Not Everybody In The Pool... Yet!

Tyler Durden's picture

From Nic Lenoir of ICAP

Just a quick update following last night's observations. AUDUSD has confirmed the break of the support of the ending triangle here, and Gold has also broken through channel support.

Remember even though some people like to think of Gold as an alternative to stocks, it really is not. From a very big picture standpoint when it comes down how liquid the system is, they both obey to the same rule. That's why Gold sold off in 2008 until the government stepped in and added liquidity to the system, and subsequently even though Gold had a head start (Gold is until proven otherwise in a structural bull market while stocks are in a structural bear market) both rallied as the central banks reflated the system. That is when it comes to the Fed's decision to start QE2 or not, both Gold and equities should react in tandem. In fact while they can diverge during transitional periods, in an over-leveraged financial system like the one we are experiencing it is liquidity driving everything so every time there is a broad macro trend you should expect the correlation of equities and Gold to be well positive.

Back to our charts, EURUSD has been a bit less clear than AUDUSD or S&P futures but building onto our observation of AUDUSD it seems EURUSD has broken through its support, and failed to post a daily close above the main resistance we had identified around 1.3285 (it came very close). I have less convictions when it comes to EURUSD because the pair has been driven by the Libor/Euribor spread which is pointing higher still, but the parallel to AUDUSD is worth noting.

On the flip side AUDJPY is still within its consolidation triangle which is in theory a continuation pattern: text books indicate there should be one last push before a big bearish reversal. Similarly to AUDUSD S&P futures seem to be in an ending triangle but they haven't validated the break of support yet. I apologize if my comments on VIX were not clear yesterday. My point was that the strongest bearish technical signal for equities has been a bullish reversal in VIX outside of Bollinger bands. Usually that happens after a period of subdued volatility where VIX itself is a lot less volatile and Bollinger bands concentrate close to the spot price. April 26 is absolutely text book in that sense and had allowed us to perfectly catch the top for equities and the low in volatility. Looking at the Chart of VIX here, we see that a last break-out higher in S&P futures, likely followed with a drop in VIX could easily take us outside the bollinger bands and ripe for a key reversal: bullish for volatility and bearish for equities.

Good luck trading,


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HelluvaEngineer's picture

I don't see the point of doing technical analysis on gold when the day of an FOMC meeting.  Just sayin'...

je naait ons steeds's picture

I don't see the point of doing technical analysis on gold on fully rigged markets.

Just Sayin'

unwashedmass's picture


me neither. after the CTFC hearings, i think we all understand that JPM paints the charts however they want them painted. me, i'm hoping for a serious slamdown back to the 1155 level, and then i am going in to buy all the bullion i didn't get the first time around.



VWbug's picture

so it's a rigged game and yet you want to go all in...

care to play some online poker?

Geoff-UK's picture

The rigging can't go on forever...look at the inability of John Law to convince Frenchmen that their currency WASN'T being ridiculously inflated.

Sooner or later, people ask their wives "hey, didn't a sixpack used to cost less than $50?"


And then physical gold become something even your cab driver talks about.

VWbug's picture

If you really belive in 'TPTB' and all that, you are setting yourself up fo a loooong period of pain by buying something 'they' want to force lower, wouldn't you say?

Personally, I think it's quite possible there are massive short gold positions out there, and any trader for a big firm who is short will protect his position any way he can, but in my experience if a competitor learns of your position they will do everything in their power to annihilate you.

So is the argument that 100% of wall street participants are short gold?

Geoff-UK's picture

In my worst case scenario, every central bank in the world wants to short gold into the ground.

I couldn't begin to predict when their capability to depress the price fails--I just don't think they have a magic wand that can depress the price of gold and silver indefinitely.

So yeah, I'm not day-trading this, and I expect them to make it appear as if i'm making the worst investment of my life.  I'm holding onto my gold for dear life, fully expecting this first-in-history experiment in all-fiat currencies world-wide to end very, very badly...

Shoegazer's picture

I don't see the point in doing a technical analysis on something that is a long term investment.

-1Delta's picture

i dont see a point in NOT doing technical analysis on something that is a long term investment. To all the gold bugs... you will have a bad day when the doellar spikes, copper tumbles, and stocks teeter. When liquidity is sucked out of the system, it includes the bullion.

ColonelCooper's picture

It will only be a bad day if you have paper gold, or need to sell your physical to cover losses elsewhere.  In your scenario, "gold bugs" will get their day in the sun. 

What people seem to have a hard time realizing, is that "gold bugs" plan to SPEND their gold more than they plan to SELL it.  Patience is a virtue, and gold is merely an insurance policy.

hamurobby's picture

Yes good point, but are things stable enough in the markets and the economy to sell your physical gold? I hedge my gold hoard (all $5 worth) by shorting the sp. Its a win win situation for me. I sleep well at night knowing I have my savings in gold. When the gov and the fed finally get it so wrong no one wants currency anymore, I will have money. The physical gold market is so small compared to the amount of currency and paper assets on this planet, that if there were to a be another hiccup in the markets, the chance of locating and purchasing physical gold may net you very little gold for any currency. If you are "all in" in anything, (including currency) you better be right.

Quinvarius's picture

I don't see the point of doing TA on paper gold at all.  Paper gold may have a liquidity relation to the banking system.  Real gold doesn't.  When the paper price dips, the physical demand kicks into high gear.  Foreign exchanges and dealers that specialize in actual delivery, not paper products or derivatives, cannot sustain a price under $1200.

Cognitive Dissonance's picture

Everything is coming together for a reversal here and now, meaning over the next few days. Let's see if the PPT can hold back the flood waters trying to break over the banks of the river. I doubt it. More like they'll be able to throw up a few road blocks to slow the rush from time to time but it's becoming clear to even the brain dead that the roller coaster has reached it's peak and is headed back down.

Whee....... Look mom, no hands.

Tense INDIAN's picture

i dnt understand ....this economy has been taken down on purpose.....and they also want the whole economy to collapse so that they can provide their "SOLUTION ".....why r they holding it up since they know that it WILL come down anyway

Young's picture

They don't give a shit about the economy, they're all from Greenspans world, as long as the market goes up the economy is "fine"... Ben to timmaaay: Hey Timmy, when you've sucked my d*ck we can go out and inflate another bubble. Timmaay: "Yeah-yeah-yeah" jumping with joy. Get the picture?

SteveNYC's picture

Planted horrific images in my mind, but worth it for the laugh!

Eric Cartman's picture

lol. "Timmaay!" I liked that. 

Walt Whitman's picture

The November erection... er, election.

Geoff-UK's picture

they'll hold off collapse until after the election as best they can


then Obama lets it fall so he can rebuild in his image--at least, that's his plan.  Not sure if Joe Sixpack is going to roll over and let him, but we'll see...

HelluvaEngineer's picture

To the technicians out there, I know everyone sees that big head and shoulders pattern forming.  Does the S&P need to get back up to 1145'ish to make it a "valid" pattern, or can it just break down from here?

realtick's picture

Perma-bears going mainstream = massive contraian buy signal.

This is stock market counter-psychology 101.




-Michelle-'s picture

Maybe before, but the times they are a-changin'.

Young's picture

Just it will touch top resistance again (from last couple of days), no doubt. The equity market is always the fool in the group, it can go up no matter what. Bear Stearns Hedge Funds implode = market up, three subprime lenders implode = market up. The fool consissts of gamblers who've been tricked to think that the market always goes up, they read Graham and worship Buffett, they want to own piece of crap stocks for the rest of their lives... Of course they don't see themselves as gamblers, they think there conservative doubling up in every downturn. Seems real smart if the market really tanks great depression or Nikkei style...

israhole's picture

Gold's "broken channel support"?  That's funny.  I typically won't use just 10 days of data to determine how "strong"  a channel or trendline is.  In fact, I don't even use trendlines because gold is real cash money.


Instead of standing on the sidelines in paper, I'm standing on the sidelines in gold.

Treeplanter's picture

Our financial overlords are showing a little desperation.  

newstreet's picture

Keep Posting Nic, please. 

10044's picture

"Paper" gold shufflers like yourself are gonna get DESSIMATED in the upcoming collapse of the market. Gold is ULTIMATE safe haven, it's God's money, not bernanke's.

flacon's picture

Haggai 2:8 (King James Version)


 8The silver is mine, and the gold is mine, saith the LORD of hosts.

jdrose1985's picture

Ezekiel 7:19
They will throw their silver in the streets. Their gold will become an unclean thing. Their silver and gold will not be able to save them in the LORDs day of wrath. They will not satisfy their hunger or fill their stomachs with it, for it has made them stumble to sin.

Treeplanter's picture

Paper money won't help, either.  Wrath sucks.

Hephasteus's picture

Blah blah blah blah. Fuck god's wrath. Fuck god's old book. Fuck god's "prophets".

Headbanger's picture

Most excellent post Nic!

taraxias's picture

More chicken entrails reading from Nic...........PMSL

What will it take to wake up the chartists that in a blatantly manipulated market, technical analysis means shit?

And aaah yeaaaah, gold is breaking down......once again. Grow up FFS.

Internet Tough Guy's picture

Paper gold always gets a smack on Fed day.

freshman's picture

I believe TA reflects everything, even the manipulations. Excellent post.

RobotTrader's picture

The "General Jim" countdown.

95 more trading days until January 11, 2011.

Gold must rise by $4.75/day to reach $1,650.

"But Jim, you promised!!"


Turd Ferguson's picture

So you've got it all figured out, Robo?

Lots and lots of time left. We'll see.

Let's see you put your dick on the line with date and price, Smartypants.

Treeplanter's picture

Yeah, Robo.  Gold could make that move in one day.  You might want to buy some while the price is right.  Harvey has been watching real silver get scarce.  Somebody will have to cover all those shorts before it's too late.  

DarkMath's picture

" I apologize if my comments on VIX were not clear yesterday."


I was left scratching my head yesterday. This post makes a lot more sense. I agree that Gold and Stocks will move together when liquidity disappears. But I think this is only temporary. Why?

Because a lack of liquidity is a sign of deflation. However here in our Debtocracy deflation will lead to the inability to pay off our National Debt. This would increasingly signal DEFAULT in bright red flashing neon letters to the rest of the world. This default fear would reduce the demand for US dollar denominated debt. Of course that will kill the dollar thus lead to RISING Gold prices.

For this reason Inflation or Deflation Gold is a good investment. Now as we all very well know Beb Bernanke will do anything in his power to fight deflation, so inflation is a far more likely outcome. Any dip you've shown in your charts will quickly get swepted up by the man behind the curtain.

American Dreams's picture

Thanks again for the excellent analysis Nic.  Being traditionally a fundamental guy and with a breakdown of such analysis I've found the tech side to be much more valuable as of late.  Please keep giving us those Bodkins for our respective quivers.

there be no shelter here

mephisto's picture

Quick point on VIX and equities - for an event like todays, spot VIX will price in a gap. On the news, VIX can fall even if equities do.

So calling for a potential fall in VIX followed by a spike doesn't necessarily mean calling for an equity bounce followed by collapse.

Yardfarmer's picture

 stocks, gold, and euro down, dollar rallies. we've returned to the inverse USD/ Au relationship long held in abeyance since the Greek debt/Euro crisis. Lenoir suggests like so many others that we are seeing a replay of September 2008, to my thinking quite a facile, short-sighted, and naive assumption.

USD has once again become the primary focus as the effects of QE 1 fade and the extremely negative economic and employment indicators expose the now unavoidable truth-the US economy is on the verge of outright collapse.

With the obvious evidence of deflationary pressures, the knee-jerk and hysterical reaction is to rush out of equities and gold and pile into once almighty dollars. Nobody in their right mind is in equities. With risk off, the only apparent refuge is treasuries and USD. Fear is driving the game. All these capital "havens" are on fire.

Despite what Lenoir, RobotTrader, or any other of the equity hounds, price chasers, or deflationary bogey men have to say,especially in these times of rampant institutional criminality, the common man wants value and substance. That is what really matters.

The insane and grotesque proportion of capital that the financials have criminally accrued taints anyone associated with them including Lenoir. Financial and investment advisers are a pack of liars and thieves lining their own pockets. I will take honest work gold, silver, land, food and water and the means to secure and protect it anywhere and any way I can find it over the frivolous airy projections of money-men and their useless charts and technical analysis.