Hourly Action In Gold From Trader Dan Posted: Dec 18 2009 By: Dan Norcini Post Edited: December 18, 2009 at 3:31 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
In remarks yesterday I mentioned that we would be watching to see at what point gold would shrug off its deleveraging carry trade pressure and begin trading as a safe haven asset of its own. It appears that we might have reached that point based on what I am seeing in today’s price action.
The Dollar is higher, particularly against the Euro (pressure is still coming from the Greece story) but gold was able to ignore that and attract buying on its own merits. That is particularly impressive given the sizeable down day yesterday for the yellow metal. One day does not a trend make however so we will need to see how the market reacts to all of this come next week.
The buyers showed up around the $1100 level and put up enough pressure to force some of the weaker shorts to cover. It could well be that the physical market sees value down here and if so, the shorts are going to have their work cut out for them.
Bonds, the safe haven asset of choice yesterday, were lower today as the schizophrenic trading continues.
About the Dollar, it is still working higher on good volume so one could argue from a technical perspective that it has a ways to run to the upside yet but because this time of the year is so tricky on account of book squaring and year-end positioning, I am hesitant to be too dogmatic about its prospects. Money gets slung around in the pits this time of year in large quantities with seemingly no meaning at times. That can generate some pretty good volume but the number has to be taken with some skepticism merely because it is related to closing out of positions on both sides.
Fundamentally, there is no reason to buy the Dollar unless you really believe that the Fed is going to raise interest rates (something which I personally do not) because you are faced with the hard reality of an ever increasing supply of the same versus reduced demand ( I noticed yesterday that the New York Fed custodial accounts is worrisomely closing in on the $THREE TRILLION mark). That bodes for lower prices for the greenback as economic law tends to be axiomatic about that sort of thing. Technically it looks much better on the weekly chart with both the 10 week and 20 week moving averages turning upwards and price above both. I will have to see a weekly close above the downtrending 40 week moving average near the 79.50 level before I would become friendly towards it for the short term. Long term it is going lower, much lower.
Interesting enough, there were several commodity markets that were higher today even with the Dollar moving higher besides gold. Silver and copper were both up. Crude oil was up and even the soybean market moved higher. Cattle too were up so the carry trade unwind slowed down quite a bit in today’s session. Next week is going to be even more unpredictable as the pits thin out considerably.
I still have my eye on the lumber market and nothing I see in that tells me that anyone is expecting homebuilding to go GA-GA anytime soon. After shooting higher on index fund buying and managed money plays for what seemed like a “cheap” commodity, it has given up a large portion of those gains. Until lumber prices begin a bullish trend, the economy cannot be said to be improving. It may have bottomed out but that is a long way from saying it is going to enter a period of strong growth. It seems to me like that market is telling us that we are going to head sideways for some time. One thing is for sure – based on this market (lumber), there is not going to be any “V” shaped recovery. Looks to me more like the letter “L”, where the thing collapsed and then moved along a bottom for some time. We’ll see.
The gold shares have stabilized near the 420 level on the HUI and some of the daily technical indicators are at their respective oversold thresholds which will tend to reinforce any move higher that can punch through overhead resistance. Chart-wise that means the HUI needs to climb back above the 455 level to generate a buy signal.
I want to again reiterate what I wrote yesterday – Be careful about reading too much into market action at this time of the year. For many traders, 2009 is now a thing of the past as they head to the exits to take some time off before the New Year comes around. Frankly the thought of what awaits us in 2010 is very disturbing. What shoe will drop next is the fear that haunts me. How long can the little boy with the finger in the dike hold back the flood of consequences? I wish we had political leaders who were true statesmen, willing to sacrifice their own personal gain for the long term economic health and prosperity of our nation, but alas, those few that exist can only sound the alarm at this point and hope that enough of their fellow citizens will rally to their cause to demand the right policies for the sake of their children and grandchildren’s future.
Many of us who believe in honest money and thus are advocates of gold are contemptuously dismissed and sneered at by the elites as “gold bugs”. Contrary to the image that they have spun into existence, I do not want to see the Dollar collapse and head into decline. No nation can ever be great and prosperous with a weak currency. Find an example in history in which that has been the case and I will cede the point. The truth is however that we are faced with certain realities, the least of which is a ruling crowd who seems determined to follow the same policies and practices that have led to the inevitable decline of any nation or kingdom which has implement them. To ignore these facts or pretend as if they do not exist is not the fruit of wisdom. Wisdom goes hand in hand with prudence and the prudent man seeks out a refuge during a time of crisis. For many of us, that place of refuge is the “barbarous relic” from a bygone age – gold. When we get leaders who implement policies that are sound then we can leave our place of refuge. Until then, we wait and watch.
Friday, December 18, 2009
DAILY CHART OF CRUDE OIL
OIL IS 'STAIR STEPPING' HIGHER AND WILL CONTINUE
HIGHER AS THE DOLLAR LOSES VALUE, DESPITE
LOWER DEMAND AS THE ECONOMY COLLAPSES.
THIS IS HYPER INFLATION AT WORK
5 MINUTE MARCH 2010 DOLLAR CHART (delayed prices)
DOLLAR MOVING DOWN RATHER STEEPLY. WILL
PROBABLY COLLAPSE NEXT WEEK
DAILY CHART OF THE S&P 500
NOT SO OBVIOUS HERE, BUT STOCKS ARE TOPPING
MAKING LOWER HIGHS AND LOWER LOWS
DAILY CHART OF THE EURO
THE EURO HAS BEEN 'TALKED DOWN' BECAUSE OF
THE GREEK MESS. IT'S JUST ANOTHER PIECE OF
'PAPER JUNK', SAYS SINCLAIR, BUT IT WILL BE
BACK UP AND WILL PULL GOLD UP, OR VICE VERSA
HOURLY TBOND CHART
BONDS TAKE BACK HALF OF YESTERDAY'S RALLY.
THE 'SAFETY' OF HOLDING BONDS IS NON-EXISTENT
PAPER IS PAPER
HOURLY DOLLAR CHART
THE FLIGHT TO THE 'SAFETY' OF THE DOLLAR DUE
TO THE GREEK ECONOMIC PROBLEMS IS A FOOLISH
MOVE OUT OF THE PAN INTO THE FIRE
GOLD TESTED THE YELLOW UPTREND LINE AND HELD THEN ROSE $21, A GOOD SIGN THIS IS A BOTTOM
GOLD PULLED BACK FROM THE RALLY ONLY 50%,
THEN MOVED BACK UP 75% OF THAT DOWN LEG.
ANOTHER SIGN OF STRENGTH. GOLD WILL NOW
TRADE SIDEWAYS TO UP UNTIL THE 2:15 PM PST CLOSE
FOR THE WEEKEND.
GOLD MOVES ABOVE THE PURPLE DOWNTREND LINE AND STAYS ABOVE YESTERDAY'S CLOSE PRICE (turquoise line)
NOTHING EXCEPTIONAL IN TODAY'S GOLD TRADING
EXCEPT THAT IT IS STILL DOWN GIVING BUYERS MORE
CHANCE TO BUY THEIR GOLD AT A BARGAIN PRICE.
NEXT WEEK COULD SEE GOLD SOAR BEFORE THE END
OF THE YEAR UNLESS HEDGE FUNDS DECIDE TO TAKE
THEIR PROFITS TO FATTEN THEIR BALANCE SHEETS
AT YEAR END. A MAJOR RALLY IN GOLD IS JUST AROUND
THE CORNER
FROM MARKETWATCH JUST NOW
Conditions for gold rally could crush other assets
Gold at $3,000 an ounce would turn world to a "terrible place," says one analyst
http://www.marketwatch.com/story/conditions-for-gold-rally-could-crush-other-assets-2009-12-18
GT sez: Maybe it's time to have all your eggs in one basket, called gold!
Gold at $3,000 an ounce would turn world to a "terrible place," says one analyst
http://www.marketwatch.com/story/conditions-for-gold-rally-could-crush-other-assets-2009-12-18
GT sez: Maybe it's time to have all your eggs in one basket, called gold!
GOLD FALLS AGAINST THE LOGIC OF OTHER MARKET MOVEMENT
IT IS NOT ILLOGICAL THAT GOLD WOULD BE PUSHED
DOWN JUST BEFORE THE 'BIGGIES' MOVE IN TO ACQUIRE
THEIR GOLD AT THESE LOW PRICES JUST BEFORE THEY
LET GOLD ZOOM BACK UP TO WHERE IT WANTS TO GO
DUE TO THE INCONTROVERTIBLE FACTS OF THE ECONOMIC
SITUATION THAT IS GROWING WORSE BY THE MOMENT
STOCK AND BOND TRADING VERY VOLATILE
STOCKS PLUNGE, THEN RALLY WELL, THEN FALL AGAIN
BONDS THE SAME THING IN THE OPPOSITE
OIL, EURO, YEN NOT QUITE AS VOLATILE, BUT STILL
MOVING UP AND DOWN QUITE FAST AND UNPREDICTABLY.
SOMETHING STRANGE IS GOING ON IN THESE MARKETS TODAY
GOLD COULD BE SETTING UP FOR A HUGE SPIKE WHICH IS NOT
UNCOMMON ON FRIDAYS AHEAD OF HOLIDAY WEEKS WHEN
VOLUME GOES THIN. HOWEVER, NEXT WEEK MAY NOT BE THIN
AND COULD BE WHEN GUV'MINTS PULL THEIR DIRTIEST TRICKS YET
BONDS THE SAME THING IN THE OPPOSITE
OIL, EURO, YEN NOT QUITE AS VOLATILE, BUT STILL
MOVING UP AND DOWN QUITE FAST AND UNPREDICTABLY.
SOMETHING STRANGE IS GOING ON IN THESE MARKETS TODAY
GOLD COULD BE SETTING UP FOR A HUGE SPIKE WHICH IS NOT
UNCOMMON ON FRIDAYS AHEAD OF HOLIDAY WEEKS WHEN
VOLUME GOES THIN. HOWEVER, NEXT WEEK MAY NOT BE THIN
AND COULD BE WHEN GUV'MINTS PULL THEIR DIRTIEST TRICKS YET
NOT MUCH PROGRESS UP OR DOWN OVERNIGHT
NO REPORTS THIS MORNING
THERE MIGHT BE A SURPRISE MOVE TODAY SO
STAY ALERT!
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