Yes indeed, that honorable profession, that noteworthy use of precious time, that virtuous expenditure of human energy, has once again been called forth by the monthly proclamation of the divine oracles - namely the FOMC.
Ah yes, those dispensers of wisdom from above, of knowledge and insight, have graced us mere mortals with another round of insightful analysis into the workings of the machine we know as the US economy. And pray tell, what did they tell us this month? Not a damn thing that we already did not know!
They held steady - no tapering of the bond buying program - not that anyone out there expected them to announce such a thing - so now it is back to parsing the statement for CLUES into the inner workings of our monetary masters. "Let us see if we can anticipate their next move for in it, lies our fortune", is today's mantra.
For Pete's sake, are as many of you out there as sick and tired as I am of this pathetic routine already? What a nauseating display of groveling by the once dynamic forces of US capitalism - sitting around waiting and licking their lips to see whether their masters will toss them some chew sticks.
Regardless, the initial moves that I am seeing is weakness in gold, strength in the US Dollar and believe it or, downward price action in the US equity markets. This seems to me to be a case of "Buy the rumor; sell the fact". The markets were essentially bid up, (gold and equities) in anticipation of a continuation in the bond buying without any tapering and that is exactly what they got. So now what? Bull markets need to be fed and one has to wonder where the food is supposed to come from next?
Yes, the Fed is on hold probably until next spring at the earliest as far as tapering goes but some are gleaning a - drum roll here please - an early taper in December because - another drum roll here - the Fed did not seem to be quite as negative on the economy as many were expecting them to sound, especially with so many of the various governors making the rounds right after the government shutdown ended and were sounding like the sky was falling.
this is leading Dollar bears to cover short bets and as such, bringing in selling to the gold market. It is also hitting silver. Interest rates are moving higher as a result. Here we go again....
I have not written much this week mainly because I am trying to spend my time in doing something more constructive than sit here and watch this idiocy all day long, day after day - I have been engaged in carving some pumpkins for Halloween, something much more enjoyable and in the larger scheme of things - much more lasting that the sentiment for each and every trading day. As a matter of fact, I am willing to bet that my carved pumpkins last for at least three days - far longer than the shifting mind sets of traders who seem to have managed to condense the entire business cycle into a 24 hour period instead of 6 months like it used to be.
Let's see where gold settles when the day ends... for now, $1360 has been reinforced as resistance which has held.
The dollar also looks to have found support above critical support near the 79 level on the USDX.
Looks like more range trade ahead which means the HFT crowd will be back to screwing with the markets once again and continuing to plunder the rest of us. I am thinking of making a new video game for Xbox. Instead of Call of Duty, I am going to make the HFT crowd the alien invaders while the "good guy" traders, get points for crushing them and sending them home crying to their mammas. Hey, I can dream can't I?
Wednesday, October 30, 2013
Saturday, October 26, 2013
Gold Closes out the Week Above the 50 Day Moving Average
Trying to get a read on gold lately has been challenging to say the least. It has been up; it has been down; it has had some wild swings intraday and then sat there on other days. However, it has finally managed to end the week above the 50 day moving average. For you technical analysis geeks like myself out there, that is a significant accomplishment.
I discussed this with Eric King on this week's Metals Wrap over at KWN but I wanted to detail it the price chart as the visuals are more often conducive to making a point.
The last time gold managed this feat (it was back in early August) the metal put on another $100 or so. That is not to say it is going to do so again but what happened as a result of this was that the hedge fund buy programs began to kick in. For whatever reason, market technicians have decided that markets closing above or below the 50 day moving average is a big deal, especially when they manage to do so on at least two consecutive days.
If you look at the chart and go back into November of last year you can see that the metal had managed to push past the 50 day moving average up near $1740 or so. It then managed to keep its footing above this level but unfortunately FAILED TO EXTEND HIGHER the next two sessions. The initial breach was constructive but the inability to BUILD on that performance was disappointing. ON the third day after the breach of the 50 DMA, the market then failed to hold above this level and back down it went. From that point on, in both January and February, this moving average capped all further upside progress.
It was not until July this year that the moving average came into play again. Notice the technical battle that occurred around this level that month. In early August, price once again cleared the 50 DMA. This time it managed to STAY ABOVE the average. Three days later, it took out the high of the day on which it first broke above this barrier. From that point on, the market rallied sharply until it ran out of steam up near $1430 or so.
So where does that leave us this week? Answer - looking for the performance of the metal early next week. If the market can push past the high of Friday and close strong on Monday, it should begin to gather some upside steam as I believe we will see some shorts begin to exit as well as attract some fresh momentum based buying. If it sets back, we want to see it STAY ABOVE the 50 day moving average, at least on the CLOSE of the pit session.
I should note here that Friday's high just so happened to reach right into a strong zone of resistance centered near $1350. That gives the performance of gold early next week even more significance. The bulls have managed to grasp the initiative in the market even if it is only a slight victory at this point. It is up to them to press their advantage at this juncture if they wish to cause some more discomfort for the shorts. If they can do so, $1375 should be an easy target for this initial push. Take it through there and they have a good chance to make a push to $1395- $1400.
If the market fails to extend higher as stated above, then bulls will want to see the price stay above $1300. There is some light chart support first near $1320-$1316 and more down near $1305.
I will say something else here that is important but is yet a good way's off. If gold were for some reason able to clear that spike high above $1425, it would be a TEXTBOOK CHART PATTERN of an important bottom. That would attract a major amount of buying which would set the market up for a run to $1480 - $1490. Again, that is a long way off but one can hope can they not? Let's see if the metal can even get a "14" handle on it before getting too carried away!
I want to note here that the HUI has also managed to claw its way back higher and is also perched above the 50 day moving average as well. that is a nice confirmation. Gold bulls never want to see the shares moving lower while the metal puts on some gains.
I personally believe that the plight of the US Dollar is going to be what determines whether or not we see gold and the shares tacking on some additional upside. I noted earlier this week in a post that confidence in the US Dollar appeared to be waning based on its price action and the chart pattern. There seems to have been a shift in sentiment towards the greenback that came on the heels of the government shutdown and the resultant increase in the US borrowing limit. That was further compounded when with one voice the various FOMC governors, even the usual hawks among that group, were signaling that any bond buying tapering was off the table for the rest of the year at a bare minimum. Subsequent weak economic data confirmed that in the minds of trader and as it did, more selling hit the US Dollar.
If you look at the following price chart, you can see the Dollar's recent woes in pictorial form. Notice how the price has been contained in a broad range since mid-March of LAST year. It did make a brief breakout above the range when the Fed was suddenly sounding hawkish on the QE bond taper caper this summer but once that came and went, back down into the range it went. This time however is it now plumbing the bottom of the range. As you can see, it has not been below the low of that range now over a year. If, and this is a BIG "IF", the dollar were to fail and fall through that low, it should continue until it falls to the next important level down near 78. If that were to give way, heaven help us all because all manner of chaos is going to break out in the commodity sector once again.
It is going to be interesting if that occurs to see what the response of the Fed is going to be because odds are that the speculative crowd will start coming back blindly onto the long side of the commodity sector once again in anticipation of a wave of inflationary pressures related to the falling currency. Again, this is just a guess at this time as I have no way of knowing whether or not the Dollar is indeed going to fail to hold at support. I am merely laying out scenarios that we could see if it does.
This is the biggest problem that I see with this unending madness known as QE. It lays the groundwork for the undermining of any confidence in the Dollar and sets it on a course of weakness. I do not want to see the Dollar weaken as an American but with this idiocy being engaged in by the Fed, and especially with the choice of Yellen ( the Dove of Doves), it is difficult for me to envision a scenario in which the Dollar embarks on a strong bull move as long as the hawkish voices on the FOMC are silent. Keep in mind it was all the hawkish talk coming of the Fed this past summer that pushed the Dollar higher along with a rise in interest rates. Until that sort of thing re-emerges, what would be the factors that could drive the Dollar higher again? The only ones I see would be if there were a resurgence of issues related to sovereign debt back over in the Euro Zone again.
Oh what a mess these meddling Central Bankers have created for us all. Heaven spare us from this plague of locusts! Has this become the new norm and are we now destined to see a perpetually rising Federal Reserve Balance Sheet (now approaching $4 TRILLION) for the rest of our lives? When does this end?
I have said this many times before but it bears repeating - as a TRADER, I have to go with the swings and the shifting sentiment in the markets in order to survive and make a living but as a long term oriented investor and a concerned and deeply worried citizen, I also have to look at gold as the only insurance against these modern day alchemists known as Central Bankers. They are going to be the ruin of us all.
I discussed this with Eric King on this week's Metals Wrap over at KWN but I wanted to detail it the price chart as the visuals are more often conducive to making a point.
The last time gold managed this feat (it was back in early August) the metal put on another $100 or so. That is not to say it is going to do so again but what happened as a result of this was that the hedge fund buy programs began to kick in. For whatever reason, market technicians have decided that markets closing above or below the 50 day moving average is a big deal, especially when they manage to do so on at least two consecutive days.
If you look at the chart and go back into November of last year you can see that the metal had managed to push past the 50 day moving average up near $1740 or so. It then managed to keep its footing above this level but unfortunately FAILED TO EXTEND HIGHER the next two sessions. The initial breach was constructive but the inability to BUILD on that performance was disappointing. ON the third day after the breach of the 50 DMA, the market then failed to hold above this level and back down it went. From that point on, in both January and February, this moving average capped all further upside progress.
It was not until July this year that the moving average came into play again. Notice the technical battle that occurred around this level that month. In early August, price once again cleared the 50 DMA. This time it managed to STAY ABOVE the average. Three days later, it took out the high of the day on which it first broke above this barrier. From that point on, the market rallied sharply until it ran out of steam up near $1430 or so.
So where does that leave us this week? Answer - looking for the performance of the metal early next week. If the market can push past the high of Friday and close strong on Monday, it should begin to gather some upside steam as I believe we will see some shorts begin to exit as well as attract some fresh momentum based buying. If it sets back, we want to see it STAY ABOVE the 50 day moving average, at least on the CLOSE of the pit session.
I should note here that Friday's high just so happened to reach right into a strong zone of resistance centered near $1350. That gives the performance of gold early next week even more significance. The bulls have managed to grasp the initiative in the market even if it is only a slight victory at this point. It is up to them to press their advantage at this juncture if they wish to cause some more discomfort for the shorts. If they can do so, $1375 should be an easy target for this initial push. Take it through there and they have a good chance to make a push to $1395- $1400.
If the market fails to extend higher as stated above, then bulls will want to see the price stay above $1300. There is some light chart support first near $1320-$1316 and more down near $1305.
I will say something else here that is important but is yet a good way's off. If gold were for some reason able to clear that spike high above $1425, it would be a TEXTBOOK CHART PATTERN of an important bottom. That would attract a major amount of buying which would set the market up for a run to $1480 - $1490. Again, that is a long way off but one can hope can they not? Let's see if the metal can even get a "14" handle on it before getting too carried away!
I want to note here that the HUI has also managed to claw its way back higher and is also perched above the 50 day moving average as well. that is a nice confirmation. Gold bulls never want to see the shares moving lower while the metal puts on some gains.
I personally believe that the plight of the US Dollar is going to be what determines whether or not we see gold and the shares tacking on some additional upside. I noted earlier this week in a post that confidence in the US Dollar appeared to be waning based on its price action and the chart pattern. There seems to have been a shift in sentiment towards the greenback that came on the heels of the government shutdown and the resultant increase in the US borrowing limit. That was further compounded when with one voice the various FOMC governors, even the usual hawks among that group, were signaling that any bond buying tapering was off the table for the rest of the year at a bare minimum. Subsequent weak economic data confirmed that in the minds of trader and as it did, more selling hit the US Dollar.
If you look at the following price chart, you can see the Dollar's recent woes in pictorial form. Notice how the price has been contained in a broad range since mid-March of LAST year. It did make a brief breakout above the range when the Fed was suddenly sounding hawkish on the QE bond taper caper this summer but once that came and went, back down into the range it went. This time however is it now plumbing the bottom of the range. As you can see, it has not been below the low of that range now over a year. If, and this is a BIG "IF", the dollar were to fail and fall through that low, it should continue until it falls to the next important level down near 78. If that were to give way, heaven help us all because all manner of chaos is going to break out in the commodity sector once again.
It is going to be interesting if that occurs to see what the response of the Fed is going to be because odds are that the speculative crowd will start coming back blindly onto the long side of the commodity sector once again in anticipation of a wave of inflationary pressures related to the falling currency. Again, this is just a guess at this time as I have no way of knowing whether or not the Dollar is indeed going to fail to hold at support. I am merely laying out scenarios that we could see if it does.
This is the biggest problem that I see with this unending madness known as QE. It lays the groundwork for the undermining of any confidence in the Dollar and sets it on a course of weakness. I do not want to see the Dollar weaken as an American but with this idiocy being engaged in by the Fed, and especially with the choice of Yellen ( the Dove of Doves), it is difficult for me to envision a scenario in which the Dollar embarks on a strong bull move as long as the hawkish voices on the FOMC are silent. Keep in mind it was all the hawkish talk coming of the Fed this past summer that pushed the Dollar higher along with a rise in interest rates. Until that sort of thing re-emerges, what would be the factors that could drive the Dollar higher again? The only ones I see would be if there were a resurgence of issues related to sovereign debt back over in the Euro Zone again.
Oh what a mess these meddling Central Bankers have created for us all. Heaven spare us from this plague of locusts! Has this become the new norm and are we now destined to see a perpetually rising Federal Reserve Balance Sheet (now approaching $4 TRILLION) for the rest of our lives? When does this end?
I have said this many times before but it bears repeating - as a TRADER, I have to go with the swings and the shifting sentiment in the markets in order to survive and make a living but as a long term oriented investor and a concerned and deeply worried citizen, I also have to look at gold as the only insurance against these modern day alchemists known as Central Bankers. They are going to be the ruin of us all.
Trader Dan Interviewed at King World News Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly audio interview with Eric King over at the KWN Metals Wrap.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/10/26_KWN_Weekly_Metals_Wrap.html
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/10/26_KWN_Weekly_Metals_Wrap.html
Thursday, October 24, 2013
So much for China concerns
Yesterday the focus was on concerns about a potential slowing of Chinese growth as officials there let it be known that they were attempting to throttle back a housing market that is showing serious signs of price inflation. That led to widespread selling of growth related commodities across the board as evidenced by the sharp selloff in crude oil ( a good deal of this was related to the increase in crude oil stocks as well) and in copper, a particularly growth sensitive metal. It also tripped up gold.
Talk about a change in sentiment in one day! Today the tone was set by more abysmal economic data coming out of the US. Factory activity showed the slowest gains in a year. If that was not bad enough, a larger than expected number of people applied for first time jobless benefits. Both served as a gloomy reminder of how poor the labor market is here in the US. Throw in comments by Fed governor Evans, that the sky is basically the limit when it comes to Quantitative Easing and the size of the Fed's balance sheet, and the Dollar struggled all day while gold shot higher with traders there now firmly convinced that there will be no let up in the Fed bond and MBS buying program anytime soon.
What seemed to be happening was a near reversal of yesterday's trade in which macro funds were throwing away commodities. Today even crude oil managed to bounce well off its intraday lows and trades tied to the weaker Dollar surfaced.
In all honesty, I am having a great deal of difficulty reading many of these markets as their price movements are becoming increasingly unpredictable and disconnected from underlying fundamental realities. In this I am not alone. Many traders are worn out from the herky-jerky price swings, most without rhyme or reason and are scaling way back in position size or sitting out altogether. Both make a lot of sense right now. If you cannot understand why a market is doing what it is doing, be careful. That is not the time to try being a hero.
What we are witnessing is this larger macro trade distorting many individual commodity markets. Let me explain - there are certain funds that are long-only funds which offer their clients exposure to the long side of the commodity sector in general. They have not been doing all that well of late truth be told. But, and this is a big "but", their theme mainly consists of keying off any weakness in the US Dollar and then buying across the board in the commodity sector as they benchmark to one of the various commodity indices out there. That means they buy BLINDLY, with no regard whatsoever to the individual fundamentals of supply/demand in those markets.
The idea behind their buying is that weakness in the US Dollar is going to eventually result in inflation and thus they push the "buy tangible assets" theme. So into the commodity markets they come crashing, with their various buy orders shoving prices higher. Then, in those particular markets where the fundamentals are bearish, sellers come in to meet that buying. When these index funds take a break from buying, the price then falls off during the session only to come right back up as they buy once again. The result is a series of maddening price swings which confuses floor traders and others alike who are attempting to get a handle on the market.
The problem this is creating is that no one really understands when this sort of buying will fade and when it will come in because it is tied to the vagaries of the currency markets. Right now the Dollar is having trouble moving higher because traders are convinced that the Fed is going to remain on the dovish side until at least March of next year. But just like yesterday, when we get some sort of hint that China might be tightening monetary policy or trying to slow price pressures across their economy, the hedge funds come in and press it from the short side. If there is any Dollar weakness, the index funds come in a buy and back and forth it goes.
I honestly do not have any idea when this is going to end. I wish it would but it is the spawn of those monetary elites that sit on the FOMC. When you have an entire economy's well being or lack thereof completely addicted to an endless ocean of funny money, it is going to result in all manner of malinvestment and price distortion.
That is why I am hesistant to read too much into any one day's price action. Who the hell knows what we are going to get the next day anymore?
I will make one rather easy prediction however - by the end of the year, we are going to read of a lot more hedge funds going bust. These whipsawing markets are murdering most of them.
Talk about a change in sentiment in one day! Today the tone was set by more abysmal economic data coming out of the US. Factory activity showed the slowest gains in a year. If that was not bad enough, a larger than expected number of people applied for first time jobless benefits. Both served as a gloomy reminder of how poor the labor market is here in the US. Throw in comments by Fed governor Evans, that the sky is basically the limit when it comes to Quantitative Easing and the size of the Fed's balance sheet, and the Dollar struggled all day while gold shot higher with traders there now firmly convinced that there will be no let up in the Fed bond and MBS buying program anytime soon.
What seemed to be happening was a near reversal of yesterday's trade in which macro funds were throwing away commodities. Today even crude oil managed to bounce well off its intraday lows and trades tied to the weaker Dollar surfaced.
In all honesty, I am having a great deal of difficulty reading many of these markets as their price movements are becoming increasingly unpredictable and disconnected from underlying fundamental realities. In this I am not alone. Many traders are worn out from the herky-jerky price swings, most without rhyme or reason and are scaling way back in position size or sitting out altogether. Both make a lot of sense right now. If you cannot understand why a market is doing what it is doing, be careful. That is not the time to try being a hero.
What we are witnessing is this larger macro trade distorting many individual commodity markets. Let me explain - there are certain funds that are long-only funds which offer their clients exposure to the long side of the commodity sector in general. They have not been doing all that well of late truth be told. But, and this is a big "but", their theme mainly consists of keying off any weakness in the US Dollar and then buying across the board in the commodity sector as they benchmark to one of the various commodity indices out there. That means they buy BLINDLY, with no regard whatsoever to the individual fundamentals of supply/demand in those markets.
The idea behind their buying is that weakness in the US Dollar is going to eventually result in inflation and thus they push the "buy tangible assets" theme. So into the commodity markets they come crashing, with their various buy orders shoving prices higher. Then, in those particular markets where the fundamentals are bearish, sellers come in to meet that buying. When these index funds take a break from buying, the price then falls off during the session only to come right back up as they buy once again. The result is a series of maddening price swings which confuses floor traders and others alike who are attempting to get a handle on the market.
The problem this is creating is that no one really understands when this sort of buying will fade and when it will come in because it is tied to the vagaries of the currency markets. Right now the Dollar is having trouble moving higher because traders are convinced that the Fed is going to remain on the dovish side until at least March of next year. But just like yesterday, when we get some sort of hint that China might be tightening monetary policy or trying to slow price pressures across their economy, the hedge funds come in and press it from the short side. If there is any Dollar weakness, the index funds come in a buy and back and forth it goes.
I honestly do not have any idea when this is going to end. I wish it would but it is the spawn of those monetary elites that sit on the FOMC. When you have an entire economy's well being or lack thereof completely addicted to an endless ocean of funny money, it is going to result in all manner of malinvestment and price distortion.
That is why I am hesistant to read too much into any one day's price action. Who the hell knows what we are going to get the next day anymore?
I will make one rather easy prediction however - by the end of the year, we are going to read of a lot more hedge funds going bust. These whipsawing markets are murdering most of them.
Wednesday, October 23, 2013
China back in the News
China, China and more China... that pretty much sums up what the big mover was in today's session. Talk out of that region was that the Chinese officials were moving to drain liquidity from their system in order to combat what they view as rising inflation concerns. Then again, perhaps a better way of phrasing this is that the Chinese officials would not be acting to add liquidity and maybe adopting some modest measures to deal with monetary aggregates.
The big deal is evidently about housing prices which continue to soar.
Traders interpreted this as bearish for commodities in general, especially copper as well as silver. They also seemed to be in a mood to further sell down crude oil but that tied more to the release of the crude stocks data.
What is interesting is to see the equity markets actually finally finding something to use as a reason to sell. It just goes to further prove the theory that what is lifting equity markets globally is not fundamentals but rather liquidity pools being created by the world's Central Banks. Take that away or even dare to breathe the words that it might be slowed or withdrawn and today's move lower in equities is what we get.
This is why I believe those analysts and pundits who continue to pound the table on buying equities based on their quaint notion that "the economy continues to improve" are full of it. Take away this giant tidal wave of Central Bank supplied liquidity and the world equity markets will fall so low that they could play handball with a snake!
Either way, it got gold. Traders who had been long decided to book profits after the nice pop higher while some of the macro traders moved back in on the short side. Further aiding the bearish mood today was the sharp drop lower in the gold shares once again. I am looking at the screen as I type this and the HUI is down over 3%. It certainly makes one think twice about staying long the metal when they see this as it usually presages a drop lower in the gold price the following day. We'll see if that is the case this time once again.
Silver is actually not doing too bad considering the big move lower in copper (down over 2%) but once again if failed to extend past $23. It is managing thus far to hold above a chart resistance level near $22.50 but just barely. It needs to clear $23 with some gusto to get the momentum crowd interested in buying it. If traders start coming around to the view that China is deliberately attempting to slow things down over there, it is going to add another headwind to silver and copper which will make it tough for gold to extend higher as well, especially as crude oil continues on the weak side.
The standout exception to the general wave of commodity selling today was in the grains which are trading in their own little world right now as hedge funds and other large traders jerk those markets all over the place due to the enormity of the spread trades they are currently employing.
I will get a chart up later on today as I am dealing with a lot of time constraints right now... thanks for your patience.
The big deal is evidently about housing prices which continue to soar.
Traders interpreted this as bearish for commodities in general, especially copper as well as silver. They also seemed to be in a mood to further sell down crude oil but that tied more to the release of the crude stocks data.
What is interesting is to see the equity markets actually finally finding something to use as a reason to sell. It just goes to further prove the theory that what is lifting equity markets globally is not fundamentals but rather liquidity pools being created by the world's Central Banks. Take that away or even dare to breathe the words that it might be slowed or withdrawn and today's move lower in equities is what we get.
This is why I believe those analysts and pundits who continue to pound the table on buying equities based on their quaint notion that "the economy continues to improve" are full of it. Take away this giant tidal wave of Central Bank supplied liquidity and the world equity markets will fall so low that they could play handball with a snake!
Either way, it got gold. Traders who had been long decided to book profits after the nice pop higher while some of the macro traders moved back in on the short side. Further aiding the bearish mood today was the sharp drop lower in the gold shares once again. I am looking at the screen as I type this and the HUI is down over 3%. It certainly makes one think twice about staying long the metal when they see this as it usually presages a drop lower in the gold price the following day. We'll see if that is the case this time once again.
Silver is actually not doing too bad considering the big move lower in copper (down over 2%) but once again if failed to extend past $23. It is managing thus far to hold above a chart resistance level near $22.50 but just barely. It needs to clear $23 with some gusto to get the momentum crowd interested in buying it. If traders start coming around to the view that China is deliberately attempting to slow things down over there, it is going to add another headwind to silver and copper which will make it tough for gold to extend higher as well, especially as crude oil continues on the weak side.
The standout exception to the general wave of commodity selling today was in the grains which are trading in their own little world right now as hedge funds and other large traders jerk those markets all over the place due to the enormity of the spread trades they are currently employing.
I will get a chart up later on today as I am dealing with a lot of time constraints right now... thanks for your patience.
Tuesday, October 22, 2013
Are we Beginning to see a loss of Confidence in the US Dollar?
Based on the price action, the answer to that question is it is certainly looking like that. The Dollar is within a hair's breadth of a strong region of support. If it does not hold, we will know the answer to this question is "YES".
I have also noticed that in conjunction with this move lower in the Dollar, interest rates at the long end of the yield curve are also beginning to drop once again. That is not good for the Dollar.
The catalyst for this was today's stunningly poor payrolls number for the month of September. Forecasts were for 180,000 jobs being created. Instead we got a pathetic 148,000! With that, it was a big "KERPLUNK" for the US Dollar and that sent gold careening higher as once again any notion of a slowdown or "taper" in the Fed bond buying program was immediately shelved.
It has been my opinion for some time now that gold will not mount any sort of SUSTAINED move higher unless there is a loss of CONFIDENCE in the US Dollar, which is in effect the same thing as a loss of confidence in the US political leadership and to a certain degree, monetary authorities. Trying to maintain an objective view of this when it comes to my own beloved nation is difficult at times to do but after watching the President's 1-800 INFOMERCIAL on the failed rollout of his healthcare law, it does not take a big stretch of the imagination to say that he looks like a cheap carnival barker pedaling a batch of snake oil instead of the responsible and serious leader of the free World which global investors expect.
Global investors are not stupid nor are they reckless with their capital. One shudders to think what would be happening to the US equity markets were it not for the fact that most of the $85 billion being created each month by the Fed is being stuffed into them. That is the only reason that they have not plummeted along with the Dollar.
All I can add to this is to say "Watch Out" if the US Dollar Index cracks chart support. That is far more important than any public opinion poll citing favorability numbers because it is a poll in which investors are voting and telling you exactly what they think about the current leadership of the nation.
I have also noticed that in conjunction with this move lower in the Dollar, interest rates at the long end of the yield curve are also beginning to drop once again. That is not good for the Dollar.
The catalyst for this was today's stunningly poor payrolls number for the month of September. Forecasts were for 180,000 jobs being created. Instead we got a pathetic 148,000! With that, it was a big "KERPLUNK" for the US Dollar and that sent gold careening higher as once again any notion of a slowdown or "taper" in the Fed bond buying program was immediately shelved.
It has been my opinion for some time now that gold will not mount any sort of SUSTAINED move higher unless there is a loss of CONFIDENCE in the US Dollar, which is in effect the same thing as a loss of confidence in the US political leadership and to a certain degree, monetary authorities. Trying to maintain an objective view of this when it comes to my own beloved nation is difficult at times to do but after watching the President's 1-800 INFOMERCIAL on the failed rollout of his healthcare law, it does not take a big stretch of the imagination to say that he looks like a cheap carnival barker pedaling a batch of snake oil instead of the responsible and serious leader of the free World which global investors expect.
Global investors are not stupid nor are they reckless with their capital. One shudders to think what would be happening to the US equity markets were it not for the fact that most of the $85 billion being created each month by the Fed is being stuffed into them. That is the only reason that they have not plummeted along with the Dollar.
All I can add to this is to say "Watch Out" if the US Dollar Index cracks chart support. That is far more important than any public opinion poll citing favorability numbers because it is a poll in which investors are voting and telling you exactly what they think about the current leadership of the nation.
Saturday, October 19, 2013
Trader Dan Interviewed at King World News Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly audio interview with Eric King over at the KWN Metals Wrap.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/10/19_KWN_Weekly_Metals_Wrap.html
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/10/19_KWN_Weekly_Metals_Wrap.html
Friday, October 18, 2013
No follow through for Gold
Once again gold reminded us all of the serious obstacles it faces in generating any widespread interest outside of the usual circles comprised of gold bugs and other die hard fans of the metal. It puts on a spectacular upside spectacle one day and the next it just seems to wither up and die. That is what happens when you get a sharp burst of short covering - violent moves higher which quickly run their course - that cannot attract any follow through momentum based buying but instead runs into another round of eager sellers.
In other words, the metal is still stuck in a trading range unable to break out either way with much conviction. I think this goes to the point of what I have been saying of late - until or unless we see some sort of event/events which precipitate a change in the CONFIDENCE of the global investment community towards the monetary authorities and/or political leaders, rallies in the metal are going to be viewed as selling opportunities. Why? Because the investment community is convinced, absolutely, that there is no inflation nor will there be any for the foreseeable future.
Need proof of this - see the following chart (again - for the umpteenth time). Commodity prices are relatively stable and have been for some time now. If anything, the sector has a slightly negative bias to its chart as the index has been slowly grinding lower the last two years now. This is the reason gold, and especially silver, are going nowhere. The momentum based crowd is not interested in chasing prices higher nor will they be until or unless there is solid evidence that the "BUY TANGIBLES" theme is back in vogue.
Much of this will depend on what the fortunes of the US Dollar are over through the end of the year. The dollar is weak but has not completely broken through technical chart support. I would only become concerned about the Dollar if it were to first mount a WEEKLY CLOSE below the 79 level but more so if it crashed through 78. That to me would indicate that a SHIFT IN SENTIMENT towards the greenback has indeed occurred. That would signal that LOSS of CONFIDENCE thing that I just mentioned. Should that take place, I do believe we would see a concern that inflation would result from the weakening currency and that would bring about the possibility of TANGIBLE asset buying once more on the part of the speculative community. That is simply not present right now.
What is present is the mania in US equities. This beats even the craze leading up to the 2000 fiasco if you ask me. The VIX or Volatility Index is plumbing multi-year lows as the S&P 500 pushes into one new record high after another. There is NO FEAR out there anywhere in sight. The only fear that I can see at this point is the FEAR OF MISSING OUT ON A MARKET THAT CAN NEVER STOP GOING HIGHER. Yes, indeed, the era of the never-ending bull market in stocks is firmly upon us.
Tell me something, how in the world is gold ever going to mount any sort of sustained move higher or generate the sustained buying (another way of saying the same thing) necessary to push it constantly upwards when the stock market makes one new high week after week - This all the while the pundits and other talking heads assure us that stocks are still cheap! Who wants gold when you are guaranteed spectacular profits in a NO WAY YOU CAN LOSE MONEY scenario, all courtesy of the fools at the Federal Reserve who still cannot see a bubble if it walked up to them and slapped them across their clueless faces?
When even the perma bulls begin to say out loud what many of us have been saying for years now (this market is resistant to any bad news of any kind) you know you damn well have a mania taking place. The deal is however, that as a trader or shorter-term oriented investor, you have to put aside any reservations you have and go with the herd if you are going to make any money. All I can say however is that you had better be quick on the draw and be able to get the heck out of Dodge in a hurry if things turn sour. Until it does, enjoy the ride.
A quick look at the gold chart... This is a 4 hour chart. Notice the trading pattern - a broad range noted within the colored rectangles making support and resistance. Also notice that since the short covering burst higher yesterday on pretty good volume, that same volume just dried up as the price approached the top of the trading near $1330 - $1340. What that tells me is that speculators are not the least bit interested in chasing the price higher RIGHT NOW. For that to change, we will need to see something on the technical price chart where a overhead resistance levels gives way in convincing fashion. That will draw the momentum crowd into the long side. For now, they are either shorting the market or staying out of it altogether as they seek more profitable opportunities to deploy their massive capital firepower elsewhere.
One last thing - let me comment on something going around the web drawn from my friends over at GATA. This will probably not endear me to some but I feel it needs to be said as there is too much trading misinformation out there. It seems that some keep taking note of large sell orders hitting the gold market during relatively thin trading conditions taking price lower. This is made a big deal out of and offered as proof positive that some nefarious powers want to break gold lower in order to discredit the metal and is thus part of the manipulation scheme.
Let me first and foremost note that I firmly believe the powers that be here in the West carefully monitor the gold price and that they are active through the bullion banks to try to keep the metal under wraps and prevent it from careening higher. However, and this is key - this occurs during times when gold is in a strong, sustained uptrend especially when bullish enthusiasm and excitement is at its best. Gold does compete with the US Dollar and thus it is important that anything that tends to undermine confidence in that Dollar or more specifically in the political and monetary leaders of the US be kept under wraps as much as is possible.
That being said, when gold is moving lower, the bullion banks are generally buyers, not sellers. The sellers are hedge funds and other large speculators. Just take a look at the Commitment of Traders report if you doubt that. Here is a good question for those who keep incorrectly pointing to these large sell orders as evidence that the culprits (whom they always equate to the bullion banks/government ) are deliberately suppressing the price of gold - how come we never hear a peep out of you when the gold price is shooting sharply higher with massive buy orders driving up through series after series of previously placed stop loss orders? Where is it written that the price can only be driven downward by some nefarious force seeking to maximize their trading profits? Can there not be those large capitalized traders who seek to push a market sharply higher and inflict the maximum amount of pain possible to short sellers when they spot market conditions that permit this?
Look, I trade a host of markets nearly round the clock and I can tell you point blank that in many of the markets I trade, especially the grains and the livestock markets, during the early morning hours here in the US, all manner of crap takes place. I have lost track of the number of times that some hedge fund or large spec has come in and jammed prices higher or lower, depending on which way there were positioned and then waited for the stops to get set off in order to make a quick killing. Every entity that pulls this sort of stunt is of course picking an opportune time in which to maximize the impact of their order placement. There is nothing the least bit out of the ordinary about this, even if one happens to believe it is certainly unethical as I do. ( I believe the exchanges' decisions to move to 24 hour round-the-clock trading in some markets was a huge mistake as it lends itself to this sort of legalized theft).
Gold therefore is no exception to this nor is there any reason for me to believe that anything occurring in there recently is anything out of the ordinary. Hedge funds, whom I believe have destroyed the integrity of our markets, are a like a plague of locusts that have descended upon us as they shove markets all over the place, many times without rhyme or reason. They are not the least bit interested in maximizing a selling price - they are interested in pushing price in the direction in which they are positioned.
Also, keep in mind that once upon a time, in a galaxy far, far away, large sellers or large buyers went about their business in as quiet and sophisticated method as was possible. They tried to hide their large sells or large buys so as not to alert other traders to what they were doing and thereby get in or get out before the herd came along. Those that followed such skilled practices are for the most part, long gone, dead or retired. The modern hedge fund has a computer that replaces the brains of the trader and it is programmed to sell a certain amount or buy a certain amount of contracts without regard to its impact on most occasions. In other words, they are brutally clumsy because the idea is to simply get out and get out FIRST before the next guy. Why wait and try to be sly about it when the entire trading strategy consists of responding to whatever the last price tic happens to be?
How I view this gold market right now then is that hedge funds, while still net long the market, have been increasingly interested in playing gold from the short side. That means they will be selling rallies or seeking to knock price lower when they feel like they can do so and have the greatest impact on price. What is necessary to prevent gold from succumbing to their selling then is for those who are interested in buying the metal to come in and make their presence felt with the same gusto/determination that the short sellers are exhibiting. If and when they do, we can pick that up on the price chart as it shows up as a SUPPORT level. If their buying is sufficiently large enough, they can force the price higher and in turn pick off the buy stops of other short sellers and turn the tables on them. That is what happened yesterday.
Let's see what next week brings to us and whether or not gold resumes its range trade and heads lower or if bulls can chase it higher and up and out of the top of that trading band.
In other words, the metal is still stuck in a trading range unable to break out either way with much conviction. I think this goes to the point of what I have been saying of late - until or unless we see some sort of event/events which precipitate a change in the CONFIDENCE of the global investment community towards the monetary authorities and/or political leaders, rallies in the metal are going to be viewed as selling opportunities. Why? Because the investment community is convinced, absolutely, that there is no inflation nor will there be any for the foreseeable future.
Need proof of this - see the following chart (again - for the umpteenth time). Commodity prices are relatively stable and have been for some time now. If anything, the sector has a slightly negative bias to its chart as the index has been slowly grinding lower the last two years now. This is the reason gold, and especially silver, are going nowhere. The momentum based crowd is not interested in chasing prices higher nor will they be until or unless there is solid evidence that the "BUY TANGIBLES" theme is back in vogue.
Much of this will depend on what the fortunes of the US Dollar are over through the end of the year. The dollar is weak but has not completely broken through technical chart support. I would only become concerned about the Dollar if it were to first mount a WEEKLY CLOSE below the 79 level but more so if it crashed through 78. That to me would indicate that a SHIFT IN SENTIMENT towards the greenback has indeed occurred. That would signal that LOSS of CONFIDENCE thing that I just mentioned. Should that take place, I do believe we would see a concern that inflation would result from the weakening currency and that would bring about the possibility of TANGIBLE asset buying once more on the part of the speculative community. That is simply not present right now.
What is present is the mania in US equities. This beats even the craze leading up to the 2000 fiasco if you ask me. The VIX or Volatility Index is plumbing multi-year lows as the S&P 500 pushes into one new record high after another. There is NO FEAR out there anywhere in sight. The only fear that I can see at this point is the FEAR OF MISSING OUT ON A MARKET THAT CAN NEVER STOP GOING HIGHER. Yes, indeed, the era of the never-ending bull market in stocks is firmly upon us.
Tell me something, how in the world is gold ever going to mount any sort of sustained move higher or generate the sustained buying (another way of saying the same thing) necessary to push it constantly upwards when the stock market makes one new high week after week - This all the while the pundits and other talking heads assure us that stocks are still cheap! Who wants gold when you are guaranteed spectacular profits in a NO WAY YOU CAN LOSE MONEY scenario, all courtesy of the fools at the Federal Reserve who still cannot see a bubble if it walked up to them and slapped them across their clueless faces?
When even the perma bulls begin to say out loud what many of us have been saying for years now (this market is resistant to any bad news of any kind) you know you damn well have a mania taking place. The deal is however, that as a trader or shorter-term oriented investor, you have to put aside any reservations you have and go with the herd if you are going to make any money. All I can say however is that you had better be quick on the draw and be able to get the heck out of Dodge in a hurry if things turn sour. Until it does, enjoy the ride.
A quick look at the gold chart... This is a 4 hour chart. Notice the trading pattern - a broad range noted within the colored rectangles making support and resistance. Also notice that since the short covering burst higher yesterday on pretty good volume, that same volume just dried up as the price approached the top of the trading near $1330 - $1340. What that tells me is that speculators are not the least bit interested in chasing the price higher RIGHT NOW. For that to change, we will need to see something on the technical price chart where a overhead resistance levels gives way in convincing fashion. That will draw the momentum crowd into the long side. For now, they are either shorting the market or staying out of it altogether as they seek more profitable opportunities to deploy their massive capital firepower elsewhere.
One last thing - let me comment on something going around the web drawn from my friends over at GATA. This will probably not endear me to some but I feel it needs to be said as there is too much trading misinformation out there. It seems that some keep taking note of large sell orders hitting the gold market during relatively thin trading conditions taking price lower. This is made a big deal out of and offered as proof positive that some nefarious powers want to break gold lower in order to discredit the metal and is thus part of the manipulation scheme.
Let me first and foremost note that I firmly believe the powers that be here in the West carefully monitor the gold price and that they are active through the bullion banks to try to keep the metal under wraps and prevent it from careening higher. However, and this is key - this occurs during times when gold is in a strong, sustained uptrend especially when bullish enthusiasm and excitement is at its best. Gold does compete with the US Dollar and thus it is important that anything that tends to undermine confidence in that Dollar or more specifically in the political and monetary leaders of the US be kept under wraps as much as is possible.
That being said, when gold is moving lower, the bullion banks are generally buyers, not sellers. The sellers are hedge funds and other large speculators. Just take a look at the Commitment of Traders report if you doubt that. Here is a good question for those who keep incorrectly pointing to these large sell orders as evidence that the culprits (whom they always equate to the bullion banks/government ) are deliberately suppressing the price of gold - how come we never hear a peep out of you when the gold price is shooting sharply higher with massive buy orders driving up through series after series of previously placed stop loss orders? Where is it written that the price can only be driven downward by some nefarious force seeking to maximize their trading profits? Can there not be those large capitalized traders who seek to push a market sharply higher and inflict the maximum amount of pain possible to short sellers when they spot market conditions that permit this?
Look, I trade a host of markets nearly round the clock and I can tell you point blank that in many of the markets I trade, especially the grains and the livestock markets, during the early morning hours here in the US, all manner of crap takes place. I have lost track of the number of times that some hedge fund or large spec has come in and jammed prices higher or lower, depending on which way there were positioned and then waited for the stops to get set off in order to make a quick killing. Every entity that pulls this sort of stunt is of course picking an opportune time in which to maximize the impact of their order placement. There is nothing the least bit out of the ordinary about this, even if one happens to believe it is certainly unethical as I do. ( I believe the exchanges' decisions to move to 24 hour round-the-clock trading in some markets was a huge mistake as it lends itself to this sort of legalized theft).
Gold therefore is no exception to this nor is there any reason for me to believe that anything occurring in there recently is anything out of the ordinary. Hedge funds, whom I believe have destroyed the integrity of our markets, are a like a plague of locusts that have descended upon us as they shove markets all over the place, many times without rhyme or reason. They are not the least bit interested in maximizing a selling price - they are interested in pushing price in the direction in which they are positioned.
Also, keep in mind that once upon a time, in a galaxy far, far away, large sellers or large buyers went about their business in as quiet and sophisticated method as was possible. They tried to hide their large sells or large buys so as not to alert other traders to what they were doing and thereby get in or get out before the herd came along. Those that followed such skilled practices are for the most part, long gone, dead or retired. The modern hedge fund has a computer that replaces the brains of the trader and it is programmed to sell a certain amount or buy a certain amount of contracts without regard to its impact on most occasions. In other words, they are brutally clumsy because the idea is to simply get out and get out FIRST before the next guy. Why wait and try to be sly about it when the entire trading strategy consists of responding to whatever the last price tic happens to be?
How I view this gold market right now then is that hedge funds, while still net long the market, have been increasingly interested in playing gold from the short side. That means they will be selling rallies or seeking to knock price lower when they feel like they can do so and have the greatest impact on price. What is necessary to prevent gold from succumbing to their selling then is for those who are interested in buying the metal to come in and make their presence felt with the same gusto/determination that the short sellers are exhibiting. If and when they do, we can pick that up on the price chart as it shows up as a SUPPORT level. If their buying is sufficiently large enough, they can force the price higher and in turn pick off the buy stops of other short sellers and turn the tables on them. That is what happened yesterday.
Let's see what next week brings to us and whether or not gold resumes its range trade and heads lower or if bulls can chase it higher and up and out of the top of that trading band.
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