Good insight on the European gold. Although I am convinced that it will dry up eventually, just like the central bank gold has finally dried up. It's only a matter of when.
Gold doing fairly well tongiht considering the USD has climed about 0.6 and is knocking at 87.
For monday, support is at 1225.9, 1232.7, resistance at 1237.8, 1244.5, 1249.5.
Great analysis Roadrunner. Its the same everytime.
This breakdown was called several weeks ago. Can you say POP!!
From briefing.com........
"China's Shanghai Composite Index plunged 5.11% with heavy selling in every sector. Technology (-6.82%), consumer services (-6.55%), industrials (-6.19%) and consumer goods (-6.07%) all shedding more than 6%. Petro China sold off by 3.77% as fears of a slowdown continue to spook investors in sectors tied to economic growth. Property developer China Vanke dropped 5.3% on mounting fears the property bubble in China will soon burst. Every sector in the index traded lower by more than 4%. Of the 883 stocks in the index, 865 traded lower."
Maybe this is the capitulation selling, maybe not. But China did not particpate in the global equity rebound last year. Markets always lead fundamentals. Base materials are probably about to get their rear-end handed to them.
This dip to 1210 was something I was expecting, as it is a 38.2 Fib retracement for the move from the 1150's. The timing makes a compelling case that this will mark a low and that gold can easily resume its rally from here. I expect the day to close well over 1220.
For Tues, there is a support level at 1213, and resistance at 1227.9 and 1236.8.
Penetration of that $1213 support bodes for possibly $1200 or lower. The gold stocks seem to be leading the way acting skittish with the main market. Assuming we get a lower retest in gold this week I'm not sure how it can make any significant upwards movement until bond/options expiration week ends on Thursday 5/27. The last week of April was actually the strongest combined bond/options exp. week we've had in 9 months. And while it did bump up gold on Tuesday, it sort of stewed the next 2 days before reassuming the uptrend on Friday. In that case gold was simmering to get a shot at $1250. I think right now the situation is not quite as bullish and intense with the Euro gaining some traction. The liquidity flows continuing to leave stocks and bonds isn't helping any. The chart of every major world stock exchange is necking down for the 2nd time in weeks.
But this should be a good week to find some gold stock bargains hitting support points that have held for the past few months. I see a couple of juniors that shot up in the last 2 wks only to give it all back. Some of those now look inviting.
Silver went down, the GSR got bigger, then Gold followed shrinking the GSR. Now silver has gone green for the day. Gold is following silver for the last 2 moves.
I was a little concerned that my call wouldn't come through for a while, although we're not entirely out of the woods yet... back down to ~1225 after playing with 1230 briefly. VERY IMPRESSIVE recovery considering the USD index at the moment has tacked on $.93 and is in the mid 87's. Also impressive is silver hanging on at ~19.00. I expect the USD will hit a brick wall at 88, which should boost gold back up a bit, but we'll have to see what happens.
I am super pleased with gold's performance today, and I can't see how anyone could be bearish on gold with these indicators. I don't think people are giving the fact that the USD index is currently up over a full point today and gold remained essentially unchanged (or was up, depending on when you consider the "day" to begin) enough respect.
The USD has essentially gone up for the past 24 days straight, from ~80 to ~87.5 which is a monster move, and gold is up about $10 depending on how/when you measure. That is phenomenal by any measure. I think the other mistake that can be made now is relying on traditional chart reading, market relationships, and other indicators because the gold market has clearly changed, and some of those methods and relationships will no longer be reliable.
The USD is clearly overbought and due for a correction. That doesn't mean we'll get one, but somewhere I have to expect that we'll see at least some consolidation and sideways movement which will help boost gold to the $1300's by mid-June if not sooner. Gold is on fire, and this is the last good opportunity to load up. The Euro is of course the wild card here. The USD *should* face stiff resistance at 88.0 (currently at 87.60), but if the euro keeps crashing I suppose we could blow through this level easily.
Today gold established a pretty good bottom at ~1210, testing it twice and bouncing right off. I wouldn't be surprised to see one last attempt tonight but I'm not really expecting it. I don't think gold is quite ready to go anywhere yet, so I'm looking at gold to oscillate between 1220 and 1250 for another day or two.
For Wed support is at 1197.4, 1210.8, 1220.3, and resistance is at 1233.7, 1243.2, and 1266.1.
The USD is putting lots of pressure on stocks. Hard to have the stock market do well with a strong dollar. I'm sure the fed and the whitehouse are crafting ways to offset the recent moves in the dollar to help their friends on Wall Street as well as to help general economic recovery. I think it will take a while for them to engineer whatever move they plan to make, but I think it will take place over the next few months and help gold to keep soaring.
I'm sure the fed and the whitehouse are crafting ways to offset the recent moves in the dollar to help their friends on Wall Street
How is the rising dollar hurting Wallstreet?
1. Interest rates have come way down. Cheaper money means more profit. 2. Volatility has increased. More opp for profit. 3. Price are coming down. Buy low, sell high.
The opportunites are endless.
It should be of no surprise that the dollar is higher. I've been pointing out the flaws in the Euro for years now. That said, the dollar may be getting a bit extended, but momos are still strong. Eventually I will get off the dollar train. But it wont be because the dollar going to zero, but because the easy money has been made.
<< <i>How is the rising dollar hurting Wallstreet? >>
You really don't know?
How about exports? Kind of hard to sell things when they cost more simply because of the exchange reate. Everything's easier to sell when it's cheaper. How about exchange rates? International companies repatriate earnings and take a big hit.
Spot breaking $1200 on the downside, now $1194. One year chart looks more and more like a failed spike rally on news. The economic news seems to have gotten a lot of fish to bite on gold, probably a lot of newbie fish, and now they may be trapped. 50 day moving average is intermediate support at about $1140 on spot.
Again, seasonally, May tends to be one of the best months, June tends to be one of the worst, and traders look to be jumping that data trend.
I remain mildly bullish on gold. My most recent position selling GLD July 100 puts, is taking on water, now down 100% in notional value.
<< <i>How is the rising dollar hurting Wallstreet? >>
You really don't know?
How about exports? Kind of hard to sell things when they cost more simply because of the exchange reate. Everything's easier to sell when it's cheaper. How about exchange rates? International companies repatriate earnings and take a big hit. >>
All companies who do business in foreign countries and repatriate those earnings back to the USA use currency hedges. I do not consider "Wall Street" to be JNJ, PG, KO. But rather JPM, GS, BAC.
Momos rolling over on Gold and silver. Another false rally completed.
And about exports. I thought we dont make anything in this country.
I think the other mistake that can be made now is relying on traditional chart reading, market relationships, and other indicators because the gold market has clearly changed, and some of those methods and relationships will no longer be reliable.
The mistake will be to follow charts then abandon them because your heart tells you so. Nothing has changed in the gold market. It goes up when there are buyers and down when there are sellers.
Look at the Aussie dollar today. Down 3%. Did anything change? Is Australia a less viable country than yesterday? Nope. This is just what happens when you have a currency based on rocks, whose value is determined by another currency. The Aussie dollar could be making a huge double top. Target would be 78---if it stops there.
Spot breaking $1200 on the downside, now $1194. One year chart looks more and more like a failed spike rally on news. The economic news seems to have gotten a lot of fish to bite on gold, probably a lot of newbie fish, and now they may be trapped. 50 day moving average is intermediate support at about $1140 on spot.
Low now at $1184-$1185 for the day. The 1 year chart to me looks like a cup that briefly broke out and now has come back to retest the original breakout back around $1200. Normally these cups first bounce hard off the neckline while trying to break through. In this case that was the old high at $1226. And it was not repelled whatsoever for any length of time probably because the Euro crisis was so blown up. So now we go back under the neckline and regroup at a lower resistance point and take a few whacks at the $1200-$1226 area again. We may still revisit $1150-1160 as well. With bond/expiration week looming this gold weakness should carry through at least next Wednesday.
I was surprised at the drops in the miners today. While I was expecting weakness this week, I was not expecting anything like this a whole week from expiration, esp. with just a $20 drop in gold. Most larger miners were down 5-7% during the day. I see a few noteworthy juniors that even hit the 9-11% mark. This was the baby and bathwater day.
I was surprised at the drops in the miners today. While I was expecting weakness this week, I was not expecting anything like this a whole week from expiration, esp. with just a $20 drop in gold. Most larger miners were down 5-7% during the day. I see a few noteworthy juniors that even hit the 9-11% mark. This was the baby and bathwater day.
roadrunner >>
Keep in mind that today was "witching Wednesday." With equity options expiring this Friday, many players roll their equity options to later months. I think some of today's volatile action in all markets was due to options related trades. It will be interesting to see if markets can stabilize Thursday and Friday, as would be expected if Wednesday movements were due to ripple effects from options.
That makes sense Red Tiger. I have noted that the day before stock options expiration (Thursday) that GDX and company often take a spill for a day or two. I don't think I've noted that spilling over early into Wednesday. There was a strong pullback in GDX today after the hit.
A flea on the back of the wildebeast. A mere photon in the space-time continuum. An intern in the life of Bill Clinton.
It's nothing. >>
It could be upwards of 25%. If so, then that takes it back to the 2008 peak. So after 3 years gold could be be a dud. I suppose it will still outperform real estate and equities, but it may be enough for folks to become disillusioned and wonder where the promise went. When they sell, then the real rally can begin.
<< <i>The 6-12 month decline in gold has begun. >>
A little early to be making that claim. I think we're about a month away from knowing who's right on this one.
So far the current move is still registering as consolidation. The charts need another day or two to "re-energize" and they will be ready for another move. This is consistent with RR's point about expiration week. Ackerman says it would take a selloff exceeding 1156.20 this week to turn the charts bearish, and this is reasonable.
The USD index has topped out on it's price oscillator and ChaikinMoneyFlow indicators, so I think it's ready to take a breather.
Everything is very volatile right now. Support for gold is at 1177.7, with resistance way up at 1202.9 and 1219.2.
Took some hits on my gold positions and ended up reducing my position back down to core holdings.
<< <i>All companies who do business in foreign countries and repatriate those earnings back to the USA use currency hedges. I do not consider "Wall Street" to be JNJ, PG, KO. But rather JPM, GS, BAC. >>
I'm not so sure about that. I've read many quarterly reports that claim either earnings boosts or shortfalls due to exchange rates. If they had properly hedged, it would be nothing to mention. That is, unless it's just a convenient excuse.
<< <i>And about exports. I thought we dont make anything in this country. >>
Never made that claim. Nevertheless we still export food and raw materials. There is still some manufacturing but it's now largely down to final assembly. Certainly nothing compared to what it was.
<< <i>Nothing has changed in the gold market. It goes up when there are buyers and down when there are sellers. >>
How insightful, but not accurate. Case in point: Gold went up in Venezuela overnight when Chavez recently devalued their currency overnight. The POG changed for Venezuelans without buyers or sellers.
The USD may take a breather. In fact, im about done with the trade. Not that I think it is going lower-just the easy money is gone. Its been a fun trip, although frustrating at times. I am still thinking that the dollar has not only made A bottom, but THE bottom. And what would support THE bottom, the very bond selloff that you are expecting. Money will flow to higher yields.
I reduce my GLD exposure by covering my short Jun 97 puts for a break even loss. I already sold short Jul 100 puts on GLD, so feel over exposed. Margin calls, perhaps related to other markets, may result in a short term melt down and that would have done a lot of damage with my doubled short put position. I also have May 92 puts going off the board tomorrow.
I remind myself of rule #1, live to fight another day.
We've broken below the fat finger/flash crash (close) today... gut feeling they will defend DOW 10k, if not 9.7k, if not 9.5k, if not... look out below.
I think DOW 10k will be defended whether its PPT futures purchases, or FED cash swaps... or both.
Whether it works mid-term... my guess is no... but in their minds... "we have to do something".
Yeah, and defend the EURO, the USD, bail out Freddie, Fannie, FDIC, banks, states, the entitled, etc, etc. A ridiculous policy, but that's whats going to happen.
I'm surprised that gold has held up as well as it did today. Most everything else of note is down 3-4%. Interesting............VIX/VXX the big winner.........MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>We've broken below the fat finger/flash crash (close) today... gut feeling they will defend DOW 10k, if not 9.7k, if not 9.5k, if not... look out below. I think DOW 10k will be defended whether its PPT futures purchases, or FED cash swaps... or both. Whether it works mid-term... my guess is no... but in their minds... "we have to do something". >>
I would think that 9900 is the line in the sand. This was the point where the market held and rebounded on the Flash Crash Day....we shall see soon enough............MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I am conflicted on how to interpret today's action. I'm leaning towards 'it's not a big deal' but caution is clearly in order. Practically everything is being sold... commodities, stocks, and even dollars.
It appears that there is more downside in order for stocks, with 1010 the apparent target for the SP500. If we do see 1010, it's probably going to be a GREAT short term play (to go long), as I would expect a massive rebound from that level.
So now the question is if gold will continue to decline if stocks continue to decline. Since the markets have pretty much decoupled recently, I don't think this will affect gold.
On the positive side, gold has held up VERY well given the declines in stocks and other commodities, so I still don't think this is the beginning of a bigger decline - it's still just a consolidation. Another consideration is that things are quite oversold now so what is the likelihood of yet another down day in row?
Another positive is that this move has accomplished the feat of instilling fear in gold bulls (and all other bulls), which is a good thing. Remember, gold likes take to take off with the fewest people on board as possible, and this move down has scared - or convinced - many that the rally is over. I assure you, it is not.
<< <i>We've broken below the fat finger/flash crash (close) today... gut feeling they will defend DOW 10k, if not 9.7k, if not 9.5k, if not... look out below. I think DOW 10k will be defended whether its PPT futures purchases, or FED cash swaps... or both. Whether it works mid-term... my guess is no... but in their minds... "we have to do something". >>
I would think that 9900 is the line in the sand. This was the point where the market held and rebounded on the Flash Crash Day....we shall see soon enough............MJ
9900 is as good a place as any to make a stand. The character of the subsequent bounce will say a lot about where it goes next.
I covered all my shorts today and started to nibble in the final hour through selling naked puts. The premium for 24 hours was too much to pass up. Mostly in basic material names, but also a hated financial also, and a slippery commodity. A flat open tomorrow would be nice. The 38% retrace of the upmove from Mar 09 is about 1020 which is also the peak of the Oct and Nov 08 bounces and a retest of the broken downtrend off the Oct 07 high. If this level fails, then bye bye. But I dont think it will. However it is extremely unlikely we get even close to SPX 1250 this year.
I'm not ready to toss in the towel on gold for 2010 until it's predominant bullish chart formations fail. The primary one is the Inverse H&S that was formed over 18 months (2208-2009) and would project to $1350 to $1450 gold. There is also a current cup formation that for now is in the process of tracing out the handle portion. If it doesn't succumb to <$1140-$1150 this should stay in play.
One could say that the cup formation in the first half of 2008 resulted in a washout. That's true. But that cup also failed to get back to $1033 for a proper retest...only making it to $989 in July '08. A key part of that stall was JPM & Co. doubling up on their gold/silver derivatives. While the current formation is very similar, gold did make it past the $1226 all time high before backing off. Gold could both continue to consolidate in the $1140-$1200 range and still demonstrate neg divergences in the momentum indicators....while also staying in the upper half of the current trend channel shown in Cohodks' second chart.
Note also the previous cup formation in the first half of 2009. It looks very similar to the one just traced out in 2010. That 2009 pattern eventually turned up after an 8-9% correction (we're at 6.5% on the current one). I remember that period well as most of "gold nation" was very bearish and forecasting a decline back into the $800's or $700's for one last great buying opportunity....that never came. That July-August period fooled a lot of people.
So which of the above cup formations will predict what will happen in this one? Both had negative mom. divergences. I'd say the odds favor further upside after a month or so correction similar to summer of 2009. What we didn't have back in 2008 was world-wide support in gold from a number of nations and central banks. 2 years has added a lot more believers in gold as well as shown the weaknesses in fiat, debt, and derivatives. It took a deleveraging washout in summer of 2008 to kill that cup formation. It also didn't hurt that silver derivatives were doubled up from $90 BILL to $190 BILL during July 2008, a phenominal increase in papered leveraged. Recall the JPM inherited the Bear Stearns silver shorts and then took it to another level that summer in a well planned Ag execution. Can that same type of papering be generated today with the same effect while the CFTC is still nosing around JPM's silver sandbox?
I wonder if there is such a person that is only long TJ Maxx, Visa and Mastercard..............
MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Wolf359... thanks for posting that 'heat wave', I've never seen that before. On occasion I look at this: yahoo (advances & declines) (todays NYSE up/down volume looks odd) I need to take some time to digest your post... its pretty cool.
RR... I've been looking at the 'cup formation' also... waiting to see if the handle forms. I also noticed that the right side of the rim is higher than the left... which is giving me hope for the cup & handle. As MJ said today... "we will see soon enough".
I've enjoyed this thread lately... thanks for all of the great work/observations/posts!!!
<< <i>The people at Zero Hedge are wondering if Armageddon is here after a review of today's heat maps (Red is bad, green is good):
>>
If this is Armageddon, then Armageddon aint so bad. If you had posted that same heat map when market was up 400, 2 weeks ago, it would have been a sea of green.
Covered all my short puts. CLF, AA, GS, FCX. All with monster moves off the open. Going into the weekend flat. Maybe
I just had a thought about your charts. Isn't a good regression analysis intended to show the bulk of the trend, rather than basing the whole trend on the peaks? Just askin'.
I think there's some mis-interpretation goin' on. Isn't it more important to be watching where the regression trendline (not shown) is when the RSI turns positive again, than to be basing everything simply on the highs when the RSI turns down?
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>I just had a thought about your charts. Isn't a good regression analysis intended to show the bulk of the trend, rather than basing the whole trend on the peaks? Just askin'.
I think there's some mis-interpretation goin' on. Isn't it more important to be watching where the regression trendline (not shown) is when the RSI turns positive again, than to be basing everything simply on the highs when the RSI turns down? >>
Sorry, jmski52, I have no idea what you are talking about. What do you mean by "regression line"? I am only trying to show a possible trend channel. And in order to do that I must draw a line connecting the tops and the bottoms. I am not looking at RSI when I draw these line.
Do you mean by "regression line", a line that is the median of the trend--equal trading above the line as below?
The line coming up from the low of 681 is very steep and will be broken. Whether it breaks in the next few weeks at 1125 or in a few months at 1175 remains to be seen, but it will be broken. This may lead to merely a sideways trade, but the formation that is building is called a "rising wedge" and breaks are usually very violent. Of example, as I pointed out about a month ago, there were many stocks and indices with similar patterns. And we have all seen what the stock market has done in the last 4 weeks.
IMO, gold will probably test the Feb low of 1044 or the breakout level of 1000. The actual number really isnt as important as the direction.
The 10yr chart shows the importance of the $1000 level.
Roadrunner mentions cup and handle formations and cites a few examples. Im not a big fan of that formation and while I understand what he sees, I dont see them. He also mentions an inverse head and shoulders formation. But how about this---just for giggles. What if gold is making a huge (non) inverse H&S pattern? Looking at the 10yr chart, maybe the period from 08 midway through 09 is the left shoulder and is now in the process of making the head? Yikes!!!! I dont expect this, but it is a possible outcome that only time will resolve.
The importance of the $850-$875 level in gold can be demonstrated by the "bathtub" and handle formation from 1980-2008. That's where the true long term support lies.
I was interested in knowing if Cohodk's rising wedge was apparent in the gold bull market of 1969-1980. To my surprise there really wasn't a really strong and clear cut wedge in the 1973-1980 period. Pretty much each time gold got going it went into a parabola. The 1970-1972 period shows a parallel channel or very slightly declining wedge that preceded the first major breakout towards $100+ in the 2nd major leg of gold (1971-1974). That's really the only wedge-like structure appearing over 11 years from what I can see. I guess one thing to take from this is possibly the lack of govt/bank interventions in the 1970's gold market. Gold parabola's in the past decade have been frowned upon by the PTB....lol.
The link below to chartsrus.com has numerous historical commodity, currency, stock, bond, ratio, etc charts going back hundreds of years. Interesting stuff.
Dollar seemed to have completed a multi-month, 5 waves up a few days ago and now headed for some type of correction...as the Euro heads the other way. Should be a period to give gold some room to retrace some of its $82 drop. It also seems that the liquidity and volatility ratios have been stretched to their limits and now ready to recover somewhat. COT in commercial's gold futures was pretty lack luster with no change in ratio and minimal changes in O/I or net short positions. More commercial short positions were closed out in the dollar dropping net shorts by about 7%.
An unexciting day for gold and an $11 loss, but it did allow the short term charts to fully energize for the next move (be it up or down) on Monday. Next week is roll-over week for futures contracts that aren't taking delivery.
I spent some time studying the charts and I have some interesting observations. The first and most concerning is on the weekly gold chart, where we have a bearish engulfing candle. This is not good - they tend to be a very reliable signal. The may 4th bearish engulfing candle for SP500 foretold the most recent big drop... Too bad I didn't see it.
However, I researched the final phase of other recent parabolic moves and found similar patterns that did NOT result in more bearishness to come. It seems to be an example of one of the charting "rules" that are suspended during the final phase of a parabolic move. In fact, they were usually just isolated candles - pauses in the big parabola. And it's important to note, all parabolic moves (in their final phase) experienced corrections as severe as ~11%. This one was only 6% (assuming it's over).
I also looked at daily candles for the past year, and today marks the 7th red daily candle in a row. This is the longest stretch of red candles in the past year that I could find. It was also interesting that the POG seems to move in 4 to 8 day increments, generally being up, down, or sideways for 4 days at a time. Of course, sometimes you string together several 4-day segments in the same direction. An interesting observation, but probably not useful as it's hard to tell exactly when to start or stop counting the trend. But if that's the case, the current down trend is probably about over, and I'd expect we can expect the next 4 days to be flat or up. Timing models are looking for a minor gold top around Thursday, so that would be 4 up to up-to-sideways days that we can expect if the model is correct.
I thought the weekly dollar chart was interesting. It's definitely a V-shaped recovery (so long as it doesn't evolve into a 'W'). As Cohodk says and is obvious, the easy money has been made in this play. It looks to me like the USD has gotten ahead of itself and it could very well drift back to ~84 in the next few weeks. The timing models are looking for a dollar bottom approx June 3 or 4.
Gold has decoupled from the USD but regardless, it still may have some limited influence. The USD looks very over-bought which should help gold, but gold also looks like it could have a tad more down-side to come. I see the max downside for gold to be ~1140, which will keep gold in its channel. You'll probably notice that I have drawn my channel using different data points than Cohodk. I guess this is why different people come to different conclusions, but I'd like to hear commentary on which channels are "more correct," if such judgement can be made. Perhaps they are both valid.
So in conclusion, I think the downside is pretty much over for the near term, and next week should see a decent recovery through Thursday.
Sorry, jmski52, I have no idea what you are talking about. What do you mean by "regression line"? I am only trying to show a possible trend channel. And in order to do that I must draw a line connecting the tops and the bottoms. I am not looking at RSI when I draw these line.
Do you mean by "regression line", a line that is the median of the trend--equal trading above the line as below?
Doesn't a statistical regression analysis take an assortment of data points on an x-y axis and make it into a regression line? The slope of that regression line is what I would consider meaningful, rather than simply looking at the peaks, valleys, maximums and minimums.
If you think of the price points on your chart as data points and take a weighted average of the (price points) x (volume), wouldn't you have something that looked like the moment around a moving mass? And wouldn't that represent something close a price trend?
It seems to me that the RSI and this type of price momentum indicator might work well together.
I do see what you mean about this rising wedge. It looks obvious that something has to give, so you may have a point as well. Regards, jmski.
Q: Are You Printing Money? Bernanke: Not Literally
PC, your dollar and gold comments seem to make sense. The dollar does look done for now. My bets are that the dollar has completed a 5 wave pattern since December and will now hibernate for a month or more. It has yet to see any real significant correction on those first few up legs. So it's about time to pull back to eventually the 82-83 level.
I might lengthen the gold range to as low as $1115 which would represent the IH&S neckline. While it has already pulled back once to test the neckline at $1130, it could pull back and test it once again at a slightly lower point (neckline tilts down). The primary horizontal resistance line through that entire IH&S formation is about $1120. And $1130 represents the current bottom of the 2 year up trend channel. Even if gold bounces up to the $1280-$1300 as Hoye suggests it might, it should return to retest those lower levels by July. Timers seem to feel commodities will bottom in mid-June. I still think with bond and expiration week going on next week the best gold can do would be similar to April. With 18,000 $1200 call options expiring on Tuesday it's not likely the Banks will give that money away. Gold moved up strongly on Tuesday of the last bond week then pulled back and consolidated for 2 days until moving back up on Friday. With this many $1200 calls expiring Tuesday gold will not likely breech $1200 until later in the week. By June 1st it should be running up again.
The current VIX chart concerned me about another deleveraging washout so I went back to the the July-October 2008 period to see how much in common they have. I was surprised that they rhyme quite well. The time to complete the first 2 parabolic spikes are very similar. And so are the peak values. In both cases they have a smaller set of spikes sitting out a couple months (the current ones occurred in early Feb.). In each case the first set of large spikes (30-50) occured about 2 weeks apart. In the current case they were on 5/9 and also 5/21. In comparing RSI, MACD and Slow Stoch. they are also quite similar in amplitude. The current chart may be slightly weaker in nature as there is a tad of negative divergence in the RSI and it didn't get back to 70 on this most current peak. If one lays the dollar's strength over the same time period, the dollar was still gaining strength back in 2008 as these volatility spikes started. It seems that today's dollar is currently losing momentum. The dollar's volume (UUP) peaked a couple of weeks ago at a much high value. It had relatively small volume on Friday's (5/21) peak. The dollar from July-October 2008 seemed to start it's run much later. On a comparison basis it seemed to be at about the 80 level.
Another weakness in today's VIX chart is that Friday's close was lower than the first peak of 2 weeks ago. That did not occur in 2008 on the first 2 spikes into the 30-50 range. Each one of those closed higher. GSR also shows some of the same negative divergences mentioned above. Gold and the major stock indicies seemed to be at July 2008 while VIX and the dollar are already in September. Things fell apart in October 2008. In summing it up there is no smoking gun to show complete similarities. But there are enough of them that for the next few weeks one should be on guard with the various volatility and liquidity indexes. I'll feel more comfortable if interest rates and 3 month Libor turn around. There's nothing barring the dollar from taking a brief nap and then roaring back in several weeks to poke into the 90's as VIX heads for the moon. My gut feel says volatility and the dollar have peaked for a while, but I certainly won't bet the farm on it.
The New Zealand dollar to yen ratio has provided a reasonably accurate liquidity monitor for the past couple of years. Currently it shows the ratio right at the point of falling off the cliff or maybe starting a new uptrend. One might have to lean towards the cliff dive...because after consolidating in a rectangle since October it just recently tried to leave the bottom of the box following the prescribed 5 touches as mentioned in Edwards & McGee. On the flip side though if one only looks at alternation of waves, the next one would be upwards following the completion of 5 steps. An interesting study. And like the VIX, it has many parallels to the similar point back in July 2008. But in that case a descending triangle was the final consolidation before the blowout. If the current ratio continues to fall away from the box.....look out below. The Euro to Yen ratio has typically paralleled the NZD/Yen until the Euro came under massive attack. This ratio has formed a rounded H&S top and now is under the 2008 low. I don't know if that's "good" news (the worst has come and gone) or unbelievably bad news.....ie the mom. indicators could still run deeper before fully bottoming. And just to link bonds into the discussion. The 30 yr bond has not had more than 7 straight up weeks in the past 3 yrs. w/o a rest. Even the final blowup in November 2008 was the culmination of 7 up-weeks. This past week has now made it 7 in a row as well.
Spain's CajaSur savings bank is being bailed out this weekend by it's central bank to the tune of 550 MILL Euros ($691 USD). This bank is partly run by the Catholic Church. Let's see what effect this has on the various currencies. My guess is more QE and bailouts mean more speculative bets being placed.
Nice to see the recovery come in today to the mid 1190's. There should still be some room for upside to the next resistance level at $1210 tonight or tomorrow, then probably a pause. A push over 1210 will signal with certainty that this correction is over, and we could see that later this week.
Support is at 1182.5, 1190.0, and resistance at 1199.9 and 1207.4.
Again, I'll point out that this $15-20 move came at the same time as the USD index recovered by a full point.
Edited to add: BTW, I switched to the August gold contract, which is about $2 higher than the June gold contract.
<< <i> You'll probably notice that I have drawn my channel using different data points than Cohodk. I guess this is why different people come to different conclusions, but I'd like to hear commentary on which channels are "more correct," if such judgement can be made. Perhaps they are both valid.
So in conclusion, I think the downside is pretty much over for the near term, and next week should see a decent recovery through Thursday.
>>
PC, I see nothing "wrong" with your trend channel. There was a bit of a parabolic move coming off the bottom--there are 100's if not 1000's of stock charts that look similar. I used the beginning of the move and you chose the period after the dust settled. If you could see into my chartbook, you would see that I have drawn many lines similar to yours on other charts. But in either case, the area around 1125 is critical. A close below and its almost a certainty to test 1000.
The dollar is short-term overbought, but given that all currencies are now pigs vs the dollar, one cant say the dollar is going up cuz the Euro is going down anymore, shows that this move is major and important. UBS put out this piece over the weekend. It touches on many of the thoughts I've had over the past 2 years. Namely that the USA will emerge first with strong(er) growth. Money will flow to the most stable economy. This combined with the USA being the most powerful and dominant country on the planet will only solidify this rally. I do believe THE bottom has been made.
As far as today. A bit of a bounce coming off the March lows. This trendline is steep and will be broken, probably in the next few days. Maybe on Thursday? Next stop would be the 50dma, which will not hold, then a test of the bottom of the trend channel.
Roadrunner, take a look at a chart of the YEN. Then decide on which way the NZD/YEN ratio is headed.
As far as today. A bit of a bounce coming off the March lows. This trendline is steep and will be broken, probably in the next few days. Maybe on Thursday? Next stop would be the 50dma, which will not hold, then a test of the bottom of the trend channel.
To make sure I have this right, you're refering to the S&P and the Feb low at around 104? 50 dma is a long ways off right now as well. That would be a heck of a bounce.
take a look at a chart of the YEN. Then decide on which way the NZD/YEN ratio is headed
Ok, that seems to help. Thanks.
Picked up some miners on the 1st hour smackdown today to go along with some I picked up Friday (NAK, JAG, NG, AZK, RBY, GBG, VGZ). For some reason I'm reluctant to buy into GDXJ or GDX right now as they still seem relatively "high." I missed out on getting Yamana at under $10 while I "thought" about it. Don't think there will be another chance this week. Gold held up pretty well during the day. Apparently the banksters were just satisfied to keep price under $1200 in order to wipe out those 18,000 calls. Still 5 and 7 yr bond auctions to go this week but if the best the shorts could do was to keep gold just under $1200, those 2 bond auctions probably won't matter too much.
As far as today. A bit of a bounce coming off the March lows. This trendline is steep and will be broken, probably in the next few days. Maybe on Thursday? Next stop would be the 50dma, which will not hold, then a test of the bottom of the trend channel.
To make sure I have this right, you're refering to the S&P and the Feb low at around 104? 50 dma is a long ways off right now as well. That would be a heck of a bounce.
I was referring to gold, not the SP-500. I meant to write------A bit of a bounce coming off the trendline from theMarch lows.
For todays trading, it almost seemed as though gold didnt exist. It didnt do much when the DOW was down 300 and didnt do much after it had completely recovered.
Comments
Gold doing fairly well tongiht considering the USD has climed about 0.6 and is knocking at 87.
For monday, support is at 1225.9, 1232.7, resistance at 1237.8, 1244.5, 1249.5.
This breakdown was called several weeks ago. Can you say POP!!
From briefing.com........
"China's Shanghai Composite Index plunged 5.11% with heavy selling in every sector. Technology (-6.82%), consumer services (-6.55%), industrials (-6.19%) and consumer goods (-6.07%) all shedding more than 6%. Petro China sold off by 3.77% as fears of a slowdown continue to spook investors in sectors tied to economic growth. Property developer China Vanke dropped 5.3% on mounting fears the property bubble in China will soon burst. Every sector in the index traded lower by more than 4%. Of the 883 stocks in the index, 865 traded lower."
Maybe this is the capitulation selling, maybe not. But China did not particpate in the global equity rebound last year. Markets always lead fundamentals. Base materials are probably about to get their rear-end handed to them.
Knowledge is the enemy of fear
For Tues, there is a support level at 1213, and resistance at 1227.9 and 1236.8.
But this should be a good week to find some gold stock bargains hitting support points that have held for the past few months. I see a couple of juniors that shot up in the last 2 wks only to give it all back. Some of those now look inviting.
roadrunner
Silver went down, the GSR got bigger, then Gold followed shrinking the GSR. Now silver has gone green for the day. Gold is following silver for the last 2 moves.
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The USD has essentially gone up for the past 24 days straight, from ~80 to ~87.5 which is a monster move, and gold is up about $10 depending on how/when you measure. That is phenomenal by any measure. I think the other mistake that can be made now is relying on traditional chart reading, market relationships, and other indicators because the gold market has clearly changed, and some of those methods and relationships will no longer be reliable.
The USD is clearly overbought and due for a correction. That doesn't mean we'll get one, but somewhere I have to expect that we'll see at least some consolidation and sideways movement which will help boost gold to the $1300's by mid-June if not sooner. Gold is on fire, and this is the last good opportunity to load up. The Euro is of course the wild card here. The USD *should* face stiff resistance at 88.0 (currently at 87.60), but if the euro keeps crashing I suppose we could blow through this level easily.
Today gold established a pretty good bottom at ~1210, testing it twice and bouncing right off. I wouldn't be surprised to see one last attempt tonight but I'm not really expecting it. I don't think gold is quite ready to go anywhere yet, so I'm looking at gold to oscillate between 1220 and 1250 for another day or two.
For Wed support is at 1197.4, 1210.8, 1220.3, and resistance is at 1233.7, 1243.2, and 1266.1.
The USD is putting lots of pressure on stocks. Hard to have the stock market do well with a strong dollar. I'm sure the fed and the whitehouse are crafting ways to offset the recent moves in the dollar to help their friends on Wall Street as well as to help general economic recovery. I think it will take a while for them to engineer whatever move they plan to make, but I think it will take place over the next few months and help gold to keep soaring.
How is the rising dollar hurting Wallstreet?
1. Interest rates have come way down. Cheaper money means more profit.
2. Volatility has increased. More opp for profit.
3. Price are coming down. Buy low, sell high.
The opportunites are endless.
It should be of no surprise that the dollar is higher. I've been pointing out the flaws in the Euro for years now. That said, the dollar may be getting a bit extended, but momos are still strong. Eventually I will get off the dollar train. But it wont be because the dollar going to zero, but because the easy money has been made.
Knowledge is the enemy of fear
<< <i>How is the rising dollar hurting Wallstreet? >>
You really don't know?
How about exports? Kind of hard to sell things when they cost more simply because of the exchange reate. Everything's easier to sell when it's cheaper.
How about exchange rates? International companies repatriate earnings and take a big hit.
Spot breaking $1200 on the downside, now $1194. One year chart looks more and more like a failed spike rally on news. The economic news seems to have gotten a lot of fish to bite on gold, probably a lot of newbie fish, and now they may be trapped. 50 day moving average is intermediate support at about $1140 on spot.
Again, seasonally, May tends to be one of the best months, June tends to be one of the worst, and traders look to be jumping that data trend.
I remain mildly bullish on gold. My most recent position selling GLD July 100 puts, is taking on water, now down 100% in notional value.
<< <i>
<< <i>How is the rising dollar hurting Wallstreet? >>
You really don't know?
How about exports? Kind of hard to sell things when they cost more simply because of the exchange reate. Everything's easier to sell when it's cheaper.
How about exchange rates? International companies repatriate earnings and take a big hit. >>
All companies who do business in foreign countries and repatriate those earnings back to the USA use currency hedges. I do not consider "Wall Street" to be JNJ, PG, KO. But rather JPM, GS, BAC.
Momos rolling over on Gold and silver. Another false rally completed.
And about exports. I thought we dont make anything in this country.
Knowledge is the enemy of fear
The mistake will be to follow charts then abandon them because your heart tells you so. Nothing has changed in the gold market. It goes up when there are buyers and down when there are sellers.
Knowledge is the enemy of fear
Knowledge is the enemy of fear
Low now at $1184-$1185 for the day. The 1 year chart to me looks like a cup that briefly broke out and now has come back to retest the original breakout back around $1200. Normally these cups first bounce hard off the neckline while trying to break through. In this case that was the old high at $1226. And it was not repelled whatsoever for any length of time probably because the Euro crisis was so blown up. So now we go back under the neckline and regroup at a lower resistance point and take a few whacks at the $1200-$1226 area again. We may still revisit $1150-1160 as well. With bond/expiration week looming this gold weakness should carry through at least next Wednesday.
I was surprised at the drops in the miners today. While I was expecting weakness this week, I was not expecting anything like this a whole week from expiration, esp. with just a $20 drop in gold. Most larger miners were down 5-7% during the day. I see a few noteworthy juniors that even hit the 9-11% mark. This was the baby and bathwater day.
roadrunner
<< <i>...
I was surprised at the drops in the miners today. While I was expecting weakness this week, I was not expecting anything like this a whole week from expiration, esp. with just a $20 drop in gold. Most larger miners were down 5-7% during the day. I see a few noteworthy juniors that even hit the 9-11% mark. This was the baby and bathwater day.
roadrunner >>
Keep in mind that today was "witching Wednesday." With equity options expiring this Friday, many players roll their equity options to later months. I think some of today's volatile action in all markets was due to options related trades. It will be interesting to see if markets can stabilize Thursday and Friday, as would be expected if Wednesday movements were due to ripple effects from options.
roadrunner
Knowledge is the enemy of fear
A flea on the back of the wildebeast. A mere photon in the space-time continuum. An intern in the life of Bill Clinton.
It's nothing.
I knew it would happen.
<< <i>The 6-12 month decline in gold has begun.
A flea on the back of the wildebeast. A mere photon in the space-time continuum. An intern in the life of Bill Clinton.
It's nothing.
It could be upwards of 25%. If so, then that takes it back to the 2008 peak. So after 3 years gold could be be a dud. I suppose it will still outperform real estate and equities, but it may be enough for folks to become disillusioned and wonder where the promise went. When they sell, then the real rally can begin.
Knowledge is the enemy of fear
<< <i>Momos rolling over on Gold and silver. Another false rally completed. >>
USD... Another false rally to EUR parity maybe completed.
I know... maybe I should give USD to Prector... only to be told to hold USD...
<< <i>The 6-12 month decline in gold has begun. >>
A little early to be making that claim. I think we're about a month away from knowing who's right on this one.
So far the current move is still registering as consolidation. The charts need another day or two to "re-energize" and they will be ready for another move. This is consistent with RR's point about expiration week. Ackerman says it would take a selloff exceeding 1156.20 this week to turn the charts bearish, and this is reasonable.
The USD index has topped out on it's price oscillator and ChaikinMoneyFlow indicators, so I think it's ready to take a breather.
Everything is very volatile right now. Support for gold is at 1177.7, with resistance way up at 1202.9 and 1219.2.
Took some hits on my gold positions and ended up reducing my position back down to core holdings.
<< <i>All companies who do business in foreign countries and repatriate those earnings back to the USA use currency hedges. I do not consider "Wall Street" to be JNJ, PG, KO. But rather JPM, GS, BAC. >>
I'm not so sure about that. I've read many quarterly reports that claim either earnings boosts or shortfalls due to exchange rates. If they had properly hedged, it would be nothing to mention. That is, unless it's just a convenient excuse.
<< <i>And about exports. I thought we dont make anything in this country.
Never made that claim. Nevertheless we still export food and raw materials. There is still some manufacturing but it's now largely down to final assembly. Certainly nothing compared to what it was.
<< <i>Nothing has changed in the gold market. It goes up when there are buyers and down when there are sellers. >>
How insightful, but not accurate. Case in point: Gold went up in Venezuela overnight when Chavez recently devalued their currency overnight. The POG changed for Venezuelans without buyers or sellers.
The USD may take a breather. In fact, im about done with the trade. Not that I think it is going lower-just the easy money is gone. Its been a fun trip, although frustrating at times. I am still thinking that the dollar has not only made A bottom, but THE bottom. And what would support THE bottom, the very bond selloff that you are expecting. Money will flow to higher yields.
The gold run is done.
Knowledge is the enemy of fear
That depends.
I knew it would happen.
I remind myself of rule #1, live to fight another day.
I think DOW 10k will be defended whether its PPT futures purchases, or FED cash swaps... or both.
Whether it works mid-term... my guess is no... but in their minds... "we have to do something".
And Gold is going to the moooooon as a result.
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Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>We've broken below the fat finger/flash crash (close) today... gut feeling they will defend DOW 10k, if not 9.7k, if not 9.5k, if not... look out below.
I think DOW 10k will be defended whether its PPT futures purchases, or FED cash swaps... or both.
Whether it works mid-term... my guess is no... but in their minds... "we have to do something". >>
I would think that 9900 is the line in the sand. This was the point where the market held and rebounded on the Flash Crash Day....we shall see soon enough............MJ
DOW
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
It appears that there is more downside in order for stocks, with 1010 the apparent target for the SP500. If we do see 1010, it's probably going to be a GREAT short term play (to go long), as I would expect a massive rebound from that level.
So now the question is if gold will continue to decline if stocks continue to decline. Since the markets have pretty much decoupled recently, I don't think this will affect gold.
On the positive side, gold has held up VERY well given the declines in stocks and other commodities, so I still don't think this is the beginning of a bigger decline - it's still just a consolidation. Another consideration is that things are quite oversold now so what is the likelihood of yet another down day in row?
Another positive is that this move has accomplished the feat of instilling fear in gold bulls (and all other bulls), which is a good thing. Remember, gold likes take to take off with the fewest people on board as possible, and this move down has scared - or convinced - many that the rally is over. I assure you, it is not.
Support is at 1171.9, resistance at 1185, 1195.9.
<< <i>
<< <i>We've broken below the fat finger/flash crash (close) today... gut feeling they will defend DOW 10k, if not 9.7k, if not 9.5k, if not... look out below.
I think DOW 10k will be defended whether its PPT futures purchases, or FED cash swaps... or both.
Whether it works mid-term... my guess is no... but in their minds... "we have to do something". >>
I would think that 9900 is the line in the sand. This was the point where the market held and rebounded on the Flash Crash Day....we shall see soon enough............MJ
DOW >>
9900 is as good a place as any to make a stand. The character of the subsequent bounce will say a lot about where it goes next.
I covered all my shorts today
Knowledge is the enemy of fear
I was using a weekly/line chart... just wanted to take a step back and a longer look.
<< <i> Its been a fun trip >>
... and a good call cohodk.
Another view.
Knowledge is the enemy of fear
One could say that the cup formation in the first half of 2008 resulted in a washout. That's true. But that cup also failed to get back to $1033 for a proper retest...only making it to $989 in July '08. A key part of that stall was JPM & Co. doubling up on their gold/silver derivatives. While the current formation is very similar, gold did make it past the $1226 all time high before backing off. Gold could both continue to consolidate in the $1140-$1200 range and still demonstrate neg divergences in the momentum indicators....while also staying in the upper half of the current trend channel shown in Cohodks' second chart.
Note also the previous cup formation in the first half of 2009. It looks very similar to the one just traced out in 2010. That 2009 pattern eventually turned up after an 8-9% correction (we're at 6.5% on the current one). I remember that period well as most of "gold nation" was very bearish and forecasting a decline back into the $800's or $700's for one last great buying opportunity....that never came. That July-August period fooled a lot of people.
So which of the above cup formations will predict what will happen in this one? Both had negative mom. divergences. I'd say the odds favor further upside after a month or so correction similar to summer of 2009. What we didn't have back in 2008 was world-wide support in gold from a number of nations and central banks. 2 years has added a lot more believers in gold as well as shown the weaknesses in fiat, debt, and derivatives. It took a deleveraging washout in summer of 2008 to kill that cup formation. It also didn't hurt that silver derivatives were doubled up from $90 BILL to $190 BILL during July 2008, a phenominal increase in papered leveraged. Recall the JPM inherited the Bear Stearns silver shorts and then took it to another level that summer in a well planned Ag execution. Can that same type of papering be generated today with the same effect while the CFTC is still nosing around JPM's silver sandbox?
roadrunner
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MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
RR... I've been looking at the 'cup formation' also... waiting to see if the handle forms. I also noticed that the right side of the rim is higher than the left... which is giving me hope for the cup & handle. As MJ said today... "we will see soon enough".
I've enjoyed this thread lately... thanks for all of the great work/observations/posts!!!
We live in interesting times...
<< <i>The people at Zero Hedge are wondering if Armageddon is here after a review of today's heat maps (Red is bad, green is good):
If this is Armageddon, then Armageddon aint so bad. If you had posted that same heat map when market was up 400, 2 weeks ago, it would have been a sea of green.
Covered all my short puts. CLF, AA, GS, FCX. All with monster moves off the open. Going into the weekend flat. Maybe
Knowledge is the enemy of fear
I think there's some mis-interpretation goin' on. Isn't it more important to be watching where the regression trendline (not shown) is when the RSI turns positive again, than to be basing everything simply on the highs when the RSI turns down?
I knew it would happen.
<< <i>I just had a thought about your charts. Isn't a good regression analysis intended to show the bulk of the trend, rather than basing the whole trend on the peaks? Just askin'.
I think there's some mis-interpretation goin' on. Isn't it more important to be watching where the regression trendline (not shown) is when the RSI turns positive again, than to be basing everything simply on the highs when the RSI turns down? >>
Sorry, jmski52, I have no idea what you are talking about. What do you mean by "regression line"? I am only trying to show a possible trend channel. And in order to do that I must draw a line connecting the tops and the bottoms. I am not looking at RSI when I draw these line.
Do you mean by "regression line", a line that is the median of the trend--equal trading above the line as below?
The line coming up from the low of 681 is very steep and will be broken. Whether it breaks in the next few weeks at 1125 or in a few months at 1175 remains to be seen, but it will be broken. This may lead to merely a sideways trade, but the formation that is building is called a "rising wedge" and breaks are usually very violent. Of example, as I pointed out about a month ago, there were many stocks and indices with similar patterns. And we have all seen what the stock market has done in the last 4 weeks.
IMO, gold will probably test the Feb low of 1044 or the breakout level of 1000. The actual number really isnt as important as the direction.
The 10yr chart shows the importance of the $1000 level.
Roadrunner mentions cup and handle formations and cites a few examples. Im not a big fan of that formation and while I understand what he sees, I dont see them. He also mentions an inverse head and shoulders formation. But how about this---just for giggles.
Knowledge is the enemy of fear
I was interested in knowing if Cohodk's rising wedge was apparent in the gold bull market of 1969-1980. To my surprise there really wasn't a really strong and clear cut wedge in the 1973-1980 period. Pretty much each time gold got going it went into a parabola. The 1970-1972 period shows a parallel channel or very slightly declining wedge that preceded the first major breakout towards $100+ in the 2nd major leg of gold (1971-1974). That's really the only wedge-like structure appearing over 11 years from what I can see. I guess one thing to take from this is possibly the lack of govt/bank interventions in the 1970's gold market. Gold parabola's in the past decade have been frowned upon by the PTB....lol.
Gold from 1968-1973
Gold from 1974-1979
The link below to chartsrus.com has numerous historical commodity, currency, stock, bond, ratio, etc charts going back hundreds of years. Interesting stuff.
Chartsrus.com
Dollar seemed to have completed a multi-month, 5 waves up a few days ago and now headed for some type of correction...as the Euro heads the other way. Should be a period to give gold some room to retrace some of its $82 drop. It also seems that the liquidity and volatility ratios have been stretched to their limits and now ready to recover somewhat. COT in commercial's gold futures was pretty lack luster with no change in ratio and minimal changes in O/I or net short positions. More commercial short positions were closed out in the dollar dropping net shorts by about 7%.
roadrunner
I spent some time studying the charts and I have some interesting observations. The first and most concerning is on the weekly gold chart, where we have a bearish engulfing candle. This is not good - they tend to be a very reliable signal. The may 4th bearish engulfing candle for SP500 foretold the most recent big drop... Too bad I didn't see it.
However, I researched the final phase of other recent parabolic moves and found similar patterns that did NOT result in more bearishness to come. It seems to be an example of one of the charting "rules" that are suspended during the final phase of a parabolic move. In fact, they were usually just isolated candles - pauses in the big parabola. And it's important to note, all parabolic moves (in their final phase) experienced corrections as severe as ~11%. This one was only 6% (assuming it's over).
I also looked at daily candles for the past year, and today marks the 7th red daily candle in a row. This is the longest stretch of red candles in the past year that I could find. It was also interesting that the POG seems to move in 4 to 8 day increments, generally being up, down, or sideways for 4 days at a time. Of course, sometimes you string together several 4-day segments in the same direction. An interesting observation, but probably not useful as it's hard to tell exactly when to start or stop counting the trend. But if that's the case, the current down trend is probably about over, and I'd expect we can expect the next 4 days to be flat or up. Timing models are looking for a minor gold top around Thursday, so that would be 4 up to up-to-sideways days that we can expect if the model is correct.
I thought the weekly dollar chart was interesting. It's definitely a V-shaped recovery (so long as it doesn't evolve into a 'W'). As Cohodk says and is obvious, the easy money has been made in this play. It looks to me like the USD has gotten ahead of itself and it could very well drift back to ~84 in the next few weeks. The timing models are looking for a dollar bottom approx June 3 or 4.
Gold has decoupled from the USD but regardless, it still may have some limited influence. The USD looks very over-bought which should help gold, but gold also looks like it could have a tad more down-side to come. I see the max downside for gold to be ~1140, which will keep gold in its channel. You'll probably notice that I have drawn my channel using different data points than Cohodk. I guess this is why different people come to different conclusions, but I'd like to hear commentary on which channels are "more correct," if such judgement can be made. Perhaps they are both valid.
So in conclusion, I think the downside is pretty much over for the near term, and next week should see a decent recovery through Thursday.
Do you mean by "regression line", a line that is the median of the trend--equal trading above the line as below?
Doesn't a statistical regression analysis take an assortment of data points on an x-y axis and make it into a regression line? The slope of that regression line is what I would consider meaningful, rather than simply looking at the peaks, valleys, maximums and minimums.
If you think of the price points on your chart as data points and take a weighted average of the (price points) x (volume), wouldn't you have something that looked like the moment around a moving mass? And wouldn't that represent something close a price trend?
It seems to me that the RSI and this type of price momentum indicator might work well together.
I do see what you mean about this rising wedge. It looks obvious that something has to give, so you may have a point as well. Regards, jmski.
I knew it would happen.
I might lengthen the gold range to as low as $1115 which would represent the IH&S neckline. While it has already pulled back once to test the neckline at $1130, it could pull back and test it once again at a slightly lower point (neckline tilts down). The primary horizontal resistance line through that entire IH&S formation is about $1120. And $1130 represents the current bottom of the 2 year up trend channel. Even if gold bounces up to the $1280-$1300 as Hoye suggests it might, it should return to retest those lower levels by July. Timers seem to feel commodities will bottom in mid-June. I still think with bond and expiration week going on next week the best gold can do would be similar to April. With 18,000 $1200 call options expiring on Tuesday it's not likely the Banks will give that money away. Gold moved up strongly on Tuesday of the last bond week then pulled back and consolidated for 2 days until moving back up on Friday. With this many $1200 calls expiring Tuesday gold will not likely breech $1200 until later in the week. By June 1st it should be running up again.
The current VIX chart concerned me about another deleveraging washout so I went back to the the July-October 2008 period to see how much in common they have. I was surprised that they rhyme quite well. The time to complete the first 2 parabolic spikes are very similar. And so are the peak values. In both cases they have a smaller set of spikes sitting out a couple months (the current ones occurred in early Feb.). In each case the first set of large spikes (30-50) occured about 2 weeks apart. In the current case they were on 5/9 and also 5/21. In comparing RSI, MACD and Slow Stoch. they are also quite similar in amplitude. The current chart may be slightly weaker in nature as there is a tad of negative divergence in the RSI and it didn't get back to 70 on this most current peak. If one lays the dollar's strength over the same time period, the dollar was still gaining strength back in 2008 as these volatility spikes started. It seems that today's dollar is currently losing momentum. The dollar's volume (UUP) peaked a couple of weeks ago at a much high value. It had relatively small volume on Friday's (5/21) peak. The dollar from July-October 2008 seemed to start it's run much later. On a comparison basis it seemed to be at about the 80 level.
Another weakness in today's VIX chart is that Friday's close was lower than the first peak of 2 weeks ago. That did not occur in 2008 on the first 2 spikes into the 30-50 range. Each one of those closed higher. GSR also shows some of the same negative divergences mentioned above. Gold and the major stock indicies seemed to be at July 2008 while VIX and the dollar are already in September. Things fell apart in October 2008. In summing it up there is no smoking gun to show complete similarities. But there are enough of them that for the next few weeks one should be on guard with the various volatility and liquidity indexes. I'll feel more comfortable if interest rates and 3 month Libor turn around. There's nothing barring the dollar from taking a brief nap and then roaring back in several weeks to poke into the 90's as VIX heads for the moon. My gut feel says volatility and the dollar have peaked for a while, but I certainly won't bet the farm on it.
The New Zealand dollar to yen ratio has provided a reasonably accurate liquidity monitor for the past couple of years. Currently it shows the ratio right at the point of falling off the cliff or maybe starting a new uptrend. One might have to lean towards the cliff dive...because after consolidating in a rectangle since October it just recently tried to leave the bottom of the box following the prescribed 5 touches as mentioned in Edwards & McGee. On the flip side though if one only looks at alternation of waves, the next one would be upwards following the completion of 5 steps. An interesting study. And like the VIX, it has many parallels to the similar point back in July 2008. But in that case a descending triangle was the final consolidation before the blowout. If the current ratio continues to fall away from the box.....look out below. The Euro to Yen ratio has typically paralleled the NZD/Yen until the Euro came under massive attack. This ratio has formed a rounded H&S top and now is under the 2008 low. I don't know if that's "good" news (the worst has come and gone) or unbelievably bad news.....ie the mom. indicators could still run deeper before fully bottoming. And just to link bonds into the discussion. The 30 yr bond has not had more than 7 straight up weeks in the past 3 yrs. w/o a rest. Even the final blowup in November 2008 was the culmination of 7 up-weeks. This past week has now made it 7 in a row as well.
NZD to XJY ratio
Euro to Yen liquidity ratio
Spain's CajaSur savings bank is being bailed out this weekend by it's central bank to the tune of 550 MILL Euros ($691 USD). This bank is partly run by the Catholic Church. Let's see what effect this has on the various currencies. My guess is more QE and bailouts mean more speculative bets being placed.
roadrunner
Support is at 1182.5, 1190.0, and resistance at 1199.9 and 1207.4.
Again, I'll point out that this $15-20 move came at the same time as the USD index recovered by a full point.
Edited to add:
BTW, I switched to the August gold contract, which is about $2 higher than the June gold contract.
<< <i> You'll probably notice that I have drawn my channel using different data points than Cohodk. I guess this is why different people come to different conclusions, but I'd like to hear commentary on which channels are "more correct," if such judgement can be made. Perhaps they are both valid.
So in conclusion, I think the downside is pretty much over for the near term, and next week should see a decent recovery through Thursday.
>>
PC,
I see nothing "wrong" with your trend channel. There was a bit of a parabolic move coming off the bottom--there are 100's if not 1000's of stock charts that look similar. I used the beginning of the move and you chose the period after the dust settled. If you could see into my chartbook, you would see that I have drawn many lines similar to yours on other charts. But in either case, the area around 1125 is critical. A close below and its almost a certainty to test 1000.
The dollar is short-term overbought, but given that all currencies are now pigs vs the dollar, one cant say the dollar is going up cuz the Euro is going down anymore, shows that this move is major and important. UBS put out this piece over the weekend. It touches on many of the thoughts I've had over the past 2 years. Namely that the USA will emerge first with strong(er) growth. Money will flow to the most stable economy. This combined with the USA being the most powerful and dominant country on the planet will only solidify this rally. I do believe THE bottom has been made.
As far as today. A bit of a bounce coming off the March lows. This trendline is steep and will be broken, probably in the next few days. Maybe on Thursday? Next stop would be the 50dma, which will not hold, then a test of the bottom of the trend channel.
Roadrunner, take a look at a chart of the YEN. Then decide on which way the NZD/YEN ratio is headed.
Knowledge is the enemy of fear
Those charts make me think of Christmas even though it's 7 months away and 90 degrees here in Iowa.
Broke down and sold 5 ozs of gold today at $1190. I want rare coins more than bullion right now. About $800 in profit so I'm happy about that.....
To make sure I have this right, you're refering to the S&P and the Feb low at around 104? 50 dma is a long ways off right now as well. That would be a heck of a bounce.
take a look at a chart of the YEN. Then decide on which way the NZD/YEN ratio is headed
Ok, that seems to help. Thanks.
Picked up some miners on the 1st hour smackdown today to go along with some I picked up Friday (NAK, JAG, NG, AZK, RBY, GBG, VGZ). For some reason I'm reluctant to buy into GDXJ or GDX right now as they still seem relatively "high." I missed out on getting Yamana at under $10 while I "thought" about it. Don't think there will be another chance this week. Gold held up pretty well during the day. Apparently the banksters were just satisfied to keep price under $1200 in order to wipe out those 18,000 calls. Still 5 and 7 yr bond auctions to go this week but if the best the shorts could do was to keep gold just under $1200, those 2 bond auctions probably won't matter too much.
roadrunner
To make sure I have this right, you're refering to the S&P and the Feb low at around 104? 50 dma is a long ways off right now as well. That would be a heck of a bounce.
I was referring to gold, not the SP-500. I meant to write------A bit of a bounce coming off the trendline from theMarch lows.
For todays trading, it almost seemed as though gold didnt exist. It didnt do much when the DOW was down 300 and didnt do much after it had completely recovered.
Knowledge is the enemy of fear