Thursday, October 17, 2013
Still Searching for My Stomach
Apologies for little postings of late - I have been having a love/hate relationship with my computer as has been giving me grief. That and the fact that these markets are grinding me down as I try to read that which is nearly unreadable right now.
I have had my kids drag me on enough amusement park rides to know that I hate the blasted things but compared to what gold has been doing the last few days, I am beginning to have second thoughts about that. As a matter of fact, if I could make a living riding roller coasters and barrels of fun, etc. instead of having to trade these markets, I might just retire from this madness.
The kind of volatility we are seeing favors one group only, the HFT crowd, who love this unpredictable and meaningless "noise" that so many different commodity markets are currently exhibiting.
Take gold for example - most, including myself, believed that as soon as we got resolution on the borrowing limit deal here in the US, gold would sell off while equities would rally. Guess what - equities rallied and gold did too. Prior to that most of us thought gold would move higher on threats of US default while stocks would sell off. Guess what - gold sold off just like equities.
The two markets have been moving in the same direction more than they have been parting company it seems. Counterintuitive, is a word one hears bandied about when it comes to gold these days. Counterintuitive seems to sum up most of the commodity markets in general anymore. Not much makes the least bit of sense.
Gold seemed to use the government shutdown and budget deal as a reason to rally today based on comments being made by various Fed governors. In a rare display of unanimity, the governors all stated that there was not going to be any Fed bond buying slowdown ( NO TAPER) because the government shutdown had resulted in a slowing of economic activity, not to mention the fact that not even the Fed had any access to the usual government economic data.
When traders figured out this Fed speak as being brutal for the Dollar, they proceeded to beat the snot out of the greenback. That was all that gold needed for an excuse to rally. Keep in mind that this is something I am trying to repeatedly emphasize - since there are no visible inflation signs as far as the investment class is concerned, and since there does not appear to be any chance of the economy growing rapidly with an increase in the Velocity of Money, it is going to take an issue of CONFIDENCE to get gold moving higher. That is what we saw today. Traders took note of the response of the Chinese to the US fiscal mess and lack of serious leadership in Washington DC and combined that with the ultra low interest rate continuing into the indefinite future based on those various Fed governors, and ran en masse out of the US Dollar.
You can also be assured that the deal that our feckless leaders came up with ASSURES us that we will be watching another replay of the dog and pony show come late January/early February next year once again. In other words, the circus show taking place at Versaille on the Potomac hardly inspires any sane thinking individual or gives them the least bit of confidence that those buffoons heading up the political parties have the faintest clue the kind of long lasting damage that they are inflicting on the nation as a whole.
Personally the establishment elites disgust me.
Either way, once the Dollar dropped through chart support, some strong buying in gold tripped the overhead buy stops and up, up, up she went. By the way ladies and gents, this was another one of those stunning short covering events in which hedgies were leaning on the short side and got caught off guard and were forced to run. One thing that concerns me about these kinds of rallies - as a general rule they tend to be rather short lived; furious, exciting, dramatic, but not enduring. Specs have had a tendency to sell into these rallies of late so we will have to be careful and not read too much into the price action of one day but at least gold managed to recapture that "13" handle, which takes some of the excessive bearishness out of the market, at least for a day or so.
The key for gold is whether or not bulls can build on today's performance and actually take out some more overhead chart resistance levels or whether the bears will show up at these areas and meet them as willing and eager sellers. We will know soon enough, especially with the Friday curse ahead of us. If the bulls can close the market over $1300 for the week, they will have dodged a serious bullet. That does not get them out of the wood however' it just buys them some time and a bit of breathing space since the intermediate trend is still down.
If you notice the market broke down below the bottom of the recent trading range but recovered quickly and negated what looked to be a bearish wave lower. Until I see the price break out of the topside of this range however, and that means clearing $1330 for starters but particularly $1350, I cannot get too excited about the metal's future prospects, barring a further collapse lower in the US Dollar. If the Dollar cracks up, gold will take out overhead resistance and will see a further wave of short covering that will set up a run towards $1380 and then on to $1400. Right now, I am watching to see where the various sides will manifest themselves for further clues into this market which has been nearly impossible to predict of late.
I have had my kids drag me on enough amusement park rides to know that I hate the blasted things but compared to what gold has been doing the last few days, I am beginning to have second thoughts about that. As a matter of fact, if I could make a living riding roller coasters and barrels of fun, etc. instead of having to trade these markets, I might just retire from this madness.
The kind of volatility we are seeing favors one group only, the HFT crowd, who love this unpredictable and meaningless "noise" that so many different commodity markets are currently exhibiting.
Take gold for example - most, including myself, believed that as soon as we got resolution on the borrowing limit deal here in the US, gold would sell off while equities would rally. Guess what - equities rallied and gold did too. Prior to that most of us thought gold would move higher on threats of US default while stocks would sell off. Guess what - gold sold off just like equities.
The two markets have been moving in the same direction more than they have been parting company it seems. Counterintuitive, is a word one hears bandied about when it comes to gold these days. Counterintuitive seems to sum up most of the commodity markets in general anymore. Not much makes the least bit of sense.
Gold seemed to use the government shutdown and budget deal as a reason to rally today based on comments being made by various Fed governors. In a rare display of unanimity, the governors all stated that there was not going to be any Fed bond buying slowdown ( NO TAPER) because the government shutdown had resulted in a slowing of economic activity, not to mention the fact that not even the Fed had any access to the usual government economic data.
When traders figured out this Fed speak as being brutal for the Dollar, they proceeded to beat the snot out of the greenback. That was all that gold needed for an excuse to rally. Keep in mind that this is something I am trying to repeatedly emphasize - since there are no visible inflation signs as far as the investment class is concerned, and since there does not appear to be any chance of the economy growing rapidly with an increase in the Velocity of Money, it is going to take an issue of CONFIDENCE to get gold moving higher. That is what we saw today. Traders took note of the response of the Chinese to the US fiscal mess and lack of serious leadership in Washington DC and combined that with the ultra low interest rate continuing into the indefinite future based on those various Fed governors, and ran en masse out of the US Dollar.
You can also be assured that the deal that our feckless leaders came up with ASSURES us that we will be watching another replay of the dog and pony show come late January/early February next year once again. In other words, the circus show taking place at Versaille on the Potomac hardly inspires any sane thinking individual or gives them the least bit of confidence that those buffoons heading up the political parties have the faintest clue the kind of long lasting damage that they are inflicting on the nation as a whole.
Personally the establishment elites disgust me.
Either way, once the Dollar dropped through chart support, some strong buying in gold tripped the overhead buy stops and up, up, up she went. By the way ladies and gents, this was another one of those stunning short covering events in which hedgies were leaning on the short side and got caught off guard and were forced to run. One thing that concerns me about these kinds of rallies - as a general rule they tend to be rather short lived; furious, exciting, dramatic, but not enduring. Specs have had a tendency to sell into these rallies of late so we will have to be careful and not read too much into the price action of one day but at least gold managed to recapture that "13" handle, which takes some of the excessive bearishness out of the market, at least for a day or so.
The key for gold is whether or not bulls can build on today's performance and actually take out some more overhead chart resistance levels or whether the bears will show up at these areas and meet them as willing and eager sellers. We will know soon enough, especially with the Friday curse ahead of us. If the bulls can close the market over $1300 for the week, they will have dodged a serious bullet. That does not get them out of the wood however' it just buys them some time and a bit of breathing space since the intermediate trend is still down.
If you notice the market broke down below the bottom of the recent trading range but recovered quickly and negated what looked to be a bearish wave lower. Until I see the price break out of the topside of this range however, and that means clearing $1330 for starters but particularly $1350, I cannot get too excited about the metal's future prospects, barring a further collapse lower in the US Dollar. If the Dollar cracks up, gold will take out overhead resistance and will see a further wave of short covering that will set up a run towards $1380 and then on to $1400. Right now, I am watching to see where the various sides will manifest themselves for further clues into this market which has been nearly impossible to predict of late.
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