Around the Web

By Biiwii

Market Analysis, News & Opinion From Around the Web…

 

GDX: Steep Declines & Buying Go Together

By Steve Saville

Steep Price Declines and Increased Buying Often Go Together

In numerous TSI commentaries over the years I’ve written about the confusion in the minds of many analysts regarding what constitutes gold supply and the relationship between supply, demand and price in the gold market. I’ve also covered the issue several times at the TSI Blog, most recently on 24th June in the post titled “More confusion about gold demand“. I’m not going to delve into this subject matter again today other than to use the example of last Monday’s trading in GDX (Gold Miners ETF) shares to further explain a point made in the past.

On Monday 20th July the GDX price fell by about 10% on record volume of 170M shares. Since every transaction involves both a purchase and a sale, more GDX shares were bought last Monday than on any other single day in this ETF’s history. And yet, this massive increase in buying occurred in parallel with a large price decline. How could this be?

Obviously, the large price decline CAUSED the massive increase in buying. Many holders of GDX shares were eager to get out and the price had to fall as far as it did to attract sufficient new buying to restore the supply-demand balance.

It’s normal for large and fast price declines in the major financial markets to be accompanied by unusually-high trading volumes, meaning that it’s normal for large and fast price declines in the major financial markets to be accompanied by increased BUYING. Most people understand this. So why is it held up as evidence that something nefarious is happening whenever an increase in gold buying accompanies a large decline in the gold price?

I can only come up with two plausible explanations. One is that many analysts and commentators switch off their brains before pontificating about gold. The other is that the relationship between gold supply, demand and price is deliberately presented in a misleading way to promote an agenda. I suspect that the former explanation applies in most cases, meaning that in most cases there’s probably more ignorance than malice involved.

Macrocosmic NFTRH 353

By Biiwii

Friday was a microcosm of the macrocosmic alignment that would need to be in place for a long-term bullish view of the gold sector.  We update the precious metals and the rest of the kit and caboodle too.

nftrh353

 

RASI Shows Bull Market Waning

By Tom McClellan

Ratio Adjusted Summation Index
July 24, 2015

The Summation Index was invented by my parents back in 1969, as a companion to the McClellan Oscillator.  But it was in more recent years that we refined our understanding of the importance of the Summation Index in revealing what lies ahead for the stock market.

Continue reading RASI Shows Bull Market Waning

‘More Informed’ Inflation

By Alhambra Investment Partners

Agitating For A More Informed Inflation

There are numerous problems created by asset bubbles and many more as a result of a series of them. The financial system becomes highly destabilized, especially as authorities and policymaking bodies misunderstand them to the point of determined stasis rather than courting necessary evolution and reform, which in turn has the same effect on the economy. This is not a linear exchange, however, which is why the major alteration to the governing dynamics due to asset bubbles may really be how they mask and often hide what is really taking place.

A healthy economy in the modern sense is one that fosters labor specialization, period. An economy that does not create greater participation is not a healthy economy, so in that sense or under those circumstances measuring the “dollar” value of goods and services produced and traded may be misleading. If such commerce is redirected to only specific economic segments, even determined by income (as asset bubbles tend to stratify income levels), there can be dissonance between those figures and the economy as it actually exists.

Continue reading ‘More Informed’ Inflation

Precious Metals Risk Management

By Biiwii

[edit]  Profit booked on JDST and partial DSLV.  Off to NFTRH.com for an update.

As noted in NFTRH 352:

I thought about releasing my JDST position on Friday because it is very profitable and because it appears that capitulation is in the air. But then I thought about the margin clerk and all those names he may be preparing to call upon on Monday. I thought about how my main intent is not to profit from the precious metals decline but to be intact for buying its bottom. I am not now nor never have been a bearish trader of great skill.

I released a portion of JDST on Monday’s pukage because it had me weighted too net short (ref. the bit above about my lack of bear trader skills) after Monday’s big shoe dropped.  I thankfully kept the rest of the position, which is today at a 100% profit.  But that is still not the position’s primary objective.

Due to this disgusting chart’s measurement, I decided to buy 3x Silver short DSLV (now nicely profitable as well) a couple days ago as silver bounced.  After discussing the favorable trend developing in the gold and silver CoT structures last weekend #352 noted the following bearish technical situation in silver due to a loss of critical support.

silver

The CoT are simply representations of what the various traders are doing on balance. The ‘commercials’ (incl. a large contingent of companies within the gold industry) tend to be net short but that does not force the large speculators to buy. These large entities buy, gold sector promoters tout it and then the whole thing gets cleaned out. Don’t personalize it. That is emotion. Use it. Anyway, technically silver can easily swoop down into the 13’s if a capitulation event comes into play. Understand that these price objectives on Au and Ag are not predictions; they are measurements.

I expect the macro to turn over the next several weeks to few months.  But for right now a process needs to finish up in the precious metals.  We will need to see what the heretofore perma bulls are saying.  Some have already switched bearish, which is positive.  But others continue to live in denial and I think this process wants to address that.

So I use the bear funds as hedges with a plan to (very) slowly add quality junior miners/exploration near the targets we have laid out, and hopefully these bear funds turn out to be profit vehicles if I can use enough patience and get the timing right.  So we’ll see how that goes.  They could be sold about 2 minutes after this post goes up or they could be held into a final swoosh.  They are dangerous vehicles, however, and not for long-term holds.

I don’t pretend to be a fancy trader because I can be a Keystone Kop in that area sometimes.  One thing I do pretend to be is a hard core risk manager and that has been working out very well.  Hopefully soon, the other side of ‘risk manager’ can emerge.  That would be ‘risk taker’ when RvR gets compelling (ref. Q4 2008).*

* As noted a million times already, the macro funda (for US players, anyway) are not currently what they were in Q4 2008.  Not nearly, as long as the stock market remains aloft and Treasury yield spreads remain depressed, and as long as market participants take the Fed seriously.

Robber Barons

By Bob Hoye

Pivotal Events Excerpt

hoye

The ‘Real’ Reason the Fed Wants to Raise Rates

By Biiwii

In case you thought you were smart enough to know why the Fed wants to do what it supposedly wants to do [1] MarketWatch sets you straight with the real scoop.  We’ll use this as a talking point and see what comes of it…

Here’s the real reason the Fed wants to raise rates

Policy makers want to give themselves some room to maneuver

That is the commonly held belief and who am I to dispute it?  A big part of the problem is and has been their refusal to begin a journey toward normalization 2 years ago, when the economy began to visibly (we noted the seeds of that improvement in January of that year) improve.  They had no confidence and I was left to wonder (aloud here, frequently and I am sure, sometimes obnoxiously) why Grandma [2] (and her 0% savings account payout) had to continue to bear the brunt of this non-action despite a recovering economy.

Continue reading The ‘Real’ Reason the Fed Wants to Raise Rates

Pivotal Events Excerpt

By Bob Hoye

World Changer

hoye

China’s ‘TIC’ for May…

By Alhambra Investment Partners

TIC For May Is Really What Is Missing About China

The latest update for TIC “flow”, for the month of May, was mostly what was expected given the “dollar pause” at that time. Central banks were still active but not nearly as engaged as they had been through the worst parts of the “dollar” crisis in late 2014 and early 2015. Official accounts (central banks and foreign governments) had turned positive in May for the first time since November, and even treasury mobilizations had dropped considerably.

This is not to say that all was decent and good about the “dollar” in May, only that it wasn’t nearly so vibrantly depressing. Given the activities in July, we may find out through TIC a few months down the road that this was the proverbial eye of the hurricane.

ABOOK July 2015 TIC Official UST Continue reading China’s ‘TIC’ for May…

Proper Seasonal Gold Chart

By Michael Ashton

In an excellent (and free!) daily email I receive, the Daily Shot, I ran across a chart that touched off my quant BS alert.

goldseas

This chart is from here, and is obviously a few years out-of-date, but that isn’t the problem. The problem is that the chart suggests that gold prices rise 5.5% every year. If you buy gold in January, at an index value of 100, and hold it through the flat part of January-June, then you reap the 5% rally in the second half of the year.

Continue reading Proper Seasonal Gold Chart