"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, September 12, 2013

Gold gets "Whack-A-Moled"

Some of you might remember that cheapie little kids game called "Whack A Mole" in which you get a plastic hammer in order to beat the crap out of the little mole that sticks its head up through the plastic opening in the slide. Well, that is what gold reminded me of today. All it took for the metal to get "whacked" down through support was a jobless claims number. Once that hit the wires it was all downhill for the metal. And yes, it is not helping matters none that the Syria situation has turned into "Peace in our Times" as far as traders are concerned.

I mentioned in yesterday's piece that gold could drop down into the next support level near $1330 - $1325 should its support level give way. That is where it is currently sitting and truthfully, it looks like bears are growling and wanting more. If the market cannot hold above $1320, it can easily drop down to test the psychologically important $1300 level. Bulls would not want to see gold lose its "13" handle as that would be devastating psychologically, especially during a time of the year in which we generally have pretty hefty physical offtake over in Asia ahead of the festival seasons.

We simply have to wait and see what kind of response we get to the various economic data releases that are hitting the wire in order to get a better feel as to whether or not gold is going to hold support or not. The only thing I believe I can clearly say is that the bears have regained the short-term momentum in this market.

The following chart notes the ADX indicator which I like to use to judge trend strength. Notice that the ADX line has been moving lower, indicative of a LACK OF TREND. It is now rising, albeit ever so slightly while the -DMI ( Negative Directional Indicator) is also rising and is trading above the + DMI ( Positive Directional Indicator - blue line).  That is very clear - the market is moving sideways to lower with bearish forces in control. I do not know how to spell it out any clearer.

The shorter term 10 day moving average has completed a downside cross of the 20 day moving average which is a negative signal. I will be the first to admit that moving averages can be useless during phases in which markets are choppy as they can generate signals which can get you whipsawed but the facts are that the hedge funds are still in love with the things and thus they cannot be ignored. The fact that the price has now dropped below all four of the moving averages noted on this chart will get the attention of their algos... My thinking is that hedge funds are in the process of rebuilding those recently lifted short positions - the ones they were covering for most of the last two months and what drove the price over $200 off the low. That is not what any bulls want to hear right now. Perhaps some news will hit the wires that demands no break or let up whatsoever in the Fed Bond Buying adventure but that is an unknown and we have to work with what we have at the current time.

The HUI fell completely apart today ( again).... it has major support near 220 - 217 which it had better hold or else....

Silver proved just how fickle it can be as it was blasted into the nether regions today. The 50 day moving average is about 50 cents or so below today's close ( $21.38).... one would expect it to encounter some buying near that level if nothing else from some short covering. If not, the charts indicate a drop into a former congestion zone from $20.25 - $19.75.

Even as I type these late afternoon comments, price for both of the metals is continuing to sink lower....the damage on the charts is significant once again with the bulls under the gun to hold the market here or face increased losses.