Chart Porn 2/5/2012

*UPDATE: To maintain my unblemished integrity, I feel compelled to disclose that my Super Bowl protest was postponed till next year. Alas, I too gave in to the call of the herd, gorged myself on absurd amounts of unhealthy food, and partook in the exuberance of an event the sheer pagan excess of which presages the imminent disintegration of our civilization.

Special thanks to commenter Dr. Durden for the title suggestion, which I have changed from the usual "Sunday pre-game" in protest of the Super Bowl. If you're unlike me, and you actually care which group of mercenary thugs, oafish simpletons, and peacocking dullards proves better at a childish game than the other, then may I suggest you just check the score when the contest is over? (Rooting for a team has no effect on the outcome, you know… so why subject yourself to the corny commercials rigorously engineered to elicit the maximum number of retard smiles from the proud engine of the global economy, the semi-literate American consumer?). That said, I do recommend you catch at least part of the halftime show. It's a man's duty never to escape from reality, but rather always to look it head on, however ugly it may be. Tonight's decrepit performer, who at her best was a talentless, hysterically vain, self-promoting whore, has finally transmogrified into something meaningful: nothing less than the perfect symbol of her nation (she has surpassed even the globally broadcast military hoopla during the introductions carefully designed to bring fear into the hearts of our numerous enemies, whose pathetic resistance against the noble hegemony of American democracy shall never prevail!)

This will be an important week in the metals. My silver chart (now in color!) reveals two very important crossing points. The $36 level in mid-March and the $33 level in mid-May. But if silver rallies this week, making its way into the purple zone where it was rebuffed Thursday of last week, then it could very possibly go straight to the third important crossing point, the $42-$45 level as early as March. On the other hand, as seems likely, if silver corrects further this week, then this chart is telling me that the red downward channel will continue to exert resistance, such that a strong move in the near future becomes less likely.

Here is the 10 year yield measured in silver. Note we bounced off the blue dotted line once again. The overall downward trajectory seems on track (see light blue lines in purple channel) (note: updated, 2/6)

Here is the weekly gold chart, where as badly as last week ended, it never fell out of the channel that it had impressively entered the week before. The weekly close this week will be very important. Gold can fall out of the black channel during the week, but a weekly close below would be quite bearish.

Here's the daily chart with the Fibonacci moving averages (144 day, and 377 day, pink and green respectively), as well as the 200 day (yellow) and the 252 day (i.e. yearly) (brown). Note that they are all currently right around their lines of best fit, all of which share the same slope, also shared by the top two black dotted trend lines which go back further than this chart in terms of resistance (note: chart updated, 2/6).

Is gold trading like a safe haven? One way to determine this is to look at the ratio between gold and the CRB commodities index (of course gold is part of that index, but we can ignore that). The CRB goes up with inflation, so if gold goes up faster, then that (at least partly) means people are actually looking for a store of value in fear of future inflation (which other components of the CRB, except for the other precious metals, really are not). You will see that the three red horizontal lines represent three "tiers" over the past decade, such that gold's status as a safe haven is a step function of sorts. The 2008 financial fiasco raised it to a much higher level, and then the "debt ceiling" fiasco of last August took it another small step higher, where it has been trapped, despite 11 attempts to break the top red line (most recently Thursday).

Finally, the HUI. I'm watching the $530 level (red/green line). If that can hold we could break out of the white quasi-pennant formation soon. Otherwise, another test for support at the bottom white trend line is very much in the cards.


5 comments:

Vincent said...

Another good read.
Thanks for the effort.
Noticed your bullish call for Feb 29.
I'm at 33.02/1706.5
Gaining confidence in my "tech/psych" charts.
Long time lurker, always waiting for the next smart write up from the staff here..
Peace.

Jeanne d'Arc said...

You will see that the three red horizontal lines represent three "tiers" over the past decade, such that gold's status as a safe haven is a step function of sorts. The 2008 financial fiasco raised it to a much higher level, and then the "debt ceiling" fiasco of last August took it another small step higher, where it has been trapped

Movement to a new 'fourth' tier seems predicated on another event. Presumably either (a) an announcement of QE3, or (b) military intervention in Iran.

Conversely, a relative calming of fears in Europe, and continued good figures (whether one believes them or not) coming out of the US economy, could conspire to create the 2012 'event' in which gold returns to the second or even the first tier.

Food for thought...

JdA

PS - you're doing coloured charts now, GM? I mean, I know this is now the 'chart porn' slot, but that's positively sluttish... I don't know where to put my eyes...

Jeanne d'Arc said...

Oh, and:

It's a man's duty never to escape from reality, but rather always to look it head on, however ugly it may be.

Funnily enough, that precise thought went through my mind when GM and Brian decided to prance about in their new speedos for my supposed delight before jetting off to Davos-Klosters...

Dr Durden said...

Ooooooh, preeety!

Have you done the Fib work on gold from the all time high to the recent break low of $1535? It smacked 61.8% at $1765 and quickly dropped. As we all know, the last time it tried the same move, it ran into $1800, couldn't get trough and eventually resulted in a massive failed move. Or was it Blythe and crew stomping on it again?

Looking at silver in the same regards, it seems to be playing out in the same way. Really nothing to get excited about until $35 is behind it for a few weeks IMHO.

And did anyone catch all the silver and gold symbolism during the Stupid Bowl? Freekin everywhere. First and most obvious: Lombardi Trophy - silver.

The other on that really stuck out was an ad that showed a guy sitting in a bathtub filled with gold coins stating "you could win up to $2M DOLLARS!" Note: bathtub FULL of gold coins and more pouring into it almost to drown the guy, not paper dollars. He wasn't downing in a sea of Benjamin's. Gold gold gold, money money money. Wait, what????

Of course, the lipsync party at half time featured former Mrs Guy Ritchie doing scissor kick crotch shots in a gold-laden dress and was bought onto stage on a golden throne.

It's just tradition. Nothing to see here, stay tuned for further distraction(s).....

GM Jenkins said...

@Vincent, thanks for the kind words. I like your reference to "Tech/psych" charts, which is what they really are.

@JdA: yes, that's what i was getting at: the 11 futile attempts to smash the top horizontal red line (only visible on a shorter period version of the chart) suggests the next psychological step for gold will be an event, and probably an event like that in 2008 that took the ratio up a much higher "step" than the somewhat ambiguous credit downgrade (ambiguous insofar as the next credit ceiling increase had no psychological effect, and moreover, treasuries actually increased in value after it). As far as speedos are concerned, have no fear, I have put mine away until I burn off the effect of my Super Bowl beer and burger binge (friendly advice to readers: jalapenos and competitive eating don't go well together).

@Dr. Durden, nice observation about the fibonacci retracement since $1900 gold, I'm following that now.