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Morning Gold Fix: Don't Be Short Gold (Yet)
As gold is currently breaking out courtesy of another concerted take down of the dollar, which has sent futures surging, and the EURCHF to a fresh all time, and very ominous, low, FMX Connect provides some insight on how to trade the current gold bounce.
Submitted by FMX Connect
Get Short
The last two weeks have not been good to gold. A new all time high came and went, and the market swooned $60.00 off that level. We now look like we are in a flagging bearish formation with a steep drop to follow if we pierce the 50day moving average again.
From Nic Lenoir, one of our favorite technicians courtesy, Zero Hedge.
Precious metals give worrying signs to investors. On December 7 both Gold and Silver posted key bearish market reversals. After the initial drop markets tried to recover and failed at the 61.8% retracement for Gold on the 14th. Now we have triggered a H&S pattern we are trying to re-test the neckline as resistance and have managed to hold the 50-dma for now but when that support gives and knowing how bullish everyone is I expect a major correction. The February 1350/1300 put spread can be bought for $11 or $12 right now and for any asset manager out there who is long it offers great protection and a good risk reward for people who feel like taking a stab.- Nic Lenoir
We’re Agnostic For Now
The following chart is our favorite and most understood by our team. It focuses on volatility. Volatility is much more predictable and has less noise than pure direction. So for us, as options people, it makes more sense to use it to trade. One thing worth using volatility for is finding good risk reward scenarios and using volatility breakouts to predict directional breakouts.
Simply put, the Bollinger bands currently represent shrinking volatility in terms of trading ranges. When they widen in opposite directions the trade is to go with the direction the midline takes. Your stop out is the midline. A ridiculous risk-reward. Why is this often successful? Because volatility cycles. And you are looking at one extreme of the cycle. That is not to say it can’t flat line for an extended period of time. But you will be doing nothing during that time, and your powder will be dry for the trade.
Sometimes the break out occurs, and then you get stopped out. That is ok, because the risk-reward works in your favor historically. Furthermore, if the market pierces the redline and moves to the other extreme with the bands still widening, you have what we call: “first way, wrong way”. Consider reversing your position. Note: The dark line drawn at 1372 is the 50 day moving average.
Don’t get short
The last 2 times the moving average was pierced we observed the selling coming from momentum funds. They expressed themselves heavily in options as well, buying puts in a flurry of activity that lasted 2 hours. But then it all but stopped. As the market crept back above the 50 day, all put buying ceased. Historically, options buyers are undercapitalized players or they are simply piggybacking what their desk’s bigger futures traders are doing. That is not to say they are wrong. But it is to say, their conviction is mechanical, and they react to moves. We think that for now they sold it in the hole, but are simply expressingthat belief by not getting short yet.
Conclusion:
- The double bottom shown above is powerful support, but triple bottoms are made to be broken. If you need to be long, get long here with a stop out at that level.
- If you are bearish and need to be short sell it but use our Hourly Bollinger Band breakout to help you decide a stop loss level
- Nic Lenoir’s bear flag and head and shoulders observations are good ones, and are tempering our own bullishness.
- It is the end of the year, many Dealers have pulled in the reins hoping to preserve money for the Kung Fu Grip GI Joe. There could be a lot of noise. Lighten your volume and widen your stops.
Our position: flat. We’ll let the Bollinger bands tell us what to do. We are expressing the ”flatness” being long straddles in addition to putting on futures when the time comes. The straddles are hard to justify with the holidays’ coming, but nothing is ever easy.
FMX Connect will post a twitter alert if they spot a B-Band breakout.
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HourlyChart Bollinger Band Breakout. Long at 1391 with a stop at 1387 on an hourly settle or an intra hour pierce of 1384.
my two cents on Cramer bullishness
He is allowed to be right now on CNBS, so he can establish some credibility, and he can say to sheeple: you see i told you...then when the next takedown is orchestrated sometimes around 1500-1600 he will come out and say SELL this is the top...in other words another trick to separate fools from their hard earned cash...a little more long-term plan than the usual scalping of innocent...but we talking about Mr. G, so expect to see all kind of tactics being employed...
i dont think is as simple as "trade against what Cramer says" in this case...my two cents
Sorry for all the spam this morning but, if you're actively following gold, you must understand this very important point:
http://tfmetalsreport.blogspot.com/2010/12/criminal-evil-empire.html
Thanks TF. The thing that many analysts don't take into account is that at the center of gold and silver markets is a hard core that is growing daily. It is made up of folks like us who understand that phys gold and silver are not like iPhones where supply can be manipulated. It is not subject to the same rules as other investments or commodities, especially now. People that understand the gravity of the economic situation will never be goaded into playing "day trader" with their physical gold or silver. It is a fools gambit, at some point the music stops, and anyone short of Warren Buffet will not be able to put their hands on the most valuable substances on earth.
Question: do fools earn their cash the hard way?
HFT trade that gold dude...personally Im kickin back on physical from $600 where people told me I was a lunatic for buyin that 'gold bubble'.
Amen, brother.
These FMX Connect people have proven themselves to be totally fucking worthless when it comes to TA in the metals. Why Tyler continues to post their shot is beyond me.
The metals are being driven by fundos only. Period. If you're going to trade these markets based on imaginary angles and lines you're going to get your ass kicked from here to Blythe's mountain vista.
+1,0000000000000000000000000000000000000
Lots of people do not understand the game the SE Asians are playing.
Turd, like your blog. Thanks and Merry Christmas!
+1
++++ Keep it up, Turd
+1
Kinda like sitting down for a game of chess only to see the black & white stones of "Go!" -- good luck wid dat!
bit late to the party on this one seeing gold just blew past the 61.8% fib at $1387 about 15 mins ago and is above $1390. Gold top callers? wrong for last 10 years and wrong again here.
They seem to think gold is an HFT stock.
Guessing they spiked you out as an amateur here as it is now at 1380
Well, first off, don't forget silver. Looking good at last check, up .22. Boom!
I'll worry when gold is near 3,600, cause silver will be "To the moon", as it should by then.
Intraday charts are so misleading.
ORI
http://aadivaahan.wordpress.com
$5 bucks is a breakout he says.......
“A mine is a hole in the ground with a liar at the top.” - Mark Twain
down to 1381 few minutes ago.
hey...where is Johnny Bravo when you need him???
my guess is the orders from the headquaters are: No G. over 1400 by Christmas...thats a time when families get together and cant afford that kind of headline...grandpa talking about old days of Mr. G
If you are short Gold, use 1414 as a stop. If you are short Silver, use 30.25 as a stop.
you might also use a bullet as a stop at this point, aimed at the front lobe
look at your yahoo delayed quote board in 20 minutes and you will see Silver just dropped 50 cents.
oh my, oh my, we're now at 29.15, it's a massacre!
50 cents. That would be a HUGE move if silver was still 7 bucks. LOL
Wrong again. Flag has been broken and H&S only works 30% of the time. DUH!!!
That may all be but, I am out for several reasons! Only longs I have are physical PMs! Rest is all CASH! Don't like many things right now, too greedy isn't good either!
Can't make those exports too expensive or the 'recovery' will come to a halt. Currency manipulation is on!
Charts = Farts in this market.
China is calling the tune.
“Last week Asian buyers let the price come in to them. They were buying all day long, hitting all of the offers and they were not sending the price higher. As much as the orchestrators were hitting the bids, there were some smart buyers hitting the offers. The thinking was, I can pick up tonnage here, literally I can pick up tonnage here.”
...and, China is picking up tonnage...
“On the surface this does not appear to have anything to do with the physical market. The spot buyers are indexing, and this is what no one is talking about. They are indexing the metal to the real physical even if they can’t get the physical metal at that moment.
What would stop you from putting up a few billion dollars? This is what China is doing. You’re China, you were refused IMF gold, so you are going to quietly sell your treasuries, or swap your treasuries more likely for a spot financial transaction. What they are doing is buying spot, which is a currency transaction because you can’t get the metal. The physical market has now completely diverged from the paper market.
The only way to fight it, and it can’t be done in the US, but it can over here in England (the Asians can), is to buy the foreign exchange transaction which is gold versus dollar, silver versus dollar. So essentially what you are doing is shorting the dollar versus gold, or shorting the dollar versus silver. The great thing about that is even if you can’t buy the physical, you are now indexed to the price of the metal. So even if you can’t get the physical at that time, you now have your hedge, you essentially have what you want.
So if the price of gold and silver goes up, the price of your spot goes up. Even if the Comex defaults, spot will go up. Even when the market is taken down, it is constructive in terms of filling your physical orders. As they take the price down, you are happy to pay a premium to pick up the physical. The point of all of these purchases is to eventually convert them to physical gold, or physical silver, 100% of them. The Fed has to know this, they are not stupid.”
So much for charting gold when China is dumping $billions into the spot market and patiently waiting for delivery.
Thanks to KWN for the info... http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/14_KWN_Source_-_When_That_Happens%2C_The_Game_is_Over.html
That theory works up to the point there is an actual default, anywhere. If there are defaults, then most likely small players will not be able to take delivery from any contracts. At best, they will be settled for cash or GLD/SLV shares.
Possibly some sovereigns and large institutions are able to take some delivery. But, overall paper metal will not do well.
Perhaps China has decided to take delivery of what ever is available. They will take paper with premium to spot for the remainder. They can play this game in any commodity market they wish.
Why would China not take this approach when they know the dollar is being printed to death?
I'm with you, there. My guess is they have put in quite a bit of research into how much they can bend the market without breaking it.
They also buy gold stealthly by buying unrefined from CDE(and probably others).
However, I feel sure that once a default occurs on any large paper trading vehicle that the paper for physical game is over. Then, only those on the inside will be able to get what little is left. After that, outsiders will only get SLV/GLD/FRN for their paper contracts.
Agreed. Jim Rickards in the talk linked below states that China (now second largest gold producer) has only ~ 4 years supply left in the ground.
This is a great talk by Rickards... It is longer than his KWN interviews and he is talking to a lot of military brass. He says we are going back to a 40% gold backed currency, among other things.
"Rethinking the Future International Security Environment"
http://outerdnn.outer.jhuapl.edu/rethinking/VideoArchives/MrJamesGRickardsPresentationVideo.aspx
That is a great presentation, watched it the other night.
why would China do this or that? It's the question on everyone's lips however ONLY the chinese know what they are up to. Everyone claims they know what China is or isn't doing but at the end of the day it's speculative horse shit.
I am not a PM bear but I also struggle to swallow justifications pinned to very questionable and cloudy viewpoints about China's motivations etc. Unless you are part of the inner political circle there you will never know and those circles are so lucrative that there is no reason one would ever divulge their secrets.
Sorry to be trolling guys but that's just how it is.
Who is selling to China (the other half of the equation)?
"This is what China is doing. You’re China, you were refused IMF gold, so you are going to quietly sell your treasuries, or swap your treasuries more likely for a spot financial transaction. What they are doing is buying spot, which is a currency transaction because you can’t get the metal. The physical market has now completely diverged from the paper market."
BINGO. They are dumping Treasuries, for HARD assets.Chinese have had it with the Feds Ponzi Scheme, and their getting the best bang for their bucks, w/out stirring up the Markets.
These people think 50 yrs in advance, we plan for lunch.
WHAT THE?!?!
Someone just hit Silver back to lows of day
You guys that are in here trying to trade this shit need to understand that this happens every fucking day at the exact same time. Blatant manipulation by the Evil Empire.
http://tfmetalsreport.blogspot.com/2010/12/monday-morning.html
Every Day .......... What would be true unmanipulated price now $2000,$2500,$5000 or $10000 maybe ?
You gotta love these guys. I figured they would get reasonable and defend $1650. But they went the full batshit crazy route.
At least it will end this shit sooner.
Bankers just got juiced by the Fed
charts charts charts charts... Does the economic outlook of any fiat currency seriously look like it's going to recover anytime soon? Seriously? I don't hear anyone in Congress talking about really reducing the deficit, it's a political showstopper and they're going to avoid it until it's all too late.
Well as usual this morning, after a runup, then naked shorting takes over. There seems to be another battleline drawn at about 1400 and 30.
UPDATE: Stopped out at 1384. loss of 7.00.
Being honest about your calls and commenting in your posts speaks of great character. And please if you're gonna short do it between 7-10 EST.
Err, gold just blew down to 1383????? Since when can anybody call/stop the PPT from shorting the shit out of gold through CRIMEX...
Not to worry, China's agents are buying spot on every Fed induced dip. They will patiently pound the new low offer in both gold/silver. Note how both gold/silver were taken down at the same time.
I agree... but I am not a gold buyer unless USD ind breaks 79.5...
WTF is w/the metals premarket?
Silvers up 30-cents, then down 50-cents in the next candle? Gold bouncing around like a fish-out-of-water, too.
Asian agent bids already hitting the Fed take down of PMs.
China has lots of $s to play this game till they run out of $s...Which is their intention.
Fed can create unlimited fiat so they will continue to play as well...until the dollar turns to a smoldering pile of rubbage.
Reefer, you need to get with the program:
http://tfmetalsreport.blogspot.com/2010/12/monday-morning.html
I didn't know our girl was Jewish? Shouldn't she be in Florida visiting relatives by now?
LOL! Is it safe to go back in the water? Or is this going to keep up for a while until Comex @ 1:30?
The pattern's looked different the last few days. Usually they get hammered all morning, and turn it around in the afternoon.
Been reading your blog Turd, what caught me was the spike up BEFORE the flying monkey brigade turned on their screens. I've got 5-min. candles and it's an odd looking formation.
Reefer
IT's just the Crimex morning dump baby, where has you been for the last twenty years?
you sound like used car salesman
Check it out for yourself...move your little mousie to the gold or silver window and observe the short term charts. Pretty obvious what is ongoing.
http://finviz.com/forex.ashx
Getting abit too obvious lol.
There is no way in hell anyone with a functioning brain would call this a fair market.
Just buy the dips with decently wide stops and in smaller sizes and just ride this up.
Suckering in buyers breakouts is the shearing tactic du jour.
Look what week we are in, expect anything.
I look for a pullback to 1290-1315 levels, for a very short duration.
We need a pullback/lull,its healthy for the long term, and I want to buy more.
LOL
And white witch Blythe did it again ... exactly as expected http://marketcyclesresearch.blogspot.com/2010/12/white-witch-blythe-does-it-again.html
What's with the f'n sudden silver take-down before the open?
Looks like gold just got pimp slapped.
Game on in the metals pits, looks like Norcinis 'locals' are busy puttin their kids through college.lol
hope' y'all bought the dip. but watch out its almost pm fix time another smackdown expected shortly
http://abcnews.go.com/Politics/attorney-general-eric-holders-blunt-warni...
Now the government thinks the American people are the problem. Is anyone starting to smell the coffee these days in the year of my Lord, 2010? I hope so.
wtf .. totally obvious what he is doing. Trying to create a 9/11 type fear and loathing, but among Americans against Americans. Ramp up the fear, so they can bring in a raft on new ways to trash human rights, natural justice....
Kina, The ENTIRE Julian Assange( Wiki Leaks) fiasco is a gov't program, designed to give them reasons to STOMP the shit out of the Internet.
Hide And Watch.
Only a matter of time before ZH gets on their radar, and some of its paticipants 'looked' into.
Its a gold and silver bug kind of thing. We have a suspicious nature that God gave us. It is healthy to keep a suspicious nature about a government, especially a government that is totally, now, out of control.
"Society in every state is a blessing, but government, even in its best state, is but a necessary evil; in its worst state an intolerable one; for when we suffer or are exposed to the same miseries by a government, which we might expect in a country without government, our calamity is heightened by reflecting that we furnish the means by which we suffer."
Thomas Paine
another sharp move down right at the comex open...clockwork
Same gold time, same gold channel. Every single freaking day.
http://tfmetalsreport.blogspot.com/2010/12/monday-morning.html
Turd,
Thanks for your Blog brother.
Hell I just use it to my advantage,buy the dips.
The stupid bstds, make it easy.
Soon, and very soon, they wont be able to control shit.
I love Nick's commentaries and those of many other ZH contributors. However, charting gold, except maybe for short term momentum plays, seems like a fool's errand. Predicting a big drop just on technicals is, at best, 50/50. Gold appears to have taken on the status of a currency and "the race to the bottom" has begun in earnest. With the Chinese and other Eastern Asians needing to beef up their reserves, central banks not selling but buying gold, Soros and others in the know buying, countries going broke faster then my daughter can download from itunes, etc. , etc., the downside is just too small in the near term to get too worried about a "big drop" anytime soon. Unless the big drop referred to is only 50-100 points. I can see that happening almost anytime, but not lasting very long.
The best way I've found to play this gold/silver market as a non-pro (which is what I am) is to try to buy on dips if one is a long term investor in physical. And, if playing spot, go with the medium/longer term trend (up), keep leverage low (2:1-4:1 max), scale in on dips (I know it's scary, but it's really to only way to make money on spot if one is trading with the trend), don't worry about going negative for a while (i.e. dip buying) and allow for 100-125 +/- ("big drop") point swings in your plan. The key is keeping leverage low. It's working for me.
"Technology can be among the most powerful weapons in the dictator’s armory. Propaganda, the suppression of the truth, particularly in democratic societies, will bring upon an age of enslavement where instead of yokes and chains, people in celebrated “free” societies like America will be bound by the soft restraints of ignorance, incuriousness, distraction and irrationality."
–Aldous Huxley
+++++
The voice of reason!
Buy physical and hold on for the ride! It's the best/biggest show on earth.
Blythe/Fed vs the Chinese gold/silver buying agents.
Indeed it is a Brave New World, where the slaves bask in their imaginary freedom, thru IGadgets.
+1 - my sentiments exactly. Although I think we're actually in some nasty split between a brave new world and 1984 - brave new world for the compliant, 1984 for any dissenters.
In any case, price action is just a slightly new wrinkle by the bullion banks to take advantage of people who were smart enough to notice that breakouts at 8:30 EST were getting to be a reliable indicator of the day's (and week's) direction. So jack the price at 8:30 then break it at 9:00 and throw everybody into a minor panic. I find these really short-term charts in the PMs really hard to play, and too emotion-churning if watched. Better to just put in tiered buy orders down at the support and trendline levels and leave it alone.
++++
Been playing silver the exact same manner these last couple of months, but its easy to get greedy and chase.
The key is not to be a "pig", slow and steady will win this race.
You must have nerves of steel. Ha ha
Descending wedges, head and shoulders...etc. Got entrails?
I personaly prefer the chicken bones in a cup indicator myself. Plus its fun to get a lot of looks rattling them and throwin them out on my desk and yelling 'WHOOP! There it is!'
Exactly right! Next will come prognosticators reading bones.
Anyone trying to time these moves better be very quick in/outers.
By the time one studies a chart a take down has occured and bids come roaring in.
By the time the bollingers expand, the trade has already moved massively - pointless strategy.
Hint with bollingers: find a deviation that allows previous surges off ema to touch and retrace off bands (try 13 ems dev 3) or, use dev 1 and trade when price has closed over top band or under bottom band
Forgot to add, when using a wider dev such as 3, wait for a trend that looks to be hitting a band, draw a trendline on the lows if uptrend, and vice-versa. Trade price crossover of trendline back to EMA. Mostly works if trend above/below 60 degrees....
and who said this week would be dull? I got underwater positions littering my chart but my god it's fun
Meantime,
if you get tired of the manipulation in the gold and silver markets,
there is always coal ...
http://finance.yahoo.com/q?s=PCX
Tyler, could you please issue a postion statement on owning SLV instead of physical silver. Some people can do both, and some people can only buy SLV for several reasons (e.g. their local shops are out of silver, or they have their investment money tied in an IRA). So, if a person can not buy physical, can they still make an impact by buying SLV? Some posting here and/or elsewhere argue that SLV doesn't really hold physical 1 for 1. Some argue SLV can theoretically issue millions of new shares and put off taking delivery indefinitely, taking advantage of dips. Others say SLV may also be shorting to manipulate the stock price. Others claim there is actually a glut of silver in the refineries. I think I have heard it all, and the shorts have definitely pulled out the big guns in the MSM, causing longs to pull out their guns too. So, I don't actually know what is the truth about buying SLV. Could you please have somebody do a piece on it? Theoretically, those who have IRA's could go 100% into SLV on any given day or span of days....like 12/29 for example....and I'm sure many ZH readers would like to know if that would have a contributing, counterproductive, or no effect on Max Keiser's campaign to buy physical silver.
I would find it very educational and informative if a headline were to read "______ SLV, Crash JP Morgan" (words to fill in the blank could be "buy", "sell", or "short" for example)
Jewelers are moving to all silver or gold plate on base alloy now, unless it is very high end.
Pewter and gold plating on pewter are now coming in.
Silver pcs are double the price of plated on pewter pcs.
not my gold man in boulder. no base alloy used.
Where? Go to the Middle East or Asia where gold jewelry is used to store wealth. You won't find gold plated in these parts of the world. 96.5% pure
Interesting thing with the EURCHF is that Basler Zeitung just released an article [1] (sorry its German, but you can run it through Google Translate) which says that their exports are up 8.2%.
I think this is interesting because it indicates that the Swiss Central Bank's (SBS) point of whining about a to high CHF was BS. They were interventing back then and actively defending (aka printing CHF to buy EUR) at 1.45, now the EUR is down to 1.26 but still their exports (main trading partner is the EU) are growing.
[1] http://bazonline.ch/wirtschaft/konjunktur/Schweizer-Exporte-legen-deutli...
Short? I just bought some shares of Silver Standard and US Gold. The only thing that worries me is Mexico, land of silver and gold mines. If the cartels aren't dealt with seriously, they seem likely to move in on gold and silver production, thinking it's good money. Otherwise I have enough physical metal to feel hedged against the giant fiat collapse.
I wouldn't worry about the mexican cartels. They will take the path of least resistance, they will continue with their drug trade because it is easy for them to do and they make a ton of fiat doing it. Gold would be harder for them to benefit from, though I guess they could sell it to our guberment in exchange for weapons etc...
Do the folks in the parts of the world with manufacturing businesses, oil production and money as savings (assets) celebrate the western holidays as well?
A most see.
http://www.youtube.com/watch?v=NKNPP-IEhhs
Here in Pakistan there is no developed silver market. All we have here is Gold.
So the only option for me is to buy SLV shares which I have done so.
Bought a few shares at 26 and some jan-22 strike 28 calls. My target price for end of Jan is around 32$ so lets see how that goes.