Please click on the following link to read my interview with Eric King on the KWN network about today's price action in both gold and the gold shares.
Wednesday, May 23, 2012
Continuous Commodity Index - Fed Operation "Push Down Commodities" Successful
I have been convinced for some time now that the Fed is growing increasingly concerned about the impact from both the Eurozone and the slowdown in China on the US economy. The swooning equity markets in the US ( the S&P 500 is almost negative on the year as of the low today) are heralding investor fears and uncertainty over when the next round of stimulus might be coming.
Yet the Fed continues to remain relatively silent when it comes to committing to any definitive date for another round of bond purchases even as the yield on the Ten Year Note is now close to 1.70%, having clearly broken below the critical 1.8% level last week.
I have maintained for some time that the Fed fully understands the impact that another round of QE will unleash on the commodity markets and is therefore attempting to see these markets driven lower before engaging more actively in QE talk. As stated many times here already, the danger they face in this gambit that they are playing is a collapsing stock market. One wonders just how much more downside they are going to try to squeeze out of the commodity markets before stepping in.
If you notice on the chart below, the CCI has one more line of support near the 500 level, which is the 38.2% retracement level of the entire rally from the 2008 low. If that does not halt the decline in the commodity world in general, then it is quite conceivable that the index could fall all the way to the 50% retracement level near 438. That level is also reinforced as technically significant as it is near the lower tine of the pitchfork drawn off the 2001 low and 2008 high, an area where we can expect to see some buying emerge.
While one can see that the long term macro trend on commodity prices remains higher, the intermediate trend is lower as is the minor trend which can be clearly seen on a daily chart.
For the silver guys out there, you will need to see this chart show some definite signs of bottoming before silver can be expected to start any sort of uptrending move.
Yet the Fed continues to remain relatively silent when it comes to committing to any definitive date for another round of bond purchases even as the yield on the Ten Year Note is now close to 1.70%, having clearly broken below the critical 1.8% level last week.
I have maintained for some time that the Fed fully understands the impact that another round of QE will unleash on the commodity markets and is therefore attempting to see these markets driven lower before engaging more actively in QE talk. As stated many times here already, the danger they face in this gambit that they are playing is a collapsing stock market. One wonders just how much more downside they are going to try to squeeze out of the commodity markets before stepping in.
If you notice on the chart below, the CCI has one more line of support near the 500 level, which is the 38.2% retracement level of the entire rally from the 2008 low. If that does not halt the decline in the commodity world in general, then it is quite conceivable that the index could fall all the way to the 50% retracement level near 438. That level is also reinforced as technically significant as it is near the lower tine of the pitchfork drawn off the 2001 low and 2008 high, an area where we can expect to see some buying emerge.
While one can see that the long term macro trend on commodity prices remains higher, the intermediate trend is lower as is the minor trend which can be clearly seen on a daily chart.
For the silver guys out there, you will need to see this chart show some definite signs of bottoming before silver can be expected to start any sort of uptrending move.
Monday, May 21, 2012
Gold attempting to get to that "16" Handle
Gold put in a decent performance in today's session but was stymied at that psychological resistance level of $1600. It seems as if traders are basically standing around looking at each other to see who is going to commit first to buying it above this level.
Right now there is a general hesitation to get too aggressive as there is yet another, (sigh!) summit this week in Europe, this time in Brussels on Wednesday, where the market will have to digest whatever fodder these clowns want to utter. Look for more of the same talk that we got from this weekend's gathering in Chicago - namely - growth instead of austerity which translates to money printing.
At some point this will have the anticipated inflationary impact but not until we see something actually take place besides more talk. The moment, and I do mean the moment, we get confirmation that the ECB and the Fed are going to do the only thing that they can do, gold will move higher and start another leg in an uptrend. Until then we may have to be content with it marking some time here and allowing dip buyers to come in at appropriate moments barring some unexpected news.
I have not had to change the notations and resistance and support levels on the price chart as of yet but you can see where the resistance is located near the $1600 level. Above that, $1625 or so is next.
Downside support comes in at the $1575 - $1565 level.
Right now there is a general hesitation to get too aggressive as there is yet another, (sigh!) summit this week in Europe, this time in Brussels on Wednesday, where the market will have to digest whatever fodder these clowns want to utter. Look for more of the same talk that we got from this weekend's gathering in Chicago - namely - growth instead of austerity which translates to money printing.
At some point this will have the anticipated inflationary impact but not until we see something actually take place besides more talk. The moment, and I do mean the moment, we get confirmation that the ECB and the Fed are going to do the only thing that they can do, gold will move higher and start another leg in an uptrend. Until then we may have to be content with it marking some time here and allowing dip buyers to come in at appropriate moments barring some unexpected news.
I have not had to change the notations and resistance and support levels on the price chart as of yet but you can see where the resistance is located near the $1600 level. Above that, $1625 or so is next.
Downside support comes in at the $1575 - $1565 level.
Whistling Pass the Proverbial Graveyard
Remember when you were a little child and had to walk past a graveyard or cemetery on the way home? The process was rather unnerving particularly if it was in the evening. So along comes the advice of your seniors..."Just strike up a pleasant tune and whistle it out loud. It will perk you up and chase away any fears".
I got the distinct impression that this is what occurred in today's S&P 500 futures pit. Oh I know what the "perma bulls" will tell us. "Equity prices had gotten too cheap. The economy is not as bad as the stock markets are indicating" and so on and so on. But the "whistling tune" I loved the best today was this one:
"European leaders are going to go at their problems by employing a 'GROWTH' strategy and are moving away from 'AUSTERITY'.
NOTE: INSERT MELODY HERE TO AID WOULD-BE WHISTLERS AS THE AIR RUSHES PAST THEIR LIPS".
Why not just cut the crap and state the obvious - these short-sighted politicians and monetary officials will do anything to prevent themselves from getting booted out of office by a public ADDICTED TO GOVERNMENT SPENDING. Look at what happened to Sarkozy. He was replaced by a Socialist who LOVES DEBT AND MORE TAXES to apparently try to fund it all.
Hard choices?! Forgeddabout it! That's for the poor chump stupid enough to think that the public will give him a chance to do so.
Either way, the result of this "pursuit of growth" instead of austerity was the supposed reason that we had an enormous short squeeze in the US equity markets today. My guess is that the powers that be made sure that they had their "pals" bid the market high enough to trip the algos into buying and then sat back and laughed at what they had managed to pull off once again.
With the FACEBOOK IPO smell still souring the air, one has to wonder how much more contempt these elites have for the general public whom they just led to the slaughter touting that piece of junk stock. Didn't matter however - today was "All these European problems are so overblown Dude - Day".
The timing of the big BULLISH OUTSIDE REVERSAL DAY just happened to coincide with a market approaching the critical 50% Fibonacci Retracement Level. That level also happens to not be very far away from the 200 day moving average. Surprise? I doubt that. Now we watch and wait to see how much, if any, staying power, today's contrived equity rally is going to have.
I got the distinct impression that this is what occurred in today's S&P 500 futures pit. Oh I know what the "perma bulls" will tell us. "Equity prices had gotten too cheap. The economy is not as bad as the stock markets are indicating" and so on and so on. But the "whistling tune" I loved the best today was this one:
"European leaders are going to go at their problems by employing a 'GROWTH' strategy and are moving away from 'AUSTERITY'.
NOTE: INSERT MELODY HERE TO AID WOULD-BE WHISTLERS AS THE AIR RUSHES PAST THEIR LIPS".
Why not just cut the crap and state the obvious - these short-sighted politicians and monetary officials will do anything to prevent themselves from getting booted out of office by a public ADDICTED TO GOVERNMENT SPENDING. Look at what happened to Sarkozy. He was replaced by a Socialist who LOVES DEBT AND MORE TAXES to apparently try to fund it all.
Hard choices?! Forgeddabout it! That's for the poor chump stupid enough to think that the public will give him a chance to do so.
Either way, the result of this "pursuit of growth" instead of austerity was the supposed reason that we had an enormous short squeeze in the US equity markets today. My guess is that the powers that be made sure that they had their "pals" bid the market high enough to trip the algos into buying and then sat back and laughed at what they had managed to pull off once again.
With the FACEBOOK IPO smell still souring the air, one has to wonder how much more contempt these elites have for the general public whom they just led to the slaughter touting that piece of junk stock. Didn't matter however - today was "All these European problems are so overblown Dude - Day".
The timing of the big BULLISH OUTSIDE REVERSAL DAY just happened to coincide with a market approaching the critical 50% Fibonacci Retracement Level. That level also happens to not be very far away from the 200 day moving average. Surprise? I doubt that. Now we watch and wait to see how much, if any, staying power, today's contrived equity rally is going to have.
China flips the Finger to Wall Street
The following article appeared today on Reuters which is well worth your read. In a move that illustrates the growing clout of China, approval was granted by the US Government for it to bid DIRECTLY through the auction system of the US Treasury, completely bypassing the PRIMARY DEALER BANKS.
My guess is that the Chinese were sick and tired of being front-run by these unscrupulous banks and issued a stern but quiet demand to either allow them to go this route, OR ELSE!
This further underscores the fact of the growing economic clout of China and just how utterly dependent our nation has become on its funding of our outrageous and downright contemptible indebtedness.
http://www.reuters.com/article/2012/05/21/us-usa-treasuries-china-idUSBRE84K11720120521
NEW YORK (Reuters) - China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury's first-ever direct relationship with a foreign government, according to documents viewed by Reuters.
My guess is that the Chinese were sick and tired of being front-run by these unscrupulous banks and issued a stern but quiet demand to either allow them to go this route, OR ELSE!
This further underscores the fact of the growing economic clout of China and just how utterly dependent our nation has become on its funding of our outrageous and downright contemptible indebtedness.
Exclusive: U.S. lets China bypass Wall Street for Treasury orders
By Emily Flitterhttp://www.reuters.com/article/2012/05/21/us-usa-treasuries-china-idUSBRE84K11720120521
NEW YORK |
NEW YORK (Reuters) - China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury's first-ever direct relationship with a foreign government, according to documents viewed by Reuters.
Saturday, May 19, 2012
Trader Dan on King World News Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals Wrap.
Friday, May 18, 2012
Gold continues its bounce
Gold continues to bounce higher in today's session as it moves further away from the bottom of the BROAD 8 MONTH TRADING RANGE shown on the chart below. The metal actually seems to be reverting to its safe haven function as it is holding its gain in spite of continued weakness in the broader US equity markets.
It does seem to have hit a band of resistance, as might be expected, near the psychological round number of $1600. For gold to get a handle of "16" in front of the price, we are going to need to see more hedge funds willing to go long this market even as their algorithms are increasingly playing a large number of the commodity markets in general from the short side. A clue that this might be happening is to watch for an increase in open interest which will mark an end to the wave of long liquidation that has dropped the price of gold so sharply over the past 2 weeks. We actually did see that increase in yesterday's open interest so I am especially interested in seeing Monday morning's data about today's session.
The HUI has not been able to REMAIN ABOVE the 400 level. If it can pull that off before the end of trading today, it will be a sign that this sector might have finally been sold out. If it closes back below the 390 level, it is going to move lower and retest the bottom made this week near 372. It did form a POTENTIAL spike bottom this week but as stated, it needs to confirm this by closing a week above the 420 level. Aggressive traders/investors can try nibbling on the long side of QUALITY MINERS only, with good chart patterns, PROVIDED they employ sound money management techniques. That means if the price moves through this week's low, get out - no questions asked. You can always try again; i.e. unless you foolishly turn a small trading loss into a large trading loss and end up looking like road kill on the trading floor.
Do not try arguing with a market and attempting to tell it why it is not behaving properly (that means going in the direction you THINK it should be going). Guess what? the market doesn't give a rat's ass what you or I or anyone else for that matter, thinks it should be doing. It will do what it wants to do, when it wants to do and the sooner you recognize that and give it the respect it deserves, the sooner you will be on your way to becoming a successful trader or investor. Show me a stubborn fool who refuses to admit that he or she is wrong for the time being and I will show you yet one more casualty whose carcass lies dead in the trading arena. The inscription that you will see on their trading tombstone is as follows:
"Here lies Mr. or Ms. Wannabe TRADER - he was right to the bitter end".
Silver has managed to hold the $26 level once again, although this time around it did not get down as close to 26 even as it has done on two previous occasions, once in September of last year and then again in December of last year as well. I am still skeptical of this market however as it is too closely associated with the risk trades. If Copper could ever stop falling out of bed, I will feel more comfortable about silver. The best thing that can be said about it right now is that at least it stop going down for a change. If we get any sort of news over the weekend detailing a worsening of conditions in Europe, silver is going to turn right back around and go lower. You just have too many funds selling the metal who need something to shift the sentiment towards inflation to bring them back into this market in a very big way. That means we will need more statements from Federal Reserve officials leaning towards QE sooner rather than later.
One last thing - I do find it very noteworthy, that in spite of the fact that the US equity markets are sinking today and nervousness remains in the minds of many traders, the US Dollar cannot seem to find a bid. It reached as high as 81.93 before swooning once again. That tells me that 82 in the USDX is a FORMIDABLE RESISTANCE LEVEL that is going to take some sort of terrible economic news to get enough "safe haven" bids coming into the DOllar to absorb all of the offers from willing sellers at that level.
It does seem to have hit a band of resistance, as might be expected, near the psychological round number of $1600. For gold to get a handle of "16" in front of the price, we are going to need to see more hedge funds willing to go long this market even as their algorithms are increasingly playing a large number of the commodity markets in general from the short side. A clue that this might be happening is to watch for an increase in open interest which will mark an end to the wave of long liquidation that has dropped the price of gold so sharply over the past 2 weeks. We actually did see that increase in yesterday's open interest so I am especially interested in seeing Monday morning's data about today's session.
It should be noted that the rally has now taken the price back above the 10 day moving average. That is oftentimes a level that funds who are short will begin covering at. If the market has enough strength to make it to the 20 day moving average near $1617, you will see more of that short covering plus new buying from this camp. We will have to see whether or not that transpires early next week. I get the distinct impression from watching the price action in this market, as well as a host of other markets, that traders are extremely nervous, if not downright fearful about what might happen over the weekend in regards to the Euro zone and many did not want to risk being on the short side of the gold market heading into a weekend.
As stated in previous columns, the bounce from the bottom of this extended range is constructive as it further cements this level down near $1530 as extremely solid support. A sea change would therefore have to occur globally for those buyers whom have been active down there, to sit on their hands were prices to head back lower and revisit that level. I personally will feel a bit more comfortable that will not occur IF we can climb back over $1600 and keep that handle on the price. That will tell prospective buyers that the metal is not going to get any cheaper and if they were holding off waiting for better prices, they had better get in while the gettin's good. That means next week's price action will be very telling as to what we can expect for gold moving forward.
The reason I say this is because the first time that gold dipped down towards $1530 back in September 2011, it did not GET BACK DOWN THERE AGAIN for another three months. Then it rebounded immediately in December 2011 and has only now come back down to that level again. This time it was a period of 5 months. If prospective buyers see this thing will not back down below the $1600 level, they will commit to larger purchases as the odds favor it being another rather long period before they can hope to buy it this cheaply once again.
It looks to me like we have resistance pegged in a band between $1615 - $1625 on the upside. That will have to be taken out for gold to move back to $1650. There is some light support on the downside near $1565; after that additional support can be seen near $1550.
The HUI has not been able to REMAIN ABOVE the 400 level. If it can pull that off before the end of trading today, it will be a sign that this sector might have finally been sold out. If it closes back below the 390 level, it is going to move lower and retest the bottom made this week near 372. It did form a POTENTIAL spike bottom this week but as stated, it needs to confirm this by closing a week above the 420 level. Aggressive traders/investors can try nibbling on the long side of QUALITY MINERS only, with good chart patterns, PROVIDED they employ sound money management techniques. That means if the price moves through this week's low, get out - no questions asked. You can always try again; i.e. unless you foolishly turn a small trading loss into a large trading loss and end up looking like road kill on the trading floor.
Do not try arguing with a market and attempting to tell it why it is not behaving properly (that means going in the direction you THINK it should be going). Guess what? the market doesn't give a rat's ass what you or I or anyone else for that matter, thinks it should be doing. It will do what it wants to do, when it wants to do and the sooner you recognize that and give it the respect it deserves, the sooner you will be on your way to becoming a successful trader or investor. Show me a stubborn fool who refuses to admit that he or she is wrong for the time being and I will show you yet one more casualty whose carcass lies dead in the trading arena. The inscription that you will see on their trading tombstone is as follows:
"Here lies Mr. or Ms. Wannabe TRADER - he was right to the bitter end".
Silver has managed to hold the $26 level once again, although this time around it did not get down as close to 26 even as it has done on two previous occasions, once in September of last year and then again in December of last year as well. I am still skeptical of this market however as it is too closely associated with the risk trades. If Copper could ever stop falling out of bed, I will feel more comfortable about silver. The best thing that can be said about it right now is that at least it stop going down for a change. If we get any sort of news over the weekend detailing a worsening of conditions in Europe, silver is going to turn right back around and go lower. You just have too many funds selling the metal who need something to shift the sentiment towards inflation to bring them back into this market in a very big way. That means we will need more statements from Federal Reserve officials leaning towards QE sooner rather than later.
One last thing - I do find it very noteworthy, that in spite of the fact that the US equity markets are sinking today and nervousness remains in the minds of many traders, the US Dollar cannot seem to find a bid. It reached as high as 81.93 before swooning once again. That tells me that 82 in the USDX is a FORMIDABLE RESISTANCE LEVEL that is going to take some sort of terrible economic news to get enough "safe haven" bids coming into the DOllar to absorb all of the offers from willing sellers at that level.
Thursday, May 17, 2012
Bonds singing "Anticipation"!
While one day's worth of price action does not a trend make, it is interesting to me watching the combination of price action in both the gold market and in the Treasury market.
In the long bond, the market has broken into a new all time high. That is significant as it shows that traders there are anticipating an upcoming round of bond purchases attached to a new Federal Reserve round of Quantitative Easing. It seems as if the catalyst for today's surge higher was the Philadelphia Fed business index drop to an unexpected -5.8. Business conditions in that corner of the realm are worsening rather quickly.
Note also that the yield on the Ten Year Note has now fallen solidly BELOW that critical 1.80% level. This is what has traders moving towards action by the Fed. That line is technically signficant, as has been stated before, seeing that we have never had a WEEKLY CLOSE below this level and it is now Thursday! If this yield were to further break below that spike low at 1.696% and the Fed were to NOT ACT, Bernanke would get his place in history all right, but it would not be in the light that he no doubt is hoping for!
All of this appears to be the driver in the nice pop higher in the gold market this morning, continuing the rally that began in Asian trading last evening. A push past $1580 would certainly startle the bears and induce further short covering that has the potential to take the price back to the key $1600 level.
Let's see where the dust settles at the end of the trading session today. For now, it appears that traders are regarding any dose of rotten economic news as increasing the odds of QE sooner rather than later.
If, and this is the big question, IF gold becomes CONVINCED that the Fed is going to act, it will immediately bottom. That is all one needs to know about the gold market. Nothing else will matter at that point.
We are back to picking the petals from Daisy flowers - She loves me; she loves me not. The Fed loves me; the Fed loves me not. Will it do the QE or will it not???
In the long bond, the market has broken into a new all time high. That is significant as it shows that traders there are anticipating an upcoming round of bond purchases attached to a new Federal Reserve round of Quantitative Easing. It seems as if the catalyst for today's surge higher was the Philadelphia Fed business index drop to an unexpected -5.8. Business conditions in that corner of the realm are worsening rather quickly.
Note also that the yield on the Ten Year Note has now fallen solidly BELOW that critical 1.80% level. This is what has traders moving towards action by the Fed. That line is technically signficant, as has been stated before, seeing that we have never had a WEEKLY CLOSE below this level and it is now Thursday! If this yield were to further break below that spike low at 1.696% and the Fed were to NOT ACT, Bernanke would get his place in history all right, but it would not be in the light that he no doubt is hoping for!
All of this appears to be the driver in the nice pop higher in the gold market this morning, continuing the rally that began in Asian trading last evening. A push past $1580 would certainly startle the bears and induce further short covering that has the potential to take the price back to the key $1600 level.
Let's see where the dust settles at the end of the trading session today. For now, it appears that traders are regarding any dose of rotten economic news as increasing the odds of QE sooner rather than later.
If, and this is the big question, IF gold becomes CONVINCED that the Fed is going to act, it will immediately bottom. That is all one needs to know about the gold market. Nothing else will matter at that point.
We are back to picking the petals from Daisy flowers - She loves me; she loves me not. The Fed loves me; the Fed loves me not. Will it do the QE or will it not???
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