While both gold and silver had nice days today, they both made their best levels earlier in the session. The rest of the session was pretty much spent going nowhere and fading off their highs.
Try not to read too much into any of these markets, with a few exceptions, based on one day's performance. What we are witnessing is both a combination of relief buying associated with a miserable, rotten piece of legislation that will accomplish nothing except to ACTUALLY INCREASE THE DEFICIT but has temporarily served to asssuage fears overs the so-called "fiscal cliff" and the fact that hedge fund managers are committing lots of brand new money into the markets to start off the year. This positioning or allocation of hot money is going to come in regardless of the fundamentals in those markets which have been selected by the hedgies as the go-to investments for the New Year.
In the grains, a host of that new money was greeted with jubilation by bears who wasted no time in using the machine buying to sell at a much better price than they were originally hoping for.
The liquid energies went the opposite direction as crude ran nearly to $94 before it too faded and fell back off its best level. Copper had a huge up day which certainly did not hurt the cause of silver one bit. As a matter of fact, the base or industrial metals, were all soaring skyward in union at one point as the algorithms gorged themselves on that sector in today's session.
One would think by judging the performance of the S&P 500 that the US has hardly a care in the world. Like I said in a post last week or so, hedge fund buying and selling tends to be very short-sighted in its activity so those with a longer time frame of reference are often left confused by what appears to be buying or selling divorced from anything in the real world. Get used to it as the mindless machines and this industry will be with us, unfortunately, until at least we get an environment in which the average saver can obtain a decent rate of return on their savings accounts and can forego the casino world of the US stock markets.
Gold did clear that stubborn resistance level at $1680 which is promising and has helped to turn the technical posture on the charts. Silver regained the very strong resistance level of $31 so both of these metals no doubt saw some significant short covering as a result. I am a bit concerned about the depth of the fade in silver as it fell nearly 50 cents off its session high. That level near $31.55 or so coincides with the falling 20 day moving average so if the bulls can take it through this level and hold it there, we should see it make a rather quick run to $32.30.
Downside support in silver is near the $30.40 level followed by $30.
The yen continues to fall apart which is helping to keep the Dollar from further weakening to the extent that we are used to seeing when these risk trades are coming on full bore. The British Pound made a 52 week high against that same US Dollar today.
Bonds fell apart today as no one wanted anything to do with them as a safe haven. Then again, I have been feeling this way about US TReasury debt since the second round of QE began. I will be surprised if the bonds completely break down at these levels since any move higher in interest rates at this point will absolutely brutalize the US fiscal condition even worse and I doubt that the Fed is not going to notice that. They are not directly targeting the back end of the yield curve with QE4 but rest assured a spike in the Ten Year Note is not going to go unnoticed by our master planners. Every time it appears that the long bond is about to finally start a strong downtrending move, it promptly reverses and move higher. Maybe this time will be the start of an exception to that. We'll see.
Wednesday, January 2, 2013
Monday, December 31, 2012
Happy New Year to my Readers
May the New Year of 2013 be a Happy, Healthy, Safe and Prosperous one for you all. Thank you for your interest in the blog this past year. For those who took some time out to write words of encouragement or thanks, I appreciate you!
Only the Lord knows what will come our way in this next year but one thing promises to be certain in regards to the markets - more volatility, more uncertainty, more wild price swings and more Central Bank interference.
Only the Lord knows what will come our way in this next year but one thing promises to be certain in regards to the markets - more volatility, more uncertainty, more wild price swings and more Central Bank interference.
Comex Gold Closes UP 6.9% for the Year
Comex gold had a nice day to finish out the year as it moved sharply higher around mid morning and pushed right into strong resistance at $1680 on the price chart.
The move enabled gold to put in yet another good performance on a yearly basis as it added 6.9% in 2012.
Gold in Yen terms was the best performer among the major currencies as the Yen lost over 20% of its value against gold.
The move enabled gold to put in yet another good performance on a yearly basis as it added 6.9% in 2012.
Gold in Yen terms was the best performer among the major currencies as the Yen lost over 20% of its value against gold.
Saturday, December 29, 2012
HUI Weekly Chart
The mining sector, as evidenced by the HUI has not been a happy place for bulls since late this summer. The selling has been a combination of both frustrated and disenchanted longs bailing out in addition to some opportunistic shorting.
While the broader stock market has fared well since the beginning of the year, it too began fading about the same time as did the overall mining sector. However, it still techically remains in an uptrend as long as it holds above the 1350-1340 level unlike the mining shares which have completely broken down falling through one support level after another.
The performance of the mining shares against the broader market can be seen by examining the following ratio chart comparing the HUI to the level of the S&P 500. Notice that even though the S&P was also working lower since late this past summer, it has outperformed the mining sector by a considerable amount. In hindsight, shorter-term oriented traders/investors would have been better advised to have bought into the stock rally and left their gold shares for another day. There is a reason that the motto: "You cannot fight the Fed" has some credence. Whether or not one agrees with this idiocy known as Quantitative Easing, the fact is that the market loves it, particularly the financial stocks.
About the best that can currently be said about the mining shares is that that are not further breaking down against the broader stock market. The low in the ratio seems to attract buying. Translation - at some point, perhaps we are there - in relation to the broader market, the gold shares are simply too cheap.
That being said, the problem with the mining sector, right now, is that big money is simply not interested in owning them. Value based buyers are but those are insufficient in size to drive them higher in price. Besides, value based buyers are never the ones who drive prices higher. That would be a contradiction in terms. Value based buyers PUT FLOORS UNDER MARKETS. Momentum based buyers drive them higher.
What is missing in the mining sector is the MOMENTUM BASED buyers. Right now, the momentum based buyers are busy chasing higher returns in other sectors of the market. To bring them into the miners one needs to see a TECHNICAL CHART SIGNAL and currently that is missing. For a bare minimum - the HUI needs to clear and CLOSE ABOVE 440. That will signal a very short term bottom is in. To do more than just meander sideways above support however, it will need to push past 455 which will spark some short covering and further fresh buying that will set up a TEST of 465. If and when this index clears that level, then, you will begin to see some more serious buying occur.
I am not in the business of making predictions for as a trader I do not have that luxury. I have to read what the current sentiment in the market is if I hope to profit and thereby trade accordingly. While 2013 might be a banner year for the mining sector (and I hope that it is), the current chart picture is not especially encouraging.
Remember, as a trader or even an investor, you are not going to profit UNLESS AND UNTIL many more traders/investors come around to your way of thinking. Without their money coming into a stock/commodity, it will go nowhere. Once it does, and the chart action confirms that your view/opinion of the market is becoming more widespread, then and only then can you be considered to have made a GOOD CHOICE. If you buy a stock that sits at the same level for months on end or even years on end you might eventually be proven to have made a correct choice but think about the lost opportunity cost of having tied up so much of your valuable investment capital that could otherwise be working for you elsewhere.
This is the reason that doing a regular analysis of your portfolio (WEEKLY) is so critical. If a technical chart is breaking down, get out of that stock unless you are content on sitting through corrections in price that may last for a long time. Do not forget, if you are constantly monitoring a portfolio or position on a regular basis, you can ALWAYS GET RIGHT BACK IN if the technical posture changes for the better.
I personally am not a big fan of Jesse Livermore because I believe he would have starved to death in today's markets. That the markets have changed tremendously since his day is an understatement of near cosmic proportions. Livermore, who by the way ended up taking his own life - an abject failure in my defintion of a successful man - should have learned to cut his losses instead of "sitting tight". How in the hell does anyone know in advance what sort of events can transpire that can completely wreck one's trading account? Yes, long term fundamentals will eventually win out but at what incredible cost to one's investment or trading account.
Also, Livermore never had to contend with trading against computer algorithms. Those mindless machines, which control most of the world's trading capital nowadays, could care less about the long term view. They are going to buy or sell depending on the current price signal, not on what any of us might think is going to happen 6 months out from now.
The good thing however is that the same technical price signals that trigger those nasty algorithms can be seen on the price charts and if we learn to properly interpret them, allow us to position ourselves to let the machines work in our favor.
In closing here, I want to emphasize the fact that I am talking as a trader and as someone dealing with paper markets. When it comes to PHYSICAL BUYERS OF METALS, if you do have a long term view of the consequences of nearly unlimited money printing by so many of the Western world power Central Banks, then you can also use the algorithm based selling of these paper markets to acquire the ACTUAL METAL during episodes of price weakness. Buy them when they are cheap; do not chase them when they are higher. Remember, this pertains only to the actual metal; not to positions being taken in the Comex futures market. If you choose to willy-nilly buy into the futures markets WITHOUT a technical price signal confirming that, just understand that you are an accident waiting to happen. Trade smartly and do not end up as road pizza on the floor of the pit.
While the broader stock market has fared well since the beginning of the year, it too began fading about the same time as did the overall mining sector. However, it still techically remains in an uptrend as long as it holds above the 1350-1340 level unlike the mining shares which have completely broken down falling through one support level after another.
The performance of the mining shares against the broader market can be seen by examining the following ratio chart comparing the HUI to the level of the S&P 500. Notice that even though the S&P was also working lower since late this past summer, it has outperformed the mining sector by a considerable amount. In hindsight, shorter-term oriented traders/investors would have been better advised to have bought into the stock rally and left their gold shares for another day. There is a reason that the motto: "You cannot fight the Fed" has some credence. Whether or not one agrees with this idiocy known as Quantitative Easing, the fact is that the market loves it, particularly the financial stocks.
About the best that can currently be said about the mining shares is that that are not further breaking down against the broader stock market. The low in the ratio seems to attract buying. Translation - at some point, perhaps we are there - in relation to the broader market, the gold shares are simply too cheap.
That being said, the problem with the mining sector, right now, is that big money is simply not interested in owning them. Value based buyers are but those are insufficient in size to drive them higher in price. Besides, value based buyers are never the ones who drive prices higher. That would be a contradiction in terms. Value based buyers PUT FLOORS UNDER MARKETS. Momentum based buyers drive them higher.
What is missing in the mining sector is the MOMENTUM BASED buyers. Right now, the momentum based buyers are busy chasing higher returns in other sectors of the market. To bring them into the miners one needs to see a TECHNICAL CHART SIGNAL and currently that is missing. For a bare minimum - the HUI needs to clear and CLOSE ABOVE 440. That will signal a very short term bottom is in. To do more than just meander sideways above support however, it will need to push past 455 which will spark some short covering and further fresh buying that will set up a TEST of 465. If and when this index clears that level, then, you will begin to see some more serious buying occur.
I am not in the business of making predictions for as a trader I do not have that luxury. I have to read what the current sentiment in the market is if I hope to profit and thereby trade accordingly. While 2013 might be a banner year for the mining sector (and I hope that it is), the current chart picture is not especially encouraging.
Remember, as a trader or even an investor, you are not going to profit UNLESS AND UNTIL many more traders/investors come around to your way of thinking. Without their money coming into a stock/commodity, it will go nowhere. Once it does, and the chart action confirms that your view/opinion of the market is becoming more widespread, then and only then can you be considered to have made a GOOD CHOICE. If you buy a stock that sits at the same level for months on end or even years on end you might eventually be proven to have made a correct choice but think about the lost opportunity cost of having tied up so much of your valuable investment capital that could otherwise be working for you elsewhere.
This is the reason that doing a regular analysis of your portfolio (WEEKLY) is so critical. If a technical chart is breaking down, get out of that stock unless you are content on sitting through corrections in price that may last for a long time. Do not forget, if you are constantly monitoring a portfolio or position on a regular basis, you can ALWAYS GET RIGHT BACK IN if the technical posture changes for the better.
I personally am not a big fan of Jesse Livermore because I believe he would have starved to death in today's markets. That the markets have changed tremendously since his day is an understatement of near cosmic proportions. Livermore, who by the way ended up taking his own life - an abject failure in my defintion of a successful man - should have learned to cut his losses instead of "sitting tight". How in the hell does anyone know in advance what sort of events can transpire that can completely wreck one's trading account? Yes, long term fundamentals will eventually win out but at what incredible cost to one's investment or trading account.
Also, Livermore never had to contend with trading against computer algorithms. Those mindless machines, which control most of the world's trading capital nowadays, could care less about the long term view. They are going to buy or sell depending on the current price signal, not on what any of us might think is going to happen 6 months out from now.
The good thing however is that the same technical price signals that trigger those nasty algorithms can be seen on the price charts and if we learn to properly interpret them, allow us to position ourselves to let the machines work in our favor.
In closing here, I want to emphasize the fact that I am talking as a trader and as someone dealing with paper markets. When it comes to PHYSICAL BUYERS OF METALS, if you do have a long term view of the consequences of nearly unlimited money printing by so many of the Western world power Central Banks, then you can also use the algorithm based selling of these paper markets to acquire the ACTUAL METAL during episodes of price weakness. Buy them when they are cheap; do not chase them when they are higher. Remember, this pertains only to the actual metal; not to positions being taken in the Comex futures market. If you choose to willy-nilly buy into the futures markets WITHOUT a technical price signal confirming that, just understand that you are an accident waiting to happen. Trade smartly and do not end up as road pizza on the floor of the pit.
Trader Dan Interviewed on King World News Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals Wrap.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/12/29_KWN_Weekly_Metals_Wrap.html
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/12/29_KWN_Weekly_Metals_Wrap.html
Wednesday, December 26, 2012
Alas, Christmas has now come and gone for another year. The hustle and bustle of the season begins to wind down, the wrappings, bows and pretty paper now being consigned to the trash bin. Soon the lights will be coming down and the trees discarded for mulch or put back into the basement or attics. The children will be out making merry with their new toys and games. These things seem as constant as the North star for those of us who celebrate this wondrous holiday.
Sadly, as constant as the above, so too it seems is the desire of political leaders to debauch or debase their own currencies. Witness the Japanese Yen as it continues to plummet following the path desired by the new political leadership. The point is not being lost on gold as it continues to hover near record highs when priced in terms of that currency.
Incidentally, unleaded gasoline is threatening a breach of overhead resistance at the top of its trading range near the $2.81 level. Distillate strength is keeping a very firm bid in the liquid energy markets despite the continued threat of a so-called 'fiscal cliff' breakdown.
Crude oil is flirting with a band of heavy resistance between 90.30 - 90.60. Above that, it can be expected to see strong selling pressure emerging if it approaches the $93 level.
Cold weather has given heating oil a boost and it too is up near the top of its trading range. These energy markets are worth keeping an eye on as any bona fide breakout will tend to give gold a boost to the upside as well.
Well, at least we got a brief respite from the high gasoline prices. We'll see how long this upside push might last in the liquid energies.
Sinking grains today are working to undercut strength in silver which had been following copper to the upside but began wilting as the soybean complex, along with wheat, lead the entire grain complex lower. Silver still likes to see soybeans moving higher as it tends to feed into an inflationary bias. When you get the grains moving higher, along with copper and the other base metals, it is almost impossible to prevent the grey metal from moving higher along with them.
Sadly, as constant as the above, so too it seems is the desire of political leaders to debauch or debase their own currencies. Witness the Japanese Yen as it continues to plummet following the path desired by the new political leadership. The point is not being lost on gold as it continues to hover near record highs when priced in terms of that currency.
Incidentally, unleaded gasoline is threatening a breach of overhead resistance at the top of its trading range near the $2.81 level. Distillate strength is keeping a very firm bid in the liquid energy markets despite the continued threat of a so-called 'fiscal cliff' breakdown.
Crude oil is flirting with a band of heavy resistance between 90.30 - 90.60. Above that, it can be expected to see strong selling pressure emerging if it approaches the $93 level.
Cold weather has given heating oil a boost and it too is up near the top of its trading range. These energy markets are worth keeping an eye on as any bona fide breakout will tend to give gold a boost to the upside as well.
Well, at least we got a brief respite from the high gasoline prices. We'll see how long this upside push might last in the liquid energies.
Sinking grains today are working to undercut strength in silver which had been following copper to the upside but began wilting as the soybean complex, along with wheat, lead the entire grain complex lower. Silver still likes to see soybeans moving higher as it tends to feed into an inflationary bias. When you get the grains moving higher, along with copper and the other base metals, it is almost impossible to prevent the grey metal from moving higher along with them.
Monday, December 24, 2012
Merry Christmas to my readers
“The people who walked in darkness have seen a great light; those who dwelt in a land of deep darkness, on them has light shone... For to us a child is born, to us a son is given; and the government shall be upon his shoulder, and his name shall be called Wonderful Counselor, Mighty God, Everlasting Father, Prince of Peace” (Isaiah 9: 2&6).
"But thou, Bethlehem Ephratah, though thou be little among the thousands of Judah, yet out of thee shall he come forth unto me that is to be ruler in Israel; whose goings forth have been from of old, from everlasting." (Micah 5:2)
"And so it was, that, while they were there, the days were accomplished that she should be delivered. And she brought forth her firstborn son, and wrapped him in swaddling clothes, and laid him in a manger; because there was no room for them in the inn. And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And, lo, the angel of the Lord came upon them, and the glory of the Lord shone round about them: and they were sore afraid. And the angel said unto them, Fear not: for, behold, I bring you good tidings of great joy, which shall be to all people. For unto you is born this day in the city of David a Saviour, which is Christ the Lord. And this shall be a sign unto you; Ye shall find the babe wrapped in swaddling clothes, lying in a manger. And suddenly there was with the angel a multitude of the heavenly host praising God, and saying, Glory to God in the highest, and on earth peace, good will toward men. And it came to pass, as the angels were gone away from them into heaven, the shepherds said one to another, Let us now go even unto Bethlehem, and see this thing which is come to pass, which the Lord hath made known unto us." (Luke 2: 6-15).
"But thou, Bethlehem Ephratah, though thou be little among the thousands of Judah, yet out of thee shall he come forth unto me that is to be ruler in Israel; whose goings forth have been from of old, from everlasting." (Micah 5:2)
"And so it was, that, while they were there, the days were accomplished that she should be delivered. And she brought forth her firstborn son, and wrapped him in swaddling clothes, and laid him in a manger; because there was no room for them in the inn. And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And, lo, the angel of the Lord came upon them, and the glory of the Lord shone round about them: and they were sore afraid. And the angel said unto them, Fear not: for, behold, I bring you good tidings of great joy, which shall be to all people. For unto you is born this day in the city of David a Saviour, which is Christ the Lord. And this shall be a sign unto you; Ye shall find the babe wrapped in swaddling clothes, lying in a manger. And suddenly there was with the angel a multitude of the heavenly host praising God, and saying, Glory to God in the highest, and on earth peace, good will toward men. And it came to pass, as the angels were gone away from them into heaven, the shepherds said one to another, Let us now go even unto Bethlehem, and see this thing which is come to pass, which the Lord hath made known unto us." (Luke 2: 6-15).
Gold Chart Updated
Gold is tracking sideways remaining above support at the recent bottom near $1636 but unable to get much going to the upside. The rest of this week will see reduced liquidity and thus the possibility of increased price swings. Unless we get a large sustained move in either direction, I would not read too much into the price action this week. Perhaps the only event that might provide some fundamentally-based direction would be news regarding the so-called 'fiscal cliff'.
Silver continues to look much weaker on the charts than does gold. Some of this is no doubt tied to the fears regarding the lack of an agreement of that cliff issue. The reason I say this is because copper is also getting knocked down and has fallen some 20 cents off its recent best levels near $3.72. Unless copper reverses to the upside, silver will have some trouble getting anything going.
Silver experienced only a brief or mild bump off its recent low and then gave a fair amount of that back today. This market will not attract any momentum-based buying whatsoever unless it can get back above 31 which will force some shorts out and issue some signals to the algorithms to begin some buying. If the recent low does not hold, I see no chart support until $2850 - $28.30.
Silver continues to look much weaker on the charts than does gold. Some of this is no doubt tied to the fears regarding the lack of an agreement of that cliff issue. The reason I say this is because copper is also getting knocked down and has fallen some 20 cents off its recent best levels near $3.72. Unless copper reverses to the upside, silver will have some trouble getting anything going.
Silver experienced only a brief or mild bump off its recent low and then gave a fair amount of that back today. This market will not attract any momentum-based buying whatsoever unless it can get back above 31 which will force some shorts out and issue some signals to the algorithms to begin some buying. If the recent low does not hold, I see no chart support until $2850 - $28.30.
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