Hurry Up And Wait

Anyone who has served in the military, particularly on active duty, knows what it means to “hurry up and wait” very well indeed. Some describe this as “extended periods of boredom separated by times of panic”. A good look at a chart of market prices will show the same – periods when the market oscillates sideways in quite a narrow range and then suddenly a major – if interrupted at times – moves to reach a completely new level. This is true of normal markets, but it seems to apply even more to markets that are being manipulated against their normal development. At times the tug of war on the price between market forces and the intervention from some powerful outside entity reaches a near stalemate, with the price caught in a narrow if still volatile range. Everything seems to be under control, until something happens to boost to one of the competing forces; then a strong, sustained move, apparently out of the blue, comes as a surprise for the observer. Now many of the markets seem to be in that situation, waiting for a ‘something’ to give direction.  

When the unexpected happens, the markets react. Sometimes the reaction favours the manipulators – or they try to force the market as if the event was just what they were waiting for – and sometimes it favours the natural market direction. Events in Paris on Friday seems to have been of the latter type, but the efforts counteract the natural market forces had mixed successes. The news of the attacks in Paris seems to have broken by mid-day EST, following the attacks at 2130 Paris local time. The immediate reaction on Wall Street was surprisingly mild.

The DJIA started the day in a bear trend, but levelled off and then started a steep rally – as so often happens The familiar rising trend shows that the sideways trend was probably a result of strong support coming into the market earlier, to reverse the bear trend; this is of course nothing new for the DJIA after an intra-day decline. As people realised that what had happened in Paris while on full alert after Charlie Hebdo, also could happen in a US city, support faded or was over-whelmed by an increase in selling.

The gold market also reacted to events in Paris, with a first reaction clearly intuitive – frightened people flew into their ultimate safe haven. The price spiked steeply. As is so often stated in Midas, this is Not Allowed to happen! Just as the price reached its double top, BANG! Down she went steeply, to set a new low for the day. People simply HAVE to be made aware that there is no safe haven in precious metals.

There are so many folks who disbelieve in manipulation of the markets. I wonder whether they think people believe the events in Paris are a once-off and that all is now safe again and they can sell gold for a certain profit into the silly demand from panicking investors. What other explanation than manipulation is there for this? As is often said, A picture is worth . . .” and this one tells a story of intervention!

Euro-Dollar Chart

Last week’s comment started by saying the euro warns that Europe is in trouble. As it happens, the euro fell more as the week started, but then it remained in the tight range which reveals nothing of significance – a ‘wait’ phase, as mentioned earlier.

It might seem surprising at first glance that the euro did not react strongly to what happened in Paris; surely the intuitive reaction would be for it to lose value quickly and steeply against other currencies, the US dollar in particular. However, one has to keep in mind the saying, “A flood tide lifts all boats.” The euro-dollar rate will not change much if the currencies react in similar manner to the Paris attacks – and the dollar firmed relatively little in terms of the dollar index; it is also still below its high of earlier the week.

Last Monday, the euro moved closer to support at line D ($1.0654) and may well test it this week is investors try to absorb what had happened on Friday the 13^th. But assuming the forces acting on the currencies remain just like the tide, and that nothing further happens, support at line D would be expected to hold.    

Euro-dollar, last = $1.0774 (www.investing.com)

Dow Jones Industrial Average (DJIA)

Last week was not so good for Wall Street. The DJIA started the week well, closing on Monday still above the support of line A; (17245), as if waiting there to resume its steep rally of the past 8 weeks. But a break lower on Tuesday had the DJIA close  at its low for the week and also for Friday, as per the day chart shown earlier.

 A recent frequent comment here was that much effort would be going into pushing the DJIA back above the 18 000 level, so that it can fulfil its role as most watched weathervane of US economic health. The new rally has clearly failed to achieve the psychological target, only making it as far as to hold above support at line A for two weeks. Given how investor sentiment is likely to be this week in the wake of events in Paris, it seems doubtful whether a new steep rally can materialise.  

If weakness persists this week, the support of steep channel VW (16691) becomes an important benchmark; line W has acted as strong support on two occasions and if penetrated, would warn to expect much further weakness. If so happens, would it then be the signal that the Bear has finally taken over?

Dow Jones Industrial Index, last = 17245 (money.cnn.com)

Gold PM fix - Dollars

Gold price – London PM fix, last = $1081.50 (www.kitco.com)

On Friday, the gold PM fix at $1081.50 is just $0.70 above the recent July low at $1080.80, which is the lowest gold has been since the $1090.75 in March 2010 – still 30 months to go before the high in September 2011. The price is testing near 5-year lows, following the sustained downward pressure that kicked in in October 2011 – at the same time strange things started to happen in other markets too.  Something had changed in the expectations or perceptions of T(US)PTB; things that seemed to have rippled out to affect other global market powers as well.

http://blog.uncommonwisdomdaily.com/interesting-chart-of-chinese-gold-imports-8571

And Chinese gold imports is not the only strange development at that time. Gold still has support at the bottom of its large wedge, at line G ($1069). Perhaps the metal will truly become a safe haven now that terror seemingly can strike at will.

Gold PM fix - Euro

Euro gold price – PM fix in Euro, last = €1008.7 (www.kitco.com)

The renewed weakness in the euro again could not prevent the euro price of gold to decline even lower last week, with the Friday euro PM fix testing important support at the bottom of bull channel KL ( €1005.9). There is some more support at line S (€994.3), but it would be a negative if euro gold followed the example of the dollar price to test the bottom of its major bullish chart formation. Far better for the bull channel to hold and trigger a rally.

While Friday’s events may help in this respect, keep in mind what happened to the price of gold when it spiked in reaction to the attacks. I continue to believe silver is the bigger threat than gold for the people who so long seemed to have full control of the precious metals. If bull channel KL can hold, or recover if there is to be a test of support at line S – which hopefully holds – this too can be a game changer.

Silver Daily Fix Chart

Silver daily fix, last = $14.39 (www.kitco.com)

Silver, like the gold price, could not hold its bull channel – KL ($16.66) – but broke lower and is now close to testing key support at line S ($14.14), earlier the bottom boundary of large pennant GS. Technically, silver is clearly under greater pressure than gold, or the euro for that matter. This can be read as silver being pressured by more than just the stronger dollar.

The best one can say is the outlook remains longer term bullish on the break higher from the pennant, despite weakness implied by the break below channel KL. It is of little consolation, but growing desperation in some major markets is a positive sign that something will give way soon and thereby return normalcy to the markets.

U.S. 10-year Treasury Note

The latest ‘hurry up’ phase in the yield on the 10-year US Treasury note has settled into a fresh ‘wait’ phase. The rebound higher of markets resistance at 2.04% at line L (2.171%) late in October rushed higher to peak last Monday at 2.34%. The yield then settled sideways in what is clearly another defensive position to keep the yield from upsetting the already fragile housing market.

Wall Street is the more nervous market and if it should suffer from a conventional flight to safety, the Treasuries could benefit from that; so could gold and perhaps also silver. The scale of and apparent ease with which events in Paris unfolded on Friday is certain to simmer in investor’s minds over the weekend; it is impossible to guesstimate what will happen and what official reactions might be. Perhaps again a case of one should try to anticipate the unexpected!   

U.S. 10-year Treasury note, last = 2.275%   (www.investing.com)

West Texas Intermediate crude. Daily close

After holding near support at line D ($45.22), with a rapid recovery whenever the price dipped below that support, the price moved higher to briefly break above the resistance at line W ($45.65). The break failed immediately and the fresh weakness again took the price below the support at line D, this time to extend even lower.

Support at the bottom of bull channel ST ($41.70) was long considered to define a new rising channel for crude, but on Friday the price dipped through that support level – albeit by only about a dollar. However, This is sufficient to classify as a clear break, which, if it extends lower, could reach as low as long term support at line Z (%33.95). That would really be bad news, for fracking operators in particular.   

West Texas Intermediate – Daily close, last = $40.74

©2015  daan joubert,   Rights Reserved      chartsym (at) gmail(dot)com