Gold Gathers Itself whilst the S&P Defies the Economy
Many are wooed “Be mine!” ’round the Feast of St. Valentine … ‘cept if yer Gold. February being a month wherein the yellow metal throughout most of the millennium has been a proven positive performer, (over the last 14 years averaging a Lovers’ Month net gain of 1.4%, including those bettering 3% in ’02, ’05, ’08, ’10, ’11 and ’14), instead has found this year’s Cupid to have come up stupid.
To be sure, as thoroughly documented in the last three weekly missives, Gold truly had “gotten ahead of itself” vis-à-vis the near-term valuation relative to BEGOS (Bond / Euro / Gold / Oil / S&P). Now, (finally), Gold has completed its rather ill-romantically-timed requirement of reversing back to this particular measure of valuation. As we below see, price settled yesterday (Friday) at 1228 and the oscillator (price less the smooth valuation line) at the graphic’s foot has returned to zero after having been excessively high (+136 points) those few weeks back:
Still, if there remains any good news for February, ’tis but half over and thus there’s the chance to recover. Also good is Gold’s having dug in its heels to essentially gather itself together, rather than doing what in recent years had oft become ongoing week-over-week slides, this time instead posting just the barest of skids for these last five days, and therefore keeping the parabolic Long trend (ascending blue dots beneath price) intact. What we’d really like to now see, given that Gold is again re-aligned with its BEGOS valuation as just described, is a push back up into the 1240-1280 resistance zone as bordered by the purple lines in this next chart of Gold’s weekly bars:
‘Course, the market over which February is fawning is the S&P 500, its suddenly leaping to a record high, moreover lacking rationale as to why, following its chaotic state year-to-date. This only increases the expanse of our anticipated Three Cs (Correction/Collapse/Crash) market fallout. That being then, here below is the now: the month-over-month percentage tracks of Gold vs. the S&P. The vertical line marks the beginning of February as we see the “sheeple” chasing one of the most over-valued S&P 500 Indexes in history, with Gold’s having lost at love in the balance:
Yes, for the stock market, love is surely in the air. In the wee hours of Friday morning, Bloomy Radio was all a-buzz over Q4 Earnings Season, pointing out with 75% of S&P companies having reported their bottom lines, that 77% have beaten estimates. Well, by golly, life just has to be good, eh? Not to spoil the romanticism of it all, but we hasten to point out that when Q4 Earnings Season began on 12 January, the price/earnings ratio of the S&P was 29.3x. As of the Index’s record high close yesterday, that ratio is now 36.5x. But lest we forget, lack of actual incoming earnings growth remains irrelevant. As does the further disintegration in the Economic Barometer:
“Looks like irrationality again leading to inevitability there, mmb…”
Squire, your surprising use of multi-syllabics is yet again testament to just how far you’ve come. Indeed toward agreeing ’twill all come undone, I flipped through the Rolodex late yesterday and rang up an old friend:
“Confucius? ‘Tis yer old buddy mmb. With regard to this now rocky marriage between the Econ Baro and the S&P, what say?” He himself no doubt in a romantic mood responded: “Confucius say: married man who make love to woman on hill is not on level”. Ten’ll get ya twenty dude’s short the S&P.
And thus when it all whirls back ’round, ’twill be reflected in same for the following three markets’ 21-day linear regression trends, their respective “Baby Blues” indicative of trend consistency to, in turn, reverse course:
Specific to Gold right now, in having unwound its “ahead of itself” stance, price today at 1228 is actually 22 points below the magnet level, which we next see on the left is 1249. Thus there’s the technical impetus to attack the 1240-1280 resistance zone, again within those same purple lines also as shown on the right in Gold’s 10-day Market Profile. As to “getting off the schneid” to so do, we’ve immediate trading resistance just above the current 1228 level at both 1234 and 1238. And with but nine StateSide trading days remaining in the year’s fastest month, for Gold to record yet another positive February, it need find love at 1284, taking out en route the trading resistor shown at 1265, and further again land atop that entire purple-bounded, more broad-based resistance zone:
And with that we turn to the Gold Stack, followed by a few newsworthy Gold positives.
The Gold Stack
Gold’s Value per Dollar Debasement: 2489
Gold’s All-Time High: 1923 (06 September 2011)
The Gateway to 2000: 1900+
The Final Frontier: 1800-1900
The Northern Front: 1750-1800
On Maneuvers: 1579-1750
Structural Resistance (broadly): 1479
The Floor: 1466-1579
Le Sous-sol: Sub-1466
Base Camp: 1377
Year-to-Date High: 1308
Neverland: The Whiny 1290s
The 300-day Moving Average: 1262
10-Session “volume-weighted” average price magnet: 1250
Resistance Band: 1240-1280
Trading Resistance: 1234 / 1238 / 1265
Gold Currently: 1228, (weighted-average trading range per day: 21 points)
Trading Support: 1224
10-Session directional range: down to 1217 from 1287 = -70 points or -5%
Structural Support (wide): 1213-1167
The Weekly Parabolic Price to flip Short: 1201
Year-to-Date Low: 1167
Obviously these days there’s a formidable load of fundamental frenzy being followed by our friends in the FinMedia, so much so that what leads on one financial news site may be completely buried on that of another. But we do try to keep abreast of what is best for Gold and, with a wry eye, oft wonder why ’tis not therefore already at our current “scoreboard” level of 2489, in turn giving further rationale, with respect to the S&P, to our rather infamous quip about “sittin’ on the bid at 880″, which from current levels would be a -58% stock market hoovering. Don’t roll your eyes: at our Investors Roundtable, the figure -67% for an S&P correction has actually been mentioned. But at the end of day, as efforts globally are made to ensure there is enough dough to go ’round and thus keep the world solvent, we “know” that Gold is going to “go”. Here are a few slices from the past week.
1) ‘Tis said the People’s Bank of China is “inventing tools” to grow money its supply. Renminbi run rampant? China ranks a distant second only to the USA in GDP, ($9T and $17T respectively by World Bank data, albeit the EuroZone en masse is pushing $18T, a number easy to grow when countries are added to the mix, even if Greece were to be dropped).
2) The “thunderbolt” that is Germany, along with two of the EuroZone’s PIIGS (Spain and Italy), are credited with the lion’s share of the combined 0.3% Q4 growth for the 19-nation bloc. ‘Course, that leaves the meagre performances of the other 16 countries. Bring on that new quantitative easing and turn deflation into inflation, right? ‘Course, ’tis what eventually does occur, (got Gold?)
3) Meanwhile, said deflation is meandering across the Channel into the UK, the Old Lady of Threadneedle Street expecting consumer prices this year to continue to fall and the possibility of inflation going sub-zero, in turn rationalizing cutting what little is left of the key lending rate (currently 0.5%).
4) The price of Oil (52.65 WTI) has stabilized from the 43.58 low of some two weeks ago. Still, presently down some 51% from last year’s high of 107.73, such price plunge continues to take its toll as we now see mighty Halliburton having announced cutting 6,500 jobs, whilst in France, Total on losing $5.6B in Q4 expects to layoff 2,000 folks over the next three years and sell assets in an effort to reduce costs by $4B. If there is one industry that can send the dominoes a-fallin’, ’tis obviously Oil.
So there we’ve just these few examples amongst so many ’round the world leading either directly or indirectly — but inevitably — to the production of more currency units, ultimately leaving Gold with but one direction to run: UP!
Wednesday (18 February) brings the Minutes from the Federal Open Market Committee’s January get-together; remember: there was no press conference. So what did they really say? As you saw above, the Econ Baro is saying a lot!
Sorry. No data so far.