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: Short Position, (signal= Oct 1)
Technical Read: The past 2 days the GLD posted a tidy loss, equal to approximately a 33% retracement in the rally from the early October (closing) low. The yellow metal has twice now retreated from the rarified air above 120. To work off its overbought status, I would expect an attempt to challenge the lows established earlier in the month.
Backdrop:
Catalyst 1 – The US dollar closed at 85.93, comfortably above the recent support area (84.80). The superior growth potential in the US (versus Europe) is helping. The recent uptick in interest rates hasn’t hurt either. This is a negative for gold.
Catalyst 2 – Stock market bears expecting a resumption of the slide were disappointed as the S&P moved to two week highs. An after-market weak earnings report from cyber retailer, Amazon, may prove a challenge in the morning. By the way, my own research is positive for big caps. 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: Short Position, (signal= Oct 1)
Technical Read: This has been a tough rally for the Mummy website. The initial short position went our way but the 3 week rally has been painful with only two down days. The lift seems to feature a lack of selling. GLD is picking up some resistance just north of the 120 level. A real reversal should dip below 119 this week. Near-term, gold is over bought.
Backdrop:
Catalyst 1 – The US dollar initially traded lower but reversed to positive by the end of the day. Watch for follow-through buying on Wednesday. A close above 85.50 will be negative for the yellow metal.
Catalyst 2 – The end-of-week rally in stocks garnered a fair amount of skepticism over the weekend from technically oriented pundits. The Monday/Tuesday follow-through buying has been quite powerful. My indicators do not signal a downtrend is in effect. If equities hold here, some of the fear theme should be sucked out of market watchers. 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: Short Position, (signal= Oct 1)
Technical Read: GLD moved decisively higher mid-day before settling near the lows of the day (with similar action in bonds and the S&P). This rally in the yellow metal has been painful for the Mummy. My indicators are very divided at this point, with the edge going to a resumption of a bearish move. This scenario would indicate we are at the top end of a trading range with little energy left. The current concerns in the market place have limited sellers thus inducing lift for the past week or so. I hope this will soon resolve itself. By the way, the quote is from Churchill.
Backdrop:
Catalyst 1 – The deflation alert is on. Petroleum watchers are now expecting OPEC to maneuver in favor of market share not price increases. This translates into no-price-hikes for Texas Tea and the crude market is reflecting that. A global economic contraction is negative for asset prices. That has negative implications for gold.
Catalyst 2 – The US dollar index traded lower before trimming losses by the end of the New York session. The close at 85.09 is below the approximate 85.50 support level. This is bullish for gold.
Catalyst 3 – The S&P 500 had an eye-popping day featuring a hefty bolt-the doors selloff midday, with losses being trimmed significantly by the close of the day. If the S&P can hold here, it would be negative 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: Short Position, (signal= Oct 1)
Technical Read: GLD managed to retake (plus a little) our sell signal levels, but still closed in the trading range (3 week or so) just below the 118 level. The four-day rally had a short-covering feel to it as if gold traders more interested in trimming their short positions instead of really going long. Momentum indications have pulled off their lows as well. We still have the short signal one but I am looking for this week’s trading to tip the hand of the gold market.
Backdrop:
Catalyst 1 – The Fed minutes reeked of the phrase “data-dependent”, which basically means the central bank is laying the intellectual groundwork for delaying tightening. This along with reductions in Fed growth forecasts is signaling market watchers to be on the alert for deflation. As a side note, the IMF cut its global growth forecasts as well. Deflation is a negative for gold in general but in the knee-jerk aftermath of a crisis, the yellow metal could jump. Watch for signs of a refuge play.
Catalyst 2 – The US dollar index went below the near-term 85.50 support level before closing the week back above it. In a crisis, the dollar is also likely to pick up a bid and this is negative for gold.
Catalyst 3 – The S&P 500 had sustained some wild daily gyrations recently but Friday’s close has put the widely-followed index at the approximate lows of August. If stocks catch a bid it would be mildly bearish for gold. The Mummy is still neutral on the S&P.
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: Short Position, (signal= Oct 1)
Technical Read: Gold climbed recovered about 2/3s of Friday’s loss (based on GLD trading) on Monday, reacting to a drop in the dollar (see catalyst 1) and possibly a story circulating that part of the previous week’s damage came due to a large errant trade. There was limited follow-through buying the next day. Tuesday’s close was roughly in line with the previous channel (lower) resistance, a dubious position for further advances this week. My readings are still negative and I would not be surprised if we have seen the highs of the week.
Backdrop:
Catalyst 1 – The US dollar index had a bad day on Monday and limited follow-through selling the next day (roughly mirror imaging gold). The the dollar is now resting on near-term chart support (85.50). If dollar picks up a bid going into the weekend, this will be bearish for gold.
Catalyst 2 – The S&P 500 sustained considerable selling today. Stocks are nervous about global slowing that appears to be centered in Europe. A sustained whiff of deflation could really shake the ground. However, I am not sure stocks have much more to fall in the near-term. The S&P bears face significant support just 25 points lower. The Mummy is not signaling much more to the downside either. Severe equity selling would be supportive for gold, but if it has a deflationary theme, both could end up going down together.
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: 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.
