Gold Busts Its Bolics!Monday May 18, 2015 13:21
Parabolics, that is, which as we below see on a weekly basis have stifled Gold since 20 February. But upon this past Wednesday's being the third strongest upside performance-to-date in 2015, our Captain Endicott successfully navigated Gold's flight up and through the weather front of those dastardly declining red parabolic Short dots, turning them sky blue in reversing their role from overhead resistance to underlying support per the rightmost weekly bar and encirclement:
Now before we all go running excitedly about in the aisle, Gold's busting up through its parabolics doesn't mean the good captain has turned off the seatbelt sign. 'Tis terrific to have embarked upon a fresh parabolic Long trend, however we surely expect more lurching about being in store across the BEGOS Markets' spectrum (Bond / Euro / Gold / Oil / S&P), ideally with Gold to benefit in the balance.
"Uh mmb, before you yourself get too carried away, that 1240-1280 resistance zone is still there, eh?"
To your point, Squire, 'tis there to be sure, as are the many resistive hurdles itemized in the Gold Stack near the foot of this week's missive. The Gold Troops' road toward our goal of 2000 shall again be fraught with fights. Then in the wake of winning such battles, entering the fray shall be those (i.e. the "majority") who've missed the train as they finally climb aboard en route to the even more rational "scoreboard" valuation up the tracks at 2500. 'Tis merely a matter of time, given the unsustainability for Gold to continue to be suppressed and trading at half its value, whilst stock market indices, notably the S&P 500, go on trading at double the support of net earnings.
Indeed, stock markets are making all-time highs all over the place in further attempts to rationalize valuations based on low-to-negative interest rates and "continued QE" (grazie Signor Draghi) as investors "look the other way" when it comes to corporate earnings. Should you breeze by the website and click on Earnings Season, you'll see that for Q1, only 51% of some 2,500 companies reporting improved their bottom lines: that is the weakest Earnings Season by our percentage basis since Q3 of 2009 (when just 39% improved following the prior year's overfly of The Black Swan). 'Tis no wonder that today our "live" price/earnings of the S&P 500 closed out the week yesterday (Friday) at 33.5x. The complacent carefree contentment of The Eloi continues, (thank you Herbert George Wells).
'Course, not everyone is merrying about in mirth out there, evidenced this past week alone by reports indicative of declines in retail sales, export prices and wholesale inflation, whilst the University of Michigan's sentiment reading pulled back the most since its December 2012 reading, and Industrial Production went backward for the second consecutive month, its combined two-months' of slippage being the largest since May/June 2009. All-in-all, this may be taking the pressure off the Federal Open Market Committee's voting to raise rates if only for credibility's sake, for at the end of the day, even they have to sense we're going the wrong way:
So, should the Economic Barometer not right itself "right quick", does the Federal Reserve Bank, rather than go for rate squeezing, instead opt for Quantitative Easing? For Gold, 'twould have to be pleasing, and those sensing so see the train as starting to go. Here are Gold's daily closes from a year ago-to-date along with the 300-day moving average. Something about which to smile:
Turning to our three months of daily bars with their "Baby Blues" of 21-day linear regression trend consistency, below in the left-hand panel for Gold, the blue dots have gone from their week ago "state of flux" to now pressing just into positive territory, whilst in the right-hand panel for Silver, the blue dots are well on their way toward the +80% level, which in turn would confirm the trend as being consistently up. Note in both panels that, following bouts of selling, the ensuing buying has been exceptionally enthusiastic...
...and give such earnest entry into the Precious Metals, I recall during Gold Guru James Sinclair's visit through San Francisco last November, his emphasizing that those same entities who've driven price down these recent years shall, in turn, drive it back up. We thus might reckon [and embellish]: "They're baaaaack..." --(Poltergeist II: The Other Side [of the Trade]).
At least from the near-term trading perspective, the 10-day Market Profiles for both Gold (left) and Silver (right) show price not just near two-week highs (the time duration of these panels), but indeed near a 12-week high for King Gold and a 15-week high for Sister Silver, (on their closing bases):
And dare we induce yet another dose of common sense, Gold indeed ought well be propped up whilst so much else has dropped down: The People's Bank of China just dropped their key interest rate for the third time in six months, EuroTalks of Greece's being dropped (Grexit) remain mixed, (not to mention musings of an unlikely UK's Brexit, albeit the Bank of England has dropped the growth forecast there), and as the studied reader knows by now, April's full-time StateSide civilian employment dropped by 252,000 folks. That's a lot of dropped stuff out there from everywhere. As to how it all presently stacks up for Gold, we are pleased to next bring to you:
The Gold Stack
(As was previously noted, we've removed the "Structural" Support and Resistance levels as they're subjectively chosen and thus lack the specificity of the other categories):
Gold's Value per Dollar Debasement, (per our opening "Scoreboard"): 2502
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
The Final Frontier: 1800-1900
The Northern Front: 1750-1800
On Maneuvers: 1579-1750
The Floor: 1466-1579
Le Sous-sol: Sub-1466
Base Camp: 1377
Year-to-Date High: 1307
Neverland: The Whiny 1290s
The 300-day Moving Average: 1247
Resistance Band: 1240-1280
10-Session directional range: up to 1228 (from 1177) = +51 points or +4%
Trading Resistance: (none per the 10-day Market Profile)
Gold Currently: 1223, (weighted-average trading range per day: 17 points)
Trading Support: 1222 / 1214 / 1193 / 1189 / 1183
10-Session “volume-weighted” average price magnet: 1199
The Weekly Parabolic Price to flip Short: 1142
Year-to-Date Low: 1142
We'll close it out for this week with these three notes:
1) Quite conflicting curiosities are emanating from Arabia these days. On one hand, they're out to "douse" the surge in StateSide shale production, yet at the same time assure us that $100/bb Oil is a thing of the past. From Oil's closing price 42 days ago on 17 March of 42.43, 'tis risen 41% in settling yesterday at 59.96. Were that rate of increase to continue, Oil would close above $100/bb on 31 July of this year. Perhaps what they're really saying is that, indeed $100/bb is passé, for instead $200/bb shall eventually rule the day.
2) One wonders what they're drinking over at the Organization for Economic Co-operation and Development. The OECD has put forth that a tax increase such as to raise alcohol prices by 10% is (as quoted) "among the most effective means of countering excessive consumption, which reduces economic output in most developed countries and contributes to early death and disability." Methinx they've got it 180° out-of-phase, for 'tis the tax increase which reduces economic output, in turn as sure a thing as is death. And clearly we shan't drink to that.
3) On a more sobering note is next week's inflow of economic data, which includes what was said at the Fed during the FOMC's April meeting, (recall there was no post-statement Chair Yellen press conference), and well as April's Leading Indicators, (which the aforeshown Econ Baro has already reported for us).
Feeling good about it all? Got some Gold?
Mark Mead Baillie