Gold Intraday and the Slanting W Chart Formation

As a reminder, tomorrow is an option expiration for precious metals on the COMEX.  As you may have gathered a pullback today was to be expected given the behaviour of momentum algos and skittish longs.  Tomorrow is another matter depending on how the call and put structure of the options is distributed.

If a large number of calls become converted to active August contracts, then a 'gutcheck' to test the new contract holders on Friday or Monday may be anticipated.  That does not mean that shorting or selling is a sure thing for the momentum speculators.

The delivery period for the August contract begins at the end of next week.  The inventory levels at the COMEX are dangerously thin if a robust delivery mechanism for physical bullion remains functioning.   The word of the gold supply situation has gotten out to the general trading news sources.

A failure of the exchange is almost unthinkable given its consequences and the effects on an already eroded confidence and reputation. 

As we have recently seen, lower prices may have gleaned bullion from the gold ETFs, but it triggered a wave of physical bullion, particularly from Asia, that has placed the exchange systems in London and New York at risk.

I have highlighted the key support levels which will test the slanting W formation on the chart.

What happens will confirm the formation, or not, and help to set a minimum price objective from that formation if it does.

US Healthcare Costs a Global Outlier and Monument to Crony Capitalism

I think the Big Pharma/Health and Big Finance sectors have similar cartel like structures where a few large companies dominate the field, exercising considering political power and the ability to obtain subsidies and protections from the system while fending off regulation and price restraints.

There are others of course, like the energy field from exploration to distribution, often known as Big Oil, but which now includes natural gas and electric energy production and distribution.

The recurring myths of the efficient market and 'free trade' are exacting a heavy toll on the general public and the real economy.  They provide ideological cover to a favored elite that is acting in the manner of a privileged and extractive aristocracy while beguiling many with the allure of easy money.

The concentration of ownership in the media has become an inhibiting and directing influence in public discourse that is hard to miss.

The current recovery fueled corporate perks and ZIRP for the financial sector, a fine example of 'trickle down' economics, will be remembered as one of the great policy errors of modern economic history. They pretend ignorance, they feign helplessness, and they know.  But they are getting paid not to act effectively, and even not to see, but to spin some fantasy.

They 'feel your pain.'  They just do not do anything substantial about it.  Even a second term president can still talk as though he is a recently arrived outsider, critiquing the actions of some predecessor and a corrupt system in which is he barely involved.

These are not leaders.  They are like modern CEO's, professional organizers and managers, who talk a great game about their accomplishments but, when the truth comes out, posture that they stand outside the very system for which they have long held the ultimate responsibility.  

But even worse are those who make little pretense to justice and goodness and moral principle, preferring to appeal to the darkest impulses, the fears and hatreds of a society.  Their actions betray their words.

The lack of serious reform, in large part because of the partnership between Big Money and Washington's new political class, and the dormancy of the progressive impulse, will eventually stress the fabric of society to the limit.  And then change will come.

Read the entire story here.

Gold Daily and Silver Weekly Charts - Thursday Is COMEX Option Expiration

Gold finally broke through its 50 Day Moving Average today and ran a little higher on that momentum.

It is now in what could prove to be heavy resistance between 1340 and 1360.

Silver is not really moving with gold for now. I think gold is being driven by more of a short squeeze that is particular to its own supply issues, as well as a monetary situation that does not affect silver yet as strongly.

As a reminder, Thursday the 25th is precious metals option expiration on the COMEX.

Trading options on the COMEX is trading paper derivatives of paper derivatives of rehypothecated paper assets.   It is such an absurd game that only 'systems players' would stay with it.

SP 500 and NDX Futures Daily Charts

Stocks drifted in lazy trading today with little economic news to drive them either way.

AAPL reports tonight so that will likely move the markets, especially the tech sector.

Palast: Did Fabulous Fabrice Really Cause the Financial Crisis

Here is a reminder from Greg Palast, who is one of those rarest of creatures, the investigative journalist, about what caused the last financial crisis, and the source of the criminogenic environment that is likely to be a major contributing factor to the next.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

"...In August 2007, hot-shot hedge fund manager John Paulson walked into Goldman Sachs with a brilliant plan to cash in on the US housing crisis.

He paid Goldman to announce that Paulson would invest a big hunk of his fund's wealth, $200 million, in securities tied to the US mortgage market’s recovery. A few lucky investors would be allowed to give Goldman their billions to bet with Paulson that Americans would not default on their home mortgages.

It was a con. Secretly, Paulson would bet against the mortgage market, hoping it would collapse – making sure it would collapse. All he needed was Goldman to line up the suckers to put up billions to be his "partners".

It was Goldman’s and Paulson's financial version of Mel Brooks' The Producers, in which a couple of corrupt theatre producers schemed to suck investors into a deliberate flop...

What did the Feds do to Paulson? He received... a special tax break.

Am I defending the Fabulous Fabrice, the French-fried scapegoat? After all, he was just along for the ride. But he was deeply thrilled to carry water for the Bad Boys. And the charges against him are merely "civil", meaning he won't get jail time even if found guilty.

And what about Goldman, whose top brass knew of the entire game? The Securities and Exchange Commission did fine Goldman for its duplicity – a sum equal to 5 percent of the cash Goldman got from the US Treasury in bail-out funds.

After Goldman’s con became public, its CEO, Lloyd Blankfein was hailed as a visionary for offloading mortgage-backed securities before the shit hit the finance fan. Blankfein hailed himself for, he said, "doing God's work". God did well. Blankfein’s bonus in 2007 brought his pay package to $69 million for the year, a Wall Street record.

Rather than prison or penury, Blankfein was appointed advisor to Harvard University’s business and law schools.

So here’s the lesson all Harvard students are taught: If you can't do the time, don't do the crime... unless your booty exceeds a billion."

Read the entire piece by Greg Palast here.

Make no mistake. The world is watching-- with increasing revulsion.

"I believe we have a crisis of values that is extremely deep, because the regulations and the legal structures need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I'm going to put it very bluntly. I regard the moral environment as pathological. And I'm talking about the human interactions that I have. I've not seen anything like this, not felt it so palpably.

These people are out to make billions of dollars, and [think] nothing should stop them from that. They have no responsibility to pay taxes, they have no responsibility to their clients, they have no responsibility to people [or] counterparties in transactions.

They are tough, greedy, aggressive, and feel absolutely out of control, in a quite literal sense. And they have gamed the system to a remarkable extent and they have a docile president, a docile White House and a docile regulatory system that absolutely can't find its voice. It's terrified of these companies.

If you look at the campaign contributions, which I happened to do yesterday for another purpose, the financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I'm afraid to say... both parties are up to their necks in this.

...But what it's led to is this sense of impunity that is really stunning and you feel it on the individual level right now. And it's very very unhealthy.   I have waited for four years,  five years now,  to see one figure on Wall Street speak in a moral language.

And I've have not seen it once. And that is shocking to me. And if they won't, I've waited for a judge, for our president, for somebody, and it hasn't happened. And by the way it's not going to happen any time soon, it seems."

Jeffrey Sachs

Gold Daily and Silver Weekly Charts - Rally Up to the 50 DMA For Option Expiration Week

Gold got an early start last night and cracked through the 1300 barrier with some energy, and moved higher into the close today.

As a reminder, this week Thursday the 25th is an option expiration for the precious metals at the COMEX.

Today was obvious short covering and a reflection of the oversold condition and the commensurate tight physical supply situation after a protracted bought of price manipulation on paper.

So what next. I think it would be too much to expect the markets to turn instantly honest.  

Next week begins the important August delivery period, and we must keep a steady eye on supply.

The chart shows the first legitimate bottom formation that we have seen in some time, with a 'slanting W' formed and working, at least so far.  There was intraday commentary on this here.

The sahibs of India are continuing to try and dampen their people's enthusiasm for buying gold. I suspect that the people will give such maneuvers the small amount of attention that they deserve.

David Stockman says he expects a financial dislocation and a flight to gold.

So let's hope for the best, but brace for antics.

And as always, fulfill your oaths.

Stand and deliver.