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-- Posted Thursday, 3 October 2013 | | Disqus

Gridlock! That sums up where the US government is as Democrats and Republicans via for their time in front of the cameras as each party rolls out their platforms for their upcoming run at the Presidential and Congressional races. Not for one minute do I think this is about us.

 

I’ve read enough and have experienced enough to believe that there’s nothing magical about exceeding the Debt Limit on October 17th. There’s cash to maneuver beyond that at hand and the President has constitutional powers to do things to keep the government working. If it gets to the point where he has to use those powers, it will be up to the law experts decide if he broke the law. I don’t see it going there. Rather, I expect one side or the other to “blink” and somehow, someway and short term, yes short-term compromise will take place.

 

It’s clear that the economy is now slowing down because a large part of those employed by the government are furloughed. The direct impact of this will slow down economic growth for at least this month and depending on how long the budget impasse goes, could impact the full quarter.

 

That begs the question; “Do you see the Fed tapering in this environment?” I don’t. I didn’t see them needing to taper last month and frankly don’t see any need to begin the tapering process this year.

 

Those of you who read my Gold Reports know that my trade recommendations come out via my Twice Daily Updates. Last week I recommended in those updates to go short at $1340, which was filled. In my updates I recommend trading two contracts at a time. Final profit on this trade was taken off yesterday as prices fell down to 1280.1. Since covering the shorts, gold has rallied back to the $1315 level. I have recommendations out for my subscribers to sell short again.

 

Today the New York Times writes;” The debt-limit impasse could cause credit markets to freeze, the dollar to plummet and interest rates to rise precipitously, the Treasury Department said in a report released Thursday. A default might prove catastrophic, the report said, and could potentially result “in a financial crisis and recession that could echo the events of 2008 or worse.”

 

Ask yourself “Why isn’t gold rallying on this news?” The only reason I come up with is that the “smart money” believes we’re looking at theatrics. Yes if things plays out too long the end result can early turn into a crisis, one in which gold should rally, but the market doesn’t think we’re at that point yet. It seems to me the markets think we’re probably getting closer to the beginning compromise talks. Even more importantly, I think there no chance the US will default on debt. If we did, what a fabulous legacy it leaves for President Obama. My point here is that t’s not going to happen. There’s a lot of power the office of the Presidency carries, and keeping us from defaulting is one of those powers.  In the meantime world leaders will continue to criticize the US and credit agencies, still reeling from being sued by the US on the last round of rating downgrades, will once again become vocal in their threats threaten to cut ratings of US debt. However, these agencies will likely wait for more certainty before lowering their ratings.

 

Gold has no bullish story other than the debt ceiling issue.

 

Iran and Syria are no longer war threats.

 

Inflation as the government measures it is very low, certainly not an issue.

 

Any idea of the Fed initiating tapering in this environment, when people are getting laid off and the government is running out of funds is most likely off the table.

 

Therefore, the bears have the day. Yes they’ll be rallies, either because we get the point of letting our debt go into default, because other stimulus measures come into play or just because prices get too low. The problem is that in reality, there’s still no game changer like inflation that can cause a systematic change at work right now.

 

Seasonal Gold Chart

 

 

 

The above chart show the pattern gold takes in Bearish Years. The seasonal rally that just went by, the one where traders buy gold on Sept 10th and exit on October 1st failed miserably this year. I recommended selling into this seasonal trade as I think in “Bear” years trades on the long-side of the market don’t fare well. At the later part of October another seasonal buy trade in gold takes place. We’ll see where the market is at that time before considering it.

 

In the meantime given that this is a bearish year, look at rallies as overall selling opportunities. Yes there are seasonal times to get long. That’s what makes up “seasonal trades”. However in years that are bearish, seasonal buys tend to get muted unless the market is ready to make an overall transition of its trend. I don’t see that occurring this year. 

 

Weekly Charts

  

 

(The above chart was created using our new Market Center Charting software which works on PCs, Apples and tablets of all type. It’s extremely easy to learn to use. To give it a Free try, click here.)

 

As you can see, the chart pattern on the Weekly Gold Chart does not match that of the Daily Chart. This is a bullish pattern because you have higher lows, marked by orange arrows pointing up and higher highs, marked by red arrows points down. The market is trading basically against its 18-Week Moving Average of Closes, 1325.6.

 

A rollover to which would change the Weekly Chart’s picture from bullish to bearish would occur if prices were to break 1281.9, the most recent low. That could change the chart pattern to lower highs and how lows, setting up a test of the 1218.8 level, the Bollinger Band Bottom as seen in the top right syllabus on the chart.

 

Daily Chart

 

  

Resistance on the above Daily Chart of December 2013 is the 18-Day Moving Average of Closes, 1327.8. You can see that on the legend on the far upper left listed as SMA (Close.18) 1327.8. This is where I see those bearish this market trying to make a stand by having sell orders in to go short at that level.

 

Look at where the Bollinger Band Numbers came in. The low was 1276.9 on Wednesday while the Bollinger Band bottom was at 1282.2. The bounce taking place now might allow short sales against the 18-Day Moving Average of Closes.

 

If prices were to get over 1353.8, the bearish chart pattern of lower highs and lower lows would be broken. Until that occurs, the Bear Market in gold in alive and well.

 

While I didn’t show more moving averages of closes, the 100 and 45-Day Moving Average of Closes come in right now at 1339 and 1446.6 respectively. In other words there’s a lot of resistance just below the 1350 price level.

 

 

Summary

 

Two weeks ago in this report I said; “I will be issuing a sell signal tonight in my twice Daily Update.” Well I didn’t. I did it shortly afterwards and yesterday issued a recommendation to cover the remaining shorts with as much profit as $60 per ounce.

At the same time I issued the gold sale, I also issued a sell recommendation in Platinum, a metal not often discussed in this report since I focus on gold here. The Platinum Chart is ever more bearish than gold.

I am looking at rallies in gold as selling opportunities, at least until the chart pattern changes. The current rally, the one that’s taken gold off its 1276.9 low made just yesterday, is helping to get the gold chart to relieve an oversold condition.

I issued to Subscribers of my Market Research another sell signal in today.

__________________________________________________________________

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, 3 October 2013 | Digg This Article | Source: GoldSeek.com

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