CoT Gold & Silver Report --- Wow

Excuse the delay.  I was busy writing the opening to NFTRH155 which, not so coincidentally is titled 'Market Psych 101'. Look at those large spec's run from gold.  Look at those evil commercials cover.  Silver looks good to, post annihilation. 

GOLD - COMMODITY EXCHANGE INC.                                       Code-088691
OPTION AND FUTURES COMBINED POSITIONS AS OF 09/27/11          |
--------------------------------------------------------------| NONREPORTABLE
      NON-COMMERCIAL      |   COMMERCIAL    |      TOTAL      |   POSITIONS
--------------------------|-----------------|-----------------|-----------------
  Long  | Short  |Spreads |  Long  | Short  |  Long  | Short  |  Long  | Short
--------------------------------------------------------------------------------
(CONTRACTS OF 100 TROY OUNCES)                       OPEN INTEREST:      824,865
COMMITMENTS
 195,497   36,743  228,369  326,598  526,349  750,464  791,462   74,401   33,403

CHANGES FROM 09/20/11 (CHANGE IN OPEN INTEREST:   -140,455)
 -34,710    9,569  -73,745  -22,245  -74,282 -130,700 -138,458   -9,755   -1,997

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADER
    23.7      4.5     27.7     39.6     63.8     91.0     96.0      9.0      4.0

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS:      358)
     201       83      150       58       53      312      238
 

SILVER - COMMODITY EXCHANGE INC.                                     Code-084691
OPTION AND FUTURES COMBINED POSITIONS AS OF 09/27/11          |
--------------------------------------------------------------| NONREPORTABLE
      NON-COMMERCIAL      |   COMMERCIAL    |      TOTAL      |   POSITIONS
--------------------------|-----------------|-----------------|-----------------
  Long  | Short  |Spreads |  Long  | Short  |  Long  | Short  |  Long  | Short
--------------------------------------------------------------------------------
(CONTRACTS OF 5,000 TROY OUNCES)                     OPEN INTEREST:      156,853
COMMITMENTS
  25,509    5,615   54,745   52,423   82,671  132,677  143,030   24,177   13,823

CHANGES FROM 09/20/11 (CHANGE IN OPEN INTEREST:    -10,730)
  -8,872       36    1,255    6,952  -11,571     -664  -10,279  -10,066     -451

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADER
    16.3      3.6     34.9     33.4     52.7     84.6     91.2     15.4      8.8

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS:      180)
      88       34       77       44       46      161      132
 

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Silver Wheaton - Premium silver stock on the brink

There is no way to spin this as bullish unless you are a silver bull bottom feeder/true believer (as I am w/ the gold stocks for example).  I would love to buy back SLW, but not until this is resolved. 

It can rebound from deeply over sold levels, but at any such time as it would hold below that neck line, SLW is in serious danger.  Maybe I am thick, because I still do not get the supposedly compelling silver story.  If the Fed is setting up the next round however, silver would get in gear once again, pronto.

But until such time, this chart projects to under 15 *IF* the neck line is lost.

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Some Unbroken Gold Stocks

I know it is fashionable to be writhing in pain, complaining about manipulators and worshiping the coming Armageddon, but... some of my holdings are doing just fine.  Others are getting clobbered, and I am taking advantage as the bottom feeder that I am.  I have even traded MFN and NGD while holding BTO.TO right on through.  But tell me Jerry, where is broken?  SHOW me broken??

Will it come Monday?  Maybe.  But I exist in the here and now.

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Frederic Mishkin on Kudlow re the Fed

You know, there was a time when I would negatively highlight the two Larry's, 'Lyin' Larry and Kudlow.  I suppose Lyin' Larry is still out there and available to spin the public at any such time as needed.  But I have to admit that Kudlow - perhaps now that he is free from the 'Kudlow & Cramer' format and also free of his previous stance against gold and pro "King Dollar", has had some pretty interesting shows of late.  It seems as though every time I do a random flip over to Kudlow he has a very relevant and/or interesting interview going on. 

Last night was Fred Miskin, one of the Wizard's backers for sure, but agree or disagree with what he says, this - in my geeky view - is must see TV.




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Tin Foil From NFTRH154 - Treasury Bonds

NFTRH154 put on a tin foil hat for a small T Bond segment among its 21 pages, and then took it right off again when fun time was over.  Admit it, would you not rather be operating in a bizarre Wonderland than your grandfather's normal financial system?


US Treasury Bonds

Inflation? What inflation? Look at the structure of the long bond ‘continuum’ and think
about the Fed buying into this trend by buying longer-term Treasury bonds. It is almost
as if they want to promote the fear of deflation. Why would they want to do such a
thing? Could it be that it is easier to keep the system running with inflationary
policy when everyone is afraid of the deflation? <--- Tin foil hat affixed tightly.

And here is the updated picture from the daily 30-year yield chart shown last week.
These levels once mandated the balls out inflation that launched ‘Hope 09’. The Fed just
announced something that propelled bond yields lower toward the point where they
would have a mandate to inflate. It is almost as if they want people afraid of deflation.

“Sit quietly and we will control all that you see and hear…”

Sorry, I could not resist. It was a tough week. NFTRH is not going conspiracy theorist,
but it is written by a human with eyes, ears and a b/s detector.

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Bullish (defined)

Of course the previous post did not state what I am bullish on.  First and foremost, the gold stocks of course.  But then, I am not bullish on them because of inflation like many in the gold 'community' seem to be.  Quite the opposite.  Emerging markets?  Yup, but the short term target is much lower before bull thoughts come into play.

There is due to be pain as the old system slowly comes apart.  This pain looks like it will be most acute in the EM's and commodities.  Precious metals are playing some downside catch up as well, that is obvious.  But from the rubble of Q4 '11, I expect to be able to take a longer term view, lock and load and stop burning so many trading commissions.

Longer term, I don't care for commodities, and I don't like the US or Europe.  I am - as usual, not nearly as constructive on silver as many seemingly rational gold bugs.  I do like the gold stocks and gold as a store of value only.  I do like the idea of Jonathan's "global leveling of the playing field". 

Oh, so much more to come in this exciting market.  But for now, let's just look at what the beautiful Cu-Au chart has to say.  For one thing, it seems to be indicating another dump dead ahead.  It also says that the game of successfully inflating to prop the economy ended in 2007... for a long, long while.

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Bullish

Oh, and yes by the way, that is what I am despite not having dumped a single bear position as of this writing.  I get more bullish the longer that the fear, loathing and downward stock activity persists.  To remind readers, I am not a bear or a d Boy, though I think this liquidation has longer to run.  But not much longer.

I am usually guarded against too much doom talk with respect to October, the month 'everybody knows' is supposed to be scary.  I think (think) we have more down to go in the broad markets, but on balance the sum of the analysis begs me - and my newsletter - not to get too bearish for too long.

But that is just me... people are free to whip up whatever kind of personal or collective hysteria they want.  2008 all over again?  I think not, but one thing's for sure; we will know soon.

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SPX chart and some words...

As we await the German vote on the 'European Financial Stability Facility' (AKA another finger in the dike) we realize that the weekly SPX has not yet broken down and remains in something of a sloppy Bear Flag, working its way upward.

Daily charts show the flag rounding into a mini recovery topping pattern.  But if the market can trumpet some happy sounding stuff out of Europe, who knows?  Maybe the top of the flag can be approached once again.  Regardless, this market is broken.

CNBC has some robots touting that the USA will avoid the bulk of the problems from Europe (as if we do not have our own obfuscated, but deeply embedded problems of our own.  Last night a robot said Emerging Markets will get killed and one should employ a long US, short EM's strategy.  No thank you sir.  The EM's look terrible technically, but that will be the play at the appropriate time; not so much US, not Europe.  Not played out, debt choked, mature entities.

Ultimately, I think 900 - 1000 beckons for SPX with some patience.

Edit (10:00) Ouch... but not really.  Today is why I do not go net short.  Just try to balance.   And no, I don't buy it.  The broad markets are bearish until further notice (which would be given by altered technicals).

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NFTRH email update, pre-market 8:50 eastern time

NFTRH

"Attached please find updated charts for gold-euro, gold-Canada dollar and gold-S&P 500 [charts omitted], originally produced for NFTRH154.

As you can see, gold has already come to or nearly to support in ratio to these items.  The gold-silver ratio has likewise corrected quite a bit.  This has happened more quickly than anticipated.

The upshot?  Most of the bull potentials have already been expressed in the short term, in my opinion.  Hence, as noted on the blog yesterday I have already begun to guard core gold miner positions with the existing junk bond bear (SJB), an outright short on SPY (in the preservation portfolio, where I can short) and SDS in the 'spec' port where I cannot.  Also, ZSL (silver bear) has been bought back.

If gold finds support and rises again in ratio to these and other positively correlated (to the global economy) items, the contraction/deflation play will be back on.  I would, in this scenario, sell anything not considered core and protect the rest of the positions.  Gold can and probably would remain weak in the face of a deflationary episode so if you own it, know why and do not get emotional.

The USD looks like a candidate to resume its uptrend in and around here, with the theater in Europe providing some noise and delay.

We have an end of month and end of quarter upon us this week.  Perhaps the markets will levitate into the Q end, but my plan continues to be one of scaling back into short positions.  The plan for most people should be 'have cash and await opportunity'.

I would much rather be wrong in my caution and have helped prevent subscribers from 'making coin' then show an unbridled confidence and help them get ground up in any coming liquidations.  The plan continues to be that October can be very challenging.  We have had a good year thus far, on a relative basis.  I believe it is best to let the clouds pass before leaning heavily to any bull side.

Regards,

Gary"

Just to keep making the point that capital preservation is JOB 1 and also the point that NFTRH is about much more than a weekly newsletter.

Edit (4:01) Current short/bear roster:

Regular brokerage (cap. preservation account)
Short SPY
Short QQQ
Silver bear fund ZSL
Energy bear fund DUG
Junk Bond bear fund SBJ

IRA (NFTRH speculative portfolio)
SPX bear fund SDS
NDX bear fund QID
Energy bear fund DUG
Crude Oil bear fund SCO
Junk Bond bear fund SJB

I tried to get too cute on base metals and emerging markets.  Will watch those, but also try not to get out of balance.  My gold stocks got hammered of course.  This is about protecting them more than anything else.  I have never been a particularly good bear.

Oh and please... no recommendations above people.  The cat is out of the bag now.

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GSR - Liquidity is going away

Gold-Silver ratio looks like it is back on an impulse upward after the briefest of respites.  If so, liquidity is going to go on an impulse downward.  Nothing is bullish in the very short term.  It looks like October is going to be classic.

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HUI - SPX ratio

A big difference technically between now and Armageddon '08 is the lack of downside leadership by the gold stocks.  It is as if certain fundamentals, born of a deflationary environment are percolating below the surface, waiting for the final bottoms and/or washouts across all sectors.

Liquidation can be a bitch, but gold stock players should realize that in 2008 gold stocks were finishing up a big rally even as their fundamentals had been degrading for years (with the 'real' price of gold).  Details will be followed weekly in NFTRH (and by email update) because it is now time to be paying attention, both to what we see on the surface, and what is going on beneath the surface, where most players do not think to look.

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Bye bye silver bear

Last time I took quick profits on ZSL I had to eat my heart out as silver crashed a few days later.  Well, I must never learn.  ZSL is now ejected once again for a few hours work and +7.5%.  But only because short positions are growing in other areas.  Now I can be a 'respectable' gold bug again and not irritate the 'community'.  Edit (12:20) ZSL retained strictly for insurance/hedging (of metal) purposes in another account.  When I discuss the portfolio, it generally means the speculative portfolio.

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HUI Gold Bugs 60 min.

Filling gaps (both upside & down) and testing support...

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Oil Bear SCO

SCO retraces 62%, fills gap and...

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SLV filling a gap

The silver proxy is filling a gap of its own.  I could have made good money selling ZSL this morning, but am still hedging gold stocks at this point.  Hmmmm... what do do?  Last time I took profit on silver short, it was a mistake as much more would be available shortly.  Think Gary... THINK.  :-)

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It's all the same market...

Look, I am a gold bug, but you should know by now I am not a gold price cheerleader.  Nor am I a raving inflationist, cheer leading commodities of all kinds higher into Peak Oil, China Stories and all that other crap.

We are of course inflating continually against a deflationary impulse or need to correct.  I am not a dBoy because they get blown up in their stance periodically.  I am not an iBoy because of the same condition.  I am an idBoy.

So those that despise Prechter - truly one of the 3 or 4 people who helped create me - can turn off the blog for the day, or forever.  Up to you.  But as we enter witching season, don't say you could not have been prepared.

Video removed due to glitch

I am on the gold mining case because fundamentals tell me I should be.  These funda's are not readily apparent to the average tout or commodity/inflation hump.  They are not even apparent to Prechter from what I can see.  But there is deflation and there is the inflation used to try to stem it.  Disregard daddy d Boy if you want, but he has been on the theme of creation and fated contraction of credit since I began reading him a decade ago.  Anyway, here's Bob on Junk Bonds and the contraction of credit in general.
Prechter is going to be a sub-theme here on the blog going forward and as long as the deflation phase persists because as noted back in 2008, there are times you (or at least I) definitely want to know where he's at.  And yes, I receive a commission for any new business EWI receives through this site and that does not change my view a bit. 


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HUI & GDX filling gaps

...and filling a gap left due to the initial enthusiasm is not a bad thing.  Now, about those big gaps up higher...

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Silver (2x) short ZSL

Has come back nicely, and I am going to add it as the next 'hedge' position against gold stocks.  If silver gets through resistance just above beginning at 34, I'll reconsider. 

Edit (3:03) NFTRH154 said this:

"In my opinion, anyone lucky enough to be short silver last week who has not yet covered is just being piggish (unless they are working a strict hedging regimen)." 

I think I am early here, but... we'll see.  No reco of course because I don't reco readers listen to anyone else for guidance on their OWN trading.

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Get ready to laugh

A pod disguised as a news anchor talks about the gold sell off.

I think this rock star economist may be the "Todd Hirsch" mentioned by the automaton in the video.  A little research turned up a tweet where he gets a bit excited and asks "...is this finally the end of the gold bubble or just more crazy, random volatility in the markets?"  I'll take (b) Todd (and Alex).

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Copper ceiling weighing heavy

Looks like the ceiling on COPX could be around 14, whereas a month ago it was at 17.

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SPX Daily

So what do I do?  Why, I dial in a daily SPX chart and decide to add a bear position against this item to go with the lone remaining bear on junk bonds.  Slowly, I guess the plan is to scale in short various items against the favored gold sector.  Bear positions in base metals, energy, emerging markets lay in wait if all goes according to plan.

Wild card would of course be the Fed.  But I think they'll sit sidelines as long as this relief rally keeps on keepin' on.

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SPX Updated

The only question I have is whether SPX is going to fail at or below the weekly EMA 80 (1214) or the red band (the original projected retrace/resistance level of 1260).  And SPX is not even nearly the worst of what's going on out there.  Commodities are terrible.  Emerging markets - esp. China - are terrible.  October is coming.  Prechter fright masks selling at a premium.

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Boo!

Industrial Metals updated

A recovery by GYX to around 410 could be a gift for bears that wish to reload.

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Having fun yet? Gold, silver & HUI to targets

Gold hit the lower target (1550) in pre-market and fully satisfied the 'preferred' target (low-mid 1600's) during the regular session.  Silver?  What is there to say?  This wild man finally hit a potential target NFTRH first established in the spring, by declining below 30.  It is good to have this out of the way.

It is not to say all is rosy from here, but it is to say that we have gotten rid of the whole lot of damned lousy sponsors that came aboard the precious metals (esp. gold) during the hype of the summer.  Good riddance momo's.  Risk vs. Reward is now in line for gold and gold stocks.  Silver's RvR is obviously better now than it was a week or two ago, but I still have my suspicions about this cross-dressing precious metal (did not stop me from adding a premium Ag miner).

Now back to managing what should be an interesting October.  There is so much going on and you'd better be watching T bonds and you'd better be on your game with the 2008 comparisons flying around. 

I am glad I took profits on short positions on Friday and let the gold stocks run free for a bit.  For the last couple weeks - since the the HUI 610 breakout came under threat - I have been updating subscribers on some lower support levels we might have to manage, including 525.  Ding. 

Ain't this fun.  You have got to love the markets. 

BTW, this is how I write on the blog.  The newsletter is a different matter, sans the bravado - or whatever that is above.  Risk management is going to be key for a while longer I think.  Meanwhile, I am using this time to tweak and upgrade the quality of the portfolio.  Whatever... a good day.  Actually a good last week.  A lot of good things have happened, whether or not that appears outwardly obvious.

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Industrial Metals nearly to target

GYX came near the target and hammered.  Questions is, will there be an interim relief rally before target or express train lower?  I'll take 'A' Alex, but without any real conviction.

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Gold is Getting 'Fixed' (NFTRH154 excerpt)

Gold is Getting ‘Fixed’

On Friday, the conspiracy pieces were flying (some to my inbox) as indignation surged while gold tanked. One was forwarded by fund manager, NFTRH subscriber and all around sharp guy LL, to which I responded (pardon the crude descriptor for ‘momo’s’): 

“L, let me ask you this. Why then did my charts tell me low to mid 1600's weeks ago? I am not trying to toot any horns, but I dismiss the conspiracy rationalizations. Too many a-holes bought gold IMO. Now it is being fixed.”

We know (or should know) that gold is gamed and worked over in myriad ways by powerful people seeking to shape perceptions (we are in the midst of the ‘misperceptions game’) out of desperation. But the correction in gold was necessary because these are the markets and in the markets, dumb and emotional money never wins out.

Thus, the folks that outright panicked in the face of the Euro crisis and the US debt debate folly were always slated to be washed away because they are what should be considered unhealthy holders; weak hands that bought in knee jerk fashion rather than in service to a sensible, ongoing plan (the ‘knee jerk’ into gold was part of the reason I wrote To The Newly Minted Gold Bugs [http://is.gd/VoXBmj] in August). Also, a severely over bought chart did not hurt the correction case one bit. Anyone could see this coming. Spare me the rationalizations; it is time to think like a winner, not a loser.

Precious Metals – Gold

Was that a capitulation I saw on Friday as all the blinking red lights on my screen seemed to light up like a Christmas tree gone berserk on Friday afternoon? I am not sure; nor do I really care. What I care about is that this chart is no longer over bought by greedy and fearful momentum players. No matter what conspiracies the vast, internet-based gold bug ‘community’ burps up, this chart had to be fixed.

Gold declined on heavy volume on Friday, filled the gap and satisfied the 62% Fib. Technically, there could be additional downside to the EMA 200, former channel bottom and lateral support at around 1550. But the chart is getting fixed. You get bullish on gold when it is hated, not when it is loved. RSI is coming to a support zone, MACD has been totally corrected, and we have patience.

‘Public Opinion’ sentiment was (finally) beginning to come off the highs as of September 20th. Want to bet that it is much healthier now? The public’s dogged fixation with gold, however brief, was a troubling indicator. It is notable that the sentiment in silver was already significantly compromised as of the 20th and commodity sentiment was in the dumps.

I make many moves during the week out of instinct, but the work I do on Saturdays often confirms why I should have (or should not have) made those moves. Today’s work tells me exactly why I covered all short positions against commodity related items. Public opinion is now supportive of rebounds in the precious metals and especially commodities. ‘Supportive’ is not a mandate for an immediate relief rally, however.

Here I will note that targets remain lower on things like base metals, and silver’s chart looks awful. So we should be aware of the possibility of a snap back rally perhaps to test, and potentially fail at, broken supports.

Back on gold, also as of the 20th, gold’s CoT structure looked good as large speculators got less long and commercials less short. Take a guess how it may look as of the end of last week. Hedge funds are getting their grubby hands off of the play. It is not a play; it is a hunk of insurance and monetary value.

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NFTRH154 Out Now

That was one hell of a week in the foxhole.  NFTRH154 emerges from the rubble with an intact plan and an intact portfolio (+4% for 2011 thus far).  Cash remains on hand, short positions against gold stocks, energy, base metals and large tech stocks are gone and as a bonus, the opportunity came to upgrade the speculative portfolio as some premier gold producers came down nicely.

There is something very interesting going on with the state of long term treasury yields and current Fed policy; very interesting.  I am having a lot of fun.  Maybe a little too much fun, as I value at least some time for relaxation as well.  But this is so much better than the extended interim periods when trends levitate and everybody gets to look like they know what they are doing.

Not saying I know for sure what will happen.  Far from it.  But I do have the tools and work ethic to stay in alignment with the macro themes; and damned if I am not going to use them.

Okay, football time.

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A very recent NFTRH Update on gold, etc...

This is a sample email update uploaded as part of the FAQ section of the NFTRH subscription page. 

Sample NFTRH Update (Post-FOMC)

Check it out and then think 'hmmm, how many gold bugs were calling for a correction to low to mid 1600's since early August?'  Then there was his excerpt from a September 14th update:

"The new gold public opinion data is just out from Sentimentrader.com and as of 9/13 it remains OVER bullish and has not budged from the last reading.  This is of course not a bullish sign for the short term and dovetails with the analysis in NFTRH152 showing that gold's MACD was still over bought and that gold needed further correction.  It is not a big deal, because the correction is healthy.  I would have liked to have seen a dent being put in sentiment by now, however."

There were many more updates over the last few weeks, as I care more than anything about the well-being of NFTRH subscribers and more and more that has come to mean more email updates as events become shall we say, dynamic.  Positive feedback keeps me on this course.

This has been a promo of sorts (I guess, but more like me telling it as I see it) and I am very serious when I tell you I feel a hell of a lot better today than I did with gold up around 1900, sponsored by some of the most knee jerky (and thus, weak kneed) people on the planet.

The key to success is not just walking the contrary walk, but being wired that way. 

Okay, NOW go have a good weekend.  I am going to.

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CoT Gold & Silver report hot off the presses...

 
GOLD - COMMODITY EXCHANGE INC.                                       Code-088691
OPTION AND FUTURES COMBINED POSITIONS AS OF 09/20/11          |
--------------------------------------------------------------| NONREPORTABLE
      NON-COMMERCIAL      |   COMMERCIAL    |      TOTAL      |   POSITIONS
--------------------------|-----------------|-----------------|-----------------
  Long  | Short  |Spreads |  Long  | Short  |  Long  | Short  |  Long  | Short
--------------------------------------------------------------------------------
(CONTRACTS OF 100 TROY OUNCES)                       OPEN INTEREST:      965,320
COMMITMENTS
 230,207   27,175  302,114  348,843  600,631  881,165  929,920   84,155   35,400

CHANGES FROM 09/13/11 (CHANGE IN OPEN INTEREST:    -20,894)
 -23,605   -1,909   -3,789    1,792  -14,042  -25,602  -19,740    4,708   -1,154

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADER
    23.8      2.8     31.3     36.1     62.2     91.3     96.3      8.7      3.7

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS:      402)
     238       91      177       56       55      354      267

SILVER - COMMODITY EXCHANGE INC.                                     Code-084691
OPTION AND FUTURES COMBINED POSITIONS AS OF 09/20/11          |
--------------------------------------------------------------| NONREPORTABLE
      NON-COMMERCIAL      |   COMMERCIAL    |      TOTAL      |   POSITIONS
--------------------------|-----------------|-----------------|-----------------
  Long  | Short  |Spreads |  Long  | Short  |  Long  | Short  |  Long  | Short
--------------------------------------------------------------------------------
(CONTRACTS OF 5,000 TROY OUNCES)                     OPEN INTEREST:      167,584
COMMITMENTS
  34,381    5,579   53,489   45,471   94,241  133,341  153,309   34,243   14,274

CHANGES FROM 09/13/11 (CHANGE IN OPEN INTEREST:       -695)
  -2,643    1,758      142      724   -4,569   -1,776   -2,670    1,081    1,975

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADER
    20.5      3.3     31.9     27.1     56.2     79.6     91.5     20.4      8.5

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS:      188)
     101       26       75       40       47      165      129

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Gold

Hmmm... tickling the top of the target range now.  Go figure.

There is a less probable one - insert here the usual boiler plate about not trying to pick an exact bottom, it sure can go lower - down lower.  Regardless, the unhealthy momos are going bye bye.

Bye bye momos.

Okay, now have a good weekend.  I'll try to pop the CoTs up when available, but I have a lot do do today.

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http://www.biiwii.com

Covering Commodity shorts for the w/e

And look to replace w/ shorts against things made of paper.

Gold-Silver Ratio breaking out

Imagine that, gold is tanking to target and yet it is exploding higher in the other 'precious' metal, silver.  What do you suppose this means?  What is the impact on gold mining (lower panel)?  What about the broad market? 

 Folks, we are now deep within the 'mis perceptions' game and it is important to understand the dynamics in play beneath the nominal charts.  I hear Tim (@SOH) talk about 'the precious metals' being all done as gold and silver get clobbered and I think, whahhh? We're just getting started.  That is because I am looking beneath the nominal appearance of things to try to get at their meanings.

It has consistently worked before and I see no reason why it will not this time.  Gold's real price is moving higher, and people should really get up to speed on what that means. There is pain here and now, but later there could be some be big changes.

Hey, have a good weekend.

http://www.biiwii.blogspot.com
http://www.biiwii.com

Thanks Bob

Upon watching the video from the Prechter link a few posts down I just had a 'duh' moment as in, 'you just covered your broad gold miner hedge position and kept your other bear positions... you want to replace DUST with bearish positioning against a sector you do not favor (as you do the gold miners)... why not look at junk bonds?'

Duh, the JNK and HYG charts have not declined in proportion to the monetary problems out there, why not replace DUST with SJB?  Okay, thanks Bob.


http://www.biiwii.blogspot.com
http://www.biiwii.com

Market Sentiment...

I must admit that the structure of broad sentiment messed with me leading in to the current err, issue.  Sentiment and the structure of T bonds (more on this in NFTRH154) kept me from being whole hog bearish on the short term (as opposed to simply hedged), and there is something to learn here.  Like some of the worst market declines can happen within a backdrop of theoretically bullish contrarian sentiment.  When things go asymmetrical, some tools will go dormant pending a return of symmetry - or something like that.

One tool is still on the job however, and it is the gold-silver ratio.  It is only just getting started to the upside and argues that things may continue to be very unruly and broad sentiment will get worse before it gets better.

Smart/Dumb Confidence compliments of Sentimentrader.com

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http://www.biiwii.com

Prechter Fright Masks Available...

The more that people criticize my highlighting of Prechter, the more seriously I take the bear market's downside potentials.  It is as simple as that.  Do I agree with everything he says or writes?  No.  Did I learn a lot from him and do I want to know what he is saying now?  Yup.  This is free, timely and relevant because today, we have a genuine deflation event in the works and policy makers looking increasingly impotent in the face of it.  Go get this for free, no strings.  Dismiss or consider it as you see fit.





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http://www.biiwii.com

Gold

Au is coming along nicely toward - but not yet to - target ladies and gentlemen.  What, you thought all those knee jerking momos were right when they panicked into something they barely understood?  Give me a break.

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http://www.biiwii.com

GYX Industrial Metals are beautfully bearish

...and I still hold BOM against core gold stocks.  There is a play here you know.  We are shifting from an expiring inflationary economic expansion to the predictable contraction.  Industrial metals like copper, nickel, etc. are dependent on expansion.  Don't tell me "but... China".  The 'China Trade' and thus, the commodity trade is over for a while.  The measured objective for the GYX is below 350.

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Equity Put/Call Ratio was one signal

Do you think the CPCE's uptrend was a good indicator of the market's current problems?  I do.  We have been watching the uptrend for months.  Now, it is time to focus on the gold-silver ratio, T bonds and some other stuff as we gauge the coming of well, what comes next.  BTW, one thing I am not going to focus on in the short term is sentiment; it sucks.  So the bear is enforcing himself amid already putrid sentiment.  Okay.

Here is the old chart you may remember from the blog, as we managed bear capitulation to the bull case and began a fledgeling trend change in the CPCE.  How times - and trends - have changed.

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And this from another subscriber...

"Well, Gary, I am thrilled.  I preserved wealth by taking longs off table and buying DUST yesterday, pre-FOMC, and today pocketed a 20% gain.  All cash and totally relaxed.  Damn, this is fun!  :)
Thanks for the solid analysis,
-Dave"

It is funny, I wish I was Dave right now, but I write a newsletter and feel the need to not be a day trader as consistent themes are carried forward.  I am not having quite as much fun as Dave as I take some hits while hedging positions and managing risk.  But I am having some sort of fun I guess, because things are going asymmetrical, which is my favorite environment.

Here we cull out the momo geniuses.  And that will at some point include the bear herds as well.  The next play, after Liquidation '11 will likely be a bullish one; first selectively and then maybe a little more broadly, globally speaking.

Meanwhile, where did I put that Prechter mask?


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http://www.biiwii.com

Gold-Silver Ratio

Here is the gold-silver ratio proxy GLD-SLV.  You know, this has been an ongoing negative divergence to the broad market recovery rally heretofore called Relief '11.  Its refusal to break down signals caution and the need for risk management.  Its current still-bullish structure is a really bad sign for the near term liquidity of asset markets.

There are some ironic implications with respect to the gold stock sector and these will probably be the focus in NFTRH as the misperceptions game gets cooking in here.

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Pre-FOMC Update (excerpt)

"As noted on the blog yesterday, DUG has been brought in to add more 'bearish commodities' flavor and this morning I am also going to add the DUST bearish gold mining ETF as a strict hedge against what I wrote in the first paragraph [about being "clueless" as to what the Fed would do].  If all goes well post-Fed, this will be dumped at a loss [it wasn't].

I am a chronic risk manager and others may not be that way.  So there is no recommendation here other than to stay balanced until we get the FOMC behind us.  Cash is a great position when pending questions are yet to be answered." 

After the Fed, I promptly added SCO, QID and a short on the QQQ to the BOM, DUST and DUG positions.  Not looking to make money, just looking to manage risk for now.

This morning subscriber Pierre sends this note, which makes it all worth it for me:

Subject:  Well Done

"Love it when there’s a plan … makes me feel like I am not just tossing cash around blindly.

Right now sitting on loads of cash!"

It's all about having plans amid a world of players either without them or operating on faulty ones.

http://www.biiwii.blogspot.com
http://www.biiwii.com

Keegan Resources (KGN)

I frequently post charts of NFTRH stocks that fly upward, in the smarmy way newsletter writers sometimes do.  Like, 'look at me, stock picker genius'.  Well, here's one I have held for a long time and the market (on a terrible day no less) is not enamored of KGN's Positive Pre-Feasibility Study.  On quick look, I am guessing this is due to projected CapEx.

I am getting dinged today, but my newsletter has consistently highlighted the risks of a deflationary 'event' with regard to the broad markets.  Cash has been emphasized and in my case, damage is very well limited by bear positions on things like energy, base metals and as of yeterday, big tech.

I do not take pride in presenting the chart above, but these are the markets and risk management should always be a priority.

http://www.biiwii.blogspot.com
http://www.biiwii.com

Doctor Copper was a quack...

There are some supports down lower, with the 'best' target looking like a 50% retrace under 3.  Mr. Prechter?  Bob?  You out there?  Time to put on the fright masks for a spooky October.  But here's a hint... a smart player should attempt not to be a linear thinker and herd follower over the next few months.

http://www.biiwii.blogspot.com
http://www.biiwii.com

FOMC hot off the presses

Release Date: September 21, 2011

 

For immediate release

Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.

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Excerpt from one of several email updates last week

This update was produced as we dealt with the whipsaw in the gold sector, while remaining rational and emotionally grounded.  But here I want to excerpt part of the update that I think blog readers will find interesting.  I highly recommend watching all 7 interview videos of geologist and newsletter writer Brent Cook, at BNN.  As noted below, Mr. Cook is a pleasure to listen to and you will gain some nice insights.  BTW, I do not know Mr. Cook, have never communicated with him and stand to gain nothing by pointing you to him.  I was just impressed is all, and feel that the content adds value to the blog.

Good morning,

[Technical parameters on HUI and charts omitted]

These are our parameters and today I will try not to work you over with too much input.  If something is unclear, pop a mail to gtATbiiwii.com

Separately, thanks to subscriber 'GC', I would like to present this BNN interview with geologist and resource stock newsletter writer Brent Cook:  http://watch.bnn.ca/market-call-tonight/september-2011/market-call-tonight-september-15-2011/#clip533083

Listening to him talk about various mining and exploration companies is a pleasure and I strongly suggest you take a listen to all 7 segments of this interview.

Quick recap: 

• Expecting a 'liquidity event' (born in Europe) that would provide buying opp. in the resource sector
• Prefers gold over other 'resources'
• Very positive on NFTRH holdings Fortuna Silver and Golden Predator
• Has good things to say about EVG.to, PG.to, CNL.to & SGR.to (in the event readers may wish to look into these more closely - I am putting them on radar)
• Top picks are long time NFTRH favorite Almaden Minerals (AAU/AMM.to) and Lara Exploration (LRA.v), which is another prospect generator
• Listen to his discussion of Almaden:  "chances for a real home run"... "good, big, sexy system" [at Ixtaca]... Almaden keeps its favored properties and options out others within its lower risk business plan [which is something I have always liked about this company]

Regards,

Gary

Adding Oil & Gas Bear Dug

Adding DUG to the long precious metals / short general commodities theme.  And no, I am not overly comfortable doing too much before the policy clerks emerge tomorrow.  But DUG will replace the bear position on silver for now.  See if I can't make another couple bucks going against the peak oil crowd.

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http://www.biiwii.com

da BOM

So the metal hedge on silver is gone.  Not so for that on base metals.  Not yet.

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http://www.biiwii.com

Goodbye ZSL

...and thank you for another profitable hedge on the precious metals!

One possible path for the SPX

S&P Seasonal Chart Courtesy seasonalcharts.com

I know the world is supposed to be ending and all, but what if... just maybe an alternate scenario is coming to the fore?  People are obsessing on the bear case in an almost fetishistic unity and yet, there are sentiment and T bond structures (reviewed in NFTRH this week) arguing against the herd.  How often is the herd right, anyway?  Think about it.

Check out this little seasonal model.  SPX tends to form a Reverse Symmetrical Triangle (reversal) pattern after a toppy summer right into Wall Street's Q4 bonus season. 

I will allow for one more dunk to new lows (per the late October down-spike circled, but I cannot see how I can be bearish after that.  Seasonals, improving valuations and the stuff we reviewed in NFTRH153 on sentiment and T bonds, are making me feel greedy; greedy and bullish, pending a bottom.

Would it not be sweet to get a final and scary dump in October, right on cue?  This scenario has the crowd being setup once again.  You have got to love the markets.


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http://www.biiwii.com

Copper roof springing leaks left and right

The Global X Copper Miners ETF is breaking down from a bear flag after a classic test of the neck line.  Not good. 

http://www.biiwii.blogspot.com
http://www.biiwii.com

Doctor Copper

From NFTRH152 on September 11:

"The ‘Commodity’ segment veered into a riff on the real price of gold, so let’s get it back onto a nominal view of an important commodity, the good Doctor, whose prescription the broad markets await. He has pulled out his little script pad, he is writing but we do not yet know what the heck he is writing on there. Copper continues to fool around at the union of the EMA’s 50 and 200 and visual support. A loss of current support would be a very bearish thing. A hold of support would bring on a test of resistance above."

NFTRH153 saw some things this weekend that give it pause with respect to the current analysis that would see a potentially major liquidation this fall.  In fact, #153 sees reasons why the market could turn bullish once the downside grappling (SPX bear flag) clears.

But Copper is losing the support zone noted above (was green in NFTRH152, now yellow on its way to red) and copper is looked to far and wide as the 'roof' of a bull market.  The roof is caving in.  I remain happily short the base metals complex.

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http://www.biiwii.com

NFTRH153 Out Now

NFTRH153

There is a higher words per charts ratio than normal because quite frankly I was all charted out after last week's email update extravaganza revolving around the whipsawing gold stock sector.  Things settled down and it was time to just talk, pop in a few charts and explain why NFTRH's outlook may - repeat may - be brightening just a bit for the broad markets.

The SPX is on track for our anticipated 1250-1260 recovery into heavy resistance and a test of the big breakdown.  Yet there are sentiment issues in play along with a structure on the long term T bond yield that make me think the play may not be as everyone (including me) seems to be expecting.

As for the gold sector, it's all good.  Gold is correcting toward target, the gold stocks will either bolt higher or explore lower support levels but folks, this is one bullish sector beyond a micro-term that is conveniently going to feature the FOMC dead ahead.

The speculative portfolio is +11.5% for 2011, which is weird because I am risk managing and that usually means a +5%, -5% 'trading range'.  I'll take it.

Have a good Sunday.

http://www.biiwii.blogspot.com
http://www.biiwii.com

CoT Gold & Silver Report hot off the presses

GOLD - COMMODITY EXCHANGE INC.                                       Code-088691
OPTION AND FUTURES COMBINED POSITIONS AS OF 09/13/11          |
--------------------------------------------------------------| NONREPORTABLE
      NON-COMMERCIAL      |   COMMERCIAL    |      TOTAL      |   POSITIONS
--------------------------|-----------------|-----------------|-----------------
  Long  | Short  |Spreads |  Long  | Short  |  Long  | Short  |  Long  | Short
--------------------------------------------------------------------------------
(CONTRACTS OF 100 TROY OUNCES)                       OPEN INTEREST:      986,214
COMMITMENTS
 253,812   29,084  305,903  347,052  614,673  906,767  949,660   79,447   36,554

CHANGES FROM 09/06/11 (CHANGE IN OPEN INTEREST:    -21,536)
 -13,286    3,490   -9,486    7,168  -10,964  -15,604  -16,960   -5,932   -4,576

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADER
    25.7      2.9     31.0     35.2     62.3     91.9     96.3      8.1      3.7

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS:      401)
     241       84      167       59       59      354      259

SILVER - COMMODITY EXCHANGE INC.                                     Code-084691
OPTION AND FUTURES COMBINED POSITIONS AS OF 09/13/11          |
--------------------------------------------------------------| NONREPORTABLE
      NON-COMMERCIAL      |   COMMERCIAL    |      TOTAL      |   POSITIONS
--------------------------|-----------------|-----------------|-----------------
  Long  | Short  |Spreads |  Long  | Short  |  Long  | Short  |  Long  | Short
--------------------------------------------------------------------------------
(CONTRACTS OF 5,000 TROY OUNCES)                     OPEN INTEREST:      168,279
COMMITMENTS
  37,024    3,821   53,347   44,747   98,811  135,118  155,979   33,161   12,300

CHANGES FROM 09/06/11 (CHANGE IN OPEN INTEREST:       -218)
    -835      497      480    1,873     -282    1,518      695   -1,736     -913

PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADER
    22.0      2.3     31.7     26.6     58.7     80.3     92.7     19.7      7.3

NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS:      193)
     100       31       75       38       48      168      131
 

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Prechter - Triple top forming in the stock market...

Hey look, Halloween is coming and I love this stuff.  I know that real bear markets have been outlawed by official decree (and a hell of a lot of inflationary policy), but what if the guy is right?  What if?

(Video) Bob Prechter Explains 'Triple Top' Forming in U.S. Stock Market

This excerpt from the special video issue of the August Elliott Wave Theorist brings you Bob Prechter’s analysis of the triple top that has been forming in the U.S. stock market over the past 12 years. Watch as Bob himself explains what this pattern means for you and the markets.



You can get even more analysis – including an 84-year study of stock values – that will help you gain perspective about the recent market moves with Elliott Wave International’s FREE report, “Reality Check: Studying the Past to Bring Clarity to the Future.”

You’ll get a glimpse into the in-depth analysis Robert Prechter presents each month in his Elliott Wave Theorist with 3 excerpts from his most recent issues.
Don’t let extreme market volatility leave you confused and scared. Prepare yourself for today’s critical market juncture with your FREE report from Robert Prechter.

Read Bob Prechter's FREE report "Reality Check: Studying the Past to Bring Clarity to the Future."



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QQQ daily chart

Big tech is leading the charge, and looking the most bullish out of broad US sectors.  A 62% Fib retrace has been exceeded, volume is increasing and well, let's see how it plays out.  QQQ is getting into some heavy resistance up here, but I don't think it is done leading the pre-Q4 suck-in.

http://www.biiwii.blogspot.com
http://www.biiwii.com

Gold proxy GLD - 60 min. chart

The Diamond pattern has manifested in a breakdown.  Surprised?  The breakdown targets 164.  Will it get there?  I think it stands a good chance, but then I am just a chart twittler and the chart says yes.

I was reading some analysis somewhere talking about something called a "gold punisher", whatever that is.  The analysis also had a theme stating 'don't listen the MACD wiseguys' or something like that.  As if people looking at the way over extended MACD on a daily gold chart were leading readers astray by stating that gold needed to correct from over bought levels.

Guilty, NFTRH has been managing that condition for weeks now.  And gold is coming along, though still not yet there.  Besides, nominal gold is not about price, now is it?  The value proposition remains good and it's getting better as we bleed the momentum freaks out of the investor base.

http://www.biiwii.blogspot.com
http://www.biiwii.com

Central Banks trying to control their little worlds

US Stock Indexes Rise After ECB Moves

ECB to conspire, I mean coordinate with other CB's to keep the construct afloat.  Market celebrates.  Hey, something had to provide the thrust for the bear flag recovery to approach targets.

http://www.biiwii.blogspot.com
http://www.biiwii.com

Irrational?

Well, this morning's spike down in gold, accompanying these headlines is irrational (yet so predictable): 

New York Manufacturing Activity Dips Again  --MarketWatch

US Jobless Claims Jump to Highest Since June  --MarketWatch

What is not irrational is the correction in gold, which has been in the cards and ongoing for weeks now.  May as well have some misperceptions help it on its way.  Get this, when counter-cyclical things happen in the macro, gold will retain relative value and the gold stock sector - pending turbulence - will ultimately benefit.

For casino patrons micro managing the price of gold, the target is err... lower.


http://www.biiwii.blogspot.com
http://www.biiwii.com

"Selling may just be getting started" --R. Ross

I met this gentleman a while back and aside from being a classy dude, he is one of the very few TA geeks I pay any attention to what so ever.  He happens to sit a few seats over from my friend Jonathan at the mid-town Manhattan shop called Auerbach Greyson.

Rick Ackerman has posted a link to Richard Ross' latest global technical commentary (PDF).  Go get it.  I happen to be short silver and base metals and am looking for a more broad canvas on which to paint bearish.  Richard is very helpful this week in that regard.

And by the way, he is never afraid to be bullish.  I have seen him remain steadfastly bullish over extended periods and be proven correct.  This is what you want from TA; what is, not what an agenda may want it to be.

Think about it, Auerbach Greyson is a specialty emerging market global brokerage.  It would be in their interest to put out bullish (or at least not bearish) drivel to keep their clients sedated.  But instead, there resides a hell of an unbiased TA guy just up the row of terminals from the "globe trotting" owner of the shop.  Class... class... class... a rarity on Wall Street.

Selling May Just Be Getting Started


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http://www.biiwii.com

Rah Rah Sis Boom Ba!!

Let them hump Greece reassurances all they want.  The play is and has been recovery from over bearish sentiment followed by resumption of the bad stuff.  The time to get bullish will come, but I seriously doubt it's coming soon.  Here is our old weekly Dow showing some upside issues that Relief '11 will encounter.

BTW, I have been here all day today but have been busy bludgeoning people with email updates.  :-)

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http://www.biiwii.com

Historical comparison: CPCE & SPX

The Equity Put/Call Ratio's uptrend from 2008 looks similar to today's uptrend.  So does the topping structure in SPX.  All we are missing is a rise on hope to SPX 1250-1260 and a final kiss goodbye if history is to repeat.

BTW, I don't write bearish stuff to promote an agenda.  When the time comes to be bullish, the majority will be doting on every word the deflationists issue from on high, and I foresee becoming bullish again.  Some day.

http://www.biiwii.blogspot.com
http://www.biiwii.com

10 Year T Note - Big Picture

Do you remember when we first started looking at this chart?  It was back when it was threatening to break down at the yellow shaded oval.  It was back when inflation hysterics were foremost on the public mind.

Now, we've got inflation working over time, but it is not taking.  NFTRH152 tried to make this point using the Federal Reserve's MZM and M2 money supply graphs along with MZM and M2 "velocity" graphs.  Velocity of money is a big thing for deflationists.

Anyway, I always find it interesting to review the big pics, and this one on T bonds puts the inflation noise of late 2010 and early 2011 in perspective.  Next up, the public becomes frightened of deflation and we swing to the left doe cee doe.

http://www.biiwii.blogspot.com
http://www.biiwii.com

MACD Explained

EWI does a good job of explaining MACD, highlighting the importance of divergence and the 'zero+' and 'zero-' conditions I often note.  Using a simple candlestick or OHLC price chart alone is not enough.  It is in the divergences to MACD, support, resistance and divergence w/ RSI and several other of what I call the 'panel' indicators that give a leg up.  These oscillators and indicators paint in additional reference points that are important.

Momentum Analysis Using MACD

Learn more about using Momentum analysis to make Elliott wave trading decisions in this video by EWI European Interest Rate Analyst Bill Fox. Find more lessons on technical indicators in EWI's newest free report. See the information below.


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