Both of these metals have been moving in lockstep recently as risk trades were either jammed on or taken off. Silver has been trading like an industrial metal during such times. Today it is moving like a safe haven metal. Very interesting developments to say the least.
In the process it is now trading solidly above critical resistance near the $32.50 level. If it can hold these gains, it will be on target for a shot towards $34.
Tuesday, October 25, 2011
Is Gold resuming its Safe Haven Status?
In a departure from recent price action in which it has been acting more like a "risk" asset rather than a safe haven asset, gold is moving higher alongside of both the US Dollar and the US Treasury market. It appears that traders are becoming increasingly "jittery" over developments in Europe concering the bank recapitalization plan and the Stability Mechanism. Safe havens flows are definitely returning to gold based on what we are witnessing today.
Thus far the volume has been very strong on the breakout above key resistance at the $1680 level with the market challenging overhead psychological resistance at the $1700 level. If gold can put on a handle of "17", it will get the attention of money that has been sitting on the sidelines as well as putting some further pressure on shorts.
I will get a chart up a bit later towards the end of the session today as I want to see how it does for another couple of hours.
Thus far the volume has been very strong on the breakout above key resistance at the $1680 level with the market challenging overhead psychological resistance at the $1700 level. If gold can put on a handle of "17", it will get the attention of money that has been sitting on the sidelines as well as putting some further pressure on shorts.
I will get a chart up a bit later towards the end of the session today as I want to see how it does for another couple of hours.
Monday, October 24, 2011
Let's Play "Guess a Chart"
Take a look at the following TWO charts and see if you can notice how similar the two of them are.
You can tell that both charts, while not identical, are eerily similar in the manner in which they depict the overall price action.
The top chart is the S&P 500. The lower chart is Crude Oil.
They both tend to move up at the same time, mover lower at the same time and grind sideways at the same time.
What these charts tell us is that there is no longer any SERIOUS INVESTMENT "STRATEGY" in today's financial markets. All that they are doing is reflecting either the willingness of the HEDGE FUNDS to take on RISK TRADES or to FLEE from RISK.
On any given day, if the risk trades are on, these nitwit hedge fund managers buy everything in site except for US TREASURIES or the US DOLLAR. If the following day brings in risk aversion trades, they throw away everything purchased the previous day and do the exact opposite.
Truth be told this sort of thing has nothing to do with INVESTING. It has everything to do with MONEY FLOWS generated by computer algorithms. This sad state of affairs is what Central Bank interventions and constant interference into the financial markets has reduced our markets to.
Traders have to put aside their personal disgust at this madness and trade accordingly if they wish to profit. Still, in this trader's opinion, this is one more symptom of the decline of the West. No longer is the stock of various companies bought because of long term prospects for solid profits based on solid research and good analysis. Instead it goes up based on whether or not the Central Banks will spit more liquidity into the marketplace.
Heaven help us all.
Saturday, October 22, 2011
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
http://tinyurl.com/3bwf22e
http://tinyurl.com/3bwf22e
Thursday, October 20, 2011
Fed's Balance Sheet not growing but not shrinking much either
Take a quick look at the chart below to get a sense of what is taking place as a result of the cessation of the Fed's QE2 program and the inception of its "Operation Twist".
Recall that Operation Twist is nothing more than a rolling over of maturing shorter term Treasury debt into longer term Treasury debt in a deliberate attempt by the Federal Reserve to manipulate the rate of interest on the longer end of the yield curve.
While I personally find the idea that a small group of individuals presumes to be able to determine the exact rate of interest to fine tune an economy and make in move in the direction of their choice to be repugnant, it is what it currently is. I believe this constant interference into the interest rate sector is causing more complications than it is supposedly curing. It was the lowering of interest rates down to 45 year old levels some while back that paved the way for all this malinvestment and contributed to the excess that we are all too sadly aware of by now.
The notion that the same people who were partly responsible for creating this mess are the saviors to rescue us from it is laughable for its stupidity.
That being said, the Street loves nothing more than a Fed-induced liquidity party. As you can see, during both episodes of Quantitative Easing, I and II, the S&P 500, which is an excellent proxy for the US stock markets as a whole, moved higher, nearly reaching levels that it had climbed to just prior to the bust of Lehman Brothers in mid-2008, which ushered in the credit crisis.
As long as the Fed was expanding its balance sheet, there were "Blue Skies - nothing but Blue Skies, do I see" ahead. When the FOMC pulled the plug on QE2 in June of this year, down went the S&P, and it has not yet been able to recover from that cold turkey withdrawal of Billions in liquidity.
What the Fed is now doing with its Operation Twist is not expanding its Balance Sheet but is rather rolling over some of the maturing shorter term debt into longer term Treasuries. The effect has been to basically keep the Treasury portion of their Balance Sheet from not shrinking but also from not expanding. As their Balance Sheet flatlines, the broader stock markets are buckling under the weight of the rotten economy and global slowdown that is now taking hold.
Given the current conditions, it is difficult to gauge what might be a driving factor that would take the S&P anywhere near back to its recent peak just below 1400. Without another injection boost of liquidity, the best that the market could hope for is a period of sideways movement.
Recall that Operation Twist is nothing more than a rolling over of maturing shorter term Treasury debt into longer term Treasury debt in a deliberate attempt by the Federal Reserve to manipulate the rate of interest on the longer end of the yield curve.
While I personally find the idea that a small group of individuals presumes to be able to determine the exact rate of interest to fine tune an economy and make in move in the direction of their choice to be repugnant, it is what it currently is. I believe this constant interference into the interest rate sector is causing more complications than it is supposedly curing. It was the lowering of interest rates down to 45 year old levels some while back that paved the way for all this malinvestment and contributed to the excess that we are all too sadly aware of by now.
The notion that the same people who were partly responsible for creating this mess are the saviors to rescue us from it is laughable for its stupidity.
That being said, the Street loves nothing more than a Fed-induced liquidity party. As you can see, during both episodes of Quantitative Easing, I and II, the S&P 500, which is an excellent proxy for the US stock markets as a whole, moved higher, nearly reaching levels that it had climbed to just prior to the bust of Lehman Brothers in mid-2008, which ushered in the credit crisis.
As long as the Fed was expanding its balance sheet, there were "Blue Skies - nothing but Blue Skies, do I see" ahead. When the FOMC pulled the plug on QE2 in June of this year, down went the S&P, and it has not yet been able to recover from that cold turkey withdrawal of Billions in liquidity.
What the Fed is now doing with its Operation Twist is not expanding its Balance Sheet but is rather rolling over some of the maturing shorter term debt into longer term Treasuries. The effect has been to basically keep the Treasury portion of their Balance Sheet from not shrinking but also from not expanding. As their Balance Sheet flatlines, the broader stock markets are buckling under the weight of the rotten economy and global slowdown that is now taking hold.
Given the current conditions, it is difficult to gauge what might be a driving factor that would take the S&P anywhere near back to its recent peak just below 1400. Without another injection boost of liquidity, the best that the market could hope for is a period of sideways movement.
Another down day for the Metals
Both gold and silver continue to move lower and towards the bottom of their trading ranges. In the case of gold it dropped through $1620 and fell to just above $1600 where buyers showed up. It is currently attempting to get back over the $1620 level.
Silver violated support at both $31 and then again at $30 but it did encounter some decent-sized buying just below that latter level and has bounced back above $30 as I write this.
As expected, the HUI, once it sank through the support region near 520, fell all the way to the next support zone near 500 which extends down towards 490. This needs to hold if the mining shares are going to avoid even steeper losses.
The HUI is already deeply negative for the year but has been able to recover on each trip down towards 490 for nearly an entire year now. We would not want to see this level give way. If it does, the critical Fibonacci of 50% comes in near 470 and one would expect that to stem the selling. Should it fail there really is not muchn on the chart as far as support goes until we get all the way down towards 460-450.
Note that the weekly uptrend line on the chart has given way. The shares will need a strong rally tomorrow to go off the board for this week on a better note.
Silver violated support at both $31 and then again at $30 but it did encounter some decent-sized buying just below that latter level and has bounced back above $30 as I write this.
The HUI is already deeply negative for the year but has been able to recover on each trip down towards 490 for nearly an entire year now. We would not want to see this level give way. If it does, the critical Fibonacci of 50% comes in near 470 and one would expect that to stem the selling. Should it fail there really is not muchn on the chart as far as support goes until we get all the way down towards 460-450.
Note that the weekly uptrend line on the chart has given way. The shares will need a strong rally tomorrow to go off the board for this week on a better note.
Wednesday, October 19, 2011
Gold fails at the upper end of its trading range - moves lower
Once again, the $1680 level has proved to be too high a mountain for the gold bulls to climb.Having failed there the previous trading session, it has now begun moving back down within the recent trading range testing support levels in the process.
The first level that gave way was $1660. We are now challenging $1640. If that gives way, we then move towards $1625 - $1620, followed by the region near $1600.
The HUI is absolutely no help once again as the ratio trades are back, due mainly to weakness in the broad equity markets and the dumping of risk trades.
Traders who love changing their convictions on the markets every day, ought to be head over heels in love with these markets being there simply is no "rhythm" to them. UP- DOWN; UP - DOWN, The entire world of the equity markets has gone Bi-Polar.
Technically the HUI is still in a bearish posture as it cannot get back above the 50 day moving average. That is the first strike. Until it can clear that marker decisively, technicians are going to be selling rallies.
The second strike against it is that it cannot push through the top of its recent trading range which comes in near 555- 560. Having failed there is has now moved back down towards the bottom of the trading range but has thus far failed to hold at the important 520 level. It is now vulnerable to a dip back towards 500 or even 490 once again if the broader equity markets cannot soon rally back.
Silver failed to best very stubborn resistance at $32.50, fell back within its trading range, violated support near $31 but is trying to regain that level. If it does not, it will drop back to $30.
If you want my opinion as to when all this idiocy is going to end and we are going to get some better behaved markets instead of the madness that we are now forced to witness each and every day - it will end when this stupid attempt by the Central Banks of the West to keep the liquidity spigots open comes to an end. It is this meddling by the monetary authorities, who refuse to let the markets cleanse themselves by punishing foolish decisions, whether made by countries or businesses, and rewarding prudent decisions, which is the source of this volatility. Remove that and the markets will trend in one direction or the other. That is what terrifies them and why they refuse to stop interfering with the necessary cleansing process. All they are doing however is making matters worse and guaranteeing that the day of reckoning will be all that much worse.
The first level that gave way was $1660. We are now challenging $1640. If that gives way, we then move towards $1625 - $1620, followed by the region near $1600.
The HUI is absolutely no help once again as the ratio trades are back, due mainly to weakness in the broad equity markets and the dumping of risk trades.
Traders who love changing their convictions on the markets every day, ought to be head over heels in love with these markets being there simply is no "rhythm" to them. UP- DOWN; UP - DOWN, The entire world of the equity markets has gone Bi-Polar.
Technically the HUI is still in a bearish posture as it cannot get back above the 50 day moving average. That is the first strike. Until it can clear that marker decisively, technicians are going to be selling rallies.
The second strike against it is that it cannot push through the top of its recent trading range which comes in near 555- 560. Having failed there is has now moved back down towards the bottom of the trading range but has thus far failed to hold at the important 520 level. It is now vulnerable to a dip back towards 500 or even 490 once again if the broader equity markets cannot soon rally back.
Silver failed to best very stubborn resistance at $32.50, fell back within its trading range, violated support near $31 but is trying to regain that level. If it does not, it will drop back to $30.
If you want my opinion as to when all this idiocy is going to end and we are going to get some better behaved markets instead of the madness that we are now forced to witness each and every day - it will end when this stupid attempt by the Central Banks of the West to keep the liquidity spigots open comes to an end. It is this meddling by the monetary authorities, who refuse to let the markets cleanse themselves by punishing foolish decisions, whether made by countries or businesses, and rewarding prudent decisions, which is the source of this volatility. Remove that and the markets will trend in one direction or the other. That is what terrifies them and why they refuse to stop interfering with the necessary cleansing process. All they are doing however is making matters worse and guaranteeing that the day of reckoning will be all that much worse.
Monday, October 17, 2011
Same Play - Different Act
Gold has once again failed to sustain its footing for any length of time above the critical $1680 resistance level. Last Friday it managed to eke out a close above this level but just barely. "Just barely" does not constitute a convincing technical breakout so it had the opportunity to try to be more emphatic in today's session.
As trade moved into early European trade, the gold price took off to the upside buoyed by comments out of the G20 summit that seemed to indicate decisive action and timely action was going to occur in Europe in regards to their bank recapitalization/stability mechanism plan. It moved up towards $1700 on strong buying which then evaporated as comments out of Germany throw a bucket of cold water on the hopes of traders/investors that the bureaucrats were going to follow through on intentions expressed at the summit.
Down went gold along with silver and along with the stock markets. Up went the Dollar; up went the long bond and down went the Euro and the commodity currencies. Once more it was, "RISK OFF" and so back to the same old same ol'.
It certainly did not aid the case of the bulls in the metals to look over at the HUI and observe it disintegrating as it failed to even touch the 560 level, a level which it MUST better to get anything exciting going to the upside. It dropped back down towards support at 540 and managed a squeaker of a close above there but if it loses that level, it is going to fade towards the lower end of the range near 520 to see if any buyers will emerge there.
Silver once again stumbled at the $32.50 level and dropped back into the trading range which continues to confine it. As expected when the risk trades are being yanked, silver underperformed gold in today's session. That will continue as long as RISK AVERSION is in vogue.
As trade moved into early European trade, the gold price took off to the upside buoyed by comments out of the G20 summit that seemed to indicate decisive action and timely action was going to occur in Europe in regards to their bank recapitalization/stability mechanism plan. It moved up towards $1700 on strong buying which then evaporated as comments out of Germany throw a bucket of cold water on the hopes of traders/investors that the bureaucrats were going to follow through on intentions expressed at the summit.
Down went gold along with silver and along with the stock markets. Up went the Dollar; up went the long bond and down went the Euro and the commodity currencies. Once more it was, "RISK OFF" and so back to the same old same ol'.
It certainly did not aid the case of the bulls in the metals to look over at the HUI and observe it disintegrating as it failed to even touch the 560 level, a level which it MUST better to get anything exciting going to the upside. It dropped back down towards support at 540 and managed a squeaker of a close above there but if it loses that level, it is going to fade towards the lower end of the range near 520 to see if any buyers will emerge there.
Silver once again stumbled at the $32.50 level and dropped back into the trading range which continues to confine it. As expected when the risk trades are being yanked, silver underperformed gold in today's session. That will continue as long as RISK AVERSION is in vogue.
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