pebblewriter

Tag: gold

  • Update on Bitcoin: May 28, 2020

    I’ve only posted about BTC once before, back on Mar 23 in response to a member request [see: FOMC Embraces MMT.]  The Dow was about to test its 2016 election day lows and, not coincidentally, the Fed had just unleashed QEinfinity.

    The post went as follows:

    Two major chart patterns jump out at me: first, the obvious triangle pattern on the weekly arithmetic chart (it isn’t there on the log chart) suggests BTC should bounce from here and return to the top trend line (which failed, BTW, to hold a recent tiny breakout.) It currently stands around 9,925.Second, the daily log chart shows a TL was broken last week but BTC has since rebounded back above it. For those wondering, the retracement of the rise from the Dec 2018 lows to the Jun 2019 highs reached about 81%. Had the TL held, we’d be looking at a Fibonacci 78%.

    If you believe that BTC will necessarily rise (as gold will) as QE explodes, the charts support a continuing bounce. If you believe the FOMC will do whatever it takes to support the USD and crush surrogates such as BTC and GC, then keep an eye on that TL (5,000ish) as a fairly clear stop level.

    Having spent a few hours studying Bitcoin, I promptly forgot about it.  I don’t really follow it, and believe it’s at least as heavily manipulated as everything else. Probably more. But, thanks to member John K., I was encouraged to take another look.

    As it turned out, BTC did continue its bounce and went on to test the top trend line, reaching 9917.25 on May 8.  It was an impressive 100% move from the March lows.

    Of course, now it’s back at overhead resistance – the same trend line from December 2017 which halted the 2017 and 2019 rallies.We’ll take a look at the potential for a reversal or a breakout.

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  • Update on Gold: Apr 8, 2020

    In our last formal update on gold in January [see: Jan 2 Update on Gold] with GC trading at 1529, I noted that although DXY had held up well, gold should benefit from loose Fed policy – but could see a backtest of its SMA200 based on the oil/gas meltdown we expected.

    I am partial, though, to the Fed putting the damper on inflation in January (reported in Feb) and setting up a backtest of the SMA200 or even the neckline which would set up another leg up to 1710-1735 in Oct 2021 or Jan 2022. Note that this would tie in nicely with the idea of an oil/gas meltdown in 2023.

    We certainly got all those things, but the timing was just a tad off.

    Long time members will remember I’ve been writing about gold’s potential Inverted Head & Shoulders Pattern for years. This post from September 2017 comes to mind.

    As I stated in that last update, I think TPTB will do whatever it takes to keep that giant IH&S targeting 1721 from playing out. The only thing I can see outweighing their efforts would be a true black swan event such as open warfare on the Korean Peninsula.

    Sure enough, every time GC got close to that neckline (the dashed yellow line above), it was smacked down by as much as 18%. It has happened 9 times since July 2016.  It was nice for trading purposes, but frustrating to the many gold bugs out there.

    While rising oil and gas prices were helpful to Aramco’s share offering in 2019, they disrupted the delicate balance between inflation and interest rates and sent a clear signal that it was finally time for GC to break out — which it finally did last June.

    Since then, it’s been a matter of waiting for the rising price channel to reach our upside targets. It might have been a long wait if not for the coronavirus. We managed to avoid war with North Korea, but this smaller, deadlier enemy was plenty Black Swan enough for the Fed.

    A few trillion in QE later, GC has reached our 1735 target — well ahead of schedule and after a very dramatic SMA200 backtest.

    Is the run over, or is there more to come?

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  • Just Two Charts

    Two charts best define the day we had yesterday.

    First, VIX tagged our next highest target: the intersection of the .786 Fibonacci retracement and the trend line connecting two previous highs.

    The other one was the SPX arithmetic (as opposed to log) chart, which stopped on a dime at the channel bottom.The bleeding continued well past the Fed’s ineffectual $1.5 trillion injection and had to wait until the low-volume aftermarket to be staunched. At that point, central bankers went to work – pumping oil and gas, the dollar, interest rates and currencies in order to restore confidence whip up the algos. It worked…at least so far.

    I’ll have a separate post up later regarding COVID-19, including my latest projections for the US.

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  • Burning Down the House

    Once upon a time, a few boys whose families owned the biggest lemon groves in town got together and opened up a lemonade stand. It was a very hot summer, so they sold an enormous amount of ice-cold lemonade. Since they controlled the supply of lemons, they were able to quickly raise prices from 10 cents per glass to as much as $1.50. Their customers didn’t mind as they could afford 1.50, it was excellent lemonade, and there were no alternatives. They like it so much, in fact, they invested $2 trillion in shares of the stand.

    One day a freak storm hit town, and the temperature dropped from 95 to 25 degrees in a matter of hours. The weatherman said it could last for months. Not many people were interested in ice-cold lemonade, even though the boys frantically dropped their prices. They even tried cutting back on the amount of lemonade they made. For some reason, this had no effect on sales, and prices continued to drop. A few boys split away from the group and tried selling cheaper lemonade on their own, but this further depressed prices. Soon, the lemonade stand went out of business. The end.

    And that, boys and girls, is how OPEC came to be in their current predicament.

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  • When Will News Begin to Matter Again?

    Apparently AAPL slashing guidance is inconsequential and Bill Gates, who is predicting 10 million deaths, is some sort of conspiracy theorist – because the market continues to ignore the coronavirus story. Perhaps somewhere down the line the investing world will come to realize what we’ve known for years: stocks have become increasingly easy to manipulate.

    Lately, it has been VIX’s constant smackdowns below various measures of support and the perennial games played with currencies which have directed algos to buy every dip.  With oil and EURUSD having reached important downside targets, the formula might change somewhat. But, at what point will the game be obvious to all?

    Futures are off about 15 points, not even 1/2% after a slew of dreadful headlines over the weekend.

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  • Middle East Tensions Escalate

    Not too surprisingly, the Iran problem didn’t go away over the weekend.  If anything, both sides are making threats that would significantly expand the conflict. What’s more, Trump’s unilateral actions have resulted in Iraq’s parliament calling for all US troops to withdraw from Iraq – without question an important win for Iran.

    Trump’s 2011 predictions of a politically-motivated attack on Iran by Obama (which obviously never came to pass) are causing many to question the timing and motivation of his own actions, not to mention the existence of a coherent Middle East strategy.

    So far, equities’ reaction has been contained.  Though, gold and bonds are providing a less filtered reaction to the escalating risks. Gold popped up to tag our next upside target… …and, 10Y notes broke out.Past Trump-related emergencies (trade war, impeachment, etc.) have been easily downplayed or explained away. I can’t imagine that Trump or his sycophants will be able to spin this latest series of missteps as unimportant.

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  • Update on Gold: Jan 2, 2020

    In our Aug 28, 2019 Update on Gold I noted that although GC had just reached our 1560 target, ZN had also reached our 132’100 target.  The picture was further muddled by the fact that DXY and GC had been moving in unison – an unusual occurrence, to say the least.

    ZN’s resistance could put the brakes on, meaning rates would rise and GC would theoretically fall.  But…I expect ZN’s pullback to be modest — possibly only 3-4% — suggesting GC’s pullback would also be fairly modest.

    As it turned out, GC and ZN both reversed.  Although DXY made a half-hearted effort to break out, it was limited to 1.5% and GC’s reversal was limited to 1446.

    DXY’s rally stopped making any sense at all once FOMC members began hinting at additional rate cuts. When the Fed resumed QE (QE-not as we like to call it), the market knew what to do: DXY has been steadily selling off and GC has climbed back to within $30 of its August highs.

    Does this mean more upside ahead?

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  • Update on Gold: Dec 26, 2018

    Back on August 15, we noted that gold was nearing an important downside target.  From Charts I’m Watching: Aug 15, 2018:

    [Gold] has reached triple support –the .618, yellow TL off the 2011 highs, and the red TL from 2010.  We’ve targeted 1173.60 since the yellow TL broke down in May and gray channel broke down in June.  I strongly suspect it will bounce here.

    GC dipped slightly lower, bottoming out at 1167.10 the following day, then began an arduous climb that reached our 1268.30 target last week.

    As it threatens a breakout, we’ll take a fresh look at the road ahead.

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  • Update on Gold: Apr 11, 2018

    In our last major update [see: Jan 26 Update] we noted that gold, 1355 at the time, had reached the same price level at which it had frequently reversed.  Even though we’d had a bullseye at 1377-1380 for over a year, it had stopped short several times.

    GC is sitting just below the neckline of the huge IH&S that could result in a significant breakout.  The fly in the ointment: I don’t think TPTB will let it break out.  So, you should either take profits here in the 1348-1365 range, or at least set your stops at this level.

    As it happened, 1365 (reached the day before) was the cycle high.  Gold tumbled 4.1%, then bounced around between roughly 1308 and 1362 for the next two months.  Our interim posts caught most of the moves:

      * * *

    Feb 8: Analog Details  “[Gold] has dropped 4.1% since reversing where expected in late Jan, and just reached fanline and double channel support [1321.] Could it finally be ready to tag 1377-1380?”  Bottomed that day, rallied to 1364 over the following week (+2.51%.)

    Feb 15: Where to, Next?  “GC might have run out of steam here [1360.] Cautious types should consider taking profits, while the daredevils out there remain focused on 1380.” Topped out the following day at 1364 (+2.95%.)

    Feb 27: Powell’s French Toast   “Gold is getting clobbered…our analog suggests a Mar 1 turning point. The SMA100 should be around 1303 by then and would be a better bounce spot.”  Bottomed on Mar 1 at 1303.60 (+4.15%.)

    Mar 27: Algos to Markets – All Better  “GC, which tagged its 1362 resistance yet again, has retreated once more… It still has a good shot at 1380, but only if/when DXY finally breaks down.” Reached 1369.40 today (+5.05%.)

     * * *

    So, here we are, sitting on a tidy 14.7% gain.  It’s not terrible for 2 1/2 months work, considering gold has only netted a 0.9% gain during that period.  But, I hate to leave money on the table. Is it time to pull the plug on 1377-1380?  Or, are we about to reach or exceed it?

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    The two major factors at work are the ongoing saga of the US dollar and the possibility of a shooting war with Russia in Syria.  I can’t speak to the question of a war other to say anything’s possible, especially with the crew currently running the ship.

    The dollar is another matter.  While it normally rises and falls in sync with interest rates, this relationship reversed at the end of 2017.    At that point, DXY logged another leg lower while TNX spiked. At just shy of 3%, the TNX became a drag on equities — the whole “going broke” thing [see: Why Rising Rates Are a Problem This Time.]  But, as the gyrations in equities picked up again, great care was taken to ensure it didn’t plunge in value.

    I suppose the thinking was that lower rates would weaken the dollar’s appeal.  Or, maybe it was just fear of a yield curve inversion.  In any case, TNX’s purple TL has refused to break down. DXY also refuses to break down.  And, this could go on for quite a while.  It needs to tag the bottom of the rising purple channel.  But, until mid-July rolls around, that would mean dipping below the .618 at 88.423.  So, it’s quite possible TPTB will prop it up for another three months! 

    Remember, Mnuchin publicly stated he wants to support the USD.  And, it goes without saying that he, like every central banker, loathes any serious price appreciation in gold, as it undermines the value of the mighty dollar. One silver lining, EURUSD suggests a shorter timeframe, say Jun 5.  But, even two months would be a long time to wait for another few points.  An escalation in MENA tensions could obviously accelerate things.  But, is it worth taking the risk for 10-15 points?  I think not.  I’d pull the plug or at least enter stops here at 1367.  If it pops above 1380, great.  No argument with going long, again.  DXY could drop to 87 tomorrow, and GC could easily reach 1377-1380 or higher.

    But, if DXY continues sideways, and unless war breaks out in the next day or two, it seems likely that gold’s next move will be lower.  The most obvious support is at the rising white channel bottom and SMA100, currently around 1315.2-1318.  If the channel breaks down again, the SMA200 will reach the purple channel line later this month, probably around 1300.  I’ll update things if we see a material deviation in either direction.

    GLTA.

     

     

  • Price Alert: Gold

    Gold is approaching our next upside target from two weeks ago [see: Gold – Following the Yellow Brick Road.]

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