Model Gold Portfolio: Neutral, today “exit long” (previous signal was “Long” on 11/20)
Technical Read: Gold was slammed during holiday thinned (a new phrase) trading on Friday but the bears’ dominance was decisively crushed with a substantial rally today. GLD is above our entry level (11/20) but now short-term overbought. Readings indicate it is time to go neutral (exit longs).
Backdrop:
Catalyst 1 – Friday’s gold crash did not manage to coincide with a dollar breakout (this was a clue to the “brief” aspect of the selloff). The US Dollar index is still in its trading range, so a positive for gold
Catalyst 2 – The S&P 500 had a downside reversal today as well. The uptrend is still in effect but the strength is starting to wane. Mildly positive for Gold.
Catalyst 3 – Moody’s (credit rating agency) cut Japan’s credit rating from AA3 to A1. US credit rating agencies don’t really have the reputation for great forward insight. Still, taken for what it is, another asset class on the ropes, mildly positive for gold.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Model Gold Portfolio: Long, 11/20 (Today’s chart was produced intra-day so the closing price pictured is not really the official close).
Technical Read: GLD drifted higher from our bullish trend change signal. The current position continues to feature limited selling and thus would lead one to conclude higher prices for the yellow metal are ahead. I wish a happy Thanksgiving to the Mummy watchers!
Backdrop:
Catalyst 1 – The US Dollar Index bounced to the upper end of the recent trading range but failed break out and is selling back down to the lower end of the range. A well behaved dollar (not trending higher) is positive for gold.
Catalyst 2 – The S&P 500 has moved north of its previous range. This is mildly bearish for gold.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Model Gold Portfolio: Long, 11/20 (previous signal neutral, 10/27)
Technical Read: GLD selling on the 19th did not gain any downside momentum for the 20th. Prices reversed to the upside and thus indicate a lack of selling power in the yellow metal. The Backdrop still has negatives for gold but has improved. The previous question was would the bullish trend have the strength to overcome some overbought positioning. The bulls have won out and the models are now positive.
Backdrop:
Catalyst 1 – The US Dollar index is now range bound, meaning the uptrend is on hold. Prices are now hugging the bottom range. The next surprise move for the greenback could be a stop hunting raid south (86.50 on DXY). This is neutral for gold (for now).
Catalyst 2 – The S&P 500 closed up and is holding above the pseudo break-out at 2040. It is not a blast off but the up-trend is still in place. This is mildly bearish for gold.
Catalyst 3 – The US Labor Department said its index for final demand increased .2% in October reversing a PPI decline of .1% in September. A modest decline was expected but the services sector component provided the boost. This is a rare bit of non-deflationary news and is a mild positive for gold.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Technical Read: GLD did not retrace much of the Nov 14 rally before it moved modestly higher. I am not sure the backdrop (see below) warrants a substantial bullish move but the technicals are improving. The real challenge on this front is whether the buying pressure is sufficient to move a modestly overbought market higher. The models are still neutral.
Backdrop:
Catalyst 1 – The US Dollar index appears to have paused but the price action is not indicative of a trend reversal. This is still mildly bearish for gold.
Catalyst 2 – Several posts ago, I opined the next likely move for the range-bound S&P 500 would likely to be up. Today was a breakout for equities. More to follow. This is bearish for gold.
Catalyst 3 – Japan unveiled the economic surprise of the week. The third quarter GDP posted a 1.6% contraction. This on the back of a 7.3% contraction in Q2 puts the third largest economy in a technical recession. The current policy tug of war between fiscal easing (stimulus) and raising taxes (tightening) does not provide an optimistic resolution.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Technical Read: GLD blew though resistance on the back of a daily bearish reversal in the US dollar (see catalyst 1). The move came after several days if decreasing volatility (closing price differences) for the yellow metal. Never sell a dull market, they say. Gold traders should now set their sights on determining if this means a bullish move is now in motion. The alternate view is that it was of the Friday-short-squeeze flavor. The Friday pop may be too much (overbought) for a safe bullish entry immediately, but it has our attention. The models are still neutral.
Backdrop:
Catalyst 1 – The US Dollar index pushed higher on Friday but then reversed. The sudden appearance of technical buying in the euro and some disappointment in US payroll number could have been factors in the slide (er… ISIS announced its new currency too). Though the dollar reversed for the day, for it to be bullish for gold, the greenback must reverse its bullish trend. Friday’s currency action did NOT accomplish that (look at a chart). This is a neutral factor for now.
Catalyst 2 – Equities were unfazed by the currency/gold action. The S&P 500 ticked up less than a point, not uncharacteristic of recent days. This is mildly bearish for gold.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Technical Read: With the GLD now picking up support at the $110 level, the downtrend has been largely negated. On my last post, I mentioned that expected returns (via calculations) had dried. Recent trading has the gold surrogate ETF bound in a tight range ($110-$113). Now what? It is a waiting game. Putting on a position too early could lead to the eager trader getting chopped up. Watch the market for changes.
Backdrop:
Catalyst 1 – The S&P 500 pushed a tad higher today, extending a series of miniscule gains. There is a difference between stocks and gold: the expected returns calculations are pointing to a hefty move ahead. With shorts being treated to days of losses, the most likely outcome would be a short capitulation, triggering additional buy-stops. Good health for stocks is mildly bearish for gold.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Technical Read: Gold picked up support today as the GLD bounced off the $110 level. This was to be expected as the previous down move was pretty extreme and placed the market in an oversold situation. I am looking for a trade but my readings are not positive for a buy. My expected returns calculations are very anemic (less than $1!). So the plan for the Mummy is to stay neutral and try to gauge the direction for a profitable move.
Backdrop:
Catalyst 1 – The S&P 500 continues to inch higher after the Nov 3rd pivot point. The chart action is a bit over-extended but there is no clear sign of reversal. My indications are still positive for stocks. This is bearish for gold.
Catalyst 2 – The US dollar is trending up against a backdrop of European deflation fears. In a recent interview (CNBC), Juergen Fitschen (German Banking Association) advised that it was “undeniably that we have slowed down recently” ahead of the anticipated German third quarter GDP release. Apparently the association chair was preparing traders for bad numbers. Germany economic growth is key for the faltering European economy. Serious economic contraction could be a bottomless pit for the world economy. Weakness in the Rhineland would likely spur the ECB to take dovish action, which would weaken the currency (euro) and be bearish for gold (via the dollar). By the way, the yen is having tough slogging against the dollar as well.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Technical Read: GLD broke down further with just the most nascent sign of a support. The longs were popped pretty hard. The break of the Oct 3 low signals that the trend is down but the gold market is very very oversold making a profitable short trade entry unlikely (the horse has already left the barn) at this point. Gold traders need to be patient and watch for a higher probability entry point.
Backdrop:
Catalyst 1 – OPEC signaled expectation for continued oil price softness in the organization’s annual World Oil Outlook. The expectations of sliding energy prices are helping US equities and covering the Fed’s QE exit. The S&P chart looks good, this is bearish for gold.
Catalyst 2 – ECB President Mario Draghi affirmed the European Central Bank is preparing for further easing action to help EuroLand’s economy. This is bearish for the euro and bullish for the US dollar. This in turn, is bearish for gold.
Catalyst 3 – Another blot on the sunshine of economic growth came this week as the OPEC annual report downgraded expected growth in the “BRIC” countries (Brazil, Russia, India and China). This is another point for global deflation which is also bearish for gold.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Technical Read: During the second part of the week, GLD (see catalyst 1) really collapsed, despite some initial base building around the 118 level. So what now? From a trend perspective, gold is heading down, however the Wed-Thu-Fri drop has made this market very oversold (we look at things in a trading time frame). Trend down but market oversold readings mean step aside now and wait for an advantageous trade entry point.
Backdrop:
Catalyst 1 – The Fed announced an end to its quantitative easing program Wednesday. This was potentially a destabilizing event but the time occurred during a bout of low oil prices. The energy dividend (tax cut effect) is stepping in to mask the Fed move out of QA. Is Yellan that smart, or just lucky? Stocks broke north of trading resistance in the aftermath. This was bearish for gold.
Catalyst 2 – The US dollar rallied post-Fed and the language in the statement was a little more salubrious than expected. Stronger economy = higher interest rates = more selling pressure for gold.
Catalyst 3 – A moment to ponder, this week we save two highly visible space travel accidents (the NASA space station resupply rocket explosion and later the Virgin Galactic SpaceShipTwo tourism rocket crash). Maybe it wouldn’t hurt traders to be wary of overbought (or oversold) situations.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
Model Gold Portfolio: Exit Short to Neutral (formerly a short position). Signal date= 10/27.
Technical Read: The retracement off the high (10/21) has moved the gold market off its overbought position. On a longer time frame, speculators can make a bearish case, but for the trading window I inhabit, the risk (upside vs downside) is balanced. The trade (10/01 to 10/27) is technically a loss of a buck and change (on the GLD). This is within the category of a modest loss and the mummy certainly did not crush us. I would have liked to have spent more of October in money markets (neutral). The good news is we can begin looking for a new exciting entry point, hopefully in the next few weeks.
Backdrop:
Catalyst 1 – Simply put, the biggest plus for gold is the hair-trigger sensitivity of the market to a plethora of issues: Ebola, ISIS (or ISIL), Ukraine or the Gaza. These situations, and the possibility for them to worsen suddenly, are keeping the gold bears off balance.
Catalyst 2 – The US dollar is in a choppy, trendless mode. If the greenback uptrend is on pause, the bearish headwind is too. We will have to evaluate this going forward.
Catalyst 3 – The stock market is experiencing a new kind of stimulus (not from Fed interest rate policy): lower oil prices. The energy discount is going to add liquidity in a very broad based manner, helping all who manufacture, transport and purchase physical items. During this phase, this is bearish for gold.
Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.
GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com
“Use nonlinear research to help determine the future direction of the S&P and trading can become much less complex.” GH Garrett
Technical Read: Gold was slammed during holiday thinned (a new phrase) trading on Friday but the bears’ dominance was decisively crushed with a substantial rally today. GLD is above our entry level (11/20) but now short-term overbought. Readings indicate it is time to go neutral (exit longs).
