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Posted on November 23, 2008 at 22:51 in Commentary by Tim Salem1 Comment »
Welcome to a new week everyone!
A new week…and the beginning of the “End of Year/Holiday Volatility” season that we work with each year.
The analogy with today’s title refers to the “Skeletal” view that we have during this time.
We begin to see the major Institutions, Hedge Funds, Entities, and Banks begin to “Thin the Herd” for the run up through the new year.
Senior Management and Traders begin their holiday and vacation plans to take time off, junior traders and customer service personnel are left at the dealing desks, and what is left is the “Skeletons” of the Firm…and the transparent “lower trading volume” that comes with along with it.
This year may just be entirely different…the World’s trading entities have already begun “Thinning the Herd” to the point of having overgrown pasture with the 5-6 Cows left to graze the planet’s financial landscape!
So what does this mean for us?
Under previous ”normal” conditions during November and December, we usually see light volume of the Major Market participants bringing along plenty of volatility, noisy whipsawing, and large intraday swings.
Yes…I do hear you.
“But CVJ!…We are seeing that RIGHT NOW…and have seen that scenario for months!”
I am shedding a few tears for all of you…I am so proud!
You guys are sharp! 
With the President-Elect beginning to assemble his incoming Cabinet here, we heard on Friday and “saw” a major catalyst for Dow strength, Gold strength, and Dollar weakness in the probable choice of New York Federal Reserve President Tim Geithner as the Secretary of the Treasury.
This is what the world Media would have us believe.
But…as Traders…we know better.
In my personal view…we were simply reaching key technical levels in the Dow below 8000, a touch under 800 in the S&P, as well as most Major currency pairs where a paradigm shift was literally imminent.
As we always say, we cannot continue in a uni-directional path forever.
This scenario is a good analogy for our “Skeletons” emerging view with Market activity in the next 6 weeks.
We will see unexpected impulsive volatility that will be based on seemingly mundane Data, sentiment, rumor, or fact.
It is as if the final Quarter of the year is always under increased magnification.
Remember…Entities that have billions of dollars to try and square in the Books by December 31st will go to the Markets of “least Resistance”…just as the flow of Water.
They find these “Portals of Opportunity” right here in the Foreign Exchange markets.
A quick recap of Gold from our visit on Friday.
Our thoughts about pushing towards $760 surely came through, and we blew past this level onto the key area of $800-808 per ounce.
It appears we may simply have a “false break” here, as the previous consolidating in the larger Triangle gives us a “market memory” to visit again and say “Hello”.
Additionally, the macro-Consolidative Price actions of the entire month provides additional sentiment to visit $770 a clear Support here.
It turns our that our “physical” Gold buying friends we spoke of on Friday are still on task, indeed!
The World Gold Council stated the purchase of Coins and Bars to be at a 10-plus year high in the 3rd quarter.
Hmmm…maybe “CVJ’s crazy thoughts” on Gold during Friday’s Post aren’t too off the Mark after all…
OK…now all of you owe me a Drink! …hee hee…
I would like to encourage those who subscribe by email, and those who do not directly subscribe to the Blog, and all of the superb Blogs here on FXStreet, to have a look at this Link for the solutions to using the RSS Feeds.
It is deeply expedient…and much more convenient than email.
I mean…C’Mon…how many more emails do you really need in your Inbox each day?
http://www.google.com/support/feedburner/bin/answer.py?answer=79408
Tags: bars, coins, currency markets, Majors, resistance, support
Why I still Love my Nemesis…Gold
Posted on November 20, 2008 at 22:13 in Trading Ideas by Tim Salem1 Comment »
Welcome to Friday, Everyone!
OK…a quick update on the “Pretty Metal Lady” from Wednesday’s deeply volatile day!
While Gold was slightly bullish and relatively stable….the World around Her certainly was not!
(But hey…what does She care, right?…According to our “story”…She’s in Australia grilling Shrimp with new boyfriend, I.M.A. Hedge Fund! …hee hee…
Volatility and Risk Aversion still rule the Day…so how did Gold handle it?
( click once for capture)
Our Symmetrical Triangle we identified yesterday continued its’ coiling throughout the Asian Session, and broke north a good 20 Bucks to form a “mini”-Bull Flag, as I call them.
We can see the Fractals here, with our “building blocks-within-building blocks” idea, and if the current directionality continues… a push to our Resistance area of the $760’s is highly probable.
( Remember…Support and Resistance are “relative” in my personal view, so I consider them as active ”areas” or “ranges” that function as Key Levels. Price is not stagnant…so why should areas that define it be? )
Remember our Monthly View?
The Technicals of the Fibonacci retracement itself confirm my Bullish view…Plain and Simple.
But I know all of you want the big singular Argument!
“CVJ!…Tell us more of your crazy thoughts!”
In which I cordially reply, “It will be my pleasure, and thank you for inquiring!”
With global assets continuing to deflate, what have the Central Banks of the world economy been doing?
You’ve got it…cutting Interest Rates!
Our Fed, and our friends in the EuroZone and the U.K. will more than likely continue to do so, and how do we “counter” moves such as these?
We “offset” and liquidate Asset Classes to meet Margin Calls. Gold is one of the Tools to do just this. But in a “counter-intuitive” fashion in our current climate.
I say this because Gold certainly has not functioned the past few months as the traditional “Safe-Haven” security blanket like you had as a child.
(This is where our friend, I.M.A. Hedge Fund, comes in! While he’s off in Australia with Gold…what are all of his Hedgie Friends doing around the globe?)
They are de-leveraging by meeting massive margin Calls using Gold, as well as other “Hedging” instruments, to cover other poorly performing Asset Classes they may have.
This is translating to an impressive increase in “Physical” Gold buying, as the Supply continues to strain.
Supply constrains…Price expands…Economics 101.
Now here comes my token DISCLAIMER!
All of you know by now I tend to hold longer-term views on most things…including Trading itself….meaning “A Scalper I am Not”.
I enjoy the Macro-View, and also realize any of the “actions” that take place will take months to digest and reach their fruition.
My Bullish Gold view is no different.
We are not seeing Gold as a “hedging” against Inflation in this current climate just yet…but our “Physical” Gold purchasers I mentioned above would respectfully disagree.
Our own Fed Minutes stated that “More agressive easing (by Central Banks) should reduce the odds of a deflationary outcome”.
As soon as the easing ceases, and our Hedgie Friends around the globe stop liquidating everything but their Summer Estates…Gold should rise and appreciate in value, as well as the AUD/USD…the Aussie Dollar.
When?
“I have no idea….and I do not NEED to know because I REACT to…”
Well…if you have followed the Blog daily…you know the rest.
Tags: Asset Class, AUD/USD, central banks, deflation, hedge fund, inflation
The Other Woman I Love…Gold
Posted on November 19, 2008 at 22:41 in Market Analysis by Tim Salem2 Comments »
Hello Everyone!
Today…we move on to my nemesis…my ex-girlfriend…Gold!
I’m doing OK with it…ever since she ran off with I.M.A. Hedge Fund…you can only cry for so long, right!
So what is the reason for the fallout with the “Other Woman I Love”?
It was her evil twin brother…his name is Flight to Quality.
( OK OK…I’ll stop with my big soap opera! All of you need to tell me when my animated writing just gets to be too much! )
In all seriousness, Gold is arguably the First Currency of human civilization.
It’s Role in the annals of time are well documented, and will not be considered here. So down to business for our needs here in the Foreign Exchange world.
The correlation between Gold and the Australian Dollar is one of the highest historical correlations that we have in all of Finance.
The correlation has hovered up to a massive 96%…usually averaging around 86% more or less.
We find this correlation primarily as the Aussie Dollar really can be seen as a “Proxy” for Gold, as these first two Captures below illustrate.
(Remember…just as with Oil and the Loonie…consider Gold and the Aussie as two separate Instruments with their own individual characteristics. The Gold/Aussie correlation is even higher, so we really need to be mindful of seeing them on their own merits!)
The great vast land of Australia is the worlds’ third largest producer of Gold, as well as a leading economy for the production of all Metals in this Commodities Complex.
South Africa is the world’s second largest Gold producer…and who is #1?
CHINA! …something my FXStreet Premium South African friend, Boykie, is none too happy about!
(click once for captures)
We notice a significant “unwinding” in the correlation here the last few months, don’t we?
See how strong Gold is?…how resilient it has remained?
It has simply not continued to slide down to the sea as the Aussie has, but has had plenty of consolidating “Push and Pull” Price action within itself.
This is where our “safe haven” nature comes in…HISTORICALLY, at least! This certainly has not been the “pure” relationship that it appears to be!
Gold has lost more than 20% of its’ value since the March 2008 Highs…so it may not quite be the strong “Safe Haven” we would like it to be.
In its’ most simplistic form…when we see “Fear” as a sentiment racing across the Financial Spectrum, we see see a “Flight to Safety”, or a “Flight to Quality” into Gold as an Asset Class.
We are trying to “hide and preserve” the integrity of our inherent value, so we will convert our Funds into Gold.
Of course, these relationships are deeply complex…but for our needs here, I am trying to be as simple and concise as possible.
Let’s start with a little basic Technical Analysis and see where it may lead us…
( Once again…that Masked Marauder is back who says things do not work! First it was Markets have no Memory, and now Fibonacci Analysis is invalid…OK..we need to get this guy to open his eyes and take off his Mask!…hee hee…
Onto the 4-Hour, where we can clarify some Triangular Consolidating Patterns.
OK…now the really fun part!
Are you not going to ask me what my Bias is?
Just like my “wife”, Crude Oil…I am Bullish on the ”Pretty Metal Lady” over the long-term.
“Not AGAIN, CVJ!…Bullish again?”
I hear you, I hear you…do not revolt against me just yet!…
Just as with Crude…I will provide a singular Argument for you in defense of my position tomorrow.
In the meantime… I bid “Good Day, Madam!” to Gold.
Her new Beau… I.M.A. Hedge Fund, is sweeping her away for a long weekend.
You guessed it…to Australia.
Tags: China, commodity, correlation, crude oil, FXstreet Premium, gold, hedge fund, Metals, proxy, safe haven, South Africa
CPI comes in Bleak…but Reactions take place for other Reasons
Posted on November 19, 2008 at 10:01 in Commentary by Tim Salem2 Comments »
Hi everyone!
An IntraDay update for you!
Our U.S. CPI data points were dismal, as our large economic spiral continues into the Abyss.
Expectations here on total CPI were 0.2% Month-over-Month, and 2.4% Year over Year.
“Close…but NO Cigar!”, as we say…
Remember, these are INCLUDING Food and Energy…which will usually give a little stability since we use these items daily in our lives.
Stability?…I think not!
Month over Month fell off of the mountain coming in at -0.1%. This should not be a surprise to anyone out there in the States that has gone shopping.
Year-over-Year brings along additional confirmation with 3.7% as opposed to our estimate of 4.1%
We simply are just not buying any non-essentials…so this paradigm will be reflected in a larger chasm with what we are paying in retail prices and actually measuring in Price movements.
Our Core…minus Food and Energy was a bit more in line with 0.1% vs. 0.2% estimated…and Year-over-year clocks in at 2.2% vs. 2.4%
Now…here is the Key, in my opinion.
Did the “breaks” we saw and Dollar weakness come into play due to CPI being off the Mark and negative?
No !
It is my belief…and has been for weeks and weeks….that our Markets are simply ignoring any major Data Point releases.
We simply have too high of correlations to the US. Equity markets, the Dow, S&P500, etc. and our Currency work has been reflecting the overall Risk Aversion that has been blanketing the World.
Please be mindful of this…
Remember…the Markets are largely “counter-intuitive”, so as Traders we must adapt to the “Prevailing Winds” that blow our way!
Tags: Consumer, CPI, Data, news release
Crude Oil and I…A Marriage?…or a Passing Fling?
Posted on November 18, 2008 at 22:49 in Commentary by Tim SalemNo Comments »
Greetings All!
Today’s Post is a long one…so go get a drink and your reading glasses!
Let’s see how my fair-weather Wife, Crude Oil, progressed in our market analysis overnight through Tuesday’s Close.
We bring up our Hourly View again, and it is clear if your were of the Bearish sentiment…you were correct.
Bias remains to the downside here, and our lower Support level of 49.90 is still deeply in sight.
(Now, keep in mind these Charts represent the December Crude Futures Contract…so your Charts may vary by a few fractions of a Cent, or Ticks. Interestingly enough, this Contract expires tomorrow…which gives us more ammunition to the downside…)
(click once for captures)
Our overall “sentiment” really has not changed “technically” in the last day.
We still have a wide berth for a corrective retracement here…but I will say this: 49.90/50.00 will most likely be reached before we see this corrective directionality.
Oil is down 60% since its’ $145 peak in July, and is certainly poised to continue falling. All we need to hit our $49/$50 levels are continued Dollar strength, and another collapse in the Dow. The Yen Crosses such as EUR/JPY and GBP/JPY will also follow, providing additional confirmation.
This will certainly bring the mid-$40’s in sight.
Now…let’s get to all the large Macro Socio Economic Neo Political Geographical and Historical Criteria of Crude Oil, and see where we land!
( OK…try saying all of THAT 10 times as fast as you can…)
I know…I can hear all of you saying in unison…
“But CVJ!…We have a brilliant idea! LET’S NOT!”
Fine with me!
I will attempt to sculpt all of this down into a singular view of “Why is that crazy CVJ Bullish on Oil?”
While in the medium-term, I do believe Crude and Commodities as a whole are still due for depreciating value…I do not see this lasting forever. After all, what are Commodities? They are largely things we humans need and consume.
Crude Oil is the “Consumer King” of them all!
Now…while we continue to work on all sorts of alternative energy resources and such, I personally do not see these solutions as viable in the near-term…even when they come to fruition and are practical and adopted on a global scale.
These macro-factors will take 40-50 years to really clear the “consciousness” of the World to adopt, and perhaps a generation longer.
I use one Example here for my Bullish argument.
The TATA Automobile Company.
“The WHAT, CVJ?”
Tata. This is India’s largest vehicle manufacturer, but you should know it for another reason:
It bought Jaguar and Land Rover from Ford for $2.4 billion earlier this year!
What…never heard of this? The American Media kept this on the QT?…under the table?…beneath the sheets?
I’m shocked, I say…SHOCKED!
The Tata “Nano” is the new Indian flagship “sub-compact compact” car that is geared towards 45 million Indian citizenry and their Motor-Scooting ways. Not to mention the other 230 million “middle class” folks who may find the automobile attractive for their needs.
The Nano is a cute little thing… it makes that new “Smart Car” look like that stretch Limo-Hummer you took to the Opera last week.
If I ever get to India to visit a couple of my Trading Mentors and fellow-Bloggers, Sunil Mangwani and Dr. Sivaraman, we will have to drive around in one!
The Key? The $2500 price tag!….well within reach of tens of millions of Indian, Asian, African, and other populations looking to ditch the Rickshaws and Bicycles!
So, to me, this singular event will translate itself into a surge in Petrol demand, as well as Crude and all of its’ other Distillates in manufacturing and transporting all these little “Matchbox” Cars all over these economies.
That is my argument for being Bullish on Crude Oil in the macro-long term. Simple and concise.
While we look for the alternatives and move ahead with our lives…we have to remember those in the “emerging” world economies are moving ahead as well.
Prime Example: Just because the Olympics are over in Beijing…does not mean China has closed up shop and went back to the fields!
DISCLAIMER!
Please do not go all “Earth Day” on me here.
Please do not send me an Anthrax postcard or something…or…Heaven forbid… even worse…
A “4X Made Easy” Course! …hee hee… :-)
Please be mindful here…that these are just some thoughts on my part based on common sense and the logistics of Supply and Demand over a really long-term Cycle!
I have no idea what Crude will do in the next 3 minutes…much less the next three years.
Again, as a Trader, I do not NEED to know. I simply have to have movement and Price action to REACT from.
My friends and personal Mentors hold the same view. When you have an “arsenal” of resources to work within the Markets properly…it becomes a matter of trying your best to choose the right resource for the task at hand.
Are we always on target?…always correct?
Of course not!
But the Key is having your Risk Management criteria in place at all times, as this will cushion the damage of choosing the wrong resource and ill-advised opportunity you presented to yourself.
So bring on the Questions and Comments as always! |
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