Gold Market Recap
The title seems a contradiction. Hopefully what follows will clear that up.
UPDATED 10:09 AM- the whippy activity is telling us that the market is digesting the unemployment information while it is factoring in a margin hike potential. ignore the noise. Where we closen what counts technically. The story below is more relevant than ever
- GOLD SELLS OFF ON ECON NUMBERS
- CME RAISES SILVER MARGINS - no more shorts left, now punish the longs. This is where we think discretionary power is inconsistent.
ICE raises Margins, CME does not yet.
ICE raised margins in Commodities and Currencies today. Gold margins were among those raised. The reaction was a selloff at the announcement yesterday, and more pressure downward today. But, there was no washout. We expected Comex division of CME to raise margins as well. Nothing happened as this goes to press. NOTE: CME did raise margins on June 24th. So they may wait until another spike before raising again.
If an exchange feels a market is attracting too much "hot money" and the open interest (OI) is comprised of too many overleveraged players, they will raise requirements for a time to protect their product and the investors in it. Bulls, libertarians, and others will point a finger and say "rally killers". We are not saying that markets are not "managed" from time to time by the Fed. They are. QE is a government buying its own bonds. How is that not manipulation? We are saying that we see no nefarious plot today. The effect of the Gold margin hike is decribed in more detail HERE. Be prepared for more ICE hikes and other exchanges to raise margins.
Gold Looks Toppy
Things are looking a little thin up here. What follows is an agnostic view on the market. Bull or bear it doesnt matter. This opinion is designed to help bulls make informed decisions on taking profits. It is also for Bears to quantify their feeling of when to sell. We are trying to help you prepare to exit, or not. Feel free to ignore the info. But it is based on classic technical and cash flow analysis. Me, Doug P, and Dinsdale P, are not directional traders. We arbitrage markets.
Technicals Say Don't Lose Focus
Open Interest and the Evening Star Candle Formation
In the yellow circles above you see that open interest is flatlining. That means the shorts have covered, and there are no net new longs. This is called "strong hands to weak hands behaviour". It implies that IF the market reverses, it will do so speedily. The market can go up, but OI has no opinion on how fast. We've seen markets rally after this indicator another month, so it alone is not a reason to short Gold. It would however make us peel back some speculative longs.
The Candle Formation seen is close to an Evening Star. Simply put, it is comprised of a strong trend followed by a gap day then a new high, then a small down day here. These do not predict direction either. Tomorrow is either a validation or a rejection of the formation. Evening stars say "If the market goes below today's low, momentum can pick up quickly." This is not a perfect evening star BTW.
So if people have slowed allocations to Gold as the Open Interest is telling you, and the Evening Star Candles are saying if we go lower, it could be very fast, you now have 2 warning signs.
Divergence with the Dollar
Look at the pink oval. This is the initial reaction to Brexit. The USD and Gold were both bought as a safe haven. Gold and the Dollar move together in non US related panics like ME wars, adn EU crises. After the oval, the 2 safe havens reverted to their traditional relationship. Gold rallied as the USD went down. But now the USD is breaking out of what can be seen as a Bull flag (black line on top, pink line on bottom). And when people stop being worried (why in G-d's name they aren't freaking out more we do not know), Gold and the USD start to move in opposite directions. Here we see the USD clearly saying " I would not be short the USD right now until it goes back in that black lined channel at least"
So there are several reasons short term to be careful if you have a long position and are trading short term.
- More Margin hikes (on next spike higher likely)
- OI and Candlesticks
- Dollar divergence
If you are bearish, there is your alert to get ready to go with the flow lower. If you are a bull. We would wait at least for the Evening Star to be negated.
Now let's show you in one terrifying chart why that does not matter if you are an investor
The National Debt aka the USA Department of "we dont care about you"
The USA's and every other countries' debt ain't going away tomorrow
This is a frightening chart. It petrifies us. Forget Gold. We have children. We see no leadership in this country adult enough to make us take the medicine we need. Politiicians will kick the can down the road to get reelected. The Fed and Central Banking is a religion now. "The Central Bankers will save us." That is not hyperbole. FBI director Comey is a shill for the Clintons.
So if gold drops $10, $100, $300 , it shouldn't matter to an investor. Lower Gold will be an opiate to the easy money morons that are running this country (and the world) to ruin. And if Gold drops $300 it wont be because this debt magically disappeared. When the chickens do come home to roost, it willrally twice as much as it drops. So We look at that chart and say, I hope I never need my Gold to go to the store to buy something. I'll probably need a gun if that is the case to leave my home.
Bulls take heart. The debt cannot be cured overnight. Frankly, Gold at $3,000 might make the "Elite" pay attention to what they are doing to our countries. that is why we want Gold to rally. To wake these people up.
- Soren K.
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