean market once again today as May hit the magical $15.00 level. We'll see if China begins any cancellations in earnest and whether or not imports from S. American begin to really take off.
I will get a chart up later for both gold, the COT stuff and the mining shares. I do not know whether or not the COT data will show the hedge fund short covering that has been occurring this week. My guess is that it will not, at least not in size because the big move from down below $1280 did not come until events flared up over in Ukraine on Thursday, two days after the cutoff point from the CFTC. Same goes for silver - hedge funds have been playing it increasingly from the short side and the combination of a stronger durable goods number, plus the psychological support from a higher gold price no doubt sent a fair number of shorts scurrying to cover but that occurred after Tuesday of this week. In other words, do not read too much into today's COT data. With what happened on Thursday, it is interesting but far too dated to give a clear read on how things stand here at the end of the week.
Considering the move higher in gold and its ability to recapture a "13" handle, the miners look rather lackluster at the moment. Maybe that will change by the closing bell. The HUI continues to trade down below both its 50 day moving average and its 200 day moving average, not exactly a glaring example of a big market endorsement of the sector. There is value-based buying at work in the sector but the momentum crowd is MIA.
The US stock markets are getting hit with some selling ahead of the weekend as traders are nervous holding long positions over the weekend in which anything can or might happen. Caution/prudence dictates standing aside, especially if you have some decent profits. I suspect that a fair number of money managers/institutions are welcoming this move lower in the broader equities. Valuations have not been cheap keeping many from buying. Their problem has been that they do not want to miss the move up but are hesitant to buy when many issues are trading up so close to chart highs. The setback will allow some strategic positioning to begin taking place.
So far, 1880 - 1890 on the S&P has proven to be a bridge too far for the bulls. Its session low at 1853 is right about even with the 50 day moving average. The 100 day comes in near 1830 which also corresponds closely to the mid-March swing low at 1823. If the 50 day does not hold it, I would look for prices to drift down towards that level to see if the market can uncover some buying there.
More later...
Thursday, April 24, 2014
HUI Chart
A quick chart update...
The 200 day moving average is serving to cap the move higher, for now. Nothing definitive either way, bull or bear. It's a crap shoot and traders do not shoot craps.
The 200 day moving average is serving to cap the move higher, for now. Nothing definitive either way, bull or bear. It's a crap shoot and traders do not shoot craps.
Stop Hunting - the Financial Version of the Hunger Games
Just a quick post for now to detail some goings on this morning.... more later including some charts...
The Durable Goods number that came out this morning and caused some ripples. By the way, those are "big ticket" items. The orders jumped 2.6% from February last month beating the market expectations of a 2% rise. It was also the largest increase since November.
The result of this was to set off a round of short covering in the copper market as those who have been shorting copper based off of problems in China and expected slower growth there, were caught off guard by the strength of the number here. China is the world's largest user of copper but the US is still important to that market.
I noticed that as copper strengthened on this bout of short covering, so too did silver. It seemed those leaning on the industrial metals from the short side decided to head to the sidelines and await some further data before pressing their case. Copper has been quietly sneaking higher over the last month tacking on some $0.25/pound and while the chart is not especially friendly, it seems to have found a bottom below $3.00 for now. As many of you who read this blog regularly know, I track that market quite closely as I believe it is a much better barometer of what is going on as far as growth or lack thereof than most anything else.
The way I am reading that chart right now is that growth is not solid but neither is it all that sluggish. In other words, things are improving, but not by all that much. If copper can clear $3.20 then I will feel more comfortable about future economic growth prospects.
Hey, how about that REVERSE FLASH CRASH where the "good, benign, saintly" manipulators came in an shoved gold higher in some sort of perverse spike upwards? First it was run lower and a huge number of downside sell stops were picked off enriching quite a few floor traders in the process, only to careen higher forcing a huge number of buy stops to be run.
I am reminded of the old song:
" A hunting we will go, a hunting we will go; Hi, Ho, the derry O, a hunting we will go".
Just insert the word 'stop' in front of the word 'hunting' and you about have it.
By the way, do not expect to hear any round of criticism from the GIAMATT crowd about the ricochet higher in price. After all, that is reserved only for downward moves in price. Spikes higher are perfectly acceptable because we all know that everyone who wants to buy gold in large quantities wants to make sure that they buy it in such an obvious fashion that they drive the price higher so that they can pay a much higher price for it than if they had otherwise quietly been accumulating it.
I am using a bit of sarcasm here to just prove the point I continually make here at this site - today's wild swings in price are evidence of the broken nature of our markets due to the proliferation of computerized trading which rips price higher and lower as the new norm. Remember this the next time gold drops lower and up start the usual: "FLASH CRASH - evidence of evil manipulators at work" nonsense flares up.
Here is what actually happened and it had NOTHING, ZERO, NADA to do with manipulators or some secret esoteric anonymous large trader lurking in London or anything else - News hit the floor that Russia has decided to hold military exercises near the Ukranian borders and that included air operations.
Pro-Russian forces in eastern Ukraine are continuing to clash with Ukranian forces and that announcement sent stocks temporarily lower while gold shot higher as safe haven plays popped up. You can usually see that sort of thing when the Yen reverses and scoots higher.
It looks to me like the initial spike higher has attracted some sellers now that things seemed to have calmed down a bit. We will have to wait and see how the dust settles today. As long as there are any fears of further escalations over there in Ukraine, the market will be supported. If those fears fade, watch for more selling pressure to re-emerge once again.
The Durable Goods number that came out this morning and caused some ripples. By the way, those are "big ticket" items. The orders jumped 2.6% from February last month beating the market expectations of a 2% rise. It was also the largest increase since November.
The result of this was to set off a round of short covering in the copper market as those who have been shorting copper based off of problems in China and expected slower growth there, were caught off guard by the strength of the number here. China is the world's largest user of copper but the US is still important to that market.
I noticed that as copper strengthened on this bout of short covering, so too did silver. It seemed those leaning on the industrial metals from the short side decided to head to the sidelines and await some further data before pressing their case. Copper has been quietly sneaking higher over the last month tacking on some $0.25/pound and while the chart is not especially friendly, it seems to have found a bottom below $3.00 for now. As many of you who read this blog regularly know, I track that market quite closely as I believe it is a much better barometer of what is going on as far as growth or lack thereof than most anything else.
The way I am reading that chart right now is that growth is not solid but neither is it all that sluggish. In other words, things are improving, but not by all that much. If copper can clear $3.20 then I will feel more comfortable about future economic growth prospects.
Hey, how about that REVERSE FLASH CRASH where the "good, benign, saintly" manipulators came in an shoved gold higher in some sort of perverse spike upwards? First it was run lower and a huge number of downside sell stops were picked off enriching quite a few floor traders in the process, only to careen higher forcing a huge number of buy stops to be run.
I am reminded of the old song:
" A hunting we will go, a hunting we will go; Hi, Ho, the derry O, a hunting we will go".
Just insert the word 'stop' in front of the word 'hunting' and you about have it.
By the way, do not expect to hear any round of criticism from the GIAMATT crowd about the ricochet higher in price. After all, that is reserved only for downward moves in price. Spikes higher are perfectly acceptable because we all know that everyone who wants to buy gold in large quantities wants to make sure that they buy it in such an obvious fashion that they drive the price higher so that they can pay a much higher price for it than if they had otherwise quietly been accumulating it.
I am using a bit of sarcasm here to just prove the point I continually make here at this site - today's wild swings in price are evidence of the broken nature of our markets due to the proliferation of computerized trading which rips price higher and lower as the new norm. Remember this the next time gold drops lower and up start the usual: "FLASH CRASH - evidence of evil manipulators at work" nonsense flares up.
Here is what actually happened and it had NOTHING, ZERO, NADA to do with manipulators or some secret esoteric anonymous large trader lurking in London or anything else - News hit the floor that Russia has decided to hold military exercises near the Ukranian borders and that included air operations.
Pro-Russian forces in eastern Ukraine are continuing to clash with Ukranian forces and that announcement sent stocks temporarily lower while gold shot higher as safe haven plays popped up. You can usually see that sort of thing when the Yen reverses and scoots higher.
It looks to me like the initial spike higher has attracted some sellers now that things seemed to have calmed down a bit. We will have to wait and see how the dust settles today. As long as there are any fears of further escalations over there in Ukraine, the market will be supported. If those fears fade, watch for more selling pressure to re-emerge once again.
Tuesday, April 22, 2014
Goldman Sachs Saves Gold from Falling Apart
Yes, you read that headline correctly, much to the chagrin of the GIAMATT crowd. What am I referring to? Answer - this morning, two analysts from that firm upgraded their recommendation on the precious metals mining sector to "Neutral" from "Sell". They cited " a more responsible use of shareholder wealth". I found that rather interesting to say the least.
What was even more interesting was the headline that the story came down the Dow Jones wire under: " Gold Miners Now Less Likely to Torch Your Money". While it is a serious matter to those who have been so hurt by investing in this sector, I had to chuckle at the caption that the reporter chose. I think it pretty much summed up the sentiment of many toward these miserable things.
It was this upgrade of the miners which kept gold from utterly collapsing below critical chart support centered around the $1280 level. Hedge fund selling leaned on the market early in the session with a couple of approaches to $1280 on decent volume. Price rebounded away from that support but could not manage to make much upward progress. A big push finally took it down through $1280 but with the gold miners refusing to follow, short covering took the price back up again.
Obviously, there is a fierce battle occurring over this chart level. Whichever side blinks first, is going to lose it. As mentioned in recent posts, speculators are becoming more interested in playing gold from the short side, although, I wish to reiterate, they remain net long still. They are selling while bullion banks are buying to cover shorts. Ignore any talk about this being a plot of the bullion banks to take gold lower therefore.
Hedge funds are already net short copper, very close, if not already there now, net short silver, and are reducing their net long exposure to gold. If the gold price cannot find its feet right here, right now, watch for increasing long side liquidation and a new wave of fresh shorting.
Here is a look at the gold chart:
Notice how it is flirting dangerously with that red line that has held it going back to early this month. If it cannot recover quickly, price should move to test $1260, and then $1240 if that were to fail. Again, were it not for that Goldman recommendation on the mining shares, we would not be talking about $1280 at this point but rather whether or not $1260 is going to hold. Those who keep with this non-stop gold is being manipulated lower by Goldman Sachs and JP Morgan talk would do well to thank them at this point for saving their investment account from even worse harm.
There is nothing gold for the bulls as far as any sort of upside potential unless gold were to push past $1320 for starters. We'll have to see how Asia responds to the move lower this evening. Last night was not exactly a stellar endorsement. Maybe picking up the metal another $7 - $10 lower will make a difference.
Incidentally, those Newmont Mining/Barrick merger rumors are continuing today.
It sure did not help gold any today watching crude oil get whacked lower. It is still trading above the $100/barrel level so it is not exactly falling apart but it does appear that the $105 ceiling is still very much intact.
In yesterday's post, I mentioned the planting progress or more properly, the lack thereof, in regards to corn. The "corn is never going to ever get planted this year" guys pounced all over that driving it back up above the $5.00 mark. That pressured beans as traders are concerned more farmers will have to shift to beans instead of corn. You will have to watch the weather forecasts to figure out which way these things will go from here on out.
Welcome to the start of grain trading season!
By the way, for those who enjoy inflicting pain upon themselves, try trading coffee if you are bored. After imploding early last week, it went flying upward on Thursday last week just about erasing the losses from the two previous trading sessions. It then fell yesterday but decided to rally over 7.5% today. In the process it managed to score a 9 week high. To put that in a bit of perspective - that is an over $4,200 move in a single contract in one day! Maybe tomorrow or Thursday it will give it all back up again. Seriously, unless you really know this particular market, leave it alone. I know a couple of guys who traded that stuff and ended up having it cost them their commodity trading career.
I mention it only as an example of just how wild and unpredictable these commodity futures markets have become on account of the computer generated buying and selling. It is the norm, not the exception. Remember that whenever you are tempted to swallow that "flash crash" nonsense that constantly surfaces whenever gold has a sharp move lower. These sorts of insane price swings are everywhere, in every market anymore.
Let's see how gold fares the rest of today. Perhaps I will post a more updated chart later this evening depending on how things go. Bulls are piggybacking on Goldman's recommendation to keep the price supported for now.
What was even more interesting was the headline that the story came down the Dow Jones wire under: " Gold Miners Now Less Likely to Torch Your Money". While it is a serious matter to those who have been so hurt by investing in this sector, I had to chuckle at the caption that the reporter chose. I think it pretty much summed up the sentiment of many toward these miserable things.
It was this upgrade of the miners which kept gold from utterly collapsing below critical chart support centered around the $1280 level. Hedge fund selling leaned on the market early in the session with a couple of approaches to $1280 on decent volume. Price rebounded away from that support but could not manage to make much upward progress. A big push finally took it down through $1280 but with the gold miners refusing to follow, short covering took the price back up again.
Obviously, there is a fierce battle occurring over this chart level. Whichever side blinks first, is going to lose it. As mentioned in recent posts, speculators are becoming more interested in playing gold from the short side, although, I wish to reiterate, they remain net long still. They are selling while bullion banks are buying to cover shorts. Ignore any talk about this being a plot of the bullion banks to take gold lower therefore.
Hedge funds are already net short copper, very close, if not already there now, net short silver, and are reducing their net long exposure to gold. If the gold price cannot find its feet right here, right now, watch for increasing long side liquidation and a new wave of fresh shorting.
Here is a look at the gold chart:
Notice how it is flirting dangerously with that red line that has held it going back to early this month. If it cannot recover quickly, price should move to test $1260, and then $1240 if that were to fail. Again, were it not for that Goldman recommendation on the mining shares, we would not be talking about $1280 at this point but rather whether or not $1260 is going to hold. Those who keep with this non-stop gold is being manipulated lower by Goldman Sachs and JP Morgan talk would do well to thank them at this point for saving their investment account from even worse harm.
There is nothing gold for the bulls as far as any sort of upside potential unless gold were to push past $1320 for starters. We'll have to see how Asia responds to the move lower this evening. Last night was not exactly a stellar endorsement. Maybe picking up the metal another $7 - $10 lower will make a difference.
Incidentally, those Newmont Mining/Barrick merger rumors are continuing today.
It sure did not help gold any today watching crude oil get whacked lower. It is still trading above the $100/barrel level so it is not exactly falling apart but it does appear that the $105 ceiling is still very much intact.
In yesterday's post, I mentioned the planting progress or more properly, the lack thereof, in regards to corn. The "corn is never going to ever get planted this year" guys pounced all over that driving it back up above the $5.00 mark. That pressured beans as traders are concerned more farmers will have to shift to beans instead of corn. You will have to watch the weather forecasts to figure out which way these things will go from here on out.
Welcome to the start of grain trading season!
By the way, for those who enjoy inflicting pain upon themselves, try trading coffee if you are bored. After imploding early last week, it went flying upward on Thursday last week just about erasing the losses from the two previous trading sessions. It then fell yesterday but decided to rally over 7.5% today. In the process it managed to score a 9 week high. To put that in a bit of perspective - that is an over $4,200 move in a single contract in one day! Maybe tomorrow or Thursday it will give it all back up again. Seriously, unless you really know this particular market, leave it alone. I know a couple of guys who traded that stuff and ended up having it cost them their commodity trading career.
I mention it only as an example of just how wild and unpredictable these commodity futures markets have become on account of the computer generated buying and selling. It is the norm, not the exception. Remember that whenever you are tempted to swallow that "flash crash" nonsense that constantly surfaces whenever gold has a sharp move lower. These sorts of insane price swings are everywhere, in every market anymore.
Let's see how gold fares the rest of today. Perhaps I will post a more updated chart later this evening depending on how things go. Bulls are piggybacking on Goldman's recommendation to keep the price supported for now.
Monday, April 21, 2014
Gold Holds $1280 support; Remains Rangebound
Not much going on in gold today - it ran down to test the bottom of its trading range near $1280 and bounced off of that. Strength in the Dollar and a general sea of red across much of the commodity complex, undercut any reason to get aggressive buying it but enough interest was stirred down near that critical support level to prevent a sharper drop.
Gold shares were of no help for most of the day with the HUI exhibiting general weakness but towards the end of the session many of the share components of that index managed off their worst levels of the session. Gold over at the Comex seemed to come up alongside some of those shares.
I noticed that GG moved higher, gaining over 2% as I type these comments as management has effectively given up on their efforts to acquire Osisko. The market liked that in regards to GG but understood the implications for Osisko with that stock dropping 5.8% as I type this. That effectively clears the way for Yamana and Agnico-Eagle to pick it up. Both of those stocks were hammered lower. Obviously the market thinks they are going to end up paying too much for it given the weak gold price and its rather dubious prospects at this stage.
It will be up to the Asians to prop this thing up tonight here in the West ( in the morning over there in the East ). If they pull back for any reason, gold is in trouble. We'll watch the overnight trade and hopefully be able to see some clues as to their intentions.
The late comeback enabled the HUI to dodge the proverbial bullet today as it was flirting with a key technical chart support level near its session low. The bottom is holding as a result; however, any further strength in the US Dollar will probably see that fail. The currency markets, along with the US interest rate market, are the key drivers for gold right now.
Corn moved lower today, along with wheat which was derailed by talk of rainfall in the parched regions where it is badly needed. Beans were also pressured today although the bulls did their usual ramp job on the close as they came in and bought a bunch of them back. There was also a round of short covering as frustrated bears waiting for the funds to finally get out of these things got impatient and said, "the hell with it" and closed out some trades. Some large specs are convinced that the US is going to run out of beans before we get any of the early harvest from this year's crop coming in and that is why they keep coming back and buying the beans. When this theory/sentiment shifts, we will know it.
This afternoon we got the plantings progress number from the pencil pushers. Corn came in at 6% planted compared to last year's 4% at this time and the 5 year average of 14%. I would remind you that these numbers are not nearly as important as they once were given the significant advancements in the speed at which US farmers can get those seeds in the ground nowadays but old habits seem to die hard in the grain markets and there are some who still view these numbers as if they mean anything this time of the year. They still have enough clout as far as their buying and selling goes that one has to react to this goofiness but it is what it is and traders have to understand that and position accordingly. Both corn and soybeans have built up a nice demand base as prices retreated from all time highs last season. The question is, especially for beans, will that demand base remain intact given the potential for a large bean crop up here in the Northern Hemisphere this growing season. Along that line, any more credit related issues concerning the Chinese and soybean purchases is going to be ONE VERY BIG DEAL.
Cold Storage will be coming out this week so we livestock traders will be watching for that. I enjoy getting the emails and comments from some concerning the sky-high prices that they are seeing for both pork and beef in their local grocery stores. The drama is playing out as expected. What I can tell you is that I am very confident that we will see prices move lower this fall for both but this spring/summer is going to be one which is not going to be a lot of fun for those of us that enjoy bar-b-q. Sadly, this is what happens when we get back to back drought years in cattle country ( 2011 + 2012) along with record high prices for corn and meal ( some blame goes to that pestilential ethanol crap). One simply cannot do a single thing to change the breeding cycle of bovine bovinus ( that is my pitiful attempt to throw some fancy Latin phrases around to impress the reader ) as it takes time to rebuild a cattle herd.
I hope the readers had an enjoyable Easter weekend. It is back to the sawmill now.
Gold shares were of no help for most of the day with the HUI exhibiting general weakness but towards the end of the session many of the share components of that index managed off their worst levels of the session. Gold over at the Comex seemed to come up alongside some of those shares.
I noticed that GG moved higher, gaining over 2% as I type these comments as management has effectively given up on their efforts to acquire Osisko. The market liked that in regards to GG but understood the implications for Osisko with that stock dropping 5.8% as I type this. That effectively clears the way for Yamana and Agnico-Eagle to pick it up. Both of those stocks were hammered lower. Obviously the market thinks they are going to end up paying too much for it given the weak gold price and its rather dubious prospects at this stage.
It will be up to the Asians to prop this thing up tonight here in the West ( in the morning over there in the East ). If they pull back for any reason, gold is in trouble. We'll watch the overnight trade and hopefully be able to see some clues as to their intentions.
The late comeback enabled the HUI to dodge the proverbial bullet today as it was flirting with a key technical chart support level near its session low. The bottom is holding as a result; however, any further strength in the US Dollar will probably see that fail. The currency markets, along with the US interest rate market, are the key drivers for gold right now.
Corn moved lower today, along with wheat which was derailed by talk of rainfall in the parched regions where it is badly needed. Beans were also pressured today although the bulls did their usual ramp job on the close as they came in and bought a bunch of them back. There was also a round of short covering as frustrated bears waiting for the funds to finally get out of these things got impatient and said, "the hell with it" and closed out some trades. Some large specs are convinced that the US is going to run out of beans before we get any of the early harvest from this year's crop coming in and that is why they keep coming back and buying the beans. When this theory/sentiment shifts, we will know it.
This afternoon we got the plantings progress number from the pencil pushers. Corn came in at 6% planted compared to last year's 4% at this time and the 5 year average of 14%. I would remind you that these numbers are not nearly as important as they once were given the significant advancements in the speed at which US farmers can get those seeds in the ground nowadays but old habits seem to die hard in the grain markets and there are some who still view these numbers as if they mean anything this time of the year. They still have enough clout as far as their buying and selling goes that one has to react to this goofiness but it is what it is and traders have to understand that and position accordingly. Both corn and soybeans have built up a nice demand base as prices retreated from all time highs last season. The question is, especially for beans, will that demand base remain intact given the potential for a large bean crop up here in the Northern Hemisphere this growing season. Along that line, any more credit related issues concerning the Chinese and soybean purchases is going to be ONE VERY BIG DEAL.
Cold Storage will be coming out this week so we livestock traders will be watching for that. I enjoy getting the emails and comments from some concerning the sky-high prices that they are seeing for both pork and beef in their local grocery stores. The drama is playing out as expected. What I can tell you is that I am very confident that we will see prices move lower this fall for both but this spring/summer is going to be one which is not going to be a lot of fun for those of us that enjoy bar-b-q. Sadly, this is what happens when we get back to back drought years in cattle country ( 2011 + 2012) along with record high prices for corn and meal ( some blame goes to that pestilential ethanol crap). One simply cannot do a single thing to change the breeding cycle of bovine bovinus ( that is my pitiful attempt to throw some fancy Latin phrases around to impress the reader ) as it takes time to rebuild a cattle herd.
I hope the readers had an enjoyable Easter weekend. It is back to the sawmill now.
Saturday, April 19, 2014
Weekly Gold Chart
I wanted to take just a short bit of time between firing up the pit smoker and throwing some bovine flesh upon it to put up a quick chart of gold for the readers.
As I mentioned on Thursday, gold is totally at the mercy of events in Ukraine for the time being.
You can see on the chart that the metal has been range bound for some time now ( about one year ). Please keep this is mind when you read more breathless talk about gold being poised for a big move "any time now". How many of these "any time now's" have we read over the last year? Whether it is the GOFO talk or backwardation talk or "Russia is going to dump the Dollar" talk, or whatever.
Technically not a single one of these premises, or others not listed, have changed the technical posture of this market for a year. If and only if the price breaks out of this range, can we say with certainty that the market has become concerned with these things. For now, it could care less and thus neither should we.
The green rectangle defines the range which is near $1400 on the top side and just below $1200 on the bottom side for a range of some $200. Just last month ( March ) the price had rallied up to the top of the range only to meet with selling. That pushed it back down with it looking likely that it was headed down towards $1200 once more. However, events flared up in Ukraine and gold received some strong bids due to safe haven flows. Those bids came in near $1280.
The circumstances due to these geopolitical concerns have created a new and higher bottom at the $1280 level. However, gold has been unable to push past $1320 for any length of time. That has carved out a new range within the broader range. This is marked on the chart as "Tighter Trading Range".
These two levels are our new boundaries which are confining the price for the time being. If the market senses any lessening of tensions in Ukraine, chances are that $1280 will not hold on the bottom. If not, there is a band of congestion between $1260 - $1240 that will draw it like a magnet should it fail. There is little support between $1240 and $1200 meaning that if $1240 were to fail, $1200 will be tested.
On the upside, only a breach of $1320 would give the bulls the needed impetus to make a run to $1350.
If events in Ukraine fade from traders' minds, the focus will shift back to US economic data with participants looking for clues to the Fed's future actions on in US interest rate front. Any improvements on the jobs front will immediately fan the flames of higher interest rates next spring, which the market continues to waver back and forth on. Higher rates will pressure gold as it should support the US Dollar. Again, we do not know what the economic data will look like and thus that leaves the markets very susceptible to sudden and sharp price swings either way as price responds to changes in expectations or sentiment along those lines.
Lastly, here is the current Commitment of Traders data viewed in chart form as to the positioning of the large hedge funds in comparison to the price of the metal.
There was a rather large shift this week in the positioning of the hedgies as they were both liquidating stale longs and adding new shorts. The combination dropped their current net long position by some 8000 contracts or so. This is the reason for my concern if the $1280 level does not hold - there will be a significant amount of long liquidation among this category of traders if it does not.
In another interesting development, the small traders, the general public, were selling gold this past week as well. Is the bloom coming off the metal for this category? They are net long still but this is the least bullish they have been in five weeks. Sentiment could be changing in the speculative community and that will bear close monitoring.
Happy Easter.
As I mentioned on Thursday, gold is totally at the mercy of events in Ukraine for the time being.
You can see on the chart that the metal has been range bound for some time now ( about one year ). Please keep this is mind when you read more breathless talk about gold being poised for a big move "any time now". How many of these "any time now's" have we read over the last year? Whether it is the GOFO talk or backwardation talk or "Russia is going to dump the Dollar" talk, or whatever.
Technically not a single one of these premises, or others not listed, have changed the technical posture of this market for a year. If and only if the price breaks out of this range, can we say with certainty that the market has become concerned with these things. For now, it could care less and thus neither should we.
The green rectangle defines the range which is near $1400 on the top side and just below $1200 on the bottom side for a range of some $200. Just last month ( March ) the price had rallied up to the top of the range only to meet with selling. That pushed it back down with it looking likely that it was headed down towards $1200 once more. However, events flared up in Ukraine and gold received some strong bids due to safe haven flows. Those bids came in near $1280.
The circumstances due to these geopolitical concerns have created a new and higher bottom at the $1280 level. However, gold has been unable to push past $1320 for any length of time. That has carved out a new range within the broader range. This is marked on the chart as "Tighter Trading Range".
These two levels are our new boundaries which are confining the price for the time being. If the market senses any lessening of tensions in Ukraine, chances are that $1280 will not hold on the bottom. If not, there is a band of congestion between $1260 - $1240 that will draw it like a magnet should it fail. There is little support between $1240 and $1200 meaning that if $1240 were to fail, $1200 will be tested.
On the upside, only a breach of $1320 would give the bulls the needed impetus to make a run to $1350.
If events in Ukraine fade from traders' minds, the focus will shift back to US economic data with participants looking for clues to the Fed's future actions on in US interest rate front. Any improvements on the jobs front will immediately fan the flames of higher interest rates next spring, which the market continues to waver back and forth on. Higher rates will pressure gold as it should support the US Dollar. Again, we do not know what the economic data will look like and thus that leaves the markets very susceptible to sudden and sharp price swings either way as price responds to changes in expectations or sentiment along those lines.
Lastly, here is the current Commitment of Traders data viewed in chart form as to the positioning of the large hedge funds in comparison to the price of the metal.
There was a rather large shift this week in the positioning of the hedgies as they were both liquidating stale longs and adding new shorts. The combination dropped their current net long position by some 8000 contracts or so. This is the reason for my concern if the $1280 level does not hold - there will be a significant amount of long liquidation among this category of traders if it does not.
In another interesting development, the small traders, the general public, were selling gold this past week as well. Is the bloom coming off the metal for this category? They are net long still but this is the least bullish they have been in five weeks. Sentiment could be changing in the speculative community and that will bear close monitoring.
Happy Easter.
Thursday, April 17, 2014
Geneva Talks Pressure Gold
"She loves me; she loves me not", could be the expression best used to "time" one's entry into or out of the gold market lately. Just look at the headlines I have chosen to employ the last few trading days and you will get the idea. Back and forth they have gone as the mood of the market has been flipping from day to day. Most of gold's recent gains are related to the situation in Ukraine; take that away and the other fundamental factors remain bearish. Gold is therefore ultra sensitive to any sort of swing/change in what is taking place over there.
Today, apparently talks in Geneva ( 6 hours worth ) between the US, Russia and the EU, yielded some fruit, at least in the mind of traders. A framework was agreed upon which it is hoped that tensions could be throttled back. We'll see how that goes but for today, it was negative for gold prices, especially with yields on US Treasuries rising and a stable to firm Dollar. The yield on the Ten Year jumped today to 2.721% as I type these comments from a low near 2.60% earlier this week.
Again, at the risk of beating a dead horse, buying gold based on geopolitical tensions is always tenuous at best because as soon as those tensions are viewed as diminishing, gold is going to come under selling pressure not only from longs who are seeking to book any gains that they might have achieved before those are lost, but also from opportunistic shorts who are hoping for additional long liquidation to take the market down into sell stops that they have been eying.
We got that today in the form of a breach below psychological chart support at the $1300 level. Once gold lost that "13" handle, the stops kicked in and took it down sharply. It did get some buying right above $1290 but the technical damage was done at that point.
Looking at the daily chart, the market looks heavy heading into next week. Keep in mind that we have a long holiday weekend in the West with Easter coming up. That means a lot can happen between now and Sunday evening ( in the West) or Monday morning in Asia. If we do not see any flareups over in Ukraine over the weekend, gold could be in for some more selling come then. Everything is contingent on events meaning the market can go either way.
Back to the chart however...The big move down on Tuesday this week has cast a bearish pall over the market. It did bounce from the support level near $1280 but that was due to events in Ukraine. Two things have happened as a result of this. First, is that the price fell BELOW the 50 day moving average on Tuesday; that is negative. Then today, it fell BELOW the 200 day moving average once again. It should be noted in a trendless market moving averages are notorious for producing whipsaws but nonetheless, technicians keep an eye on these things to try to gauge just who might have the upper hand, bulls or bears.
The support noted is not that far off meaning if tensions lighten up a bit over the weekend, we will more than likely see gold test that support level. If it holds, fine. If it does not, $1260 will be seen in short order followed by a trip to $1240 if that fails to stir up active buying. All of this to say one simple thing - $1280 is shaping up to be a most significant chart technical level. If the bears crash it, watch for them to really pour on new, fresh short positions.
The ADX continues to move lower indicating the trendless feature of this market. The trading range, once between $1400 and so on the top and $1280 on the bottom has now constricted to near $1320 on the top with the bottom remaining the same. Bears are currently in control based on the directional movement lines.
A big contributor to the lack of upside enthusiasm in gold continues to be the poor showing by the gold mining shares. As mentioned yesterday, the market does not like these bidding wars it is seeing among some of the larger firms and is punishing their stock prices as a result. By more importantly, look at the technical price chart of the HUI and you will see what the problem is:
The HUI ended last week on a horrible note and it has been bleeding lower for most of this week. As things now stand, it is precariously perched just on top of chart support near 216 closing in the lower half of today's trading range. If it loses that, there is not much in the way of help until the index would near 211- 210. If 210 were to go, all bets would be off for the gold shares as one could begin to make the case that the index is on course to surrender all of the gains of the year. Let us hope not for the long suffering bulls.
Disgruntled Bulls - Please keep the hate emails and the nasty posts to yourself as I am just relating how things could shape up from a purely technical posture.
The overall commodity sector ( as a whole ) is working higher adding some support to gold but as far as any sort of upside trending move higher, the GSCI is not indicating one at the moment. Instead we see the index continuing to make a series of lower highs and relatively stable lows. Keep in mind something I wrote yesterday - this index is designed to key off of the most active or front months in the commodity futures markets. Currently a goodly number of these markets are showing markets in a backwardation structure. What is important to note about this is that the futures markets are anticipating a comedown in commodity prices as we move deeper into this year. Markets, being forward looking by nature, are discounting any serious threat of upward price pressures later this year. Of course, unforeseen events, especially weather, can always trigger reassessments of such things, but for now, the markets are signaling a break in upward price pressures in the commodity sector towards the third quarter of this year.
Along this line, economic data coming out of China will be closely scrutinized.
There are already rumblings of credit issues in that regards involving Chinese buyers of soybeans. That is not insignificant and will be closely watched due to its implications in the grain markets. Old crop beans seemed a bit nervous about this today although with the way the funds have been buying them, they did not break down all that much. Quite frankly, that soybean market makes me nervous. There remains a large number of farmers who are sitting with last year's beans in their storage bins who apparently will not let go of them. I have no idea what they are waiting for. If the function of the market is to ration demand, it is certainly doing that judging from the export numbers we got this morning. Maybe we need to see another week of poor numbers to convince some of these guys that prices are getting rather lofty. The thing is however, as long as the funds can push them higher without any serious hedge pressures from commercial entities, they are going to do just that. Standing in their path is a quick way to become a "former" commodity trader.
With the markets being closed for Easter, it will be a nice break away from the madness. We Christians celebrate the Resurrection of the Lord Jesus Christ from the grave as the evidence that His sacrifice for our sins was accepted and that they are now atoned for. We also believe that the resurrection is proof that Jesus was who He said He was, namely the Son of God. For those who believe, it is a glorious message!
"I am the resurrection and the life; he who believes in Me, shall live, even if he dies." ( John 11:25).
Happy Easter!
Today, apparently talks in Geneva ( 6 hours worth ) between the US, Russia and the EU, yielded some fruit, at least in the mind of traders. A framework was agreed upon which it is hoped that tensions could be throttled back. We'll see how that goes but for today, it was negative for gold prices, especially with yields on US Treasuries rising and a stable to firm Dollar. The yield on the Ten Year jumped today to 2.721% as I type these comments from a low near 2.60% earlier this week.
Again, at the risk of beating a dead horse, buying gold based on geopolitical tensions is always tenuous at best because as soon as those tensions are viewed as diminishing, gold is going to come under selling pressure not only from longs who are seeking to book any gains that they might have achieved before those are lost, but also from opportunistic shorts who are hoping for additional long liquidation to take the market down into sell stops that they have been eying.
We got that today in the form of a breach below psychological chart support at the $1300 level. Once gold lost that "13" handle, the stops kicked in and took it down sharply. It did get some buying right above $1290 but the technical damage was done at that point.
Looking at the daily chart, the market looks heavy heading into next week. Keep in mind that we have a long holiday weekend in the West with Easter coming up. That means a lot can happen between now and Sunday evening ( in the West) or Monday morning in Asia. If we do not see any flareups over in Ukraine over the weekend, gold could be in for some more selling come then. Everything is contingent on events meaning the market can go either way.
Back to the chart however...The big move down on Tuesday this week has cast a bearish pall over the market. It did bounce from the support level near $1280 but that was due to events in Ukraine. Two things have happened as a result of this. First, is that the price fell BELOW the 50 day moving average on Tuesday; that is negative. Then today, it fell BELOW the 200 day moving average once again. It should be noted in a trendless market moving averages are notorious for producing whipsaws but nonetheless, technicians keep an eye on these things to try to gauge just who might have the upper hand, bulls or bears.
The support noted is not that far off meaning if tensions lighten up a bit over the weekend, we will more than likely see gold test that support level. If it holds, fine. If it does not, $1260 will be seen in short order followed by a trip to $1240 if that fails to stir up active buying. All of this to say one simple thing - $1280 is shaping up to be a most significant chart technical level. If the bears crash it, watch for them to really pour on new, fresh short positions.
The ADX continues to move lower indicating the trendless feature of this market. The trading range, once between $1400 and so on the top and $1280 on the bottom has now constricted to near $1320 on the top with the bottom remaining the same. Bears are currently in control based on the directional movement lines.
A big contributor to the lack of upside enthusiasm in gold continues to be the poor showing by the gold mining shares. As mentioned yesterday, the market does not like these bidding wars it is seeing among some of the larger firms and is punishing their stock prices as a result. By more importantly, look at the technical price chart of the HUI and you will see what the problem is:
The HUI ended last week on a horrible note and it has been bleeding lower for most of this week. As things now stand, it is precariously perched just on top of chart support near 216 closing in the lower half of today's trading range. If it loses that, there is not much in the way of help until the index would near 211- 210. If 210 were to go, all bets would be off for the gold shares as one could begin to make the case that the index is on course to surrender all of the gains of the year. Let us hope not for the long suffering bulls.
Disgruntled Bulls - Please keep the hate emails and the nasty posts to yourself as I am just relating how things could shape up from a purely technical posture.
The overall commodity sector ( as a whole ) is working higher adding some support to gold but as far as any sort of upside trending move higher, the GSCI is not indicating one at the moment. Instead we see the index continuing to make a series of lower highs and relatively stable lows. Keep in mind something I wrote yesterday - this index is designed to key off of the most active or front months in the commodity futures markets. Currently a goodly number of these markets are showing markets in a backwardation structure. What is important to note about this is that the futures markets are anticipating a comedown in commodity prices as we move deeper into this year. Markets, being forward looking by nature, are discounting any serious threat of upward price pressures later this year. Of course, unforeseen events, especially weather, can always trigger reassessments of such things, but for now, the markets are signaling a break in upward price pressures in the commodity sector towards the third quarter of this year.
Along this line, economic data coming out of China will be closely scrutinized.
There are already rumblings of credit issues in that regards involving Chinese buyers of soybeans. That is not insignificant and will be closely watched due to its implications in the grain markets. Old crop beans seemed a bit nervous about this today although with the way the funds have been buying them, they did not break down all that much. Quite frankly, that soybean market makes me nervous. There remains a large number of farmers who are sitting with last year's beans in their storage bins who apparently will not let go of them. I have no idea what they are waiting for. If the function of the market is to ration demand, it is certainly doing that judging from the export numbers we got this morning. Maybe we need to see another week of poor numbers to convince some of these guys that prices are getting rather lofty. The thing is however, as long as the funds can push them higher without any serious hedge pressures from commercial entities, they are going to do just that. Standing in their path is a quick way to become a "former" commodity trader.
With the markets being closed for Easter, it will be a nice break away from the madness. We Christians celebrate the Resurrection of the Lord Jesus Christ from the grave as the evidence that His sacrifice for our sins was accepted and that they are now atoned for. We also believe that the resurrection is proof that Jesus was who He said He was, namely the Son of God. For those who believe, it is a glorious message!
"I am the resurrection and the life; he who believes in Me, shall live, even if he dies." ( John 11:25).
Happy Easter!
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