Sunday PM pre-game, 5/3/2014

Hello friends,
--and sorry for the infrequent posting many of you have been wondering about. My plate's been pretty full of late.

Speaking of "full plates" -- we recently heard from our erstwhile contributor and lemur-emeritus, JdA (left) in the comments of my previous post.(Lemuritis was a tempting contraction, but sadly too evocative of another contraction, one that has led to the fever and painful urination I've been suffering on and off since Spring Break in 1997) ... and we're all thankful (as always) that she could take the time off her busy schedule to chime in:
 The PM situation is looking very ropey to me: in fact, I'm pretty sure that gold is going to tank over the next few months, and silver will perform even worse. Perhaps even in time for the anniversary of the Great Mayday Massacre of 2011…
 I have to agree, but I'm not short yet: the PMs have a way of following the long term charts, but flipping off the short term ones. As I pointed out last week, still waiting for a break below the 20-30 week ribbon on a weekly close (as well as the 144-day MA below that):

As well as confirmation of the first three-line break chart's reversal by the second (which I use to gauge intermediate cycles in gold, silver respectively)

So I'm faced with a dilemma... Given the lack of time I have for posting these days (as mentioned above), I figure it's better than nothing at least to post many of the charts I track, with minimal commentary. Perhaps some readers will find them helpful. At any rate, I'd be happy to answer any questions in the comments. 

So it's the end of another month, and I've decided to post monthly three line break charts for many commodities. I find the cleanliness of these charts absolutely amazing. Note these all go back to the early 1980s!

(Remember, a new bar is added to these charts whenever a monthly close is higher/lower than the previous high/low of the current trend. If two bars trend in the same direction, then the high/low of the first (i.e. earliest) of the two bars has to be broken for a reversal to take place. If three or more bars all trend in the same direction, the first (i.e. earliest) of the previous three bars has to be broken for a reversal to register.)

 Thus with the recent $19.17 close in the April silver price, we now only need to see a ~$20 monthly close for silver to register a bullish three line break reversal. I don't think that will happen, but it would a very positive development for the bullish case in silver if it did. 

Which isn't to say silver won't break $20 intra-month (and I am mildly expecting a rally). Those who have read my previous post will recall that the important monthly three-line break chart for "10 year yields measured in oil" was in the process of undergoing a reversal, and I predicted based on my gut feeling that it's too early for such a reversal, that oil would proceed to fall in price. Which it did like clockwork. There is still now no three-line break reversal on the chart.

Note gold needs a >$1600 monthly close to register a three line break reversal. Yet another reason why I see a close below $1200 before a return to a bull market: 

And here are many others, which are really worth tracking. . .

And frickin' wow:

 And now some old charts that are at precarious points.

Silver weekly:

Gold in swiss francs ... ugly:

"10-year yields in silver" seem to be heading up the new brown wedge. New readers should note the correspondence between hits of the dotted green wedge, and the major highs/lows in the gold price...

 Here's the long term chart of gold with my important proprietary support/resistance ribbon. Long way to go before last years catastrophic $1525 level is broken to the upside again, friends. Probably $1425 too, as I've mentioned for different reasons in the past several months.

 And one final interesting chart, suggested by our old friend Elmer Habavilo (hey Elmer where you been?). Note the correlation between gold and the Canadian dollar below it, starting when the two parted ways back in mid-December. It's at a historically very rare low. Interesting to note what similar lows have meant for gold in the past...

 Till next time!


by request ... 3-line break monthly and weekly of NASDAQ.

Amazing, isn't it, that the 2000 bubble high is in play again?

One reason I like these charts is that three-line reversals often lead to tradeable predictions. Eg...For over 35 years on the monthly chart, and since the 2001 crash on the weekly chart, not a single 3-line break reversal to the upside has been a "singleton" event. It's always followed by at least one more up bar, and usually many more bars. So a reversal on the weekly chart, which is currently in a 3-bar bear cycle, is worth keeping an eye out for.

Also, none of the equity charts, including these, say blow off top any time soon. Not sure why there's so much talk of a world historical crash approaching. Of course a major correction can always occur, and may this year. But I would see it as a buying opportunity, barring other developments.


ssgtrader said...

Ya, where is our friend Elmer ?

Anyway GM, did yu ever check your 3 bar break against the equity charts like INDU, SPX and NDX ? Are they equally useful ? Thanks !

GM Jenkins said...

Hey ssg-
The SPX monthly version is up there. The Dow looks the same. The Nasdaq is worth looking at (both monthly and weekly), so I posted it just now.

costata said...

Thanks GM, always interesting to look at these markets from your TA perspective.

I was reading an interesting piece earlier today from ZeroHedge. Someone I follow on Twitter tweeted a link. Here's the link:

A couple of analysts are quoted as expecting a major rally in bonds as a result of a rotation out of stocks and into bonds this year. Apparently there is also some new regulations in the US for pension funds that will add to the demand as well.

The main driver for the bond market cited in the ZH compilation that I linked above is a shortage of "risk-free" collateral as a result of the Fed (and foreign Treasuries + CBs) buying up so much of the US Fed. Govt debt and top-ranked corporate debt that a severe shortage in this paper is emerging and putting pressure on the supply of collateral and required regulatory capital. Add holders such as pension funds into the mix and looks explosive to me.

It might be worth looking into your TA crystal ball in order to see if there is a hint of these bond market developments on the horizon.

PS I also wonder if there is a correlation between a weak oil price and a weak gold price.

ssgtrader said...

Hi GM, thanks for the Nasdaq chart. I just check nasdaq is 4138 so I was wondering why your still showing 3999 ? It has been up for last 2-3 weeks right ? I agree that Nasdaq has not gone into bubble phase. If you follow Armstrong, the trillion printed will cause stock market inflation and send stock to much higher level and than PM will followed in the final phase. So I will rather stick to long NDX whenever there are correction to good support level and put very tight stops.

ssgtrader said...

More update on China. My China colleague told me the property prices in the 2nd liner cities are very dangerous. China on a large part depends on property sector to power their economy, so I don't think in the near future, China retail buying is going to power the PM price.

I also believe companies and govt investment in data center and their own cloud (data security - you can't trust data security in google, microsoft or facebook etc) will power NDX ahead. Besides, the social media boom will power needs for more data centers benefiting companies in network and storage area. Just my own personal opinion

ssgtrader said...

GM Jenkins said...

Thanks for the China update, ssg. Keep em coming -- always interesting!

Re: the NASDAQ, the reason why the chart is stuck at 3999 is because that was the low point of the current trend. The three line break charts do not measure time in the normal way: events aren't marked day to day (or week to week, or month to month), but rather only when a daily close (or weekly close, or monthly close, depending on the chart, of course) (1) builds on an already existing trend OR (2) reverses a trend as per the rules I describe in the post. So, it's a way to eliminate noise and generate a big picture. So, on the weekly chart, the NASDAQ is still in a down trend, and a new red bar will be added, continuing the down trend, if a week closes below 3999. On the other hand, because there are currently 3 red bars, the first of those three has to be broken to the upside to register a reversal (and a new white bar) -- and that level would have to be >$4308.

GM Jenkins said...

Thanks costata. Interesting and very plausible that bonds could rally from here. I looked at the charts pertaining to your comment on my phone but can't post them right now. However, on the weekly yields chart, there is an obvious down channel going back to 2003, and the recent high yield over 3.0 just hit the top. So from that perspective, it makes sense that we're headed back down. I've posted the chart before and will include it next time. Similarly, looking at gold-oil correlations just now, I've noted that a low correlation seems to predict a local minimum or maximum fairly well. I need to tweak the period of the correlation and make sure it's not just a chance-based illusion though...

GM Jenkins said...

* local min/max in gold price

costata said...

Thanks again GM. I would appreciate any observations you have on the gold oil price ratio's predictive powers (if any).

I sent a question to Victor The Cleaner about the Fed's ability to use its new re-repo facility to negate any shortage of USG paper in the market. I'll pass on his response.