Saturday, August 27, 2011
Trader Dan on King World News Weekly Metals Wrap
Please click on the following link to tune in to my regular weekly radio interview with Eric King on the King World News Weekly Metals Wrap.
Friday, August 26, 2011
Silver - Daily Chart notes
Silver has thus far held solidly at the intersection of three major chart support levels detailed on the following chart. Horizontal support near $39.50, the 38.2% Fibonacci retracement level of the move from $50 down to $33, and the upsloping trendline created by the price action of ther last 6 weeks. Now the bulls will need to take it through the 50% retracement level once again and keep it ABOVE that level to set it up for another test of overhead resistance near $44.
4 Hour Gold Chart
Trying to explain the reasons for the price action in the markets today is an exercise in futility as there are far too many cross currents at work and far too many hedge fund computers sloshing money all over the place. And this does not even take into account the parasitical HFT crowd.
That being said - gold initially dipped a bit lower and came off its best level early in the session as Bernanke's highly anticipated speech turned out to be a dud. Why these guys expected him to come out and announce another round of QE3 escapes me for the reasons we have detailed here on this site previously. The political environment just did not permit it without a SERIOUS DEGRADATION of the economic data (not to mention the glaringly obvious fact that is DOES NOT WORK).
After the initial knee jerk lower (which also took silver down with it), gold moved back up again as the speech was interpreted by the market as saying that the economy was very weak and that the Fed was closely monitoring the upcoming economic reports. Most took it as saying that the Fed left the door open for additional monetary stimulus next month in September and reinforced the demand for gold as a safe haven. Once that theory seemed to gain traction, gold began money steadily higher as the Dollar began heading steadily lower.
I also happen to think that with Bernanke passing the ball off to the political leaders to address the structural issues plaguing the US economy, those who wanted to put their trust in those clowns to fix anything decided that gold looked mighty attractive and decided to trust it instead of their princes.
The other issue working for gold was the thinking that what ECB President Trichet might say this weekend would actually be more important that what was contained in Bernanke's speech. After all, Europe is experiencing its own version of its credit crisis and the ECB is going to be under pressure to deal with that, not the Fed. Whatever they might do, if anything further, to provide some form of monetary accomodation or further increase the size of their bond buying program, makes gold all that much more attractive.
Let me make a quick comment in regards to some of the "experts" that are continually trotted out to pontificate by stating that "gold is not a safe haven". Have you ever noticed that it is ALWAYS AFTER A SELL OFF IN GOLD that these mushrooms pop up and appear for the sole purpose of annoying us? They are never anywhere to be found while the metal is making one record high after another. But let the market experience a normal price retracement such as those that occur in any bull market and out they come dazzling us with their brilliance. My response is simple - if they think it is not a safe haven, then they should have some courage and short the market with reckless abandon to prove how smart they are? After all, once it broke out above $1500, they could have sold it short over and over again all the way to $1900. After all, a $400 dollar drawdown on a short position would only amount to a paper loss of $40,000 on each short position initiated. What's that to these wizards???
I cannot think of any other statement that so utterly disqualifies these individuals from being taken seriously as stating that gold is not a safe haven. Not only does it display amazing ignorance, the statement has also been proven to have been blatantly erroneous. What else can explain a $400 rally since the beginning of July? Indigestion induced by a bad batch of pepperoni pizzas that made the round in the investing community?
Gold is and always will be a measure of the CONFIDENCE that investors have in their monetary and political leaders. It is that simple.
If you doubt my comments, then let a more objective argument make the case and convince you of the utter stupidity of these babblers who are legends only in their own minds. Following is a chart comparing the price of gold to the price of the long bond. Both are considered CLASSIS SAFE HAVENS.
Which one has proven to have been the better choice as a safe haven since the first inception of the Fed's failed QE policies were first begun? Yes, you have guessed it - Gold.
The chart settles the argument. Ignore the babblers and pay them no heed. They have been discredited and can be and should be ignored by savvy traders and investors.
That being said - gold initially dipped a bit lower and came off its best level early in the session as Bernanke's highly anticipated speech turned out to be a dud. Why these guys expected him to come out and announce another round of QE3 escapes me for the reasons we have detailed here on this site previously. The political environment just did not permit it without a SERIOUS DEGRADATION of the economic data (not to mention the glaringly obvious fact that is DOES NOT WORK).
After the initial knee jerk lower (which also took silver down with it), gold moved back up again as the speech was interpreted by the market as saying that the economy was very weak and that the Fed was closely monitoring the upcoming economic reports. Most took it as saying that the Fed left the door open for additional monetary stimulus next month in September and reinforced the demand for gold as a safe haven. Once that theory seemed to gain traction, gold began money steadily higher as the Dollar began heading steadily lower.
I also happen to think that with Bernanke passing the ball off to the political leaders to address the structural issues plaguing the US economy, those who wanted to put their trust in those clowns to fix anything decided that gold looked mighty attractive and decided to trust it instead of their princes.
The other issue working for gold was the thinking that what ECB President Trichet might say this weekend would actually be more important that what was contained in Bernanke's speech. After all, Europe is experiencing its own version of its credit crisis and the ECB is going to be under pressure to deal with that, not the Fed. Whatever they might do, if anything further, to provide some form of monetary accomodation or further increase the size of their bond buying program, makes gold all that much more attractive.
Let me make a quick comment in regards to some of the "experts" that are continually trotted out to pontificate by stating that "gold is not a safe haven". Have you ever noticed that it is ALWAYS AFTER A SELL OFF IN GOLD that these mushrooms pop up and appear for the sole purpose of annoying us? They are never anywhere to be found while the metal is making one record high after another. But let the market experience a normal price retracement such as those that occur in any bull market and out they come dazzling us with their brilliance. My response is simple - if they think it is not a safe haven, then they should have some courage and short the market with reckless abandon to prove how smart they are? After all, once it broke out above $1500, they could have sold it short over and over again all the way to $1900. After all, a $400 dollar drawdown on a short position would only amount to a paper loss of $40,000 on each short position initiated. What's that to these wizards???
I cannot think of any other statement that so utterly disqualifies these individuals from being taken seriously as stating that gold is not a safe haven. Not only does it display amazing ignorance, the statement has also been proven to have been blatantly erroneous. What else can explain a $400 rally since the beginning of July? Indigestion induced by a bad batch of pepperoni pizzas that made the round in the investing community?
Gold is and always will be a measure of the CONFIDENCE that investors have in their monetary and political leaders. It is that simple.
If you doubt my comments, then let a more objective argument make the case and convince you of the utter stupidity of these babblers who are legends only in their own minds. Following is a chart comparing the price of gold to the price of the long bond. Both are considered CLASSIS SAFE HAVENS.
Which one has proven to have been the better choice as a safe haven since the first inception of the Fed's failed QE policies were first begun? Yes, you have guessed it - Gold.
The chart settles the argument. Ignore the babblers and pay them no heed. They have been discredited and can be and should be ignored by savvy traders and investors.
Wednesday, August 24, 2011
HUI once again retreats below 580
Watching this game being played by the shorts in the mining shares as they attempt to extricate themselves from their rather tenuous short positions in the shares is shaping up to be mighty entertaining.
On Monday of this week, the mining sector finally blasted through the stubborn line of resistance that has formed on its price chart near the 580 level. It ran right through the 600 level and almost as high as 610 before settling near the high of the session. All in all, very bullish chart action. Yesterday it moved lower along with the gold and silver markets but bounced off the 580 level confirming that former resistance level as the new support level even though it ended lower on the day. It kept itself above the low of MOnday's session as well. That too was friendly.
Today, the shares were mangled with the result that the index collapsed back through that same old 580 level and was unable to regain its footing above it before the close of the trading session. It did managed a decent bounce off the session low however.
Since the middle of June, the mining sector, while lagging the performance of gold (and silver to a certain extent) , has been in a definite uptrend marked by a series of higher highs and higher lows. While the long suffering share holders have been distressed by their lack of upside activity, as long as the index stays above the uptrend line shown on the chart, it will still be in a bullish posture although it will have to clear 610 to get another strong leg to the upside.
If this index recaptures the 580 level within the next couple of days, the shorts are in trouble.
On Monday of this week, the mining sector finally blasted through the stubborn line of resistance that has formed on its price chart near the 580 level. It ran right through the 600 level and almost as high as 610 before settling near the high of the session. All in all, very bullish chart action. Yesterday it moved lower along with the gold and silver markets but bounced off the 580 level confirming that former resistance level as the new support level even though it ended lower on the day. It kept itself above the low of MOnday's session as well. That too was friendly.
Today, the shares were mangled with the result that the index collapsed back through that same old 580 level and was unable to regain its footing above it before the close of the trading session. It did managed a decent bounce off the session low however.
Since the middle of June, the mining sector, while lagging the performance of gold (and silver to a certain extent) , has been in a definite uptrend marked by a series of higher highs and higher lows. While the long suffering share holders have been distressed by their lack of upside activity, as long as the index stays above the uptrend line shown on the chart, it will still be in a bullish posture although it will have to clear 610 to get another strong leg to the upside.
If this index recaptures the 580 level within the next couple of days, the shorts are in trouble.
Silver Chart
Silver was whacked along with gold in today's session as technical selling kicked in after the takedown began once it appeared that the run to $44 would fail to build on its gains. After $42 gave way, selling accelerated as down side stops were run which were helped along by the frontrunning High Frequency Trading club ( also known as market parasites and general pond scum).
The market did bounce higher from the $39 level however and while it still looks heavy, the level from which it bounced is the confluence of three technical support levels on the chart. The first is horizontal support noted in heavy red which also is the former Fibonacci 38.2% retracement level which was a pivot level around which silver was trading for the better part of the last 5 weeks. You will also note a short term uptrendline which has been forming drawn off the last June lows and the early August swing low that comes in very near this level as well.
Ideally, we would like to see silver hold in this general region to prevent a deeper fall towards $37.00 - $36.50. I would feel a bit more confident about its immediate prospects if it could regain its footing back above the former 50% retracement level up near $41.25 - $41.50 on the price chart.
Volume was very heavy today indicating a great deal of panic type selling was taking place. Unlike the drop that occured in silver back when it neared the $50 level in April, the Commitment of Traders report shows a relatively low level of speculative interest on the long side compared to past for the managed money or hedge fund category. They are currently about 11,000 contracts shy of their net long position size that they were holding back in April at the peak.
Also noteworthy is the fact that the Swap Dealers are barely net short while the Commercial net short exposure is also relatively small. The latter two categories rarely if ever sell into downward silver markets so if any selling is going to occur in silver, it is going to have to come from either additional long liquidation or fresh speculative side short selling.
In regards to the former - while the hedge funds are net longs, after today it is fairly easy to theorize that that long side exposure has been whittled away considerably. That begs the question - is this category of traders going to start aggressively moving to the short side? One would be rather challenged to build a fundamental case for that. In the meantime we will watch to see where chart support emerges and where the long liquidation will ease off.
The market did bounce higher from the $39 level however and while it still looks heavy, the level from which it bounced is the confluence of three technical support levels on the chart. The first is horizontal support noted in heavy red which also is the former Fibonacci 38.2% retracement level which was a pivot level around which silver was trading for the better part of the last 5 weeks. You will also note a short term uptrendline which has been forming drawn off the last June lows and the early August swing low that comes in very near this level as well.
Ideally, we would like to see silver hold in this general region to prevent a deeper fall towards $37.00 - $36.50. I would feel a bit more confident about its immediate prospects if it could regain its footing back above the former 50% retracement level up near $41.25 - $41.50 on the price chart.
Volume was very heavy today indicating a great deal of panic type selling was taking place. Unlike the drop that occured in silver back when it neared the $50 level in April, the Commitment of Traders report shows a relatively low level of speculative interest on the long side compared to past for the managed money or hedge fund category. They are currently about 11,000 contracts shy of their net long position size that they were holding back in April at the peak.
Also noteworthy is the fact that the Swap Dealers are barely net short while the Commercial net short exposure is also relatively small. The latter two categories rarely if ever sell into downward silver markets so if any selling is going to occur in silver, it is going to have to come from either additional long liquidation or fresh speculative side short selling.
In regards to the former - while the hedge funds are net longs, after today it is fairly easy to theorize that that long side exposure has been whittled away considerably. That begs the question - is this category of traders going to start aggressively moving to the short side? One would be rather challenged to build a fundamental case for that. In the meantime we will watch to see where chart support emerges and where the long liquidation will ease off.
CME GROUP hikes margins for gold
Here it comes....
CME GROUP - Gold Margin Rise Effective After Close Of Business Thursday
Margins will be raised 27%
Old Margin $7,425
New Margin $9450
Old Maintenance $5,500
New Maintenance $7,000
CME GROUP - Gold Margin Rise Effective After Close Of Business Thursday
Margins will be raised 27%
Old Margin $7,425
New Margin $9450
Old Maintenance $5,500
New Maintenance $7,000
Tuesday, August 23, 2011
Equity Bulls Banking on Fed's Bernanke playing the role of the Easter Bunny
Stocks are rallying in today's session on anticipation of another round of QE to be announced by Chairman Bernanke this Friday at the annual Jackson Hole, Wyoming meeting of various monetary officials.
As a matter of fact, the commodity complex is rallying as well with the CCI (Continuous Commodity Index) moving back towards the top of its recent trading range. It certainly appears that the hedge funds are trying to send a signal to Bernanke to bring his bag of market jelly beans to the meeting.
What everyone of these reckless money changers are remembering is last year's meeting where the first hint that another round of Quantitative Easing was in the works was announced during Bernanke's speech at this very same event. The hedge funds are hoping that lightning will strike twice. Methinks that they are going to be seriously disappointed.
Politically Bernanke is in no position to announce another round of QE. If he were to try this route once again, a route which has obviously been an abject failure considering that between QE1 and QE2 over $2.5 TRILLION was spent with nothing to show for it except a collapsing Dollar and rampant inflation in energy and food prices, he would unleash a firestorm of protest here in the US and certainly abroad by our largest creditors, China in particular.
The Chinese have already made quite clear their extreme displeasure with the impact that the QE programs are having on that portion of their reserves which are Dollar-based. One cannot continue to poke their banker in the eye without generating an unpleasant response.
I should note here something I consider extremely telling - if the equity bulls are getting giddy over the prospect of more Fed-dispensed Jelly Beans, the bond market is not buying it. Bonds should be getting hammered with both equities and commodities moving higher and the Dollar lower. Instead, they are barely lower with any dips down generating additional buying. One gets the sense that the bond bulls are just itching to snare the shorts once again and proceed to generate yet another short squeeze.
The prospect of another round of QE, instead of generating buying in gold and silver, is leading to selling. With gold being so overextended to the upside, this is welcome. With silver however it is "Heads - I win; Tails - You lose" for the silver bears. They are talking up silver as a safe haven metal which will not be needed if another round of QE is unleashed and the Fed comes to the rescue of the markets once again. The problem for those guys is that if the RISK trades come back on, then silver is going to be very difficult to keep down, especially if the copper market starts rising.
I would like to see silver keep its footing above the $42.00 level, especially after yesterday's strong showing, if it is going to move back up and revisit resistance near the $44 level.
The HUI needs to hold above 580 to prevent another round of selling in the mining shares.
As a matter of fact, the commodity complex is rallying as well with the CCI (Continuous Commodity Index) moving back towards the top of its recent trading range. It certainly appears that the hedge funds are trying to send a signal to Bernanke to bring his bag of market jelly beans to the meeting.
What everyone of these reckless money changers are remembering is last year's meeting where the first hint that another round of Quantitative Easing was in the works was announced during Bernanke's speech at this very same event. The hedge funds are hoping that lightning will strike twice. Methinks that they are going to be seriously disappointed.
Politically Bernanke is in no position to announce another round of QE. If he were to try this route once again, a route which has obviously been an abject failure considering that between QE1 and QE2 over $2.5 TRILLION was spent with nothing to show for it except a collapsing Dollar and rampant inflation in energy and food prices, he would unleash a firestorm of protest here in the US and certainly abroad by our largest creditors, China in particular.
The Chinese have already made quite clear their extreme displeasure with the impact that the QE programs are having on that portion of their reserves which are Dollar-based. One cannot continue to poke their banker in the eye without generating an unpleasant response.
I should note here something I consider extremely telling - if the equity bulls are getting giddy over the prospect of more Fed-dispensed Jelly Beans, the bond market is not buying it. Bonds should be getting hammered with both equities and commodities moving higher and the Dollar lower. Instead, they are barely lower with any dips down generating additional buying. One gets the sense that the bond bulls are just itching to snare the shorts once again and proceed to generate yet another short squeeze.
The prospect of another round of QE, instead of generating buying in gold and silver, is leading to selling. With gold being so overextended to the upside, this is welcome. With silver however it is "Heads - I win; Tails - You lose" for the silver bears. They are talking up silver as a safe haven metal which will not be needed if another round of QE is unleashed and the Fed comes to the rescue of the markets once again. The problem for those guys is that if the RISK trades come back on, then silver is going to be very difficult to keep down, especially if the copper market starts rising.
I would like to see silver keep its footing above the $42.00 level, especially after yesterday's strong showing, if it is going to move back up and revisit resistance near the $44 level.
The HUI needs to hold above 580 to prevent another round of selling in the mining shares.
Monday, August 22, 2011
Monthly Gold Chart with some Price Projection levels
Gold has shown continued strength going into the Asian session this evening. In the process of so doing, it has reached the upper limits of the pitchfork extensions shown on the chart. I have chosen the monthly upon which to do some analysis so as to get the long term picture and point out several things which merit mentioning.
Notice that the dark green center line has acted as the upper boundary for the entire move since the reaction that occured in the gold price in late 2009, early 2010. All subsequent rallies met this line and held below it until this month when price exploded through the center line alerting that the trend higher in gold was now accelerating.
The three red outer lines and the single blue outer lines are projected levels where we can expect to see some resistance form. Thus far the two red lines nearest to the center have failed to cap the price rise. We are currently trading right on the outer 3rd red line of the upper set which this month passes through the $1925 - $1935 level. Beyond that is a blue line which this month comes in near the $1950 - $1960 level.
What we are attempting to do is to project levels at which we might expect some selling to occur and a potential reaction in price to take place. There is nothing set in stone which states that these levels must produce selling. They are merely given as POTENTIAL areas of selling resistance. Should the market blow through these levels, then we will have to resort to other methods to anticipate some potential inflection points.
For now, traders can monitor price action near these levels and trade accordingly.
Should we actually get a turn lower in price, any subsequent retracement should find buying support at each of the upsloping colored lines on the way down. The dark green center line should hold any retracement if the market is going to continue with a strong and sharp advance. Thus gold could move lower to the tune of $150 - $170 from current levels and still be very strong on the chart. If such an event were to occur, the bulls would like to see the price then hug that same green center line as it forms its low and bounce upward off of that level as the overall trend continues to the upside with a bit less steep of a price advance.
Notice that the dark green center line has acted as the upper boundary for the entire move since the reaction that occured in the gold price in late 2009, early 2010. All subsequent rallies met this line and held below it until this month when price exploded through the center line alerting that the trend higher in gold was now accelerating.
The three red outer lines and the single blue outer lines are projected levels where we can expect to see some resistance form. Thus far the two red lines nearest to the center have failed to cap the price rise. We are currently trading right on the outer 3rd red line of the upper set which this month passes through the $1925 - $1935 level. Beyond that is a blue line which this month comes in near the $1950 - $1960 level.
What we are attempting to do is to project levels at which we might expect some selling to occur and a potential reaction in price to take place. There is nothing set in stone which states that these levels must produce selling. They are merely given as POTENTIAL areas of selling resistance. Should the market blow through these levels, then we will have to resort to other methods to anticipate some potential inflection points.
For now, traders can monitor price action near these levels and trade accordingly.
Should we actually get a turn lower in price, any subsequent retracement should find buying support at each of the upsloping colored lines on the way down. The dark green center line should hold any retracement if the market is going to continue with a strong and sharp advance. Thus gold could move lower to the tune of $150 - $170 from current levels and still be very strong on the chart. If such an event were to occur, the bulls would like to see the price then hug that same green center line as it forms its low and bounce upward off of that level as the overall trend continues to the upside with a bit less steep of a price advance.
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