Monday Evening Charts

Mon, Mar 19, 2012 - 5:02pm

I thought I would start a new thread with some fresh charts. Today's action in the metals was helpful but it appears that we still have some work to do before we can get excited about a rebound.

First, if it seemed that the metals were sluggish all day, it's because they were. Remember that, post-MFG, much of the speculative buying has been forced out of the Comex. So, for rallies to develop, we need some combination of these three things to happen:

  1. Cartel short-covering.
  2. Cartel new long establishment.
  3. Large spec (hedgie algo WOPR) buying.

Not much of #1 taking place right now as the recent CoT shows. Not much of #2, either. And, as long as gold remains below its 200-day moving average (near $1680), there's not much of #3. Put it all together and we're left with a day like today...a meandering drift higher that is easily subject to Cartel-inspired reversals to hold things in check. Absent some headlines to jam gold sharply higher, you have to expect this type of trade to continue. The charts seem to confirm this as the area between 1670 and 1680 shows quite a bit of resistance. Put it all together and it looks like gold will be stuck in this $1640-1680 range for a while longer.

Rather remarkably, silver looks a little bit better. Turdites will recall the seemingly endless battles that often center around the $33 level. Well, here we are again! Today's action was a very positive first step as silver was able to move up through and hold above $32.80, which is a number many of you will recall from earlier this year. If we can now build upon this tomorrow and extend these gains through $33, I think we can start feeling quite confident that the "right shoulder" is in for silver. Keep your fingers crossed!

Many have asked that I update the crude oil charts and today seems like a fine time to do it. Not only do the charts look pretty good, the war drums are growing ever louder. Soon, the U.S. will have 3 aircraft carriers in the Persian Gulf area and reports surfaced today that the Russians have inserted some troops into Syria.

As you can see on the charts below, after breaking out in mid-February, crude inevitably fell back and tested as support the level which had been resistance, near $104. Several attempts were made to break it down but price rebounded on each occasion. Now crude has clearly broken through the downtrend line from the late-February highs. At this point, it looks almost inevitable that crude will soon re-test the $110 region and, should that level fall, crude will soar toward $115.

With a tip of the hat to our pal Trader Dan, I present to you the two charts below. Do me a favor and print them off. Hold them up to the light and compare them. Maybe some of you are even resourceful enough that you can plot these two together on the same chart. Note the incredible correlation of the two since late 2008. Coincidence?? Please. And please ignore all of the douchebag, hypocrite politicians and pundits who want to blame high crude oil and gasoline prices on the "evil speculators and oil companies". Are they going to blame the S&P rally from 666 to 1400 on ExxonMobil and Chevron, too? What a load of crap. As all of you know, the $10T+ that has been created, loaned, margined and spent over the past 3+ years is solely to blame for the rise in price of everything that is denominated in dollars. In fact, consumers should be grateful that gasoline isn't $5.00/gallon at this point, given that the S&P is at 1400. Oh, well, just wait...between the impending wars and the refinery closures that Jim Comiskey pointed out last week, gasoline will get there soon enough.

Lastly, the founders of The Screwtape Files have long been followers of this site. Though they are sometimes critical of some of the uber-bullishness of the PM community (occasionally justified), several of the posters there are long-term precious metal bulls. Over the weekend, one of them sent me a link to a research piece he/she wrote on gold and gold miners. After reviewing it, it seemed logical to post it here, too. Take a look, I think you'll find it interesting. (Though I have to admit, the avatar of the blue-eyed lemur, or whatever the hell that thing is, kind of freaks me out.)

That's all for now. Let's hope we have a peaceful overnight. TF

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