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: 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
Model Gold Portfolio: Neutral (9/19 signal, exit short)
Technical Read: Today’s gold trading was a turbulent affair. Overnight selling set the stage for a gap-down opening in COMEX trading. There was a morning rally but it failed by the end of the day. At the close, GLD held at the approximate low levels of the recent pause. It was a long day for the bulls (not as long for the Mummy as our signal was neutral). My readings are not indicating significantly lower prices.
Backdrop:
Catalyst 1 – The strength of the US Dollar is pressuring gold prices and carries with it the whiff of global deflation (dollar strength and deflation are riding in the same car these days, unfortunately it is hearse). This is bearish for gold.
Catalyst 2 – Hong Kong demonstrations (and the police response) has taken less confrontational stance today as local politicians struggle to find a way out. This is bullish for gold as it is a new (and developing) situation.
Catalyst 3 – The verification of another victim of the Ebola virus in the US is probably not a market mover. But it does serve as a point of concern of thisng to come.
US Government Bond research. I am offering a similar process to the gold comments for bonds. See the “Bond” tab for more info. Recently (9/19), the bond readings changed from short to exit short (neutral) and this has been a productive signal.
GH Garrett – Veteran Commodity Watcher for Conquer the Mummy.com
Technical Read: Gold traders prepared to start the week with renewed selling, however the bears did not manage rout the market. The yellow metal continued to hold the recent narrow range. This combined with the over-extended nature of the previous decline gives the gold market a mild bullish edge on the technical read front.
Backdrop:
Catalyst 1 – The US Dollar trading uptrend continues to be a formidable headwind (bearish) for the gold market. During the weekend this appeared to be the dominant trading story on the metal, BUT…
Catalyst 2 – Political unrest in Chinese produced stunning images as youthful demonstrators clashed with government police forces, in Hong Kong, through a haze of teargas. The scene brought back memories of Tiananmen Square in 1989. By the end of the day, the protesters remained in the streets but the clash seemed to lose its edge. This outbreak to flared up and caught markets off guard as a new risk factor. This new piece on the global chessboard is bullish for gold.
US Government Bond research. I am offering a similar process to the gold comments for bonds. See the “Bond” tab for more info. Recently (9/19), the bond readings changed from short to exit short (neutral) and this has been a productive signal. The Hong Kong unrest is positive (flight to quality) for US Treasuries and therefore supportive for gold.
GH Garrett – Veteran Commodity Watcher for Conquer the Mummy.com
Technical Read: Gold traders came into the day with a bearish disposition with pre-Comex trading down $9 dollars (see catalyst 1). Gold opened near the lows of the day. This level was a little lower than the previous near-term bottom (9/22). However, after triggering various sell-stops in place, the market rebounded (see catalyst 2) as sellers were unable to push their advantage. During the recent sustained downtrend, bears have become vulnerable to short-covering. With readings now neutral, traders can now enjoy the luxury of taking a moment to reflect on what the upcoming trend will be and prepare to take advantage of it.
Backdrop:
Catalyst 1 – The US Dollar broke out to the upside following a narrow trading that terminated on 9/16. The dollar-going-up theme (which is bearish for gold) was the dominant theme going into the day from European trading.
Catalyst 2 – Initial weakness in equities continued to accelerate during the day and at some point became supportive for gold. Traders began to question if being short gold was really a good idea ahead of a weekend with a possibility of an equity crash. My read is that stocks are not really in a bearish downtrend but today’s action did breakdown from a recent trading range. For now this is bullish for gold.
US Government Bond research. I am offering a similar process to the gold comments for bonds. See the “Bond” tab for more info. Recently (9/19), the bond signal moved from short to exit short (neutral) and this has been a productive move. This is a white horse of sorts for bullish gold traders as it marks an end to the trend of rising rates.
GH Garrett – Veteran Commodity Watcher for Conquer the Mummy.com
Technical Read: When a market (gold) trend becomes sustained in a certain direction, eventually the market trend gains a certain fragileness (i.e. becomes unsustainable). Then a catalyst event changes things and the traders (whom may have become complacent) find themselves caught by a reversal. I believe the trend has now changed and the downtrend is now over. The good news is that the day after the signal, the market moved lower, thus providing a reasonable time for Mummy followers to exit their bearish positions.
Backdrop:
The bullish catalyst leading to Tuesday’s pop in the yellow metal, were the US airstrikes directed at ISIS/ISIL related targets in Syria. The widening of the conflict joins a loose confederation of regional anti-ISIS ground fighters with the heavy handed power of US airstrikes against the Islamic extremist forces. There is an added factor of some type or retaliation against the US (terrorism). Only time will tell how effective that will be. For now this is bullish for gold.
China’s (Flash) Manufacturing Purchasing Manager’s index (PMI) proved a little more robust (50.5 versus 50.0) than expected. This is a positive for the world’s financial markets but there was considerable nervousness about a contractionary reading before the report came out. Concerns about deflation are negative for gold.
US Government Bond research. I am offering a similar process to the gold comments for bonds. See the “Bond” tab for more info. Recently (9/19), the bond signal went neutral. This is supportive for gold.
GH Garrett – Veteran Commodity Watcher for Conquer the Mummy.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: 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.
