The binge continues unabated in today's session as both gold and silver bulls are giddy with delight over the FOMC statement from yesterday while bears are still trying to locate what is left of their trading accounts. Both metals are pressing higher as the US Dollar continues to plummet now that the Fed has basically given it the kiss of death once again.
Lost in this stupid euphoria over zero interest rates for the next TWO YEARS is the pathetic fact that the Fed has just consigned the savings accounts of all of our retired citizens and the elderly to the wastelands. How in the hell are they supposed to live off the fruit of their labors and enjoy their retirement SAFELY and without concerns when the monetary masters have just laid them on the altar and sacrificed them to the hedge fund gods?
This is the price we supposedly have to pay in order to watch the stock market rally - namely turning our entire generation of senior citizens into a band of wild-eyed speculators if they are to hope to obtain more than a pitiful 1% on their one year Certificate of Deposits in their local banks.
I wish that some one of these Republican presidential candidates besides Ron Paul would actually begin to deal with this madness head on. After all, we are talking about a primary in Florida, a state loaded with senior citizens and other retirees who were hoping to live off the interest yields on their savings and other CONSERVATVE investments. My view is that what the Fed is doing is downright criminal in the sense that it is plundering the wealth of those who have saved in order to prop up the rotten house of Dagon.
As a trader I have to deal with what the market gives me and what that is at the moment is a veritable orgy of risk asset buying by hedge fund managers. As a private citizen however I have to shake my head in dismay that this is now what passes for sound monetary policy and is conducive to lasting prosperity. Have we lost our collective minds?
As I stated yesterday, the end result of this FOMC green light to the speculative community is to borrow all the "free money" you can get your hands on, leverage that up at least 10:1, and plow it into commodities and other risk assets and have at it. Bring back that carry trade and let's get this party going as we are in an election year and we cannot have a sagging stock market or actually deal with the real problems associated with $16 trillion in debt.
Quo vadis America?
Thursday, January 26, 2012
Wednesday, January 25, 2012
Gold Chart - Updated
Gold shattered overhead resistance near $1680 and has continued higher as momentum based buying is coming in driving out panicked shorts who were hoping for a halt in the advance to occur as the market encountered bullion bank selling originating at $1680. The FOMC made that a mirage as a zero interest rate environment for the next two years means an environment in which it pays to own gold. The yellow metal pays no interest but at this point, neither do short term Treasuries and those offer no protection from currency induced price increases. Just look at what is occuring across the commodity sector today as hedge funds now push the price of food, energy and metals in a northerly direction. Forget about tame inflation - that just vanished.
The sheer size and scope of this fund buying has driven out everything in front of it except for the strongest of shorts.
Gold has light resistance starting at $1705 (it is right on this level now) or so and extending towards $1720-$1725. The latter is the important 50% Fibonacci retracement level from the all time high to the recent double bottom down near $1535. The bears are going to make a stand near this level. If the fund buying remains as robust as it was today - the bears are going to be routed. Pushing through this cap will set it up to make a run at $1750. If the shorts can defend $1720 - $1725 then we should see a retracement back towards the $1700 level initially followed by $1680 where support should emerge.
By the way, the HUI and some of the gold stocks dodged a very big bullet today courtesy of the FOMC. They were in severe danger of breaking down technically.
The sheer size and scope of this fund buying has driven out everything in front of it except for the strongest of shorts.
Gold has light resistance starting at $1705 (it is right on this level now) or so and extending towards $1720-$1725. The latter is the important 50% Fibonacci retracement level from the all time high to the recent double bottom down near $1535. The bears are going to make a stand near this level. If the fund buying remains as robust as it was today - the bears are going to be routed. Pushing through this cap will set it up to make a run at $1750. If the shorts can defend $1720 - $1725 then we should see a retracement back towards the $1700 level initially followed by $1680 where support should emerge.
By the way, the HUI and some of the gold stocks dodged a very big bullet today courtesy of the FOMC. They were in severe danger of breaking down technically.
FOMC to MARKETS - "WELCOME TO THE PARTY"
Or in the words of Captain Jack Sparrow. "Drink up me hearties".
The FOMC just gave the green light to every hedge fund manager between here and the planet Mars to cram every bit of leveraged funds they can borrow or beg into the commodity sector and the equity markets.
Gold soared through overhead resistance at $1680 as if it was non-existent. Silver shattered $32.50 rebounding over $1.50. Crude oil is now back over $100 and gasoline just soared another $.05/gallon. Gasoline prices alone have now rallied 40 cednts a gallon since November. Get ready for more pain at the pump. Here we go again!
The CCI shot up; bonds rallied over 2 full points and the US Dollar just got clocked. RISK ON - who gives a crap about European sovereign debt woes or Greece or anything. Free money - more free money - and even more free money.
"God Bless the Fed" is now being heard around the lunch tables at the restuarants as hedge fund managers raise their glasses of Chablis to toast their new found prosperity.
The FOMC just gave the green light to every hedge fund manager between here and the planet Mars to cram every bit of leveraged funds they can borrow or beg into the commodity sector and the equity markets.
Gold soared through overhead resistance at $1680 as if it was non-existent. Silver shattered $32.50 rebounding over $1.50. Crude oil is now back over $100 and gasoline just soared another $.05/gallon. Gasoline prices alone have now rallied 40 cednts a gallon since November. Get ready for more pain at the pump. Here we go again!
The CCI shot up; bonds rallied over 2 full points and the US Dollar just got clocked. RISK ON - who gives a crap about European sovereign debt woes or Greece or anything. Free money - more free money - and even more free money.
"God Bless the Fed" is now being heard around the lunch tables at the restuarants as hedge fund managers raise their glasses of Chablis to toast their new found prosperity.
Tuesday, January 24, 2012
Barrick Downgraded - down goes the HUI - again.
Barrick Gold was downgraded this morning to sector perform by some of the "analysts" citing concerns over delays and cost escalations at new mines under construction. Tie that in with weakness in both gold and silver, which ran into long liquidation and some fresh selling after failing to better the chart resistance levels noted yesterday, and that has resulted in the HUI sinking down to the bottom of a critical support level on the price chart once again.
The gold shares in general are becoming dogs that cannot hunt or in the case of some, not even bark.
The same hedge funds that have been buying them down at this level late last year and early this year had better not have a change of heart. Still, it is only Tuesday so they do have time to recover before the end of the week. They will certainly need to or we are going to see a technical chart breakdown.
Pressure in gold and silver today is coming from a slightly stronger Dollar and some increased chatter over Greece and woes associated with that running sore. Traders are a bit hesistant to get too aggressive on the risk trades as a result and are exercising a bit of caution. That is allowing for some long liquidation and fresh short sellers from top pickers.
Silver stills need to get a solid close ABOVE $32.50 to avoid sagging here while gold needs to close over $1680 to avoid a setback towards $1650.
Bonds, a good measurement of the willingness of traders to take on risk, are basically flat today reflecting the lack of conviction either way for today's session. We'll see what we get in tomorrow's session which should be more telling as to where we might head next.
Note on the following HUI chart that all of the major moving averages are trending lower. We need the shorter term ones to at least stop heading lower and flatten out if the HUI is going to attract any sort of momentum based chart buying in the gold sector.
The gold shares in general are becoming dogs that cannot hunt or in the case of some, not even bark.
The same hedge funds that have been buying them down at this level late last year and early this year had better not have a change of heart. Still, it is only Tuesday so they do have time to recover before the end of the week. They will certainly need to or we are going to see a technical chart breakdown.
Pressure in gold and silver today is coming from a slightly stronger Dollar and some increased chatter over Greece and woes associated with that running sore. Traders are a bit hesistant to get too aggressive on the risk trades as a result and are exercising a bit of caution. That is allowing for some long liquidation and fresh short sellers from top pickers.
Silver stills need to get a solid close ABOVE $32.50 to avoid sagging here while gold needs to close over $1680 to avoid a setback towards $1650.
Bonds, a good measurement of the willingness of traders to take on risk, are basically flat today reflecting the lack of conviction either way for today's session. We'll see what we get in tomorrow's session which should be more telling as to where we might head next.
Note on the following HUI chart that all of the major moving averages are trending lower. We need the shorter term ones to at least stop heading lower and flatten out if the HUI is going to attract any sort of momentum based chart buying in the gold sector.
Monday, January 23, 2012
Gold Chart and comments
Gold has made it into a formidable resistance level near $1680 which has served to bring out some heavy selling, just as expected seeing that a breach of this defensive line by the bulls will set the market for a run to $1700 and higher. Gold bears can read the charts just as we can and understand what will bring in the momentum buyers if they fail to hold it here.
If the recent price advance falters here at this critical zone, then we will see a setback towards $1650 - $1645 initially followed by a bit deeper drop to $1620 or so if the dip buyers are a bit sluggish in making their appearance.
On the topside, a push through $1700 sets this market on a course to challenge $1720 - $1725, above which lies much stronger resistance just above $1750, a level which I might add, needs to be taken out to accelerate the recent move higher.
Risk trades continued today with the Dollar seeing some selling pressure as the Euro moved further away from its recent 52 week low. The Dollar is sitting on top of some important chart support which coincides with both the 50 day moving average and a horizontal support level. I would not be surprised to see it bounce higher from here. If it does not, then we could see it drop down to 79 very swiftly. Bonds would probably drop off rather sharply also as it would indicate another wave of money flows into the risk trades and away from the safe haven "risk aversion" dollar.
That generated commodity-wide buying as the CCI (Continuous Commodity Index was up nearly 1.4% today. It is closing in on some important overhead chart resistance so we will see if the bulls can continue to take it higher or if the urge to snatch some money off the table strikes first.
Even natural gas put in a very strong rally off its 52 week low made early in the session on the news of cutbacks in production by Chesapeake.
The natural gas market may have bottomed today based on the very bullish chart pattern. This market however has had a habit of putting in some strong moves higher only to then resume a downtrend when the field resumes focusing on the enormous supply picture once the short covering rally is over. With the huge amounts of shale gas being produced, it is going to take other suppliers to follow the lead of Chesapeake if this is going to be a definitive bottom. That being said, natural gas is incredibly cheap. Consumers are most definitely enjoying this even if the industry as a whole is not!
If the recent price advance falters here at this critical zone, then we will see a setback towards $1650 - $1645 initially followed by a bit deeper drop to $1620 or so if the dip buyers are a bit sluggish in making their appearance.
On the topside, a push through $1700 sets this market on a course to challenge $1720 - $1725, above which lies much stronger resistance just above $1750, a level which I might add, needs to be taken out to accelerate the recent move higher.
Risk trades continued today with the Dollar seeing some selling pressure as the Euro moved further away from its recent 52 week low. The Dollar is sitting on top of some important chart support which coincides with both the 50 day moving average and a horizontal support level. I would not be surprised to see it bounce higher from here. If it does not, then we could see it drop down to 79 very swiftly. Bonds would probably drop off rather sharply also as it would indicate another wave of money flows into the risk trades and away from the safe haven "risk aversion" dollar.
That generated commodity-wide buying as the CCI (Continuous Commodity Index was up nearly 1.4% today. It is closing in on some important overhead chart resistance so we will see if the bulls can continue to take it higher or if the urge to snatch some money off the table strikes first.
Even natural gas put in a very strong rally off its 52 week low made early in the session on the news of cutbacks in production by Chesapeake.
The natural gas market may have bottomed today based on the very bullish chart pattern. This market however has had a habit of putting in some strong moves higher only to then resume a downtrend when the field resumes focusing on the enormous supply picture once the short covering rally is over. With the huge amounts of shale gas being produced, it is going to take other suppliers to follow the lead of Chesapeake if this is going to be a definitive bottom. That being said, natural gas is incredibly cheap. Consumers are most definitely enjoying this even if the industry as a whole is not!
Silver runs right into a Resistance Zone and then halts
Just as if on clue, Silver bulls came out of the gate bucking high and hard but were unable to throw the bears who have dug in at the exact spot on the chart which says they should.
Take a look at this chart which I posted last week and which is still applicable after today's trading session. Notice how silver shot up throw that "formidable resistance zone" near $32.50 but then faded to close almost right on the line instead of solidly above it.
Still, the bears dodged that bullet only by the slimmest of margins as the market put in a strong close to end the session, although it has retreated a bit this afternoon.
Tomorrow's session is now set up to be an important near term juncture for this market. If the bulls can take out today's high and hold the market above $32.50, this thing has a real shot at making a quick run at $35. If they hesistate here, we could see it set back about $1.00 or so to see if it can uncover some good quality dip buying.
Support should also emerge down near $30.95.
Take a look at this chart which I posted last week and which is still applicable after today's trading session. Notice how silver shot up throw that "formidable resistance zone" near $32.50 but then faded to close almost right on the line instead of solidly above it.
Still, the bears dodged that bullet only by the slimmest of margins as the market put in a strong close to end the session, although it has retreated a bit this afternoon.
Tomorrow's session is now set up to be an important near term juncture for this market. If the bulls can take out today's high and hold the market above $32.50, this thing has a real shot at making a quick run at $35. If they hesistate here, we could see it set back about $1.00 or so to see if it can uncover some good quality dip buying.
Support should also emerge down near $30.95.
Saturday, January 21, 2012
Silver tracking the CCI - risk trade measurement
One look at this tells you all you need to know about whether or not silver is going to perform. If risk is in and hedge fund money flows are coming into the commodity complex in general, it will move higher. When it does, silver goes right along with it.
When risk is out and money flows OUT of the commodity complex, silver sinks like a lead brick.
Notice that chart pattern is almost identical between the two.
When risk is out and money flows OUT of the commodity complex, silver sinks like a lead brick.
Notice that chart pattern is almost identical between the two.
Long term View of the Gold/Silver ratio
You will note on this chart that since Silver peaked near $50 back in April of last year, gold had generally been outperforming it for the remainder of the year. I am of the opinion that this was due to the anticipation of the end of QE2 in June of last year. Traders began preparing for the loss of the liquidity being supplied from that front. When you couple this with the fact that European sovereign debt woes began to gain ascendancy in the minds of traders worldwide, it is easy to see why gold held up better than silver. DEFLATION was back in; INFLATION was out.
If, and this is a big "IF", traders become convinced that deflationary forces have been left behind, then the environment in which the grey metal will outperform the yellow metal is created. In such a case, this ratio will begin trending LOWER as silver outperforms.
Every single bit of this is dependent on the attitude of traders towards risk, which is simply another way of saying whether they are leaning more towards improving global growth prospects and inflation rather than slowing global growth and deflation.
Stay tuned as the environment is still very volatile. For this week at least, the inflationary (risk trade) forces have won the battle.
If, and this is a big "IF", traders become convinced that deflationary forces have been left behind, then the environment in which the grey metal will outperform the yellow metal is created. In such a case, this ratio will begin trending LOWER as silver outperforms.
Every single bit of this is dependent on the attitude of traders towards risk, which is simply another way of saying whether they are leaning more towards improving global growth prospects and inflation rather than slowing global growth and deflation.
Stay tuned as the environment is still very volatile. For this week at least, the inflationary (risk trade) forces have won the battle.
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