Lost in all the "blah-blah" about the Fed's interest rate "decision" is some pending economic data due to be released at 8:30AM est October 31. The Core Personal Consumption Expenditure (C.P.C.E.) and the first estimate of 3rd quarter GDP. The C.P.C.E. is an average of the amount of money the consumers spend in a month. It is considered as an important indicator of inflation and is closely watched by the Fed. The consensus estimate for 3rd qtr GDP is 3.1%, down from the 2nd qtr GDP of 3.8%. Should the GDP come in significantly below 3.1%, worries about there not being a FED cut will evaporate quickly...and so will the Dollar. A benign C.P.C.E. number will allow the Fed some cover to cut rates further as "signs of inflation" will be absent. The Bank Of Japan also has an interest rate "decision" early AM on the 31st.
The Fed has obviously decided to sacrifice the Dollar to "save the economy". Another rate cut would almost seem certain as a 25 point cut is already priced into the markets. A failure to cut would almost certainly crush the stock markets, and that would fly in the face of "saving the economy". A weak GDP number will quickly be talked up to a 50 point Fed cut. That would be devastating for the Dollar, and hugely beneficial to the Precious Metals.
Gold and Silver both came off their highs today, and held suggested zones of support. Gold at 778 and Silver at 14.10. Should both open weaker Wednesday morning, thoughts should be focused on buying opportunities. 771 Gold and 13.84 Silver should be significant zones of support. Don't try to "catch the bottom". Use buy stops above the market to get swept in should the markets bounce. NOTE: 14.31 Silver -- the next move above here could very well signal "a point of no return" for Silver, and a call from Mission Control for "Trans Lunar Injection" as Silver begins it's trip to the Moon. If the markets open higher Wednesday morning, I'd hate to be short...
Point of Recognition
By: Alf Field
http://news.goldseek.com/AlfField/1193670482.php
There are still sceptics around, people pointing to sentiment indicators that suggest that gold is over-bought. Numbers such as 92% bulls are suggested as a reason why the gold market should turn around and correct. The fact is that in a real bull market, sentiment numbers can (and often do) remain extremely extended for considerable periods of time. People who rely on these over-bought/over-sold indicators may find that they miss a major opportunity or, worse still, suffer burnt fingers.
Tuesday, October 30, 2007
Stop, And Catch Your Breath
As October draws to a close, it appears this morning as if some legitimate profit taking is developing in the Precious Metals. Silver yesterday reached and surpassed our near-term projection at 14.43. Gold fell just shy of our 797 near-term projection. The potential for weakness in the metals over the next couple days is real.
Gold slipped under 785 overnight, and found resistance there trying to climb back through it. First support is at 778, with a move down to 771 not unexpected. Silver finally broke consolidation of the may 2006 top yesterday at 14.34. A retest over night has failed and a move back down to 14.00/10 would not be unexpected. A move back to the breakout at 13.84 should be looked at as a gift.
I've posted a chart of the often neglected Silver/Gold Ratio. This chart measures the strength of Silver relative to Gold. As you can see by the chart above it appears a double bottom has been established and that the ratio is now on the cusp of a breakout. Considering how far behind Silver has lagged Gold in this Fall's rally, it would not be surprising to see Silver begin to outperform Gold in percentage gains as we move towards the holidays.
Thursday, October 25, 2007
BOOM!
What we are witnessing in Precious Metals may be a "monumental moment" in this secular bull market. When opportunity knocked, did you answer the door?
Flag, Pennant (Continuation)
Flags and Pennants are short-term continuation patterns that mark a small consolidation before the previous move resumes. These patterns are usually preceded by a sharp advance or decline with heavy volume, and mark a mid-point of the move.
Targets: The length of the flagpole can be applied to the resistance break or support break of the flag/pennant to estimate the advance or decline.
To read more, and please do, click on the link above. Using the information provided, and interpreting this evenings move higher in Gold correctly, the measured move higher from here in Gold could be to 821.90. Measure the move just from the symmetrical triangle, and the move is to 797.30.
Silver broke from it's consolidation today at 13.84, and it's minimum measured move from said consolidation is 14.43. However, considering Gold's potential here, Silver would most likely move considerably beyond that. It should be noted that the Gold/Silver ratio is close to favoring Silver. I will have more on that possibility next week.
ALL shorts in Gold and Silver should be closed IMMEDIATELY. This move may not look back.
I will not have a post Monday, as I will be traveling.
Wednesday, October 24, 2007
Silver Refueled For Lift-off?
What's Gold's Next Move: Correction or $1000?
Jason Hamlin
While the massive spec long position/commercial short position is worthy of concern, it is also worthwhile to point out that these exact conditions were the precursor to the last major upleg in the gold market. Commercial shorts have the deep pockets that typically allow them to get their way, but they were forced to cover back in September of 2005, and we expect they will need to start covering in this scenario as well. The weight of the sinking dollar and magnitude of investment dollars flowing into commodities may be too much for them to overcome. The covering of these short positions could very well be the fuel that helps propel gold to new highs in the coming months.
Well said Jason, well said.
I'll let my Silver chart above do the talking this morning. Please click on chart to enlarge.
Tuesday, October 23, 2007
Molten Metal Melt Up
We have just received some unconfirmed reports that priests have been ushered onto the trading floor of the COMEX to read gold bears their last rites. Some of the priests were apparently reluctant to go in due to the searing heat caused by the roiling gold lava in the gold cauldron that has developed in the mountain of shorts which now threatens to blow up skyward and split, releasing the golden lava on the gold bears. Perhaps the Fed and the Treasury might use the current situation to refine some of their Depression Era coin melt, which is about all they have left. It's time for the commercial shorts to bend over and kiss it goodbye!
--Bob Chapman, The International Forecaster
For a little insight into how dire the shorts position in Gold stands right now read Bob Chapman's entire essay above that was posted Sunday, October 21 on GoldSeek.com.
Dem COMEX Rat Bastids may have finally met their demise...
Our little chart above attempts to put a face on the ass kicking these criminals are, and are about to, receive. In a nutshell...if nobody sells to the shorts, they have to cover at higher prices. These crooks are about to have the life squeezed out of them.
Risks to the downside in Gold and Silver are always present, but at this time look to be limited.
Silver is setting up for an explosive move to the upside and will be a tough train to catch once it leaves the station. Don't get left looking up the tracks... There "may" be one more opportunity to get cheap tickets for the trip to the Moon before the end of the month...but no assurances.
Monday, October 22, 2007
Answer The Door
Was that short covering we witnessed in Gold today? Gold bounced this morning at 745.15 at 7:45AM. How weird is that? If I was basing my decisions on the Sun, the Moon, and the Stars I'd have probably covered my Gold shorts as well. Gold took quite a beating, falling $20 from it's 765 high in Asia Sunday evening, and bouncing at 745.
Much of this reaction in Gold can be laid at the feet of those charged with goosing the Dollar overnight following the G7 meeting this weekend in Washington. I seriously doubt this little punter's rally in the Dollar will last the week.
It is amusing that today's drop in Gold and Oil prices was attributed to "profit taking" by those that write the financial headlines. We have been expecting a reaction in both Gold and Oil for several days now. The reaction has arrived at our door step, and opportunity is knocking. It remains to be seen if today's low in Gold is all the depth this reaction holds.
Silver held up remarkably well today. But when you consider Silver's "value" in context to Gold, you shouldn't expect it to get beat up as bad. I have suggested all along that Silver would be the beneficiary of any reaction/profit taking in Gold. So far that has been the case. Today Gold was down 1.40% and Silver was down a mere .22%. Again it remains to be seen if the depth of today's action will be final.
In the Daily Silver chart above, a case could be made that the consolidation we anticipated from Silver in the month of October has played out exactly as scripted. Silver has traded in a range between 13.84 and 13.25 since the beginning of the month. The chart above shows clearly this consolidation. RSI is showing support around 50. This is common in a strong uptrend. Is there a risk that Silver may still react lower? Always. But to date, Silver has held it's own through two separate $20 reactions in Gold this month. A close below 13.25 could force the downside in Silver. Conversely, a close above 13.84 will force the upside in silver. A minimum move of .59 could result from a break in either direction. 14.43 to the upside, 12.66 to the downside.
Near term action in both Gold and Silver will likely be influenced by action in the Dollar. Bullish Divergence has been clearly established in the Dollar today, but it remains to be seen if it can overcome all that stands in it's way. A hard downtrend line off the August high, and old support turned new resistance at 78. With so many financial entities lined up to take a shot at the Dollar as well, any little rally here will/should be short lived and unlikely to surpass 79 on the Dollar Index.
When Opportunity Knocks
Gold and Silver are on sale this morning...while supplies last.
The NIKKEI Index got shin kicked overnight. And though it closed off it's lows, the fallout overseas from the Dow's drubbing Friday is readily apparent. Gold has been sent to the outhouse. The Dollar is up strong despite the G7 paying no "lip service" to it in their statement over the weekend. Oil is off over a dollar on the strength in the Dollar.
This looks like a short squeeze in the Dollar...market sentiment was too bearish:
The U.S. Dollar (USD)
Daragh Maher, senior forex strategist at CalyonMon, Oct 22 2007, 10:57 GMT
Reuters - "In general you'd expect the dollar to be on the back foot on the fact that nothing was said by G7 vis-a-vis dollar weakness. And the biggest beneficiary of that you'd expect to be the euro."
Reuters - "In general you'd expect the dollar to be on the back foot on the fact that nothing was said by G7 vis-a-vis dollar weakness. And the biggest beneficiary of that you'd expect to be the euro."
Sue Trinh, currency strategist at RBC Capital MarketsMon, Oct 22 2007, 10:48 GMT
Financial Times - "The (G7) communique did not make any references to the levels of the dollar, euro or yen. This is, in effect, a green light to sell the dollar."
Financial Times - "The (G7) communique did not make any references to the levels of the dollar, euro or yen. This is, in effect, a green light to sell the dollar."
Geoffrey Yu, currency strategist at UBSMon, Oct 22 2007, 10:16 GMT
Thomson Financial News - "The G7 in effect gave a green light to further weakness in the US dollar by not referring to the currency in their communique."
Thomson Financial News - "The G7 in effect gave a green light to further weakness in the US dollar by not referring to the currency in their communique."
The short squeeze in the Dollar has terminated the short squeeze in Gold. I suspect the pile of COMEX shorts are heaving a huge sigh of relief this morning. Many will be happy to get out even, others will "go for the gold" and try to turn a bad bet into a winner. Today's sale on Gold and Silver will be brief. Take advantage of this opportunity to re-establish positions or add to others.
As I stated Friday, the sweet spot in Gold is 745. This is where I believe the Comex shorts began their effort to cap Gold. To date that effort has been a failure, and they have been forced to add more and more shorts in an effort to stop Gold's rise towards 800. 722 as you can see on the chart above is the last "significant" area of support in Gold. It is also a 38% retracement of last weeks high off the August low. I don't see Gold going much below there...if it even gets there. The hand writing is on the wall, and the shorts in Gold realize that their butts are in a sling. If they want to save 'em, they'll be covering them quickly.
Silver is following Gold down, but not as violently. Silver is still very undervalued in relation to Gold and should benefit from this sale in Gold. Silver support should surface at the 200 day moving average and be firm around 12.90
Again I suggest following both metals down with buy stops to catch the bounce on the way up. Choose your stops wisely. I got stopped in late Friday in Silver, and my buy stop was .26 above the market low of the day when I put it in. Use wide stops if you think there is more downside, and close stops if you think the bottom may be close at hand.
Friday, October 19, 2007
Dollar Destruction, Or Deception?
Is this where we are? It sure looks that way. Gold is taking on the characteristics of a short squeeze in motion as each day passes. Yet I just don't envision dem Rat Bastids on the COMEX throwing in the towel without a brawl. Silver has actually been consolidating between 13.85 and 13.10 and may only need one more step back before bashing down the wall at 13.85. Oil is ridiculously overbought. The froth in the futures there is thick. The Dollar? The Dollar actually looks closer to a near-term bottom than it does to destruction. The time window to act is shrinking...be prepared to act quickly if sale prices in the Metals develop.
Support in Gold at 755...a move back below 763 should get your attention.
Support in Silver at 13.66...a move below 13.73 should get your attention.
745 Gold and 13.47 Silver might be considered "sweet spots".
Wednesday, October 17, 2007
Speculator vs. Investor: The Battle has Begun
Iraqi Kurds call on Turks to seek 'peaceful' means against rebels
SULAIMANIYAH, Iraq: Kurdish officials warned on Wednesday that any Turkish incursion into northern Iraq would threaten the relative stability of the region and called on Ankara to seek peaceful means against violence from separatist rebels.
The Turkish parliament authorized the military to carry out a cross-border offensive against Kurdish rebels in Iraq. But an incursion was not expected immediately as Turkey came under increasing pressure from Washington and Baghdad to use restraint.
Sell the news... Oil has reached a full froth, it's cup runneth over. Speculators in Oil futures can smell their profits now,...many have tasted them already. Wednesday's crude inventories report showed a rise in supplies. I suspect a near-term top in Oil has been achieved.
The assembly in Turkey's capital of Ankara backed the motion by 507 votes to 19, Parliament Speaker Koksal Toptan told lawmakers. An Energy Department report today showed that U.S. oil, gasoline and heating-oil supplies rose last week.
``The Turkish vote has scared traders,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``The doomsday scenario is that things will spiral out of control and lead neighboring countries like Iran and Saudi Arabia to become involved. This isn't likely but it encourages people to be long oil.''
The measure passed by Turkey's parliament allows Prime Minister Recep Tayyip Erdogan to authorize one or more military assaults within a year. The U.S. has urged Turkey to stay out of northern Iraq, a relatively calm area of the country.
This Week In Petroleum - Fundamentals vs. Speculation
from the Energy Information Administration
On October 16, 2007, the near-month futures contract price for West Texas Intermediate (WTI), the U.S. benchmark for crude oil, set an all-time nominal record of $87.61 per barrel. This was the culmination of nearly nine months of an upward trend that saw WTI crude oil prices rise by $35.68 per barrel from its yearly low of $50.48 per barrel on January 18th (see chart below). Despite these gains, however, current crude oil prices still lag inflation-adjusted levels from the early 1980s. While crude oil prices often fall at this time of year following the end of the peak driving season, the combination of several recent developments has contributed to sustain the rally in WTI and other benchmark oil prices to record nominal highs despite U.S. inventories that remain just above the upper limit of the average range for this time of year. Several questions have once again arisen in face of rapidly rising oil prices, the first of which is the degree to which speculation has driven the upward trend. At least as important is the question of turning points – how much higher will oil prices rise and how far may they fall if oil markets soften, in, at least, the near-term, following recent end of year patterns.
The EIA website is a fascinating stop for you web browsers. If you have the time please visit.
It is amazing the effect "speculators" can have on the commodities markets. The Gold and Silver markets are excellent examples of this as well. The current record high of shorts in Gold futures is evidence of that. The difference between the two markets however is the developing confrontation between the speculators in Gold and the investors in Gold. It is the growing number of investors in Gold that are putting growing pressure on the speculators. You can see this by the strength the Precious Metals now show overnight these days as opposed to the neutral posture we have witnessed in the past. Big moves in the metal, until recently, had been pretty much confined to the games at the COMEX in NY. Now we are beginning to see big movements in the physical markets for these metals overseas each night. This is a signal that the "investor class" is waking up to Gold's value. And it is the investor class that will drive Gold to new all-time highs in the months ahead as the second phase of this secular Bull market in Gold gains traction. The investors in Gold are dem Rat Bastids worst enemy. They buy and hold. And dem Rat Bastids can't profit from their relentless shorts if nobody sells them their Gold when they look to cover their shorts [asses].
The Yen today closed just shy of 85.88, and actually cleared that level intra-day. The Dollar held 78 for the fifth day in a row and Oil appears that it may have topped for now. The shorts are looking to get out from under their current losses break even or at best tiny profits now. The kitchen sink is no longer attached to wall, and may come flying at the Gold Bugs any time now.
A big reaction in Gold and Silver is becoming less likely as each day passes. The shorts would love to get back to the beginning around 745, and hope to book some profits they should have taken on that quick visit to 720. In Silver, the shorts are not as desperate as those in Gold, but will benefit from any weakness that may develop there. Look for opportunities to reload your long positions in Gold should prices drop below 745. Look for opportunities in Silver below 13.46. I suggest using buy stops above the market, and ratchet them down should the market retreat in an effort to catch the bounce back up. Trying to catch the bottom in a market like this may result in not catching it at all. AND, should dem Rat Bastids concoct one more take down in the metal, you will avoid getting in and going down with the market. The bias in Precious Metals, long-term, is clearly to the upside...the goal now should be re-establishing positions at a price...not catching the bottom.
Tuesday, October 16, 2007
Keep One Eye On The Yen
The chart of the Japanese Yen above speaks for itself. It doesn't take a genius to see that the recent leg up in Gold coincides with the recent leg down in the Yen off it's August high. Therefore, the near term in Gold my hinge on the Yen's near term disposition. Ultimately, Gold is going to move higher regardless of the direction of the Yen, Dollar, or Euro, but that time has not yet arrived. Continued weakness in the stock markets should pressure those in the "Yen carry trade", and a rising Yen would result...along with a reaction in Gold. Well, in theory anyways. The ballooning short position on the COT is certain to exacerbate any move in Gold over the next couple of weeks.
Rope-A-Dope?
By: Theodore Butler
This is just my speculation, but I still lean towards the third possible outcome, in which the dealers manage to engineer a sell-off, at least below the key 50 day moving average. This is the "normal" outcome. It is pure manipulation and an outcome I don’t necessarily favor, but it is the outcome we have seen in the past.
I get the feeling that the commercials may be employing the rope-a-dope. This is the strategy employed by the legendary boxer, Muhammad Ali, http://en.wikipedia.org/wiki/Rope-a-dope, in which he would let the other boxer punch himself out and grow tired before attacking. My sense is that the dealers may have allowed the tech funds appear to have run roughshod over them, as the funds establish increased positions at ever increasing prices and ever increasing unrealized profits.
While it is true that the dealers are now sitting with about the largest unrealized paper loss in memory in the gold market, they have also been increasing the average collective price on their shorts and may not be in as bad a position as it may appear. Yes, the dealers total open loss on the 150,000 contracts added since mid-August now runs about $500 million, but that is just over $30 per ounce.
If the dealers are still in control, they can rig the price to recoup the open $30 open loss without much difficulty, and then some. If there are forces that will cause the dealers to be over run this time, the $30 per ounce open loss will blossom into a loss of much greater significance. Time will tell who has the upper hand.
Pelosi To Play Yoda In Star Wars Remake
Turkey Moves Closer to an Incursion Into Iraq
http://www.nytimes.com/2007/10/16/world/middleeast/16iraq.html?_r=1&ref=middleeast&oref=slogin
BAGHDAD, Oct. 15 — Tensions mounted along the Iraqi-Turkish border on Monday as the Turkish government sought parliamentary approval for military raids into northern Iraq. The vote in Parliament would permit Turkish armed forces to cross the border in pursuit of Kurdish rebels who launch attacks into Turkey from the Kurdish region of Iraq.
The rebels, members of the Kurdistan Workers’ Party, known as the P.K.K., have taken refuge in mountain redoubts on the Iraqi side of the border. They are separatists who want an autonomous Kurdish region in the far eastern part of Turkey.
The Turkish Parliament is expected to vote Wednesday and approve the motion, which would authorize the Turkish military to make as many entries across the Iraqi border as necessary for one year. The raids would be aimed solely at the P.K.K., said a government spokesman, Cemil Cicek, in a televised news conference.
This "news", buried in most newspapers, has been driving the price of Oil higher over the past few days, and in turn the price of Gold. Certainly the Dollars inability to benefit from seemingly positive economic data has added fuel to the fire, but speculators are all over this story. And when the speculators sense the story is no longer "news" they will book their profits.
In truth I'd be more concerned with the actions of that little Californian Troll, Nancy Pelosi, in our Congress. There are countless things wrong in America and she's busy blathering about the death of some Armenians a century ago:
Genocide vote will damage US-Turkey relations, says general
Turkey's top general has warned that military ties with the US will be irreversibly damaged if the US Congress passes a resolution that labels the first world war killings of Armenians a genocide.
Pelosi says she'll press on with Armenian 'genocide' resolution
WASHINGTON (CNN) -- House Speaker Nancy Pelosi said Sunday that she intends to move ahead with a vote on a resolution that labels the deaths of more than a million Armenians during World War I as genocide.
Turkey's top general warned Sunday that ties with the United States will be irreversibly damaged if Congress passes the resolution, The Associated Press reported.
Turkey has recalled its ambassador from Washington for consultations and warned of cuts in logistical support to the United States over the issue. The recall is only for a limited period of time, said a U.S. State Department official who talked to the ambassador.
"If this resolution [that] passed in the committee passes the House as well, our military ties with the U.S. will never be the same again," Gen. Yasar Buyukanit told the daily Milliyet newspaper, according to AP
The House Foreign Affairs Committee voted 27-21 Wednesday to approve the nonbinding measure, which declares the deportation of nearly 2 million Armenians from the Ottoman Empire between 1915 and 1923 was "systematic" and "deliberate," amounting to "genocide." The deportations led to the deaths of an estimated 1.5 million people.
Nancy Pelosi is an ignorant dumb ass and a shit-stirrer. She makes Rosie O'Donnel look like a genius. I vote that somebody should slap that stoopid bitch up.
Ahhh, that felt good to get off my chest...
Gold hit another new high overnight, and Silver has been some what weak. I maintain my conviction that a retreat is forthcoming. Keep an eye on the Yen. The newly minted carry trades appeared to be taking a hit yesterday as the Yen showed a sign of strength. A move in the Yen through 85.88 could spark some selling in Gold. A retreat in Oil prices could spark a sell-off in Gold as well. There is a lot of "speculative froth" in both Oil and Gold right now that needs to be drained from both markets. Remain poised to pounce on any buying opportunities.
http://www.nytimes.com/2007/10/16/world/middleeast/16iraq.html?_r=1&ref=middleeast&oref=slogin
BAGHDAD, Oct. 15 — Tensions mounted along the Iraqi-Turkish border on Monday as the Turkish government sought parliamentary approval for military raids into northern Iraq. The vote in Parliament would permit Turkish armed forces to cross the border in pursuit of Kurdish rebels who launch attacks into Turkey from the Kurdish region of Iraq.
The rebels, members of the Kurdistan Workers’ Party, known as the P.K.K., have taken refuge in mountain redoubts on the Iraqi side of the border. They are separatists who want an autonomous Kurdish region in the far eastern part of Turkey.
The Turkish Parliament is expected to vote Wednesday and approve the motion, which would authorize the Turkish military to make as many entries across the Iraqi border as necessary for one year. The raids would be aimed solely at the P.K.K., said a government spokesman, Cemil Cicek, in a televised news conference.
This "news", buried in most newspapers, has been driving the price of Oil higher over the past few days, and in turn the price of Gold. Certainly the Dollars inability to benefit from seemingly positive economic data has added fuel to the fire, but speculators are all over this story. And when the speculators sense the story is no longer "news" they will book their profits.
In truth I'd be more concerned with the actions of that little Californian Troll, Nancy Pelosi, in our Congress. There are countless things wrong in America and she's busy blathering about the death of some Armenians a century ago:
Genocide vote will damage US-Turkey relations, says general
Turkey's top general has warned that military ties with the US will be irreversibly damaged if the US Congress passes a resolution that labels the first world war killings of Armenians a genocide.
Pelosi says she'll press on with Armenian 'genocide' resolution
WASHINGTON (CNN) -- House Speaker Nancy Pelosi said Sunday that she intends to move ahead with a vote on a resolution that labels the deaths of more than a million Armenians during World War I as genocide.
Turkey's top general warned Sunday that ties with the United States will be irreversibly damaged if Congress passes the resolution, The Associated Press reported.
Turkey has recalled its ambassador from Washington for consultations and warned of cuts in logistical support to the United States over the issue. The recall is only for a limited period of time, said a U.S. State Department official who talked to the ambassador.
"If this resolution [that] passed in the committee passes the House as well, our military ties with the U.S. will never be the same again," Gen. Yasar Buyukanit told the daily Milliyet newspaper, according to AP
The House Foreign Affairs Committee voted 27-21 Wednesday to approve the nonbinding measure, which declares the deportation of nearly 2 million Armenians from the Ottoman Empire between 1915 and 1923 was "systematic" and "deliberate," amounting to "genocide." The deportations led to the deaths of an estimated 1.5 million people.
Nancy Pelosi is an ignorant dumb ass and a shit-stirrer. She makes Rosie O'Donnel look like a genius. I vote that somebody should slap that stoopid bitch up.
Ahhh, that felt good to get off my chest...
Gold hit another new high overnight, and Silver has been some what weak. I maintain my conviction that a retreat is forthcoming. Keep an eye on the Yen. The newly minted carry trades appeared to be taking a hit yesterday as the Yen showed a sign of strength. A move in the Yen through 85.88 could spark some selling in Gold. A retreat in Oil prices could spark a sell-off in Gold as well. There is a lot of "speculative froth" in both Oil and Gold right now that needs to be drained from both markets. Remain poised to pounce on any buying opportunities.
Monday, October 15, 2007
To The Moon, Or Bust
Well-well, well-well, well... Hmmm, that's a deep subject. Here we are this morning, it's the middle of October, and Gold is higher than we thought it would be. Or is it?
On September 20th I posted the following:
The mother of all short squeezes has begun in both Gold AND Silver. As prices rise, buyers become more anxious to buy forcing the shorts to bid up prices even higher to cover their shorts. The rising prices bring in even MORE buyers, and the Precious Metals markets become a runaway train fueled by increasing investor demand. The shorts get creamed...absolutely destroyed. Hallelujah!
Gold has reached the 735 projected move out of it's consolidation rectangle with amazing swiftness. Buyers are coming in and buying any little dip now. The shorts are being forced to cover at ever higher prices which have begun to put a floor under these prices. We may never see $600 Gold again. If you recall, in September of 2005 Gold broke the longstanding resistance at 456...and has not looked back.
Today Gold took out the May 2006 highs and set a new 27 year high for Gold. I suspect there may be another $25-30 of upside in Gold before we get a much needed consolidation. In the Big Picture this consolidation will seem brief, but a four week consolidation here may seem like forever. Be patient, Gold needs to catch it's breath before we get the go for "trans lunar injection" and a trip to the Moon. Silver will be the beneficiary of any profit taking in Gold as it remains 15% undervalued still. The more expensive Gold gets, the cheaper Silver will look to those that think they're late to the Precious Metals Party that Capt. Bernanke has so graciously picked up the tab for.
That May 2006 high in Gold was at 730.20 spot. $25-30 of upside would peg spot gold at 755-60. And that is where we are this morning. Can Gold maintain it's momentum here and continue to drag Silver higher? Well, I suppose with the Dollars continued abysmal performance both could go parabolic and never look back, but not if dem Rat Bastids have anything to say about it first.
Got Gold Report - COMEX Commercials All-Time Record Net Short Gold Futures
In the Tuesday 10/9 commitments of traders report (COT) the COMEX large commercials (LCs) collective combined net short positions (LCNS) increased 14,990 contracts or 7% from 212,031 to a new record 227,021 contracts net short Tuesday to Tuesday while gold metal turned in a net advance of $6.19 or 0.8% from $731.98 to $738.17 on the cash market.
COMEX commercial traders have never been so strongly net short gold, but they didn’t exactly back up the truck with an overly large one-week spike higher in new net short positions.
Since Tuesday gold tacked on another $11.58 for a Friday close of $749.75 on the cash market, which is $6.75 higher than the Friday before the last Got Gold Report two weeks ago.
Over the past week total COMEX gold open interest increased 19,071 to 458,936 total open contracts. Another record total open interest on a COT reporting Tuesday.
Long term October 2008 and beyond COMEX forwards added 6,463 contracts to 66,902 lots open, about 14.6% of open contracts which is still somewhat below average. So far we have not seen a telltale large spike higher in long forwards in other words.
As measured on COT report cutoff Tuesdays, in the seven reporting weeks since August 21, when gold was trading in the $650s and the COMEX commercials reported a collective net short position of 91,994 contracts, gold metal has advanced $80.39 or 12.2%. Over the same period the LCs have been willing to add a staggering 135,027 contracts to their net short positioning, an increase of 147%.
So as gold was still trading in the high $730s the LCs were betting in all-time record proportions that gold was about to pull back. Indeed there were at least two attempts at pullbacks over the past two weeks down into the $720s, but neither down impulse managed to gain any traction.
Repeating from the last Got Gold Report two weeks ago: “… the last time they (the LCs) set a record net short position, in October of 2005 with gold then trading in the $470s (not a misprint), there was a teensy pullback shortly after that down to the $450s (first week of November 2005) and the COMEX commercials managed to get the heck out of about 60,000 of those net short contracts just before gold took out the psychological $500 barrier on its 5-month, 59% romp higher to $730 in May of 2006. … So the last time the COMEX commercials were this confident of lower gold prices, they were very short term right, but they were long term very, very wrong.”
Is history trying to repeat? Were the meager dips down into the $720s all the pullback we are going to get to work with, or is there another, stronger dip yet to come? No one can say in advance, of course, but we can note one important difference between the two events so far. In the October/November 2005 LC record-net-short-small-pull-back event the LCs dumped a big portion (about 60,000 contracts worth) of their then collective net short positioning during the pullback. As of Tuesday, 10/9, the LCs not only have not dumped any of their net short positioning, they’re still adding to it. That suggests that at least they think a more intense pullback is coming.
Does that mean that we will see a much harsher pullback for sure? No, virtually anything is possible short term. The LCs could be dead wrong too, gold could even go parabolic from here, but it certainly does mean that the LCs need a pullback and will be gunning for one on any opportunity. Friday’s near high close of just under the $750 level also means that the largest of the largest gold futures trader’s net positions are currently underwater in a big way. And make no mistake about it, their net short position really is big, the biggest ever. How big?
Well, as of Tuesday 10/9 COMEX commercials had a net short interest in 100-ounce gold futures contracts covering an amazing 22,702,100 ounces of gold metal. That’s right, they were net short (betting against) over 706 tonnes, worth notionally about $16.7 billion U.S. dollars, almost as much as is held today in all global gold ETFs. As of Friday, virtually all of those net short positions were upside down so, to put it in street language, there are about 16.7 billion reasons why we might suspect that the LCs will be gunning for a more meaningful gold sell-down.
The trouble is for those bullion banks and very large commercial interests betting on the gold downside, further advances in gold can be explosive when they are breaking out to new highs, literally above all short positions and when momentum-chasing funds and so-called “hot-money” is flowing in. Interesting to contemplate, isn’t it?
A RECORD net short position in the Gold futures. And the record relates to the last record high which was set when? Sept. Oct. 2005. I know I keep looking back to 2005 to look forward today, but it never pays to "ignore" history.
The COT Report makes a fairly convincing case for caution for the Bulls here. Gold's technical picture supports that case, as does history. Seasonality however does not support the case for a "big" reversal here. Though always possible, that seems to be becoming less and less likely as the month of October meanders along. It would appear that consolidation is winning out over reaction in Gold as the month continues to unfold. A move in Gold back to recent support in the 720s may be about all we get to call a sale price before prices move substantially higher. A lot will depend on how successful the COT traders can be here in there attempt to "bring Gold down". If history is any indicator, there success will be severely limited, and may even explode in their face.
Above I have posted above two charts, "FALL 2005" and "FALL 2007". On them I attempt to show my "technical" reasoning for why I have maintained a "reaction/consolidation" bias for Gold this month of October 2007. So far, Gold this month, has reacted very similar following the break of 730.20 as it did when it broke 456.50 in 2005. The break this month is being tested as it was then, and the RSI and MACD both show negative divergence, and a bearish bias.
As I predicted back in September, Gold has now moved $25-30 above the old May 2006 high of 730.20. I guess today we are in the Twilight Zone. It's be a crap shoot to guess what happens next. But the case has been made that "one more" opportunity may yet present itself to get your tickets for the Gold Ride to the Moon at a discount.
Thursday, October 11, 2007
Relax
What a fascinating day in the Gold Market. The Dollar should have gone up on today's economic data, but it went down. And the short squeeze in Gold was on! Consolidation, consolidation, consolidation. Gold sold off hard in the aftermarket today as the stock markets began to realize there might NOT be another Fed cut this month. The Dollar caught another bid, and remains poised for a bit of a bear market rally. Fridays Retail Sales numbers and the PPI numbers for September have the potential to kick start the Dollars heart.
This market right now is dangerous for both camps. That's why I continue to sit on the sidelines and await an "opportunity" to buy when the "sale" signs pop up. 743 Gold is important. A move below there could take us back to 730. Any move back below 730 now should probably cause many Bulls to step aside, and let the bears have the market for a spell. 727 and 722 have served as strong support for Gold. The next few trading days should be very interesting indeed.
Silver is along for the ride. Support begins at 13.60. Then 13.52 and 13.43. Lose that and we go back to 13.15.
I continue to believe that a move back to the 50 day moving average for both is a possibility before we move substantially higher. But as "time" passes, the odds of that happening lessen. Economic data, and it's effect on Dollar sentiment, will play a big roll in what transpires over the next week or two.
Oil. Nobody complains about the price of Oil anymore. Is $80+ Oil and $2.75 gas now considered normal, acceptable?
This market right now is dangerous for both camps. That's why I continue to sit on the sidelines and await an "opportunity" to buy when the "sale" signs pop up. 743 Gold is important. A move below there could take us back to 730. Any move back below 730 now should probably cause many Bulls to step aside, and let the bears have the market for a spell. 727 and 722 have served as strong support for Gold. The next few trading days should be very interesting indeed.
Silver is along for the ride. Support begins at 13.60. Then 13.52 and 13.43. Lose that and we go back to 13.15.
I continue to believe that a move back to the 50 day moving average for both is a possibility before we move substantially higher. But as "time" passes, the odds of that happening lessen. Economic data, and it's effect on Dollar sentiment, will play a big roll in what transpires over the next week or two.
Oil. Nobody complains about the price of Oil anymore. Is $80+ Oil and $2.75 gas now considered normal, acceptable?
Wednesday, October 10, 2007
Waiting For The Worms
NEW YORK (AP) -- Wall Street stumbled through a lopsided session Wednesday, closing mixed as profit warnings and news from blue chip names Alcoa Inc. and Boeing Co. dragged down the Dow Jones industrial average but largely spared technology stocks.
The stock market's uneven but still relatively calm trading Wednesday followed a surge the day before that was sparked by release of the minutes from the Fed's last meeting. Wall Street initially was ebullient that the Fed didn't appear to rule out further rate cuts but, on reflection, some investors seemed to be questioning whether that response was a little too optimistic.
"People are looking backward at what the Fed was discussing to try and discern whether or not we're in a recession," said Kim Caughey, equity research analyst at Fort Pitt Capital Group. "Looking in the rearview mirror isn't going to give us that clarity because its history, so instead I'm really looking forward to what corporate earnings will show."
What's this, a black sheep among the flock? Where was this voice of reason yesterday as the boobs on Wall Street chased stocks higher with Monopoly Money? Can stocks, the Dollar and Gold all move higher simultaneously? They did in the Fall of 2005. Check your charts...
US Dollar: Are All Bets Off for an October Rate Cut?
Wednesday, 10 October 2007 21:57:04 GMT
We are continuing to see directionless movement in the US dollar which has strengthened against some currencies but fallen against others. Futures traders got it right yesterday when they drove rate cut expectations down sharply following the release of the FOMC minutes. Equity traders have finally followed suit by taking the Dow down 80 points today. It seems to be only a matter of time before currency traders take the dollar higher as well. The only reason why they are holding back is because they want to see Friday’s retail sales and non-farm payrolls report before deciding whether all bets are truly off for an October interest rate cut. Tomorrow’s report on import and export prices will be a leading indicator for whether producer prices last month were as firm as the market expects. In addition to PPI, the trade balance and jobless claims are also due for release. Inflationary pressures are expected to rise as the result of strong commodity prices and a weaker dollar. The latest comments from FOMC voter Rosengren indicate that the Fed supports a weaker dollar. Rosengren said that a weaker dollar is good for exports and for the time being, the pass through inflation from foreigners are not nearly as great as we might expect because a number of foreign importers frequently price to the US market rather than their own market. We continue to believe that the Federal Reserve does not need to lower interest rates at the end this month, especially if retail sales remain positive. The have already made a big move to stabilize the economy and so far, it seems to have worked. All we need now is to make sure consumer spending holds steady and data indicates that inflationary pressures are as strong as the Fed suggests. If that materializes, then the Fed has all the flexibility they need to leave interest rates unchanged and dollar bulls have the fundamental reasons to take the currency higher.
As I was saying, speculation yesterday that the Fed would cut rates again this month was BULLSHIT. That rate cut last month was aimed at one thing only...bailing out the Boobs on Wall Street. The spin was that it was done to rescue the floundering sub-prime borrower. LOL, the jokes on you...mortgage rates have been higher ever since.
CLEVELAND -- A year ago the U.S, mortgage industry wrote the highest number of mortgages of any month in history, 600,000.
Many of these adjustable rate mortgages offered "incentive rates" which are due for re-adjustment in October. Industry experts say many people who took out these incentive mortgages will face balloon increases in their payments of several hundred dollars a month.
Once the fallout from this "rate-reset bonanza" comes to light late this year or early next the Fed will get serious about rate cuts. And at that point, the US Dollar goes buh-bye. Don't be surprised if the Dollar, Stocks, AND Gold all rise higher through the Fall. As the first days on Winter arrive, the Dollar will go belly up, interest rates will fall, stocks will rise further, and Gold will explode to and through $1000.
But what about today? Noise... Gold and Silver are still "frothy" and both need to work that off before actually moving higher. "Seasonally", both are weak in October. I continue to believe that Gold and Silver will consolidate through the month of October. I do not believe that the low for the month has been hit yet. We won't know it has been until it is in the rear view mirror, but we must be prepared to take advantage of it when it appears in the present.
If we crunch the numbers...we get crunchy numbers. However, RSI and MACD can give us clues as to when we might "see" the October low appear. In Silver I will feel comfortable that we are near a low when its RSI is around 40, and confident that a low is in around 20. In the Fall of 2005, Silver rose with it's 50 day moving average as solid support, and bounced repeatedly off it when it's RSI was around 40. However, as you can see by the chart above, an RSI reading around 20 generally has coincided with a bottom in Silver. All lows in Silver are then confirmed when the MACD lines cross from bearish to bullish.
I think Silver will bottom in the second half of October between 12.70 and 12.90. I'm only guessing, and we really won't know until the "internal indicators" of RSI and MACD confirm the low is in, but it pays to be prepared. This low will most likely come and go quickly...and we all know, "The early bird catches the worm."
Stocks Bound Higher on Rate Cut Hope
Stocks Advance After Fed Minutes Give Rate Cut Hope; Dow Sets New Records
NEW YORK (AP) -- Wall Street advanced sharply Tuesday as investors interpreted minutes from the Federal Reserve's last meeting as indicating the central bank is ready to keep cutting interest rates to boost the economy. The Dow Jones industrial average and Standard & Poor's 500 index reached new record highs.
"This adds fuel to the fire that the Fed is going to try and reinvigorate the economy with further cuts, and that's what they are committed to," said Richard E. Cripps, chief market strategist for Stifel Nicolaus. "The likelihood of having a second cut either this month or at the December meeting seems greater than before the minutes."
http://biz.yahoo.com/ap/071009/wall_street.html?.v=45
There is really only one word to describe yesterday's misguided euphoria in the stock markets following the Fed's gospel: BULLSHIT!
There is another word too: PATHETIC. If the only thing driving stock prices is the "HOPE" that the Fed will continue to cut interest rates, then we're all doomed.
I maintain my current consolidation bias in the metals, and predict a breath taking plunge in the stock markets within three weeks.
Stocks Advance After Fed Minutes Give Rate Cut Hope; Dow Sets New Records
NEW YORK (AP) -- Wall Street advanced sharply Tuesday as investors interpreted minutes from the Federal Reserve's last meeting as indicating the central bank is ready to keep cutting interest rates to boost the economy. The Dow Jones industrial average and Standard & Poor's 500 index reached new record highs.
"This adds fuel to the fire that the Fed is going to try and reinvigorate the economy with further cuts, and that's what they are committed to," said Richard E. Cripps, chief market strategist for Stifel Nicolaus. "The likelihood of having a second cut either this month or at the December meeting seems greater than before the minutes."
http://biz.yahoo.com/ap/071009/wall_street.html?.v=45
There is really only one word to describe yesterday's misguided euphoria in the stock markets following the Fed's gospel: BULLSHIT!
There is another word too: PATHETIC. If the only thing driving stock prices is the "HOPE" that the Fed will continue to cut interest rates, then we're all doomed.
I maintain my current consolidation bias in the metals, and predict a breath taking plunge in the stock markets within three weeks.
Tuesday, October 9, 2007
Dollar Disease
Finance Ministers Discuss Dollar Woes
Finance Ministers to Talk Over Worries That Slowing U.S. Economy Will Drag Down European Union
BRUSSELS, Belgium (AP) -- European Union finance ministers open two days of talks Monday to discuss the United States' slowing economy, feeble dollar and massive current account deficit as major problems for the EU and the rest of the world.
Europe is starting to feel the bite as the U.S. dollar plummets, making French wine, Italian fashion and German cars expensive purchases for the EU's main export market in the U.S.
Last week, the employers federation BusinessEurope said that, by crossing 1.40 against the U.S. dollar, the euro exchange rate had reached a "pain threshold" for European companies. It also complained the euro was appreciating too fast against the Chinese yuan and Japanese yen.
While echoing their concern, the finance ministers of the 13 euro-zone nations will reiterate Europe is an innocent victim of others and that the euro-dollar exchange rate issue is part of a broader set of problems triggered by China's trade surplus and America's huge debts that require concerted steps to undo.
Luxembourg's prime minister, Jean-Claude Juncker, set the tone last week when he said the Europeans should not have to bear the consequences of other countries' inaction.
The Dollar's woes are discussed around the globe. Strangely they are ignored here at home where they will have the most devastating effect. We are told repeatedly that the falling Dollar will be good for business because it will make American "goods" cheaper" for the rest of the world to buy. We are never told that it will make everything over here in mighty America more expensive to buy. Rising costs of goods and services here in America are continually spun into stories of "signs of continued economic growth".
"Retail sales remain strong" is a common headline or soundbite these days. No one ever stops to consider that retail sales numbers tracks the "number of dollars spent" and not a representation of volume of goods and services actually purchased. If the cost at retail continues to rise then, of course "retail sales numbers" would reflect growth, but they don't. They really reflect rising costs...inflation. And the Dollar's woes are directly related to inflation.
The stock markets are not hitting new highs because of any "value" associated with stocks...or rising earnings for that matter. Are businesses really selling more stuff, or the same amount or even less stuff, but at higher prices and thus "profits" merely reflect higher costs and not higher volumes? Stocks are higher because of inflation...period. As inflation escalates, the prices of everything will rise; stocks, homes, Gold, Silver, cars, art, Big Macs...you name it. And you will no doubt be lead to believe by the lying and conniving US Government that "everything is great", "the numbers should positive growth". Why do you think the Fed continually pumps money into the economy? To foster the inflation rate, induce rising prices, and give the ILLUSION of economic growth, that's why. Despite their never ending claims about "keeping inflation under control", they are at the root of it. It is part of their mandate to "keep the economy strong"...and they've inflated the money supply since their inception in 1913.
The Dollar remains strong overnight as we head into a new day on the COMEX. Gold and Silver are testing recent support again this morning. Gold at 725 and Silver at 13.12. Closes below these lines should embolden the shorts to take both metals lower. Continued strength in the Dollar here, and weaker energy prices, would continue to pressure Gold and Silver Prices. The 50 day moving average of both remain our targets.
Sunday, October 7, 2007
Keep Your Guard Up
I refuse to be deceived by the recent "strength" in Gold. I contend that a great portion of this "strength" lies with nervous shorts and those "dip buyers" late to the latest Gold Rally. Gold [and Silver] are seasonally weak in October, and I don't think this October is going to be much different. Bear in mind that this October is ONLY one week old, and there are three and a half weeks left.
Internal indicators RSI and MACD clearly indicate a loss of momentum, and I suspect that dem Rat Bastids are baiting a trap for the Bulls. Whether or not they will be successful remains to be seen, but don't be surprised if the Gold Bugs get sucker punched be the Vermin of the Comex as October options expiration's arrive on the 19th. Just something to be wary of.
Gold and Silver will most likely get reacquainted with their respective 50 day moving averages before we move to new highs in both metals late this Fall. An assault by the Comex Vermin will be quick and ruthless, be prepared to jump in quickly when opportunity knocks. I expect to be fully invested in Precious metals again shortly after Halloween.
Thursday, October 4, 2007
Healthy Reaction In Gold, Or Bear Trap?
What an interesting day in Gold. The market again sold off overnight in Asia on continued Euro weakness and Dollar strength. Gold maintained that weakness into the New York open and then around 10AM suddenly and quickly reversed course and bounced higher. Why? Weekly jobless claims were ugly. August Factory Orders were weaker than expected. The BOE and ECB held their interest rates steady putting a bid back under the Euro. The price of oil reversed higher on supply concerns and the threat of bad weather in the Gulf. All of these factors I believe triggered nervous shorts into covering their trades and pushing the market higher quickly and finitely. The burst higher was over in the space of one hour with no follow through to signal renewed "real" buying interest.
In many ways, today's action in Gold may have offered those wishing to short the market in the near term a great opportunity to do so at a better entry price. I maintain my belief that Gold is in the midst of a short term reaction and consolidation that will last the better part, if not all, of October. This reaction has only just begun, and I suspect will not have run it's course until Gold touches it's 50 day moving average somewhere between 694 and 707. I would not rule out a complete 61% retracement, to 682, of this latest leg up in Gold. Though I don't consider it likely given the strong support at 694.
A negative nonfarm payrolls number Friday morning, like last months, certainly would have the potential to circumvent this present reaction in Gold and spring a Bear Trap, but I won't hold my breath expecting to see another one of those negative payrolls reports this month. A move back below 730 should strengthen the shorts case in the short term for Gold.
Wednesday, October 3, 2007
Ben And The Beanstalk
The reaction/consolidation we have discussed for Gold and Silver the past several posts has come to pass. We are presently in the midst of it...and only the beginning of it at that. Silver rests on it's uptrend line off the August low. And Gold, though not pictured above, has broken it's steepest trendline off the August low already. We should welcome this opportunity to grab some profits, and make plans to position ourselves for the next leg up.
The US Dollar chart above has played a role of it's own in this reaction in Gold. We mentioned a few days ago that the Dollar was VERY oversold, and may even become more so, but to expect a bounce soon. That bounce has arrived. Interestingly it has coincided with a near record high in the commercial shorts on the COT report this past week for Gold. A high in shorts last seen in early October 2005. And what followed the October 2005 consolidation? All at once now class: A 60% run up in the price of Gold! Very good, you have been paying attention.
The following essay by Steve Saville, The Speculative Investor, speaks to this very issue and lends some weight to my thesis that Gold in October 2007 is setting up much like it did in October 2005.
Gold Risks: The COT and the Dollar
The Commercial net-short position in COMEX gold futures was 208K contracts as at Tuesday 25th September (the cut-off date for the latest COT report), which roughly matches the all-time high reached in early October of 2005. This Commercial net-short position is, of course, balanced by an equally large speculative net-long position.
Although it reveals unbridled optimism on the part of speculators in gold futures, the current COT situation is not a reason, in and of itself, to expect anything more than a routine pullback in the gold price. That this is the case becomes evident when we look at the following chart showing the performances of gold and gold stocks (as represented by the HUI) during the second half of 2005. Note, in particular, that after the Commercial net-short position peaked in early October of 2005 the gold market began to work its way back towards its 50-day moving average. Following a test of this moving average in early November, another strong rally got underway.
The weakness of the Dollar here at this juncture will only benefit Gold, if it weakens further. A sustained bounce in the Dollar here could hold Gold back a bit longer than anticipated. But I suspect that people are beginning to buy Gold for more reasons than "just the falling dollar". As a matter of fact, through much of the Fall of 2005 Gold and the Dollar rose in tandem, and Gold did not really explode in price until the Dollar rolled over and crapped out in late December 2005. I maintain my contention that Gold is merely going to pause and consolidate for the balance of this October before it's next leg up begins in early to mid November.
Looking at the Silver chart above we find Silver sitting right on the uptrend line off of the August low. RSI has broken down already and we should expect price to soon follow. The first line of defense should the uptrend give way would be 12.89, the 38% retracement of the February 2007 high. Just below that is the 38% retracement of this present leg in Gold off the August low at 12.78. 12.47 is the 50% retracement of both "tops" and would appear as a "line in the sand" for Silver. 12.13 is the 61% retracement of last weeks 13.79 high. I don't expect to see Silver that low, but If it were to venture down that low I'd be backing up the truck. The MACD on the chart can give you some clues as to Silver's potential during this reaction. Prudent traders will not enter Silver until both the RSI and Stochastic reach their oversold lines marked in blue and subsequently cross over into a bullish posture. Look for clues to silver "bottoming" at any of these support lines by what the "internal indicators" [RSI MACD and Stochastic] are telling you at the time Silver comes in contact with one of them. A perfect scenario would find Silver consolidating between 12.47 and 12.79 for several days until the internals give the OK to throw long again for the next ride up.
The Dollar chart posted above speaks for itself, and MUST be respected. None of the Central Banks wants to see the Dollar go into a free fall. And the ECB is certainly becoming alarmed with the rapid rise of the Euro. A strong Euro threatens European exports and Eurozone economic growth. Expect the banks to collude in an effort to slow the Dollars slide. All recognize that the Dollars demise is inevitable, none wish to see it happen overnight. And frankly, as much as I'd love to see Gold and Silver blast towards the Moon and beyond, I don't think my current income would withstand the tsunami of inflation that would be inflicted on us all here in America should the Dollar plummet like a stone in the ocean.
Just this morning I was doing price changes in the produce department I manage for a local retail food chain. The price of fresh green beans rose from 1.79 a pound to 2.29 a pound. Tomorrow is senior citizen discount day. I am certain one of my customers will ask me if those beans are made of Gold. I will of course reply, "You're money would be better spent buying Gold." I wonder if Ben Bernake does his own grocery shopping?
Tuesday, October 2, 2007
Blue Light Special
Dow Jones Passes 14,000 for Record High- AP
Wall Street began the fourth quarter with a huge rally Monday, sending the Dow Jones industrial average to a record close. Stocks were buoyed by a growing belief that the worst of the credit crisis has passed.
Citigroup, UBS Warn of Loan Losses- AP
Wall Street began the fourth quarter with a huge rally Monday, sending the Dow Jones industrial average to a record close. Stocks were buoyed by a growing belief that the worst of the credit crisis has passed.
Citigroup, UBS Warn of Loan Losses- AP
NEW YORK (AP) -- Wall Street began the fourth quarter with a huge rally Monday, sending the Dow Jones industrial average to a record close. Stocks were buoyed by a growing belief that the worst of the credit crisis has passed.
While the beginning of the new quarter was an incentive for institutional investors to buy, they also seemed to be motivated by a sense that banks and other financial companies generally weathered the recent credit market upheaval. Both Citigroup and Switzerland's UBS AG issued third-quarter profit warnings, but indicated the current period might see a return to normal earnings levels.
Meanwhile, the market was optimistic that new economic data might nudge the Federal Reserve toward another interest rate cut at its Oct. 30-31 meeting. The Institute for Supply Management said the manufacturing sector grew in September at the slowest pace in six months; the trade group said its index of manufacturing activity registered at 52.0 in September, below forecasts for a reading of at least 52.5.
"People are getting more confident there is going to be an October rate cut," said John C. Forelli, portfolio manager for Independence Investment. "To some degree, it looks like Citi kitchen-sinked the quarter, and that from here going forward will be calmer. That's underpinning the financials."
BULLSHIT!
Anybody that believes the above media induced government pablum is a fool. The credit crisis has only just begun and is far from being over. Two of the biggest banks in the world report BILLION dollar plus loses in the third quarter...yeah I think I'll go out and buy me a trailer load of their stock, great idea. Manufacturing is at it's slowest pace in six months, but that sure sounds like cash registers ringing to me. October interest rate cut? LOL, that's highly unlikely. The Fed already regrets the 50 point cut they gave us two weeks ago. That cut has done NOTHING to bail out homeowners...it's actually made mortgage financing more expensive. Another rate cut this month? LOL, I need to think of a good name for this fairy tale. One thing alone is driving the stock market higher...loose money and a FLOOD of liquidity.
So everything is fine and dandy on Wall Street. Time to dump your Gold and Silver and chase stocks higher. And as we wake up this morning it appears that all those Gold Bulls are moving to the other side of the boat to aid and abet the enemy. But as we've said for the past several days, Gold is tired and needs to rest and consolidate it's gains. The size of the overnight sell off is a bit surprising, but the sell off itself should surprise no one.
Now we begin to make plans to buy back positions we sold in the past couple days or add to our stash. I would not be too anxious to do that just yet. I expect that Gold will be "consolidative" for most of this month of October. Just keep telling yourself that Gold is "on sale" this month.
Gold this morning has retraced the breakout from the May 2006 high at 730.20. It might be a stretch to think this is all of a retrace we get, but a consolidation up here between 750 and 730 could be possible and just as constructive. I have a feeling though that Gold is going to revisit the 700 handle at around 707.
Silver this morning awakens with a new haircut. Silver is at this time testing the last line of resistance associated with the high set back in February this year. The 38% retracement of that high at 13.34. I suspect once the Comex opens we may explore vistas we blew past last week. Look to the 200 day moving average for support, but with the 50 day still below it, we may not get much. Silver could one last time visit the 12s, but I expect the 12.80s to be the line in the sand for the Silver Bulls.
Monday, October 1, 2007
Fasten Your Seat Belts
If only everyday could be like last Friday in the Precious Metals markets... Did you note that Gold closed at an ALL-TIME monthly high Friday August 28? And the US Dollar at an ALL-TIME low? How sweet it is. Yet I continue to urge caution here as we enter October.
Market psychology, for what it's worth, warns that the side of the boat with the Gold Bulls and Dollar Bears is getting a little full. They must heed some caution at this time to their counter parts the Gold Bears and Dollar Bulls lest they fall out of the boat and leave dem Rat bastids at the wheel. If we could get the Bulls back into the middle of the ship, we may be able to keep control of the wheel, and steer this market higher and avoid the "big" bumps that cause the most pain.
Gold has traded in a very tight range overnight through 7AM est. in Asia, and has not followed thru, at this point, on Friday's big move higher in New York. On the hourly chart above we can see some divergence has developed between price and RSI. This type of divergence often indicates a reversal in the present market may be near. I am NOT calling a top in Gold. I am, hopefully, trying to anticipate a reaction/dip in price and a trading opportunity. AS we all know the daily charts of both Gold and Silver are seriously overbought. And though an overbought condition can persist for any length of time, it stands to reason at this time caution is the best course of action. If you look back to the left on the chart to price and RSI on the 20th and 21st of September you can see an example of price and RSI divergence that resulted in a "reaction" lower in price.
I have been urging caution for the better part of the past week. Many have probably ignored it and enjoyed the ride higher in Gold and the plunge in the Dollar. Using trailing stops to protect profits you have made in this leg up off the August lows is the most prudent way to pursue this market at this time. Too many times have we had this market move against us, and swiftly at that, where the time to decide to take profits comes and goes so quickly we end up stuck and riding the roller coaster down, and wishing we'd got off near the top of the last hill. Trailing stops allow the market to decide for you when to get out. If the market moves higher, raise your stops with the market. Technically, the market is due for a rest. Prepare for it, don't fight it. When the market comes in, you'll be taken out, and the planning for the next trade begins.
OK, so we get a reaction in Gold and Silver...where do they react to? Good question...
Close in support in Gold on the hour chart lies at 737 / 734 / 731. Looking out at the daily picture of Gold, and the upleg we're in off the August low, be reminded that gold broke out at 688. A retest of the area of the breakout 688 / 694 should not be ruled out. A 38% retracement of the present leg up in Gold would be down to 706. No moves down to these levels should be considered damaging to the Bull Market in Gold. A move down here will most likely be swift, relative to The Big Picture, and be over and in recovery by the end of October should it occur. We must always respect the enemy. They are not going to let Gold go to the Moon without a fight, and the US Government is not going to let the Dollar free-fall.
Silver, as we all know too well, can tip over and cliff dive on a whim. Though I don't anticipate a crash in Silver, a swift reaction lower can always be expected. A retest of Silver's breakout of the February 2006 high downtrend line at 13, though unnerving, should not be ruled out. Close in support for Silver on an hour chart lies at 13.30 / 13.11 / 12.94. I can not rule out a reaction below 13, but I do believe this leg up in Silver is "safe" to 12.78.
Short Term Caution Flags for Gold and Silver
By Gene Arensberg
Very short term a lot probably depends on if or when we see global government and central bank intervention in the currency markets to prop up an ailing U.S. dollar, but the longer term fundamental factors which underpin gold’s march higher (as measured in all the world’s fiat paper currencies) remain as bullish as ever and the prospects for a continuation of the rising floor for gold metal are most definitely not dependent on further weakness of the greenback (or any other brightly printed piece of paper).
For those who hold onto the mistaken notion that gold’s advance is purely a function of a weak dollar, when gold put in it’s last parabolic peak in May of 2006 the “buckster” was no where near its long-term historic support much less cutting new all time lows. If that’s not enough then one might take a look at gold as measured in euro, yen, or pounds sterling to see that the metal is consistently advancing (as defined by rising lows) in all paper. Just more in some than others.
No human can see the future and there is certainly no guarantee of any pullback for gold now, but since much of the current move is perceived by many in the market as an anti-dollar currency move, if the buck doesn’t catch a bid pretty soon this could indeed be the mother of all runaway gold breakouts. A breakout fueled in part by covering of the massive net short positioning by COMEX commercial traders and their counterparts in Asia and London. Also fueled by an increasing lack of confidence in fiat paper currencies worldwide. That’s if the dollar craters further remember.
More likely very short term though we can look for the usual harsh bull market style pullback to retest the breakout before gold powers much higher as measured in paper currencies.
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