first majestic silver

Gold Rejoins The Battle

Market Analyst & Author
May 22, 2016

During the years 2012 through 2015, the Gold Forces were essentially on wholesale retreat from much higher zones such as "The Northern Front" (1750-1800) and "on maneuvers..." (1579-1750), prior to falling through "The Floor" (1579-1466), et alia. But enter 2016 and Gold bolted right out of the chute, rising as much as 23% so far this year, indeed clearing the 1240-1280 resistance zone in settling above it in six of these last 13 trading days, and moreover closing up into The Whiny 1290s on two of those days. Whence we then started dishing out phrases portending price pullback, with such modifiers as "expected" or "not unexpected" or "ought not be surprised". And now provably so, the combination of the 1240-1280 resistance zone and Whiny 1290s has since become ever more identifiable as a huge hurdle for Gold to overcome ... which it obviously will, given, if for no other reason, the massive amount of monetary accommodation that will be needed from the Federal Reserve Bank in having to sop up all the SHBs ("Senior Housing Bonds") we think the U.S. Treasury shall have to invent and sell, the proceeds in turn being distributed to millions of seasoned citizens unable to pay their rent and buy food, the inadequacy of their meager life savings, plus Social Security just not filling the bill, (aka "America's Next Great Financial Trainwreck"). Such unavoidable event shall naturally be a Gold positive, along with all the other stimulators of currency debasement here, there and everywhere.

And thus, instead of giving it all up yet again as has been the case in recent years, Gold day-by-day is fighting away, in full rejoindre of the battle. Throughout these last three consecutive down weeks for Gold, price has not slipped a single pip under the 1240-1280 resistance zone, the low therein being 1245. To be sure, as we below turn to Gold's weekly bars, the parabolic trend finally has flipped to Short. But consider this: the duration thus far of the Third Millennium A.D. is 726 trading weeks; Gold's just-completed parabolic Long run of 17 weeks was only the seventh such mutually-exclusive occurrence 2001-to-date and the most sustained one since the 21-week run ending almost seven years ago on 19 June 2009. The worst parabolic patch was the 31-week Short run culminating on 31 May 2013, during which time the Gold Forces retreated from 1678 to 1388. Yet given the way this year is unfolding, surely Gold's momentum has shifted to the upside, and all-in-all, fairly impressively so, one has to say:

If in the ensuing weeks Gold can hold the 1240-1280 resistance zone, or not venture too far astray beneath it without returning up into it, the new declining set of parabolic Short dots ought, by mathematical right, be short-lived, Gold then again being off to the races to thwart The Whiny 1290s en route toward Base Camp 1377.

That said, this new parabolic flip to Short has reset our four criteria as to "how we'll know when the bottom is in" from 3-1 to 2-2. (Again, "the bottom" to which we refer is last 03 December's low of 1045. Why even Gold-Abhoring Goldman has just snugged up their 12-month Gold Shorts target from 1000 to 1150). Anyway, here is the state of our four criteria, followed by their visual:

■ The weekly parabolic trend ought be Long ('tisn't)
■ Price ought be above the 300-day moving average ('tis)
■ The 300-day moving average itself ought be rising ('tis)
■ Price ought trade at least one full week clear above 1280 (hasn't)

Meanwhile from the "Oh No Not Again Dept.", as has Gold fallen for three straight weeks, (along with Silver, Copper, the EuroCurrencies and Yen), so has the Dollar risen, the Index of the robust Buck up 2.4% from 93.025 to 95.290, a move sufficiently startling as to confuse our friendly FinMedia out there. For 'tis all about the sudden upside whirl 'round in EconData, in turn ramping up the probability of the Federal Open Market Committee voting to nudge their FedFunds target rate from 0.5% to 0.75% on Wednesday 15 June, (the same day your Q2 Tax payments are due). Here's the confusing bit: this past Wednesday 'twas reported that " lose ground as possibility of imminent Fed hike is priced in..." Query: does imminency have possibility? Imminency infers 100%, non? Yet then we heard 'twas only a 34% chance for a June Fed hike. But wait, there's more, for in the wee hours yesterday (Friday), we heard Bloomy Radio state that stocks are up as expectations surge for a June rate hike, (they're then noting that the hike odds were 28%). The take-away? Stocks are both down and up given an imminent June vote by the FOMC for a rate hike, for which there is roughly a one-in-three chance. Savvy? Ok good.

As noted, data received so far in May has pumped up our Economic Barometer, positive metrics of note coming from higher Productivity, a reduction in the Trade Deficit, along with improvements in Retail Sales, Housing Starts, Existing Home Sales, and Capacity Utilization, with survey upgrades in the Institute for Supply Management's Services category and the University of Michigan's Consumer Sentiment reading. And the cherry on top of it all for the Fed? Increases in inflation at both the wholesale and retail levels. Here's the Econ Baro:

"But mmb, the trend of that blue baro line is down across the whole chart..."

Exactly right, friend Squire. But momentary economic mirth makes for good FinTV, stirring our souls toward electing the right Executive to keep it all going, what? Just remember this: such feeling of felicity would be quickly fleeting were all debt to come due as the dominoes drop, leaving all with naught -- unless of course you own Gold.

Speaking of mis-directed merriment, we've arrived at the conclusion of Q1 Earnings Season, (the final breakout tallies of which you can see at the website). As an example, there was much rejoicing this past Thursday as "Walmart crushed expectations, and shares are exploding" so went a headline. By our reckoning, the Walmart's earnings per share of $0.98 were 4¢ worse than the $1.03 earned in the prior years like quarter. But in the way of the world these days -- be it financially, culturally, or whatever ally -- worse is better. Indeed for the Q1 earnings collected from some 2,500 companies, only 50% were better year-over-year. And specific to the S&P 500, our "live" price/earnings ratio at this writing is 37.9x and our "live" yield 2.223% ... just in case yer scorin' at home.

To market trends and profiles we go, starting with Gold. And in the below dual-panel graphic on the left we've Gold's daily bars from three months ago-to-date, the descending "Baby Blues" indicative of the 21-day linear regression trend having lost the entirety of its consistency; whilst on the right is Gold's 10-day Market Profile, which in this view essentially spans the entirety of the 1240-1280 resistance zone, the overhead challenge being to reclaim the 1274 to 1277 plateau:

And here we've the same drill for Sister Silver, at left her 21-day linear regression trend now building to the downside as the blue dots pass below their 0% axis, whilst at right what had been profile support at 17.10 has morphed into profile resistance:

For the white metal we've also this trading observance, (of which if you've read Friday's "Prescient Commentary" you're already aware). Swinging on Silver's 4-hour (240-minute) parabolics across that study's last 10 flips (Long-to-Short-to-Long-to-Short etc.) has in hindsight recorded "profitability" all 10 times. Of course, the "Doctrinaire Trader Treads the Track of Death", and parabolics like so many technical studies are sufficiently late that the pure swinger inevitably strikes out. All that said, price in those four-hour trading increments is nearing a parabolic flip to Long, the week's settle yesterday being 16.550 and the descending parabolic at 16.600, at present a difference of just 0.050, with Silver's "expected daily trading range" currently 0.420; (Silver's 4-hour parabolics are in the current list at the website's Market Rhythms page). Try not to get carried away.

We'll leave you with these three notes:

■ The Yen trade may be lively Sunday-into-Monday on the heels of the G7 ministers (meeting this weekend in Japan's prefecture of Miyagi) going all-a-tiff over the host country's intervening in the currency markets, it being the "in thing" these days to make one's currency dog as ugly as possible. That's a good reason to own Gold.

■ And speaking of dogs, their attacks on our StateSide postal workers have increased year-over-year to some 6,500 carriers having been bitten in 2015. This is timely news indeed, having just come through Dog Bite Prevention Week. How biting is your country's bow-wow currency? Again, 'tis good reason to own Gold.

■ Finally here's what we deem as de facto the best headline of the week courtesy of S&P/Dow Jones market index analyst Howard Silverblatt in crying out "Help me, Janet Yellen! It’s been a year since my last high" That's cute. Perhaps put more poignantly, 'tis been some seven years 7 since your last low: uh-oh. Yet again good reason to own Gold.

Speaking of speakers, Chair Yellen speaks next Friday up at Harvard. 'Twill be all ears on the heels of the somewhat hawkish FOMC Minutes from their late April pow-wow. Are you going to "paaak yaaa caaar at Haaavaaad Yaaad"? Probably best to instead be parked at your trading terminal and focused on Gold!

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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