Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21
Scan Computers - How to Test New Systems CPU, GPU and Hard Drive Stability With Free Software - 4th Jun 21
Hedge Funds Getting Bullish on Gold - 4th Jun 21
THERE ARE NO SOLUTIONS When the Media is the VIRUS - 4th Jun 21
Investors Who Blindly Trust the ‘Experts’ Will Get Left Behind - 4th Jun 21
US Stock Market Indexes Consolidate Into Flagging Pattern – Watch For Aggressive Trending Soon - 4th Jun 21
Microsoft (MSFT) Stock Trend Analysis - 3rd Jun 21
No More Market Bloodbath – Beyond Cryptos - 3rd Jun 21
Bank run, or run from the banks? - 3rd Jun 21
This Chart Shows When Gold Stocks Will Explode - 3rd Jun 21
The Meaning Behind Gold’s Triple Top - 2nd Jun 21
Stock Market Breakout Or Breakdown – What Does The Next Big Trend Look Like? - 2nd Jun 21
Biden’s Alternate Inflation Universe - 2nd Jun 21
What You Should Know Before Buying Car Insurance - 2nd Jun 21
Amazon (AMZN) Stock Summer Prime Day Discount Sale - 1st Jun 21
Gold Investor's Survival Guide - 1st Jun 21
Silver and Copper to Benefit from Global Electrification Push - 1st Jun 21
Will Gold Shine Under Bidenomics? - 1st Jun 21
Stock Market Buy the Dip, Again?! - 1st Jun 21
Stock Market Consolidation Ahead - 1st Jun 21
Stock Market Summer Correction Review, Crypto CRASH, Bitcoin Bear Market Initial Targets - 31st May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A New Golden Bull or Has the Market Gone Too Far Too Fast?

Commodities / Gold and Silver 2016 May 27, 2016 - 09:59 AM GMT

By: The_Gold_Report

Commodities

Precious metals expert Michael Ballanger discusses how investors should interpret the recent shifts in gold and silver "market tectonics."



As we move rapidly through the spring of 2016 and with summer less than a month away, I thought it would be a good time to revisit the main markets that dwell on my financial radar screen (gold, silver, gold and silver equities, and the S&P 500) because there has been a fairly sizable shift in market tectonics, particularly in gold and perhaps more ominously in silver over the past month.

Call it deterioration in momentum or correction; the NYSE.Arca Gold BUGS Index (HUI) is off 10% from its top at 236.23. I am almost afraid to mention the term Commitment of Traders or the word Commercials because everyone from Dennis Gartman to "kitchen chair financial planners" have now become "COT experts," pointing fingers and resurrecting archived blog posts from the last 10 years to prove their exclusive ownership of "COT analysis."

This humble scribe only learned about the COT some 10 years ago but cast it aside as a play toy for "eccentric gold traders" until 2015 when, thanks to my good friends at Gold Anti-Trust Action Committee (GATA), I started reading interpretations by the likes of Bill Murphy. Taking his lead, I delved deeper into the role of the bullion banks and why it was that, unlike every other market in the world, technical support and resistance levels were meaningless. I discovered that the only way one could monitor the activities of those banks that act and execute for the Exchange Stabilization Fund (another topic for another day) was to monitor the very banks that show up in the Participation Rate survey and which are represented as "Commercial Traders" in the COT.

So, if the guys painting the tape to create false breakouts and false breakdowns RELIGIOUSLY, time after time, are the same guys that can sell infinite amounts of synthetic "metal" represented as a keystroke entry on a inventory spreadsheet with ZERO correlation to actual vault inventories, then I better damn well USE that data as a rudimentary "tracking bracelet" of the Crimex criminals. Could the data be cooked? Of course, but I take the attitude that this is a data set designed not for the public but for the other bullion banks to check up on one another to see who is cheating and who is singing the proper words from the "hymn sheet."

Needless to say, the last four months of action in the metals has been bizarre. While there is "no fever like gold fever," that the gold market traded up $250 in the first quarter with the Relative Strength Index (RSI) peaking on Feb. 7 at 86.75 (above 70 is a "sell") at $1,263 was certainly enough to give us a short, sharp correction to $1,190 (for about a half a minute) and then despite waning RSI, waning Moving Average Convergence/Divergence (MACD), gold actually powered higher to an intraday level of $1,306 before succumbing to profit taking. Silver made its run to $18 as gold was dancing, but as I ponder the charts and breathe in the air of sentiment from the caverns of Bay Street, I get the sense that bullish sentiment has resumed as if 2011–2015 never occurred.

It took almost a decade for the Commercial Traders to amass a net short position of nearly 300,000 contracts, culminating in the 2011 top after a 766% advance in gold prices. It has taken a mere four months to repeat the drill. FOUR MONTHS! Friday's COT showing a 290,243-contract short position against total open interest at nearly 600,000 means that gold has gone from the dark depths of bear market misery with Commercials short a paltry 2,911 contracts back in early December to the exalted peak of bull market euphoria not seen since 2011 at 290,243, while the cycle of extremes took 1/33 of the time. That, my friends, is either a testimonial to the raw power of this new Golden Bull or it's a classic case of "Too far, too fast" and we are headed lower.

Which camp should we be in? Better still, how do we play it out? Now, coming from the "analyst" that called the bottom in early December, be it known for the record that I exited the leveraged ETFs (Direxion Daily Gold Gold Miners Index [NUGT] and Direxion Daily Junior Gold Miners Index Bull 3X [JNUG]) and then a bit later the Market Vectors Gold Miners ETF (GDX)—at huge profits—way too early when the COT report showed Commercial shorts at a 12-month high north of 166,000. My thinking was that there would be an initial pullback after the mindboggling rally that saw RSI for the HUI hit 86.75, and MACD and the Histograms all confirming wildly overbought conditions in both the metals and in the shares.

Furthermore, last Friday, I had the Market Vectors Junior Gold Miners (GDXJ) May $35 puts I owned expire, so I replaced the May hedge with the GDXJ June $37 puts for $2.30. Mind you, I did not touch my massive aggregation of junior explorer/developers all of which have done exceedingly well. However, what to do now is difficult because while I have been forecasting a "correction that will rip your face off," it was the action in the gold-to-silver ratio that gave me encouragement that perhaps the Commercials would indeed get "theirs." Having shorted the gold-to-silver ratio above 80, it traded down to 72.95 recently, but in the past few weeks has reversed back up ward (75.96) and as I have babbled on about ad nauseum for years, you aren't going to sustain a gold rally with silver underperforming. Lately, silver has been doing just that and that ain't good.

All of this cyber-jabbing that I read, as bloggers and newsletter writers engage in gold authority one-upmanship be it through podcasts or YouTube or FaceBook, is really akin to having a cocktail party debate amongst home security experts about which system one should install as a thief sneaks into your upstairs bedroom and removes all the valuables from the safe. Suddenly the party is over and you won the debate but all your valuables are gone. As we all talk up our books and go back out on speaking tours (now that someone actually cares), the bullion bank behemoths have actually entered your upstairs bedroom AND your office and taken your goodies AND installed listening devices. These cretins are now short as much synthetic gold as at any point since Gordon Brown dumped the U.K.'s gold holdings at the exact bottom in 1999. How on earth can one carry a gold or silver or GDX/GDXJ position without being hedged?

Calling for a correction since March-April has allowed me to seesaw back and forth but as we have all been arguing and sniping and chirping over the next $100 move, the gold price has moved sideways in perhaps a $50 band while the bankster banditos have raided the vault. With gold printing $1,235 this morning and the Commercials short roughly 300,000 contracts, on a notional basis, every $10 down move is a $300 million improvement on a marked-to-market basis. More importantly, support lines on everybody's charts are breaking like wind at a bean-eating contest, so this week could easily be a nasty one.

The "Fido Indicator" worked like a charm; two weeks ago with gold at nearly $1,300, he was a goofy, tongue-hanging-out, tail-wagging fool of a dog all happied up and snoozing on my feet under the desk; today with gold at $1,235, he is nowhere to be found. along with the other inhabitant of this house, which means the dog will be eating steak somewhere tonight while I am dining on Alpo Fettucine with a fine Chianti and some fava beans. . .

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

Disclosure:
1) Statements and opinions expressed are the opinions of Michael Ballanger and not of Streetwise Reports or its officers. Michael Ballanger is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation or editing so the author could speak independently about the sector. Michael Ballanger was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

All charts courtesy of Michael Ballanger


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in