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Ira Epstein's Gold Report



-- Posted Thursday, 19 September 2013 | | Disqus

 

Commentary

 

The Fed held pat. Subscribers to my Market Research know that I did not waiver. I stayed in the camp that predicted the Fed would do nothing. The reaction to the Fed doing nothing is what’s surprising as polls showed that about a third of analysts polled expected nothing to occur.

 

The Fed apparently reacted to two events. First, interest rates soared after the Fed floated the idea in May and June of tapering. Markets are efficient and what occurred was that just the mention of this by the Fed had the market fully price in the first tapering. The second thing the Fed reacted to and acknowledged was that the Fed was aware that the employment pool of Americans had shrunk and distorted the Unemployment Rate. These two events kept the Fed on hold.

 

In speaking about the Fed, there’s something else that is in in play. We don’t know who the President is going to nominate as next Fed Chairman. It could be Janet Yellen or maybe the President will surprise us with another nomination for Mr. Bernanke. Until the nominee is known, I think it likely the Fed won’t want to move away from an Accommodation Policy to a Rate Policy philosophy. This is like turning an oil tanker at sea. Once you commit, it’s hard to change course.

 

Another “big” event was resolution of the Syria’s use of Sarin gas. Instead of watching missile launches on TV, we’re now witnessing a peaceful resolution. By resolving the situation, gold lost another of its “bullish” props, that of war.

 

To no one’s surprise the UN reported yesterday that Sarin gas was used in Syria. Had this report been released 10 days or so ago we’d probably be watching missile launches via CNN. Today this news simply means that USA, French and UK intelligence agencies had it right. However, there’s little any country will do to punish Syria now given the brokered agreement by Russia that has Syria delivering an inventory list of where its poison gas is stored and providing access to a UN team to destroy the Syrian gas arsenal. Don’t expect the US to be part of that team.

 

Last, we have the upcoming budget battle. Expect no resolution until we get past to the point of no return. Obamacare has become an issue for Republicans who want to use it as a major bargaining chip. If there’s no resolution and the US shuts down services, debt rating agencies with threaten to lower the US bond rating. This could benefit gold if things go too far.

 

Seasonal Gold Chart

  

 

I am left wondering if the seasonal move that September often brings with it has will work. The Seasonal Trade looks at where prices are at in approximately mid-September to month’s end as that according to www.mrci.com is the time frame prices often rise. Thanks to the market’s reaction to the FOMC Statement, gold rallied from 1291.5 to 1368.5, the price it’s trading at as I am writing this. That’s about a $4 gain overall so far that required one trading through a near $70 drop from where they got in.

 

After this seasonal trade there’s another one coming in that is also bullish in October. 

 

What I’m noticing is that in Bear Markets, rallies tend to be restricted and price breaks exaggerated.  That’s how I interpret what’s now occurring.

 

Obviously a lot of what I’m saying depends on whether or not you agree with me that gold is in a Bear Market Year.

 

Prices closed this past December 28th near $1655, what I term year end. That’s a long way from where gold is now trading. Because of this and my expectation that gold will not be able to rally much in this current environment, I elected not to plot what Bullish Years look like. This doesn’t mean gold won’t rally and I won’t be wrong. I just don’t see why it would other than a possible move to gold as Congress once again plays with the budget and threatens to let the US default on its debt.

 

The problem with this is that we’ve been here done that. I don’t think you can trick the markets easily. It would take not on the threat, but that actions of going into a “real” default by the US to get gold traders continued attention.

 

Continued….

 

Weekly Charts

  

 

 

The weekly chart above is one whereby prices are making higher highs and higher lows. That is bullish.

 

Prices are trading over the 18-Week Moving Average of Closes. That too is bullish.

 

Therefore, the weekly chart is friendly in terms of pricing, with support down a 1334.3, the current 18-Week Moving Average of Close figure.

 

It would take a move back under 1274, the low made in the week ending on August 9, 2013 to negate the current chart pattern. For purpose of simplicity, I did not include the Slow Stochastic reading which is getting a bit overbought. I also did not include the Bollinger Band Top, which projects resistance at 1449.5.

 

All in all, with prices a bit overbought already on the Weekly Chart, it would be interesting to see how this gets worked out. Will prices move forward and try to eventually get up to the Bollinger Band Top or will prices back off and to get back down to the 18-Week Moving Average of Closes.

 

Daily Chart

 

 

The Daily Chart is at key resistance, the 18-Week Moving Average of Closes at 1369.8.

 

At this point those bearish this market have control since:

  • Prices are trading under the 18-Day Moving Average of Closes
  • The Swingline Study pattern remains bearish at this time
  • Getting over 1395 would negate the bearish Swingline chart pattern

I realize that the press is playing up today’s rally in gold, but the real volume occurred yesterday, not today when prices closed lower.

 

What occurred today was a situation in which yesterday’s pattern of an Outside Day Down was negated when the high of yesterday was taken out. When this occurs, it often means a bear trap was sprung and those short the market get caught.

 

A bull pattern would develop if today’s low of 1358.5 were taken out tomorrow and prices reversed and take out yesterday’s high of 1375.4 and just close higher on the day. I know this sounds confusing, but this potential chart setup would change the chart to bullish from bearish.

 

 

Summary

 

Gold bears will most likely be sellers under today’s (September 19ths) low of 1358.4. Their stop will probably be 1374.5 if short sales get activated.

If the above scenario doesn’t take place, it will take a move over 1395.0 to negate the downtrend.

You have to be fairly flexible right now since other than the US budget battle, there’s little on the horizon in terms of events to move gold higher. Syria of course could come up with a way to back out of its Russian brokered agreement which would be a game changer. I’m sure they’ll be kinks as I don’t see Syria easily doing anything without doing so in a Mideastern face saving manner to make the US look bad. That’s politics and how deals down in that part of the world work, so expect it.

I will be issuing a sell signal tonight in my twice Daily Update. It may be quickly followed with a buy order if the above scenario takes place.

__________________________________________________________________

 

To receive my specific trade recommendations, you should consider becoming a subscriber to my Market Information. It’s inexpensive and includes a lot of market research. 

To become as subscriber, simply click on the link below or type this link into your web browser:

http://www.iraepstein.com/client-non-client.html

 

 

If you’d like more information about trading gold, simply call us at

1-877-973-2077.

 

Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. Chart data is courtesy of LGP-IraCharts. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc. or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are not indicative of future performance.

 


-- Posted Thursday, 19 September 2013 | Digg This Article | Source: GoldSeek.com

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