Here is a short-term trading idea (66 second .mp4 video) for Monday, long ARRS … enjoy!
Monday, March 21, 2011
Gold production is decreasing due to few great Gold mine discoveryes. Witwatersrand played a big rule in gold offer since 1970 and people investing in Gold should observe the whole around this metal. I have seen predictions of Gold falling back to USD 300/oz (speculation) and I have also seen predictions for Gold reaching USD 9000/oz considering industrial consumption and mining supply. Gold Mining production is around 2500 ton/year and demand around 3800 ton/ year. Take your own conclusions.
The United States holds the largest gold reserve in the world. With 8,133.5 tonnes, (241, 207, 076 oz) the US gold holdings are worth approximately $337.67 billion. This massive gold reserve would have to increase 40 times just to cover the debt !! That’s $56,000 a once. But the us already defaulted on its gold reserves back in 1971. So whatever the us has or doesnt have in gold isnt being sold. Roosevelt already defaulted on gold back in 1933. Nixon defaulted on foreign creditors in 1971. Assuming the us still has gold, how much dollars must the us print in order to turn 300 billion dollars worth of gold into 14 trillion? For the full 2 hours dvd watch here: www.youtube.com/watch?v=rFBI1bzWzJ4
How far will the current pullback in the “Risk-On” markets last? Has the pullback already ended and are we going to start marching on to new recovery highs?
Let’s take a look at the current weekly chart picture in the S&P 500, Gold, and Oil to see weekly lower support reference levels should these retracements be deeper than what we saw last week.
First, the S&P 500:
The purpose of this post is just to give a quick take on lower reference levels should they come into play. If this pullback is all we get, then they simply won’t be tested.
This post answers the question:
“Should the risk markets pull-back lower, where might they find potential support?”
That being said, there are three main weekly levels to watch in the S&P 500:
The 1,267 level is the 20w EMA which is just under the key 1,270 pivot. So far, this level has held in what may be the end of the retracement… but if not, we’ll look to:
The 1,228 Level which is the famous 61.8% large-scale Fibonacci level that also happens to be swing highs from April 2010 (pre-crash) and November 2010.
Finally, the 1,200 level is both a simple “Round Number” and the 50w EMA.
We start talking ‘reversal’ instead of ‘retracement’ under 1,180.
Now, let’s apply that logic to Gold:
Gold may be a little easier to reference, in terms of simple support.
First, there’s the ‘obvious’ $1,400 level we’re all watching, and under that it’s the 20 week EMA at $1,370. So far, these support zones have held gold in this week’s pullback.
If under the $1,370 level, we’d be looking for the $1,320 prior low if not a full test of $1,300.
However, discussing these lower levels is only appropriate if we soon fall back under $1,400. If not, the uptrend continues.
Finally, let’s end with a quick take on the newly volatile Crude Oil market:
As I mentioned before and to weekly members, we looked to play an “IF/THEN” breakout above $92.50 to the $105.50 level which were simple plays between the 50% Fibonacci ($92.50) and 61.8% level ($105.50) from the entire bear market.
That “IF/THEN” payed off and occurred much quicker than anticipated.
So now, we use the $105.50 level as a key reference, and under that it’s simply $100 as an “all eyes are watching” level.
A break under $100 allows for a retest of the $92.50 key pivot, and under there – namely under $90 – allows for a move down to the $85 level.
Once again, as long as oil stays above $100, lower targets do not come into play – they only do so if we breakdown through one level and monitor price as it moves to the next.
These are probably over simplistic levels, but it does benefit investors and traders to know key reference levels and what to expect from one to the next.
Keep these in mind if we do start to trade lower in these markets, but be ready to turn just as quickly to upside projections and new recovery highs if the retracement this week is all we get.Corey Rosenbloom, CMT
S&P/TSX Venture 30 Index
Since the development of my Merv’s Penny Arcade Index I have often been asked if there is an ETF based upon this Index that speculators can buy and take advantage of its spectacular performance. Unfortunately there is no such ETF available. Well, this week there was an announcement in the media that just might satisfy these speculators.
The news in this week’s media (well, one of the news) was the introduction of the Global X S&P/TSX Venture 30 Canada ETF traded on the NYSE Acra (and hopefully soon on the TSX) with the symbol TSXV. This ETF is based upon the S&P/TSX Venture 30 Index, which is an Index composed of the 30 largest stocks (for want of a quick definition) traded on the TSX Venture Exchange (previously the Vancouver Exchange). As the media mentions, the component stocks seem to be split 54%/46% between materials and energy stocks. The materials, of course, include gold & silver stocks as appropriate.
Both the Index and the ETF seem to have started their trading history only this week so potential investors or speculators in the ETF have no historical data for technical or market analysis. I have taken the liberty of developing my own Index based upon the Venture 30 component stocks and back dated the development to the start of 2008 with a value of 100.00. This Index is a performance Index as it is based upon the average weekly price performance of each component stock without any weighting assigned. One must understand that because of the method of calculating the Index, the performance of the Merv’s Index may not match exactly the performance of the S&P/TSX Index or the Global X ETF, but it should be a good indication of how these 30 stocks performed over the past 3 years and possibly a suggestion as to the possible on-going performance of the ETF.
Of course there is NO GUARANTEE that the past performance will continue or even ever come back again. You enjoy and act at your own risk.
Shown here is a chart of the Merv’s Venture 30 Index and a technical information and ratings table for the Index component stocks. I will be keeping this info up to date for my own use and maybe, if there is an interest, post it here from time to time. Other than that I don’t know if I will be using it otherwise. Always open for suggestions. Since this Index includes energy and many other material stocks, other than a few gold and silver stocks, I am debating if I should include it in my Precious Metals Indices Table for readers weekly review of its performance.
Long term we are still not in danger of a reversal of the long term bull. Gold remains above its long term moving average line and the line slope remains in an upward direction. The long term momentum indicator remains in its positive zone although it has been reacting somewhat and is below its negative sloping trigger line. It is showing a weakening in the strength of recent gold upside moves but at this time that is only a warning to be remembered but not yet acted upon. The volume indicator continues to move ever higher into new all time highs and above its positive trigger line. So, the long term rating remains BULLISH.
Gold just touched the intermediate term moving average line this week and then bounced up, remaining above the line. The moving average line itself is still in a positive direction. The momentum indicator remains in its positive zone but acting pretty weak. It is just a very tiny bit below its negative sloping trigger line. The volume indicator remains positive and is above its positive intermediate term trigger line. On the intermediate term the rating remains BULLISH. This is confirmed by the short term moving average line remaining above the intermediate term line.
After a brief reaction and rally it looks like the short term is once more into a roller coaster motion. As of the Friday close gold has just moved slightly above its short term moving average line although the line slope is still to the down side. The short term momentum indicator crossed into its positive zone and above its trigger line although the trigger is still very slightly in a negative slope. The daily volume is giving us a different volume picture versus the intermediate or long term volume indicators. The daily volume action is quite low and the past three days of upside gold movement the daily volume remained below its average value over the past 15 days. Still, putting it all together we are at a rating of + NEUTRAL, one level below a full bull rating. A little more upside should get us back into the bullish camp. The very short term moving average line remains below the short term line suggesting that the action does not yet justify a bullish rating.
As for the immediate direction of least resistance, I’ll go with the up side as that is the direction of both the gold price and the Stochastic Oscillator.
Just a brief comment on silver this week. Although silver took a hit this past week, worse than gold, it is still performing quite well. The daily volume action seems to be somewhat better than that of gold and the momentum action is superior, although not exactly fully bullish. Unlike gold, silver short term momentum did not drop into its negative zone during the week and is bouncing upwards. Although silver did move below its short term moving average line it is once more slightly above the line on the Friday close. It looks like things are not all gloomy for silver, at least not at the Friday close. We’ll have to see ho things develop during the coming week to see if the positive mood continues.
PRECIOUS METAL STOCKS
The Penny Arcade Index has turned bearish for all three investment/speculative time periods in the Table below. The Table information is computer generated with programs that may differ from what I may normally view directly on a chart. The Penny Arcade this week illustrates one such difference. The Table uses a 30 week weighted moving average for the long term. I usually use a 40 week weighted moving average which is not quite as aggressive as the 30 WMAw. This week the Penny Arcade just crossed below its 30 WMAw line while it is still some distance above its 40 WMAw line. In addition, a different momentum indicator is used in the computer model versus the RSI that I use for my normal analysis. This different momentum is also sometimes slightly different from the RSI and this week is just a very small amount more aggressive ending in its negative zone where the long term RSI is still very slightly in the positive zone. Put these together we get a NEG (BEARISH) rating in the TABLE where I would still give the long term rating a POS or BULLISH rating from my normal weekly indicators. In any case the normal rating is very precarious and could change to the bear with very little extra negative movement by the Index.
Although the Penny Arcade Index may turn around tomorrow, right now it is telling us that gambling on the penny stocks at this time is very precarious and should be avoided for most gamblers. Wait for the Index to turn back to the up side. You should have plenty of potential profits after that.
Merv’s Precious Metals Indices Table
Well, that’s it for this week. Comments are always welcome and should be addressed to firstname.lastname@example.org.By Merv Burak, CMT
I want to take a step back and forget the shifting fundamentals and what possible effect they could have. It is time to take a look at charts, trying to tune out the news. In case of the Japanese Yen, the USD-JPY is the chart to watch, because that is the center of attention. Last week this pair dropped to 76.12, which is the new all time low, undercutting even the extreme from 1995. Other major Yen pairs did not make new lows, so they have to analyzed from a different angle.
On this monthly chart we can see a new low reached last week, clearly below the previous all time low of 79.75. However, the last candlestick shows as a hammer - a bullish reversal candle. Since it is forming after a prolonged down trend and at new low, it increases chances for a corrective bounce in the USD-JPY. Not necessarily an all out reversal, but at least some kind of bullish move. Unfortunately, this time frame can not be used for a trade because the candlestick is not complete yet. It still could change dramatically before the month is over. Regardless, this chart provides a hint of bullishness, something to remember when looking at the weekly chart.
Here the last candlestick also formed a hammer, an extreme one at that, which reflects the dramatic increase in volatility last week. This hammer also has bullish message, because it formed in a technically correct place - at a new low after a long trend. We could also point out MACD divergences and other possibly bullish signs, but my focus is on the price action alone. Based on this chart, I want to go long the USD-JPY at the open, probably around 80.60 or so, with an objective of 85.00 and a stop just under last week's low. This gives about 1:1 R/R ratio. Because a weekly chart is used, this trade could take a long time to complete, so it will be a relatively small size transaction. If this position gets stopped out, I will probably place another buy immediately, depending on ho w the charts look like. Other Yen pairs could appreciate more, but as mentioned before, this chart is technically "better", more classic.
During the last few weeks I have been mostly selling the Australian Dollar, but now it could be time to buy it selectively, short term. The European currencies in particular rallied strongly against the AUD so a correction of some magnitude might be in order here. One example is the GBP-AUD, which climbed to as high as 1.6490. I want to sell it 1.6200, targeting 150 pips, using hourly chart.
Another currency which might be due for a correction is the NZD. It sold off a lot recently so it could have a bullish run soon, if only for a little while. In case of the NZD-CAD I would like to buy it on a breakout above 0.7250, seeking at least 100 pips. On the other hand, should the price move lower first, a bullish reversal candlestick around 0.7100 would also provide a buy signal. Just like every Sunday, the opening can provide trading opportunities in form of gaps. The best candidates are probably Yen and Dollar pairs. Have a great trading week!
This chart was put together by David Rosenberg of Gluskin Sheff. It shows that wage growth in the U.S. is not keeping pace with inflation. For the statistical recovery to continue sustainably, we will need to either see this trend reversed. Alternatively we could see an increase in aggregate debt
As Mark Twain said, “History does not repeat itself, but it does rhyme.” We may be having déjà vu all over again with the 1970s inflationary period which was characterized by surging commodity prices and a weak USD. Gold’s most spectacular returns during the 1970s came in the later stage of its secular bull market, and one of the tipping points that pushed gold into overdrive was a bearish break of a multi-year trend line for the USD Index. We just had a trend line break in the USD that looks uncannily similar to the 1970s break and if history is any guide we could see a pretty explosive move in gold to the upside if the USD bearish break picks up steam.
To see what I am referring to, in the chart below I have overlaid the USD Index and gold’s movements from 1972-1980 and shifted them forward in time to align with the current USD Index starting from 2007. As you can see, when the USD Index broke its trend line support (red line in middle panel) gold then began a monster run and rallied 353% in just under a two year period for an annualized return of 123%.
Looking at the chart below, the similarities between the USD in the 1970s and the present case diverged as the USD remained stronger for a longer period with its trend line break coming four years after its low while the present is occurring just after three years. Is the USD’s decline being accelerated by Helicopter Ben Bernanke’s QE programs? Sure looks like it.
Shown below is a close up of the USD Index breaking its three year support. Some may be hesitant to call this a real break as it is only marginally below its trend line, though I believe this is the real deal as the USD is universally weak against a global basket of currencies. Shown in the second image below is the current USD Index (on top) along with my G10 USD Index (USD equally weighted among the other G9 countries) breaking below its 2008 lows. The third panel in blue shows the Real Trade Weighted USD breaking to ALL-TIME LOWS, and the Nominal Trade Weighted USD Index showing a material trend line break. While not shown, my Latin American USD Index and my Asian USD Index are also breaking to new lows. With such widespread weakness in the USD in other currencies, the break in the USD Index looks like the real thing, which may push gold to new all-time highs!
A weak USD isn’t the only catalyst to send gold prices higher, so too is the trend in real interest rates. Shown below is gold in black and 5-year (orange) and 10-year (red) real interest rates shown in the right axis and inverted for directional similarity. You can see that both 5-yr and 10-yr real interest rates are declining (rising in chart) and are supportive of higher gold prices.
In short, the USD may not bounce back as Fed Chairman Ben Bernanke’s QE programs are taking its toll on the greenback. That it is also universally weak against global currencies at the same time real US interest rates are falling, gives two very bullish catalysts for gold that may push it to a new all-time high.
The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500 and Bombay SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.
A Longer Look Back
Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Bombay, Hang Seng) is readily apparent. However the pattern has been less apparent over the past few months.
|Date||Time (ET)||Statistic||For||Actual||Briefing Forecast||Market Expects||Prior||Revised From|
|Mar 21||10:00 AM||Existing Home Sales||Feb||-||4.80M||5.05M||5.36M||-|
|Mar 22||10:00 AM||FHFA Housing Price Index||Jan||-||NA||NA||-0.3%||-|
|Mar 23||7:00 AM||MBA Mortgage Index||03/18||-||NA||NA||-0.7%||-|
|Mar 23||10:00 AM||New Home Sales||Feb||-||275K||288K||284K||-|
|Mar 23||10:30 AM||Crude Inventories||03/19||-||NA||NA||1.745M||-|
|Mar 24||8:30 AM||Initial Claims||03/19||-||370K||384K||385K||-|
|Mar 24||8:30 AM||Continuing Claims||03/19||-||3700K||3700K||3706K||-|
|Mar 24||8:30 AM||Durable Orders||Feb||-||0.2%||0.9%||3.2%||2.7%|
|Mar 24||8:30 AM||Durable Orders ex Transportation||Feb||-||0.5%||1.8%||-3.0%||-3.6%|
|Mar 25||8:30 AM||GDP - Third Estimate||Q4||-||2.9%||2.9%||2.8%||-|
|Mar 25||8:30 AM||GDP Deflator - Third Estimate||Q4||-||0.4%||0.4%||0.4%||-|
|Mar 25||9:55 AM||Michigan Sentiment - Final||Mar||-||69.0||68.0||68.2||-|