Triggered covered call sale

GDX hit my objective as I thought it would.  I sold the 22 May 48 Call and triggered 50 contracts for $3.70 per share, or $370 per contract.  I am looking for this premium to drop to less than a dollar where I will buy back to close the trade.

3 Mo: "

via StockCharts.com
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6 mo: "

via StockCharts.com

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Dollar divergence

6 mo: "

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On the Dollar 6 month chart, divergence between price and all indicators I use for charting. The positive slope of the price line does not agree with the negative slopes associated with RSI, MACD, and Stochastic. That bodes well for future dollar weakness and for now stronger stock markets. Of course gold is doing it own thing now and and the correlation with the dollar has been weak.

USD - 3 yr: "

via StockCharts.com
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On the weekly chart, the dollar has found resistance at the Fibonacci 50% retracement line.  Stochastics are hanging around the 80 signal line and a cross down below sets up the 20 week MA as the target or around 80.  That level also corresponds to support from the Fibonacci 38.2% retracement line.

GDX approaching resistance

GDX has had a nice run this week and holders of this ETF are saying "its about time!"  Fact is the mining stocks have been under-performing gold and silver ever since the Fall of 2008 and the fall of the global stock markets. Now since February GDX has been out-performing and I can prove it with the following chart that plots GDX divided by Gold price:

GDX:$GOLD - 6 mo: "

via StockCharts.com
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The green trend channel is clearly up.  Alas, all things have their time and I think GDX is nearing a short-term top.  We are very near 70 on the RSI which is indicative of an over-bought condition.  Price is nearing the top of the up trend channel and resistance awaits overhead.  The 6 month GDX chart looks like:

6 mo: "

via StockCharts.com
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As can be seen, RSI is reading 70.74 and over sold.  In fact, RSI is at the highest reading on this chart and price has reversed by now when considering just this indicator.  We are nearing both resistance from the early January high and the upper limit of the trend channel.  Stochastic is also reading over-bought with a reading over 70.

The mining issues have been correlating with the overall stock market since the meltdown in 2008.  Prior to that time, they were more inversely correlated than not.  If the broad market continues its slow melt up, I expect GDX to continue its up trend and achieve its previous all time high of 56.73.  But, it wont happen on this run that started 2 weeks ago.  So what to do?  Buy and holders should hold.  Traders?  Look at the 3 month chart:

3 Mo: "

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My assumption is that price is going to test resistance that is waiting at 51.16.  I think it is going to be repelled and either go sideways or lower.  If it it goes lower, Slow Stochastic will either not embed or lose embed status and cross below the 80 level.  When it does this, the price target becomes 18 day moving average, currently 47.77.  I think a trade into the May 48 call has merit.  Running the numbers, I think you can sell the May 48 call for 3.70 if GDX makes it to 51.16.  This will give you price protection during the correction down to 48.  As long as price does not exceed 51.70 on May 22 or before you exit, you will make money on the trade.  If it does exceed 51.28, you lose the price appreciation beyond that point.

every once in awhile...

you read something that vibrates.  When you read the first two quotes, you know that truth resides here.  Read on...

Michael Krieger - This Is The Last Dance

by Tyler Durden

7 people liked this

Presenting the latest terrific analysis by Michael Krieger of KAM LP, who joins Willem Buiter and everyone else left with a gram of prudence, in realizing that this is nothing more than the "last dance."

History is a set of lies agreed upon.
-  Napoleon Bonaparte

Most people prefer to believe their leaders are just and fair even in the face of evidence to the contrary, because most people do not want to admit they do not have the courage to do anything about it.  Most propaganda is not designed to fool the critical thinker, but only to give moral cowards an excuse not to think at all"
-  Michael Rivero

Every man gotta right to decide his own destiny,
And in this judgment there is no partiality.
So arm in arms, with arms, we'll fight this little struggle,
'Cause that's the only way we can overcome our little trouble.
-  Bob Marley, Zimbabwe

A Thousand Words On Conventional Wisdom
Conventional wisdom.  Many market analysts define conventional wisdom in relation to what direction the market is going to head in the future, but I think this is an utter mischaracterization of the concept.  For example, someone that is bullish on the market right now is likely to see conventional wisdom on stocks and the economy as overly bearish after ten years of no returns for U.S. equities.  In contrast, someone that expects a market collapse will say that everyone is a cheerleader and that the “conventional wisdom” after such a huge rally is for stocks to continue to go up.  This is not how I would describe conventional wisdom and all is does is drag the debate into the intellectual gutter.  Rather, to me conventional wisdom is more the “zeitgeist” of the financial and economic community at any given time.  Zeitgeist is defined by the Merriam-Webster dictionary as:  the general intellectual, moral, and cultural climate of an era.  In this sense an “era” will generally mean a lengthy period of time, several decades or perhaps even more extended periods.  That said, what is interesting is that every cycle in the global economy seems to bring forward distinct “mini-zeitgeists” that the experts create to justify market movements or give credence to economic dogma. 

When I define conventional wisdom in this manner what I have found is that I almost always disagree with conventional wisdom.  Two very interesting recent periods were fall 2007-July 2008 and then mid-2008-early 2009 period.  In the first period, it was clear to me that decoupling was impossible because the U.S. was too large and it was clearly on the verge of collapse and, more importantly, that China and the U.S. were joined at the hip in a Keynesian economic Frankenstein that would not be easily severed.  Despite what I thought was pretty obvious at the time, conventional wisdom was that the BRICS had decoupled and all would be well.  Rather than seeing the commodity surge as the flight out of the dollar due to the distinct money policies of the U.S. Fed and everyone else, the rally was seen as evidence of decoupling.  This is mainly because conventional wisdom tends to view rising assets as a signal of prosperity.  I believe this was and is generally due to a misunderstanding of economics (we are all taught mostly rubbish in schools) and a shocking ignorance of the global financial system, how it really works and who/what is pulling the levers.    

Once the collapse occurred the mini-zeitgeist cycle changed and everyone was forced to admit the errors of the decoupling thesis.  That said, a new “conventional wisdom” emerged that was just as ridiculous as the one that came before.  For example, the dollar rally was perceived as a flight to safety when this is not exactly true.  The real reason for the dollar rally was that the world expected deflation and with the world’s reserve currency still the U.S. dollar this meant it would be time to settle positions much of which meant dollar settlement.  So while many investors did indeed end up rushing out of “risk assets” and into the dollar, the desire to be in the dollar due to the relative strength of the U.S. economy was not the cause of the rally.  This misunderstanding is also why so many investors remained in the deflationary mindset for far too long.  The only way a deflation defined as dollar strength and commodity weakness could occur on a sustainable basis would have been if things were allowed to fail and the financial system was allowed to collapse.  As soon as quantitative easing became a reality if should have been clear to all that we had just entered a new era.  Even if one wanted to make the deflation case today (and I think the case can be made), the idea that deflation would lead to commodities falling in value versus the dollar is preposterous given the stance of the Federal Reserve.  In my opinion, the deflation would be in relation to gold since it is now rightfully starting to be appreciated as the natural reserve currency of the world.  The whole idea of the inflation/deflation debate is asinine since both sides are right in their own ways.  The missing component is that the deflationists by and large haven’t figured out that the new reserve currency is gold.  This becomes very clear when one watches the recent debate between Jim Grant and David Rosenberg.  Grant argues that long-term treasuries are a horrific investment right now (I agree 100%) while Rosenberg thinks they are attractive.  I respect Mr. Rosenberg and I think he does fantastic work but it wasn’t lost on me that he had no good response when Mr. Grant posed to him the question about what if the entire monetary system itself changes.  This is the key point.  The Central Bankers and their inept political allies will be the last to figure out that the entire paper ponzi they created and nurtured is falling apart all around them.  The Central Bankers because they are loyalists to economic dogma as absurd as the notion that the sun revolves around the earth.  The politicians because for the most part they don’t understand anything and have few skills other than getting elected to office by making promised they can’t keep.  Look back at history and you will notice that it is entrenched academic ideas that die the hardest.  In the Middle Ages they would send people to prison or worse for speaking against the dogma of the day.  The establishment has and will fight back hard to maintain the status quo but the truth and economic law will win out in the end.  Ben Bernanke is a parlor magician with a printing press.  Please just go away! 

For more on this topic please read the following piece by Martin Armstrong titled “The Clash of Two Worlds:  The Battle Between Knowledge and Ignorance.”  http://www.martinarmstrong.org/files/The-Clash-of-Two-Worlds-2-7-10.pdf
Does China Need the U.S. to Collapse?
Another piece of conventional wisdom espoused these days is this idea that the Chinese “need the U.S. as much as we need them.”  I think this is utter nonsense and in fact the opposite may in fact be true.  At the least, it is worth considering.  In July 2009 I wrote a piece titled “The Emerging China Risk” just before the Shanghai market topped out in early August.  I noted that M2 and loan growth in China was dangerously high and that they risked creating major bubbles.  Very few people were talking about this at that time.  Now it is accepted that China has a property issue and the Shanghai index is still around 18% off from the August high.  When I talk to people I respect in the business about the tremendous mal-investments occurring in China as a result of the government’s throwing money at the problem in an attempt to retain power, the main pushback I get are “ well x number of people still need to move to the cities” and “cars person in China is x versus the developed world.”  This is all well and good but has anyone noticed oil is $85/b.  As I have said time and time again, resource constraints are a very serious fact of life in the short-term.  What 2007-2008 should prove to everyone is that the developed world and the emerging world cannot both grow strongly at the same time in the near-term.  Resources will not allow China to grow at 10% and the U.S. to grow at 3%.  Sorry folks, we will see oil at $200/b before you know it. 

What is happening right now is everyone is printing enormous amounts of money in this Keynesian nightmare and thus supporting inefficient aggregate demand as I mentioned in last week’s email.  This means the market’s rebellion will continue to be expressed in surging commodity prices and then surging sovereign yields.  The really scary thing for me as an American is that the longer this goes on and the more empty cities and malls the Chinese create the greater their incentive and need to collapse the United States becomes.  This is because as commodity prices continue to soar and the terms of China shifts against China (this has already started) the more they will need the improve their consumers purchasing power so that they can fill all of the vacant infrastructure.  This is when the need to allow the yuan to strengthen will be most apparent and there will be no choice.  Purchasing power for the Chinese will surge and the U.S. and Europe will be priced out.

The Last Dance
Either China’s leadership is very smart or is very stupid (I know what ours is).  I do not have a great feel for this since I have no connections there but I am pretty sure it is one or the other.  Conventional wisdom at the moment tells us two things with regard to China.  1) They need us as much as we need them.  2) They are creating monster bubbles that are dangerous and have no idea what they are doing.  With point #1 I completely disagree.  On point #2 I had tended to agree with that and in fact may have even played a small role in making that notion part of conventional wisdom with my prior writings.  More and more I am doubting #2.  The alternate scenario goes like this.  They refuse to allow the yuan to strengthen because they know that once they do that it will mark the real end of the dollar era.  So instead they are spending like crazy on infrastructure ahead of them allowing the dollar to plunge.  Then the strong yuan will be employed to purchase all the commodities they need to utilize their infrastructure and the OECD gets priced out. To those that talk about yuan devaluation, you need to be specific.  Devaluation versus what?  Versus commodities generally along with other currencies?  I can buy that argument very easily.  Versus the dollar, highly doubtful.  Why?  The latest data says China owns $877.5 billion in U.S. treasuries.  All they have to do is start dumping and the dollar is finished as the Fed will be forced to print so many dollars it will make Mugabe blush.  People need to wake up.

Last year I wrote about how the leaders in America were essentially fiddling as Rome burned.  This fiddling has become an all out dance party and many investors have been dragged onto the floor one more time due to money printing, an inherent desire to be optimistic, a plethora of propaganda and rising asset prices.  However, this is the last dance folks.  Our corporate and political leaders have destroyed us.  Chuck Prince would be proud.

Mike  

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Why I read Grandich...

Wall Street Veteran’s Model Portfolio Greatly Outperforms Stock Market

by jojo

 
Grandich.com Model Portfolio shows substantial gains over last year-and-a-half
WALL, NJ – In September 2008, veteran market commentator and newsletter writer Peter Grandich moved his worldwide economic and market forecasts to a daily blog. Taking advantage of the instantaneous dissemination of information available via the Internet, on November 29, 2008, he posted his Model Portfolio, a hypothetical portfolio of equities selections based on his blog commentaries. To put it conservatively, his results have greatly outperformed the markets.
PORTFOLIO PERFORMANCE:
There are currently 27 open positions in the Model Portfolio. Of those, 22 are up and 5 are down. The average net gain is 61 percent and the average hold period is 7 months. (Performance is based on pricing at 11 a.m. April 29, 2010.)
There are also 43 closed positions, of which 38 were up and 5 down at the time their positions were closed.  The average net gain was 48 percent and the average hold time was 5 months.
 
OPEN POSITIONS                                      CLOSED POSITIONS
• 22 positions are up                                           • 38 positions closed for a gain
• 5 positions are down                                        • 5 positions closed for a loss
• Average net gain – 61%                                    • Average net gain – 48%
• Average hold period – 7 months                • Average hold period – 5 months
View the entire model portfolio at http://www.grandich.com/model-portfolio/
The Model Portfolio began with just two stock recommendations: Northern Dynasty Minerals, which was purchased at $3.36 and is close to $10 a share today, a position which is still open; and Hudson Bay Minerals, purchased at $2.90 and closed on June 1, 2009 at $8.40 with a 190% gain.
HISTORICALLY ACCURATE:
Peter Grandich’s Model Portfolio comes more than two decades after his first forecasting success.  Labeled the “Wall Street Whiz Kid” by Good Morning America, Grandich gained national notoriety by being among the very few who not only forecasted the 1987 stock market crash just weeks before it happened, but on the very next day predicted that within two years the market would reach a new all-time high.   Proving his ‘87 forecast was no fluke, Mr. Grandich said in January 2000 that the year would go down as the year the great mega bull market of the 80s and 90s came to an end.
RECENT MARKET PREDICTIONS:
Grandich continues to demonstrate his uncanny ability to predict major turns in the markets.
 
Worst bear market of the modern era… short the US Market - In October 2007, just a few days after the stock market reached its all-time high, Peter Grandich predicted the worst bear market in the modern era and recommended to his readers the sale of all equities except those related to precious metals. Grandich even went so far as to suggest shorting the US Stock Market.
The Mother of all bear market rallies - Then, just one day before the actual bottom in March of 2009, he told his readers that he saw the mother of all bear market rallies ahead and said he was removing his bear suit. He said at the time that the DJIA could rally to as high as 11,000 through the June/July 2010 period.  As that time frame and price level moved closer, he increased his target for the DJIA several hundred points higher. 
Gold is going higher - Grandich is recognized worldwide as one of the foremost authorities on metals and mining shares and is one of the most ardent bulls.  He joined the gold bull camp when the precious metals was around $300, and despite regular calls for gold’s demise from other analysts, Grandich continues to forecast substantially higher gold prices.
US Dollar to rally - Grandich had also predicted a rally for the US Dollar, which he believes will be its last for years to come.
BACKGROUND
Though he never finished high school, Peter Grandich entered Wall Street in the mid-1980s with no formal education or training and within three years was appointed Vice President of Investment Strategy for a leading New York Stock Exchange member firm. Now an internationally-acclaimed financial expert, he has made a 25-year career out of his knack for uncanny, accurate market predictions.
His ability to analyze and forecast financial happenings has resulted in hundreds of media interviews including GMA, Neil Cavuto’s Your World on Fox News, The Kudlow Report on CNBC, Wall Street Journal, Barron’s, Financial Post, Globe and Mail, US News & World Report, New York Times, Business Week, MarketWatch, Business News Network and dozens more. He’s spoken at investment conferences around the globe and is regarded as one of the world’s foremost market strategists. 
X X
For more information or to interview Peter Grandich, email Peter@Grandich.com with INTERVIEW REQUEST in the subject line.

   

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Dan Norcini 29 April

Hourly Action In Gold From Trader Dan

by Dan Norcini

Dear CIGAs,
Click chart to enlarge today’s hourly action in Gold and the HUI in PDF format with commentary from Trader Dan Norcini

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Bill Bonner is hilarious...in a good way!

Poor Fab Tourre: Indignation Over the Goldman Scapegoat

by Bill Bonner

Poor Fabulous Fab.
The young Frenchman went to all the right schools in Paris. He must have been good at math, because he got into Stanford. And then, it was onward and upward… He landed a job at Goldman. He was making millions. His girlfriend wrote to say how she’d like to curl up in his arms.

And then, at the tender age of 31, powee! Right in the kisser.

His beautiful derivatives lost 85% of its value in just 5 months, his clients get sore and now he’s got a whole posse of senators on his tail.

The senate torturers didn’t have any idea what Fabulous Fab was up to. They wouldn’t know a derivative contract from a household fusebox. But they knew something had gone wrong. They knew the public was out for blood. And they knew the lights were on and cameras were rolling.

This was the time to impress the rubes back home. Get some Wall Street hotshot in the dock and grill him hard. And a Frenchman to boot! What luck.

I-N-D-I-G-N-A-T-I-O-N! The senators were positively shocked…shocked!…to discover that Fab…and Goldman…were out to make money. Maybe they thought the Goldman was a public utility – like Amtrak or the Post Office. Government services don’t work very well, they may have told themselves, but at least they don’t make any money!

Yes, senators can feign indignation when it is called for. But what are they so indignant about? Well, that’s another matter. Who knows and who cares! The point is, the voters want to see them nail this little Frenchman…and they’re going to make a good show of it.

The media reports suggest that everyone played along on Tuesday. The senators were indignant. The Goldman fellow denied any wrongdoing…but regretted that had sent the emails out. While the senators pretended indignation, the Frenchman’s regret was certainly sincere. So was his denial. For, in fact, it’s hard to know what he did wrong. Yes, he played his clients for suckers, but so what? That’s what Fab Finance is all about – make money…and then dump the risk onto someone too dumb to know what he’s doing. And then, when he blows up…and the whole system blows up…in come the senators to bail everyone out.

From Fab’s perspective – and ours – if you can find bankers and hedge funds dim enough to take your derivative contracts – without wondering what is in them – you are performing a public service by separating them from their money. Better for the cash to be in the hands of someone who knows what to do with it – like Fabulous Fab himself.

But let us imagine that Fabulous Fab gets his hands on some real dough. And let’s imagine that he is not in the mood to gamble on his own jackass derivatives…or to find some chump to sell them to.
What would he do with the money?

Ah…here, he would have to close his newspaper and turn off his television and think deeply about what is actually going on in the world. Forget the circus surrounding Goldman. Forget the news flow. Forget even the ‘information’ coming from the markets.

Now, it’s time to think. This is real money we’re talking about…not just casino chips.
Fab is no dope. He’d probably look at what is happening with Greek debt…and he’d be suspicious of all government bonds. After all, Greece’s finances are not so different from a half-dozen other countries – including the US of A. True, Greece’s debt problems have investors running to the relative safety of the US…which lowers borrowing costs for the US and makes it easier for the feds to finance their debt.

But the problem of too much public debt can’t be solved by low interest rates and more debt. Eventually, the US runs into the same problem the Greeks face now. Only the US problem is even bigger…and there is no bigger, richer nation to bail it out.

Fab figures all of that out… He figures US lending rates may go down in the short run, but in the long run, the feds face the same predicament – they need to borrow more and more money just to keep the show on the road. And eventually, lenders will want higher interest rates. And it won’t be too long before Moody’s and Standard and Poor’s take a hard look at America’s balance sheet too.

The news yesterday was that the rating agencies may downgrade Spain, Portugal, and Ireland even further. AndReuters reported that the Greek debt alone would cost bondholders $265 million – if Greece has to reschedule (that is, if Greece defaults on its loans).

Greece now. Then Spain. Then Ireland. Then Britain. Then America.

Bill Bonner
for The Daily Reckoning

Disgusted Yet?

When your objective is to expand the money and credit supply to re-inflate a bubble, and the only way to do that is through debt transactions, then the ridiculous becomes necessary.  It is not about right or wrong, wisdom or folly.  No, it is about numbers.  Really big numbers.  So when all rational ways of creating debt are exhausted, the irrational ways have to be utilized. 

Greek (Inverse) DIP Update: Bailout Loans To Be Junior To Existing Claims

from zero hedge by Tyler Durden

In breaking all ties with reality, the IMF has decided that not only will US taxpayer money be freely abused to rescue a profligate Greece, but that money will be effectively junior to existing claims, in essence making it some MC Escher DIP reverse DIP nightmare. Basically US taxpayers will be Last In, Last Out, and will recover any proceeds only after existing creditors get paid out. Pardon us, but this is bloody ridiculous. When will someone in the mainstream media start focusing on this??? Americans are getting the short end of the stick, and nobody in this country knows or cares about it.This is more billions that will be promptly paid and never recovered.
Euro Intelligence reports:
In a conversion with German MPs, that was already being leaked while it was taking place in the Bundestag, Dominique Strauss Kahn outlined some of the details:

• The package would be in the order of €100-120bn for three years, during which Greece would be taken off the market. (Germany ‘s economics minister said that Germany contribution would be €8.4bn each year for three year running, with a risk on the upside. The Germans had apparently thought that the €45bn would be the total size of the package)
• The package will contain no element of restructuring and rescheduling
• The loans will be junior to those of the existing bondholders.

Everything, and we mean everything, is being done for Europe's banks to not experience even one cent of Mark to Myth losses as that would set off the entire house of cards. Who is paying: European and US (and global) taxpayers. Why? Because the alterantive is the same "end of the world" bullshit we have grown to love and expect.
Even Germans, still staunchly opposed to the bailout, are voicing in on Merkel's lack of decision-making ability:

A frong-page editorial in FT Deutschland launched a severe attack on Merkel, criticising a total loss of reality by ignoring the problem, and saying that her procrastination is adding to the cost of the crisis. Martin Schulz head of the Socialists faction in the European Parliament said that the aid should have been decided a long time ago. He accused Merkel of Greek bashing, as she tried to benefit politically from the rising anti-Greek sentiment in Germany. The Italian economist Tito Boeri said that each days of this crisis would cost the German taxpayer dearly.

As for the Greek response, we are still confident a government overthrow is merely months away:

Kathimerini quotes Juergen Stark as ruling out the possibility that the ECB might end up buying Greek bonds. In a separate article, Kathimerini reports that IMF/EU/ECB sought to cut the 13th and 14th salary but labour minister Andreas Loverdos said that this is not acceptable to the Greek government. Pushing retirement age and job cuts in the public sector are other sensitive issues (see Kathimerini). The government still expects to end negotiations on Sunday and to get aid by May 19. Strikes are likely to continue until the summer, but the hard part only starts later.

h/t Paul

SLV showing contracting Bollinger bands

Nature is cyclic. Humans are part of nature, and markets are made of humans. Therefore markets are cyclic. Volatility is like a tide that ebb and flows. The Bollinger band is visual depiction of price volatility in that it is designed to contain prices within it 95% of the time. When prices are stable and not doing much, the band likewise will not change a lot. When prices change quickly, higher for instance, the band must rapidly expand to contain the price action. Lower prices then require the band to contract. The Bollinger band therefore is always in a state of expansion and contraction, constantly changing to reflect price volatility.

Extremes within a cycle always signal change. The Bollinger bands are no different. A contracting Bollinger band in SLV is indicating lower volatility. The band has narrowed to a degree that historically indicates an extreme. Therefore the band is warning that volatility is likely going to increase and lead to an expansion of the band. It does not tell us the direction of price volatility unfortunately. It could be up or down. That call must be made with the help of other indicators and studies, including fundamental analysis.

The ovals highlight periods of contracting bands. Each contraction was followed by rapid expansion. This is as natural as breathing in and out. SLV is going to be breaking out one way or another. My bet is that it follows gold higher.

6 Mo: "

via StockCharts.com
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GLD 28 April

GLD made a new intraday high, but fell back to close above the important 114.13 level.  That makes 2 closes above what has been serving as resistance.  We also had our 2nd day breach of the Bollinger band.  The upper boundary is now serving as resistance and is designed to keep prices contained within 95% of the time.  Therefore, either price can be expected to reverse or go sideways for a period of time to come back into the band or the band must rapidly expand to contain the price action.  The Bollinger band serves as a resistance and support tool, but also as a reading of volatility.  Contracting bands indicate lessening volatility of price action, while expanding bands illustrate higher price volatility. Volume was good for the 2nd day in a row lending credence to the breakout.  RSI is moderate and not yet over sold.  Stochastics are over sold with a reading greater than 70 and we should be looking for the embed (3 days above 80) as indicator of increasing upside momentum.  Stochastics while being an over bought/over sold indicator, they are also a momentum indicator and give important signals when achieving or losing an embedded state.   

3 Mo: "

via StockCharts.com
"
The 6 month chart shows the next price objective of 119.54, the previous all time high.  The only resistance between will be the upper limit of the Bollinger band.  When prior resistance is breached, it becomes support.  So, 114.13 is now the first support zone.  Further support comes at the 18 day moving average of 112.55.  Finally an area around 110 containing the 45 and 100 day MAs and the Bollinger band is providing a serious support foundation.


6 Mo: "

via StockCharts.com
"
And finally the perspective chart...

One Year: "

via StockCharts.com

"

Gold In Various Currencies

from Welcome To Jim Sinclair's MineSet by Dan Norcini

Dear Friends,

Linked below are some charts of gold priced in currencies other than the US Dollar. As you can see from the charts, gold is either making new highs or is close to previous highs. What this reveals in picture form is a loss of confidence in paper currencies.

This is gold reverting to its historic, age-old role as a safe haven for wealth preservation.

Trader Dan

Click charts to enlarge in PDF format

Dan Norcini gold update

from Welcome To Jim Sinclair's MineSet by Dan Norcini

Dear CIGAs,

Hat’s off to the gold bulls who were able to overpower the bullion bank line of selling at the $1162 level. After being initially repulsed from that line in yesterday’s New York session when the banks seemingly threw everything but the kitchen sink at the metal, even on a day in which widespread commodity selling was the norm, the longs refused to run instead digging in their heels and fighting back. Open interest indicates the fierce contest that took place as it surged over 6,600 contracts in the most active June contract. That feat enabled them to push the closing price right up to the resistance line on the technical charts that the Comex bears had been attempting to enforce. Today, when both Euro gold and British Pound priced gold went on to make brand new all time highs today at the London PM Fix ( €880.613 and £764.218 respectively), that strength was enough to give the bulls the force necessary to finally make a decisive breakthrough of the Maginot line at $1162.
There is one more test standing between the Gold bulls and a run at $1200 and that is $1172 – $1175 (today’s session high). If the longs can take price up through that and hold it there for at least another couple of hours, that should push out some more of those shorts on the fund side who have been siding with the bullion banks as well as bring in another wave of momentum based buying. With the gold shares also moving higher, both cylinders are firing in sync which means the advantage goes to the bulls.
I should note that while yesterday’s session witnessed a “risk aversion” move in the currency world, with both the Dollar and the Yen the beneficiaries of “safe haven” flows, today is seeing the Dollar higher in a continued move away from Europe but also widespread selling of the Yen. The result is that Yen priced gold has gone on to make another new high on the charts. Gold is soaring in terms of just about all of the major currencies (I will provide some updated charts this afternoon detailing this). As stated here before, it is this continued surge of gold priced in alternative foreign currencies which is making the life of the bullion banks quite uncomfortable right now and leading to sustained buying on dips in the Dollar price as well as attracting further money flows from the Managed Money side of things.
The reason for this is obvious, gold is trading as an alternative currency and a safe haven given the turmoil and gnawing fears clawing at the stomachs of investors, especially as they wait for the next shoe to drop. Yesterday it was a downgrade of both Greece and Portugal; today it is Spain. Tomorrow could it be Italy? Then what happens when the ratings guns get trained on some of the US States or municipalities? Combine this with the fact that such occurrences will lead to continued need for accommodative monetary policies (read that as low interest rates and lots of money being printed) and you can understand why managed money is actively seeking out a store of wealth and is becoming suspicious of paper debt. Would you want to be stuck holding the general obligations of any nation (or state for that matter) when there is a very good likelihood that such debt is going to be downgraded causing your wealth to evaporate overnight? If that were not bad enough, then the currency that the debt is issued in gets sold down giving you a double whammy. Gold starts looking very, very attractive; no let me rephrase that, essential rather, if you are going to attempt to preserve the fruits of your life’s labors. Translation – there is a growing loss of confidence towards paper currencies and a move towards gold.
This is where the derivatives kings have brought us all. Now that these shamans have conjured up indices in which they can place bets on whose debt is going to get whacked next, they can just about wave their magic wands, mouth some incantations and then short the hell out of the debt causing a self-fulfilling prophecy. They make billions while their target gets crushed. It should be obvious by now that these damn derivatives contrary to Alan Greenspan’s near incessant blatherings while he was Fed Chairman, are not enhancements to productivity but are rather tools of the devil that bring only destruction and misery in their path. They provide no economic benefit to anyone but the big banks who spawned these damnable monstrosities for their own pleasure.
Back to the gold shares, the HUI is attempting to confirm an upside breakout on the weekly price chart from a 5 month long triangular consolidation pattern drawn off the November 2009 high and the February 2010 low. It broke above that formation early this month but then pulled back to retest the top of the breakout line last week. Today’s session high near 455 is the key to a trending move from a technical perspective. Bulls are pushing hard to close price over this level at the end of the week and hold it there. If they can accomplish this, it bodes very well for their prospects next week and beyond and should set the index (and of course the individual stocks that comprise the index) on course for a run towards the mid January 2010 high. That is the last technical level on the weekly chart before a test of the November 2009 high becomes possible.
Click charts to enlarge today’s hourly action in Gold and the HUI in PDF format with commentary from Trader Dan Norcini

Its not a Donkey and Elephant thing!

It does not matter who occupies the White House!  This is the reality of it, we pay for the bailouts of not only our own beloved mega banks and multi-national corporations, we also bailout foreign banks and foreign countries!  Got to expand that monetary/debt bubble remember?  But hey, what the Hell do I know?  Next time you need to vote, go ahead and vote for the Republican or the Democrat and rationalize you are doing the least harm. 

It's Official- Greek Debtor In Possession Loan Now €100-125 Billion; US Contribution To Greek Bailout: At Least $7 Billion

from zero hedge by Tyler Durden

It's Official: Greek Bailout Expanded To €100-€120 billion over three years (40 billion a year) according to Strauss-Khan, which would eliminate Greek funding needs for the next 3 years via a primed DIP funded by Europe and the US. German contribution to be no less than €25 billion. IMF role will likely be at least €25 billion if not more. At about 20% US contribution to the IMF, the US taxpayers just got hit with a $7 billion bailout fee to make sure French and German banks don't have to Mark-to-Bankruptcy their Greek exposure. This is definitely not a done deal: Germany's SPD says they will not vote for the aid, which according to preliminary rumors will make all eurozone member states subordinate creditors to the new "DIP" facility. All those buying this rally are assuming that Germans will go quietly with the new proposal even though they threw up all over the old "only" €10 billion demand. Oh, and wait until Greeks realize what the "austerity" terms of the new IMF package are. We are sure the Greek airforce will just call in sick for the rest of the century at that point.

April 27th gold and silver update

Yesterday was a big day for gold, not so much for silver.  While silver many times gets its cues from gold, it also responds to an industrial influence.  Risk was generally out in a big way with the Greece crisis approaching end game.  So with de-leveraging comes the notion that global business will suffer, resulting in the commodity complex selling off.  Gold is a commodity, why was it up in a big way yesterday.  Simple question, simple answer: gold is now functioning more as money than as a commodity.  When fear enters the market money will flow to where it is treated to the least risk.  The market is speaking loud and clear, change is happening.  The dollar has always been the go to money for safety.  It seems there is a competitor for the function the dollar has provided.  Funny, gold has served that purpose for over 3000 years, yet it is perceived by the public as the upstart challenging the "King Dollar!"  Amusing.

GLD finally closed above critical resistance of 114.13.  You can bet the  bullion banks will be gunning hard today to blow the price back down.  They know quite well technicians the world over are watching and the algorithms are humming away and ready to pounce on a technical buy signal such as we saw yesterday.  Price closed essentially on the high of the day for the 2nd time in 3 days.  This time there was good volume confirming the big candlestick.  Moving averages are in the preferred bullish configuration, all below current price and in order from shortest to longest duration.

GLD - Daily Candlesticks: "

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The 6 month chart shows nothing left for price resistance, other than the Bollinger band, between yesterday's price and the all time high of 119.69.  I would not be surprised to see the bullion banks pull all stops and try to hammer price back under 114.0.  They do not want gold at all time highs as Greece and Portugal burn to the ground.

SLV has had the better chart until very recent.  It is taking a pause and still has some overhead resistance remaining at 18.70.  Volume was very good yesterday, but the price closed well off the high and low of the day, indicative of indecision.  Moving averages are all in bullish alignment under price providing support, in order from shortest to longest duration.

3 Mo: "

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The 6 month chart shows additional resistance at 18.17 and 18.50.  Then it is clear all the way up to the all time high of 19.0, with only the Bollinger band providing resistance.

6 Mo: "

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GDX, the proxy for the HUI index of unhedged miners, had a decent day but as with SLV responded to the downward pressure of the general global stock market.  This has unfortunately been the case for the miners evr since the meltdown of 2008.  The miners have correlated more with the overall stock market and consequently have underperformed both gold and its own traditional performance within a gold bull market.  This will likely change when the public catches gold fever, because people are familiar with stocks, stocks, and more stocks.  They will see this as the most logical and  convenient way to gain exposure.  I wish I knew when this will occur, but until then I will continue to favor the option play on the metal etfs in order to gain the traditional 3:1 leverage that the stocks have offered in the past.

The 3 month chart shows 49.11 remaining as resistance from the previous high.  The moving averages are almost in preferred alignment, with the 50 day MA quickly advancing to replace the 100 day MA in the order.  Then the most bullish configuration will be present, all MAs below price providing support, in order from shortest to longest duration.  Volume was good yesterday.

3 Mo: "

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The 6 month chart shows more overhead resistance at 51.16 and is the next price target if progress continues to the upside.  As can be seen here, GDX is still some distance from the all time high of 55.32 and illustrates the degree as to how much stocks are under performing.  Price has been gravitating to the Fibonacci 38.2% and 62.8% retracement lines.  The resistance of the previous high is sitting right on the 62.8% line.   

6 mo: "

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The next 2 charts show the under performance clearly.  The chart show the ration of GDX to gold, or GDX divided by the spot price of gold.  A price trending upward shows out performance of GDX, or the mining stocks, relative to gold.  A downward trending price shows under performance.  The 1 year chart shows GDX out performing gold since February, but it still remains within the larger overall downtrend from September 2009.  It is on the verge of breaking out and should be watched for confirmation.

GDX:$Gold One Yr: "

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The 3 year weekly chart is an eye opener!  The carnage was complete in the fall of 2008 and GDX has lagged gold ever since.  This has discouraged many a gold bug, including yours truly!  When faced with the absolute certainty of this chart and what it says, one has to make a choice.  Continue to do things as you have always done and insist on rationality to return to the markets, or face the issue and change tactics.  I chose to change tactics and now rely predominately on options to gain my leverage.  With that said, I will be monitoring these ratio charts to tell me when stocks will again be a viable vehicle for me to utilize.

GDX:$GOLD - Three Yr: "

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