A very nice start to the week today. The after hours action on Friday had left me quite nervous but my concerns weren't justified...so far. Let's see what the rest of the week brings.
But so far, so good, particularly in gold which broke down on the hourly chart back on Friday, only to regain and rally today. This is particularly encouraging given that:
- The engulfing candle on the daily from Friday should have emboldened the spec shorts.
- Today is the first trading day of the month.
That gold was able to turn around and rally today...strongly...is very encouraging. Now, before we get too excited, there's still a long ways to go before Friday so you must expect some continue volatility. However, gold had every reason to extend lower today and it didn't. In fact, the opposite occurred. This must be considered a very positive sign for the days and weeks ahead.
Take a look at these two gold charts. On the hourly chart, note that gold had broken down and out of a two-week rally. This was very discouraging back on Friday and had me quite concerned that we were going to see another test of $1350 before the NFP (BLSBS) on Friday. Instead, look what happened! Price rode along the downtrend line for about 24 hours and then finally popped back UP and through and now rests right below the $1413 horizontal resistance line. As of this moment, chances are high that this "ascending triangle" will resolve to the UPside.
And check this daily chart. It is telling us that something significant is about to happen! Notice the volatility and price ranges of the past three days as gold is pressing up against both the horizontal resistance of $1413 and the 20-day moving average, currently at $1410.90. What I believe that this is telling us is this: It's do or die time for the Spec Shorts. They've pressed their short-term advantage and run their net and gross short positions to record and unsustainable levels. IF they fail here...and gold moves through $1420 and then $1440...there can be no denying the existence of a powerful double-bottom at $1350. If gold then moves UP through and closes above the $1485 and $1487 intraday highs of late April and early May, it will be all over for the shorts. The only remaining hurdle at that point will be the old range bottom at $1525 and, once through there, the panic felt by the shorts will be palpable.
Turning now to silver, though the charts aren't quite as demonstrably bullish, silver looks OK nonetheless. It has no doubt found a very solid floor near $22 as you can count anywhere from seven to ten attempts to permanently breach that level that have been thwarted. Look first at this hourly chart and notice not only the persistent $22-23 range but the stout floor, as well. Also, if you're wondering why the $23 level is acting as resistance, the answer is clear. The 20-day MA for the July silver is currently $22.94. As in gold, moving above this key short-term indicator will put a lot of pressure on the algo and HFT spec shorts so the level is being actively defended.
And now look at what I've found on this daily chart. This descending triangle will resolve itself very soon, probably by Friday. Normally, you'd expect the resolution to be more downside and that may be the case. Who knows? But...I think that $22 is a very solid floor, gold looks to be headed higher AND I have a hunch that Friday's BLSBS dats is going to "disappoint" the econobulls. Therefore, I think chances are high that this triangle will actually resolve to the UPside, instead. We'll see. Either way, we'll know very soon.
The closing OI for FirstNoticeDay of the June gold came in at a scant 4,946. This is disappointing to say the least. However, April FND had only 6,601 standing yet we still managed to see almost 1,300,000 ounces get delivered as many folks showed up during the April delivery process and "jumped the queue". Will this happen again. Maybe. Harvey Organ keeps track of this daily so I'll monitor the situation and keep you posted. One thing is certain...The Banks had better hope that this Comex delivery demand stays low because, as of Friday, they showed a registered inventory of only 1,571,000 ounces. That's enough to settle just 15,710 contracts.
And the overall open interest in Comex gold continues to plummet. As of Friday, it stood at just 375,206, which is the lowest level since late 2008. With today being the first day of the new month AND the first day of trading after the June contract went off the board, it will be interesting to see tomorrow what kind of change we saw today in overall OI.
Anyway, putting it all together, between these charts and the CoT positioning, it seems clear that we are on the verge of a permanent trend reversal and major spec short squeeze. The BLSBS on Friday appears to hold the key unless the longs decide to take matters into their own hands before then.
Finally, my friend Dan at FutureMoneyTrends just sent over another great interview with Marin Katusa of Casey Research. You should take a look. It's worth the nine minutes.
Have a great rest of your day and let's see how things trade overnight in Asia and London. The action there will definitely set the stage for New York tomorrow.