Gold Daily and Silver Weekly Charts - Feeling the Pressure

"Truth is truth, to the end of reckoning."

William Shakespeare, Measure for Measure

What goes down must generally go up, at least once in a while, especially when going down is fighting against the prevailing fundamental trend.

There was intraday commentary here about gold and silver that is worth reading if you have not done so already. 

The downtrend is not yet over, but I am providing some clues as to those things that are worth watching.  These include the gold/silver ratio, and the dow/gold ratio. 

The short interest and market structure in silver provide a backdrop for some explosive upside movement IF the price can break out of the steady selling pattern which may have already gone to an extreme.

If there is a break in the market, you will not see it coming from anything on the Comex, which has become an extended infomercial for quite a bit of what is wrong in the US markets and economy: lack of transparency, captured regulators, weak enforcement, unequal protections, insider trading, and institutionalized frauds and inefficiencies.

It is difficult to draw any conclusions from the historic defeat of a major House of Representatives player in a primary, because of the exceptionally low voter turnout of less than 14%.  And the overconfidence of the incumbent, Eric Cantor, going into the election certainly did not help to motivate his workers to get their base out to vote.

But having said that, it looks like this might be a reaction against an establishment politician who was widely perceived as a willing enabler of the financial corporations.  We would have to see more elections like this to draw any meaningful conclusions however.  As it is, people can use this one example to support just about any bias that they may wish to support.

It would be interesting to see a coalition of the dissatisfied start ousting incumbents, but there are many cultural divides to be breached for that to happen.  Both sides, at their extremes, really cannot 'see' the other without scorn, stereotype, and derision.   The center is a quiet place these days.  But that is where the healing will begin.

Let's see what happens.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Elephant In the Room

Stocks had a bit of a correction today from what were clearly overextended levels.

The economic news this morning was weak, but tends to reinforce the view that The Recovery™ is highly selective, based on a monetary and fiscal policy that favors a relatively powerful few and fortunate individuals with exceptional wealth and connections.

That is not to say that there are not ways to do better than average with hard work and smart thinking. Rather, it is that there are artificial headwinds, and both subsidies and impediments for some, that work against a more general prosperity that have not yet been reformed out of the system.

I really don't see this correction gaining much momentum to the downside yet, although one has to keep an eye out for those exogenous events such as we are seeing in Iraq, Syria, and the Ukraine.

Barring such an event, a correction of the SP futures to 1900 would still not break the uptrend channel.  It will let some of the air out of this market, which is plentiful, and provide the wash-rinse cycle that the pros use to extract their rents, in addition to HFT.

There is no sustainable recovery, just more talk about 'the new normal' and the need for patience to allow time and the market to work their cures, in an act of faith in those canards that brought us to where we are in the first place.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds - Gold/Silver Ratio - Dow/Gold Ratio

I suspect we will know when this long decline in this precious metals market is over when the Gold/Silver ratio drops to something less lofty than 65.

Even with today's big move, the metals have not yet broken the downtrends, but are bouncing off the bottom of a declining channel, at least so far.

But as those who study the longer term charts know, the June-July timeframe often sees an end to a secular downtrend in this long bull market in precious metals.

I suspect today's rally in the metals is due to weakness in stocks, and a changed perception in risk given the deteriorating situation in the Mideast, as well as the very weak economic results this morning.

But I do not want to lose sight of the theme that gold is priced in the West, but it is largely bought and sold in the East. And I suspect much the same can be said about silver.

When silver takes off, and the gold / silver ratio drops back into the 50's at least, we will know that the bull is more likely back.

We may also wish to keep an eye on the Dow/Gold ratio as well.

Gold Daily and Silver Weekly Charts - Consumed In the East, But Priced In the West

"Foreign investors can use offshore yuan to trade gold directly on the SGE international board, which is promoting the internationalization of the renminbi. The international board will form a yuan-denominated gold price index system named 'Shanghai Gold.'

Shanghai Gold will change the current gold market with its 'consumed in the East but priced in the West' arrangement. When China has the right to speak in the international gold market, the true price of gold will be revealed."

Xu Luode, Chairman, Shanghai Gold Exchange, 15 May 2014

And so the price capping continues, in the ritual of confidence, and nothing really happens at the Comex warehouses.   Contracts are stopped, and the bullion gets pushed around the showroom window.

Have a pleasant evening.