For some time now we have been warning about the danger to portfolios given the deteriorating fundamental, economic and technical backdrop in the markets. Our warnings, for the most part, have been ignored as individuals continue to chase stocks in hopes that "this time will be different", and somehow, stocks will continue to ramp higher even though all three support legs are weakening. Currently, it is the imminent arrival of the next round of Quantitative Easing (QE) that keeps "hope" elevated but further Central Bank intervention is unlikely in the near term leaving the markets at risk of a further correction. The technical and fundamental setup is currently a negatively trending market. It is very likely that, in the current environment, we will retest the May lows, if not ultimately set new lows, in August. Those lows will likely coincide with further weakness in the economy which should be the perfect setup for the Fed to launch a third round of Quantitative Easing. (more)
kingworldnews.com / July 26, 2012
Today acclaimed commodity trader Dan Norcini told King World News, “Once you had the 50 day moving average in gold violated to the upside, then you had a much larger wave of short covering which began to occur.” Norcini also said, “The momentum crowd, that was waiting for $1,600 to be breached, then took over and the move has continued to feed on itself.”
Norcini also discussed a key level which “… is where you will really see the shorts panic.” But first, here is what he had to say about the recent action in gold: “The move in gold we have been seeing was precipitated by an article which indicated the Fed was going to move in August, instead of September. Some of the shorts began to cover yesterday, and as they began driving the prices higher they tripped some key technical levels.”
Dan Norcini continues:
“Once you had the 50 day moving average in gold violated to the upside, then you had a much larger wave of short covering which began to occur. You have to keep in mind that the hedge fund community has not only been liquidating longs, but they have also been adding fresh shorts.
The hedge funds had been anticipating gold would break lower, but they’ve been stymied by central bank buying coming out of the Far East. The momentum crowd, that was waiting for $1,600 to be breached, then took over and the move has continued to feed on itself….