Sunday PM pre-game, 3/16/2014

Greetings, friends-

Eric Sprott in his latest appearance on King World News mentioned an imminent "golden cross," wherein gold's 50-day MA is expected to rise above its 200-day MA.

“We are going to have the ‘Golden Cross’ probably sometime next week, which I think will bring lots of guys in from the sidelines who realize that a new bull market has started because there is no better sign than the Golden Cross.

First off, could it really be the case that “Billionaire Eric Sprott” doesn’t have an army of interns crunching numbers for him, to keep him from sounding less sophisticated with his prognostications than a day trader at a barber shop? (Actually, he wouldn’t need an army, just an eighth grader with a TI-89.) 

Rather than guessing “within days” or “sometime next week,” Sprott could’ve been quite specific in his prediction: Friday. It’s virtually impossible the “golden cross” will occur Monday, Tuesday, or Wednesday, and highly unlikely it will occur Thursday, as gold would have to hold an *average* closing price over those 4 days $50 higher than where it is now. For the MAs to meet on Friday, the closing price of gold only has to average $1375 next week, so that's possible. Of course, if price falls next week, the golden cross will not occur next week. But most KWN readers, I fear, tend not to consider that possibility.

See the chart below for what the average price of gold would have to be over n days for the golden cross to occur in n days. And someone forward it to Mr. Sprott...

Note that though the golden cross is likely to occur within 5-10 trading days, it isn’t *quite* as inevitable as KWN’s Team of Erics seems to imply in that interview (at least practically speaking, since the cross would have to be fairly emphatic for it to have any self-fulfilling effect on momentum) -- e.g. if gold drops back below the $1275 level over the next 4 weeks, there will be some coiling (the 200-day MA is on pace to flatten and start turning up), and the outlook becomes dicey. 

Let's visit Sprott's statement: “there is no better [bullish] sign than the Golden Cross.” Strong words. So he'd probably say there's no worse bearish sign than its opposite, the so-called “Death cross," right? Actually, no, as it turns out, that's bullish too. Please see Sprott's mention in the article "The Death Cross is actually bullish for gold" from last year... where you'll also find mentioned the fact that the "golden cross" has an even worse track record. Ah Sprott, you gotta love the guy. 

Anyway, seeing as I was already at King World News (I go there for the pictures), I read Egon von Greyerz piece, where he showed that the bull market in equities loses its luster when measured in Swiss Francs. I recommend it. I don't think I've posted a gold in Swiss Francs chart in something like 2 years, so here it is. Note that an all-time high was hit on October 1, 2012. So we Ameri-centric investors tend to think the gold bear market has been grinding on for 2.5 - 3 years now, but with respect to Francs (and Euros), let's remember that the all-time high was in play even in 2013. See the blue trend line I've drawn in: it starts on Oct 1 (the day of US gov't shutdown, when Euro rallied), and was touched a few times, the last being right after the Cyprus bail-in news exactly one year ago, when Gartman predicted gold would jump 5% when trading resumed. Let's see if that trend-line will be strong resistance (I suspect so).

My predictions from 2 weeks ago were so damn good, I'll just paste some updated ones. I probably should've taken profits Friday, but I didn't. I'm guessing based on the below charts, there's still room to climb (though I'd bet aggressively against $1434 being broken, even intraday, anytime soon). There is almost certain to be some violent dips this week, as per the usual FOMC bullshit. 

The 300-day MA seems important (it's where gold stalled), as does the comparable (Fib) 89-week MA and the 78-week (i.e. 1.5 year) MA. 

With no further ado, updated charts from two weeks ago :

An important breach here!

And a new bar on the top chart. Let's see if it can be confirmed on the bottom chart. Note that the bottom chart (GLD:GDXJ) is my silver proxy-- and silver has indeed been lagging gold.


ssgtrader said...

Couples of years back before 2011 Sprott was quite accurate. I recalled he did said silver look like going to test $50 end 2010. But last few years his record has been poor

ssgtrader said...

Even if we do get a golden cross in the daily chart, one should still be mindful of the death cross in the weekly chart, so it is not plain sailing for PM

Unknown said...

I don't know about golden crosses, but seeing as how th Obama administration is making these relatively futile sanctions on Russian officials and businessmen these days, it seems like The USA might just be effectively asking Russia to dump their $132 billion in treasuries so that Russia can be the fall guy for the coming economic collapse... Because from where I stand, this just doesn't seem to make sense any other way-- the us is sanctioning a country that is the 9 th largest holder of treasuries worldwide... It seems like the USA might just want some to prick the bubble that has to be pricked anyway... This way they can blame Russia for the collapse

Unknown said...

And no one make me find my previous post(s) where I laid out how food inflation will break out in in earnest this year: