U S Dollar Remaining Firm

The strength in the US Dollar had recently been coming mainly at the expense of the Japanese Yen. That is abating somewhat as the Yen is seeing some short covering and fresh buying as traders pare back expectations for AGGRESSIVE Bank of Japan action in the immediate future. It is clear that the Japanese monetary authorities want a lower yen but apparently the recent pressure from the rest of the G20 has caused them to ease back a bit on browbeating their own currency.

What is helping the Dollar more so recently is the weakness in the Euro which has not been able to recover from the blow it received as a result of the Cyprus debacle. That precedent setting raiding of bank deposits has left its mark, a mark which I believe will not ever completely heal.

Throw in the fact that we have a US equity market which has been goosed into the stratosphere, compliments of Ben Bernanke and the rest of the doves over at the FOMC, and you have the ingredients for further strength in the Dollar as by comparison to the rest of the world, the US economy looks decent.

I find it ironic that in this nation we have reached a point where we now define deviancy downward. The same holds true for our financial and economic standards. This abysmal "growth" we are witnessing in the US economy (again, thanks to QE and nothing else) is now heralded as good. There was a time when growth of this nature would have been mocked.

With a Federal debt expected to reach somewhere in the neighborhood of $20 trillion by 2016, with a massive and increasing unfunded entitlement crisis growing ever larger with the passing of each and every month, and with no real plan by the current administration to even remotely deal with these matters, the Dollar's honeymoon on the Foreign exchange markets will come to an abrupt end at some point. When that point occurs is anyone's guess right now but unless we have to rewrite the economic history books, the Dollar is going to eventually go the way of the British Pound.

If you notice on the chart, the Dollar enjoyed an uptrend that began in July 2011 and lasted through July 2012 at which point it transitioned to more of a broad sideways trend below 84. Dips to the 79 level have attracted consistent buying while sellers appeared at the 83 and higher level. That level closely coincides with the 61.8% Fibonacci retracement level noted.

If the Dollar can clear this level convincingly on a weekly basis, there is some light overhead resistance near 85 - $85.50 but beyond that, there does not look like much in its path for a run toward the 89 level.

I should also note here that this consistent strength in the US Dollar is continuing to set the hedge fund algorithms into selling commodities as a general trading strategy.

This is the reason for the continued weakness in silver, and in gold, I might add, although as I have stated in some private emails, I do not understand the strength in the crude oil market. With building stocks here in the US and with no sign of robust demand that I can see, I am honestly baffled as to why hedge funds want to own crude oil, given the fact that the commodity complex continues to reflect a global economy growing at quite a reduced rate.

See the chart below of the CCI to understand why Silver is getting clocked and making fresh seven month lows. Were it not for strength in crude oil, the CCI would have broken that support line shown on the chart near the 540 level and begun retreating down towards the lower part of the downtrending price channel.

Silver Breaks Down

Silver has been struggling to get anything going to the upside for some time now but it has been able to hold above chart support near the $28 level; until today.

It broke down out of the bottom of a 6 week long trading range and in the process made a fresh 7+ month low. That is not bullish action no matter how you look at it.

If you have been listening in to my regular weekly interviews over at King World News on the Metals Wrap, I have been discussing the fact that this market has looked heavy due to the fact that it has been under attack from hedge funds which are playing the base metals such as copper, and silver, increasingly from the short side. That speculative money is selling rallies and working to push these markets lower and it has been having some success. Silver has managed to hold up but now looks to be falling apart.  I want to see another day's price action to learn whether this is just a one day wonder and a bear trap or the start of another leg lower down to the next support zone I have noted on the chart.

For the silver bulls out there - you must keep in mind that the way the speculative community at large looks at this metal, it must have an inflationary environment present if it is going to thrive to the upside. With the global economy showing no signs of inflationary pressures at the moment and with Copper continuing to wilt, it is going to be a near Herculean task to see silver generate enough bullish action to spook this growing contingent of shorts.

Notice the following breakdown of the HEDGE FUND positions in this market. Can you see the steady increase in their short positions and the continued liquidation of existing long positions. That data is only good through last Tuesday so my guess is that the hedge funds are NOW NET SHORT the silver market.

I should also note here that using the data provided by the COT which shows a definite breakout of the hedge fund positioning going back to 2006 as a starting point, the hedge funds have never been short silver since this data collection began! In other words we are looking at something that has not occurred in SEVEN YEARS! The closest the hedge funds came to being net short in the silver market was in September 2007 when their net long position has a mere 168 including futures and options.

For now, until we get some sort of spark or reason for these hedge funds to reverse their bearish leaning, silver looks to be headed lower. I would watch copper for any sign of a reversal to the upside but unless copper can do that, silver is going to get cheaper.

Trader Dan Interviewed at King World News Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King over at the KWN Markets and Metals Wrap.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/3/30_KWN_Weekly_Metals_Wrap.html

Gold Flops

Once again the gold market has failed to respond to what should have been bullish news. How many times have we witnessed this now over the past few months? The very foundations of the Euro are being shaken and yet the metal can barely keep its head above water. Selling pressure has been that intense. One can only wonder how much of the hoard of Western Gold has been drawn upon by these monetary elites to squash the warning signal and further the illusion that all is well.

At the same time we see the US equity markets screaming to one new high after another. I mean, there really is not a single care in the world is there? I understand the tape as a trader but I swear that economic and monetary historians are going to look back at this period and wonder if some sort of bewitching spell has been cast over the minds of men.

I mentioned to a friend in passing the other day that we could have the entire state of California slide into the Pacific Ocean along that San Andreas fault line, and the S&P 500 would still move higher.

More and more the disconnect between copper and the base metals, not to mention the Dow Transports and the broader equity markets worsens. For that matter, take one look at the Continuous Commodity Index or CCI, and marvel yet some more. I have been a complete fool when I naively believed that the conjuring into existence of another $85 billion each and every month would have seen that money being moved indiscriminately by hedge funds into BOTH equities and commodities. Not so - somehow the alchemists running these Central Banks have managed to herd the investor lemmings class selectively into equities. That in itself is nothing short of astonishing,

 

Is it any wonder then that gold cannot seem to find its footing? While a growing number of investors/traders are coming around to seeing the US government issued CPI for the worthless propaganda that it is, one cannot argue with the commodity futures world itself where the collective judgment of the market towards commodities in general is quite evident.

Apparently, while trillions of dollars have been created, the velocity at which those dollars are changing hands is simply not accelerating. Rather than circulating through the economy in general and inducing inflationary pressures, the money merely moves from the Fed's "electronic printing presses" into Wall Street and sits there.

Looking at the gold chart, one can see that buying support is evident on trips below $1600 but the market cannot gather enough momentum-based buying to trigger the overhead stops above $1620 that need to be targeted if this metal is going to get some upside excitement going. It is rangebound once again. Bargain or value based buying provides support at the bottom of the range while technically based selling is evident above $1610. Quite frankly, at this point, I do not know what it is going to take to break the metal out of this range.

Moving along to silver, one can see the same rangebound pattern particularly on this 4 hour chart. Note that the metal cannot break through $29.25 - $29.40 on the top side but it attracts buying on trips down towards the $28 level. It too is stuck.

Following is a monthly chart of gold... On this longer term chart one can see the very broad range that has been in place for some time now, with $1800 on the top and $1550-$1530 on the bottom remains solidly intact. Gold is obviously in the lower third of that range.

Happy Easter to all my fellow Christian readers. Christ's resurrection from the dead and His ascension into heaven is proof that His sacrifice for sin has been accepted by the Father and that He was all that He claimed to be. Rejoice and my His peace guard your hearts and minds. It is certainly needed in this time of distress in which we now find ourselves.

Euro Loses 1.29 Support Level

It is my opinion that last week the European Central Bank was quite active in the Foreign exchange markets defending the Euro and preventing the breakdown below the 1.29 level. Watching the price action, and this is from the perspective of a long time trader, there was no fundamental reason I could see for the Euro to experience intraday rallies of the magnitude that it was seeing, based on the deteriorating conditions surrounding Cyprus. It was if some magic hand was pushing it back up and away from the 1.29 level on any approaches there with enough force to take it all the way through 1.30 and then some.

Today, based on the earlier comments of the Dutch Finance Minister, that support zone collapsed on very large volume. I have no doubt whatsoever that it was this event that set Mr. Dijsselboem scurrying back to the microphones to disavow what he so arrogantly announced previously during the trading session, to wit - that the arrangement made with Cyprus would henceforth serve as a "template" for dealing with problem banks in problem Eurozone nations.

While he may backtrack and attempt to spin those earlier comments, which were quite clear I might add, the damage has been done as the proverbial cat is now out of the bag. Regardless of the subterfuge and deceitful backpedaling, it is now abundantly clear that the monetary officials in the Eurozone regard taxpayer deposits as, in actuality, belonging to the state.

As usual, we are now witnessing the resort to the typical left leaning claptrap about "only the wealthy" being forced to contribute to the savings of the banks but that begs the question that any sane individual would be asking under such conditions, "Why the hell should I as a depositor be the least bit concerned about the safety of my life's savings in any bank?" After all, that defeats the entire reason for depositing money in a bank in the first place. If the banks cannot be trusted, and if the government officials are all to willing to raid, confiscate, steal, the money of the depositors in order to bail out the unholy nexus between the banks and the government, how in the world can that inspire the least bit of confidence in the banking sector anywhere in the Eurozone that similar issues exist?

What we are witnessing is the rotten stench of decaying balance sheets brought on by years and years of overspending. As long as there were enough banks willing to buy that government debt, the party and the recklessness could go on. However, Mr. Market has a way of eventually bringing reality home to even the most obtuse of individuals and that is precisely what has now happened.

Quite simply - who in their right mind would be willing to buy the bonds of these troubled nations? And more precisely, whither goest Cyprus at this point? It's economy is a wreck and in my view will continue to be so into the foreseeable future. It's economy was based primarily on banking and tourism. At this point, who would want to travel there other than those wanting a bird's eye view of the trainwreck and as for banking.... that goes without saying.

While gold is certainly being capped above the $1610 level, it is continuing to attract dip buyers on trips down towards support at $1585. It ran down there earlier today only to encounter sufficient buying to propel it back above the $1600 level. Clearly that in itself, while not an outright victory for the bulls, is a defeat for the bears who no doubt were shocked by the severity of the buying pressure that came into the market.

Bulls still need to clear $1620 to force some of these shorts out of the market. It might be tough to do that as long as the capping operation is ongoing but my guess is that it will take a tremendous amount of physical gold sales to continuing holding the price down.

 

 

As usual, the gold shares once again were of no help to the actual metal. I read a report today somewhere that stated if gold were to fall as low as $1,000, many of the entities involved in gold mining today would no longer be viable. The way some of these shares are acting, they already no longer look viable, truth be told.

 

It should be noted that the party in the global equity markets, brought on my near endless conjuring of "money" into existence by the Central Banks primarily of the West, has been handed a citation by the police and told to tone it down as the neighbors are complaining of the noise. Obviously this is a no-no to the best laid plans of mice and men, those being the monetary officials who I would lump under the category more of mice than men, since I consider them despicable Cretans and parasites. That means all the stops must be pulled out to keep Cyprus afloat and assuage any rising concerns among the investor class.

 

The entire thing boils down to keeping this ephemeral confidence from waning one iota. It is all about illusions, perceptions and subterfuge.

Dutch Finance Minister Loves Raiding Savings Accounts

Reuters is reporting this morning comments from the Dutch Finance Minister, Jeroen Dijsselbloem, who by the way heads up the group of European Finance Ministers, to the effect that the "solution" in Cypress is a "new template" to address future banking problems in the Euro area.

I want you readers, particularly those of you in the Eurozone,  to wrap your heads around this and consider the brazen audacity displayed by these people. What he is saying is that bank savings deposits no longer effectively belong to you the savers. They belong to the state and the state will confiscate them whenever it is deemed to be in that state's best interests.

If this does not send shock waves throughout the system and instill fear in individuals throughout the Eurozone, then there is no hope for any such people. Normal, rational, sane, thinking individuals will immediately recognize this for what it is; a complete reversal of the traditional role of banking in which banks makes loans to depositors and other individuals. Now, depositors are in effect making loans to banks. Yet even that is not an apt comparison for in the case of a loan, one usually expects to receive back the amount loaned plus interest. In this case, the depositors are having their money forcibly extracted from them with no hope of ever seeing it again and having that money used to bail out the banks instead! I never believed I would EVER witness this in my life and yet here it is. What is even worse is the blasé attitude displayed by the monetary authorities. Just who in the hell do these people think that they are?

These pestilential parasites, who sit in ivory towers and can glibly utter such rapacious comments, are literally undermining the entire banking system in their shortsighted idiocy.

Do these fools really believe that those citizens who have money in Eurozone banks, particularly high net worth individuals, are going to merely sit by and calmly observe this situation and do absolutely nothing? I cannot think of a better way to start a run on the banks. If individuals believe that the state now believes it has the right to raid their hard earned wealth at any time why would they feel the least bit secure about putting that wealth in harm's way?

As far as the price action in both gold and in the euro goes, Gold was down rather sharply early in the session as the safe havens were thrown out once a "deal" was announced. The Euro was down but not by much considering the backdrop. Once those Dutch official's comments hit the wires, the bottom fell out of the Euro and gold began working off its lows.

Gold in Euro terms shot sharply higher and is up nearly 1% as I type these comments. If it can push past the 1250 euro mark, it looks like it has room to make a run to 1280.

I am still thunderstruck as I contemplate those comments uttered by Mr. Bloem. This is like something out of fictional novel and yet it is happening right before our eyes.

Trader Dan Interviewed at King World News

Please click on the following link to listen in to my regular weekly radio interview with Eric King over at the KWN Weekly Markets and Metals Wrap. We will be discussing the implications of the market action in both gold and the Euro given the Cyprus situation.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/3/23_KWN_Weekly_Metals_Wrap.html

Cyprus Fears Rekindled?

Talk today was all about the resurgence of fears related to the situation in Cyprus. The US equity markets were heavy throughout the session as a result but from what I could tell, there was not that much demand for safe haven US Treasuries. Yes, those were higher but considering the extent to which the concerns surrounding Cyprus were in the headlines, I would have expected a much stronger tone to the US bond market.

Also, remember when the news first broke over Cyprus over last weekend and the markets opened for trading Sunday night here in the US. The Euro was absolutely mauled as a result. Today, while it was weaker, it refused to stay below the 1.29 level. From what I can see, there apparently is not that much worry over the Europe if the common currency will not stay down below 1.29 on the Cyprus news flaring up again.

The Yen on the other hand was acting as if the end of all things was upon us as it completely erased yesterday's sharp losses soaring over 150 pips at one point today. For the life of me I do not understand why anyone would call the Yen a "safe haven" currency but then again, I do not understand why anyone would call the US Dollar one either. Both nations are printing TRILLIONS of these respective currencies into existence and yet this is somehow a safe haven?

Like I and many others have said - there is nothing rational about markets, not any more.

Gold caught a firm bid today and managed to stay above $1610 for most of the session which is promising. It needs to prove it can clear resistance near $1620 if the bulls are going to be able to seriously squeeze that extremely large hedge fund short position. Frankly, I am not sure what it is going to take to push gold through this level if the Cyprus news and the reverberations related to that cannot do it. Whoever it is that is doing the selling up near the session highs is strong handed and will take some serious force to dislodge.

Gold in Euro terms is showing signs of life having broken out to the upside of its downtrending channel. It is no longer making a series of lower highs and lower lows but has stabilized and looks to have forged a bottom. With Yen gold strong, Sterling Gold looking decent and now Euro gold joining the chorus, the bears will have to dig in deeply to prevent the respective overhead chart resistance levels from giving way. We know that there is a deep pocketed seller present in New York - is that the only place?

Resistance in Euro Gold is near today's high at 1250 followed by 1270 and then 1280. After that, Gold has a shot at testing psychological round number resistance at 1300 euros.

U S Dollar priced gold is shown below on a two hour chart where the selling effort can be more clearly seen.