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  • Gold (XAU) Technical Review

    Trend: Mixed Momentum: Mixed Sentiment: Mixed Daily Trading Range: High $54 (3.2%)                              
    Daily Simple Moving Average Lines: Blue (20 SMA) Green (50 SMA) Orange (100 SMA) Red (200 SMA)  

    Gold (XAU) 4-Hour Chart

    Gold (XAU) 4-Hour Chart

    Technical Wave: The move lower from 1760 to 1550 was the A-leg of an ABC-Down structure, which sent the B-leg up from 1555 to 1650, resulting in the C-leg test of support at 1520. If the next upside bounce fails to break near-term resistance at 1650, the December 2010 price at 1410 could be a potential technical target, however unlikely that may fundamentally seem. 

    The near-term overall outlook remains mixed, with strong opinions on both sides as to the merits of holding or selling bullion. There are still compelling common-sense reasons to assume that dips will be bought, in-line with long-term analysis that shows gold to be in a raging bull market. However, the near-term technical picture indicates that shadow central banking cartels control valuations, and may not yet have finished suppressing Gold values.

    Buy Support: Bullish traders will be looking to buy any short reversal to 1510, (the swing point area that have proven to be pivotal in trade this year), which could then target 1595 and 1625.

    Sell Resistance: Bearish traders will be looking to sell long moves that fail at resistance around 1650 (the 50% Fiboncci retracement area from the move lower from 1760 to 1520) which could then target 1625 and 1580 (the recent swing point low), if global risk markets implode.

    Overall: A technical picture that confirms bullion positions are being built for the long haul, but not without some serious tests of near-term support, as global markets are forced to constantly re-price equity and interest rate risk. The 3.2% of daily movement is keeping traders busy. Reversals to main support have been bought so far this year, and nothing suggest that will change, however volatile the intra-day moves become.

    This Week: Look for the pattern of buying-the-dip to continue, but not without some major and consistent tests of support, and accept that news-headline related moves are dominating technical potential. The near-term trend and outlook is mixed, but many times this year buying opportunities have come from these set-ups. The intra-day trading range is extreme and signals that massive volatility remains a constant threat. The 200-day SMA area could offer the next main area of volatility if tested around 1625.



    Information, analysis and methodologies provided are for informational purposes only, obtained from sources believed to be reliable, and should not be used as a replacement for research by an individual investor or licensed investment professional. In no event should the content of this correspondence be construed as an express or implied promise, guarantee, or implication that profits or losses can be made or limited in any manner whatsoever. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

    Jan 08 4:03 AM | Link | Comment!
  • 2012 Dreams and Hopes? Bank Now

    The global equity indices benchmark, S&P 500, is back to Dec 1998 valuations, having also closed at a net sum gain in 12-months of 2011 trade. It would seem that Buy-and-Hold investors are in for a repeat of 2011, and many could be looking at 1.5% (three-session) YTD gains and wondering whether to bank now and take the year off. 

    A large number of market participants are saying that the US business cycle will de-couple from global contraction, and is likely to recover in 2012. It is said the growth will be driven by strong demand now that the US global economy appears to have diminished the pace of contraction, if recent economic releases are not subject to mighty revisions in the future.

    That outlook however flies in the face of Federal Reserve Minutes that point to 2013 as the time that interest rate expansion, and therefore sustainable growth, will be seen.

    A fundamental question rises for those who see growth coming in the near-term; where is economic demand likely to come from? It is an important discussion for those who still believe in Buy-and-Hold equity positions, because if growth is not actually seen it is very likely that equity indices will not move too far from current valuations.

    There are two main groups to pull expectancy from (outside of dreams and hopes); consumers, and from industry, and both seem increasingly unlikely to assist in the expansion phase. 

    Consumer demand is usually driven by credit. However, credit card and loan/mortgage defaults are holding record highs on both sides of the Atlantic, while, the velocity of money – which speaking from a theoretical point of view, measures the level of economic activity – has reached very low values for the vast majority of developed economies. 

    The U.S. saving rate increased exponentially, in-line with the drop of available credit, to 7% in 2009, the highest rate seen since 1993, after being at negative rates in 2008. Nothing has changed in that pattern, except that reduced savings rates in 2010 and 2011 may be attributed to the paying down of debt or replacing lost income flows.

    This situation points to a consumer that has been forced to start saving for their financial safety, rather than building a pile of unsustainable debt, as in previous decades, that aided economic expansion, but ultimately proved toxic for Wall Street and Main Street. 

    As admirable as it is that savings have been forced on consumers, and the heady days of Main Street excess look to be partially restrained, the administration will be pushing for an increase in consumer debt to fund the expansion that pays back the stimulus packages. The heady days of Wall Street excess seem not to have been interrupted.

    Strike one; the U.S. consumer will not be consuming the economy into growth anytime soon. 


    The glimmer of hope is that global savings rates eclipse the rate at which Americans save, and as such the overseas savers may be able to spark a consumption rally. That however, remains nothing other than a glimmer, rather than a ray of consumption sunshine. 

    Industrial demand is in a comparable situation to the consumer driven demand. During the economic downturn a high percentage of factories have been temporarily closed, or have reduced output dramatically, while employees are fired. This means that when the economy picks up and factories see a stronger backlog of orders, they will simply re-open the idled machines, instead of buying or building new. 

    This economic phenomenon is known as economic slack, and can be measured using the capacity utilization report and detail. Since the US economic slowdown started, the capacity utilization rate has dropped at a very strong pace, and has been far stronger than in previous economic slowdowns. 

    Due to the economic slack, industrial demand is likely to stay at low rates, until the economy reaches once again the 2007 production levels. That is something that is not likely to happen until the consumer in the U.S. starts to consume. 

    Strike two: the industrial sector will not be manufacturing its way to economic growth anytime soon. 


    All this put together shows that the recovery period will be slow and long, and when translated into market momentum will likely transpose itself into a side-ways trend in risk and currency markets over the medium to longer term. Sound familiar? It should, because this is setting up to be a repeat of last year.

    Investors and analysts will try to value regional business cycles and local economic growth, and while that is unfolding, divergence will be seen in regional valuations and expectancy. The forex market might come back to life on its own, breaking some of the historical correlations it had with S&P futures over the last year, as the regional debt-to-growth ratios are absorbed and valued. 

    The easiest way to generate growth, historically, is to cut interest rates, lower taxation, and force credit onto banks. However, as  witnessed from 2003 to 2007, there is a harsh price to pay for the famine-to-feast business cycle that the US is travelling, as it goes from contraction to peak, and back down again, in record time. 

    The troughs get deeper, whilst the cycles get shallower, and that creates a unique US-based conundrum that may, over time, impact negatively the US perception that the consumer will save the day. Just how will the consumer be able to do that? (Rhetorical).

    Strike three: the administration may be issuing a new, bigger, better, stimulus package, that covers the interest on the previous package, but that looks to be like a drop in the ocean of what is really required. Economic growth and expansion are a long way off.

    The Fed knows it, tenured traders feel it, and the Talking Heads will likely get to see it as 2012 unfolds.



    Information, analysis and methodologies provided are for informational purposes only, obtained from sources believed to be reliable, and should not be used as a replacement for research by an individual investor or licensed investment professional. In no event should the content of this correspondence be construed as an express or implied promise, guarantee, or implication that profits or losses can be made or limited in any manner whatsoever. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

    Jan 07 10:51 AM | Link | Comment!
  • Futures Trade Desk- Daily Market Update

    Client Note 

    Daily Market Update

    Latest Update

    - The pattern of trade seen over the last four years is already evolving; 2012 will be volatile with bullion likely to be favored over stocks. The halting of some financial stocks in Europe, and the overall dark cloud surrounding debt issues will not easily clear. A big week of Red-flag economic releases awaits, ahead of US Earnings Season starting next week.

     

    Economic Calendar

    04:30 ET Gbp Services PMI Est 51.6, Prev 52.1

    08:15 ET Usd ADP Non-Farm Employment Change Est 176k, Prev 206k

    08:30 ET Usd Unemployment Claims Est 375k, Prev 381k

    10:00 ET Cad Ivey PMI Est 57.5, Prev 59.9

    10:00 ET Usd ISM Non-Manufacturing PMI Est 53.0, Prev 52.0

     

    Recent Updates

    - If the debacle surrounding Government debt issues creates increasing spreads, and becomes a likely pattern of 2012 trade, bullion will strengthen.

    - The US releases Red-Flag economic reports from 08:30 ET through 10:00 ET which will very likely impact sentiment and open trade potential for the next 24-hours. 

    - Downside momentum will not really build until S&P 500 closes a day below 1250, and the German Dax closes below 6000 and holds. Bullion is holding support after a move to test major resistance. 

    - Equity Indices have absorbed some European Financial stocks being halted, with some lower by over 5%, with S&P 500 holding 1250 main support.

    - Major currencies are giving back ground to the USD, as dollar-denominated Swap lines (credit) are being used to create inter-bank liquidity via the latest iteration of a bailout. 

    - The EUR/USD signal from 1.2950 yesterday has moved to test 1.2830 in response to weak inter-bank sentiment. CHF has also lost value, which has pur EUR/CHF close to the 1.2000 'line-in-the-sand' valuation by SNB. 

    - European Financials have been hammered lower in response to weak Government bond auctions that have failed to stem rising payment yields. The interest rate on Government debt will not be sustainable.

    - Main global asset classes are back to their 2012 opening prices. The Dollar Index caught bids in-line with EUR and CHF weakness. There are no new signals forming at this time. 

    - Gold bullion (XAU) is at 1625 resistance, which remains a roadblock headed up by the 200 and 20-day SMA's. The next reversal will very likely be bought, but history says that 200-day SMA areas will not easily break.

    - Take care with any open position at this time; global market momentum, trend and sentiment are not aligned, which will create volatility. Some will bank early and often, using the previous session high or low as targets.

     

     

     

     

    Information, analysis and methodologies provided are for informational purposes only, obtained from sources believed to be reliable, and should not be used as a replacement for research by an individual investor or licensed investment professional. In no event should the content of this correspondence be construed as an express or implied promise, guarantee, or implication that profits or losses can be made or limited in any manner whatsoever. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

     

     

    Jan 05 9:19 AM | Link | Comment!
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