Quiet With Some Promise

December 29, 2015

We are into the last week of 2015 -- and the markets are still marking time; but there is some promise for the precious metals. Only a whisper of a promise and may not have much more when 2015 runs out on Friday. However, if the promises develop some more during this week, the New Year may just have a good start for the gold and silver bulls. With year end just ahead, large money is riding on a strong close for Wall Street and the treasuries. It would not surprise if these markets rally into the close, while other players try to get the prices of the metals as low as possible to ensure good profits on their derivatives. Time is getting short!

A year ago it had seemed as if 2015 could be the year when some markets started to unravel while good things were anticipated for others. At that time, sentiments expressed here were aligned with these anticipations, but 2015 did not deliver. In fact, the opposite. Also at that time, few other voices expressed similar views; the consensus was still that the economy was not good at all, but at least was muddling along; this actively promoted view was based on official yet questionable statistics.

During 2015 this changed; more and more evidence of intervention in markets was uncovered; much of this with pure (?) profit as the motive, but brave authorities in Europe looked at similar evidence in market for precious metals and started to act. Given a mounting degree of risk in markets where available supply is running low, those who are manipulating prices clearly have not been doing so primarily to make a profit, but for some ulterior motive.

Now these players have to think on how to manage an End Game that would enable them to keep their profits without suffering undue financial or legal risk. At the rate China and others are accumulating gold – quite well reported – and probably silver as well – rarely reported – they may not have much time to act. This, by now long awaited, exhaustion of available supply of gold seems likely to move centre stage in 2016 and that could mean fireworks in the PM market!

As reported elsewhere (Serial bear pennants on the DJIA), Wall Street has been on the receiving end of repeated resuscitations since October 2011. One needs nothing more than to look how surprisingly quickly the DJIA recovered, then more, after an event had the index spiking lower into what might have been the start of a sell-off. Many voices are now heard warning that corporate profits no longer justify the lofty prices of the major stocks, while the stock buy-backs using low cost debt that have assisted the record prices should taper off as rates increase and levels of corporate debt approach realistic limits.

Those changing circumstances could provide the bearish impetus required to break through the artificial support for the DJIA to begin the long overdue bear market – which implies that it could be very steep and long sustained. Even the professional shorts, of which many had bled out during the repeated resuscitations of the DJIA, will not close positions too soon and thus offer some floor of support; they all know they can be patient, sit back and enjoy a long ride down.      

My best wishes to all readers for a new year that will bring peace and good health, prosperity and good companionship.

Euro-Dollar Chart

Following the widely expected increase in rates, which briefly undermined the euro, the currency settled in a tight range. This seemingly ‘wait and see’ attitude in the forex market could still spring a surprise as 2015 slips into its close. There is ample room for a move that would not threaten either key support for the euro, at line D ($1.0681) or the resistance at line Q ($1.1174) that is protecting the dollar.

olding above line N should reHH

Euro-dollar, last = $1.0973 (www.investing.com)

Dow Jones Industrial Average (DJIA)

Despite some evidence – mostly during intra-day trade – that the DJIA is not being allowed to trade freely, the market is not showing a clear direction. It is stuck in a quite tight range, not getting close to the important 18 000 level, not challenging support at 17 000. A sharp move this week cannot be excluded, likely to be lower that higher, unless some people believe a close above 18 000 is critically important.

Dow Jones Industrial Index, last = 17552 (money.cnn.com)

Gold PM fix - Dollars

Gold price – London PM fix, last = $1068.25 (www.kitco.com)

Gold is holding the sideways break from channel KL ($1091) for a bearish signal. It dipped lower to briefly break below the support of line R ($1062), but managed two weeks ago to recover back above line R. A brief dip below support at line D ($1054)  opened up bearish potential, but the price recovered immediately to hold last week back above the support at line R. If this can hold – or improve further – as 2015 is on its last, 2016 may just begin with a positive outlook for gold.

Gold PM fix - Euro

The euro still stands relatively firm against the dollar, which keeps the euro price of gold within the same narrow range of  the week before – below the large and long term triangle AS (€1001) and holding close to support at line Y (€979.2), to prevent a definite bearish break below the large pattern. A brief dip below this support gave a false warning signal; however, the euro price of gold should recover back into the triangle AS to inspire some confidence.

A recovery back into the triangle and a break higher from it is essential to confirm a new bull market in gold; a higher dollar price, while the euro price sits sideways or even declines, does nothing except signals a weak US dollar. This will not be good enough for the metal, even should US owners of gold see an improvement in their financial situation. Gold needs to experience strong demand and a rising price in its own right; not as a result of dollar weakness.  

Euro gold price – PM fix in Euro, last = €979.5 (www.kitco.com)

Silver Daily Fix Chart

Silver daily fix, last = $14.20 (www.kitco.com)

Initially, following the break below bull channel KL ($18.72), silver held to support along line S ($14.02) – extension of the lower boundary of large pennant GS. But two weeks ago – in sympathy with an attack on gold – the onslaught against the precious metals took the price of silver briefly below line S to seek support at line G ($13.30). The low fix at $13.71 did not really challenge line G and silver has since   recovered back above the important support at line S.

Playing around with some channel ratios, shows some evidence that the silver price might experience a bullish surge some time during January, perhaps even as early as mid month. This is way out exploration of possibilities, but would be good to see – more so if gold also reacts!

U.S. 10-year Treasury Note

The yield on the 10-year US Treasury note is still settled in bullish triangle NF (N: 2.336; F: 2.069). The first leg down, from line N down to line F, was a sustained if volatile rally, while the rising leg 2, tested the support of the market at line N three times before reversing lower into leg 3. Leg 3 briefly touched the market resistance at line F before turning bearish into leg 4 again. So far, the fourth leg has failed to complete by reaching line N again. It now seems more likely that a break above line N at the end of leg 4 will happen; such a premature break would be very bearish.

U.S. 10-year Treasury note, last = 2.245%   (www.investing.com)

West Texas Intermediate crude. Daily close

WTI crude – Daily close, last = $38.10 (Investing.com)

After holding at support from line S ($41.438) on two occasions, the support gave way and the price continued lower to also break below the $35 level. This move below bull channel RS and into bear channel YZ, with support at $30.46, does not spell anything good on two fronts. Firstly, it points to slack demand for oil from the global economy. That spells trouble for more than just the US. However, with the massive financial commitment to shale oil extraction, US banks and the financial system is over-exposed to debt that is unlikely to be serviced for quite some time; perhaps long enough to precipitate a new financial crisis.

The recovery back to above $38 is a positive sign. However, it this not enough for any optimism. That would require at least a recovery back into bull channel RS.

©2015  daan joubert,   Rights Reserved      

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