GOLDTRADER'S GROUP (NEW BLOG): Dec 21, 2009

Monday, December 21, 2009

FROM JSMINESET.COM

Hourly Action In Gold From Trader Dan Posted: Dec 21 2009 By: Dan Norcini Post Edited: December 21, 2009 at 4:42 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
There appeared to be more carry trade unwinding in today’s session with noisy chatter about the “improving” US economy engendering an interest rate hike next year. I don’t buy it but it is the current market psychology. That, in combination with the woes besetting some of the various Euro member countries, has resulted in an exodus out of the Euro and into the Dollar. Even the Yen is getting sold down today. Down went most of the commodity world once again with very few exceptions. That is the proof that the gold selling is related to the carry trade unwind.
Ominously, bonds have crashed through very strong support at the bottom of what has been a 5 month long trading range. Should they fail to recover this level before Christmas, that market could be sending a signal that long term interest rates are on the rise. There is still some chart support just above 115 with major support near 112^ 16 that would have to give way however before we could say that with certainty. I am sure that the home building industry is cheering such an occurrence on!
Strength in the equity markets has brought price up near the 1110 level on the S&P with the bulls hoping to force an upside breakout and a new leg higher. Glad to know that the equity crowd feels such warm and fuzzy feelings towards the prospects of the US economy moving forward particularly in light of the despicable manner in which the political hacks managed to buy and bribe enough Senators to corral 60 votes guaranteeing a government takeover of 1/6 of the entire US economy. Maybe Wall Street figures that will be good for business. Excuse me while I note one more nail in the coffin of the US Dollar.
The Dollar however, for now, continues moving higher and is now about 100 points away from the 40 week moving average that comes in near 79.36. I am still waiting to see if it can best that level. Foreign Central Banks are beginning to take note and getting ready to act accordingly in their divestment programs.
As long as the greenback continues to hold steady and move higher, gold will have difficulty shrugging off a “sell the rally” mentality among stale longs and eager shorts. It is going to take a violation of technical levels in the Dollar to the downside and in gold to the upside to force Dollar long liquidation and gold bear short covering. So far we are not yet seeing any of that. The problem that gold now has is that the hedge funds are on the sell side and until those algorithms of theirs flip to buy mode, the carry trade unwind is going to continue. Markets that live by the technical breakout also die by the technical breakdown and for now, momentum is with the move lower. When that downside momentum dries up, price will reverse. Until then, we just sit and observe.
A large portion of the price gains that the HUI made during the month of November have now gone up in smoke but that index is approaching oversold levels on its daily price chart. One would therefore expect that selling pressure should begin to subside here. Given the decreasing levels of liquidity, the price swings back to the upside could be just as violent in nature as the sell offs have been. Personally, the last two weeks of the trading year are a general waste of time as people are buying and selling for book-closing purposes, vacations, etc. so like I have said repeatedly, try not to get too worried about price gyrations during this time frame. They really do not mean as much as some analysts would have you believe.