Friday, January 14, 2011
Thursday, January 13, 2011
DAN NORCINI'S THURSDAY COMMENTS AND GOLD CHART
Posted: Jan 13 2011 By: Dan Norcini Post Edited: January 13, 2011 at 5:12 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
Gold came under selling pressure in the face of a much weaker Dollar and a surging Euro, occurrences which would normally be expected to lend buying support to the metal but which for today worked against it based on the flavor du jour of trader taste.
Euro gold was the culprit as it took a very big hit dropping off some 23 euros from yesterday’s closing mark which followed on the heels of the initial weakness it experienced once word got out that Portugal’s bond sale went off okay. That had traders buying Europe and reversing trades put on that were attempting to take advantage of the worries associated with the at that time future bond sales. Europeans were in effect selling gold due to friendly feelings towards risk on that continent. Weakness in Euro gold spilled over to US Dollar priced gold which had been mounting an impressive move off its worst levels and had actually climbed into positive territory shortly before the close of pit session trading.
In response to an earlier email, I advised the writer that it is almost an exercise in futility in attempting to grasp what the mindset of the hedge fund community is going to be on any given day. Today they were back in love with the Euro – tomorrow the world could be coming to an end and they will rudely dump it and whisper sweet croonings into the ears of the US Dollar swearing their undying fealty to it. Stick with the long term trends and ignore the short term noise.
The real picture is that official sector related selling is evident on the charts just below the $1400 level in gold and with the uncertainty and confusion among traders as to the ever-changing sentiment towards Europe and towards the US in terms of economic improvement or lack thereof, there is not yet enough conviction-oriented buying in gold to take it through the upside ceiling which is being imposed.
Bulls will have to take it up and through $1400 to kick out a significant number of shorts. They had done some great work in getting it back above $1380 but that fell apart within 30 minutes of today’s pit session close.
I mentioned in an email a short time ago, that the days of gold trading nearly tick for tick in the inverse with the US Dollar are behind us. It is still going to be strongly influenced by the Dollar, do not mistake what I am saying, but it has been moving independently of the Dollar for some time now as Europe has come to the forefront of investors’ minds. We can see that when fears associated with European sovereign debt issues recede, gold is tending to experience selling pressure. When those same fears revive, gold moves higher.
It is all quite confusing attempting to decipher this volatile mess but this same uncertainty is being reflected in the price charts which show gold finding support on forays below $1360 but selling as it moves towards $1400. In effect, the confusion and lack of conviction or loss of confidence is leading to a range trade in the metal.
You see something similar to this being reflected in the long bond market where the FED and its tomfoolery have created a yo-yo market which keeps popping up whenever they come in and monkey with the long end of the curve only to experience selling pressure tied to the same thing that is pushing the Euro higher – namely, better feelings towards risk and a lack of desire to engage in safe haven trades. The interest rate market is a joke and foreign holders of US Treasuries are not going to be drawing much comfort from the fact that it is being propped up by more and more by freshly minted “binary digits”. When I see the Dollar dropping lower as longer term interest move lower, thanks to the boyz at the Fed, that tells me that not only are foreign holders of that debt watching it lose value as the dollar declines but if they desire to buy more of the same, they are going to get a LOWER RATE OF RETURN for their troubles. I don’t know about you, but that sure fires me up and makes me want to immediately rush out and load up on a couple $billion in long dated bonds from Uncle Sam.
I will submit that the actions of the Western Central Banks and their constant interference in the markets and their adventures in money printing are solely and completely responsible for the maddening volatility that we are now experiencing in our markets. They are the ones who create the conditions that lead to conflicts between fundamental factors which shift nearly day by day as they move in or sit by planning their next move. Traders position themselves on one side of a market only to be caught completely off guard as an ECB or a Fed steps in and does its thing. That leads to a panic out of one side of a market and a rush onto the other side in an attempt to recapture losses or maximize gains. Such actions trigger price signals on the computer algorithms of the hedge funds and in they come full speed ahead or out they go heading for the hills. The next day the fundamentals shift back and the entire process is then reversed.
The truth is what we are witnessing is just another battle in the long war between the Central Banks of the West and the Speculators. The former are attempting to create a world in their own image and form (Central bankers all have god complexes) while the latter are attempting to cipher through the factors that lead to movements in price through which they can hopefully profit. Speculators do not distort markets – true specs respond to changes in fundamental supply and demand factors. Central Bankers are the ones who distort and wrest markets into contorted, horrid creatures that honest viewers can sometimes barely recognize.
Silver could not recapture $30 and thus is now moving back down towards the bottom of its trading range. Support still lies near $28.50 with better buying expected near $28.
The HUI is once again not providing the least bit of help to the metals as it continues its anchor-like effect on the rest of the complex. Hedgies can make money by shorting the hell out of those shares and buying the metals with their ratio spread trades and do it over and over again until they are forced out by another surge in the bullion markets.
We will have to see how physical demand for both metals continues on dips in price. Thus far Asia has been active.
The CCI took a breather today after yesterday’s stellar performance. It still looks strong on the price chart and at this point is giving no evidence of topping. There are some negative divergence signals on some of the oscillators but strength in the grains in particular is helping to maintain the overall bullish pattern. Copper is running into a bit of difficulty at the $4.40 level and crude is thus far unable to best $92 on a closing basis. I am watching oil to see if it can indeed push past $92 and close there to set it up for a run towards $95.
Any further strength in the energy markets will be favorable for gold.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1311Gold.pdf
Gold came under selling pressure in the face of a much weaker Dollar and a surging Euro, occurrences which would normally be expected to lend buying support to the metal but which for today worked against it based on the flavor du jour of trader taste.
Euro gold was the culprit as it took a very big hit dropping off some 23 euros from yesterday’s closing mark which followed on the heels of the initial weakness it experienced once word got out that Portugal’s bond sale went off okay. That had traders buying Europe and reversing trades put on that were attempting to take advantage of the worries associated with the at that time future bond sales. Europeans were in effect selling gold due to friendly feelings towards risk on that continent. Weakness in Euro gold spilled over to US Dollar priced gold which had been mounting an impressive move off its worst levels and had actually climbed into positive territory shortly before the close of pit session trading.
In response to an earlier email, I advised the writer that it is almost an exercise in futility in attempting to grasp what the mindset of the hedge fund community is going to be on any given day. Today they were back in love with the Euro – tomorrow the world could be coming to an end and they will rudely dump it and whisper sweet croonings into the ears of the US Dollar swearing their undying fealty to it. Stick with the long term trends and ignore the short term noise.
The real picture is that official sector related selling is evident on the charts just below the $1400 level in gold and with the uncertainty and confusion among traders as to the ever-changing sentiment towards Europe and towards the US in terms of economic improvement or lack thereof, there is not yet enough conviction-oriented buying in gold to take it through the upside ceiling which is being imposed.
Bulls will have to take it up and through $1400 to kick out a significant number of shorts. They had done some great work in getting it back above $1380 but that fell apart within 30 minutes of today’s pit session close.
I mentioned in an email a short time ago, that the days of gold trading nearly tick for tick in the inverse with the US Dollar are behind us. It is still going to be strongly influenced by the Dollar, do not mistake what I am saying, but it has been moving independently of the Dollar for some time now as Europe has come to the forefront of investors’ minds. We can see that when fears associated with European sovereign debt issues recede, gold is tending to experience selling pressure. When those same fears revive, gold moves higher.
It is all quite confusing attempting to decipher this volatile mess but this same uncertainty is being reflected in the price charts which show gold finding support on forays below $1360 but selling as it moves towards $1400. In effect, the confusion and lack of conviction or loss of confidence is leading to a range trade in the metal.
You see something similar to this being reflected in the long bond market where the FED and its tomfoolery have created a yo-yo market which keeps popping up whenever they come in and monkey with the long end of the curve only to experience selling pressure tied to the same thing that is pushing the Euro higher – namely, better feelings towards risk and a lack of desire to engage in safe haven trades. The interest rate market is a joke and foreign holders of US Treasuries are not going to be drawing much comfort from the fact that it is being propped up by more and more by freshly minted “binary digits”. When I see the Dollar dropping lower as longer term interest move lower, thanks to the boyz at the Fed, that tells me that not only are foreign holders of that debt watching it lose value as the dollar declines but if they desire to buy more of the same, they are going to get a LOWER RATE OF RETURN for their troubles. I don’t know about you, but that sure fires me up and makes me want to immediately rush out and load up on a couple $billion in long dated bonds from Uncle Sam.
I will submit that the actions of the Western Central Banks and their constant interference in the markets and their adventures in money printing are solely and completely responsible for the maddening volatility that we are now experiencing in our markets. They are the ones who create the conditions that lead to conflicts between fundamental factors which shift nearly day by day as they move in or sit by planning their next move. Traders position themselves on one side of a market only to be caught completely off guard as an ECB or a Fed steps in and does its thing. That leads to a panic out of one side of a market and a rush onto the other side in an attempt to recapture losses or maximize gains. Such actions trigger price signals on the computer algorithms of the hedge funds and in they come full speed ahead or out they go heading for the hills. The next day the fundamentals shift back and the entire process is then reversed.
The truth is what we are witnessing is just another battle in the long war between the Central Banks of the West and the Speculators. The former are attempting to create a world in their own image and form (Central bankers all have god complexes) while the latter are attempting to cipher through the factors that lead to movements in price through which they can hopefully profit. Speculators do not distort markets – true specs respond to changes in fundamental supply and demand factors. Central Bankers are the ones who distort and wrest markets into contorted, horrid creatures that honest viewers can sometimes barely recognize.
Silver could not recapture $30 and thus is now moving back down towards the bottom of its trading range. Support still lies near $28.50 with better buying expected near $28.
The HUI is once again not providing the least bit of help to the metals as it continues its anchor-like effect on the rest of the complex. Hedgies can make money by shorting the hell out of those shares and buying the metals with their ratio spread trades and do it over and over again until they are forced out by another surge in the bullion markets.
We will have to see how physical demand for both metals continues on dips in price. Thus far Asia has been active.
The CCI took a breather today after yesterday’s stellar performance. It still looks strong on the price chart and at this point is giving no evidence of topping. There are some negative divergence signals on some of the oscillators but strength in the grains in particular is helping to maintain the overall bullish pattern. Copper is running into a bit of difficulty at the $4.40 level and crude is thus far unable to best $92 on a closing basis. I am watching oil to see if it can indeed push past $92 and close there to set it up for a run towards $95.
Any further strength in the energy markets will be favorable for gold.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1311Gold.pdf
Wednesday, January 12, 2011
Continuous Commodity Index Reaches Another All Time High
Posted: Jan 12 2011 By: Dan Norcini Post Edited: January 12, 2011 at 2:12 pm
Dear Friends,
The CCI, Continuous Commodity Index, which I use to track the commodity complex as a whole, today scored yet another all time record high. It should be noted that it moved to this new and higher level without any meaningful assistance from gold and silver which were fighting off selling for most of the session.
The big movers were the grains on the heels of a bullish USDA report, crude oil as it pushed past $92 and the livestock sector, with cattle futures moving to yet another all time record high.
With the commodity complex ratcheting upward, it is going to pose a real challenge for the perma bears at the Comex to keep the precious metals from moving higher.
Selling pressure in gold was tied somewhat to relief over the Portuguese bond sale which was not a total fiasco. That led to bond selling as the need for “safe havens” was somewhat diminished for the time being and brought relief buying back into the Euro. Normally one would expect the Dollar weakness to give gold a bit of a boost but this time around it was selling supposedly tied to the reduced need for gold as a safe haven.
Given the tenuous condition of Portugal and Spain, and others in the Euro zone, those that are dismissing a need for gold as a safe haven are very premature.
Incidentally, those of you who track the bond market will no doubt have noticed the intervention by the Fed as it continues to screw with the long end of the curve. Bonds recovered nearly a full point off their worst level even with the S&P making yet another yearly high and the CCI sharply higher as well. History is going to point its finger directly at the Bernanke-led Fed and their brazen efforts at distorting the interest rate markets as the prime culprits in making an already unstable debt situation even worse. The notion that bonds should be moving higher with inflationary pressures about to hit like a tsunami is laughable at best. What is Bernanke going to do when crude oil moves to $100 barrel – buy more bonds on the long end to further push it to $110 and higher? Consumers paying $4.50 for gasoline should send their credit card bills to his FOMC for payment as they are responsible for this orgy of commodity buying. I keep warning on what is happening in the food sector – it is now too late to prevent that from hitting us all – what is coming next is energy.
The sum of $600 billion to throw at the bond market is no small matter but at some point down the road, that market is going to react with a vengeance. When it does, it will be much like a rubber band that was stretched further and further only to snap back with stinging sharpness. I continue to watch this tragedy unfolding in stunned disbelief. Are these damned fools oblivious to what they are doing to the middle class in this nation?
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1211CCI.pdf
The CCI, Continuous Commodity Index, which I use to track the commodity complex as a whole, today scored yet another all time record high. It should be noted that it moved to this new and higher level without any meaningful assistance from gold and silver which were fighting off selling for most of the session.
The big movers were the grains on the heels of a bullish USDA report, crude oil as it pushed past $92 and the livestock sector, with cattle futures moving to yet another all time record high.
With the commodity complex ratcheting upward, it is going to pose a real challenge for the perma bears at the Comex to keep the precious metals from moving higher.
Selling pressure in gold was tied somewhat to relief over the Portuguese bond sale which was not a total fiasco. That led to bond selling as the need for “safe havens” was somewhat diminished for the time being and brought relief buying back into the Euro. Normally one would expect the Dollar weakness to give gold a bit of a boost but this time around it was selling supposedly tied to the reduced need for gold as a safe haven.
Given the tenuous condition of Portugal and Spain, and others in the Euro zone, those that are dismissing a need for gold as a safe haven are very premature.
Incidentally, those of you who track the bond market will no doubt have noticed the intervention by the Fed as it continues to screw with the long end of the curve. Bonds recovered nearly a full point off their worst level even with the S&P making yet another yearly high and the CCI sharply higher as well. History is going to point its finger directly at the Bernanke-led Fed and their brazen efforts at distorting the interest rate markets as the prime culprits in making an already unstable debt situation even worse. The notion that bonds should be moving higher with inflationary pressures about to hit like a tsunami is laughable at best. What is Bernanke going to do when crude oil moves to $100 barrel – buy more bonds on the long end to further push it to $110 and higher? Consumers paying $4.50 for gasoline should send their credit card bills to his FOMC for payment as they are responsible for this orgy of commodity buying. I keep warning on what is happening in the food sector – it is now too late to prevent that from hitting us all – what is coming next is energy.
The sum of $600 billion to throw at the bond market is no small matter but at some point down the road, that market is going to react with a vengeance. When it does, it will be much like a rubber band that was stretched further and further only to snap back with stinging sharpness. I continue to watch this tragedy unfolding in stunned disbelief. Are these damned fools oblivious to what they are doing to the middle class in this nation?
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1211CCI.pdf
Tuesday, January 11, 2011
Physical Market Continues To Show True Value Of Gold
Posted: Jan 11 2011 By: Dan Norcini Post Edited: January 11, 2011 at 9:27 am
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
Throughout the entirety of the now decade-long bull market in gold, it has been the physical market where the real deal is bought and sold, that has been the arena in which the true level of “value” has been found and not the phony paper market in New York known as the Comex.
Time after time we have seen the speculative trading funds get loaded on the long side of the gold market taking it up another leg higher but then their buying has met up with selling resistance which they have been unable to breach. The result has been a temporary stalling in price which has then moved lower as these same funds liquidated longs and began reducing their long side exposure.
The big buyers from the East have awaited these bouts of speculative selling as an opportunity to secure the metal at a lower price which has then served to put in a floor of chart support allowing a period of base building to commence which has then preceded the next leg higher.
With that in mind, please see the following story that came down the wire feed last evening from Dow Jones concerning the demand for gold hitting the Perth Mint of Australia. It is this kind of demand which is going to make life extremely difficult for the gold bears should it continue.
As said previously, the pause in the gold market does not look like that associated with a trend change but rather a lull in speculative buying as some indecision and uncertainty enters the psyche of traders. That lack of buying has allowed prices to drift lower which is being met with very strong demand as reported by both this story and JBGJ. If bears begin to get stymied in their efforts to take price below $1365 and hold it there for an attempt at $1340, they are going to be forced to cover.
Once again it appears the battle for middle Earth has been joined.
Throughout the entirety of the now decade-long bull market in gold, it has been the physical market where the real deal is bought and sold, that has been the arena in which the true level of “value” has been found and not the phony paper market in New York known as the Comex.
Time after time we have seen the speculative trading funds get loaded on the long side of the gold market taking it up another leg higher but then their buying has met up with selling resistance which they have been unable to breach. The result has been a temporary stalling in price which has then moved lower as these same funds liquidated longs and began reducing their long side exposure.
The big buyers from the East have awaited these bouts of speculative selling as an opportunity to secure the metal at a lower price which has then served to put in a floor of chart support allowing a period of base building to commence which has then preceded the next leg higher.
With that in mind, please see the following story that came down the wire feed last evening from Dow Jones concerning the demand for gold hitting the Perth Mint of Australia. It is this kind of demand which is going to make life extremely difficult for the gold bears should it continue.
As said previously, the pause in the gold market does not look like that associated with a trend change but rather a lull in speculative buying as some indecision and uncertainty enters the psyche of traders. That lack of buying has allowed prices to drift lower which is being met with very strong demand as reported by both this story and JBGJ. If bears begin to get stymied in their efforts to take price below $1365 and hold it there for an attempt at $1340, they are going to be forced to cover.
Once again it appears the battle for middle Earth has been joined.
DAN NORCINI'S TUESDAY COMMENTS WITH GOLD CHART
Posted: Jan 11 2011 By: Dan Norcini Post Edited: January 11, 2011 at 2:34 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear CIGAs,
Sovereign debt woes out of Europe, particularly Portugal, continue to bring a strong bid into gold. During the early part of the European trading session gold had pushed within a mere 4 euros of its all time high before it was taken down as the clock moved into New York trading (gee – what a surprise). These problems are not going to go away any time soon and as they come to the forefront of the headlines will serve to remind traders of the problems with the Euro and facilitate a drive to gold as a safe haven. They will also be there to serve as a supportive feature for the metal during bouts of price weakness should further fund long side liquidation take place.
If Portugal, or any other of these financially troubled Euro nations, cannot sell their bonds, the ECB is going to have to come in and become the buyer of last resort or else risk a spreading of a debt contagion on their watch. Chatter was that they were already doing just that today. We’ll see how many of their bonds the Japanese and Chinese will actually buy after stating that they would be purchasers of some of the debt. Savvy investors in the Euro zone have figured out that what the ECB is doing is a sort of back door QE and that is why they are buying gold and thus why the price of gold in euros is so firm.
In US dollar terms, gold climbed back above the significant chart level of $1380 during those European trading hours but fell back coming into New York and surrendered the level. We still have a “sell the rally” psyche since the price is trading below the short term moving averages so bulls will need to get the price firmly above $1400 to change that but first they have to better this $1380 mark. As the session wore on in New York, bulls made a late comeback and recaptured the hill at $1380 heading into the close, achieving a nice technical victory. Several of the technical indicators that I follow are down in the oversold zone and beginning to flatten out so it will not take too much in the way of further price gains to push those indicators into generating buy signals. Bears would still dearly love to take price below $1365 and hold it there to enable a push towards $1345 – $1340 but thus far have been frustrated in their attempts to do by the emergence of solid buying of physical coming out of Asia and Europe. These shorts will be forced out if price closes above $1400.
Silver is showing good strength at a time when it needed to on the technical charts. The further it moves up and away from $28.50, the better for the bulls as it will bring some buyers back in from the sidelines who were hesitating for fear of getting trapped by fund selling that would ensue if those support levels were taken out. The chatter about tightness in the physical silver market certainly appears to be validated by the price action of the metal at the Comex. I still want to see it climb back above the $30 level and hold there before getting confident enough to expect another leg higher. It ran into selling exactly at the 10 day moving average which is currently trending lower so we will want to see it first push past this level near $29.80 and close above it to begin spooking the bears and inducing some short covering.
The metals are finally getting some help from the HUI but that index needs to climb above 560 to get anyone terribly excited. There are so many shorts in the mining shares that if the metals can break their overhead resistance levels, a frenzy of buying is going to appear.
Bonds were lower again (Here we go back to the yo-yo once again) as risk was back in vogue today. The Yen was sold off as it always is during times of risk trades and the CCI was up sharply with crude oil rising back above $90 and moving towards $91. Copper was also quite strong today taking on more than 10 cents at one point. At least for today the markets seemed to be in sync with what the bond market was doing. Perhaps that is because the Fed was not quite as active today doing their QE thing that they love to do with the freshly created binary digits that we all get to pay for (correction – our kids get to pay for). Anyone who thinks we still have free markets in the US needs to wake up and smell the coffee. The bond market is very heavily managed by the monetary authorities; without their manipulations of long term interest rates, the bond market would have already broken down and begun another leg lower. Prospective bond buyers should be forced to wear a wrist band with a red warning light that glows whenever the CCI (Continuous Commodity Index) is moving strongly higher particularly if crude oil is going along for the uphill ride.
I see my pals at GATA have won a small but perhaps significant victory in their efforts to pry open the books of the masters of the dark (that would be the Fed). Congrats to Bill and Chris!
Corn is leading the grains complex this morning as traders anticipate a bullish release from the USDA tomorrow morning. Corn tends to draw strength from gains in crude oil as that tends to support ethanol prices. If corn closes above $6.30 and wheat closes above $8.10, watch out! Beef and now pork prices are climbing sharply at the wholesale level pushing the price of cattle into record territory for some contracts. Look for a resurgence in cattle rustling ( I am serious about this). Many of the commodity charts are showing prices just below recent highs. A push past those levels and the rising price of food is going to see the afterburners kick in. Retail prices have already begun their climb higher as any of you who monitor prices at the local grocery stores are aware. When it takes as much money to pound a pound of bacon as it does a fine quality Choice beef filet, we are all in trouble. Unfortunately for all of us, there does not appear to be any relief in sight. Keep in mind that much of this is man induced – it is the direct result of Federal Reserve policy. As mentioned yesterday, the fundamentals in many of the foods are already strongly bullish – the extra kick higher than comes from a plethora of funny money chasing tangibles, just exacerbates the situation. I sincerely believe we are going to be seeing food riots around many parts of the globe this year. The Eastern authorities know full well whom to blame for that. Unrest in any nation is a serious political issue and the West is fomenting it by foolish monetary policies and reckless money printing.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1111Gold.pdf
Sovereign debt woes out of Europe, particularly Portugal, continue to bring a strong bid into gold. During the early part of the European trading session gold had pushed within a mere 4 euros of its all time high before it was taken down as the clock moved into New York trading (gee – what a surprise). These problems are not going to go away any time soon and as they come to the forefront of the headlines will serve to remind traders of the problems with the Euro and facilitate a drive to gold as a safe haven. They will also be there to serve as a supportive feature for the metal during bouts of price weakness should further fund long side liquidation take place.
If Portugal, or any other of these financially troubled Euro nations, cannot sell their bonds, the ECB is going to have to come in and become the buyer of last resort or else risk a spreading of a debt contagion on their watch. Chatter was that they were already doing just that today. We’ll see how many of their bonds the Japanese and Chinese will actually buy after stating that they would be purchasers of some of the debt. Savvy investors in the Euro zone have figured out that what the ECB is doing is a sort of back door QE and that is why they are buying gold and thus why the price of gold in euros is so firm.
In US dollar terms, gold climbed back above the significant chart level of $1380 during those European trading hours but fell back coming into New York and surrendered the level. We still have a “sell the rally” psyche since the price is trading below the short term moving averages so bulls will need to get the price firmly above $1400 to change that but first they have to better this $1380 mark. As the session wore on in New York, bulls made a late comeback and recaptured the hill at $1380 heading into the close, achieving a nice technical victory. Several of the technical indicators that I follow are down in the oversold zone and beginning to flatten out so it will not take too much in the way of further price gains to push those indicators into generating buy signals. Bears would still dearly love to take price below $1365 and hold it there to enable a push towards $1345 – $1340 but thus far have been frustrated in their attempts to do by the emergence of solid buying of physical coming out of Asia and Europe. These shorts will be forced out if price closes above $1400.
Silver is showing good strength at a time when it needed to on the technical charts. The further it moves up and away from $28.50, the better for the bulls as it will bring some buyers back in from the sidelines who were hesitating for fear of getting trapped by fund selling that would ensue if those support levels were taken out. The chatter about tightness in the physical silver market certainly appears to be validated by the price action of the metal at the Comex. I still want to see it climb back above the $30 level and hold there before getting confident enough to expect another leg higher. It ran into selling exactly at the 10 day moving average which is currently trending lower so we will want to see it first push past this level near $29.80 and close above it to begin spooking the bears and inducing some short covering.
The metals are finally getting some help from the HUI but that index needs to climb above 560 to get anyone terribly excited. There are so many shorts in the mining shares that if the metals can break their overhead resistance levels, a frenzy of buying is going to appear.
Bonds were lower again (Here we go back to the yo-yo once again) as risk was back in vogue today. The Yen was sold off as it always is during times of risk trades and the CCI was up sharply with crude oil rising back above $90 and moving towards $91. Copper was also quite strong today taking on more than 10 cents at one point. At least for today the markets seemed to be in sync with what the bond market was doing. Perhaps that is because the Fed was not quite as active today doing their QE thing that they love to do with the freshly created binary digits that we all get to pay for (correction – our kids get to pay for). Anyone who thinks we still have free markets in the US needs to wake up and smell the coffee. The bond market is very heavily managed by the monetary authorities; without their manipulations of long term interest rates, the bond market would have already broken down and begun another leg lower. Prospective bond buyers should be forced to wear a wrist band with a red warning light that glows whenever the CCI (Continuous Commodity Index) is moving strongly higher particularly if crude oil is going along for the uphill ride.
I see my pals at GATA have won a small but perhaps significant victory in their efforts to pry open the books of the masters of the dark (that would be the Fed). Congrats to Bill and Chris!
Corn is leading the grains complex this morning as traders anticipate a bullish release from the USDA tomorrow morning. Corn tends to draw strength from gains in crude oil as that tends to support ethanol prices. If corn closes above $6.30 and wheat closes above $8.10, watch out! Beef and now pork prices are climbing sharply at the wholesale level pushing the price of cattle into record territory for some contracts. Look for a resurgence in cattle rustling ( I am serious about this). Many of the commodity charts are showing prices just below recent highs. A push past those levels and the rising price of food is going to see the afterburners kick in. Retail prices have already begun their climb higher as any of you who monitor prices at the local grocery stores are aware. When it takes as much money to pound a pound of bacon as it does a fine quality Choice beef filet, we are all in trouble. Unfortunately for all of us, there does not appear to be any relief in sight. Keep in mind that much of this is man induced – it is the direct result of Federal Reserve policy. As mentioned yesterday, the fundamentals in many of the foods are already strongly bullish – the extra kick higher than comes from a plethora of funny money chasing tangibles, just exacerbates the situation. I sincerely believe we are going to be seeing food riots around many parts of the globe this year. The Eastern authorities know full well whom to blame for that. Unrest in any nation is a serious political issue and the West is fomenting it by foolish monetary policies and reckless money printing.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1111Gold.pdf
Monday, January 10, 2011
DAN NORCINI'S MONDAY COMMENTS WITH GOLD CHART
Posted: Jan 10 2011 By: Dan Norcini Post Edited: January 10, 2011 at 3:13 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear CIGAs,
There seemed to be a general reflation type of trade back in play today although it was mixed in the sense that the bonds were a bit higher which generally does not comport with the return of risk trades. Copper was lower as well which sent off a mixed signal.
The grains however were very strong with beans leading the charge and corn right on their heels. Crude oil moved higher on news of a drop off in oil moving through the Trans Alaska Pipeline due to a discovered leak near Prudhoe Bay.
The Dollar was slightly lower and equities were a tad lower leading to some conflicting short term signals for traders to sort through.
In response to a private email, I suggested while the US Dollar is going to continue exerting a strong influence on the overall level of commodity prices, I am not so sure that we are going to see a direct link reassert itself to the degree where we have nearly every tick higher in the Dollar followed by a tick lower in commodities. There are certain commodity markets which have a set of fundamentals that are strongly bullish. While those markets are indeed influenced by inflows of hot money flows and would tend to move lower while the Dollar moves higher, the fundamentals are so strong that downdrafts are going to be bought, Dollar or no Dollar. Those markets which are more bubbles associated with only hot money flows buying commodities across the board, and which do not have the supportive fundamentals, could see deeper retracements in price should the Dollar continue to strengthen but I do not believe we can any longer make the statement: “Dollar UP, Commodities down”.
The reason in my view is the nature of the so-called “economic recovery” in the US. While recent economic data has given proponents of an improving economy some reason to support their view, the fact is that job creation is practically non-existent. Even those jobs which are being created are not sufficient to keep up with just the increase in the numbers of job seekers due to population growth, much less put a solid dent in the rising number of unemployed or underemployed. I believe the market is looking past the various data releases and more focused on the fact that this critical aspect of any true recovery, jobs, remains weak and will remain sluggish for the foreseeable future. Fed Chairman Bernanke as much as said the same in his comments last week.
Translation – the market expects that the QE policy is not going to go away and is convinced that inflation is in its future. That means the bullish trend in commodities as a whole will continue until or unless there is a CLEAR SIGNAL that the number of jobs being created is of sufficient size that QE will no longer be necessary. The price action of the overall sector as indicated by the CCI is reflecting this view as it is more suggestive of a lull in buying rather than the beginning of a sustained downtrend. I think we are seeing this reflected in the gold market which while it cannot yet manage to climb back above $1400 and reassert another leg in its long term uptrend, does not appear to want to break sharply lower either.
We will know whether this is indeed the case if the Dollar manages to punch through the 82 level on the USDX and closes there on a weekly basis. We will have to stay tuned and watch developments in real time to see where we head next.
In regards to the Dollar strength, let me suggest it is not a function of improving fundamentals in the US as much as it is an aversion to the Euro based on the lingering woes associated with the problems of some of the various member states of the EU. We can call the Dollar strength the more appropriate, “It’s not the Euro” trade. There is also a bit of support that comes in from the idea that floats to the surface that QE is going to be withdrawn sooner than anticipated whenever the US economic data releases come in better than expected.
Short term the markets are giving off mixed signals which is indicative of uncertainty on the part of traders. Some are moving to the sidelines or lightening up a bit as they wait to gauge future direction. In addition, we are still going to be dealing with index fund rebalancing which further clouds the analysis. I expect this to continue until we get enough data to buttress the opposing arguments one way or the other but even at that, the long term damage associated with a $14 Trillion national debt is not going to go away nor are the effects of what can only be called unlimited money printing by the Fed.
I do want to point out that I continue to monitor the price of gold in various major currencies to see how traders around the globe are viewing the market. Gold priced in Euro terms is very strong hanging in there at a mere 15 euros below its recent all time high.
A quick note on silver – its move away from support near $28.50 is encouraging but I would want to see it close back above $30 to get an “all clear” for the bulls. The shorter term moving averages are still moving lower but it has been able to move back up and away from both the 40 day and 50 day moving averages, which is constructive.
The HUI is what it is, a playground for the hedge funds and their ratio spread trades which seem to come back on during periods of indecision in the market. It needs to get above 560 to get something going to the upside.
Bonds are trading mixed gaining a bit of support from the lower equity markets but encountering selling as the CCI moves higher. They too are in a wait and see mode.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1011Gold.pdf
There seemed to be a general reflation type of trade back in play today although it was mixed in the sense that the bonds were a bit higher which generally does not comport with the return of risk trades. Copper was lower as well which sent off a mixed signal.
The grains however were very strong with beans leading the charge and corn right on their heels. Crude oil moved higher on news of a drop off in oil moving through the Trans Alaska Pipeline due to a discovered leak near Prudhoe Bay.
The Dollar was slightly lower and equities were a tad lower leading to some conflicting short term signals for traders to sort through.
In response to a private email, I suggested while the US Dollar is going to continue exerting a strong influence on the overall level of commodity prices, I am not so sure that we are going to see a direct link reassert itself to the degree where we have nearly every tick higher in the Dollar followed by a tick lower in commodities. There are certain commodity markets which have a set of fundamentals that are strongly bullish. While those markets are indeed influenced by inflows of hot money flows and would tend to move lower while the Dollar moves higher, the fundamentals are so strong that downdrafts are going to be bought, Dollar or no Dollar. Those markets which are more bubbles associated with only hot money flows buying commodities across the board, and which do not have the supportive fundamentals, could see deeper retracements in price should the Dollar continue to strengthen but I do not believe we can any longer make the statement: “Dollar UP, Commodities down”.
The reason in my view is the nature of the so-called “economic recovery” in the US. While recent economic data has given proponents of an improving economy some reason to support their view, the fact is that job creation is practically non-existent. Even those jobs which are being created are not sufficient to keep up with just the increase in the numbers of job seekers due to population growth, much less put a solid dent in the rising number of unemployed or underemployed. I believe the market is looking past the various data releases and more focused on the fact that this critical aspect of any true recovery, jobs, remains weak and will remain sluggish for the foreseeable future. Fed Chairman Bernanke as much as said the same in his comments last week.
Translation – the market expects that the QE policy is not going to go away and is convinced that inflation is in its future. That means the bullish trend in commodities as a whole will continue until or unless there is a CLEAR SIGNAL that the number of jobs being created is of sufficient size that QE will no longer be necessary. The price action of the overall sector as indicated by the CCI is reflecting this view as it is more suggestive of a lull in buying rather than the beginning of a sustained downtrend. I think we are seeing this reflected in the gold market which while it cannot yet manage to climb back above $1400 and reassert another leg in its long term uptrend, does not appear to want to break sharply lower either.
We will know whether this is indeed the case if the Dollar manages to punch through the 82 level on the USDX and closes there on a weekly basis. We will have to stay tuned and watch developments in real time to see where we head next.
In regards to the Dollar strength, let me suggest it is not a function of improving fundamentals in the US as much as it is an aversion to the Euro based on the lingering woes associated with the problems of some of the various member states of the EU. We can call the Dollar strength the more appropriate, “It’s not the Euro” trade. There is also a bit of support that comes in from the idea that floats to the surface that QE is going to be withdrawn sooner than anticipated whenever the US economic data releases come in better than expected.
Short term the markets are giving off mixed signals which is indicative of uncertainty on the part of traders. Some are moving to the sidelines or lightening up a bit as they wait to gauge future direction. In addition, we are still going to be dealing with index fund rebalancing which further clouds the analysis. I expect this to continue until we get enough data to buttress the opposing arguments one way or the other but even at that, the long term damage associated with a $14 Trillion national debt is not going to go away nor are the effects of what can only be called unlimited money printing by the Fed.
I do want to point out that I continue to monitor the price of gold in various major currencies to see how traders around the globe are viewing the market. Gold priced in Euro terms is very strong hanging in there at a mere 15 euros below its recent all time high.
A quick note on silver – its move away from support near $28.50 is encouraging but I would want to see it close back above $30 to get an “all clear” for the bulls. The shorter term moving averages are still moving lower but it has been able to move back up and away from both the 40 day and 50 day moving averages, which is constructive.
The HUI is what it is, a playground for the hedge funds and their ratio spread trades which seem to come back on during periods of indecision in the market. It needs to get above 560 to get something going to the upside.
Bonds are trading mixed gaining a bit of support from the lower equity markets but encountering selling as the CCI moves higher. They too are in a wait and see mode.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1011Gold.pdf
Friday, January 7, 2011
DAN NORCINI'S FRIDAY COMMENTS AND GOLD CHART
Posted: Jan 07 2011 By: Dan Norcini Post Edited: January 7, 2011 at 1:47 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear CIGAs,
Extreme volatility was the standout today as a conflicted payrolls report had participants scrambling to assess the direction in which to place their bets.
Overnight, gold fell through strong support near $1365 plunging down towards $1350 in anticipation of a very strong jobs number. When the number failed to live up to the anticipated hype (remember that bizarre ADP number earlier this week), shorts scrambled for cover as buyers came back in. That buying took gold well off its worst levels (nearly $20) and back above $1365. It will need to hold this level to prevent another run lower towards $1345 – $1340. One can easily observe the battle around this critical level on the 15 minute bar chart.
JBGJ reports strong physical offtake in Asia on the move lower which is what will be needed to offset the fund liquidation and fresh short selling entering the market. The key will be whether the funds begin to liquidate or sit tight.
The selling in gold and across many of the commodity markets is coming from the notion that the US economy is slowly improving thus alleviating the need for much more in the way of the Fed’s QE2. I do not subscribe to that concept but there are enough adherents that it is engendering selling in many of the commodity markets. When we get a reminder of how tenuous any so called “recovery” in reality is, it tends to bring buying back into gold as sentiment shifts in favor of more QE for a prolonged period of time. In effect we are reduced to plucking petals on a daisy: “She loves me; she loves me not”; or more appropriately: “Ben will do more QE; Ben will not”. Depending on what market participants believe Ben will do, determines what direction our markets will go on any given day.
Keep watching copper and crude oil for a clue…
The Dollar is also having an effect on the overall commodity sector as it continues gaining support from an aversion to the Euro based on the sovereign debt woes in that zone. It also tends to move higher when we get generally positive news on the US economic front. It is necessary to keep in mind that today’s markets do not focus on the long term; algorithms are all short term oriented. The long term consequences of a $14 trillion debt load and continued money printing in an attempt to induce job creation are not going to be denied – short term however the crowd will get behind the effects of the liquidity creation of the Fed and the devil with the harm being done to the country and the next generation who are the ones who will have to bear the brunt of today’s borrow, print and spent policies. I have said it many times and will say so again; “The Chinese play chess while the US plays checkers”. The former has a 50 year plan; the latter has a 90 day window of forward looking”.
Back to gold – I like the fact that it has found buyers on its foray’s lower but it must get back above the 50 day moving average soon. As mentioned yesterday, the longer it stays below this level, the stronger the temptation is going to be for funds to begin cashing in on some of their longs. When the short term moving averages are trending lower and the market is below the 50 day, rallies are generally going to be sold. This is the reason that the bulls have to take price back above $1400 to engender a “buy the dip” mentality instead of a “sell the rally” one.
Something will need to develop on the sentiment front to induce this move towards $1400 with the upcoming economic data being carefully scrutinized for clues to the Fed’s next move.
Oddly enough the market is right back at the level it was trading at the week of Christmas last year before it took off to the upside on some wild-eyed end of year buying which caught a lot of us by surprise. I had fully expected to see the selling that occurred earlier this week take place the last week of last year. I am still at a loss to explain what the deal was behind all that buying the last week of the year. Regardless, we do not want to see two consecutive closes below $1365.
Silver is flirting very dangerously with critical support near the $28.50 level. It is looking weak enough to break that level and move towards $28 which the friends of silver would not want to see violated as it would portend a break towards $27. Apparently the $30 level was too much for the grey metal in spite of the good technical finish it put in last year. Bulls need to perform quickly here.
I have been looking for some fresh money to hit the commodity markets with the advent of the New Year but so far that is not occurring. If anything, money is flowing out of the commodity sector for the time being. To me it does not look like a trend reversal in the sector overall but rather a loss of interest on the buy side which is allowing many of these markets to drift lower as longs liquidate and finally take those profits which I expected them to take last year. The fundamentals in the grains remain strong but they too are seeing some of this selling. Very few markets, only sugar that I can see for now, are escaping the selling telling us that it is broad based as exposure to commodities is being cut for the time being. If the play was to exit commodities and move to stocks, that sure does not appear to be what is happening today given the weakness in the S&P 500. It looks more like booking profits and moving to the sidelines to reassess what to do next.
From what I can see, a pattern is developing in which we are getting better US economic data but the status quo on job creation which is nil. Bernanke admitted much the same in his comments today. The result could be some choppy markets which are difficult to gauge as to short term trends. Just look at the bonds if you need any further proof. They are trading like some sort of damned yo-yo.
When risk is off the table, the bonds will tend to move higher as will the Japanese Yen. When risk is back on, the bonds will move lower as will the Yen. It is all quite maddening to get a decent read at such times and the best advice for traders is to trade smaller and run more quickly. You are never going to be able to compete with the algorithms so learn to stay out of their way and let them chop someone else, including their own kind, to pieces while you wait for those longer term trends to reassert themselves. Markets in these choppy phases are extremely dangerous to trade so be careful.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January0711Gold.pdf
Extreme volatility was the standout today as a conflicted payrolls report had participants scrambling to assess the direction in which to place their bets.
Overnight, gold fell through strong support near $1365 plunging down towards $1350 in anticipation of a very strong jobs number. When the number failed to live up to the anticipated hype (remember that bizarre ADP number earlier this week), shorts scrambled for cover as buyers came back in. That buying took gold well off its worst levels (nearly $20) and back above $1365. It will need to hold this level to prevent another run lower towards $1345 – $1340. One can easily observe the battle around this critical level on the 15 minute bar chart.
JBGJ reports strong physical offtake in Asia on the move lower which is what will be needed to offset the fund liquidation and fresh short selling entering the market. The key will be whether the funds begin to liquidate or sit tight.
The selling in gold and across many of the commodity markets is coming from the notion that the US economy is slowly improving thus alleviating the need for much more in the way of the Fed’s QE2. I do not subscribe to that concept but there are enough adherents that it is engendering selling in many of the commodity markets. When we get a reminder of how tenuous any so called “recovery” in reality is, it tends to bring buying back into gold as sentiment shifts in favor of more QE for a prolonged period of time. In effect we are reduced to plucking petals on a daisy: “She loves me; she loves me not”; or more appropriately: “Ben will do more QE; Ben will not”. Depending on what market participants believe Ben will do, determines what direction our markets will go on any given day.
Keep watching copper and crude oil for a clue…
The Dollar is also having an effect on the overall commodity sector as it continues gaining support from an aversion to the Euro based on the sovereign debt woes in that zone. It also tends to move higher when we get generally positive news on the US economic front. It is necessary to keep in mind that today’s markets do not focus on the long term; algorithms are all short term oriented. The long term consequences of a $14 trillion debt load and continued money printing in an attempt to induce job creation are not going to be denied – short term however the crowd will get behind the effects of the liquidity creation of the Fed and the devil with the harm being done to the country and the next generation who are the ones who will have to bear the brunt of today’s borrow, print and spent policies. I have said it many times and will say so again; “The Chinese play chess while the US plays checkers”. The former has a 50 year plan; the latter has a 90 day window of forward looking”.
Back to gold – I like the fact that it has found buyers on its foray’s lower but it must get back above the 50 day moving average soon. As mentioned yesterday, the longer it stays below this level, the stronger the temptation is going to be for funds to begin cashing in on some of their longs. When the short term moving averages are trending lower and the market is below the 50 day, rallies are generally going to be sold. This is the reason that the bulls have to take price back above $1400 to engender a “buy the dip” mentality instead of a “sell the rally” one.
Something will need to develop on the sentiment front to induce this move towards $1400 with the upcoming economic data being carefully scrutinized for clues to the Fed’s next move.
Oddly enough the market is right back at the level it was trading at the week of Christmas last year before it took off to the upside on some wild-eyed end of year buying which caught a lot of us by surprise. I had fully expected to see the selling that occurred earlier this week take place the last week of last year. I am still at a loss to explain what the deal was behind all that buying the last week of the year. Regardless, we do not want to see two consecutive closes below $1365.
Silver is flirting very dangerously with critical support near the $28.50 level. It is looking weak enough to break that level and move towards $28 which the friends of silver would not want to see violated as it would portend a break towards $27. Apparently the $30 level was too much for the grey metal in spite of the good technical finish it put in last year. Bulls need to perform quickly here.
I have been looking for some fresh money to hit the commodity markets with the advent of the New Year but so far that is not occurring. If anything, money is flowing out of the commodity sector for the time being. To me it does not look like a trend reversal in the sector overall but rather a loss of interest on the buy side which is allowing many of these markets to drift lower as longs liquidate and finally take those profits which I expected them to take last year. The fundamentals in the grains remain strong but they too are seeing some of this selling. Very few markets, only sugar that I can see for now, are escaping the selling telling us that it is broad based as exposure to commodities is being cut for the time being. If the play was to exit commodities and move to stocks, that sure does not appear to be what is happening today given the weakness in the S&P 500. It looks more like booking profits and moving to the sidelines to reassess what to do next.
From what I can see, a pattern is developing in which we are getting better US economic data but the status quo on job creation which is nil. Bernanke admitted much the same in his comments today. The result could be some choppy markets which are difficult to gauge as to short term trends. Just look at the bonds if you need any further proof. They are trading like some sort of damned yo-yo.
When risk is off the table, the bonds will tend to move higher as will the Japanese Yen. When risk is back on, the bonds will move lower as will the Yen. It is all quite maddening to get a decent read at such times and the best advice for traders is to trade smaller and run more quickly. You are never going to be able to compete with the algorithms so learn to stay out of their way and let them chop someone else, including their own kind, to pieces while you wait for those longer term trends to reassert themselves. Markets in these choppy phases are extremely dangerous to trade so be careful.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January0711Gold.pdf
Thursday, January 6, 2011
Wednesday, January 5, 2011
Inflation In Eurozone
Posted: Jan 05 2011 By: Dan Norcini Post Edited: January 5, 2011 at 10:48 am
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
I missed this story from yesterday but felt it was significant enough to bring it to your attention as it has a parallel here in the US.
The headline is entitled; “Inflation Jumps in Europe”.
When you read the story note the first sentence well: “Higher prices for food, oil and other commodities are starting to stoke inflation in the euro area…”
This is precisely what we have been warning you about that was going to occur over here based on the chart of the CCI (Continuous Commodity Index). The fact is food prices are globally connected nowadays with rising prices in one quarter of the globe spilling over into the rest. Monty has spoken to rising inflation in the emerging markets in his newsletters; now it is becoming evident that inflation is surfacing in the developed world, protestations and denials by the monetary authorities to the contrary.
You will also notice that the job situation in the Euro zone is not particularly healthy, meaning wages are flat over there as well. The pundits constantly refer to this fact when they assure us that inflation is manageable. Excuse me to differ; yes – upward pressures on wages are non-existent but that does little to soothe the problems of the average citizen who are watching the cost of the essentials of life moving higher as his or her wages go nowhere. Translation – more of the disposable income of the consumer is forced to pay for the necessities of life leaving less for discretionary spending. Oil’s first foray above the $91 level already has seen the headlines trumpet the charge: “OIL PRICE ‘ENTERS DANGER ZONE’”. Wait until gasoline enters its peak demand season later this year!
The monetary authorities are playing a very dangerous game in attempting to stoke the fires of inflation to ward off the icy fears of deflation. By beating back the latter and seeking to generate “growth”, they may find their creation not so compliant and manageable as they might believe.
Perhaps there are some marching orders given to the primary dealers to see what can be done about those pesky commodity markets.
ARTICLE:
http://finance.yahoo.com/news/Inflation-Jumps-in-nytimes-130499028.html;_ylt=AsOkxtbyRQJ2NQZftSl7H_67YWsA;_ylu=X3oDMTE2bmRqbGQwBHBvcwMxMQRzZWMDdG9wU3RvcmllcwRzbGsDd2hhdHlvdXNob3Vs?x=0&sec=topStories&pos=7&asset=&ccode=
I missed this story from yesterday but felt it was significant enough to bring it to your attention as it has a parallel here in the US.
The headline is entitled; “Inflation Jumps in Europe”.
When you read the story note the first sentence well: “Higher prices for food, oil and other commodities are starting to stoke inflation in the euro area…”
This is precisely what we have been warning you about that was going to occur over here based on the chart of the CCI (Continuous Commodity Index). The fact is food prices are globally connected nowadays with rising prices in one quarter of the globe spilling over into the rest. Monty has spoken to rising inflation in the emerging markets in his newsletters; now it is becoming evident that inflation is surfacing in the developed world, protestations and denials by the monetary authorities to the contrary.
You will also notice that the job situation in the Euro zone is not particularly healthy, meaning wages are flat over there as well. The pundits constantly refer to this fact when they assure us that inflation is manageable. Excuse me to differ; yes – upward pressures on wages are non-existent but that does little to soothe the problems of the average citizen who are watching the cost of the essentials of life moving higher as his or her wages go nowhere. Translation – more of the disposable income of the consumer is forced to pay for the necessities of life leaving less for discretionary spending. Oil’s first foray above the $91 level already has seen the headlines trumpet the charge: “OIL PRICE ‘ENTERS DANGER ZONE’”. Wait until gasoline enters its peak demand season later this year!
The monetary authorities are playing a very dangerous game in attempting to stoke the fires of inflation to ward off the icy fears of deflation. By beating back the latter and seeking to generate “growth”, they may find their creation not so compliant and manageable as they might believe.
Perhaps there are some marching orders given to the primary dealers to see what can be done about those pesky commodity markets.
ARTICLE:
http://finance.yahoo.com/news/Inflation-Jumps-in-nytimes-130499028.html;_ylt=AsOkxtbyRQJ2NQZftSl7H_67YWsA;_ylu=X3oDMTE2bmRqbGQwBHBvcwMxMQRzZWMDdG9wU3RvcmllcwRzbGsDd2hhdHlvdXNob3Vs?x=0&sec=topStories&pos=7&asset=&ccode=
DAN NORCINI'S WEDNESDAY COMMENTS AND GOLD CHART
Posted: Jan 05 2011 By: Dan Norcini Post Edited: January 5, 2011 at 3:23 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
Yesterday’s violent sell off across the commodity sector unsettled more than a few investors/traders on account of its ferocity and extent (not a single commodity escaped the selling). As can be expected during such bouts of intense selling, there was follow through selling overnight and into the early hours of North American trading. Some of this was margin call related – other was tied to fresh shorting and further long liquidation.
When the ADP job numbers were released around 7:00 AM Central Time, the bond market rapidly began to descend while the Dollar shot sharply higher, especially against the Japanese Yen. About the same time a key commodity market, copper, began rising off its overnight lows. As copper continued moving higher one could observe the bids entering all across the entire commodity sector, including both gold and silver. The grains, sugar, crude oil and livestock sector also began seeing fund related buying surface. This buying seemed to feed into the gold market, in spite of the strength in the Dollar, and enabled it to climb off its worst levels.
The result was to take gold away from a critical support level near $1365 on the downside and thus spare it any further carnage for the time being as some weaker shorts decided that there was not much sense in trying to push it with that kind of buying present. The bulls have bought themselves some time now to attempt to repair some of the technical damage done to the shorter-term oriented charts. Their first goal will be to take price back above $1380 and hold it there for a pit session close. The temptation will be to sell rallies since the short term moving averages are now trending lower. We will have to wait and see whether or not the bulls can push price high enough to turn those averages up once again.
It sure would not hurt matters if the HUI were to stop moving lower. I will feel better about it if it can close above yesterday’s high at 561.
Silver found support near critical $28.50, which it needed to do in order to prevent a deeper move lower but it needs to recapture the $30 level once again to give some technical chart assurance to the bulls. The bounce is constructive and if it leads to a ranging trade above today’s low, the bulls will have gained the advantage. It is essential that the longs hold the $28.50 level on any closing print.
I think it important to note once again the breakdown in the bond market. It has been falling apart only to be jammed higher by the Fed when they implement their purchases as part of the ongoing QE2 program but it seems to me that the legs down have more conviction to them than do the artificially contrived rallies. They will need to close conclusively below the mid December 2010 double bottom near 118^21 to give us a better indication of whether or not the Fed is going to singlehandedly be able to hold up a market that looks as if it wants to go lower. The ADP job numbers may be suspect but the bond market decided to take them at face value confirming at least in my mind, that the bonds are looking for reasons to move lower. That being the case, it is going to be quite the experience observing how the Fed is going to be successful in its quest to drive long term interest rates lower.
I should also note that crude oil did not stay down very long below $89 before popping higher. That, along with copper, will be key to seeing how the broader commodity complex is going to fare moving forward. It needs a close above $91.50 to push higher and set up a test of the high it posted this Monday near $92.50.
The Dollar (USDX) needs to push past 82 to get anything going on the upside. It does not appear to want to move lower right now as chatter about an improvement in the US economy coupled with lingering concerns about the welfare of several of the various European nations is giving buyers of the Euro pause to question their convictions. Quite frankly, seeing this Dollar strength being accompanied by another rush of money into the commodity sector is quite remarkable, given how sensitive those algorithms are to the well being or woes of the greenback.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January0511Gold.pdf
Yesterday’s violent sell off across the commodity sector unsettled more than a few investors/traders on account of its ferocity and extent (not a single commodity escaped the selling). As can be expected during such bouts of intense selling, there was follow through selling overnight and into the early hours of North American trading. Some of this was margin call related – other was tied to fresh shorting and further long liquidation.
When the ADP job numbers were released around 7:00 AM Central Time, the bond market rapidly began to descend while the Dollar shot sharply higher, especially against the Japanese Yen. About the same time a key commodity market, copper, began rising off its overnight lows. As copper continued moving higher one could observe the bids entering all across the entire commodity sector, including both gold and silver. The grains, sugar, crude oil and livestock sector also began seeing fund related buying surface. This buying seemed to feed into the gold market, in spite of the strength in the Dollar, and enabled it to climb off its worst levels.
The result was to take gold away from a critical support level near $1365 on the downside and thus spare it any further carnage for the time being as some weaker shorts decided that there was not much sense in trying to push it with that kind of buying present. The bulls have bought themselves some time now to attempt to repair some of the technical damage done to the shorter-term oriented charts. Their first goal will be to take price back above $1380 and hold it there for a pit session close. The temptation will be to sell rallies since the short term moving averages are now trending lower. We will have to wait and see whether or not the bulls can push price high enough to turn those averages up once again.
It sure would not hurt matters if the HUI were to stop moving lower. I will feel better about it if it can close above yesterday’s high at 561.
Silver found support near critical $28.50, which it needed to do in order to prevent a deeper move lower but it needs to recapture the $30 level once again to give some technical chart assurance to the bulls. The bounce is constructive and if it leads to a ranging trade above today’s low, the bulls will have gained the advantage. It is essential that the longs hold the $28.50 level on any closing print.
I think it important to note once again the breakdown in the bond market. It has been falling apart only to be jammed higher by the Fed when they implement their purchases as part of the ongoing QE2 program but it seems to me that the legs down have more conviction to them than do the artificially contrived rallies. They will need to close conclusively below the mid December 2010 double bottom near 118^21 to give us a better indication of whether or not the Fed is going to singlehandedly be able to hold up a market that looks as if it wants to go lower. The ADP job numbers may be suspect but the bond market decided to take them at face value confirming at least in my mind, that the bonds are looking for reasons to move lower. That being the case, it is going to be quite the experience observing how the Fed is going to be successful in its quest to drive long term interest rates lower.
I should also note that crude oil did not stay down very long below $89 before popping higher. That, along with copper, will be key to seeing how the broader commodity complex is going to fare moving forward. It needs a close above $91.50 to push higher and set up a test of the high it posted this Monday near $92.50.
The Dollar (USDX) needs to push past 82 to get anything going on the upside. It does not appear to want to move lower right now as chatter about an improvement in the US economy coupled with lingering concerns about the welfare of several of the various European nations is giving buyers of the Euro pause to question their convictions. Quite frankly, seeing this Dollar strength being accompanied by another rush of money into the commodity sector is quite remarkable, given how sensitive those algorithms are to the well being or woes of the greenback.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January0511Gold.pdf
Tuesday, January 4, 2011
DAN NORCINI'S TUESDAY COMMENTS WITH GOLD CHART
Posted: Jan 04 2011 By: Dan Norcini Post Edited: January 4, 2011 at 7:56 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear CIGAs,
Gold and silver are starting off the New Year doing what many professional traders, myself included, expected them to do during the last few trading days of last year! They went soaring to the upside in front of the New Year and are just now experiencing a pullback as funds lift some longs and some new shorts are seemingly being emboldened by the notion of an “improving economy”. I was extremely surprised last week to see them shooting so sharply higher with new money coming into the market as the calendar year wore down to a close. Now it seems as if we are finally seeing some of that selling showing up during the first full week of trading, which again, is out of the normal pattern. Then again, not much of anything in these markets is “normal” anymore since the funds have taken over everything.
Some of this is rebalancing associated to the changes in the commodity indices that I mentioned yesterday but there is definitely a bit more to it than that. For whatever the reason, commodities are experiencing a general wave of selling today after the CCI went on to make yet another all time high yesterday. It’s not just gold and silver; crude oil, the grains, the meats, etc, all are seeing a wave of selling as the algorithms trip into the sell mode for the time being. We’ll just have to wait and see where the buyers surface in the sector. The “buy commodity” strategy will be in effect as long as the FOMC does not change monetary policy or scale back its QE2 program which based on today’s release of their minutes, suggests is not going to happen anytime soon.
Silver needs to find enough buying support to climb back above the $30 level to cement that as a base and prepare it for a leg higher. Failure to do so will drop it further and see it move down towards the $29 level. We’ll have to watch if it can entice some fresh buying should it move that low. From a bullish perspective, I would prefer that it not move below $28.50 for any length of time.
Gold needs to climb back above $1400 to give the bulls some encouragement for another try at $1420. I would not like to see gold get a close below $1380 as that would portend a deeper setback down towards $1365 or so. It is sitting right on the 50 day moving average which a lot of technicians watch so it will be important for the bullish cause for it to move up and away from that level quickly to keep the sentiment firmly bullish.
Momentum has been declining in gold making a series of lower highs as the price has moved up which has to be monitored as the hedgies are all about chasing prices either higher or lower depending on momentum. The huge buyers of the physical market could care less about momentum but they do watch such things in an attempt to determine if they will get further fund long side liquidation allowing them to get a better price on their planned purchases.
I read today that the US debt topped $14 Trillion which makes me shake my head in dismay when I hear talk about an improving economy. FOURTEEN TRILLION DOLLARS – we use to toss around the “billions” when referring to government debt; now we bandy the “trillions” around with the same carefree and lackadaisical sentiment. I keep hearing comments that as long as there is demand for US Treasuries, it shows that the US can continue to run these huge deficits and plunge itself further into debt because it is obviously not hurting demand for our IOU’s. That makes me even more incredulous seeing that most of the demand is coming from the Fed itself. Then again, I am probably an outdated dinosaur who naively viewed debt as something intrinsically to be avoided. The current crop of financial talking heads seem to think that being a creditor is a curse while being a debtor is a blessing. I must have missed something back in school somewhere.
I brought that up really to simply reiterate the fact that the only way this obscene burden is going to be eliminated from the shoulders of our children and grandchildren is by effectively defaulting through currency devaluation. We all know that; so does every other major holder of US Treasury debt on the planet. That is why I do not particularly care what happens to gold during these fairly regular bouts of selling. It runs higher; falls back, runs higher, falls back and just keeps repeating the process over and over again as it moves inexorably higher.
Those with a scintilla of a functioning mind can understand what the US monetary authorities are doing. But you also have to keep in mind that the Fed has powerful allies on its side – mainly all those who want to do business with it. As long as those seeking profits from being primary dealers exist, those who have a vested interest in seeing the current policies continue will be around to contend with in the markets. To be successful as a long term investor, you have to recognize the fact and then use that to your advantage. History is not on their side but short term, the size of their trading accounts is. Use their actions in the market during which they push and strive against reality to look for opportunities. Technicals win in the short run but fundamental realities always win in the long run – always.
Crude oil after putting in several closes above the $91 level, got whacked pretty hard during today’s commodity rout and thus far has not been able to pick itself off of the carpet. Let’s watch that, and copper, to see if market sentiment moves around to viewing some of today’s selling as overdone. If so, we will see buying coming in sometime tomorrow, perhaps right after the margin related selling is conducted.
Bonds are unchanged as I pen this but have been trading higher most of the day. If the Fed ever stops buying in there, the support levels will not hold but for now they have succeeded in having the shorts second guessing themselves.
The HUI needs to close through the 580 level to generate some new upside excitement. It looks like it has enough momentum to move down towards 540 and possibly 530 before we get some stronger buying. A push back through today’s session high near 561 within the next two days should shove it into a trading range pattern.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January0411Gold1.pdf
Gold and silver are starting off the New Year doing what many professional traders, myself included, expected them to do during the last few trading days of last year! They went soaring to the upside in front of the New Year and are just now experiencing a pullback as funds lift some longs and some new shorts are seemingly being emboldened by the notion of an “improving economy”. I was extremely surprised last week to see them shooting so sharply higher with new money coming into the market as the calendar year wore down to a close. Now it seems as if we are finally seeing some of that selling showing up during the first full week of trading, which again, is out of the normal pattern. Then again, not much of anything in these markets is “normal” anymore since the funds have taken over everything.
Some of this is rebalancing associated to the changes in the commodity indices that I mentioned yesterday but there is definitely a bit more to it than that. For whatever the reason, commodities are experiencing a general wave of selling today after the CCI went on to make yet another all time high yesterday. It’s not just gold and silver; crude oil, the grains, the meats, etc, all are seeing a wave of selling as the algorithms trip into the sell mode for the time being. We’ll just have to wait and see where the buyers surface in the sector. The “buy commodity” strategy will be in effect as long as the FOMC does not change monetary policy or scale back its QE2 program which based on today’s release of their minutes, suggests is not going to happen anytime soon.
Silver needs to find enough buying support to climb back above the $30 level to cement that as a base and prepare it for a leg higher. Failure to do so will drop it further and see it move down towards the $29 level. We’ll have to watch if it can entice some fresh buying should it move that low. From a bullish perspective, I would prefer that it not move below $28.50 for any length of time.
Gold needs to climb back above $1400 to give the bulls some encouragement for another try at $1420. I would not like to see gold get a close below $1380 as that would portend a deeper setback down towards $1365 or so. It is sitting right on the 50 day moving average which a lot of technicians watch so it will be important for the bullish cause for it to move up and away from that level quickly to keep the sentiment firmly bullish.
Momentum has been declining in gold making a series of lower highs as the price has moved up which has to be monitored as the hedgies are all about chasing prices either higher or lower depending on momentum. The huge buyers of the physical market could care less about momentum but they do watch such things in an attempt to determine if they will get further fund long side liquidation allowing them to get a better price on their planned purchases.
I read today that the US debt topped $14 Trillion which makes me shake my head in dismay when I hear talk about an improving economy. FOURTEEN TRILLION DOLLARS – we use to toss around the “billions” when referring to government debt; now we bandy the “trillions” around with the same carefree and lackadaisical sentiment. I keep hearing comments that as long as there is demand for US Treasuries, it shows that the US can continue to run these huge deficits and plunge itself further into debt because it is obviously not hurting demand for our IOU’s. That makes me even more incredulous seeing that most of the demand is coming from the Fed itself. Then again, I am probably an outdated dinosaur who naively viewed debt as something intrinsically to be avoided. The current crop of financial talking heads seem to think that being a creditor is a curse while being a debtor is a blessing. I must have missed something back in school somewhere.
I brought that up really to simply reiterate the fact that the only way this obscene burden is going to be eliminated from the shoulders of our children and grandchildren is by effectively defaulting through currency devaluation. We all know that; so does every other major holder of US Treasury debt on the planet. That is why I do not particularly care what happens to gold during these fairly regular bouts of selling. It runs higher; falls back, runs higher, falls back and just keeps repeating the process over and over again as it moves inexorably higher.
Those with a scintilla of a functioning mind can understand what the US monetary authorities are doing. But you also have to keep in mind that the Fed has powerful allies on its side – mainly all those who want to do business with it. As long as those seeking profits from being primary dealers exist, those who have a vested interest in seeing the current policies continue will be around to contend with in the markets. To be successful as a long term investor, you have to recognize the fact and then use that to your advantage. History is not on their side but short term, the size of their trading accounts is. Use their actions in the market during which they push and strive against reality to look for opportunities. Technicals win in the short run but fundamental realities always win in the long run – always.
Crude oil after putting in several closes above the $91 level, got whacked pretty hard during today’s commodity rout and thus far has not been able to pick itself off of the carpet. Let’s watch that, and copper, to see if market sentiment moves around to viewing some of today’s selling as overdone. If so, we will see buying coming in sometime tomorrow, perhaps right after the margin related selling is conducted.
Bonds are unchanged as I pen this but have been trading higher most of the day. If the Fed ever stops buying in there, the support levels will not hold but for now they have succeeded in having the shorts second guessing themselves.
The HUI needs to close through the 580 level to generate some new upside excitement. It looks like it has enough momentum to move down towards 540 and possibly 530 before we get some stronger buying. A push back through today’s session high near 561 within the next two days should shove it into a trading range pattern.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January0411Gold1.pdf
The Reweighting of Commodity Indices
THIS IS PARTLY WHY GOLD IS DOWN TODAY
Posted: Jan 03 2011 By: Dan Norcini Post Edited: January 3, 2011 at 9:27 pm
Filed under: Trader Dan Norcini
Posted: Jan 03 2011 By: Dan Norcini Post Edited: January 3, 2011 at 9:27 pm
Filed under: Trader Dan Norcini
Dear Friends,
Every year around this time some of the big commodity indices that are used as benchmarks by various fund managers are reweighted with the percentage of the commodities making up the basket tracked by each particular index varying depending on the methodology employed by the owners of the index.
Two of the larger commodity indexes are the Goldman Sachs Commodity Index (now called the S&P GSCI) and the Dow Jones – AIG Commodity Index).
My preliminary read of the GSCI index shows a heavier weighting in both silver and copper over the weighting given to each last year (2010) and a bit of a lighter weighting given to gold than last year.
Copper and silver are both being increased 2.7% over last year while gold is being reduced 2.5% compared to last year. Disclaimer – I hate reading through these reports issued about the various indices as my head goes numb from looking at the all the calculations so these numbers should not be taken as gospel until I can confirm the exact change. For now – this is my preliminary read.
Generally what this translates to in terms of the average market watcher is that the commodity style funds that commit investment funds into the commodity complex, must match the percentage of their holdings to these various indices. Depending on which index they choose to benchmark against and what changes may or may not be made for the new calendar year, such changes may result in an increase in buying for some commodities and an increase in selling for others. The reason is that the fund managers must rebalance their holdings to bring them into line with the new weightings in the index.
Since the largest portion of the money driving our commodity markets these days is the result of these commodity funds, the changes can sometimes explain some of the price action that the various commodity markets will experience during the rebalancing phase. This phase tends to last a few weeks as the index re-weightings become published and disseminated through the investment community and are then implemented by fund managers.
Keep this in mind as we watch the price action over this month.
Also keep in mind that any fresh money coming into the markets for investment for the new year is going to find itself being spread across all of the various commodities making up each commodity index. Sometimes that new money is more than enough to offset the selling of the older positions from the previous year as the fund managers rebalance. For those markets where the percentage weighting has been increased from the previous year, the combination of fresh, new investment money for the new year in combination with the increased need by the funds to buy extra positions in those commodities, can be quite a powerful combination for any market already in a bullish uptrend.
I have yet to examine the DOW JONES AIG index. When I do, I will report back to our readers.
Every year around this time some of the big commodity indices that are used as benchmarks by various fund managers are reweighted with the percentage of the commodities making up the basket tracked by each particular index varying depending on the methodology employed by the owners of the index.
Two of the larger commodity indexes are the Goldman Sachs Commodity Index (now called the S&P GSCI) and the Dow Jones – AIG Commodity Index).
My preliminary read of the GSCI index shows a heavier weighting in both silver and copper over the weighting given to each last year (2010) and a bit of a lighter weighting given to gold than last year.
Copper and silver are both being increased 2.7% over last year while gold is being reduced 2.5% compared to last year. Disclaimer – I hate reading through these reports issued about the various indices as my head goes numb from looking at the all the calculations so these numbers should not be taken as gospel until I can confirm the exact change. For now – this is my preliminary read.
Generally what this translates to in terms of the average market watcher is that the commodity style funds that commit investment funds into the commodity complex, must match the percentage of their holdings to these various indices. Depending on which index they choose to benchmark against and what changes may or may not be made for the new calendar year, such changes may result in an increase in buying for some commodities and an increase in selling for others. The reason is that the fund managers must rebalance their holdings to bring them into line with the new weightings in the index.
Since the largest portion of the money driving our commodity markets these days is the result of these commodity funds, the changes can sometimes explain some of the price action that the various commodity markets will experience during the rebalancing phase. This phase tends to last a few weeks as the index re-weightings become published and disseminated through the investment community and are then implemented by fund managers.
Keep this in mind as we watch the price action over this month.
Also keep in mind that any fresh money coming into the markets for investment for the new year is going to find itself being spread across all of the various commodities making up each commodity index. Sometimes that new money is more than enough to offset the selling of the older positions from the previous year as the fund managers rebalance. For those markets where the percentage weighting has been increased from the previous year, the combination of fresh, new investment money for the new year in combination with the increased need by the funds to buy extra positions in those commodities, can be quite a powerful combination for any market already in a bullish uptrend.
I have yet to examine the DOW JONES AIG index. When I do, I will report back to our readers.
Monday, January 3, 2011
DAN NORCINI'S END OF 2010 GOLD AND CCI CHARTS
Posted: Dec 31 2010 By: Dan Norcini Post Edited: December 31, 2010 at 11:29 pm
DAN'S CHARTS:http://jsmineset.com/wp-content/uploads/2010/12/Year-end-Gold-and-CCI-2010.pdf
DAN'S CHARTS:http://jsmineset.com/wp-content/uploads/2010/12/Year-end-Gold-and-CCI-2010.pdf
Thursday, December 30, 2010
DAN NORCINI'S THURSDAY COMMENT ON JIM SINCLAIR'S TRACK RECORD
Posted: Dec 30 2010 By: Dan Norcini Post Edited: December 30, 2010 at 2:48 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
Most of the emails I have received the past couple of weeks that are related to Jim’s prediction of $1,650 gold in January of 2011 have been gracious and have expressed heartfelt appreciation for Jim’s steady hand of guidance over the past 7 or so years. The deep admiration for Jim’s selfless giving of his years of experience in the financial realm, has shown through so many of these emails. It truly is an uplifting experience to read them. For those of you who have taken the time to do so, my sincere and heartfelt thanks.
Sadly, there are some who instead of focusing on the nearly flawless track record that Jim has secured over these past years in providing general price levels that would act as signposts along the way of this now decade long bull market in gold, have chosen to carp and criticize because gold is not within a $100 or so of Jim’s price prediction for next month. To those of you who are so small minded and so ungrateful for the many benefits that have been freely given to you by my dear friend, I can only say that perhaps you would be best served by going elsewhere for your regular reading on the state of the gold market. It is evident that some of you are far wiser than the rest of us and are much more in tune with the gold market than Jim can ever possibly hope to be.
I would also suggest that since the world is in such need of your acumen and wisdom, you start up your own web site and provide your commentary to all free of charge, all the while maintaining the cost of servicing that web site out of your own financial resources.
The rest of us mere mortals, whom will benefit from such knowledge that drips from your lips like ripe pomegranates, will then have the luxury of watching you put your money where your mouth is, AHEAD OF THE FACT.
Here is the truth – those of us who are professional traders make our living IN THE MARKET, not OFF OF THE MARKET. We have to possess the courage of our convictions and put our money on the line every single day. Sometimes we get it right; sometimes we don’t. The key to measuring success in this business however is not how we make out on each individual trade but rather how we do on our collective trades. If we are right more often than wrong, we succeed and thrive. If not, we are soon gone and looking for a different profession. Those of you back seat drivers who are only brave enough to call a market after the fact would do well to remember that before becoming too full of yourselves.
Here is wishing all our readers, even the jerks, a Happy, Safe and Prosperous New Year. Thank you for the many kind words of encouragement and appreciation that we have received over the past year. I do not know what the year that lies ahead holds for all of us, but one thing I am certain of, the policies being advocated by the current Federal Reserve, and those being followed by the ECB and the BOJ for that matter, will not end well for anyone. If printing money into existence was the path to lasting prosperity, nations far wiser and of more duration than ours, would have long ago discovered it. History, unfortunately, is not on the side of such things.
GT sez: BRAVO!
Most of the emails I have received the past couple of weeks that are related to Jim’s prediction of $1,650 gold in January of 2011 have been gracious and have expressed heartfelt appreciation for Jim’s steady hand of guidance over the past 7 or so years. The deep admiration for Jim’s selfless giving of his years of experience in the financial realm, has shown through so many of these emails. It truly is an uplifting experience to read them. For those of you who have taken the time to do so, my sincere and heartfelt thanks.
Sadly, there are some who instead of focusing on the nearly flawless track record that Jim has secured over these past years in providing general price levels that would act as signposts along the way of this now decade long bull market in gold, have chosen to carp and criticize because gold is not within a $100 or so of Jim’s price prediction for next month. To those of you who are so small minded and so ungrateful for the many benefits that have been freely given to you by my dear friend, I can only say that perhaps you would be best served by going elsewhere for your regular reading on the state of the gold market. It is evident that some of you are far wiser than the rest of us and are much more in tune with the gold market than Jim can ever possibly hope to be.
I would also suggest that since the world is in such need of your acumen and wisdom, you start up your own web site and provide your commentary to all free of charge, all the while maintaining the cost of servicing that web site out of your own financial resources.
The rest of us mere mortals, whom will benefit from such knowledge that drips from your lips like ripe pomegranates, will then have the luxury of watching you put your money where your mouth is, AHEAD OF THE FACT.
Here is the truth – those of us who are professional traders make our living IN THE MARKET, not OFF OF THE MARKET. We have to possess the courage of our convictions and put our money on the line every single day. Sometimes we get it right; sometimes we don’t. The key to measuring success in this business however is not how we make out on each individual trade but rather how we do on our collective trades. If we are right more often than wrong, we succeed and thrive. If not, we are soon gone and looking for a different profession. Those of you back seat drivers who are only brave enough to call a market after the fact would do well to remember that before becoming too full of yourselves.
Here is wishing all our readers, even the jerks, a Happy, Safe and Prosperous New Year. Thank you for the many kind words of encouragement and appreciation that we have received over the past year. I do not know what the year that lies ahead holds for all of us, but one thing I am certain of, the policies being advocated by the current Federal Reserve, and those being followed by the ECB and the BOJ for that matter, will not end well for anyone. If printing money into existence was the path to lasting prosperity, nations far wiser and of more duration than ours, would have long ago discovered it. History, unfortunately, is not on the side of such things.
GT sez: BRAVO!
Wednesday, December 29, 2010
Trader Dan Comments On Soaring Commodity Prices and Plunging Bond Prices
Posted: Dec 28 2010 By: Dan Norcini Post Edited: December 28, 2010 at 2:03 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
Thanks to our diligent internet news sleuth, JB Slear, the following story is brought your way.
Tie this story about the fall in US home prices together with what is happening in the commodity sector and the long bond to see where this is headed.
Home prices are falling for one reason – lack of demand coupled with a growing supply due to the wave of foreclosure properties which are adding additional supply to the market.
The market interpreted today’s data release as evidence that the Fed’s $600 billion + QE policy would not be ending anytime soon. That brought another surge of fund related buying into the commodity sector with the result that the CCI (Continuous Commodity Index) has now kissed its former all time high made back in the summer of 2008 long goodbye. It shot above 622 and appears to be accelerating, even at the end of the year when we would normally expect to see profit taking in the sector by longs who have profited immensely in 2010.
I find it astonishing that fresh money is being committed to the sector as the calendar year winds down. This is highly unusual as this time of year is historically known as the time for book squaring. What it is telling us is that fund managers have no intention at this point of abandoning a strategy that has paid handsome dividends to them and will undoubtedly be looking to up their ante at the beginning of the New Year. Look for fresh highs early next year in the sector based on what is occurring in some of the various commodities. Sugar, after putting in a 30+ year high, has shot to yet another fresh high in today’s session. Soybeans registered a 26 month high. Ditto for corn. Copper is now trading at $4.30 a pound! Crude oil continues to hold above $90.
The bond market, after being fiddled with by the monetary authorities in the hopes of hoodwinking the public into believing that inflation pressures are subdued, promptly fell apart plunging a full point as participants are watching with great alarm the surge in the CCI.
This combination, soaring commodity prices which are certain to erode consumer disposable income, and plunging bond prices which are a prelude to higher long term interest rates, are certain to make it even more difficult for would-be home buyers to enter a real estate market already being plagued by a lack of demand. Throw in a good dose of higher gasoline prices at the pump and it becomes all too obvious what we can look forward to in the coming year. I guess we have all been naughty over the past year because it appears that Santa Ben and his band of elves at the Fed have brought us all a gigantic lump of coal.
Thanks to our diligent internet news sleuth, JB Slear, the following story is brought your way.
Tie this story about the fall in US home prices together with what is happening in the commodity sector and the long bond to see where this is headed.
Home prices are falling for one reason – lack of demand coupled with a growing supply due to the wave of foreclosure properties which are adding additional supply to the market.
The market interpreted today’s data release as evidence that the Fed’s $600 billion + QE policy would not be ending anytime soon. That brought another surge of fund related buying into the commodity sector with the result that the CCI (Continuous Commodity Index) has now kissed its former all time high made back in the summer of 2008 long goodbye. It shot above 622 and appears to be accelerating, even at the end of the year when we would normally expect to see profit taking in the sector by longs who have profited immensely in 2010.
I find it astonishing that fresh money is being committed to the sector as the calendar year winds down. This is highly unusual as this time of year is historically known as the time for book squaring. What it is telling us is that fund managers have no intention at this point of abandoning a strategy that has paid handsome dividends to them and will undoubtedly be looking to up their ante at the beginning of the New Year. Look for fresh highs early next year in the sector based on what is occurring in some of the various commodities. Sugar, after putting in a 30+ year high, has shot to yet another fresh high in today’s session. Soybeans registered a 26 month high. Ditto for corn. Copper is now trading at $4.30 a pound! Crude oil continues to hold above $90.
The bond market, after being fiddled with by the monetary authorities in the hopes of hoodwinking the public into believing that inflation pressures are subdued, promptly fell apart plunging a full point as participants are watching with great alarm the surge in the CCI.
This combination, soaring commodity prices which are certain to erode consumer disposable income, and plunging bond prices which are a prelude to higher long term interest rates, are certain to make it even more difficult for would-be home buyers to enter a real estate market already being plagued by a lack of demand. Throw in a good dose of higher gasoline prices at the pump and it becomes all too obvious what we can look forward to in the coming year. I guess we have all been naughty over the past year because it appears that Santa Ben and his band of elves at the Fed have brought us all a gigantic lump of coal.
Thursday, December 23, 2010
Wednesday, December 22, 2010
DAN NORCINI'S WEDNESDAY COMMENTS WITH CHARTS
Posted: Dec 22 2010 By: Dan Norcini Post Edited: December 22, 2010 at 5:47 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
Observing the price action in the commodity markets today has given me great reason for concern for that which I feared seems to have occurred, namely, the crude oil market has broken out to the upside. I suppose it was just a matter of time based on the orgy of fund buying across the commodity sector but I was secretly hoping that we might avoid such a close mainly to prevent what now seems to be a certain price rise for the cost of energy. Heretofore, the soaring CCI (Continuous Commodity Index) has been moving higher mainly based on food and metal costs. Now we have the trifecta where the three main segments of that index are moving higher in tandem. Actually, given the extent of the price run in the food and metals sector, the energy sector has a lot of ground to make up.
Yesterday crude put in its best close in 26 months. Today it has closed above what has become both technical and psychological chart resistance at the $90 level. Should it end this trading week above $90, holiday trading conditions or no holiday trading conditions, it will put in its best weekly close since October 2008. Moving forward into the New Year, it looks most probable that it is going to make a run at $100.
My fear mentioned above is that in addition to consumers soon to get walloped with sticker shock at the grocery stores within the space of a few months as the price rise works its way through the distribution channels, they were also going to get hit with rising gasoline and energy costs, a double whammy for their pocketbooks at the time that many can ill afford it. There are so many struggling families dealing with lost incomes and underemployment for those fortunate enough to have found work, that any further price pressures on the energy front would act to take some of them over the edge financially. Many are having to cut expenses drastically in an attempt to stay in their homes. How soaring food and energy costs are supposed to benefit the economy escapes me.
The ivory tower types of the monetary realm are completely disconnected from the havoc and harm that they have caused so many with their incredibly short-sighted and foolhardy monetary policies. The Federal Reserve is presiding over the deliberate and planned unleashing of the inflation genie without the least bit of concern as to how that is going to affect the average middle class American. Words cannot express the contempt and disdain I have for this group of elitists. Keep in mind how this entire debacle began and the “medicine” that has been brought forth to supposedly cure it. If this is the cure, they are only succeeding in slowly killing the patient.
There does not seem to be any end in sight to the continued money creation efforts of the Fed so all that we can do is attempt to protect ourselves and our loved ones from their depredations upon our life savings. The bond market, while currently being artificially propped up by these snake oil salesmen, looks heavy, even in spite of the massive buys it is seeing as the Fed makes the purchases that are part of its QE (money printing) program. Once that market breaks down in earnest, it will not take much to see a cascade of selling erupt as bond holders head to the exits. I suspect that the Chinese are more than seriously concerned about their national wealth, a large part of which still remains trapped in these worthless IOU’s called Treasury Debt.
Long term rates could then rise quite rapidly as bondholders experience a selling panic and feverishly attempt to avoid being the last man standing in what might well become a sort of perverse game of musical chairs. Their actions will create a cycle in which selling intensifies. The resulting rise in longer term interest rates will work to continue depress the Real estate sector not to mention hit thousands of homeowners trapped in adjustable rate mortgages which will then reset to a rate that may force even more of them out of their homes. Quite frankly, I see nothing on the horizon preventing this from occurring at this point because the Fed cannot create enough money to buy up all the outstanding Treasury debt that is going to be unloaded. Oh they conceivably could I suppose but at what cost to the Dollar!
Jim has said it more than once over the last few years that these derivative creators and vile peddlers have destroyed us all in their greed. Many of you have not understood what he has been saying or perhaps felt that it was an overreaction. Rest assured, the fallout from this sordid mess is now rapidly descending upon us.
(emphasis by GT)
The Fed created this travesty under the tenure of Mr. Greenspan who never saw a potential problem on the horizon without throwing money at it. For that, he was stupidly hailed as “The Maestro”. His madness, of lowering interest rates to ridiculously low levels, gave rise to the hedge fund industry and its attempts to then find yield in any sector that it could. The wave of speculative frenzy unleashed then crashed into one sector after another only abating when the derivative market blew all to hell which was inevitable. Enter Mr. Bernanke, who then revitalized the beast of speculative frenzy by one upping his predecessor. Much like Beowolf’s golden horn raised the dragon, Bernanke’s QE idiocy fan the fires of leveraged insanity as he practically begged the hedge funds to buy commodities to induce inflation and ward of his ridiculous fear of deflation. The results are now obvious. Nice going guys – you can sit in your ivory tower and quietly study the effects of your brain child while Middle America slowly dies of price asphyxiation. A pox on your entire house.
DAN'S CHARTS:
http://jsmineset.com/wp-content/uploads/2010/12/December2210Crude.pdf
http://jsmineset.com/wp-content/uploads/2010/12/clip_image00219.jpg
Observing the price action in the commodity markets today has given me great reason for concern for that which I feared seems to have occurred, namely, the crude oil market has broken out to the upside. I suppose it was just a matter of time based on the orgy of fund buying across the commodity sector but I was secretly hoping that we might avoid such a close mainly to prevent what now seems to be a certain price rise for the cost of energy. Heretofore, the soaring CCI (Continuous Commodity Index) has been moving higher mainly based on food and metal costs. Now we have the trifecta where the three main segments of that index are moving higher in tandem. Actually, given the extent of the price run in the food and metals sector, the energy sector has a lot of ground to make up.
Yesterday crude put in its best close in 26 months. Today it has closed above what has become both technical and psychological chart resistance at the $90 level. Should it end this trading week above $90, holiday trading conditions or no holiday trading conditions, it will put in its best weekly close since October 2008. Moving forward into the New Year, it looks most probable that it is going to make a run at $100.
My fear mentioned above is that in addition to consumers soon to get walloped with sticker shock at the grocery stores within the space of a few months as the price rise works its way through the distribution channels, they were also going to get hit with rising gasoline and energy costs, a double whammy for their pocketbooks at the time that many can ill afford it. There are so many struggling families dealing with lost incomes and underemployment for those fortunate enough to have found work, that any further price pressures on the energy front would act to take some of them over the edge financially. Many are having to cut expenses drastically in an attempt to stay in their homes. How soaring food and energy costs are supposed to benefit the economy escapes me.
The ivory tower types of the monetary realm are completely disconnected from the havoc and harm that they have caused so many with their incredibly short-sighted and foolhardy monetary policies. The Federal Reserve is presiding over the deliberate and planned unleashing of the inflation genie without the least bit of concern as to how that is going to affect the average middle class American. Words cannot express the contempt and disdain I have for this group of elitists. Keep in mind how this entire debacle began and the “medicine” that has been brought forth to supposedly cure it. If this is the cure, they are only succeeding in slowly killing the patient.
There does not seem to be any end in sight to the continued money creation efforts of the Fed so all that we can do is attempt to protect ourselves and our loved ones from their depredations upon our life savings. The bond market, while currently being artificially propped up by these snake oil salesmen, looks heavy, even in spite of the massive buys it is seeing as the Fed makes the purchases that are part of its QE (money printing) program. Once that market breaks down in earnest, it will not take much to see a cascade of selling erupt as bond holders head to the exits. I suspect that the Chinese are more than seriously concerned about their national wealth, a large part of which still remains trapped in these worthless IOU’s called Treasury Debt.
Long term rates could then rise quite rapidly as bondholders experience a selling panic and feverishly attempt to avoid being the last man standing in what might well become a sort of perverse game of musical chairs. Their actions will create a cycle in which selling intensifies. The resulting rise in longer term interest rates will work to continue depress the Real estate sector not to mention hit thousands of homeowners trapped in adjustable rate mortgages which will then reset to a rate that may force even more of them out of their homes. Quite frankly, I see nothing on the horizon preventing this from occurring at this point because the Fed cannot create enough money to buy up all the outstanding Treasury debt that is going to be unloaded. Oh they conceivably could I suppose but at what cost to the Dollar!
Jim has said it more than once over the last few years that these derivative creators and vile peddlers have destroyed us all in their greed. Many of you have not understood what he has been saying or perhaps felt that it was an overreaction. Rest assured, the fallout from this sordid mess is now rapidly descending upon us.
(emphasis by GT)
The Fed created this travesty under the tenure of Mr. Greenspan who never saw a potential problem on the horizon without throwing money at it. For that, he was stupidly hailed as “The Maestro”. His madness, of lowering interest rates to ridiculously low levels, gave rise to the hedge fund industry and its attempts to then find yield in any sector that it could. The wave of speculative frenzy unleashed then crashed into one sector after another only abating when the derivative market blew all to hell which was inevitable. Enter Mr. Bernanke, who then revitalized the beast of speculative frenzy by one upping his predecessor. Much like Beowolf’s golden horn raised the dragon, Bernanke’s QE idiocy fan the fires of leveraged insanity as he practically begged the hedge funds to buy commodities to induce inflation and ward of his ridiculous fear of deflation. The results are now obvious. Nice going guys – you can sit in your ivory tower and quietly study the effects of your brain child while Middle America slowly dies of price asphyxiation. A pox on your entire house.
DAN'S CHARTS:
http://jsmineset.com/wp-content/uploads/2010/12/December2210Crude.pdf
http://jsmineset.com/wp-content/uploads/2010/12/clip_image00219.jpg
Monday, December 20, 2010
Gold/Bonds Ratio Chart From Trader Dan Norcini
Posted: Dec 18 2010 By: Dan Norcini Post Edited: December 18, 2010 at 7:08 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
This is the chart I referenced in my radio interview of this week.
There are several things to note in this chart. First is the direction of the ratio – a strong, sharp, sustained thrust higher which has shattered a level not seen in 30+ years. That tells us that Gold has become the definitive safe haven and that bonds are rapidly falling out of favor compared to the security of the metal. For this ratio to reverse, it would take much higher rates of return to draw capital back into bonds and out of the metal. Where that rate might be is anyone’s guess but suffice it to say, it would be considerably higher than today’s levels. This event would first however wreak havoc on the real estate sector as it would shove interest rates to a level that would prevent many would-be buyers from obtaining loans.
It is good to remember that it took double digit interest rates back in 1980 to finally break the back of the inflation monster. Think about where rates are today and you can see that the Fed has no intention whatsoever of even remotely trying to rein in this wild horse. Even if they did, the current state of the “recovery” would prevent them from so doing.
The second thing to note about the ratio is the SPEED at which it has turned and moved higher. It is accelerating and that tells us that the shift from deflationary fears to inflationary fears is entering high gear among the general investing public. In short, inflation psychology is taking hold and taking hold quickly. You may be hearing all sorts of blather from talking heads and pundits on financial LA-LA Land TV about how tame inflation is but the fact is that this ratio is shouting loudly that all such drivel is BS. The charts do not lie and you can count on them giving you a much clearer picture of where investor psychology is moving long before the talking heads catch on.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/12/Gold-Bond-ratio-chart-12-17-2010.pdf
This is the chart I referenced in my radio interview of this week.
There are several things to note in this chart. First is the direction of the ratio – a strong, sharp, sustained thrust higher which has shattered a level not seen in 30+ years. That tells us that Gold has become the definitive safe haven and that bonds are rapidly falling out of favor compared to the security of the metal. For this ratio to reverse, it would take much higher rates of return to draw capital back into bonds and out of the metal. Where that rate might be is anyone’s guess but suffice it to say, it would be considerably higher than today’s levels. This event would first however wreak havoc on the real estate sector as it would shove interest rates to a level that would prevent many would-be buyers from obtaining loans.
It is good to remember that it took double digit interest rates back in 1980 to finally break the back of the inflation monster. Think about where rates are today and you can see that the Fed has no intention whatsoever of even remotely trying to rein in this wild horse. Even if they did, the current state of the “recovery” would prevent them from so doing.
The second thing to note about the ratio is the SPEED at which it has turned and moved higher. It is accelerating and that tells us that the shift from deflationary fears to inflationary fears is entering high gear among the general investing public. In short, inflation psychology is taking hold and taking hold quickly. You may be hearing all sorts of blather from talking heads and pundits on financial LA-LA Land TV about how tame inflation is but the fact is that this ratio is shouting loudly that all such drivel is BS. The charts do not lie and you can count on them giving you a much clearer picture of where investor psychology is moving long before the talking heads catch on.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/12/Gold-Bond-ratio-chart-12-17-2010.pdf
Friday, December 17, 2010
Continuous Commodity Index Chart From Trader Dan
Posted: Dec 17 2010 By: Dan Norcini Post Edited: December 17, 2010 at 5:29 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear CIGAs,
Based on a few emails that I am receiving that are related to my comments on the CCI chart, I thought it best to respond here so as not to have to field so many individual answers as my time is limited.
Some are misinterpreting my comments about the commodity sector being in a bubble as if I am saying gold is in a bubble. It is not. What I am saying is that I believe, based on what I can see of the normal fundamental supply/demand situation, that hedge fund buying in the commodity sector has pushed several of these individual commodity markets into bubbles.
Let’s start with what my view of a bubble is. It is an event created by an infusion of SPECULATIVE money that is not tied directly to actual changes in the real physical supply/demand equation of a commodity or asset. Bubbles are very difficult to recognize for just about all of us until after the fact but one thing is common to them all – they are all the result of a huge inflow of hot money chasing the “investment du jour”; one that has been hyped as a “no lose investment”.
The result is that buyers pay ever higher and higher prices for a product or asset with little if no concern what its fair value might actually be. In the process a sort of mania develops in which there is no fear of prices ever moving lower. The only direction that the bulk of people think the market is going to move is higher. Caution is lost in such a situation with greed taking over as those on the long side of the market become extremely confident that prices will work in only one direction – higher.
Without citing any of the commodity markets specifically because I do not want to have some blindly selling, let me just say that when commodity type funds or hedge funds buy commodities as an investment, they generally do not pick and choose markets. They buy an ENTIRE BASKET OF COMMODITIES based on the composition of the particular commodity index that they are tracking. What this translates to in an example might be a firm looking to invest $50 million of client money, will spread that $50 million across every commodity futures market that comprise the index they are using as a benchmark. SOME of these commodity markets will indeed justify the buys; others, whose fundamentals are not overly bullish, will nonetheless also move higher as this speculative investment flows into them as well.
Granted, investment demand is part of the supply/demand equation in any commodity and must be factored in when price discovery is occurring, but the nature of these flows is that they are extremely fickle, and can evaporate almost instantaneously should any sort of external development occur which might be viewed as hostile to the environment which is leading to the surge in demand from this particular corner.
Do you recall how sharply many of the commodity markets dropped when news came out that China was hiking interest rates a piddly ¼% in an attempt to get inflation under control? One would have thought that Armageddon had been unleashed on the commodity sector judging from the speed at which money flew out of the complex. Of course, those slides in price have been erased but the fact is these flows are very, very transient at times. In those markets in which demand for the underlying commodity is based mainly on these investment flows, price can collapse in a hurry once the support coming from such flows is gone or evaporates.
This brings us back to what Jim has been warning about for some time now, as has Monty and myself – namely – currency induced cost push inflation is going to occur. The Fact that the CCI is soaring and is within a whisker of taking out its all time high made back in the summer of 2008 when the sector was in a bubble just prior to the unfolding of the credit crisis, is evidence that this currency related event is indeed occurring precisely as Jim said it would. Hedge funds are buying hard assets as protection against a general global trend of currency devaluation. Regardless of whether or not the fundamentals justify these high prices for some commodities, they are all generally rising as these hot money flows rush into the sector.
It is my contention that SOME OF THESE commodities are now in bubble territory as a result.
Does that imply that prices are now going to collapse? Hardly! No one can predict with any degree of certainty WHEN a bubble might pop and prices drop. The market will follow the path of least resistance, which is higher, until some external event triggers a sell off that then feeds on itself as the hot money flees the investment altogether. That can take price to levels unheard of and certainly not supported by any real world supply/demand equation.
All I am saying with today’s comments on the CCI chart is that I would prefer to see the bubble pop and prices drop rather than have to live through an event which some seem to be hastening, if only to see the price of their gold and silver move higher, namely hyperinflation. I am on then record here as saying I do not want to have to live through such a thing. It is more horrific than many can imagine and if given the choice would prefer to see a sound currency, a sound economy and a sound fiscal structure for our nation’s government. Given the fact that there seems to be little chance for two of these and maybe, truth be told, all three, prudence dictates that we prepare for the worst and hope for the best.
While some commodities are in a bubble, gold is not. It is a currency.
Behind the price of the soaring commodity complex is the story of the debauchment of fiat currencies. That is why gold is shining and will continue to shine. The Fed wanted to create inflation – they have gotten their wish.
Hopefully, this clarifies things a bit.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/12/December1710CCI.pdf
Based on a few emails that I am receiving that are related to my comments on the CCI chart, I thought it best to respond here so as not to have to field so many individual answers as my time is limited.
Some are misinterpreting my comments about the commodity sector being in a bubble as if I am saying gold is in a bubble. It is not. What I am saying is that I believe, based on what I can see of the normal fundamental supply/demand situation, that hedge fund buying in the commodity sector has pushed several of these individual commodity markets into bubbles.
Let’s start with what my view of a bubble is. It is an event created by an infusion of SPECULATIVE money that is not tied directly to actual changes in the real physical supply/demand equation of a commodity or asset. Bubbles are very difficult to recognize for just about all of us until after the fact but one thing is common to them all – they are all the result of a huge inflow of hot money chasing the “investment du jour”; one that has been hyped as a “no lose investment”.
The result is that buyers pay ever higher and higher prices for a product or asset with little if no concern what its fair value might actually be. In the process a sort of mania develops in which there is no fear of prices ever moving lower. The only direction that the bulk of people think the market is going to move is higher. Caution is lost in such a situation with greed taking over as those on the long side of the market become extremely confident that prices will work in only one direction – higher.
Without citing any of the commodity markets specifically because I do not want to have some blindly selling, let me just say that when commodity type funds or hedge funds buy commodities as an investment, they generally do not pick and choose markets. They buy an ENTIRE BASKET OF COMMODITIES based on the composition of the particular commodity index that they are tracking. What this translates to in an example might be a firm looking to invest $50 million of client money, will spread that $50 million across every commodity futures market that comprise the index they are using as a benchmark. SOME of these commodity markets will indeed justify the buys; others, whose fundamentals are not overly bullish, will nonetheless also move higher as this speculative investment flows into them as well.
Granted, investment demand is part of the supply/demand equation in any commodity and must be factored in when price discovery is occurring, but the nature of these flows is that they are extremely fickle, and can evaporate almost instantaneously should any sort of external development occur which might be viewed as hostile to the environment which is leading to the surge in demand from this particular corner.
Do you recall how sharply many of the commodity markets dropped when news came out that China was hiking interest rates a piddly ¼% in an attempt to get inflation under control? One would have thought that Armageddon had been unleashed on the commodity sector judging from the speed at which money flew out of the complex. Of course, those slides in price have been erased but the fact is these flows are very, very transient at times. In those markets in which demand for the underlying commodity is based mainly on these investment flows, price can collapse in a hurry once the support coming from such flows is gone or evaporates.
This brings us back to what Jim has been warning about for some time now, as has Monty and myself – namely – currency induced cost push inflation is going to occur. The Fact that the CCI is soaring and is within a whisker of taking out its all time high made back in the summer of 2008 when the sector was in a bubble just prior to the unfolding of the credit crisis, is evidence that this currency related event is indeed occurring precisely as Jim said it would. Hedge funds are buying hard assets as protection against a general global trend of currency devaluation. Regardless of whether or not the fundamentals justify these high prices for some commodities, they are all generally rising as these hot money flows rush into the sector.
It is my contention that SOME OF THESE commodities are now in bubble territory as a result.
Does that imply that prices are now going to collapse? Hardly! No one can predict with any degree of certainty WHEN a bubble might pop and prices drop. The market will follow the path of least resistance, which is higher, until some external event triggers a sell off that then feeds on itself as the hot money flees the investment altogether. That can take price to levels unheard of and certainly not supported by any real world supply/demand equation.
All I am saying with today’s comments on the CCI chart is that I would prefer to see the bubble pop and prices drop rather than have to live through an event which some seem to be hastening, if only to see the price of their gold and silver move higher, namely hyperinflation. I am on then record here as saying I do not want to have to live through such a thing. It is more horrific than many can imagine and if given the choice would prefer to see a sound currency, a sound economy and a sound fiscal structure for our nation’s government. Given the fact that there seems to be little chance for two of these and maybe, truth be told, all three, prudence dictates that we prepare for the worst and hope for the best.
While some commodities are in a bubble, gold is not. It is a currency.
Behind the price of the soaring commodity complex is the story of the debauchment of fiat currencies. That is why gold is shining and will continue to shine. The Fed wanted to create inflation – they have gotten their wish.
Hopefully, this clarifies things a bit.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/12/December1710CCI.pdf
Thursday, December 16, 2010
Wednesday, December 15, 2010
DAN NORCINI'S WEDNESDAY COMMENTS WITH CHART
Posted: Dec 15 2010 By: Dan Norcini Post Edited: December 15, 2010 at 2:40 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear CIGAs,
Price action in both gold and silver is indicative of the beginnings of holiday trade as players begin squaring books ahead of the year’s end and move to the sidelines in anticipation of taking some time off. Potential exists for some rather strange moves in price. Try not to read too much into it as both longs and shorts exit the market only to return at the start of the New Year’s first full trading week. Pit locals LOVE this time of year as it gives them a chance at picking the pockets of both longs and shorts as they can use the thin trading conditions to go after both upside and downside stops. A lot of them put their kids through college based on the money they secure during holiday trading conditions. Stops are easy money for them although occasionally one or two fund traders will hang around long enough to mess with their plans.
Technically, gold needs two consecutive closes above $1400 to kick it up towards $1420. Downside support exists near the $1375 level with bears hoping to break it down below there and push it towards $1355 or so. Look for dip buyers to be active should that occur.
Silver needs to secure at least one PIT SESSION CLOSE over $30 to give it a shot at taking out the recent peak near $30.75. As stated in previous posts and in my recent radio interviews, silver is not acting like a massive short squeeze is occurring. We will know it from the price action when that occurs. Right now, it is not. The current state of the silver market is one of resting below a critical resistance level. There is good buying showing up on dips towards $28.50. Silver shorts would dearly love to take out $28 but so far the quality of the buying that has been occurring is thwarting them from so doing.
The HUI is stuck in the same situation as both metals. The recent top near 600 is strong resistance with sellers digging in their heels up there but buyers appear active on forays towards the 560 level. The end result is a sort of range trade or consolidation period.
The big story, bigger than the action in both the metal’s pits, is what continues to occur in the long bond market. It simply cannot seem to get any traction to the upside whatsoever. A market that acts like this is telling us that sellers are eager to unload bonds for whatever reason. More and more the focus of the bond market is the supply of these things versus the waning demand. When you get a day in which the equity markets fade lower and the bonds cannot hold their gains even with that sort of supportive backdrop, it is quite telling. It is saying that bond owners believe that the risk/reward for holding bonds is moving against them.
There can be several reasons for this psyche. First – fears of inflation which erodes the value of bonds. Second – fears of repayment of the principal. That may not be as much of a problem when it comes to US Treasuries in particular (they can always conjure more into existence to pay off existing ones!), but there are more than a few municipals that are looking increasingly dubious. Throw in a good dose of debt woes from sovereign nations over in Euroland and many bond holders are getting nervous about these IOU’s in general, particularly when they see riots tied to austerity measures that might work to bring some of these spendthrift nations back towards some semblance of fiscal health. Some might be thinking to let’s just get out of them completely and look for somewhere else to park our money given the strong potential for monetary and political leaders to take the path of easier resistance of just issuing more debt rather than face down a crowd of angry rioters. Thirdly – growing suspicions that China is unloading Treasuries and looking to use its massive reserves to secure sources of raw materials and precious metals. “Why be the last man holding the bag” if the big buyer is stealthily selling them. Fourthly – the Bernanke-led Fed announced that they continue with their QE program because the unemployment numbers remained too high and inflation was too tame. Any bond holder hearing that would be nuts to hold those paper promises in his or her’s hand. Lastly – some are looking at the agreement coming out of the lame duck session of Congress and see another bloated spending bill resulting in a further worsening of the US fiscal condition. Whatever the reasons, and there might be others, ( I Have a suspicions that the big banks did not like the profit potential from the narrow yield curve), bonds are a technical train wreck on the charts that looks to have more carnage inflicted upon it judging from the eagerness of sellers.
See yesterday’s bond chart for support levels. Should 119 give way, there does not appear to be much in the way of preventing a fall towards 115.
That brings us to the Dollar – it is going to be moving higher or lower based on the day to day focus of the Forex markets. On days in which Europe’s woes gain ascendancy, the Dollar will move higher. On days in which the focus turns to the US’s own set of economic or monetary woes, the Euro will move higher and the Dollar will sink. Neither of these two currencies are worth the rag paper that they are printed on so it has really become a lesser of two evils situation. “Would you prefer arsenic or strychnine with that sir?” Until yields rise high enough to compensate holders of debt denominated in either currency for the risk associated with holding them, gold and silver, and copper, platinum and palladium for that matter, will stay strong in price. All of these metals are currently serving as stores of value or stores of wealth and until something changes along those lines, it is difficult to see why those looking for such havens would shun them.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/12/December1510Gold.pdf
Price action in both gold and silver is indicative of the beginnings of holiday trade as players begin squaring books ahead of the year’s end and move to the sidelines in anticipation of taking some time off. Potential exists for some rather strange moves in price. Try not to read too much into it as both longs and shorts exit the market only to return at the start of the New Year’s first full trading week. Pit locals LOVE this time of year as it gives them a chance at picking the pockets of both longs and shorts as they can use the thin trading conditions to go after both upside and downside stops. A lot of them put their kids through college based on the money they secure during holiday trading conditions. Stops are easy money for them although occasionally one or two fund traders will hang around long enough to mess with their plans.
Technically, gold needs two consecutive closes above $1400 to kick it up towards $1420. Downside support exists near the $1375 level with bears hoping to break it down below there and push it towards $1355 or so. Look for dip buyers to be active should that occur.
Silver needs to secure at least one PIT SESSION CLOSE over $30 to give it a shot at taking out the recent peak near $30.75. As stated in previous posts and in my recent radio interviews, silver is not acting like a massive short squeeze is occurring. We will know it from the price action when that occurs. Right now, it is not. The current state of the silver market is one of resting below a critical resistance level. There is good buying showing up on dips towards $28.50. Silver shorts would dearly love to take out $28 but so far the quality of the buying that has been occurring is thwarting them from so doing.
The HUI is stuck in the same situation as both metals. The recent top near 600 is strong resistance with sellers digging in their heels up there but buyers appear active on forays towards the 560 level. The end result is a sort of range trade or consolidation period.
The big story, bigger than the action in both the metal’s pits, is what continues to occur in the long bond market. It simply cannot seem to get any traction to the upside whatsoever. A market that acts like this is telling us that sellers are eager to unload bonds for whatever reason. More and more the focus of the bond market is the supply of these things versus the waning demand. When you get a day in which the equity markets fade lower and the bonds cannot hold their gains even with that sort of supportive backdrop, it is quite telling. It is saying that bond owners believe that the risk/reward for holding bonds is moving against them.
There can be several reasons for this psyche. First – fears of inflation which erodes the value of bonds. Second – fears of repayment of the principal. That may not be as much of a problem when it comes to US Treasuries in particular (they can always conjure more into existence to pay off existing ones!), but there are more than a few municipals that are looking increasingly dubious. Throw in a good dose of debt woes from sovereign nations over in Euroland and many bond holders are getting nervous about these IOU’s in general, particularly when they see riots tied to austerity measures that might work to bring some of these spendthrift nations back towards some semblance of fiscal health. Some might be thinking to let’s just get out of them completely and look for somewhere else to park our money given the strong potential for monetary and political leaders to take the path of easier resistance of just issuing more debt rather than face down a crowd of angry rioters. Thirdly – growing suspicions that China is unloading Treasuries and looking to use its massive reserves to secure sources of raw materials and precious metals. “Why be the last man holding the bag” if the big buyer is stealthily selling them. Fourthly – the Bernanke-led Fed announced that they continue with their QE program because the unemployment numbers remained too high and inflation was too tame. Any bond holder hearing that would be nuts to hold those paper promises in his or her’s hand. Lastly – some are looking at the agreement coming out of the lame duck session of Congress and see another bloated spending bill resulting in a further worsening of the US fiscal condition. Whatever the reasons, and there might be others, ( I Have a suspicions that the big banks did not like the profit potential from the narrow yield curve), bonds are a technical train wreck on the charts that looks to have more carnage inflicted upon it judging from the eagerness of sellers.
See yesterday’s bond chart for support levels. Should 119 give way, there does not appear to be much in the way of preventing a fall towards 115.
That brings us to the Dollar – it is going to be moving higher or lower based on the day to day focus of the Forex markets. On days in which Europe’s woes gain ascendancy, the Dollar will move higher. On days in which the focus turns to the US’s own set of economic or monetary woes, the Euro will move higher and the Dollar will sink. Neither of these two currencies are worth the rag paper that they are printed on so it has really become a lesser of two evils situation. “Would you prefer arsenic or strychnine with that sir?” Until yields rise high enough to compensate holders of debt denominated in either currency for the risk associated with holding them, gold and silver, and copper, platinum and palladium for that matter, will stay strong in price. All of these metals are currently serving as stores of value or stores of wealth and until something changes along those lines, it is difficult to see why those looking for such havens would shun them.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/12/December1510Gold.pdf
Tuesday, December 14, 2010
DAN NORCINI'S TUESDAY COMMENTS WITH CHARTS
Posted: Dec 14 2010 By: Dan Norcini Post Edited: December 14, 2010 at 12:25 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
We have been alerting you to the breakdown in the US long bond over the last several weeks and have noted that its collapse in price has serious implications for all of us.
Judging solely by the price action in both the Ten year and the long bond, the Fed’s QE program, which was designed to hold down long term interest rates and thus spur lending particularly in an attempt to generate activity in the real estate sector, has proven to be an abject failure. Rates have gone up, not down. Combine that with a surfeit of houses due to the wave of foreclosures and it is difficult to see this distressed sector turning around any time soon.
What appears to have taken place is that the focus on the long end of the curve has shifted firmly towards the inflationary aspects of all this Quantitative Easing. In effect, the market has thumbed its nose at the policy boys of the FOMC and completely short-circuited the entire effort.
The long holdout on the FOMC, Governor Hoenig seems to have gotten it right as he has been sounding the alarm about the potential for strong inflationary pressures arising from this foolishness. The Fed has gotten the stock market reinflated and shoved the price of many commodities into the stratosphere, but that has come at a very real cost to all of us. The bond market is saying loud and clear – “you want inflation – fine – we’ll just get rid of our bonds”.
The simple fact is that the soaring CCI (Continuous Commodity Index) now has fully captured the attention of the bond market and unless the easy money policy is withdrawn (fat chance), they are going to begin the long anticipated, but seemingly never arriving, wave of selling which many of us have feared.
There are several dangers in all of this. The first is obvious – rising interest rates will have the opposite effect on consumer spending that the framers of the QE policy intended. The plan was to artificially force down longer term rates through the purchase of Treasuries which would spur bank lending and consumer and business borrowing. How that is supposed to be accomplished with rates going in the opposite direction, escapes me.
The next is every bit as real but perhaps not as obvious to the average consumer who is too busy with life to closely follow the implications of this like some of us screen watchers and that is the cost of borrowing for the US government.
Long term rates are rising even on the 5 year which means that the US is going to have to borrow more and more on a short term basis in order to fund its ballooning budget deficit and its rising entitlement costs if it wants to keep its borrowing costs low. That may work for a while but the fact is that a nation so deeply indebted as ours has become is now at the mercy of market forces that could drastically force up yields meaning the cost of carrying this mountain of debt grows larger with the passing of each month. In other words, our creditors are going to be demanding more money to carry us. I do not see how that benefits us in the long term in any form, fashion or shape whatsoever.
The speed at which the bond market is breaking down is startling. The problem with markets which begin to act like this is that oftentimes that selling begins to feed on itself and a frenzy to unload commences. It may or may not happen to the bonds but the risk is there. Quite frankly, there is only one line of support I can see on the price charts near the 119 level that is standing between the long bond and a drop below 115. If it gets down into that region, things are going to get dicey.
Lastly, note the ratio chart of gold to bonds that we have been sending up from time to time. Note how that ratio has soared in favor of gold. A rising ratio signifies that the market is anticipating a wave of inflationary pressures.
DAN'S CHARTS:
http://jsmineset.com/wp-content/uploads/2010/12/December1410LongBonds.pdf
http://jsmineset.com/wp-content/uploads/2010/12/Gold-Bond-ratio-12-13-2010.pdf
We have been alerting you to the breakdown in the US long bond over the last several weeks and have noted that its collapse in price has serious implications for all of us.
Judging solely by the price action in both the Ten year and the long bond, the Fed’s QE program, which was designed to hold down long term interest rates and thus spur lending particularly in an attempt to generate activity in the real estate sector, has proven to be an abject failure. Rates have gone up, not down. Combine that with a surfeit of houses due to the wave of foreclosures and it is difficult to see this distressed sector turning around any time soon.
What appears to have taken place is that the focus on the long end of the curve has shifted firmly towards the inflationary aspects of all this Quantitative Easing. In effect, the market has thumbed its nose at the policy boys of the FOMC and completely short-circuited the entire effort.
The long holdout on the FOMC, Governor Hoenig seems to have gotten it right as he has been sounding the alarm about the potential for strong inflationary pressures arising from this foolishness. The Fed has gotten the stock market reinflated and shoved the price of many commodities into the stratosphere, but that has come at a very real cost to all of us. The bond market is saying loud and clear – “you want inflation – fine – we’ll just get rid of our bonds”.
The simple fact is that the soaring CCI (Continuous Commodity Index) now has fully captured the attention of the bond market and unless the easy money policy is withdrawn (fat chance), they are going to begin the long anticipated, but seemingly never arriving, wave of selling which many of us have feared.
There are several dangers in all of this. The first is obvious – rising interest rates will have the opposite effect on consumer spending that the framers of the QE policy intended. The plan was to artificially force down longer term rates through the purchase of Treasuries which would spur bank lending and consumer and business borrowing. How that is supposed to be accomplished with rates going in the opposite direction, escapes me.
The next is every bit as real but perhaps not as obvious to the average consumer who is too busy with life to closely follow the implications of this like some of us screen watchers and that is the cost of borrowing for the US government.
Long term rates are rising even on the 5 year which means that the US is going to have to borrow more and more on a short term basis in order to fund its ballooning budget deficit and its rising entitlement costs if it wants to keep its borrowing costs low. That may work for a while but the fact is that a nation so deeply indebted as ours has become is now at the mercy of market forces that could drastically force up yields meaning the cost of carrying this mountain of debt grows larger with the passing of each month. In other words, our creditors are going to be demanding more money to carry us. I do not see how that benefits us in the long term in any form, fashion or shape whatsoever.
The speed at which the bond market is breaking down is startling. The problem with markets which begin to act like this is that oftentimes that selling begins to feed on itself and a frenzy to unload commences. It may or may not happen to the bonds but the risk is there. Quite frankly, there is only one line of support I can see on the price charts near the 119 level that is standing between the long bond and a drop below 115. If it gets down into that region, things are going to get dicey.
Lastly, note the ratio chart of gold to bonds that we have been sending up from time to time. Note how that ratio has soared in favor of gold. A rising ratio signifies that the market is anticipating a wave of inflationary pressures.
DAN'S CHARTS:
http://jsmineset.com/wp-content/uploads/2010/12/December1410LongBonds.pdf
http://jsmineset.com/wp-content/uploads/2010/12/Gold-Bond-ratio-12-13-2010.pdf
Monday, December 13, 2010
DAN NORCINI'S MONDAY COMMENTS WITH CHARTS
Posted: Dec 13 2010 By: Dan Norcini Post Edited: December 13, 2010 at 3:19 pm
Filed under: Trader Dan Norcini
Filed under: Trader Dan Norcini
Dear Friends,
Please take the time to carefully examine the following charts and when you do, realize that the commodity sector has now completely erased all of the losses it incurred beginning back in the summer of 2008 when Lehman Brothers collapsed and started the domino effect of a derivative chain meltdown.
The Fed has gotten exactly what it has wished for – deflation is dead and buried but in the process, they have now set the stage not only for an outbreak of inflationary pressures which are going to boggle the mind, but one that can very easily end up in runaway hyperinflation.
Note that the CCI (Continuous Commodity Index) has run to its current level WITHOUT the participation of crude oil which at the time it made its all time high back in 2008 was trading close to $150. It is currently below $90. That is what is terrifying. We are in effect looking at the prices of food and metals in this CCI doing all the heavy lifting in the commodity sector. Heaven help us if energy prices, particularly natural gas which has been extremely cheap, take off.
Note also the separate chart of copper which is now within a whisker of taking out the 2008 high in price.
You will also note that the S&P 500 has effectively retraced all of its losses since Lehman collapsed as well.
What the Fed has accomplished is to push the price of paper assets higher and inflate the commodity sector while the employment picture remains bleak and wages remain stagnant. Oh, and don’t forget, long term interest rates are now rising even as the housing market remains mired in foreclosures and delinquencies.
While the hedge fund world is partying today because China did not hike interest rates again, I suspect that their partying is going to be short-lived. The Bernanke-led Fed has unleashed the inflation monster upon China and if China does not move to try to quell it, they are going to be amazed at how rapidly prices are going to rise in their land. Food inflation in China is a serious political issue and the authorities are going to attempt to nip it, if they can. Short term they can knock prices down but unless the world produces some bumper crops in this next crop year, the trend in food prices is higher. We have a storm brewing globally folks.
Please know that the price of certain commodities is not moving higher because of supply/demand factors. If that were the case, copper would be much lower. Prices are moving higher because speculative hot money flows, created by the Fed and the Western Banking world QE programs, is indiscriminately mangling a host of various commodities. Commodities are now officially back in bubble territory but as long as the easy money flows, they will track higher. It is investment demand, rather hot money flow demand, that is pushing copper higher for example, not demand from the construction end of things. Wall Street in its greed has created a whole cornucopia of ETF’s that are commodity related and that is where much of the demand is coming from.
The nature of these flows is that they are extremely fickle and quite vulnerable to any news or action on the part of monetary authorities to go after the speculators. I am not sure that there is much any of them can do as long as we have free money available for leveraged plays so while the party goes on, enjoy it. Just be careful. Too much of this demand is artificial.
DAN'S CHARTS:
http://jsmineset.com/wp-content/uploads/2010/12/December1310CCI.pdf
http://jsmineset.com/wp-content/uploads/2010/12/December1310Copper.pdf
http://jsmineset.com/wp-content/uploads/2010/12/December1310SP500.pdf
Please take the time to carefully examine the following charts and when you do, realize that the commodity sector has now completely erased all of the losses it incurred beginning back in the summer of 2008 when Lehman Brothers collapsed and started the domino effect of a derivative chain meltdown.
The Fed has gotten exactly what it has wished for – deflation is dead and buried but in the process, they have now set the stage not only for an outbreak of inflationary pressures which are going to boggle the mind, but one that can very easily end up in runaway hyperinflation.
Note that the CCI (Continuous Commodity Index) has run to its current level WITHOUT the participation of crude oil which at the time it made its all time high back in 2008 was trading close to $150. It is currently below $90. That is what is terrifying. We are in effect looking at the prices of food and metals in this CCI doing all the heavy lifting in the commodity sector. Heaven help us if energy prices, particularly natural gas which has been extremely cheap, take off.
Note also the separate chart of copper which is now within a whisker of taking out the 2008 high in price.
You will also note that the S&P 500 has effectively retraced all of its losses since Lehman collapsed as well.
What the Fed has accomplished is to push the price of paper assets higher and inflate the commodity sector while the employment picture remains bleak and wages remain stagnant. Oh, and don’t forget, long term interest rates are now rising even as the housing market remains mired in foreclosures and delinquencies.
While the hedge fund world is partying today because China did not hike interest rates again, I suspect that their partying is going to be short-lived. The Bernanke-led Fed has unleashed the inflation monster upon China and if China does not move to try to quell it, they are going to be amazed at how rapidly prices are going to rise in their land. Food inflation in China is a serious political issue and the authorities are going to attempt to nip it, if they can. Short term they can knock prices down but unless the world produces some bumper crops in this next crop year, the trend in food prices is higher. We have a storm brewing globally folks.
Please know that the price of certain commodities is not moving higher because of supply/demand factors. If that were the case, copper would be much lower. Prices are moving higher because speculative hot money flows, created by the Fed and the Western Banking world QE programs, is indiscriminately mangling a host of various commodities. Commodities are now officially back in bubble territory but as long as the easy money flows, they will track higher. It is investment demand, rather hot money flow demand, that is pushing copper higher for example, not demand from the construction end of things. Wall Street in its greed has created a whole cornucopia of ETF’s that are commodity related and that is where much of the demand is coming from.
The nature of these flows is that they are extremely fickle and quite vulnerable to any news or action on the part of monetary authorities to go after the speculators. I am not sure that there is much any of them can do as long as we have free money available for leveraged plays so while the party goes on, enjoy it. Just be careful. Too much of this demand is artificial.
DAN'S CHARTS:
http://jsmineset.com/wp-content/uploads/2010/12/December1310CCI.pdf
http://jsmineset.com/wp-content/uploads/2010/12/December1310Copper.pdf
http://jsmineset.com/wp-content/uploads/2010/12/December1310SP500.pdf
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