Tuesday, April 24, 2007

Sale Ends Soon

"To the surprise of the market, this morning's U.S. data was extremely ugly," said Kathy Lien, chief strategist at DailyFX. "Today's reports only reinforce the Federal Reserve's need to keep interest rates unchanged." "The problems that the U.S. economy is facing are not going away, and today's numbers provide a harsh reality check," she said.

LOL! Anybody "surprised" by today's U.S. Economic Data must have just crawled out from under a rock. The only thing remotely surprising today was the reaction of the Precious Metals to the data and the US Dollar's subsequent nose dive. Counter intuitive gets my vote for phrase of the day.

Why were the Precious Metals so upside-down today? Lets go to the headlines and look for some answers:

US gold futures end lower on options expiries, oil

NEW YORK, April 24 (Reuters) - Selling related to options expirations and a lower oil sent gold futures to a lower finish on Tuesday, and strong resistance on technical charts kept prices from breaching the $700 psychological level.

Oil Prices Fall on Profit-Taking

NEW YORK (AP) -- Oil prices fell sharply Tuesday as traders sold to lock in profits from a Monday rally.

LOL, "profit-taking". The universal code for "we have no real idea why prices dropped". But drop they did. Lower oil prices, coupled with increased volatility due to Wednesday's option expirations, and an off day in copper combined to riddle some Precious Metals traders with doubt.

The Precious Metals should have all been up today. I've just given you three reasons why they weren't. There were other headlines today that support the case for Gold and Silver:

Copper Imports Soar by 142%

China, the world's biggest consumer of copper, more than doubled imports of the metal in March as the peak demand period for the construction industry began.

Dollar Drops On Existing-home Sales, Consumer Confidence Reports

The dollar approached an all-time low against the euro Tuesday after reports showed sales of existing homes plunged at the fastest pace in 18 years last month while consumer confidence dropped more than forecast in April, fueling worries that the U.S. economy is decelerating.

...fueling worries that the U.S. economy is decelerating. ? Damn the truth hurts, but folks, the US economy IS going down the toilet. I think we're well past the "worried" stage and entering the "reality" stage.

Patience and conviction. Oil undercut the Precious Metals today. Buy or add to Precious Metals positions on the dips. You buy an extra box of Frosted Flakes when they're on sale don't you? The chart posted above (click to enlarge) is a picture of where we've been, where we are, and where we may be going soon in Silver. Today's dip was on very low volume and it closed Friday's Gap Up. This is not a picture of an overbought market. Dem Rat Bastid's have their backs against the wall. "Always Forward, Never Straight". 14.04 is proving to be quite the battleground. Penetration here could take us quickly to 14.43 ...which is the projected high of the Ascending Triangle breakout at 13.39. 15.08 would be the initial Fibonacci target should we slice thru da Vermin's fallback position at 14.43. Prudent traders should have stops to protect a portion of their profits below the 50 "Day" moving average.

The Blanchard Economic Research Note linked below sums up today's Precious Metals market in superb detail. I highly suggest reading it in it's entirety. I will quote portions of it as it is quite relevant:

The physical market in London has been inundated with sales out of ECB banks in the last 5 weeks. 76 tonnes to be exact... The gold market has been flooded with CB gold over the past 5 weeks from sales and lending and held up remarkably well, increasing nearly $50 per ounce... The truth is that CB's are simply running out of gold they can sell into the market. We think this past five weeks of drastic sales increases is akin to a 'last gasp' of selling the market will see for some time.

Silver Resistance: 13.80 / 13.88 / 13.95

Silver Support: 13.75 / 13.67 / 13.60

__________________________________All prices SPOT

Gold Resistance: 686 / 691 / 693

Gold Support: 681 / 677 / 672

1 comment:

  1. A "Federal Reserve Note" is not a U.S.A. dollar. In 1973, Public Law 93-110 defined the U.S.A. dollar as consisting of 1/42.2222 fine troy ounces of gold.