Saturday, November 26, 2011
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen in to my radio interview with Eric King on the KWN Weekly Metals Wrap.
Wednesday, November 23, 2011
Happy Thanksgiving to my American readers
We do indeed have much to still be thankful for in this wondrous land of ours.
The Wall Street Journal has a fine tradition of reprinting some wonderful reading each and every year in honor of our Thanksgiving holiday. May I suggest taking a bit of time to read these two fine articles and reflect on the sacrifices made by those who came to these shores more than 400 years ago and by those who looked upon what they had created years later and recorded their thoughts.
http://online.wsj.com/article/SB10001424052970204323904577037921612867912.html?mod=WSJ_Opinion_AboveLEFTTop
The Wall Street Journal has a fine tradition of reprinting some wonderful reading each and every year in honor of our Thanksgiving holiday. May I suggest taking a bit of time to read these two fine articles and reflect on the sacrifices made by those who came to these shores more than 400 years ago and by those who looked upon what they had created years later and recorded their thoughts.
The Desolate Wilderness
A chronicle of the Pilgrims' arrival at Plymouth, as recorded by Nathaniel Morton.
http://online.wsj.com/article/SB10001424052970204323904577037920016916462.html?mod=WSJ_Opinion_AboveLEFTTopAnd the Fair Land
'For all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators
http://online.wsj.com/article/SB10001424052970204323904577037921612867912.html?mod=WSJ_Opinion_AboveLEFTTop
Gold weak but holding support - for now
Gold has now gone down and visited the critical support level near $1680 three times in the last three trading days, each time managing to recover as it attracted quality buying and rebounded. Considering the weak action in both the HUI and in silver, and of course strength in the Dollar, this is encouraging but overall the market is acting rather poorly.
Until this market can manage to regain its footing above $1725, it is in a precarious position. I got the distinct impression that many traders did not want to go home short over a long holiday weekend period (many are taking off until Sunday evening) due to concerns over what may great them come Sunday evening/Monday morning of next week.
The Dollar is on course to end this week on a very strong note barring any changes in the fundamental picture in Europe. That will lead to further weakness in commodities in general. Now that the failed German bund action has sent shock waves through the markets in general and chatter continues to grow that France is next on the downgrade list, the US Dollar is seeing strong inflows as money comes out of Europe. One has to wonder if the Asians are dumping Euro-based debt and gravitating towards Treasuries.
At some point in this crisis, gold is going to stop following the general commodity sector lower and will trade as a safe haven but it is going to continue to experience computer selling from hedge funds and index funds which benchmark against the various commodity indices. It should be noted however that gold is holding much better than silver or the CCI in general. This is due to its function as a safe haven. Were it not for that, it would be getting sold down more severely due to the mad rush for cash currently underway.
Note the various support levels and resistance levels I have noted on the chart. The failure at $1800 is very evident now that we have had some time to put in some more trading bars on the chart. Rallies are being held in check by the downsloping dark blue line of the pitchfork. Support has been established below $1680 with some spiking down towards $1665 producing some decent ricochetting back above $1680. Failure to hold these lows established this week should let the market fall down towards the downsloping red line which parallels the upper tine of the pitchfork.
Until this market can manage to regain its footing above $1725, it is in a precarious position. I got the distinct impression that many traders did not want to go home short over a long holiday weekend period (many are taking off until Sunday evening) due to concerns over what may great them come Sunday evening/Monday morning of next week.
The Dollar is on course to end this week on a very strong note barring any changes in the fundamental picture in Europe. That will lead to further weakness in commodities in general. Now that the failed German bund action has sent shock waves through the markets in general and chatter continues to grow that France is next on the downgrade list, the US Dollar is seeing strong inflows as money comes out of Europe. One has to wonder if the Asians are dumping Euro-based debt and gravitating towards Treasuries.
At some point in this crisis, gold is going to stop following the general commodity sector lower and will trade as a safe haven but it is going to continue to experience computer selling from hedge funds and index funds which benchmark against the various commodity indices. It should be noted however that gold is holding much better than silver or the CCI in general. This is due to its function as a safe haven. Were it not for that, it would be getting sold down more severely due to the mad rush for cash currently underway.
Note the various support levels and resistance levels I have noted on the chart. The failure at $1800 is very evident now that we have had some time to put in some more trading bars on the chart. Rallies are being held in check by the downsloping dark blue line of the pitchfork. Support has been established below $1680 with some spiking down towards $1665 producing some decent ricochetting back above $1680. Failure to hold these lows established this week should let the market fall down towards the downsloping red line which parallels the upper tine of the pitchfork.
Silver continues to be at the mercy of the risk trades
Silver rallied yesterday on news about a proposed IMF plan to aid Europe. That took equities higher, the Dollar lower and the metals up for the ride. Today that is yesterday's news as the pitiful German bond auction sent investors fleeing out of everything they bought yesterday and rushing back into the Dollar once again.
Down goes silver, crude oil, copper and just about everything else on the planet.
All you need to know about silver is contained in the following two charts. The first is the Continuous Commodity Index. The second is Silver. Note how eerily similiar the two charts are.
This is the reason that I keep saying that silver is not going to go anywhere until the sentiment towards "RISK" and towards "INFLATION" changes. As long as traders are seeing the sovereign debt crisis in Europe as worsening and eventually causing a contraction in global economic growth, they are not going to be piling into silver as they did back during the days of the Federal Reserves' Quantitative Easing program.
Silver does however continue to find buying on dips into the region near $30 which is becoming a critical chart support level. As long as buyers see value in this area it should remain well supported as they will accumulate the metal during such bouts of price weakness. If the European contagion begins to worsen, this level could become vulnerable.
As investors rush back into the Dollar, it is poised for another trip to the 80 level on the USDX. If it manages a weekly close above this level, it is going to be rough going for the commodity complex. If it traders become convinced that even Germany is going to succumb to the contagion spreading across Europe, the Dollar is going to move through 80 like a hot knife through butter. If on the other hand a change of sentiment towards Europe emerges, 80 will prove to be a formidable resistance level.We will have to see where events lead us.
Note that both longer term moving averages, the 50 day and the 100 day, are now moving higher in conjunction - a bullish sign.
Keep in mind that even though the Dollar has its own set of problems, and that set is very significant, right now it is NOT THE EURO, and that is what has money flowing back into it.
Down goes silver, crude oil, copper and just about everything else on the planet.
All you need to know about silver is contained in the following two charts. The first is the Continuous Commodity Index. The second is Silver. Note how eerily similiar the two charts are.
This is the reason that I keep saying that silver is not going to go anywhere until the sentiment towards "RISK" and towards "INFLATION" changes. As long as traders are seeing the sovereign debt crisis in Europe as worsening and eventually causing a contraction in global economic growth, they are not going to be piling into silver as they did back during the days of the Federal Reserves' Quantitative Easing program.
Silver does however continue to find buying on dips into the region near $30 which is becoming a critical chart support level. As long as buyers see value in this area it should remain well supported as they will accumulate the metal during such bouts of price weakness. If the European contagion begins to worsen, this level could become vulnerable.
As investors rush back into the Dollar, it is poised for another trip to the 80 level on the USDX. If it manages a weekly close above this level, it is going to be rough going for the commodity complex. If it traders become convinced that even Germany is going to succumb to the contagion spreading across Europe, the Dollar is going to move through 80 like a hot knife through butter. If on the other hand a change of sentiment towards Europe emerges, 80 will prove to be a formidable resistance level.We will have to see where events lead us.
Note that both longer term moving averages, the 50 day and the 100 day, are now moving higher in conjunction - a bullish sign.
Keep in mind that even though the Dollar has its own set of problems, and that set is very significant, right now it is NOT THE EURO, and that is what has money flowing back into it.
Monday, November 21, 2011
Gold nearing important technical support level
The $1680 level is an important chart area as it has served to function both as overhead resistance and as downside support depending on the status of the gold market at the time that price has neared this area. In today's session, it is acting as a downside support level thus far holding price from dropping further as the risk trades are once again taken back off.
Should this critical level fail to stem the decline in gold, price will fall into the next band of support which is near and just above the $1640 level, a level that also coincides with the rising 150 day exponential moving average. That moving average has seen value-based buyers emerge over the last two months so we can expect it to uncover similiar buying once again should price move this low.
For gold to stem the current tide of bearishness and rattle the shorts a bit, it will need to recapture the $1710 - $1715 level for starters with a further push into the $1740 region necessary to bring in some momentum based buying.
Should this critical level fail to stem the decline in gold, price will fall into the next band of support which is near and just above the $1640 level, a level that also coincides with the rising 150 day exponential moving average. That moving average has seen value-based buyers emerge over the last two months so we can expect it to uncover similiar buying once again should price move this low.
For gold to stem the current tide of bearishness and rattle the shorts a bit, it will need to recapture the $1710 - $1715 level for starters with a further push into the $1740 region necessary to bring in some momentum based buying.
Saturday, November 19, 2011
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to listen to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
Thursday, November 17, 2011
Fear, Fear and more Fear
European woes are rising and as they rise, more and more it seems as if the level of FEAR is rising alongside of it. The cost of insuring FRench, Italian, Portuguese, and Belgium bonds hit record highs today. The ECB was said to be a buyer of Italian bonds today (no one else seems to want them).
I think it does not take much in the way of insight to realize that after the collapse of MF Global (they insanely leveraged their buys of European sovereign debt to asinine levels and raided their customer monies in an effort to cover their staggering losses), there is no market for European sovereign debt. Investors are looking at the huge sums of this debt on the books of the European banks (and that on the books of US based banks as well) and are suddenly realizing that there is no one to sell this stuff to besides the big Central Banks. Many are fearing that a collapse of those big banks is coming without some sort of action by the ECB.
One has to wonder what good that will do in the long run because it will no doubt involve money printing. That is what has Germany reluctant to go along with the program because the Germans are fearful of the impact on the Euro.
All this fear send investors/traders rushing into cash and once again jettisoning commodities in general while buying US Treasuries. Hey, compared to Greek or Italian or French debt, US Treasuries look like the Rock of Gibraltor for stability. What makes this so ironic is that the US reached the "laudable" level of $15 TRILLION in indebtedness. The Dollar - like I have said repeatedly, right now it is the best looking piece of trash on the kitchen floor.
Gold was sold along with silver and along with Platinum and Palladium, which were absolutely crushed today. Palladium dropped near 7%. Copper of course was hammered lower falling better than 3%. In that sort of environment it is to be expected that Silver would get the snot beat out of it. It is down nearly 6.55 as I type this.
Gold fared a bit better than silver falling only 3% or so. While the gold shares were smacked down (again failing to extend past the 600 level on the HUI), I do not expect gold itself to fall apart. Reports today stunned traders when they learned that Central Banks were huge buyers of gold on the recent retreat in prices underscores the strong demand for the yellow metal that exists (they scooped up over 150 TONS!).
There is no doubt in my mind that value based buying of gold will continue as this stupidly insane hedge fund selling of the metal will be eagerly welcomed by various foreign Central Banks and deep-pocketed value-based buyers. I expect to see China acquiring the metal in December as dealer there prepare for their yearly New Year's celebration later in January.
Crude oil could not keep its footing above the $100 level sinking below that in today's trade as both it and gasoline were also sold off. Natural gas bucked the general selling trend as it made a new yearly low yesterday so it appeared some guys were using the general wave of selling to cover shorts. That managed to pop the market higher a bit.
As stated previously in both writing and in my radio interviews - silver is not going anywhere until it can convincingly clear the $35.50 level to the upside. That is going to require a change in investor sentiment towards it. Right now, with silver still tied directly to the risk trades, it cannot mount any charge higher until buyers feel comfortable enough to take on a high level of risk. I am not sure what might make that happen given the current state of the European mess.
Gold is a different animal as it is a true safe haven. Remember it gets knocked down along with these risk off trades because it is sold as part of a basket of commodities that comprise the various commodity indices against which hedge funds and commodity index funds benchmark. However, safe haven buying usually surfaces in gold, albeit at the lower levels because those who are worried about currency stability will move to the metal as their distrust of the monetary officials and political leaders increase.
Looking briefly at the gold chart, the $1800 level has been acting as resistance for the last two weeks or so. The $1750 had been serving as support. That gave way with the market falling through the first level of chart support near $1720 before bouncing off the second level of chart support just above the $1700 level. Gold is attempting to climb back above $1720 as I type this but as of now cannot quite muster the strength to do so. We will have to see if it can do so in Asian trading this evening.
Failure to hold at $1705- $1700 will allow the metal to drop towards $1680 where we should see some buying emerge. I would quite frankly be surprised to see gold lower than $1680 for any length of time. All of these paper currencies are extremely suspect right now, due to the huge sums of indebtedness in the system and all the implications that this carries with it. Central Bankers, when forced to choose between deflation and inflation will always opt for the latter. They feel that they can always "control" or manage that - the former is a different story altogether for them.
I think if push comes to shove and the Germans are forced to make a choice between inflation or deflation, they too will choose what might be regarded as the lesser evil of the two and opt to move forward on the Financial Stability front. It's either that, or the Euro falls apart and so too then does the ECB itself.
If gold were to fall through $1680 for any reason, I would anticipate increased buying by longer-term oriented investors/traders who are looking for the metal to make a push towards $2000. Downside in the metal at $1620 - $1600 would be much less than upside risk to that level.
I think it does not take much in the way of insight to realize that after the collapse of MF Global (they insanely leveraged their buys of European sovereign debt to asinine levels and raided their customer monies in an effort to cover their staggering losses), there is no market for European sovereign debt. Investors are looking at the huge sums of this debt on the books of the European banks (and that on the books of US based banks as well) and are suddenly realizing that there is no one to sell this stuff to besides the big Central Banks. Many are fearing that a collapse of those big banks is coming without some sort of action by the ECB.
One has to wonder what good that will do in the long run because it will no doubt involve money printing. That is what has Germany reluctant to go along with the program because the Germans are fearful of the impact on the Euro.
All this fear send investors/traders rushing into cash and once again jettisoning commodities in general while buying US Treasuries. Hey, compared to Greek or Italian or French debt, US Treasuries look like the Rock of Gibraltor for stability. What makes this so ironic is that the US reached the "laudable" level of $15 TRILLION in indebtedness. The Dollar - like I have said repeatedly, right now it is the best looking piece of trash on the kitchen floor.
Gold was sold along with silver and along with Platinum and Palladium, which were absolutely crushed today. Palladium dropped near 7%. Copper of course was hammered lower falling better than 3%. In that sort of environment it is to be expected that Silver would get the snot beat out of it. It is down nearly 6.55 as I type this.
Gold fared a bit better than silver falling only 3% or so. While the gold shares were smacked down (again failing to extend past the 600 level on the HUI), I do not expect gold itself to fall apart. Reports today stunned traders when they learned that Central Banks were huge buyers of gold on the recent retreat in prices underscores the strong demand for the yellow metal that exists (they scooped up over 150 TONS!).
There is no doubt in my mind that value based buying of gold will continue as this stupidly insane hedge fund selling of the metal will be eagerly welcomed by various foreign Central Banks and deep-pocketed value-based buyers. I expect to see China acquiring the metal in December as dealer there prepare for their yearly New Year's celebration later in January.
Crude oil could not keep its footing above the $100 level sinking below that in today's trade as both it and gasoline were also sold off. Natural gas bucked the general selling trend as it made a new yearly low yesterday so it appeared some guys were using the general wave of selling to cover shorts. That managed to pop the market higher a bit.
As stated previously in both writing and in my radio interviews - silver is not going anywhere until it can convincingly clear the $35.50 level to the upside. That is going to require a change in investor sentiment towards it. Right now, with silver still tied directly to the risk trades, it cannot mount any charge higher until buyers feel comfortable enough to take on a high level of risk. I am not sure what might make that happen given the current state of the European mess.
Gold is a different animal as it is a true safe haven. Remember it gets knocked down along with these risk off trades because it is sold as part of a basket of commodities that comprise the various commodity indices against which hedge funds and commodity index funds benchmark. However, safe haven buying usually surfaces in gold, albeit at the lower levels because those who are worried about currency stability will move to the metal as their distrust of the monetary officials and political leaders increase.
Looking briefly at the gold chart, the $1800 level has been acting as resistance for the last two weeks or so. The $1750 had been serving as support. That gave way with the market falling through the first level of chart support near $1720 before bouncing off the second level of chart support just above the $1700 level. Gold is attempting to climb back above $1720 as I type this but as of now cannot quite muster the strength to do so. We will have to see if it can do so in Asian trading this evening.
Failure to hold at $1705- $1700 will allow the metal to drop towards $1680 where we should see some buying emerge. I would quite frankly be surprised to see gold lower than $1680 for any length of time. All of these paper currencies are extremely suspect right now, due to the huge sums of indebtedness in the system and all the implications that this carries with it. Central Bankers, when forced to choose between deflation and inflation will always opt for the latter. They feel that they can always "control" or manage that - the former is a different story altogether for them.
I think if push comes to shove and the Germans are forced to make a choice between inflation or deflation, they too will choose what might be regarded as the lesser evil of the two and opt to move forward on the Financial Stability front. It's either that, or the Euro falls apart and so too then does the ECB itself.
If gold were to fall through $1680 for any reason, I would anticipate increased buying by longer-term oriented investors/traders who are looking for the metal to make a push towards $2000. Downside in the metal at $1620 - $1600 would be much less than upside risk to that level.
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