Some “long time ago” I said I was out of gold. Maybe a year? For a while I was in Palladium, but exited that a while back. Even longer ago I’d said Silver was in a bubble and going to pop (and some folks tossed rocks at me about it). Today Gold is down over $100 at the moment. This chart shows why I am prone to “dump the bubble” on a whiff of Bubblicious and not hang out waiting to read the news after the fact (especially in volatile commodities, but even AAPL Apple Computer that was a darling of the momentum trade has “rolled over” on the change of leadership.)
In other News Flow, we have Charles Schwab saying trading is down (so the “Home Gamer” isn’t playing much) and various retail reports have been off. The Average Joe & Jane are not spending. IMHO for the simple reason that they don’t have the money to spend or to trade. Too much mandated crap and too much taxes. Mandate that folks blow a couple of $Thousand / year on Obamacare and guess what, they don’t have it to spend on other things. Make gas $4.50 / gallon, there’s a few $Thousand / year more that is not going to be spent on other things. Send their jobs to China, eventually they can’t buy cheap Chinese crap even at Wally World.
In gold, there were changes in China buying, and India did another one of their typical stupidities with attempting to control / tax gold purchases by raising taxes on gold and platinum imports. Sigh. I do so wish that politicians would learn that they can not control or “manage” a market, only screw it up. A market is an organic “self organizing system” and attempting to put “external organizing” onto it breaks the inner dynamic. The only question is how much.
Add to that the forced selling from GLD when holders of the shares “click-click” dump… and some hedge funds and other Whales being overweight gold needing to “unwind” and then light the match: Rumors of Cyprus selling their gold reserves. True? False? Doesn’t matter. Match is lit.
Here’s the chart:
Tarnished Gold vs Silver, Copper, Platinum, Palladium, Apple
This is a static capture. A live version will be at the end of the posting for watching over time.
So what can we see in this chart? A whole lot of bad news and pain.
First off, notice that things which seem unrelated will often “inflect” together. The peak in GLD and APPLE (and the local peak in SLV – the ‘bubble and bust’ was off this chart to the left) happen about the same time in Sept. So when a “major play” gives an inflection signal, it is time to watch all the OTHER momentum plays to see if they are setting up for an inflection also.
Now look at RSI then. Touched 80. Time to go. Simple? Yes. It’s the “first ring of the bell”, and you can get a ‘retest’ after that. But not always. Sometimes it just rolls over and drops. As AAPL did at the same time. NEVER think you own the Golden Goose. “There’s always a story. -E.M.Smith” and Never NEVER EVER believe the story. Trade it, sure. But the stronger the story and the more “Bubbly” the enthusiasm; the faster you need to get out when it turns on you and bites your ass.
Unfortunately, I’ve learned that no amount of polite explaining to folks will convince them of that fact, nor convince them that their “story” might be flawed. Folks love their stories, embrace their belief structures, and simply can not “let go” of thinking (or “thinking they think especially well”…) and follow “trade rules” and simply do what a chart says. So much of the time I try to get folks to just understand how to read a chart and use it to ‘raise their own worry level’. To just be an awareness tool. Well this chart is a good example of why.
By late Sept early Oct you have MACD “red on top” in a nose dive toward zero crossover, then DMI goes “red on top” as the last call to exit mid Oct. We get a confirmed bear market indicate when MACD crosses below zero, DMI is clearly red on top, and RSI is below the midline. Prices do a crossover of the SMA stack, tries to cross back through the SMA lines and fails. That’s the confirmed “Just be the hell out” moment (and a good time to start doing shorts – shorting AT the SMA stack and selling out on dips away from them until the bottom call comes).
PPLT Platinum held up (with heartburn moments) until February, then PALL Palladium hung in until March, when at the March / April line we had a ‘failure to advance’ and bad news on general consumption patterns. Now it’s dropping hard too. The implications of “folks not spending” are “not good”.
Now look at AAPL. Same kind of pattern, but harder move. Unusual for a stock to be more volatile than a commodity, but that’s Apple. (And a part of why I tend not to trade it… “trendy” things can become “untrendy” in a heartbeat – you simply must watch daily…) Copper (which is the gold line on this chart and hard to see) has been mostly wobbling sideways saying the general economic trends are just laying there (near a longer term bottom patter – see below). Copper is saying the global economy is “not good”.
At the far right, AAPL is showing signs of bottoming. That “Toe” forming. Failure to advance to the downside March to April.
So what to do at this point?
Well, it’s likely that there will be a ‘day trade’ to the upside in selected metals and commodities. It’s very helpful to be in London as they trade well before everyone in the USA… Personally, I find the speed vs location disconnect makes day trade on metals hard. At some point GLD and the SMA stack will converge, so given how far gold is from the SMA stack, that ought to resolve upward. BUT, it might happen upward after a few more days down $100 / day as shorts pick up…
For me, I’m more of a “step aside and watch the blood flow” type. Wait for the “Crash, bang!, tinkle…” of a bottom indication where the dramatic drop, does a Dead Cat Bounce, then the DCB is followed by an SMA merge and wobble then the “dead money” for a few weeks after the DCB.
So that’s why I use charts. To avoid falling in love with “The Story”. To avoid getting enthusiastic about buying that dropping knife too soon. To bring discipline to the process. To look at what IS HAPPENING, not at what I THINK MIGHT BE happening.
Ok, here’s a live chart, though I’m moving the time scale out to 3 years so you can see silver in the context of the “Spike” a while back. Notice the similarity of the Silver Bubble with the Apple Bubble? See how they both ‘stand out’ compared to more staid things like base metals? (Even though commodities like copper are volatile, they tend to be limited in range in a bubble environment. Folks just won’t pay $400 for a copper water pipe, they swap to iron or plastic.) So that’s why I have “comparison charts” with several tickers on them. To make it clear what is being Bubbly and what isn’t. The fundamental properties of mining and the economics of it are not all that different between gold, silver, copper, platinum, etc. So when one of them is getting ‘way out of whack’, it usually means folks are being over enthusiastic and “There’s a Story”…
3 Year chart of Gold vs other metals and Apple
Looking at the start of this chart (now) you can see the “touch 80 – midline” RSI oscillator of a rising market (though gold being a bit volatile tends to a small ‘overshoot’ of the mid-line touch). DMI context being mostly “blue on top” saying to BTFD. (Um, “Buy The ‘Friendly’ Dip”) and MACD being mostly above zero saying that too. (Buy the inflections to blue on top, bias to be in). Now with MACD clearly below zero and DMI clearly red on top, it’s a bear market and to be shorted, not bought. (Until it gives a clear bottom indicate). In the middle, near Dec 2011, you get the “Flat in transition” kinds of indications. MACD wobble about equally each side of zero. RSI making “lower lows” but mostly wobble about the midline. DMI being more mixed (but in the context of ‘leaving blue on top’ shift bias to ‘neutral or be out’). Prices and the SMA lines in a “topping weave”, looking disordered. That’s when you shift from “trend trade” (with positive bias) to “swing trade” on a fast chart trading each ripple with neutral bias.
We had a ‘last hurrah’ about June, July, August. Then a “failure to advance” to the upside above prior highs. Now we are in a clear bear market. RSI in a ‘wobble’ from 20 to mid-line (50) and back. Short at the 50 point / SMA stack touch of price; cover on the 20 line touch (far from SMA stack). Similarly, MACD crossovers can be used to time the trade. (Or just move to a faster chart like a 10 day hourly).
So that’s how I use this kind of chart with these kinds of tickers. What is my BIAS? Bull? Topping Weave? Bear? Bottom Weave (with DCB)? Given that, do I Trend Trade? (Bull or bear?) Do I swing trade? Do I short with fast covering? Do I just step aside and wait for a clear trade entry indication?
For me, I’ve been out of metals for a while, and I’m staying out. Demand is off and “Politicians and Government Idiots” are attempting to “manage” things. Never a good situation.
Musings from the Chiefio 
Heh, my simpleton model already chased me into Gold so I’m sitting through it.
Look at Oct 2008 (Lehmann) to see what I’m expecting; compare Gold and S&P 500.
I think this is a shrot term move of a couple months and will spike up later. I have put options on Gold and am doing real well, I plan to cash out quite soon.
By the way, they now offer mini options on some of the high fliers like apple and Google, instead of 100 shares per contract you trade 10 shares. I haven’t used them yet, but they look attractive as a bet type of unit. They trade with a 7 in the name aapl7 for example.
@BobN:
Nice move with the puts. I’d figure this for a couple of months, too. Rather like the Silver Bubble from 2+ years back. Likely followed by some “ringing” up and down, then I think the “luster” will be off of gold for a while.
There’s a pretty good chance there is a government or two involved. Sell a $Billion or two in a week, has an impact… So I’ll be interested in what “government announcements” say in the next few weeks. I’d also not be surprised to find Soros shorting gold. He was selling a while back, and as a hedgey kind of guy, if you are not long, you are thinking short…
Time will tell. I’m still just in “Duck and Cover Mode” (and have been for almost a year now – more from sloth than anything else…)
@DirkH:
“Expecting” at a market is not a good method… Might want to re-read the posting, especially the parts with “expecting” in them…
Texas is trying to set up their own Gold holding facility, it will be interesting to see if New York will fork over the Gold. I’m halfway betting their Gold is gone.
Interesting that Illinois has mandated registering your Gold, not a good sign.
How much of the ‘gold’ being sold is real and how much is ‘paper’ gold? Given the current state of affairs I could see many people dumping paper gold for actual vaulted metal. It is easy for people to suddenly ‘use’ your paper to pay off a bank failure. A little more difficult if you have a stash of real metal ‘under the bed’.
“@DirkH:
“Expecting” at a market is not a good method… Might want to re-read the posting, especially the parts with “expecting” in them…”
The biggest three Gold busts of the last 10 years were followed by a stock bust. If the Gold served as collateral for highly leveraged stock purchases, this is logical.
A correlation and a potential mechanism means a candidate for a causation.
@DirkH:
That’s an argument for NOT holding gold. You said you ARE holding gold.
Now it makes even less sense…
If you are saying to do a short gold, THEN short stock strategy; then it might make sense… but you are saying “Be long gold since AFTER it then crashes, stocks will crash too.” Sorry, I’m just not getting it.
Despite inflation risks, the place to be has been cash. Not gold. That stocks might crash too, later doesn’t change that… nor does it prevent the charts from telling you WHEN to do that…
@Ian W:
Most of the gold is real physical gold, but the manner of holding ownership tends to be paper. The GLD is one of the largest gold owners in the world. In some large warehouse / vault somewhere a lift truck picks up a pallet of gold and moves it from the “GLD owns it” side to the “Custodian owns it” side on sales. What the custodian does with it then is up to them. (delivery or paper or).
The amount of gold in coins and bars in private boxes is very small.
@BobN:
Illinois is mandating registering gold AND guns? Very much plus ungood…
Texas gold will be delivered. After all, NYC has gun restrictions and Texas has lots of guns ;-)
@Ian W:
Most of the gold is real physical gold, but the manner of holding ownership tends to be paper. The GLD is one of the largest gold owners in the world. In some large warehouse / vault somewhere a lift truck picks up a pallet of gold and moves it from the “GLD owns it” side to the “Custodian owns it” side on sales. What the custodian does with it then is up to them. (delivery or paper or).
The amount of gold in coins and bars in private boxes is very small.
Not a lot of difference between GLD and a fiat currency then. The forklift could pick up your pallet and move it to ‘Fed’s Own It’ and your paper saying you do is no longer relevant. Of course if you trust the federal government not to do that….
@Ian W:
My rule of thumb is that it is “my physical gold” if, within 3 hours, I can melt it down and cast it into bullets. (Werewolves, you know… ;-)
“But he demanded that I ‘let him have the gold RIGHT NOW!‘, so I let him have it…”
1/2 ;-)
@ IAN – More paper is traded in gold than resides in banks. They assume most people exit the option position without calling for the actual Gold. I’m betting in a true crash and everyone wants to cash in, there will not be enough deliverable Gold – Oops!
If Texas wants possession of its Gold and wants it back from NY, that gives me real pause. If Texas doesn’t trust the banks or thinks it needs the gold close by, it sends a real loud message to me.
I think everyone should be very concerned, this is unusual movement and things may be going on that we aren’t aware. Call me nervous. If anything it may soon be the time to buy, but get possession.
@BobN:
Many of the paper trades are offsetting, so the amount “on paper” mostly just reflects how many times it much change hands to ‘clear’. So for all the “long” contracts that exist there tend to be offsetting ‘short’ contracts. (If there were not, prices would move dramatically until it did).
Also, per Texas and Gold:
I’d not read too much into it. I’m a “Texan by marriage” and they can be, um, “uppity” just for the heck of it some times. Also a lot of “buddy of my buddy” goes on. So it’s as likely to be that the Governor has a brother-in-law who has a sister married to a guy who runs a bank with a lot of “rent a vault space” that’s empty and dreamed up a way to get “custodian fees”…
Or just that the New York congress critter pissed off the Texas congress critter (say, by advocating gun restrictions on Texans, or even wanting to make drinks puny things less than a quart…) and this is just the Texas way of saying “Maybe y’all ought not ‘a done that…”
Personally, I’d guess they want to make Texas a “Money Center Banking” hub and are doing it to get some name recognition in that area…
Or they just thought it might piss off a bunch of folks from New York City… that right there would be enough ;-0
Typically contracts are offsetting, but not always. Oil used to always be long about 200,000 future contracts to the upside, that is a huge gap. About a year and a half ago the bias went the other way with all the big hedge funds betting oil drops by about the same 200,000 contracts. Who is buying and selling tell a big story as how to bet.
The Gold story doesn’t add up to me, many countries are accumulating Gold as fast as they can and a call that Cypress is dumping, shouldn’t make a dent in the market. The banking has huge rumblings all over Europe, people should be taking their cash and buying Gold. I think the big boys are orchestrating this to get the price down so they can git more Gold.
I lived in Texas and loved their view of life. I bet Texas truly does not trust NY and the more noise they make, the more corporations will move there. Actually, I think Texas is wise getting the Gold, I’m not sure the banks have it and when things crash (and it will) Texas will be better of than most states. Yes, pissing off NY is worthy of the effort!
I can see $1200 gold now, might nibble a bit if it drops below $1300 tomorrow. Long the Euro doesn’t look good.
It isn’t gold, it’s the Dollar. Oil fell $2 a barrel today, too. Right now people are bailing out of the Yen and the Euro and fleeing to the US Dollar. This is causing anything valued in USD to fall in price. As a secondary issue, it was speculated that Cyprus will have to dump a bunch of gold on the market to keep from default. And at the same time, China announced a triple hit on their economic numbers with GDP, consumer spending, and factory output all taking well below expectations. Meantime, the US manufacturing indices out of the NY Fed were horrible, too, and missed their expected levels … by a LONG shot. That would look deflationary which results in gold and other commodities falling even more.
Starting to look like you might be better off just going to the bank, taking out your money in $100 bills, and putting them in the safe deposit box rather than keeping them on deposit. Won’t have to worry about negative rates of interest that way and safer than under the mattress.
Spot gold was down another $7 from the NY close last time I looked at the Asian exchanges.
BOHICA
And another Hindenburg Omen…
http://www.zerohedge.com/news/2013-04-15/we-have-hindenburg-omen-sighting
George B says:
…..Meantime, the US manufacturing indices out of the NY Fed were horrible, too, and missed their expected levels … by a LONG shot. That would look deflationary which results in gold and other commodities falling even more…..
>>>>>>>>>>>>>>>>>>>>>>>>>>>
You can thank the alleged election of Obama for that. Business owners have been warning that there would be repercussions and it is not just with the smaller businesses.
82% of Small Business Executives Think The U.S. Economy Is On The Wrong Track
How Big Gov’t Strangles The Job Creators… our own database of public companies… shows that over the last 25 years, big businesses created no net new jobs. That leaves small business as virtually the only job creator.
Obamacare opponents warned that forcing companies employing 50 or more full-time workers to buy healthcare would prompt employers to slash jobs and worker hours. And that’s exactly what’s happening, says one of President Barack Obama’s favorite economists, Mark Zandi of Moody’s Analytics.
Twitchy: Applebee’s targeted after franchisee mulls hiring freeze in response to Obamacare
And these from Huff & Puff (The Huffington Post)
Home Depot Co-Founder Says Obamacare Will ‘Kill Off Small Business’ Rather than serve as a cure-all for a broken health care system, Obamacare will be a harbinger of death, says Home Depot co-founder Bernie Marcus. The death of main street, that is….
Applebee’s Franchisee Says He Won’t Hire Because Of Obamacare
A bit of creative thinking here
Denny’s Franchisee To Add Obamacare Surcharge To Customer Checks
Small Business Owner’s Obamacare Fix: Turn Employees Into Corporations….
Bakery Owners: Obamacare Will Cut Our Profits In Half
…. More paper is traded in gold than resides in banks…..
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Isn’t that how the Fractional Reserve Banking fraud started in the first place? /sarc
E.M.Smith says:
15 April 2013 at 10:18 pm
“@DirkH:
That’s an argument for NOT holding gold. You said you ARE holding gold.
Now it makes even less sense… ”
Oh, I only found out just recently – namely when zerohedge had a nice chart showing it. It’s interesting nonetheless. As the Gold crash just happened I might as well just keep it and wait.
George B says:
16 April 2013 at 3:10 am
Safe deposits in banks have, and probably will be again,..confiscated.
California Seizing Safe Deposit Boxes to Balance Budget
So it looks like even if you pay the bill yearly on your safe deposit box the state can STILL declare it ‘UNCLAIMED’ and take the contents!
Following on that here is another interesting tidbit.
Anyone who is a small business person should forget taking checks and forget keeping any money in a bank beyond what is needed to pay the bills.
Interesting very short article:
http://www.zerohedge.com/news/2013-04-18/what-exactly-did-obama-say-wall-streets-ceos-last-thursday
“…Correlation is not causation; but coincidence means you’re on the right path. Looking at the charts of Stocks, Commodities, and Precious Metals, we wonder just what it was that President Obama said at his 11am ET White House meeting last Thursday…”
Comments are interesting too.
@Quail:
Looks a bit paranoid-conspiracy to me, but yes, interesting.
Markets often move together, and not under political control. People are ‘herd animals’ and something will ‘spook the herd’ and they all run off the cliff together. Just what people do.
Large smart money players know this and exploit it. (Goldman Sachs regularly tells their clients which way the expect the herd to run next, then issue ‘recommendations’ publicly that tell the herd which way to start running… IMHO. At least, that’s what the pattern of news flow suggest.)
So we had a change of margin requirements in metals. Folks in a down market being required to cough up more cash. If you don’t, you get sold out by the margin desk. ANY asset in your margin account can be sold. It looks to me like the timing is roughly about the time that unmet margin calls get sold out ( but that ought to be verified by checking time zones, etc.)
So is that a grand conspiracy? Or just an overly promoted market part way into a collapse getting a relatively normal change of margin requirements?
So I’d hang my hat more on ‘incidental coordination via margin and selling pressure’ with a possible news or rumor driven trigger. (The exchanges regularly have folks try to float rumors to make a short term move they can exploit).
Followed a link in the comments to a site promoting the idea of a False Flag in Boston. (Infowars, I think). Just silly. In one picture they show a pressure cooker with the notation that the handle was likely removed; but the kind they show has a handle that is integral to keeping the pot closed! Remove the handle, the lid falls in. Pictures of people who look away from the race being held up as proof. I’m often hauled off to events where I get terribly bored and start ‘crowd watching’. I’m highly observant, and after 3 or 4 hours of watching random folks run past, I’d be checking out the crowd, looking at building facades and admiring architecture, trying to spot the Undercovers in the crowd, looking for the nearest Starbucks. In short, I’d look EXACTLY like the guys they ‘finger’ for not watching the race. I’d also have a large bulging backpack since it would have a load of photo gear and ‘preparedness’ kit in it, along with lunch… Which brings up another point:
Undercover cops work events. Regularly. It is normal and customary. So you spot some folks who fit the profile of a cop (fit, male, 20 something to 40 something, alert, …) that does not mean there is any kind of conspiracy or False Flag or anything other than that there is a very large crowd event, and there will be both Uniforms and Undercovers assigned. Heck, you could even have some DEA guys working the crowd trying to “bum a joint” or hustle a sell. Were I security manager for the event, I’d try to have one Undercover for every 1/2 block or so. Likely with some “kit” on him (gun, gas mask, medical first aid kit) in a pack. Just so that “if something happens”, they can quickly deal with it while being “eyes on” and maybe able to stop it in progress if some loon hauls out a weapon. I’d also put a person on top of any building that was a sniper opportunity just to make sure nobody else gets up there (budget permitting). That folks are asserting seeing folks fitting that profile of action is evidence of anything other than normal high profile event security is just paranoia. I’ve mentioned before that I was “inside a meeting of cops and Undercovers” at an event before. ( I ‘fit the profile’ enough that they accepted me as ‘one of them’ even though I wasn’t – folks don’t normally expect Undercovers to flash a badge in an open area and give themselves away…) It was interesting to see just who all was an Undercover. Some I’d not expected. Some I did. There were at least 3 agencies involved, and this was a minor event of a few hundred college kids ‘protesting the war’. I’d make it about 1 Undercover per 50 to 100 participants. (NOT including anyone in deep cover like a DEA guy hustling dealers… nor the guy who was not in the meeting, but was filming the crowd, that I “made” and when challenged gave a lame excuse that he was a freelance news photographer – he wasn’t, he was a Fed, likely FBI. Wrong camera and not filming for news, filming to photoarchive all the people present. Long steady pans of crowd from different sides, no focus on any interesting parts of the event, etc. After the ‘challenge’ he stepped a few dozen yards away and made a call to someone – pre cell phone era- and likely was told we’d been in the undercover meeting… then went back to filming…)
So are Agencies involved in attempting to “manage” events? Certainly. (That one was). But it isn’t causal, so much as ‘directing away from violence’ and ‘looking for bad guys’. Been going on for at least 40 years that I know of. Cops just don’t like the notion of breaking the law and causing injury “for effect”. They are much more inclined toward stopping injury and preventing law breaking. It would be very hard to go against that fundamental instinct.
So please, be VERY skeptical of any kind of conspiracy ideation. It’s all pretty much wrong.
They caught the bomber of the Boston Marathon. The police officer killed is a guy from my husband’s hometown and a friend of his brother.
http://usnews.nbcnews.com/_news/2013/04/18/17817173-campus-police-officer-killed-in-active-shooting-at-mit?lite
@Gail:
They got the “black hat” guy, but his little brother is still on the loose. A large part of the area near Boston is in lock down. I expect a couple of more deaths before it is all over.
Quail says:
19 April 2013 at 4:56 am
Interesting very short article:
http://www.zerohedge.com/news/2013-04-18/what-exactly-did-obama-say-wall-streets-ceos-last-thursday
>>>>>>>>>>>>>>>>>>>
That lead to this article: Jeff Sachs: The Pathological Environment on Wall Street (and in Washington, London, and Berlin)
And this Life in the Ant Farm (or is that the slave plantation?)