Technical Analysis

For those precious metal investors who think “All Official Data” is manipulated…. it isn’t.

"We live in a dystopian investment world, whose markets have morphed into an Orwellian backdrop of omnipresent government intervention and manipulation that is increasingly dictated by the quant community -- who worship at the altar of prices and price momentum (and are agnostic on values)."

“From the mass psychology perspective, Gold is very close to putting in a bottom.  Sentiment investors, contrarian investors and investors who are familiar with the concept of mass psychology should consider taking a closer look at the precious metal’s sector now”.

This signal has triggered four times in the last 20 years. Every time it did stocks lost between 20% and 50% in the following six months.

The blue chip Major Market Index failed to recapture a key breakdown level. Recently, amid the sharp post-September rally, the XMI returned to “kiss” the underside of the broken trendline. This was no happy reunion, however, as the result was a clear and precise rejection of price by the trendline.

Last week, we asked if silver would have a 14 handle again. This week, the market answered yes we can! How did we know? By looking at supply and demand.

Equity markets have not priced a meaningful slowdown in global corporate earnings. They are still pricing in central banker commentary... for now. History teaches us that equity turbulence accompanied by meaningful economic softness often marks the turn from a secular bull market in to a bear market.

Overnight weakness on the back of 8-month highs in Chinese crude inventory (combined with the recent plunge in super-tanker rates - i.e. China is no longer refilling its SPR) sent WTI Crude towards the critical $44 level (which has acted as support for 2 months). The China rate cut weakened crude further as PBOC admitted it was needed because of the state of the economy. And then Baker Hughes reported a total rig count unchanged 787 (lowest since April 2002) and an oil rig count decline of just 1 to 594 (the 8th weekly drop in a row). WTI slipped on the news.

The dollar dropped about half a milligram gold, and 50mg silver.

But who wants to read about the universal currency falling, failing? Few people are so barbarous as to think of the dollar’s value as being priced in terms a monetary metal.

Correction continues, but it is only a correction.

Don't trade yesterday’s news. There was backwardation. However, it's a sensitive indicator and you need an updated picture before buying after a sizeable price move.

Consider the sport of betting on the sport of horse racing. It’s actually similar to the analysis of the gold and silver markets. How’s that?

"NEW RECOMMENDATION: we wish to sell the S&P futures short this morning, fearing that a major top hss developed and that the recent consolidation in the stock market is precisely that: a consolidation before the next leg downward... If the consolidation is indeed reconciled to the downside, the target becomes 1725-1750, or just a bit more than 200 S&P points to the downside."

The markets are clearly sending the same warning signals that they always have. It is only a question of whether we are willing to listen, or allow our "greed" to keep us at the casino table hoping for one more "hot hand." One thing is for certain, if the market does muster a rally strong enough in the week's ahead to retest the previous bullish trend moving average, it could very well be a "sucker's rally."

This was a fairly quiet week in the market for the metals. The price action was elsewhere (e.g. equities and currencies).