Slowing Global Growth was the Theme Today

Overnight news out of China and out of Europe detailing slower than expected growth was the catalyst that served to upset the apple cart of the equity market bulls in today's trading session. It also led to further hedge fund selling of commodities in general with the result that it even took crude oil lower. Copper was clocked for nearly a 2% loss on the trading day while Silver was actually down nearly 3% at one time during the session.

Silver has broken down below both the 50 day and the 100 day moving averages on the Daily chart as the chart is decidedly bearish in this time frame.

The weekly chart shows that since 2009, either the 50 WEEK or the 100 WEEK moving average have served to provide  buying support on this time frame. Now that the 50 week has been violated, the next line of support comes in near the 100 week at the $30.15 - $30.00 level. If this does not hold, it will drop back towards the heavy blue line shown on the chart below $27.

The market has traced out a series of LOWER HIGHS with a horizontal support zone near the $26.54 - $26.00 level. No doubt many a would-be silver buyer is looking, longingly I might add, for the metal to move towards that level once again so that they can become active.

Gold has a better looking chart pattern than silver currently does in my opinion but that is due to the fact that some are still buying the metal as a safe haven out of geopolitical jitters or currency market woes and suspicions regarding the health of such. It did break down below the $1640 level in today's session dropping into the $1620's before the buyers showed up late and took it back through that support level by the close. This region has now held gold for the last two weeks so it has taken on quite a bit of significance as far as the technical analysis of this market goes. Bears would ideally love to take it through here and run the downside stops as they dream of the $1600 level. It would be helpful to the bulls' cause if India were to re-emerge down here.

You might recall that during last Friday's KWN Weekly Metals Wrap it was pointed out that the metals both look "Heavy" on the charts right now. I will not feel better about gold until I see it back ABOVE $1680 and Silver until it can climb back above $32.50 for starters.

About the only good thing that can be said about the horrific looking chart of the HUI is that it held above this week's low even on a day during which the global equity markets were experiencing some selling pressure. Yes, it closed down on the day but it apparently attracted some decent buying down at this week's lows again. If the bulls can take this thing back above 475 - 480 by tomorrow afternoon's closing bell, you might say that they have achieved a moral victory. As beat up as this sector has become, it is a marvel that anyone is left to sell the miners at these insanely undervalued levels.

If this were not bad enough to have one standing out on the window ledge by now, the following two charts might just do the trick. The HUI compared to the S&P 500 ratio, which gives us a measure of how the mining sector has been doing against the broader stock market in general, has now reached levels last seen in 2009 - nearly three years ago to be exact.

Also, the HUI to Gold ratio continues to plummet and is now within striking distance of where it was last seen all the way back at the depth of the credit crisis of 2008 just prior to the inception of the first round of Quantitative Easing. It is also at the same level it was back in February 2002.

Incidentally, for those who love inflicting further pain and discomfort upon their persons - this is the definition of a masochist - the price of gold in February 2002 was $297/ounce and the price of silver was $4.95 - $5.00. In the depth of the credit crisis in the summer of 2008, gold was trading at $680/ounce while silver was trading $9.75 - $10.00. 

While the HUI is obviously trading at higher levels than since then, those who bought gold and silver shares in an effort to provide a safe haven for their wealth from the ravages that they saw coming many years ago, would have been much better off had they simply bought the actual metals instead. To say that the mining shares have underperformed and disappointed is too mild of a word. One more apt would be that they have "crushed" their owners expectations and left a very bitter and deep wound upon them; a wound I might add that I am beginning to seriously question if it can ever be healed again.

CEOs need to somehow find a way to bring "value" to their particular shares and convince those who bought them that their investment in into the company was a worthwhile one and a desirable sector into which to park the fruits of their hard labor. They had better get busy.

Commodity Mauling Time

Funds are hammering nearly every single individual commodity futures market lower in today's session for some reason, a reason as to which I am still attempting to discover. There does not seem to be a safe haven, or "risk off" trade occuring in any large degree mainly because the bond market is trading nearly unchanged while the US Dollar is only up very slightly. Stocks while lower today have moved off of their worst levels of the session but the bloodbath is continuing across the commodity sector.

Evidently the computer algorithms have their panties in a wad and are jettisoning a large portion of their hedge fund owners' commodity holdings. The only commodity that I can curently find that is not lower today is the cocoa market. Too bad - maybe we could at least have eaten some cheaper chocolate as a consolation for what they are doing to the gold and silver markets.

Take a look at the following chart of the Continuous Commodity Index or CCI. It has not been able to recover from the hit it took after the FOMC fired their now infamous verbal intervention gun at the sector not long ago.

As stated here previously, the Fed wanted to entice the hedge funds out of the sector and into the equity markets and were hugely successful in so doing. You might also remember the "economy is doing better and does not need any QE3 only a period of continued low interest rates until late 2014", remarks. That was pretty much the short-term nail in the coffin for the sector as a whole based on the price action since then. Rallies are being viewed only as selling opportunities with the proceeds then being funnelled into the equity markets where they can make some gains, especially in time for the end of the quarter statement mailing time.

Gold is still holding above support near $1640 but is looking heavy currently. Bulls need to keep this level intact to prevent a drop to $1620 or lower. Until they can push it back above $1680, the new shorts are going to remain quite complacent and very confident. Should there be an upside surprise that takes it through that level, a large number of buy stops will be set off.

The flip side is that sell stops are building below $1640 - $1635. Floor locals are going to try to make a run at those especially if the fund selling does not let up any.

Silver took out support at $32.50 today as it continues its recent pattern of a large sell off followed by a couple to three days of short covering and consolidation only to experience another round of strong selling pressure. Spec longs are fleeing the Comex Silver market. It is currently sitting just above a layer of important chart support from a technical perspective, which if it fails, will see the market drop quite rapidly down towards the $30.25 - $30.00 region.

UP and UP she goes - where she stops nobody knows

I am becoming more and more convinced that the US Monetary Authorities have engaged in a process which is resulting in the formation of another bubble, this time once again in the US equity markets. Think back over the last decade+ and what we have seen occur in the US financial markets beginning at the height of the stock market bubble that popped in 1999.

From that point on, we have had a real estate market bubble, then a commodity market bubble, then a bond market bubble and now once again we are seeing the formation of a stock market bubble. Think back to that first popping of the equity market bubble in 1999 and to the subsequent popping of each successive bubble that has inevitably followed (as surely as the dusk follows the dawn I might add)
as a result of their short-sighted policies - what has been their response?  More of the same!

Interest rates were successively slashed to insanely low levels with the effect of PILFERING the retirement earnings of our senior citizens and those who are dependent on fixed income investments. An entire segment of the population has been robbed of a decent rate of interest on their life's savings as a result of these vultures masquerading as economic wise men.

The VICTIMS of the official monetary elites ( and yes I use the term 'victim' because that is PRECISELY what they have become in this game of madness) have been forced into scouring the land looking for a place, a sector, somewhere, anywhere - that they can hope to obtain some sort of decent yield from a SAFE, CONSERVATIVE INVESTMENT with which they can fund their last few years on this earth. Instead, many of them have been forced into joining the marauding band of wild-eyed speculators known as the hedge funds which scour the land raping and pillaging various sectors in succession looking for that precious and rare commodity known as 'Yield'.

And what pray tell have we witnessed our monetary lords and barons doing for the last ten years as far as policy? - why nothing else but managing the fallout from the popping of each successive bubble. Bubbles, which I might add, they themselves have created by employing the same prescriptive medicine, ad infinitum, stupidly looking for a different result each time they experiment upon us. One gets the distinct impression that our financial system is becoming a FRANKENSTEIN ECONOMY - the creation of madmen who cannot see what they have loosed upon the world.

The following chart of the S&P 500 tells the story of yet another bubble forming, once again in the world of equities. Yet this is a bubble being DELIBERATELY BLOWN by the Fed in the hopes that this ever-expanding balloon will engender a corresponding increase in consumer confidence in turn inducing an increase in consumer spending in the process - spending which must occur to lift the economy out of its doldrums.

Once upon a time - a long, long time ago -  in an ancient bygone era, during which primitives ruled, men naively believed that a rising stock market was the RESULT of a thriving economy. Nowadays, this is no longer true - instead there is a new religion that has grown to supplant the ancient one. This new religion, complete with its priestcraft of Central Bankers and well connected adherents, has professed a NEW CREED - one designed to drive out any vestiges of the old one. This new creed believes that if the stock market can be MADE TO RISE, the THRIVING ECONOMY will then follow. In other words, cause and effect have been reversed.

What is then required to validate this creed is to induce, cajole, herd, or otherwise force through eliminating alternatives, speculative money flows into the equity markets. Once stocks rise, opinion then turns and with opinion turning, crowd behavior then follows.

With that in mind, observe the latest chart of the S&P 500, a broad representative of the US equity markets. Note how well the speculators are being herded into the equity markets once again seeing that there is no hope of obtaining yield in a near zero interest rate environment - where else is all this money that has been created by the Bank of England, the Bank of Japan, the Fed, the European Central Bank, going to go? Even the PBOC and the Bank of Brazil are getting into the act.

Think back to 1999 and the conditions existing in the economy as far as employment and real estate goes - consider the US budget situation back then and compare that to where it has degraded now. The latest FOMC release informed us that the economy is showing moderate improvement but still faces enough challenges that it requires interest rates to remain near zero for more than a year and a half (late 2014). And yet the S&P 500 is merrily charging higher headed directly in a straight line back to the same level it was prior to the debacles that we have seen first when stocks imploded in 1999 and then again in 2008.

Yes, indeed, stocks have become the only game in town due to the machinations of these plotters and schemers who control monetary policy and attempt to influence crowd behavior. Welcome to the Brave New World of Central Planning.

By the way, does anyone else beside me, see the similarity in the chart patterns of both the Crude Oil market and the S&P 500?

Trader Dan on King World News Weekly Metals Wrap

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

http://tinyurl.com/7z97phv

Trader Dan visits Turdland at the TF Metals Report Site

Yesterday my pal, Turd Ferguson, the owner and proprietor of TF Metals Report site, was gracious enough to do one of his now famous podcast interviews, with yours truly as his latest victim ( excuse me - that was a typo Turd - I was supposed to write 'guest'   :o)  ).

Seriously - the interview was a lot of fun for me personally but more importantly, we both hope it is helpful to those who are perhaps interested in some of the pitfalls that would-be traders face as they attempt to navigate through today's wildly volatile markets.

We covered quite a bit of ground about trading in general as well as sharing some personal thoughts about the problems facing the United States as we move forward into the future.

Stop by Turd's site and check out the interview when you can or click on the following link which will take you directly there.

http://www.tfmetalsreport.com/podcast/3537/tfmr-podcast-15-trader-dan-norcini

Gold holding near $1640

The Yellow Metal attracted some short covering and some buying related to bargain hunting in today's session as apparently buying was of sufficient size to convince some of the shorts that the market was through going down for right now. After a drop of $85 in a few days, some decided that it was time to ring the cash register and grab a few profits.

It looks like a few light stops were run once the market took out $1660 but after those were filled, price retreated a bit lower and is currently below that level.

For me to become convinced that a short term bottom is in this market, we will need to see the price close back through the $1680 level once again. You might remember from yesterday's charts posted over at King World News within my recent interview, the 200 day moving average comes in very near that level.

For the time being I am hesitant to read too much into a single day's action.

The Dollar is moving lower today and I want to see whether or not this is a one day wonder or if it is going to try to mount a push back towards 82 on the USDX.

The S&P 500 continues on its near one-way trek higher scoring another fresh 52 week high in the process. I do not know about you, but I for one am glad that it was so easy to fix everything ailing the US economy by keeping interest rates near zero. I am waiting for the day when the Fed announces it is going to distribute checks to all taxpaying citizens in the amount of $10,000 each as part of its efforts to combat deflationary pressures.

The HUI continues getting beaten up as it is lower on the day even while the rest of the equity market leaves it in the dust. The sector is so undervalued against the broader market that it screams for someone to buy it but the discouragement is so strong that hardly any want to touch the miners for fear of further losses. The ratio of the HUI to the S&P 500 touched a nearly three year low today!

Silver

Bond Collapse Continues

Much to the chagrin of the Federal Reserve, bond traders are taking that FOMC statement from yesterday and taking no prisoners as they literally hammer the long bond into submission. I find it a bit ironic (to be honest I am gleeful about it) that the Fed, which continues its attempts to manipulate hedge fund behavior by herding them into the equity markets, has opened an enormous can of worms and awakened the heretofore comatose bond vigilantes as an undesirable chain reaction to their "peachy" statement about the state of the US economy.

Bond traders are already moving the Fed Funds Futures to indicate interest rate hikes in early 2014, and not the latter part of 2014 as those minutes revealed yesterday. Worse, the yield on the Ten Year has spiked. It started off the week at 2.04% and ended today at 2.27%. As for the long bond, forgettaboutit; it was absolutely pummelled today now having dropped over 3 1/2 points the last two days.

What has happened is very simple - the happy talk about the US economy coming out of the FOMC minutes has traders jettisoning safe haven trades and even short term Treasuries in favor of the bull train leaving the station in the US equity markets. The problem? The last thing that the Fed and the US government needs or wants is a rising interest rate environment.

Oh sure, they can stand a bit of a move higher, but if any of this begins filtering into the mortgage market and the cost of home mortgages, autos, etc. begins moving higher, it will nip whatever nascent recovery there might be in the bud. And don't forget - there is that pesky "LITTLE" issue of the US national debt which will cost more federal tax revenue to service in a rising interest rate environment. Remember, even with its more upbeat assessment of the US economy yesterday, the FOMC certainly did not suggest that the recovery was robust or was it healthy. What they basically said, if I might paraphrase, was that it was showing modest improvement but was not out of the woods.

Doesn't matter - the bond market is focused on the "modest improvement" part and is interpreting that, either rightly or wrongly, that the Fed is not going to be doing any QE in the immediate future. After all, if things are supposedly so firmly on the right track, why the heck does anyone want to be in a "SAFE HAVEN" Treasury when everything is peachy keen, particularly if those paper IOU's are paying out squat.

The Fed has basically undercut it own low interest rate policy by giving investors the greenlight to sell bonds in order to deploy those funds into the equity markets. See what happens when you engineer a stock market rally?

I suspect that the Fed is going to be getting increasingly nervous if this sell off in the bonds, particularly the long end, continues unabated. Let's see how far the bond bears will push them.

By the way, I am not posting any gold or silver charts today as Eric King over at King World News, was gracious enough to interview me on both markets today asking about the technicals on the metals. You can find charts there with my usual annotations where support and resistance can be located. Here is the link to that particular interview:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/14_Norcini_-_Rough_Day_for_Gold_%26_Silver,_But_Heres_Good_News.html

Platinum regains its premium to Gold

For the last six months or so, platinum has been trading at a discount to gold. This is a rare occurrence as one can see from a glance at the monthly chart going back to 1990. Only in 1991 did platinum trade at a discount to the price of gold. Late last year and early into this year, an ounce of the white metal was over $200 cheaper than an ounce of gold!

This came about due to fears that the global economy would slow down as European sovereign debt woes sent out a type of contagion rippling across the planet. Auto sales especially would be hit and since platinum is heavily used in catalytic converters, ideas spread that demand for the metal would falter.

If you notice however, platinum has been steadily gaining ground against gold as investors began anticipating Central Bank liquidity injections to deal with the pesky debt issues plaguing Europe, not to mention an ultra low interest rate environment which was intended to spur both borrowing and lending and by consequence, growth.

It also did not hurt that a major strike in an important platinum mine popped up cutting off supply from the world market.

This is another one of those combination indicators that can be used to gauge investor sentiment towards the global economy in general. As long as traders feel that there is little to fear as impediements to growth, they will bid this spread higher in favor of platinum.