090714 – Trading Down Trend

Model Portfolio: Short Signal (7/31)

Technical Read: With spot gold dropping through the Aug 25CTM140907 closing low, the yellow metal has now formed a downtrend.  I had hoped to get some type of signal change last week (exit short or long) as I want this to be a trading website. I did the “grand slam” analysis this weekend but the current read is still coming up “Short Signal.” I do not expect Thursday’s closing low to hold.

Backdrop:

  • Mario Draghi (ECB president) advised .01 percent point cut in European interest rates and an asset purchase program last week. While the knee jerk reaction might be this act could be bullish for gold prices (i.e. inflationary), in practice this is sending the dollar higher and raising the haunting specter that Euro-Land is losing the war with deflation. Both of these are negative for gold.
  • The pace of manufacturing continued to expand with the ISM index of national factory activity up ticking to 59 in August. The previous month came in at 57.1 , this strength (and its European contrast) should underpin the dollar. Bearish for gold.
  • On this site I am inaugurating a premium service for following US Government long-term interest rates. It follows that asset class in a similar way to the gold signals. I am looking to consult with only one organization at a time. Check the ‘Premium” tab on this site for details. The very first signal, based on Friday’s (9/5/14) close is “Sell Short” on bonds. By the way, this is bearish for gold too.

GH Garrett – Veteran Commodity Watcher for Conquer the Mummy .com

083014 – No follow through, but no bottom.

Model Portfolio: Short Signal (7/31)

CTM140830

Technical Read:  Spot gold managed a drifting rally this week but there was not much gusto (especially just ahead of a three-day weekend). The breakdown from the upward trending channel is the last technical event of significance.  Current readings are still bearish. I would note that (at least for the mummy site) this trade is getting long in the tooth. I hope to generate some type of signal this week.  If Labor Day passes without much excitement, I would think selling would reappear.

Backdrop:

  • This week (Friday actually), British Prime Minister David Cameron announced an increase in the country’s terrorist threat level to “severe” (the second highest level). One would think that would be good for gold, but the GLD fund actually closed down for the day. Maybe yellow metal watchers were calmed by Obama’s news conference comments that seemed much less urgent.
  • According to Eurostat, consumer prices rose just .3 year to year. The number was in the expected range but none the less at a five-year low.  My read on this is Europe is losing the race against the specter of deflation.  If decreasing prices gain the upper hand, we could end up with a depression.  This would be deadly for the highly fine-tuned economies of the West. And gold prices too.
  • I am just pilling on. I saw reports that Eurozone PMI (purchasing managers index) ticked down in August. July unemployment for the region came in at a pasty 11.5%.

GH Garrett – Veteran Commodity Watcher

082314 Follow through ahead?

Model Portfolio: Short Signal (7/31)

CTM082304

Technical Read:  Spot gold dropped through the recent upward trading channel. This combined with the penetration of the July 31st pivot point is bearish action for the yellow metal.  The question is will the breakdown continue?

Backdrop:

  • The US Dollar index broke out to the upside. This is bearish for gold.
  • Leading geo-political events (Gaza, Ukraine and ISIS expansion) are still active but the unrest is largely factored in the market.  At this point, some new accelerant needs to be added to bounce gold higher. Bearish for gold.
  • This week’s Janet Yellen comments from the annual Federal Reserve conference at Jackson Hole were highly anticipated by market participants trying to gauge the future path interest rates. However, the remarks seemed designed to give the Central Bank plenty of latitude in keeping the asset purchase program in place. Interest rates drifted lower in the wake of the event. Bearish for gold.

GH Garrett – Veteran Commodity Watcher

081614 Whew!

Model Portfolio: Short Signal (7/31)

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Technical Read:  Spot gold dropped through the recent 6 day trading range but rallied back into the channel by the end of the day. However, GLD (which has a longer US trading day) was not able to regain its footing. Friday’s trading indicates that gold is becoming susceptible to down drafts.

Backdrop:

  • The US Dollar index was soft on Friday as well but showed relative strength versus gold. This is bearish for gold.
  • The latest chapter in the unfolding Ukraine story now revolves around a caravan of supply trucks Russia is trying to insert into the Ukraine. This is less scary than some of the previous stories. Bearish for gold.
  • The US Commerce Department reported that retail sales flat lined in July (June readings were not very strong either). Remember, if a so-so economy meets a Fed getting ready to exit (to some degree) the central bank’s asset purchase program – Could a round of deflation be far behind (the interest rate market is buying this)? Bearish for gold.

GH Garrett – Veteran Commodity Watcher

080514 – Lower Highs

Model Portfolio Status: Short signal (7/31).

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Technical Read:  Spot gold continues to be unable to regain the $1300 level (the most recent attempt to stage a rally was today). Currently, the weakness is more of a “drip-drip” affair not a powerful decline. From a technical analysis stand point, a turn-around does not seem at hand.

Ambiance Backdrop:

  • Stocks fell back today, with the S&P 500 putting in its lowest close in 2 months. Economic data has generally been supportive (unemployment ticked down to 6.2% in July and consumer sentiment at 81.8), but the looming consideration of the Fed exiting its asset purchase program is going to be a specter in the future. Can the financial markets weather the rise in interest rates? The question is going to revolve around deflation. Will it come knocking? If deflation does materialize gold will not be unscathed.
  • The geopolitical back drop is still supportive. Unrest in the Middle East and the Ukraine gives gold sellers a pause but the associated strength in the dollar (the US Dollar Index has climbed steadily since June) has partially negated this.
  • 10 Year Note rates appear to be base building at higher levels than the lows of May. If interest rates manage to rally, this will not be favorable for gold.

GH Garrett – Veteran Commodity Watcher (8/05/14)

073114- The plank is cracking

Model Portfolio: Short signal (7/31)

CTM073114

Technical Read:  Spot gold failed to hold the (approximate) $1300 support level, violating it for the 3rd time in three weeks. Today’s violation was the most significant of the set.  Short-term traders should not have been long (as our previous signal was “exit long”, 7/24). Today’s move to bear trend indicates we expect more downside.  The basic technical reasons are support violation and increasing negative momentum. The case for a continued breakdown is bolstered by proprietary ConquertheMummy.com models indicating further weakness is likely.

The most significant external event today, was the severe breakdown in US equities (Dow -300, S&P 500 -39). Several high profile traders had previously noted concerns that stocks were giving technical signals that a (bearish) trend change was probably in the working. The jumpy (read: “sell first and ask questions later”) nature of stock traders combined with the news of Argentina default risks (added to the other geo-political) plate proved too much for the bulls. So how is this going to affect gold? The knee-jerk reaction is that equities liquidation could bolster the yellow metal. But if the initial analysis indicates a sell-off in stocks is deflationary, there could be negative ramifications for the price of gold as well. At least in the initial phases.

GH Garrett – Veteran Commodity Watcher (7/31/14)

072414- Good Grief

Model Portfolio: Flatland (Neutral signal = 7/24)

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Technical Read:  Spot gold fell during Thursday’s trading, giving up previous gains on the recent bounce. The 7/21 bullish signal (that cited waning selling momentum) appears to have been premature. I am going to reexamine some of my parameters and make adjustments to get back in rhythm with current trading. For now, neutral is the correct position.

GH Garrett – Veteran Commodity Watcher

 

071414- Breakout Reversed!

Model Portfolio: Flatland (Neutral signal = 7/14)

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Technical Read:  Spot gold prices staggered as overseas selling put the yellow metal on its heels from the start of trading. The selling was potent enough to reverse the recent uptrend. A breakout from a relatively flat trading range is a pretty good signal, making the reversal down back through the range potentially devastating. Spot gold closed down $32 hitting nearby stops short-term traders, including the Mummy website.  The trade is classified as loser as the long exit is lower than the entry. The good news is losses were substantially lessened (approximately 2 to 1) as we signaled a long trend near the bottom of the recent multi-week range. The position shift today to neutral puts us in a good position, more weakness and we are clear of it. It is unlikely there will be an immediate upside reversal. It is too early to consider shorting the market.

Ambiance Backdrop:

  • Not a lot has changed in the gold trading backdrop. Both the Dollar and longer-termed interest rates were well behaved.  Stocks climbed today but with the S&P 500 capping its gains a 10 points, it was not particularly eye opening.
  • The Israeli-Gaza air ware did not escalate into a full ground war. The aerial duel of airstrikes versus rockets is still on.
  • With a weekend ahead and limited fundamental news changes, it will be interesting to see if the bears can push gold down much lower.

GH Garrett – Veteran Commodity Watcher

071214- Breakout?

Model Portfolio: Bullish (Long signal = 6/27)

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Technical Read:  Spot gold prices broke out of range bound trading channel (approx. 3 weeks) at the end of the week. This is very positive for the yellow metal and signals higher prices are ahead. I would like to see the breakout to be more pronounced in future trading. Gold continues to benefit from limited conviction on the sell side due to the constructive news setup. The Mummy trading signals continue to be on the right side.

Ambiance Backdrop:

  • Armed clashes in the Middle East are now a news staple with Iraq (ISIS offensive) and Israel/Gaza action now on the top of the list. An armed Israeli military incursion could be the next escalation. This is supportive for gold (uncertainty).
  • The recent release of the Federal Reserve minute’s puts a rough time table for the central bank to phase out its controversial asset purchase program (subject to change) yielded a mixed story for the yellow metal. The Fed withdrawal could be potentially deflationary (bearish) but the coming uncertainty of whether they will do it could be supportive (bullish). I believe Yellen was chosen because she was the candidate perceived to be the least likely to change the Fed accommodative stance. For now this is a neutral for gold.
  • Shares of Banco Espirito Santo tumbled as they missed debt repayments on some short-term instruments. This was a contributing factor for jittery global equity market trading this week. Portugal is a small country and the concept of a shaky European banking system is not exactly new ground. The key will be if this event leads to a spreading of stability concerns. This is mildly bullish.

GH Garrett – Veteran Commodity Watcher