[edit, 8.1.14] SPY short covered, EWP short ongoing. [edit 2] FAZ sold. EWP still ongoing, probably for a longer hold.
How perfectly did this crap rise to test the breakdown and then drop? My stop as noted last week was a rise above 43, so I still hold Spain (Europe’s version of junk bonds) short, along with the chunk of SPY also noted. No leverage, just short. I am leveraged short against the Financials however, with FAZ, bought yesterday (conveniently noted today, so distrustful sorts feel free to discount it) on its chart pattern. This is starting to feel sooooo January 2014.
Back on EWP, it (along with Italy’s iShares EWI) was an indicator to the speculative potential (i.e. manic excess) over there in Europe since the middle of last year. The target was in the low-mid 40′s and damned if it did not get there off its lows below 20.
The monthly chart updates the situation in gold vs euro and tells a little story.
You see, once upon a time millions of Knee Jerks came flying into gold in panicked response to a credit meltdown in the weaker components of their union. The first of these monetary refugees created ‘fear gaps’ and the last of them, the unsustainable blow off top. By then, the gold mini hysteria had gone global and gold – all those unhealthy holders in tow – was cooked for a coming bear market.
Now gold vs euro is in the finishing stages of what looks like an Inverted H&S bottom after poking down and closing the open gap in 2013. The left side Shoulder did this and then the Head rammed down even deeper just to make sure. Now we have Portugal and all those low quality bond yields that were until yesterday showing a clear lack of respect for risk management.
People never change. They herd, they over intellectualize and they take too much to heart what other people say, without realizing that other people have agendas. Charts on the other hand, simply tell stories over time and space. This one has an interesting story.
Not that I want to poke fun at an asset (it’s more its promoters that deserve the poking) that I have considered essential monetary insurance (read: value) throughout its cyclical bear market. In fact, I believe that Europeans especially should be paying attention now as Gold-Euro fans its way along after closing the Euro Crisis ‘fear gap’ from 2010.
I am not counting on gold going up in USD at this time because with all the anti-dollar hype and its upside reversal (from critical support) yesterday and today I am leaning bullish on Uncle Buck. The Euro on the other hand is doing this…
There is also the case of the Euro and gold, which was the center of fear and loathing in 2010 and 2011, as gold took on too many panicked sponsors. Here is the big picture monthly view of the European fear gap getting closed out. Europeans who want a long term value opportunity could be buying now (most probably aren’t) as opposed to what they actually did, which was to buy in 2011.
The ‘all one market’ vs. the US dollar scenario is breaking up a bit. Commodities and the Euro are doing well. Gold is hanging around and the US stock market? Not liking the weak dollar so much. The precious metals want to see silver get off the floor, but it’s got a heavy open interest sitting on it. This is a tough market, folks.
One is dropping below its MA 50′s and the other is popping above, after the ECB sat on its hands with rates but made a lot of Jawboning about ‘unconventional’ stimulus in the battle against the dreaded deflation.
It is unbelievable the degree to which people still have confidence in these clowns (including the ones packed into the little clown car here in the US), but apparently they do.
It remains all one market vs. the US dollar, AKA the anti-market. SPY has actually remained somewhat on its own course over the last week, but the others are strictly in anti-USD mode right on down to the little hook upward this morning as Uncle Buck hooks down. Silver, which I got longer on yesterday, is the most sensitive.
Now we will get to test the theory that little of what most people consider fundamentals for gold actually matters. That would be things like Indian wedding season, jewelry demand, central bank buying/selling and the one hyped in the gold “community” more than any other, China gold demand.
From Hard Assets Investor: Gold Flat Amid China Demand Drop
According to the China Gold Association, demand in the world’s largest No. 1 consumer may fall 17 percent this quarter from a year ago. An official for the trade group said the decline wasn’t unusual given the huge spike in demand last year.
“Last year was a peculiar year when we saw a big fall in prices,” Zhang Yongtao, vice chairman of the CGA, said. “People bought a lot of gold, and I think demand will start climbing again once the festive and marriage season begin later this year.”
‘But but… China gold demand is strong!!’ kept people bullish last year as gold got blown up. Marriage season? Please. For me it is investment demand that matters.
Since February 1 it’s all one market arrayed against one market, Uncle Buck. Maybe it should be called the ‘all but one market’ market. Whatever…
The Euro is closing in on a target (the top downtrend line) we have had on since the bottoming pattern formed during the Euro crisis drama a couple years ago.
Euro monthly, from NFTRH 273
Contrary to this hair brained declaration by a talking head on CNBC (“I like the dollar; it’s going to kill gold for sure and I think it’s great for American corporations”) the US dollar has dropped and American corporations like it just fine. That is because American corporations like inflation against a
defl err disinflationary backdrop just fine.