Hourly Action In Gold From Trader Dan
Dear CIGAs,
Gold priced in Euro terms, or Euro Gold as I prefer to call it, notched a brand new all time high at today’s PM fix finally clearing the 900 level as it was fixed at €907.281. Yen gold also made another high at the PM Fix as did Sterling gold. This was prior to the selling barrage that swamped the commodity world in New York as the hedge funds were busily disengorging themselves of anything that was remotely tangible and rushing wildly into the safety of, (drum roll here), paper bonds. Yessiree Bob, that is what I call a nice, “let me sleep comfortably” trade. Uncle Sam is issuing these scraps of paper by the trillions and investors can’t get enough of them throwing away gold in the process. Exchanging gold for paper scraps whose yields are dropping off a cliff – excuse me while I shake my head as I marvel at this display of mental acumen by the boy wonders of the hedge fund world. One computer algorithm to rule them all.
Don’t let today’s blind selling panic shake your settled conviction concerning gold. Any setback in price is not going to last long as the causes behind the continued strength in gold are intensifying, not lessening. Investors rightly fear a contagion effect from Greece towards other weaker members of the Euro zone such as Spain and Portugal. Then there is Italy and perhaps some of the Eastern European nations bordering on the Euro zone.
This pales in comparison to what is occurring in the states here in the US but the financial press will have nothing to do with that – for now. German banks are stuck holding gobs of Greek debt but how would you feel holding gobs of California’s, or Illinois’s, or New York’s debt. What got the ball rolling downhill for Greece, even though everyone and their mother knew about it for a while, is the ratings downgrade by the rating agencies. Eventually those “way behind the curve” folks will get around to training their guns on the various US States. That is when things will get nasty.
With all this commodity related selling, copper is getting beaten with an ugly stick having lost .40 over the last month and has now surrendered all of its gains for the year. The weekly chart still shows a market in an uptrend however so this indicator has not completely rolled over as of yet. It would have to drop below $3.00 to have me concerned about a double top although price is approaching both the 40 week and 50 week moving averages. If it is going to hold, it will hold at either one of those two levels. That means copper bulls need to come up with some sort of convincing argument to justify a resumption of the uptrend sooner rather than later.
Weakness in the base metals as well as platinum and palladium helped pull silver lower today.
Crude oil, another key commodity and forward looking indicator, is not escaping the selling wave today either but at this point is still trading higher than where it began this year. It too has a weekly chart which shows a market in an uptrend. I would have to see crude oil trading below $70 to say definitively that a longer term top is in. Crude could very well work in a broader trading range with a higher bias as it is entering a seasonally strong period. It spent the better part of February and March working between 83 and 78 before moving up to its current range between 87 and 80.
The equity markets have not been very kind to would-be shorts ( I should know) but today’s cascade into the abyss has created some serious technical chart damage. The S&P has been a one way trip north for three months now and it finally appears that the “nothing but blue skies” crowd has had a dose of reality. Soaring profits for the financial stocks has led many to conclude that the banking system is back on solid ground and given rise to hopes that lending would be picking up as the economy supposedly garnered strength on the willingness to borrow once again. The problem is that the banks are making money not by lending but more so by trading. Why take on risk when you can trade virtually risk free has been their motto. The higher the long bond moves in price, the tougher it is for them to play the interest rate differential game.
The S&P is now sitting squarely on its 50 day moving average on the daily chart. A breach of this level which cannot be recovered before the closing bell or additional downside action tomorrow that cannot recapture this level, is going to turn many technical indicators that the funds use to the sell side. The onus is now on the bulls to perform and see whether or not they can avoid handing control over the market to the shorts. They have proved quite adept at snatching victory out of the jaws of defeat this entire year. One thing working in the favor of the bulls is that the longer-term oriented weekly chart still shows the S&P in an uptrend with price well above the rising 40 week and 50 week moving average although a poor close by the end of this week will tend to confirm the bearish engulfing pattern shown on this same weekly chart. How this market closes Friday of this week is going to set the tone for some time.
The long bond took to the heavens today as it surged past my initial target near the 119 ^20 level moving al the way to 120 ^01 before setting back a tad. A strong finish to the week would set the bulls up for a decent shot at 121 ^10. About those higher yields on your bank savings accounts – forget about those for now.
Based solely on the price charts as of today, one would be hard pressed to find the “V” shaped recovery chatter having any credibility.
One last comment about the HUI – the mining shares continue to be on the receiving end of the hedge fund ratio trades. They got hit with a double whammy – talk of a 40% Australian tax yesterday plus today’s severe broad equity market sell off was too much for mining share bulls to handle. We will be watching to see when buying support emerges in this sector. The shares are no longer the indicator for gold as they once were, not with the advent of the gold ETF’s which have siphoned off a considerable amount of investment money that would otherwise be finding its way into the miners. Those who designed those infernal creations, knew what they were doing.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini
Gold priced in Euro terms, or Euro Gold as I prefer to call it, notched a brand new all time high at today’s PM fix finally clearing the 900 level as it was fixed at €907.281. Yen gold also made another high at the PM Fix as did Sterling gold. This was prior to the selling barrage that swamped the commodity world in New York as the hedge funds were busily disengorging themselves of anything that was remotely tangible and rushing wildly into the safety of, (drum roll here), paper bonds. Yessiree Bob, that is what I call a nice, “let me sleep comfortably” trade. Uncle Sam is issuing these scraps of paper by the trillions and investors can’t get enough of them throwing away gold in the process. Exchanging gold for paper scraps whose yields are dropping off a cliff – excuse me while I shake my head as I marvel at this display of mental acumen by the boy wonders of the hedge fund world. One computer algorithm to rule them all.
Don’t let today’s blind selling panic shake your settled conviction concerning gold. Any setback in price is not going to last long as the causes behind the continued strength in gold are intensifying, not lessening. Investors rightly fear a contagion effect from Greece towards other weaker members of the Euro zone such as Spain and Portugal. Then there is Italy and perhaps some of the Eastern European nations bordering on the Euro zone.
This pales in comparison to what is occurring in the states here in the US but the financial press will have nothing to do with that – for now. German banks are stuck holding gobs of Greek debt but how would you feel holding gobs of California’s, or Illinois’s, or New York’s debt. What got the ball rolling downhill for Greece, even though everyone and their mother knew about it for a while, is the ratings downgrade by the rating agencies. Eventually those “way behind the curve” folks will get around to training their guns on the various US States. That is when things will get nasty.
With all this commodity related selling, copper is getting beaten with an ugly stick having lost .40 over the last month and has now surrendered all of its gains for the year. The weekly chart still shows a market in an uptrend however so this indicator has not completely rolled over as of yet. It would have to drop below $3.00 to have me concerned about a double top although price is approaching both the 40 week and 50 week moving averages. If it is going to hold, it will hold at either one of those two levels. That means copper bulls need to come up with some sort of convincing argument to justify a resumption of the uptrend sooner rather than later.
Weakness in the base metals as well as platinum and palladium helped pull silver lower today.
Crude oil, another key commodity and forward looking indicator, is not escaping the selling wave today either but at this point is still trading higher than where it began this year. It too has a weekly chart which shows a market in an uptrend. I would have to see crude oil trading below $70 to say definitively that a longer term top is in. Crude could very well work in a broader trading range with a higher bias as it is entering a seasonally strong period. It spent the better part of February and March working between 83 and 78 before moving up to its current range between 87 and 80.
The equity markets have not been very kind to would-be shorts ( I should know) but today’s cascade into the abyss has created some serious technical chart damage. The S&P has been a one way trip north for three months now and it finally appears that the “nothing but blue skies” crowd has had a dose of reality. Soaring profits for the financial stocks has led many to conclude that the banking system is back on solid ground and given rise to hopes that lending would be picking up as the economy supposedly garnered strength on the willingness to borrow once again. The problem is that the banks are making money not by lending but more so by trading. Why take on risk when you can trade virtually risk free has been their motto. The higher the long bond moves in price, the tougher it is for them to play the interest rate differential game.
The S&P is now sitting squarely on its 50 day moving average on the daily chart. A breach of this level which cannot be recovered before the closing bell or additional downside action tomorrow that cannot recapture this level, is going to turn many technical indicators that the funds use to the sell side. The onus is now on the bulls to perform and see whether or not they can avoid handing control over the market to the shorts. They have proved quite adept at snatching victory out of the jaws of defeat this entire year. One thing working in the favor of the bulls is that the longer-term oriented weekly chart still shows the S&P in an uptrend with price well above the rising 40 week and 50 week moving average although a poor close by the end of this week will tend to confirm the bearish engulfing pattern shown on this same weekly chart. How this market closes Friday of this week is going to set the tone for some time.
The long bond took to the heavens today as it surged past my initial target near the 119 ^20 level moving al the way to 120 ^01 before setting back a tad. A strong finish to the week would set the bulls up for a decent shot at 121 ^10. About those higher yields on your bank savings accounts – forget about those for now.
Based solely on the price charts as of today, one would be hard pressed to find the “V” shaped recovery chatter having any credibility.
One last comment about the HUI – the mining shares continue to be on the receiving end of the hedge fund ratio trades. They got hit with a double whammy – talk of a 40% Australian tax yesterday plus today’s severe broad equity market sell off was too much for mining share bulls to handle. We will be watching to see when buying support emerges in this sector. The shares are no longer the indicator for gold as they once were, not with the advent of the gold ETF’s which have siphoned off a considerable amount of investment money that would otherwise be finding its way into the miners. Those who designed those infernal creations, knew what they were doing.
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini
No comments:
Post a Comment