first majestic silver

Gold's Short-Lived Short Trend

Market Analyst & Author
March 24, 2019

A foundational phrase throughout these many years of penning The Gold Update is "Being Short Gold is a bad idea." 'Cept that since 06 September 2011 when the price of Gold peaked at 1923, Short has materially been the side to court, or as the French would say "la position forte".

'Course where the Gold Shorts get killed is upon price opening an ensuing trading session significantly higher than where it closed prior, leaping over many-a-Short's "stop" and sufficiently so as to force a margin call, even account forfeiture, and in the extreme, an eternal trading ban.

To be sure, opening gaps happen in both directions: since 2001, Gold has gapped down by 10 or more points on 16 occasions; but it has gapped higher by same or more on 26 occasions including that infamous 52-point (+5.9%) Short slaughtering to commence trading on 19 March 2009: "G'Bye!"

So why are we going on about this? With another week in the books and thus another bonehead Barron's piece, (this time in reference to the week prior that stocks had gained "Because Up Is the New Down"), as cockamamie as 'tis, spin that 180º and we've a valid description of late for Gold. To wit, let's begin with the chart of Gold's weekly bars.

The four rightmost red dots represent the weekly parabolic trend as Short per its so flipping on the week ending 01 March, (which in nearly two years was Gold's worst one, -2.7%, since the -3.2% rout for the week ending 05 May 2017). Yet since then for these three most recent weeks, Gold in each case has consecutively recorded higher lows, higher highs and higher settles. Why? "Because Down Is the New Up", or more specifically put, Gold is being bargain-bought within the stance of what is looking to this point as a short-lived Short trend.

'Course, it has not reached its end, the level needed to be eclipsed in the new week being 1342, which we consider perhaps "out-of-range" given Gold's 25-point expected weekly trading range is shy of the requisite span given price having settled out the week yesterday (Friday) at 1313. Putting that in perspective from a year ago-to-date, Gold has netted only two weekly gains of at least 25 points. Still as we look across the entirely of the graphic, the diagonal dashed regression trend line is now only barely sloping lower as its rotation toward positive continues:

Naturally, the ongoing bidding for Gold remains fundamentally supported per the realization first by the Economic Barometer, second by the private sector and now lastly (as usual) by the members of the Federal Open Market Committee: that which was once considered robust is now rather bust, so to speak. Or to put specifically, economic growth is waning. We saw the positive effects of the Corporate Tax Cut blast through 2018's first three quarters of earnings, the fourth then bringing them back a bit into more "typical" form. In fact specific to the S&P 500, for its 463 constituents reporting during the defined Q4 Earnings Season, only 71% were better year-over-year: that may appear impressive, but 'twas the weakest year-over-year improvement since Q3 of 2017. Was that on the news? No.

And now per the FOMC's powwow this past week, they're looking to sit on their rate change hands for the balance of 2019, (our Economic Barometer having already peaked nine months ago). And 'tis not just StateSide: on this side of the pond up in Germany, for the first time since October 2016 the 10-year yield on their bloomin' Bunds is back down to zero ("0%") as the Purchasing Managers' Index contracted to its lowest level since 2012. "Das kann nicht gut sein!" Moreover since that same year, the U.S. just posted its largest-ever monthly Treasury Deficit of $234 billion for February. All of this (and of course more) served to see the S&P succumb on Friday by better than 50 points for the 16th trading session since March a year ago. The 27% correction road to 2154 continues. Here's the Baro with the S&P 500 alongside in red:

"And mmb, by 'of course more' you mean..."

Ah Squire, nice of you to check in. It ought be obvious with specific reference to the S&P's high (understatement) "live" price earnings ratio of 30.8x along with the still-declining amount of dough it takes to make the S&P go, from $911k as of 29 January for moving the Index one point to now just $572k. 'Course, neither too was any of that on the news, (nor shall it be even after 'tis too late to have abandoned the stock market). Got Gold?

To be sure, some are getting Gold given these past three weeks of price being bid back up. For as we next turn to our two-panel graphic of Gold's daily bars from three months ago-to-date on the left and the 10-day Market Profile on the right, Gold's baby blue dots of linear regression trend consistency have adroitly veered vertically, with price finishing the week above the 1308 and 1303 supporters:

Similar is the state for Sister Silver, her price +3.0% from the 07 March low of 14.99; that compares to Gold's +2.5% rise from the same date when 'twas 1281; and yet the Gold/Silver ratio of 85.1x as earlier depicted beneath the chart of Gold's weekly bars remains at a comparable extreme to this century's norm. Thus we find Silver at the two-week support/resistance price of 15.40, unlike Gold being further up its own Profile path:

Let's therefore stack it all up for Gold:

The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 2862
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
Gold’s All-Time Closing High: 1900 (22 August 2011)
The Final Frontier: 1800-1900
The Northern Front: 1750-1800
On Maneuvers: 1579-1750
The Floor: 1466-1579
Le Sous-sol: Sub-1466
Base Camp: 1377
The 1360s Double-Top: (1362 in Sep '17 and 1369 in Apr '18)
2019's High: 1349 (20 February)
The Weekly Parabolic Price to flip Long: 1342
10-Session directional range: up to 1320 (from 1291) = +29 points or +2.2%
Trading Resistance: 1318
Gold Currently: 1313, (expected daily trading range ["EDTR"]: 13 points)
Trading Support: 1308 / 1303 / 1297
10-Session “volume-weighted” average price magnet: 1305
Neverland: The Whiny 1290s
The Box: 1280-1240
The 300-Day Moving Average: 1276 and imperceptibility falling
2019's Low: 1275 (24 January)

In closing, we continue noting the childish proliferation of stuck-on-stoopid headlines, and worse, their then leading us on the road to nowhere. Just on Friday, fresh off the Dow Wires came "Forget Gold and Palladium, Rhodium Tops Both." They're just figuring this out now? Knowingly wasting our time by clicking upon the link came this result: "We're unable to find the story you're looking for. Please don't sell us short." Really?

Sure you can run with some Rhodium, but do yourself a Long favour, luv: recognize that Gold's Short trend is short-lived!

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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