Friday Metals Wrap 6/20/2014

Greetings friends!

Sorry for my inactivity of late -- to give you an idea of how busy I've been, I thought today was Friday and printed out a bunch of weekly charts for you. So hopefully nothing too crazy will happen tomorrow after today's fireworks, to render these obsolete.

I've also been too busy to trade. And as luck would have it ... I missed a few obvious long opportunities based on my own damn charts. Hopefully I helped someone make money this week??

E.g. last Friday, turns out there was a reversal on the 3-line break chart I beat to death every week, as a proxy for when an intermediate term bull cycle begins. Another bar has been added since, and should remain there tomorrow to close the week.

I hope I've made some believers in these charts. Note how my silver proxy chart below (GLD:GDXJ) never confirmed the bearish reversal of the gold proxy chart above (DOW:GDXJ). I had mentioned I wouldn't go short until it did so. And in fact now it's very close to adding a new red (silver-bullish) bar.  
Then, there was my previous post, ("Important chart") ... Sure enough, silver broke through that important trend line days ago (as I now note commenter Fix the System tried to apprise me of, to no avail. Thanks though!). Luckily, someone did make money by means of this chart. Our good friend "David P. out of Europe", who posted it on King World News on Tuesday

So what does all this mean?
I'm pretty confident what happened today isn't stage 1 of the big moonshot every gold bug is waiting for (myself included). I still would bet that we haven't seen the final lows in either gold or silver. Looking at my monthly chart, we may be headed back to the MA-ribbon at $1400, but that should be it for awhile.

Such a move would become quite likely if the 300-day MA can be emphatically cracked, ideally to close the week tomorrow. That's my new point to go long (see black curve below)

A good sign is this breakout in the Gold in Swiss Francs chart

However, as of yet gold is only where I've speculated it would be for months now: back at the blue downtrend line on the monthly chart below. Now if that can be broken to the upside -- and gold just needs another strong up day to do so, more or less -- that might mean this rally will not be another boring short-covering one shot deal, as we've seen so often

Such a move would probably take gold through $1335, meaning this important channel would be broken (MA here is the 144-day)

Then the $1390 level would look likely -- as seen on this weekly chart with the 89-week and 78-week (1.5 yr) MAs

I'll try to have more silver charts for you next time, but here's an old Kagi chart where you can see that clearing $22.15 would be huge. 

My correlation charts, for those keeping score, proved effective. Not that it helped me, but I'll probably try to consider correlation outliers more often henceforth.

First the Canadian dollar/gold chart. Note: I'd be very wary of being long gold if/when the Canadian dollar hits the blue trend line again. . .

 Then the EEM wedge was broken, right as it became clear silver would have to start correlating positively with it. Another good sign to go long silver. Which I didn't do.

Finally, another local min/max was predicted by this one, the gold vs. TIPS.
Alright, that's it for now -- till next time!

I explain 3-line break charts in the comments, and thus am adding this important chart, See explanation in comments.


Warren James said...

Good stuff, GM. The potential silver breakout is interesting > it looks like a head fake to me, but then I can't comment since (along with a bunch of others) I totally wasn't expecting a $13xx handle today.

At some point, you may need to explain your 3-line-break charts again to me. I know the basics and I've re-read some of your other posts but I'm not 100% sure I know which signal is which.

Based on some of the stuff Trader Dan is saying, I get the impression this price movement is just the big hedge-funds playing games (but again I've got no idea, refer point 1 above ;p)

GM Jenkins said...

Hey Warren,
Since I use the 3-line break charts (and to a lesser extent Kagi) a lot, I should have a sidebar link or somehting explaining them.

3-line break charts use closing prices. So let's use a monthly 3-line break chart as an example. I'm posting the "10-year treasury yields measured in crude oil" monthly 3-line break chart to my post, (which had an important reversal last month) as an example to follow along.

Obviously red bars denote a downtrend, white bars up trends. Let's consider the uptrend we were just in. When you get a monthly closing price higher than the top of the previous white bar, you add a new white bar, that extends from the previous high monthly close to the new, higher monthly close. Simple enough.

Now reversals. If you have only 1 white bar, price needs to close a month below the lowest point of that par to register a (red) reversal. If you have only 2 white bars in a row, price has to fall below the lowest point of the first of the two to register a (red) reversal. If you have 3 white bars in a row, price has to fall below the lowest point of the first of the previous 3 to register what is called a 3-line break reversal (should technically be called a 3-BAR break reversal). There is nothing qualitatively different about a 3-line break versus a 2- or 1- bar reversal. However, empirically, 3 white bars in a row generally denote a "legitimate" rally, and when a 3-line break reversal occurs, it usually denotes a "legitimate" reversal. Check out that monthly chart, for example. Since 1980, if you get one white bar, you always get one more, and usually 3+. With red bars, you've never had fewer than 7 in a row--which means a minimum of 7 months where price has closed to new lows. Therefore, this latest red bar is significant. I'm long oil and long treasuries on account of it, and I'll be patient unless I see an (unprecedented) monthly close to a new white bar, making this the first singleton event--either up or down--in 30 frickin years!

One last point: Once you have 3 up or down bars in a row, if you add a fourth, price only has to fall below the lowest point of the third-to-last. In other words, there's no 4-bar break. The last 3 are all that matter as far as reversal points are concerned. This nicely captures momentum. I.e. If you have 3 short bars in a row, meaning you had new monthly highs for three months, but they were weak, then a reversal becomes easier.

The other cool thing about these charts is the way they measure time. Not in clock-related measures, but with respect to events: new highs and lows. So, for example, 2013 was an especially "long" month, as you had a lot of new high events. Whereas look at the decade, 1990-2000!

GM Jenkins said...

I've done some site housekeeping. I removed some non-contributors from our list of contributors. If I've done so in error, just email me, and I'll replace. Also, I changed the heading from the Trader Dan quote to L Cypher's original Screwtape motto, which I've always liked. Trader Dan has got his own site (I've added him to our blogroll, as it was a clear oversight not to include him. Anyone else interested in being added to our blogroll please let us know).

Also, frankly, TD has revealed himself to be something of a prickly and dogmatic jerk lately. It seems he cannot brook even the mildest rebukes, and seems to want a choir of sycophants agreeing with everything he says. Also, for all his spin about wanting to "help" goldbugs who are being fooled by the permabull sites (and good for him, by the way--I ceratinly appreciate the time he puts in to writing 1 or 2 long posts every day), he has not been entirely consistent in that regard (as, say Kid Dynamite or Bron S or Dan at TheFundamentalView has). TD was a regular on KWN, ferchrissake, till he got kicked off. He used to link to Turd Ferguson's site when things were going well for gold, and though Turd has been the same guy for 4 years, never once did he criticise him. He even did a podcast with Turd, which I recall being surprised to see, and listened to the whole thing, and he did not contradict Turd in any way, if memory serves me. When gold was screaming higher, he was a regular on Jim Sinclair's site, but now has allowed the old man to be kicked around in his comments right as his company is tanking. Note Jesse's Cafe Americian is one of 4 or 5 sites he links to, but that's as GIAMATT a site as any. You don't see Kid Dynamite linking to Jesse. Finally, I'd like to see him actively and directly debate more than malign anonymously (why does he never link to the GIAMATTers he criticises?) Since he considered Turd a friend, and Turd seems a real good guy (despite the hurtful stuff he says about our humble blog) why not a friendly debate? Where he can bring up great points like "If crazy gold price action reveals government manipulation, you've never traded soybeans or coffee."

Warren James said...

Thanks GM for the details, a lot to digest there. Yes I've been a bit slack with rotating the quotes lately, (although I've been reading some good ones of late). Yours is a good reminder to be conscious of blogger bias, expressed or hidden. Plenty more chances in silver 😃, have a good weekend, all.

Gary said...

If there is no post at all for 3 months at a blog , will that class as a 3 line break reversal?

Or just a dead blog?

GM Jenkins said...

Gary- if there is no post for 3 months, a (bullish) 3-line break reversal would occur only after an active month of manic, cocaine-fueled posting, assuming the number of posts that month exceeds the number of posts in the first of the previous three months.Barring such a month, the bear trend can continue indefinitely, with new (red) bars added for each incremental inactive month.

Eric Original said...

Turd seems a real good guy? OK, you really lost me on that one. Turd is an agenda driven ideologue, whose blog entertains pretty much every conspiracy theory in existence, even creating a few new ones out of whole cloth. Turd is one of the very last people on earth you would want whispering in your ear if you were trying to manage your money.

When the facts changed, i.e. the trend in metals changed, Dan changed, and parted ways with the likes of Turd and KWN, much to Dan's credit. What do you do?

(to paraphrase Keynes, which is an awesome and fun thing to do, if only to piss off agenda driven ideologues)

GM Jenkins said...

Hey Eric,
I guess it's a subjective thing, e.g. whom would you rather drink a beer with. I remember that old saw was (astonishingly, to me) thrown around as a plus for George W. Bush back in the day. Frankly, he'd be among the last people I'd want to sit around knocking back beers with. And lately seems to me Trader Dan has a lot of the same qualities. Faux-humble, irritable, aggressively provincial (if that makes sense), fundamentalist, a little too sanctimonious and jingoistic for my tastes, etc. I'm probably being too hard on him, but that's the latest impression I've gotten.

Turd is indeed a conspiracy theorist. But it's a subjective thing, again. Some people hate conspiracy theories, while others like them. I'm in the latter camp, as long as I don't get too strong a whiff of paranoid schizophrenia from the theorist. I don't mean that as a cheap slur, btw, but literally, insofar as a paranoid schizophrenic simply will not be moved by conflicting evidence, no matter how strong. I have no reason to believe Turd is that bad, but I don't really visit his site anymore since he put hit behind a paywall.

Many arguments put forth in favor of gold manipulation are simply wrong (even asinine) but that doesn't mean it doesn't occur. It really comes down to whether the real shot-callers on the geopolitical stage (including those with something on the order of a trillion dollars in swiss bank accounts, who have massive power to organize all kinds of conspiracies) care about the price of gold or not. If they don't give a shit, as even some people who have a vested interest in a higher vs. lower gold price will say (e.g. Pierre Lassonde and Jeffrey Christian), then, yeah, all suppression conspiracy theories are probably false. But if they do care, as GATA will argue (and not without evidence, either) then all bets are off, and there might be more in heaven and on earth than sober spectators of the financial scene are likely to ever consider.

Re: Dan changing his tune with the trend -- the price of gold should have nothing to do with his attitude on manipulation. In short, he never went out of his way to lambaste the "GIAMATT crowd" until after he got kicked off of KWN and until well after the GIAMATT crowd had already cost a lot of innocent people a lot of money. That's admirable, that he eventually made the switch, and I'm convinced his motives are genuine, but still, it would've been far more helpful to the poor innocent suckers he purports to care so much about had he been forthcoming before the May 2011, September 2011 and especially the April 2013 crashes. A big name PM guy guy like Bob Morarty, for example, was warning everyone that silver had gone parabolic and to be very careful. I don't recall Trader Dan being as vociferous in his warnings. But it was long ago, and I could be wrong.

Eric Original said...

Not trying to be a Dan cheerleader either, btw. I agree he's been exceptionally cranky lately, actually driving away many frequent posters.

Dan is stellar when he just sticks to the markets and leaves it at that. But he will occasionally drop some politics in there, and then has an extremely thin skin for any back talk about it.

GM Jenkins said...

Yeah, TD's striking intolerance for dissent is really my point.

The other stuff I brought up (re: "would I enjoy a beer with him"), that's just personal tastes, of course. My conversation would likewise bore him silly, I bet. I certainly can't see him enjoying the subject matter I typically discuss with my pals over brewskis and beer nuts, such as the role anatomically modern humans might have played in causing the great Pleistocene to Holocene mammalian extinction, or else the advantage of adding the cosmological constant to the field equations of General Relativity (particularly in light of their applicability to nuclear activity at the sub-parsec scale), and (last night's debate, which got heated indeed) whether we're currently living in the golden age of porn, or whether that occurred 1976-1979.

Bron Suchecki said...

Regarding changing one's tune, I would only consider that a problem if pre-tune change the person knew what they were supporting (or failing to criticise) was BS and they just changed tune cynically as that was how the wind changed.

Then you have the person who was waylaid and truly believed their pre-tune change stuff but subsequently came to a realisation it was all BS. That I don't have a problem with.

Which one is Dan, I don't know as I haven't followed all of his blog posts and pre-tune change stuff. I'm guessing it is latter and after being dumped by KWN maybe he realised what a cynical game some of these sites play.

GM Jenkins said...

Here is an archived version of Trader Dan's site at the end of 2011, when the gold bear market was already underway. He lists 3 blogs in his blog roll. Two are Jesse's and Turd's. Have either Jesse or Turd changed their philosophy at all since then?

Gary said...

A classic non-story, no news, just some politician mouthing off his opinion.

Watch it spread like wildfire, courtesy of the ZH boys.

Gary said...

Well, the ZH boys are at least publishing the fatcs this time, albeit with their usual spin:

AdvocatusDiaboli said...

if some goldbug is looking for some moral/mental support, latest GoldReport2014 is out: