Stocks and Precious Metals Charts - The Irresponsibles

“There is only one thing more painful than learning from experience, and that is not learning from experience.”

Archibald MacLeish


"We all make choices, but in the end, our choices make us.

Andrew Ryan as a character in Bioshock

It will be interesting to see if Dandy Don and the Republicans can get their own house in order.

The party leadership, particularly in the House, encouraged the frivolous use of Congressional time with their fifty odd and meaningless votes to repeal Obamacare. They are now so used to acting like powerless frat boys, that they can't seem to buckle down and get to work.

Well, maybe that is not all that bad, all things considered.

So stocks were wobbly today, because the gross ineptitude of the Trump Administration and the Congress is making most everyone doubt that they can get anything done except the grossest of neo-liberal betrayals of the American public.

They certainly do not seem to be able to create an infrastructure plan, fund it, and still provide sweeping tax and healthcare reform.

Perhaps they will settle down and start acting like adults. I am not putting my money on that particular number yet.

But then again, this is always the real challenge for the superior human beings isn't it?  And do not doubt for a moment that the fortunate few think that everything they have is richly deserved, due to their natural superiority.

And so they are puzzled by what they are to do about 'life unworthy of life' that is such a burden on them and their fellows high achievers.    And of course they think they get to decide which life is worthy of the benefits of society.   Or perhaps they let some other group of thugs, or impersonal 'market forces' to do it.

The obvious solution is single payer for all. Every other developed country has made it work. But for some reason Americans cannot seem to do it. I wonder why?

The root of the problem is predatory profit seeking at work in healthcare, pharma, and financials, areas which are always tending towards monopolies and price gouging when not restrained by sensible regulations.

Gold and silver are still hanging on below key resistance.

I have noted a potential 'inverse head and shoulders' formation on the gold chart. It is part of the long handle in the cup and handle formation.

That cup and handle is much, much easier to see on the silver weekly chart. And so far it looks good.

But as always, formations are only potential until they are activated. What the potential formations needs is that upside breakout. And do not think for one minute that a lot of the Street denizens are not watching that action as well.

Have a pleasant evening.

Charts at Market Close - The Duty of Delight - Cup and Handle

"How necessary it is to cultivate a spirit of joy. It is a psychological truth that the physical acts of reverence and devotion make one feel devout.  The courteous gesture increases one's respect for others.  To act lovingly is to begin to feel loving, and certainly to act joyfully brings joy to others which in turn makes one feel joyful. I believe we are called to the duty of delight...

People say, what is the sense of our small effort? They cannot see that we must lay one brick at a time, take one step at a time. A pebble cast into a pond causes ripples that spread in all directions. Each one of our thoughts, words and deeds is like that."

Dorothy Day

Today was the weekly trip to the butcher and the baker. We tend to be a little picky about quality, so we do drive a little distance but it is well worth it.

It is the little things that make life worth living.  Maybe that is why those who have too much, and think too much about themselves, are so often rather hard to please, and among the most miserable of God's creatures.   Greed can never be filled, and therefore the greedy heart is never at rest.

Stocks were in a lazy upward drift for the better part of the day, with silver following and gold in a sideways chop.

Kohl's and Macy's cut forecasts after the bell, and both stocks are getting slammed lower. Just another sign of the great and glorious consumer recovery.

The first one hundred days of Trump's administration are sure to be interesting. He is not even sworn into office and is already making a big splash.

Just to reiterate what I said yesterday, if gold and silver can break out from here, it will look like a rather long handle (ladle?  lol) in a cup and handle, with measuring objectives as initially indicated, and most likely much higher from here by year's end 2017.

But first the breakout attempt and a confirmation.  One step at a time.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Did We See A Bottom In Gold Today?

"Quite unexpectedly, except perhaps among a handful of long-time gold advocates, gold is quietly and gradually moving back to its centerpiece role in international reserves. Stretched and threatened financially, nation states have begun accumulating gold for the same reason private individuals do -- as portfolio insurance to cover a wide assortment of economic uncertainties.

What's more, this restoration has not occurred formally as a result of an international agreement as has so often the case in the past, but informally as a natural evolution in the way nation states think about and react to the long-term value of currency reserves. As such, it suits the times and suggests an authenticity that is likely to transform the gold market at its core.

In my view, this swing in the supply-demand fundamentals will come to be recognized in future years the most important gold market event since the Central Bank Gold Agreement (CBGA) of 1999 -- the accord that many believe kicked-off the secular gold bull market."

Michael Kosares, The Most Important Gold Event Since 1999, USA*Gold

Quite a few of the uncivilized entered the markets today, and sparked a rally in gold and silver in what appeared to be an obvious 'flight to safety' and also a powerful relief rally after the awful pounding the metals and the miners had taken into the Comex expiries and delivery dates. 

Some of the dividend paying gold and silver stocks had impressive gains even moreso than the metal, with at least one royalty trust up 11 percent or so.   Yes I flipped one from yesterday, and even trimmed my entirely outsized bullion positions bought on the dips back to something a little more 'normal' and comfortable. Of course I never touch my long term holdings in place since 2000. It is not raining nearly hard enough yet.

During hard times a solid dividend paying miner is hard to beat, unless you get lucky with one of those lottery tickets known as junior miners.  When the right time comes I hope to be there.  But for now I will play it a bit more safe. I see more potential downside in stocks until the banks step up and print it up harder. No telling how well they will fare against the splash from across the sea.

After a triple spiked test of support, the gold market went vertical today, marking perhaps what might be regarded by some of the more astute as a well-rounded bottom. I live for days like today.  Much of this was due to a reversal of the sheer manipulation for short term gains, that broke in the face of the unfolding global currency crisis.  Bam!

Never underestimate the power of the CFTC to stand idly by while the markets, taken in hand by the titans of Wall Street, degenerate into something that resembles a round of golf at the Piedmont Driving Club, or an impromptu fight club meeting at the New York Athletic Club.

Well, boys will be boys, in proportion to their toys. 

Chart-wise follow through is everything. Yes we have a short term rounded bottom, and the potential for much larger formations including a broad cup and handle the likes of which we have not seen in quite some time.  But do not underestimate the baseness of desperate men accustomed to having their way.

But first things first. We must see if gold can break the intermediate downtrend and then establish at least a broad trading range, which will form the lid of the potential cup.  It could happen in a rush, given some exogenous trigger event and the right convergence of circumstances, but I suspect it will be a long and arduous climb, fought in stages and levels. 

Chart porn-wise, the cup and handle, should it work, would take gold well over $2,000 by year end or so, and probably set up a new leg into the 3000's.

But that is all speculation. Time to do the hard climbing work for now, one day at a time.

Have a pleasant weekend.

Gold Daily and Silver Weekly Charts - Cup and Handle Develops - SEC Rocked By Sex and Corruption Scandal

"The filing of this lawsuit now by Weber officially begins the raging clusterfuck portion of the story, as he and his lawyers are releasing lurid details not only about Kotz and Maloney, but about a host of other SEC and SEC IG officials.

It's very strong stuff: the only things missing from this lawsuit are tales of SEC officials running white-slavery rings and snorting brown-brown off the corpses of strippers with West African rebels...

It's hard to say how all of this will shake out. Certainly, from a P.R. standpoint, it'll be ugly for the SEC. One other storyline to follow: If the Weber retaliation claims are true, they fall within an ongoing and increasingly disturbing pattern of federal whistleblowers who have come forward and experienced reprisals themselves instead of having their claims investigated properly."

Matt Taibbi, SEC Rocked By Sex and Corruption Scandal

Hell hath no fury like a whistleblower fired, ridiculed, and scorned in the national press. As you may recall, earlier this year Mr. Weber was labeled a dangerous crank for allegedly wanting to bring a gun to work. He was subsequently cleared in an investigation but was fired nonetheless.

I do not recall hearing about this unfolding scandal at the SEC on the mainstream medias.   But I tend to get most of my serious financial news and commentary from Rolling Stone magainze and the Comedy Central network these days anyway.

The story about this lawsuit came out quietly last week in the wire services with non-descript headlines like: Ex-SEC Investigator Sues Agency, Seeks Damages of $20 Million. There was a more in-depth story from Thomson Reuters that portrayed Weber's allegations as 'hard to swallow in their entirety' here.

The Taibbi piece is an interesting read.  Matt has an outré phraseology that puts a sharp point on his stories. If there is a Congressional investigation about this I would imagine that C-Span would receive a significant boost in the number of viewers for some of the live testimony. Americans do not care much about financial corruption, or even gross abuses of justice and individual rights including torture, unless it involves sex.

As you may recall there was a minor scandal a couple of years ago when it was revealed that there was a propensity amongst some at the SEC to spend most of the quiet intervals between trips through the revolving door between Washington and Wall Street by surfing the web with a bias towards porn sites. 

Apparently not all regulators were so sedentary in their pursuit of kicks, bangs, and thrills of the belly button and below.  You can read the details from Taibbi here.

The continuing development of a potential 'cup and handle formation' was discussed intraday here.

As I pointed out last week, the markets were being taken much too far to the sell side, and it appeared to be tax-selling as the VIX failed to show any real fear that was driving the market. It was more of a financial calculation.

So what next. This is a holiday market in the States, and is going to be thinly traded. There are the 'fiscal cliff' which is artificial, and the continuing conflict in Gaza, which is a destabilizing influence on the region and a human tragedy for all concerned. And thirdly there is the economic instability in Europe and the adoption of the bank bailouts "Japanese model" which is crippling the real economy.

All three of these present a situational risk to markets should they take an unfortunate turn for the worse. There could be an associated divergence between stocks and bullion as they may not present as liquidity events but as a risk trade.

Let's see how the market makes its way into December.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Off We Go Into the Wild Blue Yonder

Gold and silver got some legs today, following through in a reasonably well-behaved manner to the upside in this current trend channel, which can be easily seen on the chart.

It is challenging its old nemesis, the overhead resistance at 1270 which has been capping rallies for several weeks.  I suspect gold will be breaking out to the upside once it can clear that resistance, and take a crack at running up to the top of the trend channel which is around 1310-1320 about the place where I think gold may meet it.

The cup and handle is looking good, but will not activate until we break out and stick a close through the top of this trend channel which nicely defines what is a slanted cup.

Last night I took a look at a different chart for gold that indicates that if the cup and handle does activate, it will reach its next big battle around the 1550 level, which is the lower bound of the trend channel that it had been in prior to the breakdown in price and the bear market which seems to be near ending.

Gold and silver are manipulated markets, being traded as currencies and abstractions, especially with regard to gold.   As you know I am expecting the pressures on the 'gold float' to assert their dominance over the highly leveraged paper markets at some time around midyear, maybe with the June contract.

However, forecasting markets that are rigged by determined financial engineering with a relatively free hand to do naughty and perhaps even foolish things is difficult.  So we ought to be prepared for a broader range of the usual outcomes from charts like these.

The buck went down today, most likely on the weaker than expected GDP estimate, and the likelihood that any Fed rate hikes will be short lived indeed.

Silver is not the leader at this point, as that role is being fulfilled by gold.  I don't think that says anything about a precious metals bull market.  It seems to indicate that this rally is being driven by more monetary issues particular to gold, and the structure of the physical gold market, than a general inflationary move in commodities.

You can see this if you chart up the ratios of gold to various commodities and metals with a commodity component like platinum, silver, and the CRB itself.   Yes at some point that may correct, but right now gold seems to be leading, and I think there are good reasons for it that are more secular to gold and the structure to its bullion demand.

People who say that supply and demand do not apply to gold because of the big store of it above ground are making the mistake of neglecting price.  And that is a big mistake.  Just because gold is in a vault does not mean  it is for sale at whatever price the wiseguys may choose to set for it.  This does not mean that their metrics are wrong.  Rather, the market is multidimensional, and in their mocking of other measures they set themselves up for the very narrow viewpoint that they deride.

So, all in all, it was a good day for the precious metals and miners.  Let's see if we can build on that.

Mary was released from hospital today, and is now in a rehabilitation facility out further in 'the country' where we live which is nice.  I expect she will be in there for some time but visitation is easy.  Her speech is improving rapidly but she has no conscious control of her right arm or leg.

We had a bit of a shocker yesterday from the unexpected death of my father-in-law back in Ohio.  That is why I said I was not sure how I might be posting.  He simply died of old age, peacefully with his children at his bedside after falling ill in the morning. He was a carpenter, a veteran of the Army Air Corp during WWII in Europe, an avid golfer, of Pennsylvania Dutch (Mennonite) heritage, a simple, honourable man.

Have a pleasant evening.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

The dichotomy in premiums between the Spicer Funds (CEF, GTU) and the Sprott Funds (PHYS,PSLV) is remarkable.

Either the Sprott Funds have now become large and liquid enough to become trading vehicles for the desks, including those who have underwritten the shelf offerings, or investors have become shy given the repeated and somewhat heavy-handed treatment of the expansions. Perhaps a bit of both.

A highly simplified pair trade would be to go long SLV and to short PSLV, for example, to take the premium on PSLV. This would tend to compress the volatility in PSLV into sharp bursts as these trades strengthen and weaken, and then fall apart. The pros can manage the risk in it, but the specs will get something more than the premium handed to them on the breaks. This is one of those 'LTCM trades' that look quite good on paper, and supply some nice gains, with a hidden barb of risk.

Next week is an option expiration in gold and silver bullion futures, and there is a fairly obvious attempt to 'hold the line in price' before then. As I have said, the next big resistance on my charts is in the 1790-1810 area. It is the outer permimeter bears' Maginot Line at 2000-2100.

From a Nov 19 posting:

"The inverse H&S pattern measures to 1810 as a minimum objective. That is also the point at which the handle would be at a breakout to validate the entire cup and handle formation.

I would expect gold to break out and run to that point, with resistance heavier around 1790-1810. There may be some time to actually break out, as the shorts will attempt to hold a strong line there and at the next major objective at 2100 or so, which is the first objective of the cup and handle."

Nov. 27 Comex December gold options expiry
Nov. 27 Comex December silver options expiry
Nov. 27 Comex December copper options expiry
Nov. 28 Comex December miNY gold futures last trading day
Nov. 28 Comex November copper futures last trading day
Nov. 28 Comex December E-mini copper futures last trading day
Nov. 28 Comex December miNY silver futures last trading day
Nov. 30 Comex December gold futures first notice day
Nov. 30 Comex December silver futures first notice day
Nov. 30 Comex December copper futures first notice day
Nov. 30 Nymex December palladium futures first notice day

Stock and Precious Metal Charts At the End of Day - Silver Cup and Handle

Stocks were mixed today on weaker than expected home sales and some poor reports from finance and the tech sector.

The US dollar turned lower, and gold and silver 'popped' in a two step rally. Gold stands a little over 1250 and silver is hanging on to the 17 handle.

Today is the NY primary for President.

The Bucket Shop was relatively quiet yesterday with a few gold deliveries, and a bit of a build in the deliverable gold in the warehouses over the past week, back up over 550,000 ounces.

Silver is shining a bit, and on the weekly chart below has 'set' a cup and handle formation.  Now it must hold these gains and move higher.  If it can do this I would think silver will test that old support level around 19$ and try to fight its way back into the old trend channel.

In the chart on the right you can see the year to date performance of gold, silver, the SP 500 and NDX.  Silver is the leading asset.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - They Just Could Not Resist

Gold and silver were higher most of the day, with gold selling off a little after the markets closed in Europe and Asia.  The wiseguys just could not resist taking it back down into the close.  lol.

The handle on the potential cup and handle formation is not firmly set yet as gold failed to close over 1270, coupled with the initial weak retest of lower support in the early handle stages. Normally we would like to see a little arc, an interplay of buying and selling. This time it went straight down and then rallied steadily higher. It risks turning into more of an ascending wedge.

The bright side was that silver refused to give up most of its gains.

Speaking of 'they just could not resist,' here comes the Housing Bubble Part Deux and the return of 'interest only' mortgages.

So much for Dodd-Frank, financial reform, and the integrity of the financial regulators.

I have to leave for an appointment now and will not be back until much later, so I will see you again Sunday evening.

Remember to care for the poor, the unfortunate, and all the creatures of His creation, as you would like someone to care for you and yours, whether they be 'deserving' or not, for His sake.   This is the whole of the commandments and the law, the vitality of hope and faith, and above all love, which is the key to true life.

All the ceremony, the elaborate ritual and trappings, the worldly learning, the impressive rhetoric, the great shows and splendor, the zealous judgement and anger at the differences of others, will not sustain us for an instance, as they all will pass away in His kingdom, and are already as just the appearances but not the substance of faith.

Only love abides, and bring vitality to the seeds of faith. And to offend against love is to offend against the Spirit.

As we understand this, we aspire to wisdom, and the fundamental principles of His economy.

Have a pleasant weekend.

“We who used to value the acquisition of wealth and possessions more than anything else now bring what we have into a common fund and share it with anyone who needs it. We used to hate and destroy one another, and refused to associate with people of another race or country. Now, because of Christ, we live together with such people and pray for our enemies.”

Justin, Martyr, 140 AD

Gold and Silver Daily Charts

Gold broke out of its trend channel today on the same monetary euphoria that seemed to drive US equities.

Prior resistance is now support, so we would look for the top of the trend channel to provide some level of potential lift in the case of a consolidation or pullback around the 1325-1330 level. Breakouts from cup and handle formations can be violent, and it would not surprise this chartist to see that run to the first target of 1375 before gold consolidates properly. I would hope gold would take a more leisurely route higher to that second target of 1455 and beyond, our long term minimum objective for the cup and handle, since the big parabolic peaks are almost always followed by deep corrections.

This gold chart gave us a 'buy or die' signal at 1,156 which was an almost perfect 50% retracement of the big rally off the bottom. That buy signal now shifts to 'neutral' as we approach the intermediate objective of the breakout which is 1375 before a consolidation or a pullback. Keep in mind that the minimum measuring objective of 1450 was set in May 2010 although the details are periodically revised as new data is obtained from the chart. It has been a long road since then. Now things get a little more complicated.

Ben Davies' Interview on King World News is a credible hypothesis into what may be happening over the next two years or so. I always assume these large macro changes take time, but there are periods when they reach a tipping point or a sea change and the progress of such changes can accelerate significantly. The markets may be signaling such a major development.

One thing I am sure of is that as this situation plays out and as gold and silver rally higher, the reasons given by some as to why the precious metals should not be doing what they are doing, rising higher in price, will become increasingly strident, insistent, and at times unintentionally funny because they are so disconnected and inappropriate compared to reality.

It requires intelligence and maturity to realize when you are wrong, but it is a mark of character to be able to admit it, gather yourself together, and go forward again successfully, dealing with things as they are. Self-deception is a powerful ally to failure, and rationalization can be remarkably inventive and seemingly inexhaustible. Everyone is admittedly wrong sometimes, except for the deluded, the naive, the con-man, and the narcissist.

Silver is 'taking no prisoners' from the bear camp in its own powerful breakout that continues to extend beyond our expectations. I am of a mind to take some profits off the table for the short term trades, but I certainly would not get in front of this juggernaut just yet, or more seriously hedge the long term positions. That time may come, and the market will let us all know when.

The Guardians of the Realm

How's Your Confidence Now?

 

How About Now?

Gold Daily Chart: Shock and Awe; Cup and Handle Formation; US Bonds on Deck

The metal bears and bullion banks certainly get an 'A' for effort in this most impressive 'shock and awe' smackdown in the gold bullion futures. I was getting concerned about this sort of attack given the recent things floated out in the press about gold and its relationship to external events.

I had an email this morning saying that 'this proves that charting has no value in a manipulated market.' If this is your understanding of charting, that it is a sure thing, that perfect system you have been looking for, then you are right, it has no value to you. Maps do not take you where you wish to go; maps let you know where you are relative to your objective.

What charting provides is perspective, a visual representation or 'map' of the market.

More importantly, it helps us to understand the context of this sell off, which looks like the banks 'threw the kitchen sink' at the futures market over growing concern about the potential for a breakaway rally, and the physical offtake at the Comex getting out of control.

That this is US-centric selling program could not be more clear from this chart, a selling phenomenon which is repeated almost every day after the London PM fix and as the US markets open.



I do think the cup and handle formation is still active, although it has been pressed to the level at which we would be more concerned about follow through selling to the downside. As we have always said, in the event of a general selloff, a liquidity panic, everything will get sold, and the charts are trumped.

I was a little surprised that they could press it all the way down to 1199 even on an intraday, expecting 1204 to provide more solid support. But the trade is thin, and the markets are 'lightly regulated' by the CFTC under Gary Gensler (Goldman alumnus) to say the least.



Now having said all that, I am not overlooking a broader setup in the markets, created by the likes of Morgan Stanley, Goldman Sachs, and JP Morgan and their associated hedge fund cronies, in which the big financials are herding investors, shoving them around the allocation plate, keeping them moving, which is how they make their money through taxing transactions heavily with fees, commissions, and soft frauds.

Stocks are rather oversold in the short term, and the bonds are very overbought. As I mentioned yesterday, if the market does not 'crash' it would be quite seasonal for the bonds to come under bear attacks in July. Here is what that chart looks like.



Can they get ever more overbought? Sure, we just saw that sort of panic buying in the last great plunge in US equities. But historically bonds are well priced to put it mildly, and certainly not for anyone seeking value. I think a lot of tension in the market is due to the Jobs Report tomorrow, and the fact that most traders will be leaving on vacation after today.

As I recall Goldman was forecasting stocks to go lower, down to 950, if we broke support as we did a few days ago. I am interested to see if their forecasts match up with their own books. Personally I think that since they are a Fed supported bank, they should be required to disclose all their major positions in the particular, not aggregate or net, on a monthly delay at most, with weekly even better. That way the people would know if these monstrosity banks are acting honestly as a major bank supported by taxpayer dollars, or are they really enormous hedge funds which are entitled to a greater level of secrecy, but should be fully culpable for all their losses.

Gold: A Closer Look At The Potential 'Cup and Handle'

Here are the possible outcomes for the current 'rounded bottom' for spot gold.

If it has a retracement that successfully returns to set a new high for this leg of the market we will have a successful handle and the formation is activated.

However, it is also possible that there will be little to no retracement, and that gold will pause, backing and filling its recent gains, and then break out higher.  This would be just a rounded bottom, with a similar measuring objective but a slightly lower probability and a greater risk of a later correction as weak hands are shaken out, most likely in March.

Or it could just break down from here.  Gold is a very manipulated market, because it has been traded like a virtual currency lately, rather than a commodity money.

The commodity aspect of this market is going to wreak havoc at some point if this continues unabated, because unlike the Dollar the Federal Reserve does not own a gold printing press.  Although the banking system has been doing yeoman work in ginning up synthetic gold through their highly leveraged derivatives.

The astute will notice that I have essentially listed most of the possible outcomes here.  How could I not?  The trick is not to use a system to predict the exact outcome well ahead of time.   That is a good way to go broke, unless you are just selling the information to others.

No, never has an aphorism been more true that that of Walter Bagehot's, that 'life is a school of probability.'

Most want to hear exactly what will happen, and not only that but exactly when, maybe with a few days leeway.

No one knows that sort of thing, and if they did, they would not sell it to you.   There are those who have made about twenty or more tremendous predictions for a bottom in gold over the last 24 months, and one day they may be right.

And the apologists and trolls for the status quo in a corrupted market have made an equal number of more calls for gold's doom, and have done so even as it ran initially from $250 to $1850.  And quite of few of them were broken by that run, and were even whipsawed, and so nurture an abiding discontent for gold and silver, as if these venerable metals take any notice of it.

There is nothing wrong with talking about this sort of thing, and pushing back and forth on opinions, some informed and many others not.  But it is a dangerous business to actually put your money to work on this sort of basis, because you may find yourself exhausted both emotionally and financially when and if the market actually shows its hand.  And it will.

No, our job is to assess the inputs and lay of the land, understanding what is determining the price, and the various supplies and demands and what drives them, and then to learn what to watch for and to properly assess the probabilities.  And of course that is just the beginning because one has to learn discipline and money management, and the tuition for that course in life learning is rather high.

So let us continue to allow the market, and especially the analysis of the underlying stock of gold inventories and mining production, and the ebbs and flows of the currency war, the times being what they are, to inform us.

Gold Shadow Chart - Cup and Handle Calls Out 2000+

The handle is now forming on our prospective cup and handle formation.

The formation will be confirmed if gold can break up through 1800 and keep rallying after a retracement in the handle of at least 20% and no more than 50%.

If gold falls through the 50% retracement then this is more likely a trading range and gold will fall lower towards the bottom of the channel. I do not think that this will happen unless stocks also fall quite sharply. Hint.

Minimum up side target is 2,050 with a chance for 2,300 on this rally leg.

Gold February Futures Daily Chart Intraday

There is an ebb and flow to all markets. While the primary trend is in place these intraday fluctuations are of most concern to speculators and traders with a very short term focus. That is natural.

But there are also those hedge funds and trading desks that seek to spread either panic or euphoria, to promote short term trend changes and churn the market for easy but too often illicit gains through price and information manipulation. This is what I euphemistically call the 'technical trade.' And unfortunately sometimes these trade manipulators are very large and influential with the exchanges, the regulators, and even the politicians. Corruption is corrosive of society and must be contained.

Transparency, position limits, leverage constraints, and trading rules such as the uptick and curbs on frequency and tape painting help to maintain legitimate price discovery and efficient capital allocation. Secrecy, back room insider deals, and self regulation are the allies of corruption.

As was shown in the Congressional investigations following the Crash of 1929, quite a few of the analysts and financial news people covering the Street were implicated by the cancelled checks in the suitcase of a Mr. A. Newton Plummer, who delivered payments from the pools and large trading syndicates to manage perceptions as it were among the thought leaders and purveyors of information to the public. Nowadays checks are out of favor and information, sinecures, and grants are the currency among the white collar criminals.

There are few such investigations today, perhaps because that net is likely to catch quite a few fish larger than red faced analysts, economists, and news people, and some even who may have had a held a long and auspicious tenure in important positions of trust, public and private. Mr. Madoff is not a lone outlier unfortunately.  And too often the 'CEO defense' of benign non-involvement or an admission of simple error, plausible deniability as it were, and a self-effacing apology are enough to cover and excuse heinous acts of false stewardship and even betrayal.

After all, we sophisticates no longer believe in the capacity for evil among 'people like us,' but rather in the natural goodness of ourselves and of course others. And so we can suspend common sense and even rational skepticism can be turned against the truth while things are falling down all around us. There is historical precendent for the big lie and a self-destructive loyalty to its bitter end.

For those with the intermediate view one sells strength and buys weakness as indicated on the trend charts. And so this is what I do in one of my accounts with a more intermediate to short term focus.

Those portfolios with the long view do nothing but ride the trend and reap the reward, selling when the fundamental conditions that provoked the bull market no longer remain in place.

To clarify some questions I received, I do not forecast 1455 as a 'top.' It is the minimum measuring objective for the cup and handle formation that will likely be met as long as the financial markets do not undergo a liquidity panic selloff. I would like to reiterate my view that gold and silver will continue to rally while the fundamentals remain unchanged. I do not think 2800 is unlikely but there are too many exogenous variables and no active chart formation to justify a forecast higher than 1455 at this time. But the top trend line on the chart below certainly points the way.

Gold Has Had a 34% Correction

Here is a chart from Tom Fitzpatrick at King World News that I thought put this into some perspective. 

It is certainly worth reading his commentary, and I produce only his first chart with the rest to be seen at the source. With last night's selloff that correction is probably more like 35% or so but that does not alter the chart pattern.  He also shows his long term chart on silver.

I took the liberty of circling the secondary cup and handle that was the consolidation before that last big leg to the upside top. This is what I was referencing last night. I had not realized at that time it was a 34% top to bottom correction. I was setting down to do the longer term chart today when I came across this, and it is well done.

That secondary cup and handle consolidation marked a big resistance level that thereafter became big support after having been exceeded.

I am waiting to see what happens here.  This is a very 'purposeful' correction with selling that is blatantly timed to move prices lower in quiet markets.  But the overall timing matches with the new lows in deliverable bullion at the COMEX and the TOCOM.

Big corrections like this are not unusual in bull markets.  That huge correction in 2007-2008 cleared out the market and set up the move to the high.  

I do think that such corrections represent 'asset stripping' by powerful and lightly regulated insiders and traders who have a free hand to obtain assets on the cheap after manipulating prices lower, and then allowing them to rise again.  But who can say, except for someone like a regulator with access to the relevant information.

I do think that a turn, if it occurs, will coincide with the end of quarter mark to market.  Perhaps that is too cynical.  It is hard to imagine that one can be cynical enough after the serial frauds in market rigging we have seen in the past fifteen years.

These sorts of action disrupt normal market operations and allocation of capital that may inhibit future supply. But it is too much to think that these jokers would care as long as they are making money.  Traders and private equity managers are often short term predators, and the environment in markets has become almost pathological. 

One serious caveat is that since we are in a 'currency war,' at least to some peoples' thinking, one can only rely on market-oriented things like charts so much.  As I said, the selling is obviously purposeful.  And there are contentious issues being discussed by the world powers behind the scenes.

Source: King World News

Gold Daily and Silver Weekly Charts - More 'Flight To Safety' - Active February

Gold showed some strength today in an add on to the flight to safety trade, even though there was a midday hit on price that was pure antics. The dollar moved lower and silver wallowed.

I posted an update to the NAV of Precious Metals Funds and Trusts today. Sprott has successfully absorbed the Central Gold Trust. It raised some cash and added substantially to their bullion and shares under management, so its a good deal for them. Let's see if time shows if it is a good deal for the trust unit holders.

But that NAV report shows the gold/silver price ratio around 78, which is historically very high. This is I think one indication that this is a 'flight to safety' into gold for the moment.

And February is an 'active month' for gold and that shows in the delivery report from The Bucket Shop which has seen 62,800 ounces of gold 'delivered' on the February contract so far.

Silver has seen not nearly as much action, and the amount of registered for delivery silver bullion is now shockingly low as silver goes. I have high hopes for silver this year, but not while the precious metals are rallying as a safe haven.

But I would say that if I happened to hold any gold or silver bullion as a longer term holding, I would not have it in any unallocated form, or in storage associated with the Western metals trade. I can definitely see a short squeeze as a possibility, and as we learned from MF Global, possession is nine-tenths of the law.

The 'cup and handle' formation for gold remains viable but not formed or activated.

As an aside, just by way of setting the level and not being too cryptic or misleading, my wife of 38 years has a stage IV colo-rectal cancer that at least for now has no cure. But they can control it, manage it somewhat, through surgery and chemotherapy, and they have been doing so for about five years. I have gotten to know the US healthcare system quite well. We have an excellent oncologist whom we just adore and a first class hospital in a large metropolitan area. This is why we are still here.

So on occasion I may be out of pocket, and there is no mystery to it. This is our life now. It is something we do, bearing up with the good and the ill, thanking all for His tender mercies. And I am with her every step of the way. I told her that I would be the day we first found out on a routine colonoscopy and they thought it was discovered early enough, but it was not.

What doctors do not understand about cancer even now is often a surprise to many. It is much better now than when my mother and father passed away from it some years ago, but it is still heavy on treatments which are expensive and non-specifically destructive.

And there are many different forms of cancer and they are not all the same. And each cancer can act differently and peculiarly from patient to patient, ebbing and flowing in their appearances, so many can get attracted to certain 'cures' that are correlated to a particular situation, a remission, but without genuine causation. The key factor seems to be to find a very good doctor in a very good and forward looking, patient oriented setting.

I also learned quite a bit more about prostate cancer lately, in addition to watching my father pass away from it ten years ago, but thankfully need to learn no more as it was good news. I will say that the biopsy for prostate cancer is surprisingly uncomfortable. And some of the misinformation floating about is also surprising, even among otherwise informed and intelligent people who again confuse anecdotal 'cures' with scientific cause and effect.

And this is just my impression, but too often research is being driven by private grants and money, and commercial incentives. I think the government is missing a huge opportunity here and for all the worst reasons.

I just wanted to put that issue on the table so you will understand my absences going forward as they occur. I don't need any real help on this, but your prayers are always welcome, always, as I remember you all, and I do.

Have a pleasant evening.