|
-- Posted Monday, 22 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -13.60, SILVER -24.50
London Gold Fix $645.50 -36.50 LME COPPER STKS 107,325 ml tns
+500 tons
GOLD stks 7.796 ml oz, Unchanged COMEX SILVER stks 120.4
ml oz, -1,106,830 oz OVERNIGHT ACTION: Moderately aggressive selling overnight off weak equity markets and a rising Dollar. GOLD: OUTSIDE MARKET DEVELOPMENTS: With nearly all of the critical outside markets providing pressure to the gold market this morning, it is clear that the bear camp starts the new week out with a distinct edge. Perhaps the most damaging outside influence, is the fact that world equity markets are under pressure again, as that seems to foster a slower growth expectation, which in turn downplays inflation and undermines physical and investment demand for gold. With the added pressure of more aggressive declines in the copper market, the physical demand expectation in gold has shifted into a moderately bearish condition.
GOLD MARKET FUNDAMENTALS: With the outside markets giving off the impressive of an extension in the recent commodity liquidation wave, and oil price declines making seemingly suggesting that the world is unconcerned (for the time being) about the Iranian confrontation, one gets a sense that the moderately large slide in gold overnight, is at least partially justified. While the market really hasn't settled on a reason for the recent Dollar rise, persistent gains in the Dollar are turning up the pressure on the longs. However, some traders have suggested that the trend in the Dollar won't be considered a bull trend until the June Dollar Index manages to close above 85.25. With Gold in Tokyo limit down and various Asian Press outlooks suggesting that the 5 year up trend in gold is complete, it certainly appears like the bears have full control this morning. While the there is a chance that a 5-6 Nation consortium will present Iran with an offer to end enrichment and is also prepared to threaten Iran with force, the Wall Street Journal is suggesting that Iran will probably lean toward a confrontation. However, even if there is a confrontation with Iran that might only be a partially supportive development that the bear camp is capable of discounting in the current environment. Not surprisingly the gold market didn't really level its net spec long position in the last COT report, as the combined long dropped by less than 9,000 contracts. In fact, with the May 16th Commitment of Traders with Options report still showing the Gold Non-Commercial position to be net long 119,222 contracts and the Non-reportable position also net long 40,038 contracts, the combined spec and fund long was still pretty overbought at nearly 160,000 contracts. With the June gold market starting the week out nearly $50 an ounce below the level where the COT report was measured, we suspect that the overbought spec and fund long position is being pared but at this point we can hardly rule out a quick slide to the next consolidation support zone of $624. In fact, if the stock market continues to decline, oil prices decline and the Dollar mounts a string of gains, we can't rule out a slide down to $600. SILVER: OUTSIDE MARKET DEVELOPMENTS: With the gold and copper markets leading silver down early and international equity markets under pressure again, the path of least resistance seems to be pointing down. With the added bearish leadership of the copper market today, the trade is possibly seeing signs of slumping physical demand for metals. Just to add a final element of bearishness to the equation this morning, European equity markets were showing moderate selling pressure in mining shares and that seems to round out the bearish case into the US opening. In short, against a backdrop of a rising Dollar, it would seem like the silver market will be confronted with a broad wave of bearish developments to start out the new week!
SILVER MARKET FUNDAMENTALS: With the physical and investment demand expectations reeling and world equity markets seemingly confirming some type of economic contraction, it is possible that a larger portion of the spec long in silver is forced to the sidelines. About the only positive we see is a sharp daily decline in silver exchange stocks overnight but unless that becomes a pattern that might not be an element capable of shutting off the selling. Even the copper market has once again plunged through a series of critical support levels on the charts and that undermines the expectation for physical silver demand just as much as the ongoing weakness in world equity markets. With a major portion of the bull market in silver apparently driven by the expectation of strong economic growth and persistent concerns for inflation, the bull camp would seem to be back on its heels the macro economic conditions present in the headlines this morning. In fact, as long as weaker oil prices fail to stimulate economic optimism, it would seem that silver prices might be slide to even lower price levels. With the May 16th Commitment of Traders with Options report showing the Silver Non-Commercial position to be net long 23,412 contracts and the Non-reportable position net long 24,769 contracts, for a combined spec and fund long of 48,000 contracts, it would seem that the market has plenty of long liquidation potential. However, the current spec and fund long is only half of the record spec and fund long position posted back in March of 2004. Fortunately for the silver bulls, open interest in silver has declined from a lofty 149,000 contracts on April 7th to only 110,000 contracts late last week. Therefore, it is possible that July silver finds support on the charts around the $11.71 level. In the near term, one should fear an aggressive downside follow through, especially in the face of ongoing weakness in equity prices. METALS TECHNICAL OUTLOOK 5/22/2006 COMEX SILVER (JUL) 05/22/2006: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's short-term trend is negative as the close remains below the 9-day moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is 1189.1. The next area of resistance is around 1258.0 and 1277.0, while 1st support hits today at 1214.1 and below there at 1189.1. COMEX GOLD (JUN) 05/22/2006: Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The close below the 18-day moving average is an indication the intermediate-term trend has turned down. More selling pressure is likely given yesterday's gap lower price action on the day session chart. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is now at 634.0. The next area of resistance is around 671.0 and 688.0, while 1st support hits today at 644.0 and below there at 634.0.
To those of you who have emailed or commented on the daily commentary regarding price manipulation: our daily comments are strictly to provide our customers and subscribers with news, which may influence the markets marginally on a day-to-day basis. This is not the forum to address price manipulation.
There are multitudes of ways in which one can participate in a bullish or bearish perspective in the metals complex. Mining shares as well as purchasing bullion are just a few. Another investment of choice is through futures and/ or options on futures contracts. If you have traded, then you will be able to appreciate the brokerage service that Nell Sloane and Group can offer. If you have not, and wish to learn more about it, please feel free to contact her staff so that they can forward you some educational literature for your review. Please contact Nell Sloane or a member of her team at 800 238 2610.
-- Posted Monday, 22 May 2006 | Digg This Article
***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Hartfield Management, Inc. is strictly prohibited.
Previous Articles by Nell Sloane
|
