Spring sprang here on Thursday, a young man's fancy lightly turning to thoughts of love. As for us grey hairs, we instead find ourselves welcoming Gold to this well-overdue, corrective pullback as part of a healthy regimen necessary toward maintaining the renewed bull market's sustenance.
Straightaway we remind ourselves that as improbable as 'twas noted last week for Gold to maintain a year-to-date growth pace which was on track toward making an all-time high come 25 August, the tongue-in-cheek notion we had back in January of price achieving 1466 by mid-year has become far more feasible, as further does appear a run into the inner-Floor average resistance levels around the 1529 area by year's end. For Gold's vigor is back despite this welcome volume of pullback.
Catalytic in reversing Gold's recent safe haven buoyancy borne of Crimean crises, cockpit conspiracies, Chinese delinquencies and currency printing sprees -- as well as technical unsustainabilities -- was the anticipation and then inconclusiveness surrounding Federal Open Market Committee's Taper Caper, Episode Three.
Whilst Fed-speak is oft shrouded in evasive veils, 'tis been quite some time since we've witnessed so many interpretations of its monetary mysteries than those which with we've been beset since both the FOMC's Statement and Chair Yellen's Press Conference this past Wednesday. FinMedia and analyst opinions thereto have been running the gamut from the Fed's declaring a "strong move on guidance" to "squish".
Yet to package the many words of the Fed's Head Teller into a succinct sentence, we'd simply paraphrase Old Yeller as follows: "We intend to maintain an accommodative stance by altering policy, so as to maintain policy by altering such stance." (Which for you pop aficionados out there is kind of like the strained personnel state within Fleetwood Mac come their 1997 taping of "The Dance").
Either way, or perhaps better stated, "which way?" the FOMC's formal Statement inferred that the 6.5% rate of unemployment "end-of-accommodation target" has become all but attained, albeit without reference to the current "U6" level of 12.6%. Moreover, at the end of the day, one would hope those Masters of our Money are ardently sensitive to this:
To be sure, the Economic Barometer -- in its responding to some 50+ data inputs per month -- charts more as an oscillator than as an absolute price track; but you can see that its current level today is no better than 'twas six-months ago, nor one year ago. Yet, year-over-year the S&P is +21% and has materially boffed the otherwise traditionally leading characteristics of the Econ Baro. Still, with three Fed tapers in the books, its now monthly outpouring of $55 billion has to go somewhere, dangerously high equities' valuations be damned! And, "as scheduled", one ought expect such faux dough to continue at a pace of $45bn/mo. come the end-of-April FOMC gathering. But should the Econ Baro by then have barreled lower still, come the mid-June séance, might the Taper Caper turn to vapor, indeed engender increased paper?
For when it comes to "planned" ongoing accommodative reduction, Gold senses the jig is up, reflective in its own price so doing. Here again is the yellow metal along with its 300-day moving average to reiterate their reunion of just a week ago. Because this duration of average gets so little notice at large, and given that Gold had been so overdue for at least the modicum of pullback that we're finally getting, methinks it more coincidental than anything else that the average presently appears as a barrier, for post-correction, price ought well rise above it:
As for this past week, one needed nothing more than a casual glance at the news to know that price must have worked lower, simply because of the FinMedia's sudden increase of using the word "Gold" in their headlines. Having said that, (and with a tip of the cap to my long-time friend and futures mentor for alerting me to this item), we ought pay some deference to the once-mighty MarketWatch for noticing now -- some several weeks after the rest of us -- that Gold has been one of the strongest markets so far this year. Indeed a down week or a few notwithstanding, price's currently being up 11% with less than one quarter of the year having passed is quite an achievement:
And given Gold's robust uptrend thus far in 2014, "The Parabolic Also Rises". At this time last week, we pointed out that Gold had 123 points of wiggle room above its then most recent parabolic blue dot. Today, such penthouse space has been reduced to that of a studio: 54 points, and thus this is a pretty stout test for Gold right here to not correct too much further. You may recall from a month ago our notions for a price pullback into the 1290-1275 area: with the hurdle price now up to 1280, 'twould truly wreck the parabolic party were price to reach down to that zone.
I realize that for some of you, such corrective notion conjures up images of the brutally incessant selling we endured last year. And I wouldn't put it past "them" to try and scare us all again. But this time 'twould redound negatively for the Shorts, for to attempt to work the market lower, in spite of what we saw a year ago, this time in the face of even more visibly positive Gold fundamentals -- and moreover given our sense of Gold's having moved from a medium-term bearish phase back into its broader-based bullish phase -- is essentially short-sighted, indeed Short-Sided, suicide. From which let us segué into...
...the following two-panel Bad News/Good News graphic. On the Bad News left are Gold's daily bars throughout its rip-roarin' rise since December; but now the "Baby Blues" which measure the daily consistency of Gold's 21-day linear regression trend are coming down hard, suggestive of still lower price levels. On the Good News right is Gold's Market Profile for the last two weeks: recall a week ago our pointing out the "lots of lovely support there" in the Profile, much of which has since been hoovered. But clearly you can see the consolidation of price in yesterday's (Friday's) trading across the Golden Swath in the panel, price finishing the session at its mid-point as well as above the final apex supporter of 1332.
'Course, given that Gold's weighted-average weekly trading range is currently 43 points, price could be well away from here in a week's time, the Rhythm Performance Chart coming ups next being suggestive of some lower push still, prior to the correction having fully run its course.
Those of you who regularly visit the website's Market Rhythms page may well note that a study which perennially makes that daily updated listing is the good old standard MACD (moving average convergence divergence) measure on Gold's daily bars. In eight of the last ten confirmed consecutive crossings (i.e., both up and down), Gold's price has run further by at least 24 points, (i.e. $2,400 per futures contract). Indeed since last August, during which time these 10 most recent crossovers have occurred, if one has done nothing more than trade one contract in the MACD's confirmed direction and targeted a gain of $2,400 each time, the profit to this point -- including the loss of the two failures -- amounts to $14,000. That's more Good News, (especially for those of you sitting about the house in your PJs trading in 100-contract lots: $1.4 million in seven months ain't exactly chump change). Here's more Bad News, (except to you insidious Shorts out there), the Rhythm Performance Chart below of Gold's daily bars from just over a year ago-to-date displays them as green when the MACD is positively disposed, and red when 'tis negatively disposed. And despite there being a little whipsaw of late, the Rhythm has moved into MACD red mode upon Gold's opening at 1356.1 last "Tuesday Afternoon"...
... as so sang The Moody Blues back in '67. And let's be realistic: as strong year-to-date as Gold is, to expect this much needed correction to last only one week (which would be really attractive!) is a bit rosy.
Attractive or otherwise, we now turn to Gold's Magnets. 'Tis been quite the long stint of price's being in almost supernatural defiance of the magnet's attraction, but again, this anticipated pullback finally has reversed the state of the oscillator (price less magnet) at the foot of this next graphic. As to "how low is low?", during 2013, with exception to the hardest of selling spates, price typically deviated from the magnet on either side between 30-to-50 points before twain would meet again. Thus at the current deviation shown below of -20.9 points, a bit lower for price would not be untoward:
In summary, my sense is there is not too much downside distance left to this welcome Gold correction. Still, the Long parabolic blue dots at which we looked earlier are now rising at a rate of better than 20 points per week, which would place them above 1300 at next Friday's close. 'Twould thus behoove Gold not to break below 1300 in these next two weeks, else the Long parabolic trend depicted on the weekly bars would flip to Short. Nonetheless, barring Gold's simply shooting right back up from here, price can afford to trade a bit lower, indeed for these next two weeks, as long as it continues to consolidate north of 1300, and thus not cause any undue technical damage. Then the charge to trade above the 300-day moving average, which of its own according is dropping at a rate of about one point per day, will be on!
Finally, Gold being money, 'tis appropriate to close out this week's missive with the following two monetary musings.
First, as many of you may have read, the Employee Benefits Research Institute this past week released its 2014 Retirement Confidence Survey, the results thereto being somewhat oxymoronic: for given that all but a few folks shan't have the money with which to successfully retire, why call it a "Retirement" survey? Why not instead the "Hop 'Til Ya Drop" survey? Fortunately as we've oft put forth for us pro-Golders, (and as the late great Carl Sagan would put it), "billions if not trillions" of Dollars shall have to be created via the aforementioned Fed to keep us oldsters upright and able to take nourishment.
Second, from the artisan side of money, the UK's Chancellor of the Exchequer George "The Gid" Osborne is looking to replace the current one quid coin with one resembling "thrupense" from long ago. The faux Gold gilt perimeter is appealing, I have to say. One new coin, same old Queen. Luv ya Ma'am!