Wednesday 29 February 2012

Gold Loses Glitter.

The big news for the day is sell-off in gold. GLD dropped from $172 to 168 in less than five minutes.
And there was no counter trend rally after that either. And the sell-off happened with very high volume.
By that standard, silver was relatively OK.  But almost everything in the commodity sector sold-off including copper and oil.

Such a waterfall decline in one class of risk assets do not bode well for the others.  I am not saying that the crash will start from tomorrow. Rather, I want to stress the fact that the up-trend is still intact despite all the divergences and warning signals. But Russell was down over 1.5 % while SPX was down merely 0.47%. We know that “Wall St” likes to make-up the stocks at the end of the month and high flying / well known stocks have to be guarded. May be that is why they can let Russet go but protect SPX and DOW somewhat.

I was not expecting any selling before next week so when SPX showed red I was rather surprised. With today’s price action we have a bearish reversal candle and may be a bearish engulfing candle as well. I am not sure of the bearish engulfing pattern because as per Bulkowski  : The body of the black candle should engulf or overlap the white candle’s body,…… Shadow overlap is not important.”  But in today’s case, I do not think the black candle body overlap the white candle body.
In any case, tomorrow being the 1st of the month as well as Thursday, we can expect the market to be up. May be it will re-test the high before turning down. We will have to wait and see.

The ECB handed out more than $700 Billion and that may have been the last act of kindness for a long time to come. When Mr. Ben indicated that there would be no QE for a while, the junkies in the market went for a withdrawal symptom.  Did the traders and speculators decided that since there will not be any QE anytime soon, there would be no more liquidity and so sell the gold? NY Fed even did a reverse REPO today.  Even before Bernanke opened his mouth, EURO was not showing much life after the news of LTRO. So what gives?

While the 4QR GDP was reported to be at 3% ECRI is not backing away from its call for recession.

Let us see how the next jobless numbers come out.

In the mean time the Trend Table continues in green except gold. But I am happy to wait on the side line to see if all other risk assets move in the same direction. We may see a whipsaw in gold.
Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

1 comment:

  1. Terrific post, BB. Thank you, also, for the Bernanke/Paul video. TexEx