CoT - Gold

On yesterday's weekly gold chart I mentioned the increasing Commercial short position as a building negative. Now, the commercials are never going to become wide eyed bulls and in fact have been net short since the inception of this great bull market. But when they reach extreme short levels in combination with all that big dumb(er) money (hedge funds and other large speculators) heavily long... well, you know there is correction potential. Anyway, I found a nice chart showing the situation and a good site (www.timingcharts.com) for CoT charts.

Weekly gold & gold ratio charts

After questioning my stance this week due to strong commodities, I have taken refuge in these weekly charts. Stance remains the same; gold above all else. I will hold my silver miners and a few other commodity odds & ends, but nothing about these charts says 'abandon the gold/contraction' stance just yet.

Because I am short a bubble...

Please pardon me while I work out my issues... PS: On the plus side, oil has had a nasty reversal while gold stays green and keeps its watchful eye on financial offenders like said Euro-junk. Gold is a goody two shoes you know.

Euro Trash

Apparently the European Union, with all its rules, regulations, centrally managed economies and money supply growth is becoming preferable to the US and its centrally managed economy, money supply growth and toxic debt. I am still short this piece of junk and none too pleased with the proceedings. Is this unexpected? Not really. So many markets these days seem to have a manic element that hurtles them to extremes before reversal. I could have used a bit more patience on entry, but it is a small position and is hugely outweighed by gold, silver and other positions that benefit from the sad destruction of Uncle Buck (and eventually the other worthless paper currrencies). Here is the Euro pushing the envelope of my stance.

Bears' gall near record levels

2 charts forcing a healthy reevaluation

Oil and other commodities continue to contradict my stance. Could it be that stock and commodity markets have taken a 100% confidence in the Fed's willingness to jam the economy into inflate-or-die turbo mania mode? Gold measured in industrial metals has pulled back but maintains its uptrend from July. Gold measured in silver has pulled back sharply and could even be bear flagging. Gold measured in oil 'could' be double bottoming but honestly, I have been nursing the bearish oil theme for so long now it is getting wearing. Here are charts of December silver & November crude. Luckily, when you have got a balanced plan of attack you can wait and let the markets tell you what's what.

Speaking of over bought... HUI

The question now is how deep is the pull back likely to go? With everything except pesky oil (which may well be topping out) aligned in the miners' fundamental favor and considering the impulsive and relentless nature of the rise, a nice buying opportunity may be nearing. I have noted some areas where people who missed the bus at the August bottom might start scaling in. Or maybe all's well with the financial world and gold will go back to being a relic and "the credit crunch" (they've institutionalized the name which means the financial media are trying to sanitize it for public consumption as if it does not contain near infinite negative compounded and leveraged possibilities) can be denied, even as Wall St. cheers Bear Sterns' rumors that Buffett and/or a Chinese concern are interested in ownership of its stock. Our friendly troubadours are also cheering continued economic deceleration which would keep Bernanke dovish. Yes, this is healthy. I'm sticking to the "retail is bearish and covering shorts to new ATH's (on some indexes)" scenario and then an Oct/Nov time frame that is bearish but good.

Cube - Over bought & nearing target area

While sitting through the gold stock correction currently in progress, the thoughts of any self respecting market participant begin to drift toward the inevitable "where oh where do I short that pig?". In an email last night, reader Dave told me to "choke out that bull pill before it kills you" - a classic line. But I am not a bull, just a guy obeying these charts. Why question why the pig is rising? It is. And this possibility was forecast by the charts. It wouldn't have anything to do with heavily short retail, would it? Dave is short the financials & real estate - nice calls. Perhaps the pig itself will present some opps next month as well.

Quick Status on several markets

PWI = Price Will Ignite

Forget what I said about my oil & gas holdings having gone no where. Primewest Energy has exploded upon agreeing to a buyout. Up 32% at the moment. Me like.

Gold above all else?

Gold above all else; that is the camp this blogger resides in as the contraction view still holds sway in the absence of Dr. Dove's panic rate cut magically fixing the financial system and credit markets. Then there is the 30 year bond yield. But oil has continued to make a monkey out of me (even as my few oil & gas holdings have gone nowhere), the commodity bulls are out in full force (gold's just part of the resource complex) and maybe they're right. Maybe it's instant presto hyperinflation. But I don't think so. I'll stick with contraction and continued inflation where the resource complex and possibly stock market follow gold up... eventually. First, as we enter the witching season, risk of correction is rising everywhere. That said, gold has broken the ascending triangle and a target is a target. Recall 900 from 9/14 post.

Poll - You know where I stand. Where do you stand?

HUI-XOI Ratio

One Chart, Huge Implications

In the recent letter, Asymmetrical Warfare a chart of the 30 year yield was provided showing a potential continued 'big picture' rise in interest rates. Several weeks later, with a confirmed dovish Fed and Yale economist Robert Shiller telling politicians that "the collapse of home prices might turn out to be the most severe since the Great Depression"... "the decline in house prices stands to create future dislocations, like the credit crisis we have just seen"... and "if home price deflation persists or intensifies, they may discover that the Achilles' heel of this resilient economy is the evaporation of confidence that can accompany the end-of-boom psychology" (thanks to Kevin Depew of Minyanville), we find the long bond in continued decline (rates up) even as spooky deflation talk permeates government.

Bernanke to the rescue? I doubt it. This chart is profound in its implications. To be specific, the Fed is easing just as the short end of the bond market told them to. But on the long end, secular changes may be at hand. Throughout Greenspan's 'conundrum', long rates refused to play ball as he was hiking Fed funds. Those pesky foreign financiers of our consumer (something for nothing) economy kept rates contained by lapping up all that grade A debt. Well, it appears this game may be over.

As for the chart, I will admit that sometimes I see shapes or figures that don't really have names but when I see them I get excited. That is how I feel about the $TYX. Never mind the divergence and positive trend from 2005. The shape of this multi-year bottom simply 'looks' bullish. But back to the implications. If indeed this is rising in secular fashion, while the short end is grinding lower (1st lower panel) in fear of the ongoing credit crisis infecting the 'real' economy, and if the yield curve continues to rise (2nd lower panel) we will have continued pressure on an economy built on easy credit as the bond market (ie China, Japan, etc.) refuses to play ball this time and in fact implements the mirror opposite of Greenspan's conundrum; Dr. Dove will continue to lower rates (possibly in concert and competition with much of the industrialized world) while the bond market votes with its feet and drives up long rates.

This is potentially very nasty and patrons of the global casino are taking note. Some have slipped out the door while others, not so quick on the uptake are eying the exits nervously. And you wonder what gold is doing at fresh highs since secular changes began at the beginning of the decade?
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Euro drawn to target like a bug to a light

"141 +/- target" hit today. I took a short position @ around the high of the day. Rising wedge broke to upside off of our little inverted H&S thing. Over time I have noted that often when a wedge breaks the "wrong" way, the breakout will not last very long. Those of us short the Euro (me and the other guy) certainly hope that's the case this time. BTW, this is in the trading account where I take high risk speculations, which of course is what this is.

HUI

Any questions? ;-)

This is primarily a TA blog, but when the fundamentals began kicking in I had to abandon some of what I saw on the charts and bag hold right through some terrible days. While I use charts extensively, I also remain aware of the deplorable fundamentals of PonziConomy (it's global) and gold's superlative fundamentals in an age where many think 'something for nothing' is actually a viable long term strategy. Well, it isn't. Here's Huey's current situation. Bullish bullish bullish, but the miners need the majority of the rah rah commodity trade to fall back in relation to gold just as the stock market is doing. This is a process, not a one day or one week event.

BTW, thank you again for your thoughtful donations. It is very much appreciated!

Hat in hand...

Well, it's that time again. The time when I awkwardly ask if ya can spare a dime.

With the blog and the website, I put in a lot of work and yes it is work I need to do anyway as I manage all our own accounts and a few for others. I have not commercialized what I do because a) I don't want to package myself as any kind of answer man and b) my personal situation still precludes taking on the extra work load required for the quality of service I would demand. So forward we go with the blog and the website depending once in a while on the thoughtfulness of viewers like you (sounds like a PBS pitch, I know). If you have received value from the opinions presented here, please consider tossing a nickel in the cup, and thank you!

Bull

Well here comes our test of the highs off of those bullish inverted H&S things we've noted over the last couple weeks. Compliments of your dovish Federal Reserve. How could I have questioned the .50 cut in the chart below? Uncle Buck's only money right? Yeh, right. Gold miners will look to test the highs of May '06. But really, this is all about money, or the lack thereof. This, in the big picture is gold's turn to shine. The stock market I am unsure about. I have mentioned in the past that it wouldn't take much to make me a tech bull. I have got a funny feeling here that needs more study. But for the time being we'll stick with the retest and slight exceeding of the '07 highs and then major swoon into November scenario. The Fed cut rates for a REASON and the reason was not that they wanted to be nice guys. PS: Now we know the fate of the huge amount of public or retail shorts in the market. They be coverin'. Also, the VIX is down big but well above support in the 14-16 area. This may be a level to watch for as the markets top out in the coming weeks.

USD

Psych 101 - Popular Culture

Psych 101 (Part 1: Popular Culture - A YouTube Journey Through time)

2 Free trials

The first one is Elliot Wave International's 'Free Week' which has been ongoing per the banner above. Added to it is their Monthly Futures Juncture. With the current deflation impulse in progress EWI is gaining more attention:

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The other one is INO.com's 2 week complimentary trial of MarketClub. I have had the link posted here since the 10th, but being the great (not) salesman that I am, I am just getting around to posting it here. To me 'free' is a good deal: 2 week complimentary MarketClub Trial.

Enjoy... or not ;-)

Uranium, etc.

Since I mentioned it here when I bought I should close it out here as well. I sold the 2 uranium companies (UUU.to & DNN) played for a sector bounce. UUU went for 22% and DNN for 13% and now we move on. As always, higher levels could be in the cards but that is irrelevant since I no longer own them. I am big picture bullish on nothing save for the gold miners right now and even there, I am holding but bracing for some volatility in the short run. Other than that, I have shorted bonds twice in the last few days via TLT puts and the gains were 49% and 23%. Lest this sound like tooting a horn, I had absolutely butchered the 'trading' account in July/August by losing focus and NOT TRADING but rather bag holding. Now all accounts are well along the comeback trail with ample cash for what promise to be interesting times ahead.

VIX - Flashing a warning

As the pig levitates from those really bullish short term bottom patterns in predictable fashion, I think risk management should be front & center in the minds of bulls.

Gold weekly charts - Big picture all systems go but short term resistance.

2 Choices: 1) More inflation or 2) Massive credit meltdown

Gold chart: So where are we at?

Sometimes I get so hung up w/ the ratio charts that I neglect to do some good old fashioned nominal charts. Here's one for gold. This is a very bullish situation but as gold threatens the May 2006 high, short term risk will increase. Risk is different from a projection that the price will suffer a decline. After all, in 2000 the Nasdaq simply launched to strato-levels even as risk had long since become noxious. We will have to consider what is happening with the dollar as well as sentiment for gold. Regardless, I have been and remain very bullish in the big picture as the fundamentals remain superlative. The short term is noise; either a noisy downward reaction and buying opportunity or a major breakout for all the world to see. PS: Yes I know, the chart has some deplorable typo's. ;-)

Asymmetrical Warfare

Asymmetrical Warfare

Edit (9/10 @ 8:20 am) This from reader Jonathan in response to the theme of the article:

No Gary, not alone at all. Your Red Pill/ Blue Pill contemporary metaphor reminded me of a more classical version and I copy for you below the last lines of Henry V’s Agincourt speech. To quote you, “rarely do you get a chance to cast your lot…But when it happens it can change your life.” I’ll share this thinking with my team this morning, if you don’t mind.

This story shall the good man teach his son;
And Crispin Crispian shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remembered-
We few, we happy few, we band of brothers;
For he to-day that sheds his blood with me
Shall be my brother; be he ne'er so vile,
This day shall gentle his condition;
And gentlemen in England now-a-bed
Shall think themselves accurs'd they were not here,
And hold their manhoods cheap whiles any speaks
That fought with us upon Saint Crispin's day.

Euro

I am not a bull on anyone's paper currency and that includes this inflated junk.

From our friend Claude: Gold barometer bullish

Hello Gary,

It is timely for me to send you again the Gold barometer for possible

embellishment of your blog.

The last time I sent it to you it admonished to be patient and look for

a good move around September. The promise is being fulfilled in spade

because at least three additional bullish events [have] occurred recently:

1. Technical indicators have turned bullish

2. The Gold Dow ratio which has favored the Dow for long time has topped

out and is technically rolling over in favor of Gold.

3. The beginning of this Gold move found Gold mining stocks near the [bottom] of

valuation relative to the price of the metal.

Add to the above the new leg up of Oil now under way and you have a combustible

combination very similar to that prevailing in 2005 at the eve of the big Gold move.

If you wish additional charts illustrating the above three points, please, let me know.

Best regards,

Claude

Gold sector looking, errr... GOOD

I know I am Mr. Contraction w/ counter-cyclical gold, but I couldn't resist picking up a couple Uraniums (not CCJ, but just down the pecking order from there) over the last few days. They have been beaten senseless and the plan is to trade for a sector rebound. But they are 'investment grade' so I may just hold and add if they drop further. Also, I hold what appears to be a bottoming nickel/gold royalty company. Nickel? Call me a raging commodity bull! I even have a couple silvers I consider 'core'.

But look at the gold sector run. Simply excellent. Everyone should have their game plans as far as profit taking, risk managing or holding goes. I hold all core miners and then some. Trading the trading account and holding the holding accounts, with cash for possible future opps. Good luck and enjoy.

10 Yr Yields continue to decline, but...

Bloomberg Koolaid

From Bloomberg comes this nugget about why gold is up today: Sept. 4 (Bloomberg) -- Gold rose to a five-week high on speculation a rally in U.S. equities will boost investment demand for the precious metal. Silver also gained.

Leave it to the mainstream financial media to neatly package a reason for each day's market moves. If Bloomberg's Koolaid reflects sentiment at large, and the gold sector is rising due to "the rally in equities", then by definition I must be cautious and open to the XAU 110 & HUI 260 possibilities noted previously because I am not bullish on equities beyond this rally. I don't think you sweep fundamental problems under the rug, click your heels and end up home in Kansas quite that easily.

As for gold, I remain bullish... VERY bullish. But rationalizations like the above are a caveat for the near term. Gold is counter cyclical and the real bulling of the metal will start when it gets the 'flight to safety as real money' bid and to hell with what oil, copper and the stock market are doing. Gold's "investment demand" comes into play when everything else is in question, and that includes t-bills. But maybe this is just one of the final major media bong hits before we settle into some cyclical changes in earnest. Edit (2:26) In the meantime, the gold stocks continue to out-perform the broad market since mid-August. That's not too tough to take. What a day today! ;-)

Piggus Levitatus...

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