"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


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.


  1. Thanks Dan. Your opinion validates the process. ESFS, and leverage to bail out leverage. However, the leverage utilized is now on the backs of taxpayers, retirees, soon to be retirees, kids, grandkids, etc. It is really sad to see. As a person who has already downsized giving up a few prized possessions in order to keep a budget in tact, it pisses me off. Decisions by government to create equality in homeownership, leading to large banks leveraging it up with new wonderful CDS, CDO's creating unbelievable debt. Now, the same institutions rewarding each other and joining the Global Banking Cartel which will now maybe bankrupt nations. Where does it end. Implosion.Rumor mills spun during the day, then backed out of the next morning is creating chaos. When the system goes blank...I will attempt to buy all the gold stocks I can. I have to admit I sold alot of what I had yesterday. I feel relief today, and have a sneaking suspicion another Oct 08 through March 09 is coming.

  2. Dan, If I may ask your opinion of the following?
    1) EFSF passes, leveraged to 2T? (Better or less than 50%)
    2) US and Euroland able to effectively control a Greece Bankruptcy leading to orderly market action? Better or less than 50%
    3) DJIA down more than 9000?

  3. Greece will default. This is, IMO, the only option available... Lack of coordination at the highest level due to too many differences between the European countries? YES but this is just the top of the iceberg...The one used by the manipulators (or the stupid hedgies and the media) BUT the real reason for the default is that people in Greece -pushed by the unions- are killing whatever was still working (and therefore bringing cash to the Greek's Treasury through taxes) Greece will never bring a balanced budget. Greece will default and the trillions of euros wasted by the ECB will be used by the banks for their own selfish interest and I am convinced that after Greece's default one or two more countries will default. How long do we have to wait for all of this to happen? Dan gave us the answer: When monetary authorities -BUT more importantly the political authorities who do not want to lose their power and privileges- stop meddling with the reality: the system is broken and the culprits have to pay the price! Unfortunately history has taught me to never underestimate our political greedy masters...so more volatility can be expected.

  4. Thanks Dan,

    What do you think will happen to gold and siver at the day of reckoning you mention? Are you long term bull?

    I can only wonder why, in this environment, gold is still in the "risk on" trade category, and the USD on the "risk off". What's your thought on this? Is it because gold is to narrow a market to make a shelter to all the deep pockets, and therefore theire are forced to considered the USD/Treasuries as the only safe heaven? If so, will this ever change?

    I'm getting worried to see gold stubbornly refuse to go higher in this environment, and equally worried about silver weakness : we are at the price of last december, as if nothing happened since then.
    I do understand that there are deep corrections in any secular bull market, BUT :
    what they said about silver after the first correction (from 50 to 32$ in may) was that the excesses had been corrected, that weak hands had been sent away, that only strong hands remained, that the asian buying represented a strong support, etc,etc...
    It didn't keep silver from plunging UNDER 32$ down to 26$.
    Whatever the arguments of the bulls (now it is that soom JPM will be forced to have a threshold on its max short position, and once again that weak hands are gone, etc...), I can only see weakness here, despite the news telling us every week that one central bank or the other is printing more money.

    So what's happening that I don't understand here?
    Thanks a lot if you have some lights.

  5. Henri, thanks for your post. Yes, the miners are back to below their price before gold went from 1250 to 1900 back to 1620 today? It is pathetic. If we look at the chart from the meltdown which the funding issues began in Oct 2008, gold went down to 950 from 700. It never really retreated after that poing back that low. It has bounced up and down. I think we are seeing positioning now in gold bullion for its next ascent. Gold Mining Stocks on the other hand may get beat up along with the market as they hit their lows in March 2009. What do I know. I wish I had Dans take.

  6. Sorry, it dropped to 700 from 950.

  7. People including me have greatly underestimated how importance liquidity is and why US treasuries always rally and why gold and silver fail to be a safe haven. The US treasure market is so deep that funds are not going in because of what they perceive to be a good investment, but the liquidity factor as they can get in and out to put on risk in minutes. Gold and silver fail this test over and over. Silver now has given up almost everything for the year. You could have bought any decent dividend paying stock and outperformed silver with no headaches. Dan is a great technician and never gets overly bullish or bearish, simply looks at the facts...the facts are that silver will fall to 20 and you will get crushed owning it if the Dow falls another 1000 points. Therefore, I don't care what you people think about a day of reckoning....if silver can't provide liquidity it will get hammered and so will gold.

  8. I agree with you Carusso on many points. However, what is a Treasury worth after we are continually being shown that we are perpetually upping the debt limit, printing more $'s, while inflation continues to increase. The speed of the crowd out of T's will be even more powerful than what went in. If on the other hand we shut down the spicket, unemployment skyrockets. Seen Greece, NYC, lately. I would hate to be the Fed Chairman right now. The new traded world currency innuendos should start soon.

  9. Thanks again for all the great analysis that you give here and on King World News, Mr. Norcini.

    I totally agree with your opinion on how the Central Banks are affecting the markets. My question though is how much longer can it go on? What will it take to bring it to an end?

    I don't see any will by them or our governments to make decisions different from what they've been doing to influence the markets.

    I've been expecting a collapse of this house of cards since 2008, and am astounded that we are still dealing with this hanging over our heads.

  10. Or maybe another war? Now that might stop alot of things at once. The country might not be so worried about Japan style deficits while a war is going on. At that point US treasury's are a safe haven backed by the US Military. Scary thoughts.

  11. I also wanted to add that Dan is very gifted. I believe that he does have convictions, as some of his commentary has suggested. I applaud and agree with 99% of it and am mostly I appreciate and am quite humbled and impressed with his work and insight. His work as a Technician has been second to none. That is very much appreciated.


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