"And She'll Have Fun, Fun, Fun, 'til the Bankers take the Punch Bowl Away

Pardon an old Beach Boys fan for taking Liberties with one of their classic song's titles but this popped into my mind today watching the market response to the ECB's bond buying announcement.

US economy in the toilet? No problem - new 52 week high in the S&P 500. While you are at it, give that 'ol Japanese Yen the Whack-A-Mole treatment. Time for that carry trade again. RISK ON! Damn the Torpedos, Full Speed Ahead!

I really think that some creative genius should make a spoof of the Star Trek, the Next Generation series, involving Draghi and Bernanke as a combination of the Borq Queen pronouncing those fear-inspiring words, "RESISTANCE IS FUTILE!" At least for today, the markets have been absorbed into the Borq Collective and are now assimilated. All sense of individualism has been annihilated leaving only the will of the hive supreme.

Once again the Central Bankers of the West have unleashed another torrent of hot money flows right smack dab into the commodity sector guaranteeing that higher energy prices are here to stay. Did anyone check out what happened to gasoline, heating oil and crude oil today? WTI is now less than $3.00 from the $100/bbl level while gasoline is back over the $3.00/gallon level wholesale. Keep in mind that this is well after the end of the traditional "Driving Season". Anyone expecting or hoping for a bit of relief at the gasoline pump should get disabused of that notion.

Gold and Silver of course wasted no time in promptly blowing right through overhead resistance levels on the chart as the metals are now functioning exactly as they should function whenever a set of Central Bankers decide to further debauch their currencies. Take a look at gold priced in terms of the euro, or Euro-Gold. It moved within 14 euros of its all time high. The ECB's actions are certainly not being lost on European based buyers of the metal. They know damn well what this idiocy is going to precipitate.

Incidentally, Euro Silver has broken its downtrend and looks as if it wants to make a run towards the 28 Euro level. I would venture to say that if it breaks through that barrier, we will see $40 Silver here in the US.

Moving back to the US-centric view, one thing that I am watching that in my mind is even more significant that gold clearing the psychologically-important $1700 level is the fact that this occurred as the HUI has managed, FINALLY, to clear that huge overhead resistance level of 460. This level has held the miners in check since April of this year as any and all attempts to better, up to now, have failed. If the HUI can hold onto its gains into the end of the week, we should see it run to 480 whilst many of the miners reflect breakout patterns on their individual stock charts. A push through 480 sets it up for a run above 500 to 510 or so.

It is always more constructive to see BOTH the mining shares and the bullion markets taking out overhead resistance levels at the same time on their price charts. One has to be a bit more careful when bullion is moving higher while the shares are languishing.

By the way, some of today's market chatter is that the stronger ADP private employment data, combined with the action by the ECB, will make it much easier for Bernanke and company to say "NO" to another round of QE3 right away over here. That is where some of the profit taking in gold and silver is coming from. Let's watch and see how things settle out by the end of the day.

Gold Hits $1700, Eases off a Bit

Gold bulls managed to push the yellow metal to the psychologically significant $1700 for the first time in months. As can be expected, it could not hold ABOVE the level as selling from both fresh short sellers and some profit taking from longs, surfaced on the first approach to this round number.

Gold has a history of pausing around these even or round numbers, retreating, consolidating a bit, and then pushing through and moving to the next resistance level on the charts.

It looks to me like the weakness in the gold mining stocks in today's session, which are feeling spillover from the generally lower stock market, is enabling the capping action at $1700. I would personally like to see the HUI power through the 460 level as I think it would enable the gold bulls to beat back the bullion bank selling at the highs of today's session.

Incidentally, Euro Gold, or gold priced in terms of the Euro, is within a mere 20 euros or so of its all time high!

Silver is once again leading Gold to the upside as this market is now running on pure momentum as hot money pours in chasing prices higher. I am looking at $32.50 as a resistance level that needs to be cleared if silver is going to mount a push to the all-important $35.00 - $35.50 region. So far silver has pushed within .07 or 7 cents from $32.50 where the sellers showed up. Bulls however as of yet show no signs of growing weary and are buying dips in price. Support is rising and comes in at $31.50 near today's low and then $30.00 - $30.25

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.

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Hedge Fund Silver Shorts getting Squeezed Out

Take a look at the following charts of the positions of the hedge fund community in the silver market and notice what has happened to them as a result of the break of overhead resistance levels on the technical price charts. Shorts are being forced out as fresh longs invade the market.

You should also note that this data does not include today's HUGE move higher which no doubt caught a large number of fresh top pickers off guard.

Monthly Gold Charts

Silver Breaks its Downtrend

For nearly the last year and a half, silver has been in a sustained downtrend in price although it has managed to find a floor of support near the $26 level. This week it has finally broken that downtrend. If this metal is going to begin a sustained rally, any setback in price should find buying emerge near the downsloping blue line shown on the chart. Failure to hold this level and particularly now the $30 level, will see the metal fall back into that triangle formation with support then coming in down closer to $28.

Note that the metal is now trading above the 50 week moving average while both shorter term moving averages are now moving higher. The trend is up.

More Pain for the Middle Class courtesy of Bernanke

Check out the following chart of the Continuous Commodity Index or CCI and note that it has managed to put in a weekly close above the 38.2% Fibonacci Retracement Level of the move lower from its all time recent high made last year. If the market pysche remains the same, look for this index to now make an eventual run back towards the 597-600 level.

We can look at these charts as subjects of interest to us as traders/investors but what this particular stock represents is increasing pain for consumers and the hard-pressed middle class in one of the worst, if not the worst "recovery" since the Great Depression.

Think of this as increased frustration at the grocery store, at the gas pump, at the hardware store, at the local restaurant, etc. While some of this rally is the result of the drought and I will of course not lay that at the feet of the Fed, it is a simple fact that the breakout on this chart today, is the DIRECT RESULT of Mr. Bernanke's insistence on implying that another round of bond buying is on the way.

When you pull into the gas station and fill up your car or truck, and are sent reeling at the cost, you can lay some of the blame right at his feet and the feet of his elitists on the FOMC who insist on pacifying Wall Street instead of having concerns how their policies are destroying Main Street.

Bernanke Jawboning the Markets

The long awaited speech from Fed Chairman Ben Bernanke at the Jackson Hole Summit has come and gone without any definitive action being announced. However, the Helicopter Man let it be known that he believes the first two rounds of QE were a rousing success.

Once again he promised that the Fed stands ready to act if the economic conditions or data warrant it. As usual, the markets, hungry for more of the spiked punch bowl, wasted no time in casting off their initial disappointment with a huge round of indiscriminate buying directed at the risk asset categories.

Gold blew through tough overhead resistance at $1680 and looks like it now has a clear path towards the magical $1700 level. Silver too punched through resistance and looks like it wants to make a run at $32.50.

My own personal view of this is that Bernanke is engaging in a round of verbal intervention, aka, jawboning the markets higher to aid his Boss' re-election efforts. He knows full well that he is going to be replaced if Romney wins. Chatter is now that the FED will proceed with the next round of QE at their upcoming September meeting.

As I have stated repeatedly on this site, why do the actual bond buying if you can achieve the same results by merely promising or strongly suggesting that you are going to do it. This is what he has been doing for a good portion of the last two months.

The S&P 500 is trading just off its peak, interest rates on the long end are low, the Ten Year is trading below 1.6%. So what in the heck would they accomplish by pushing rates any lower than they already are? The problem is not that money is cheap to borrow; it is that no one is borrowing it or the banks are not lending it because there are no jobs! The velocity of money graph shows a line heading straight down. Why in the hell do these money masters believe that another round of manufactured bond buying is going to reverse that course?

Contrary to Mr. Bernanke's lavious praise of QE and its supposed success, I believe it has been a colossal failure and enormous waste of future taxpayer money. Over $2.5 TRILLION has been spent on bond buying and what do we have to show for it except an expanded Fed balance sheet and a currency that was nearly tanked as a result. The only thing that saved the Dollar from this debacle was the fact that the Euro was even worse. Were it not for that, the US Dollar would have cratered below the 72 level and with it, the way of life for most Americans.

One casualty of this madness however will the average American middle class citizen who will watch helplessly while their food, energy (gasoline and heating oil) costs soar ever higher while their wages remain stagnant. If I did not know better, I would swear that these arrogant elitists are determined to destroy what is left of the shrinking middle class in order to appease their overlords on Wall Street, who want the funny money injected - long term consequences be damned.