first majestic silver

Gold In Pursuit Of Modern Love

Market Analyst & Author
January 17, 2016

With respect to our declared targets this year for Gold (upper 1200s) and the S&P500 (lower 1400s), both markets are directionally off on the right foot through these first two trading weeks of 2016. Given the Media Melodrama over the stock market, 'tis that as our opening act.

The S&P500 settled yesterday (Friday) at 1880, not just down 8% in the young year, but also down 12% from its all-time closing high of 2131 on 21 May 2015. Again, we're targeting the S&P500 reaching down into the lower 1400s this year, some -25%, as perceived equity "savings account" gemstones turn into the reality of "Diamond Dogs". 'Course, that wouldn't happen to an actual savings account, (else your S&L manager would have some serious 'splainin' to do, Lucy). Moreover, at the year-to-date rate at which the S&P is falling, 'twould be in the lower 1400s come 01 March, a mere 31 trading days hence; however our good friends over at the "Nothing Moves in a Straight Line Dept." remind us there are still 242 trading days remaining in 2016, and thus there's plenty of time for the S&P's wiggling about within an overall -- and desperately overdue -- downside bias.

That said as we turn to our main act, Gold, whilst up not quite 3% year-to-date, still is being stickered with a "Rebel Rebel" label as more of an outcast alternative, rather than garnering the revered respect 'tis been accorded across so many millennia. However, at its rate of rise year-to-date, Gold would rummage into the upper 1280s spot on at mid-year with a full half year then in the balance to achieve said target, (again given that no straight line notion). And quite the target 'tis, for as you regular readers know, should Gold clear the purple-bounded 1240-1280 resistance zone as below shown in our weekly bars chart, (along the way reclaiming the 300-day moving average, presently 1161, and turning the trend of that average upward), 'twill be "how we'll know the bottom is in". Yet despite the year's up-push thus far, those red-dots denoting the Short parabolic trend as still being in place are persistently pesky, non? "Mama? Get out the dynamite!"

From dynamite to denial as we return for a moment to the stock market's act. Yesterday whilst swerving through the club locker room past its now perma-FinMedia television set, an onlooker remarked, "It'll go back up..." For you see, 'tis not really down, is it? Then emanating from the radio in this morning's wee hours came this strain, replete with the analyst's Wall Street accent: "If you're a 401k investor, it's probably best not to look at your statement in order to avoid being put into a bad mood." The level of (for lack of a better word) ignorance as to what's unfolding is incredible. For at the end of the day, things surely can only be good, right? Further, the Federal Reserve Bank's release (last Wednesday) of its "Tan Tome" found modest growth in most of the Fed districts. Whew! That was close. Why, for a moment I thought I was a lad insane, but am feeling better already. Aren't you? Here's the Economic Barometer:

Turn and face the strange "Changes", what? And from our purview, everything taking the blame for the fallout, be it China's unraveling economics and confidence and/or Oil's plentiful stockpiles pulverizing its price, 'tis all but a masquerade as to the End Problem: Earnings. For despite the new year's pullback in the S&P, our "live", conservatively-calculated price/earnings ratio at this writing is 40.4x: two times too high. Just as Gold is twice as low as it ought be (1089 vs. 2514) by our Scoreboard's measuring. The financial dislocation is diabolical, for remember, (allowing for a bit of hyperbole): if all that is owed came due at once, all would have nothing, save for all those with Gold; and all those without would want yours.

Now as we oft posit, Gold plays no currency favourites, the bow-wows all running amok chasing one another's tails as the world's economics go wobbly and money moves into the yellow metal as well as into both the Buck and the Bond. To wit, this next snapshot of Gold dancing to the upside along with the Dollar Index for now better than a month. Have you been made aware of that from any source? No, for it can't happen that the two markets ever rise in tandem. Note the almost perfectly parallel dashed linear regression trendlines. See? Who knew, eh? "Let's Dance":

Indeed specific to the last 21 trading days (one month), here is the entire BEGOS Markets complex, each component with its daily bars, diagonal linear regression trendline, and "Baby Blues", the dots which denote the consistency of that trend. Only the Bond (upper left) and Gold (upper right) are in ascent, the balance of the bunch in decline, certainly so the "Spoo" (S&P 500 Futures at lower right). As for Sister Silver (lower left) she's, at best, simply stuck, let alone hardly a "Sweet Thing":

To our final display for this week, that of Market Profiles, (of which you can see for all the BEGOS Markets at the website). We only mention that as Silver, which regularly makes this graphic, has had her profile become so scrunched that there's really not much there to show (resistance 14.000, current 13.900, support 13.800). Thus in her stead, we've substituted the Spoo (right), presently at 1877 after trading down yesterday to as low as 1849. For Gold (left), price is centered in the profile at 1089:

We'll wrap it here as follows: having punctuated this week's missive with musical inferences from one of rock's beloved greats having moved on, let us simply say that just as the man who fell to earth went back up, so too shall Gold in pursuit of "Modern Love"toward resuming its "Golden Years".

Mark Mead Baillie

Mark Mead Baillie has had an extensive business career beginning in banking and financial services for two years with Banque Nationale de Paris to corporate research for three years at Barclays Bank and then for six years as an analyst and corporate lender with Société Générale.
For the last 22 years he has expanded his financial expertise by creating his own financial services company, de Meadville International, which comprehensively follows his BEGOS complex of markets (Bond/Euro/Gold/Oil/S&P) and the trading of the futures therein. He is recognized within the financial community of demonstrating creative technical skills that surpass industry standards toward making highly informed market assessments and his work is featured in Merrill Lynch Wealth Management client presentations.  He has adapted such skills into becoming the popular author each week of the prolific “The Gold Update” and is known in the financial website community as “mmb” and “deMeadville”.
Mr. Baillie holds a BS in Business from the University of Southern California and an MBA in Finance from Golden Gate University.

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