"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Thursday, May 5, 2011

Gold drops into a very strong support level and bounces

The market has found good buying just above $1460 and continues to push higher off of this level as it enters very early trading in Asia. The drop of nearly $110 has stimulated value based buyers of the metal who have been waiting on a pull back.

If the market can push through $1500 and hold that level and not sink back below it,  it will be friendly. Some will depend on the payrolls number out tomorrow. If it is a stinker and comes in below expectations, we might see more risk aversion and potential selling as the unthinking, knee-jerk reaction will be to rush to the "safety" of the US Dollar ( I have to gag when I write this). The Yen also will probably benefit although the Japanese monetary authorities are probably already saying things unfit to print over its recent climb back up to its last whipping level.

Even at that, the market has fallen, so far, so quickly, that any short who wishes to actually realize their gains is going to have to ring the cash register before long if they are wise. Bulls make money; Bears make money but Pigs get slaughtered.


  1. Dan,
    Are you saying that a bad jobs report will cause the dollar to go up?To guote you "If it is a stinker and comes in below expectations, we might see more risk aversion and potential selling as the unthinking, knee-jerk reaction will be to rush to the "safety" of the US Dollar '
    I would think that a bad report would pull the metals up and the dollar down, that has always been the case in the past.
    Maybe you could explain why a bad report would favor the dollar ?

  2. Dan,
    I have the same question as Robert with regards to why a poor jobs report would cause the dollar to go up. Thanks in advance.

  3. Robert and conheart - logically and rationally the Dollar should go down if the jobs report number is a bad one but what seems to have been happening of late is that whenever we get something that tends to reinforce the idea that the economy is not improving and growth is slowing, the hedge funds, instead of selling the Dollar end up buying it, the yen and the bonds. That is what is called risk aversion trade. It makes no sense but that is what they have been doing. Perhaps that will change at some point and the Dollar will move lower as one might expect. We'll see.

  4. It is all the in the way in which the money power have brainwashed most people into thinking that the US dollar and other debt-usury-fiat currencies are "safe". (This goes double for the US dollar because most world trade for commodities are done in US dollars.)

    It has literally caused all those gullible enough to think of wealth in terms of these currencies. The big financial media networks then mis-classify commodities as risk when in reality, they are no riskier than the person who makes the decision to buy them.

    Given the fact that they actually uhhh.. support LIFE, I would cast my vote for the commodities being less risk than the currency that they are priced in, especially when you look at some of the currencies that have hyper-inflated (Wiemar German Mark, Zimbabwe Dollar, 1990's Russian "Rubble", to name a few).

    I have strong reason to believe that we are not far from seeing world trade move away from the US dollar, and the brainwashed masses are going to see how "safe" the dollar really is NOT.

    Then, Robert, you will start to see commodities move higher on bad US economic statistics.

  5. mainstreet...
    Goood comments ,you really make some great points.But I would say to Dan and you that the dollar is no longer seen as a safe haven , just look at the dollar its been falling and falling as the news has gotten worse.Today's rally in the dollar will prove to be fleeting,

  6. Robert;

    The Dollar has been falling for one main reason - the Fed is being seen as dovish and unwilling to raise rates while the rest of the world central banks have either been raising rates or at least talking about raising rates. When Trichet disappointed the market today, and did not raise rates in the Euro zone, as the market had strongly believed that he would, it lead to a sell off in the Euro and a sharp rally in the Dollar.

    The other reason for the Dollar weakness is that risk trades have been put on which involve using both the Yen and the Dollar as carry currencies because of their low rates. That means hedge funds can borrow enormous amounts of money cheaply in these currency terms and invest that money in leveraged trades in commodities.

    When risk is in, the Dollar is weak; when risk is out, the Dollar rallies. I am not saying the Dollar is a safe haven. I do not understand why you think I am as I have made it abundantly clear for nearly 8 years now, that it is not. I am a trader and am telling you what the market reaction is and what the market is thinking currently.

  7. Dan:

    the market is not thinking, the snot nosed pretty boys rely on their algo driven programs

    nobody is thinking at all, they set up the parameters, hit 'run program', and that's it

    and it works for them, and will continue to work for them, until it doesn't

  8. Dan has the Yen/Dollar carry trade started up again already?

  9. Thank you all for your comments. My opinion is very simple: trading the market is foolish. You could make money if lucky but not because you are smart.
    Hedgies are playing the market with the help of:
    1- algoritms (and no brain and more importantly no fundamentals) as mentioned by Jake the snake (and Jim Sinclair)
    2- The Fed -in order to keep the dollar alive.

    What we are seeing now is the big banks (with the Fed) manipulating further the market to cover their short positions (the banks) and killing gold investors (and) slowing the fall of the dollar. If the USD was to fall precipitousely the Fed would be FORCED to raise rates and when your have more than $14T debt this is suicide. It will come but the fight will be with "no prisoner"
    Trying to read and ride this market is foolish. I have stopped being a fool (except my core gold position) at the end of February.

  10. I agree with Hubert ,and mainstreet, very risky to play these rigged markets now...really since last year at least,but aside from owning a core in gold and silver ...bought at the lowest entry prices....(a little lucky fishing)

    Folks who think the bottom is in now at silver 33 might get the next shock if 'the market' does a whipsaw monday and drops it down to 32 and then to 30.

    Imagine that silver would shoot from 17 (remember the old days when it was 17 ? jees...like 10 months ago)
    17 soaring to 50..who imagined 2 weeks ago that it would ever plunge from 50 down to 30....and in 3 or 4 days time !!?

    thats the new normal free market for ya.

    Folks have to see the long term picture.
    If the wizard last year told you that silver would rise from 17 to 22,you'd be happy. and if it would rise again from 22 to ....Wow ...29...you'd be thrilled.
    Now, silver at 30 sounds like a painful shock to everybody,instead of a happy development.

    Same thing with gold....folks are salivating at the hope of buying at 1400....1400!!!
    what ever happened to gold 1000, ...1250? I was waiting for 1250 in february.
    I'm still waiting for 850.

    People can get lost in this game on the way up and on the way down.

    and its all rigged and rigged not in our favor.

  11. Jesse described it perfectly today.

    I feel blessed to have discovered these great blogs ,so full of wisdom ,just really right on.
    Trader Dan's market views
    thanks Dan. youre great.

    Jesse's Cafe American

    (TF's) Along the watchtower

    Harvey Organ

    Naathan's Economic Edge

    amazing that these are all free
    theyre worth millions

  12. Commodity chain-selling continues in earnst. Second day in a row with huge volume in USDX coming off the lows. XAU once again grinding out near the lows of the day.


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