Gold's Mild Slide Toward The Next Up Glide
Mark Mead Baillie | Sep 18, 2016 08:19AM ET
We opened last week's missive by highlighting gold having risen for, what was then, the ninth week of the prior 13. Now given this week's 19-point slide, 'tis of course risen in nine of the prior 14. Still on balance, fairly stout stuff. In fact, were gold to fall 100 points from yesterday's (Friday's) settle of 1313 and close 2016 at 1213 'twould still be an annual performance of +14%, the 14th best of the past 41 years. (We'll leave all those 13s and 14s to you numerology nuts out there, but "up is up").
All that enumerated, your third-grader can look at the following chart of gold's weekly bars and ably count them to point out that, all those recent up week's notwithstanding, 1313 is price's lowest weekly settle in the past 13:
Unlucky 13? We think not. True, the modern day skyscraper skips over the 13th floor, and no present-day Formula One driver races in a car "No. 13". But we like 13. 'Tis one of the best "exponential moving average" period studies to use, indeed right in the heart of Leonardo "Fibonacci" Bonacci's "Golden Ratio" numerical series, and for those of you in the Los Angeles area old enough to remember VHF television, there was the classic station jingle: "KLAC, Lucky 13!"
Yet with respect to the above chart, the rising blue dots denoting the parabolic Long trend would get flipped to Short should the ensuing week's trade drop a further 19 points to eclipse 1294. Obviously, every parabolic trend eventually meets its end, barring price going uni-directionally up to infinity or down to zero, (at which point the market ceases to exist).
Gold is currently in its 33rd weekly parabolic Long trend of this millennium, and this particular run -- now 14 weeks in length -- ranks tenth longest since 2001. Thus upon its running out of puff, be it next week, or next month, we shan't be surprised: we instead ought all then rise as one and give gold a "Standing-O!"
More importantly for gold is its underlying price support, and you regular readers know well of that which we write. Here at 1313 -- given gold's current "expected" daily trading range being 16 points, not to mention its weekly like measure being 38 points -- price is within a reachable spittoon's distance of wandering down into Neverland, better known as those "Whiny 1290s".
Dreadful as they were for better than a year -- when price could not comprehensively move above them (notably during 2014) -- now from the "Resistance Becomes Support Dept.", not only ought the 1290's serve as a massive mattress to hold gold from falling further, but there under also lie the "box springs" of the 1280-1240 support zone. Therefore, as goes the ebb and flow of the Gold trade, we see this price slide as mild toward the next up glide.
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For just as there's the stock market with plenty of technical downside that can't fundamentally go any higher, so we've gold with plenty of fundamental upside that can't technically go any lower. 'Tis a beautiful thing.
That prognosticated, gold and the stock market (as measured by the S&P 500), along with all of the primary BEGOS Markets (per the below chart) have been in decline month-over-month, the upside "culprit" (for some silly reason) being the Dollar Index, given "FedFear", having meandered a bit higher. Here are the percentage tracks for the past 21 trading days (one month) for the dollar vs. the BEGOS bunch:
"Wow! Oil's really skidded, huh mmb?"
Nice pun there, Squire. Yes, oil's lost 12% of its value since mid-August. 'Course here in San Francisco, where some 20% of the petrol price is pure taxes alone, 'twas reported yesterday that we're payin' 13¢ more per gallon than we did a month ago. Such is the tyranny that tortures this town. But of more import, oil is considered a leading economic indicator ... and its above track of the last month appears quite similar to the rightmost portion of the below Economic Barometer:
A bit of an eye-opener, what? Was that on the news? No. And given oil's tracking similarly to that of the Econ Baro, shall the Federal Reserve Bank lift it's funds rate come Wednesday (21 September)? No. What about in the foreseeable future? No.
Nonetheless, we've still the input out there from the HKADs ("Headline Kool-Aid Drinkers"), a well-touted FinTV network running with "The U.S. economy is barely growing, but it's expected to keep moving ahead fast enough to prompt Federal Reserve officials give serious thought to raising interest rates when they meet next week."
How 'bout a reality check which is again more in line with the Baro: here's where the foxy FedFundsFutures flock has placed its December FedBet: flat on 0.50%, (as opposed to 0.75% which would be rate-raise-indicative); this is the track of the December contract from 2014-to-date:
Meanwhile over in the Euro-Yo-Yo-Zone, Eurostat's July measure of Industrial Output dropped by 1.1% after having yo-yo'd up by +0.8% in June. "Mama mia, Mario!" (His European Central Bank Governing Council has a "non-monetary policy" meeting also this Wednesday).
So through it all, we've the precious metals in a bit of repose within their overall year of being robust. In the following two-panel display, on the left we've gold's daily bars for the past three months-to-date, the day-to-day consistency of the 21-day linear regression trend depicted by the blue dots, whilst on the right is the 10-day market profile, showing 1328 as the most dominant overhead trading resistor:
The picture is quite the same for Sister silver, who clearly is adorned in her precious metal pinstripes as she is tracking very close to gold; were she instead wearing her industrial metal jacket, we'd ironically expect her to instead be rising of late alongside Cousin copper, (who from his low last Monday of 2.0640 to his week's settle yesterday at 2.1590 put it a sporty upside sprint of +4.6%, which alas appears as nothing more than a dead cat red metal bounce, should you peek at his page over on the website):
In any event, given our gloating over gold's underlying support mechanisms, let's summarize it all with the stack:
The Gold Stack
Gold's Value per Dollar Debasement, (from our opening "Scoreboard"): 2637
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
Year-to-Date High: also 1377 (06 July)
10-Session directional range: up to 1358 (from 1307 10 days ago) = +51 points or +4%
10-Session “volume-weighted” average price magnet: 1332
Trading Resistance: 1314 / 1328 / 1341 / 1349 / 1354
Gold Currently: 1313, (expected daily trading range ("EDTR"): 16 points)
Trading Support: None
Neverland: The Whiny 1290s
The Weekly Parabolic Price to flip Short: 1294
Support Band: down to 1240 (from 1280)
The 300-Day Moving Average: 1199
Year-to-Date Low: 1061 (04 January)
With the "do nothing" Fed in the week ahead, we'll leave you with these few observations:
■ For those of you in the Cartier crowd out there, parent Financière Richemont warned on Wednesday as to its future profitability postings given revenue reductions from slowing EuroTourism and weaker demand in the Far East. Is that Gold-negative? Probably not. But if you're concerned about shrinkage in the value of your Cartier watch, just melt it down and wear it as Gold gram ingot. Now yer lookin' good!
■ Speaking of business, an annual political study by the Harvard Business School suggests that so-called "political paralysis" is the U.S.'s "single biggest barrier to competitiveness". Yet modern-day economic history shows us that "gridlock is good". Either way, gold is good ... really good.
■ How 'bout those StateSide Census Bureau findings? Real median household income last year rose 5.2% to $56,516. In 2007 'twas $57,936. Compare that to gold: it finished 2007 at $838/oz.; today 'tis $1,313/oz.
■ Dow Jones' news unit MarketWatch told us this past week that, rather than fearing stocks' selling off, we ought instead keep jumping into them. Nary a word in their piece about earnings. So we'll fill that gap: our "live" price/earnings ratio for the S&P is 36.1x. Buy 'em at the top you mo-mo, go-go guru. We'll stick with gold.
■ And finally we've this from our "Plastic Fantastic Banana Dept.": The Old Lady of Threadneedle Street is placing into circulation their new, more polymerly durable £5 note, which of course still features Liz on the obverse and Winnie on the reverse. And whilst there's no gold lacing therein, they do make quite the couple, one has to say:
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