"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
Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET
Investors worldwide are making a mad rush towards cash as they seek to become liquid based on their fears of a slowdown in the global economy. There is little confidence that monetary authorities and political leaders in Europe are doing anything substantative to deal with the issues plaguing Europe. Over here in the US, investors are reading the tea leaves from the recent FOMC statement and are expressing disappointment that the punch bowl full of QE is not coming forthwith. Then there is talk about China slowing down as well.
All of this is working to generate visions of the summer of 2008 in the minds of traders as they fear another severe downdraft across a wide spectrum of "risk assets" while watching the US Dollar rally up through technical chart resistance levels.
The result - strong selling across nearly every single commodity futures market with a strong breakdown in the Continuous Commodity Index ( CCI ). It is down at levels last seen in October 2010 and is negative for the year 2011. That chart is signaling deflation is the current fear; not inflation. If it is going to bounce, this level will be where it needs to do so or more losses are in store with a potential move as low as 510 or lower.
It could be that some dovish FOMC members might be looking at the CCI chart thinking that they have plenty of room now to manuever should they be able to convince the rest of the members of the committee that more stimulus is needed. Central Bankers are going to panic if a deflation mindset takes hold and will be forced to act.
Gold is coming under increasing selling pressure as technical chart support levels are giving way. As these levels are broken, technically oriented computer selling is occuring. That, coupled with an exodus of traders to the sidelines ahead of the Christmas holiday, is leading to exaggerated moves as liquidity issues are now impacting trading. That is only going to get worse from here through the end of the year. The one plus is that this same dearth of liquidity can result in sizeable pops higher if some large bids hit the market on any news flashes that might impact trading.
Gold took out the bottom of the tightening triangle pattern yesterday but did manage to close above the critical horizontal support level near $1660. Early in today's session, it briefly violated that level but then moved back above it giving some hope to the bulls that it might be able to stabilize. That proved to be fleeting after the Fed statement hit the markets and off came the risk trades.
Down went the equity markets and up went the Dollar, in a very big way, as it is now trading solidly above an important technical resistance level just above 80 on the USDX chart. The Euro is sinking into oblivion with traders tossing it away and rushing into the Dollar, which they are for now viewing as having a better set of fundamentals than Europe, particularly since the Fed statement did not forecast the end of the world as we know it.
The Euro is now flirting with an important chart support level near 1.3000. Failure to hold there will send it quickly towards 1.2860 with a drop to 1.2680 not out of the question.
Back to the US Dollar - The Dollar has not managed a WEEKLY CLOSE ABOVE the 80 level in more than a year. If it ends this week above 80 and particularly above the blue resistance line shown on the chart, it is going to draw in technically oriented buying and has a good shot at a test of the 50% retracement level coming in at 81. A push through this and the Dollar is going to move to 83.
... is quite simple - Meteorologists still make money even when they are terribly, horrifically, astonishingly wrong. Traders don't. Advice - with all this insane volatility maybe we should become meteorologists!
Hurricane predictors admit they can’t predict hurricanes
Two top U.S. hurricane forecasters, revered like rock stars in Deep South hurricane country, are quitting the practice because it doesn’t work.
William Gray and Phil Klotzbach say a look back shows their past 20 years of forecasts had no value.
http://www.ottawacitizen.com/mobile/story.html?id=5847032
Gold has broken down through the bottom uptrending support line in its triangular consolidation pattern but thus far is holding horizontal support near the $1660 level. Failure to hold this level will send it down towards $1620 initially followed by a test of $1600 should that fail to stem the decline.
A rebound back above $1680 is needed to reinforce the support level at $1660.
The breakdown in the Euro following disappointment over the events in Europe this past weekend has sent the US Dollar strongly higher this morning and that is pressuring many of the commodity markets in general. The CCI, or Continuous Commodity Index, has moved to a new low for the year signaling investor fears of a slowing global economy and thus a dampening off of demand for many commodities in general.
Crude oil will need to stay above the $95 level to prevent a double top from forming on that chart.
Please click on the following link to listen to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.
http://tinyurl.com/bpc7y5j
I also want to note here that I am not posting any silver, gold or HUI charts for Friday seeing that all remain mired within very broad consolidation patterns but are constricting in range. Until something changes in that regards, there is not much worth commenting on as far as the price action goes. We are waiting for something to trigger a resolving of this sideways ranging trade.
The mining sector, as evidenced by the HUI, remains mired within its now more-than-a-year long trading range which is bounded on the top by the 600 level and supported on the bottom by the 500 level. Going back into November of 2010, all rallies have eventually failed to hold for long above the top of this range. There were only two weeks in which the index was able to pull off that accomplishment but it then failed and failed very large at that. It collapsed over 85 points in a single week which dropped the index back down to the bottom of the range.
Yesterday gold was anticipating a stronger policy response coming out of the upcoming meeting in Brussels dealing with the sovereign debt crisis in the Eurozone. That brought buying back into a host of markets as well with equities rallying and the risk trades back on in full force. Today? Well, that was yesterday.
Once current ECB President Draghi basically squashed the idea of large bond purchases by the ECB, the market promptly threw away everything it put on yesterday totally reversing the risk trades as disappointment that the liquidity punch bowl was not going to be spiked as strongly as most were expecting took hold.
This madness will continue as long as uncertainty remains with traders seizing on every single bit of news to cram gobs of money into the markets or yank those same gobs back out again.
At some point it will resolve itself one way or the other but until it does, up and down is the order of the day. Perhaps something will come out of that meeting in Brussels tomorrow but who knows at this point.
As it now stands, gold remains mired in its coiling pattern. Notice how the downtrending upper resistance line is holding rallies in check.
Gold seems to be anticipating some sort of monetary stimulus and/or agreement out of the upcoming Brussels meeting this Friday in Europe to deal with the sovereign debt crisis in the Eurzone. For that matter, so too do the US equity markets which are grinding higher.
Failure to come up with some sort of market pleasing action or agreement on the part of these finance ministers will send the equity markets on a very sharp trip lower out of disappointment. On the other hand, any agreement reached will put a firm bid beneath those and engender buying in the Euro, at least for the short term.
The latter will see the Dollar move lower and should bring on the risk trades pushing both gold and silver higher. It might be enough to take gold out of this coiling pattern to the upside. It will need to at least better the $1765 level and hold above it to give us a shot at a test of $1800.
Keep in mind that no matter what they come up with, it is NOT GOING TO SOLVE the longer term, deep-seated structural issues. Conjuring up a mechanism/(s) to shore up the debt of nations who are hopelessly mired into a socialistic style system that has addicted a good portion of their citizenry to endless government handouts merely puts the proverbial bandaid on a growing cancer. When push comes to shove, loaning money to nations who have bankrupted themselves by this sort of lunacy solves nothing. It may and probably will buy a bit of extra time but there is no way out of this except by purging the debt, something no politician or monetary authority seems inclined to do. They can devalue the currency but buyers of the debt will understand that game and will demand higher interest rates to compensate them for currency risk, a guarantee of slower economic growth as it will act as both a drag on the economy and raise the cost of servicing any new debt obligations.
