Filed under: Trader Dan Norcini
Dear CIGAs,
What a difference an evening makes – once word began circulating that Ireland was going to be bailed out by the ECB suddenly the hedge funds fell back in love with risk after seeking a divorce from her just the other day. The result – where some markets were limit down yesterday (cotton), today there were limit up. Such is the fickle nature of global capital flows or more appropriately, hot money flows. Do some of you out there find it as amusing as I do watching these hedge funds panicking over Chinese talk about rate hikes to tame inflation only to then run right back into every single market that they threw away the previous few days once they see more QE this time coming from the ECB.
Make no mistake about it, the ECB is engaging in its own version of QE, just as Jim has repeatedly said they would. And if anyone is under any illusions that this was about Ireland, please let me dispel that notion here and now. It is about bailing out the BANKS who are on the hook for the money loaned to Ireland. It is always about the big banks ( I think that there is a special place in hell reserved for that crowd of international thieves). Now that Ireland has apparently received the same treatment as Greece, I suppose Portugal and Spain are next in line.
I wonder what Germany must be thinking about all this.
Regardless, the European Monetary Union is a joke – everyone knows it – there is no one size fits all policy that can ever make this forced union which resembles a patchwork quilt function properly. That did not stop the hedgies from bidding up the Euro once again with the result that down went the Dollar and up went the entirety of the commodity world. Fundamentals be damned; it is off to the races again as inflation is now back in vogue whereas yesterday it was deflation that the hedge fund world was enamored with.
I still have my eyes on the bond market as it could not take out this week’s high and is sharply lower today as I type these comments. That market more than any other is what I am watching to tell me what the investor sentiment is towards inflation or deflation. Based on what I am seeing of the price action, inflation is winning out unless the bonds can pull off a major reversal and climb back above 129 by tomorrow afternoon. That looks remote right now. Failure to do so will have cemented a major top on the weekly charts with the bond market failing to climb much above 135 back in early October thus creating a double top that was confirmed with last week’s breach of the 129 level. The implications for gold are obvious – it is going to move considerably higher once the market becomes totally convinced that the gazillions of dollar and now Euros floating around the planet are going to result in a strong surge in inflation. China is already struggling with inflationary pressures, thanks in part to their refusal to let their currency float higher in combination with the Fed’s QE which is pushing investment capital into China and causing enormous problems for their managers.
The bounce higher in gold is friendly as it is working to confirm technical chart support centered near $1,330. Bulls are not out of the woods yet as they must get the price back at least as high as $1,365 to give themselves some breathing room and unnerve some of the new shorts in the market. As long as the ten day moving average is headed lower, some technicians will look to sell rallies so the first order of business to revive the gold bull will be to get this moving average headed up, or at least no longer moving down. Maybe some more consolidation is the order of the day. I would much prefer to see that sideways trade that holds above support and cements a new and higher price level.
Silver looks better on the charts than does gold as it is back above the 10 day moving average which never turned lower although price did sink down below this level. The 20 day MA however has been thus far serving as downside support. Bulls will need to push it back through and close it above $27.80 or so to snatch back the initiative from the shorts and force some of them to cover.
The Dollar had pushed through all of its major moving averages (10 – 50 day) on its chart and looked as if it was making an upside run towards 80 but it has retreated on news about Ireland. We will have to keep a close watch on its chart to see if we can spot any clues as to what is coming next. As long as market participants are convinced that the ECB will be successful at containing any spread of financial contagion, the Dollar will encounter selling pressure. Any shift of focus back onto China and rate hike talk will spur Dollar buying and commodity selling. Take your pick as to what the funds are going to be looking at on any given day. You might as well attempt to count the grains of sand on a beach as to decipher what this crowd is going to be gazing at in tomorrow’s trade. That is why it is still best to use the longer term charts such as the weekly to get the main trend of these markets and try not to let the day to day gyrations captivate your attention too much. Too short sighted of a focus will end up only giving you a case of severe whiplash. Suffice it to say that any crowd of traders who throw away most of their positions one day only to put them all back on the next are not making informed calm decisions but are trading emotional swings. Using the word, “Schizophrenic” to describe this crowd is an insult to those who truly have to contend with that malady. Learn the fundamentals of the markets you trade and let these bozos set up opportunity for you from which you can profit. Very few of them are going to survive the mess that they have made of our markets.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/11/November1810Gold.pdf
What a difference an evening makes – once word began circulating that Ireland was going to be bailed out by the ECB suddenly the hedge funds fell back in love with risk after seeking a divorce from her just the other day. The result – where some markets were limit down yesterday (cotton), today there were limit up. Such is the fickle nature of global capital flows or more appropriately, hot money flows. Do some of you out there find it as amusing as I do watching these hedge funds panicking over Chinese talk about rate hikes to tame inflation only to then run right back into every single market that they threw away the previous few days once they see more QE this time coming from the ECB.
Make no mistake about it, the ECB is engaging in its own version of QE, just as Jim has repeatedly said they would. And if anyone is under any illusions that this was about Ireland, please let me dispel that notion here and now. It is about bailing out the BANKS who are on the hook for the money loaned to Ireland. It is always about the big banks ( I think that there is a special place in hell reserved for that crowd of international thieves). Now that Ireland has apparently received the same treatment as Greece, I suppose Portugal and Spain are next in line.
I wonder what Germany must be thinking about all this.
Regardless, the European Monetary Union is a joke – everyone knows it – there is no one size fits all policy that can ever make this forced union which resembles a patchwork quilt function properly. That did not stop the hedgies from bidding up the Euro once again with the result that down went the Dollar and up went the entirety of the commodity world. Fundamentals be damned; it is off to the races again as inflation is now back in vogue whereas yesterday it was deflation that the hedge fund world was enamored with.
I still have my eyes on the bond market as it could not take out this week’s high and is sharply lower today as I type these comments. That market more than any other is what I am watching to tell me what the investor sentiment is towards inflation or deflation. Based on what I am seeing of the price action, inflation is winning out unless the bonds can pull off a major reversal and climb back above 129 by tomorrow afternoon. That looks remote right now. Failure to do so will have cemented a major top on the weekly charts with the bond market failing to climb much above 135 back in early October thus creating a double top that was confirmed with last week’s breach of the 129 level. The implications for gold are obvious – it is going to move considerably higher once the market becomes totally convinced that the gazillions of dollar and now Euros floating around the planet are going to result in a strong surge in inflation. China is already struggling with inflationary pressures, thanks in part to their refusal to let their currency float higher in combination with the Fed’s QE which is pushing investment capital into China and causing enormous problems for their managers.
The bounce higher in gold is friendly as it is working to confirm technical chart support centered near $1,330. Bulls are not out of the woods yet as they must get the price back at least as high as $1,365 to give themselves some breathing room and unnerve some of the new shorts in the market. As long as the ten day moving average is headed lower, some technicians will look to sell rallies so the first order of business to revive the gold bull will be to get this moving average headed up, or at least no longer moving down. Maybe some more consolidation is the order of the day. I would much prefer to see that sideways trade that holds above support and cements a new and higher price level.
Silver looks better on the charts than does gold as it is back above the 10 day moving average which never turned lower although price did sink down below this level. The 20 day MA however has been thus far serving as downside support. Bulls will need to push it back through and close it above $27.80 or so to snatch back the initiative from the shorts and force some of them to cover.
The Dollar had pushed through all of its major moving averages (10 – 50 day) on its chart and looked as if it was making an upside run towards 80 but it has retreated on news about Ireland. We will have to keep a close watch on its chart to see if we can spot any clues as to what is coming next. As long as market participants are convinced that the ECB will be successful at containing any spread of financial contagion, the Dollar will encounter selling pressure. Any shift of focus back onto China and rate hike talk will spur Dollar buying and commodity selling. Take your pick as to what the funds are going to be looking at on any given day. You might as well attempt to count the grains of sand on a beach as to decipher what this crowd is going to be gazing at in tomorrow’s trade. That is why it is still best to use the longer term charts such as the weekly to get the main trend of these markets and try not to let the day to day gyrations captivate your attention too much. Too short sighted of a focus will end up only giving you a case of severe whiplash. Suffice it to say that any crowd of traders who throw away most of their positions one day only to put them all back on the next are not making informed calm decisions but are trading emotional swings. Using the word, “Schizophrenic” to describe this crowd is an insult to those who truly have to contend with that malady. Learn the fundamentals of the markets you trade and let these bozos set up opportunity for you from which you can profit. Very few of them are going to survive the mess that they have made of our markets.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/11/November1810Gold.pdf
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