"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, March 6, 2014

The Draghi Party

Early in today's session ECB President Draghi threw the Euro bulls a nice bone to chew on and with that, it was off to the races for that currency with the US Dollar and the Japanese Yen both getting ceremonially dumped.

If that was not enough for the US Dollar, one of the Fed governors, Mr. Dudley, made his way to the microphones to state that the "Fed has a long time before raising short term rates". STRIKE TWO for the DOLLAR.

STRIKE THREE seemed to come in the form of ????. Perhaps it was Dudley's comment about the tapering being data dependent ( recent data has not exactly been resplendent). He did go on to say however that the threshold to change the tapering plans would be "pretty high".

Either way, today was one of those days in which certain commodity sectors were seeing big inflows of hot money. Soybeans continue charging higher with corn getting in on the action. Already there is chatter that the planting season here in the US is going to be delayed on account of the abnormally cold weather ( where is that damned global warming when we really need it?).

Gold garnered support from the surging Euro but was also aided by the vote out of the Crimean Parliament which wants to put to a vote the idea of breaking away from Ukraine and becoming a part of the Russian sphere. Some are viewing this as an escalation in the drama over there and that of course brings a bid into gold.

Like I said the other day, if you have the uncontrollable urge to actually trade the yellow metal at the Comex either lock yourself in vault somewhere away from a computer screen or at least trade small in size. This market is very fickle right now. Just be careful and do not get reckless or listen to all the hype currently coming out of certain segments of the gold community.

I put far more credit on what is happening to the Euro and the Dollar than I do to the ridiculous talk of a nuclear war. If the Euro can clear a strong overhead resistance zone near the 1.39 level while the Dollar CANNOT hold support between 79.50 - 79.00 on the USDX, gold should be able to breach overhead chart resistance near the $1,360 zone. It would have to best $1,375 but if it does, should be able to set up at least a test of psychological resistance at the $1,400 level.

Dip buying has continued to occur in gold with the situation in Ukraine keeping bears nervous but in my mind, the big driver has been the weakness in the Dollar and the continued move higher across certain key commodity markets. Strangely - and I have yet to make any sense out of this - Copper continues to go absolutely NO WHERE. It baffles me to no end to see this key industrial commodity NOT LEADING the sector. Either copper is going to have to make a sudden move higher or I am concerned that we are going to see some big retracements in the commodity sector at some point. There is a lot of hot money flooding into the sector but a great deal of it is purely technical in nature as momentum funds are buying. The problem is that unless there is a strong fundamental underpinning to some of this, once the upside momentum plays itself out, prices could get hit hard as the longs bail out.

The key, at least in my mind, will be whether or not the US Dollar can find its friends again. That is going to take some strong economic data soon. Perhaps it will be a payrolls number but one thing is for sure, the more traders are convinced that the Fed is not going to move on the short term interest rate front any time soon, the more the gigantic specs are going to play their carry trade and shove certain commodity sectors higher.

More later if time permits.... busy, busy week....


  1. Meh....

    DBD topped out 4 days ago and commodity indexes have been selling off ever since. Thanks to the continuous and chronic "oil glut" we seem to be encountering.

    Pull up USO on the 15-min. chart., basically a nosedive ever since the hysteria of Ukraine peaked.

    Refining stocks like MPC, VLO, and TSO are joyous over the sudden and welcome crash in WTIC, as profit margins are now set to explode higher once again.

    And all this without any jawboning yet from Yellen and her crew about "inflation expectations" needing to be monitored. They always have that tool to instantly crash commodities if necessary.

    1. Mark,
      Agreed. This crisis in Ukraine will have to subside sometimes (probably soon, unless someone is hoping for WWIII to finally cash in on their gold stash) and that will most likely spell trouble for the entire complex. But there's always printing monthly billions of dollars which should provide the floor under the price(s).

  2. Dan,
    When I read your suggestion the other day's suggestion to put your hands in an ice bucket until they go numb if you feel urge to trade gold in this environment I laughed out loud, so my wife thought I completely lost it. She said if this is to continue she'll put a ban on some sites (especially this one with pinkish background).

    1. Now, when I read "lock yourself in vault somewhere away from a computer screen" I had (organic) green tea literally rushing through my nose straight onto the screen. Thank God this was at work so she couldn't had seen me.
      Thanks for that, man.

    2. Thanks, man. I had trouble expressing myself.

  3. Trying to be short anything is a "Death Wish", a la Charles Bronson; swb in sparks of course

    1. Steve, you should have told me that before yesterday morning. I shorted a couple of mines I thought ran their upward course. I actually could not sleep last night, as I was tossing and turning about. Well, I should not had gotten into the kitchen for the heat but I did it anyways. As I said the other day, funny animals we humans are.

  4. Hey Trader Dan,

    I wanted to send you a message offline about this, but I didn't see your email address. I was wondering if you would be interested about writing on Jack Schwager's Market Wizard Search? He is going to be featuring traders in his forthcoming book. He will be finding them at roadshows and online via Fund Seeder. Fund Seeder's mission is to identify undiscovered trading talent then link them with seed investors all across the globe. View our video to find out more about our vision. More info at www.fundseeder.com Thank you and I hope that this is something that may interest you.

  5. The long term USD chart isn't what you might think - the banks have the QE on their balance sheets - and they're trading it instead. Scroll down for $usd since 1982 http://astrocycle.net/currencies/us-dollar/

  6. "...hype currently coming out of other segments of the gold community."

    The hype and sales pitch from some of the more dramatic "hypesters" is non-stop no matter what the geopoloitical or market situation is.
    The only thing worse then the hype is the angry, axe grinding logic that accompanies the hype.
    Folks like Jim Willie and other flamboyant characters out there seem to be almost semi-nuts at times and it's almost hard to believe that people just lap their pure conjecture up and pay for it. To each their own.

    Virtual online cults of thought and sentiment are a relatively new societal phenonenom that some might not even realize they're apart of. In the end people believe and gravitate towards who they're comfortable being entertained while a sales pitch is taking place at the same time.
    Some folks online are simply nuts and will believe or tolerate anything as long as it seems plausible in its explanation by the hypesters and it involves blaming some type of villian.
    The used car salesman/preacher aspect in some corners of the gold blogosphere is something I think is lost on some folks. Fear and doom are age old marketing concepts.

    The best part of TD's blog, besides his rational analysis, is the fact I don't feel like I'm being cajoled relentlessly into supporting him (or his futures market investments or phyz PM purchases).
    The fact that this blog has a genuinely good vibe to it and not an angry attacking tone makes it that much better.
    Keep up the good work.

  7. " The fact that this blog has a genuinely good vibe to it and not an angry attacking tone makes it that much better"

    Well said.

    " The best part of TD's blog, besides his rational analysis, is the fact I don't feel like I'm being cajoled relentlessly into supporting him (or his futures market investments or phyz PM purchases). "

    Or "good gold shares".

  8. Dan, Jim Willie, Joe Granville, Robert Prechter, Howard Ruff, Harry Schultz, Dines, Pento and I am sure you at this point get the point and that is that these guys are promoters and letter writers with no abilities whatsoever to take any money out of these markets. They may wax eloquent, but following their advice is hazardous to one's financial health, for sure; sparks

  9. Thank you once again for your hugely insightful commentary.
    Again and again - I find myself awe struck by your knowledge
    Independent in tone.
    And freely given.
    If you ever find your commitment to continued posting flagging, consider bill fleckenstein's model of small-fee subscription service. You have many fans who like me, would be glad to show their appreciation more tangibly.
    Best Regards...

  10. Dan was for Dan the Man; sparks

  11. People are careless about Ukraine.
    Yes, I believe this could turn into a world war in a matter of months.
    I don't agree with many things Craig Roberts is saying, but I agree with the hubris of USA/EU governments, I believe in their aggressivity.
    Those people are nuts to provoke such tensions already.
    Crimea can easily be compared to Cuba as a geostrategic neighbour to Russia, a direct strategic threat if it joins NATO.
    Just remember how Kennedy reacted when they learnt that Cuba was about to be armed with nuclear missiles.
    Do you really think that Russia is going to accept the same?
    Now Krusctchev backed down at the last moment.
    Will the arrogant West back down at the last moment, should Russia decide to protect its vital geostrategic interests in this region?
    I'm not quite sure about that one.
    Too long the West has been used to other countries systematically bowing down to its will.

    1. You have correctly noted the similarity of Ukraine to Cuba. One the nuclear war risk you are perhaps too concerned. While the hubris and arrogance of my USA government is astounding they are unwilling to engage without support. Europe is to broke and weak after decades of socialism and dependence on USA for defense to engage.
      The risk I see is a single nuclear capable organization lobbing one and the others following suit. Ukraine only slightly raises this risk.

  12. http://i57.tinypic.com/dqjitd.png

    1360 is a heavy resistance for gold.
    Not only combines Both daily and weekly upper bollinger bands, but also the last top of end of october 2013.
    Still...until now, the CDUR cycles show that the bull trend was healthy. Prices went up when CDUR rose. But they consolidate horizontally when CDUR goes down.
    Now that CDUR completed its way down, let's see if prices rise again when CDUR decides to go up.
    If they don't, on the daily time unit, it will mean that prices do not respond to cycles anymore...no trading opportunity then, with prices likely to remain in a range.

  13. Forget who said this or that the figures tell it all for 2014 DOW -1% GDX +23% US economy and US$ weakening FED testing TAPER, no sign of Government living within it's means, the welfare lines grow, huge deficits at all levels of Government. Gold quietly waits!

    1. All true. I am wondering on a time when the dollar is falling, and all commodities are rising, why gold and silver are lower. There is a lot that doesnt make sense with the metals right now.


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