DAN NORCINI'S TUESDAY COMMENTS

Hourly Action In Gold From Trader Dan


Posted: Apr 27 2010 By: Dan Norcini Post Edited: April 27, 2010 at 2:12 pm
Filed under: Trader Dan Norcini
Dear CIGAs,

Market moving news today was the downgrade of Portugal’s debt rating by S&P from “A” to “A-." That sent the Euro tumbling back down after it looked as if it might have been making a short term bottom on fading Greece concerns. Voila! To add insult to injury, they also cut Greece’s sovereign credit ratings to junk level and the “fade” on Greece quickly morphed into a panic! That sent global equity markets into a tizzy and down they all went with bonds shooting sharply higher as money was quickly sucked out of equities and jammed into “safe haven” bonds.

The result – safe haven flows on the Continent into gold which continues to display strong buying interest on dips in price in Euro terms. This strength is feeding directly into Dollar based gold buying allowing gold bulls to mount a run into the bullion bank resistance line just above the $1162 level. As expected, they are fighting like hell to try to prevent a technical breakout on the charts.

The bullion banks have the computer algorithms at their back today as the swooning Euro is triggering rather broad-based commodity selling by the hedge funds. Witness the big drop in crude oil , soybeans, corn, copper, etc. When you get this sort of thing occurring, gold also gets sold by these programs but even in spite of that, there is sufficient buying occurring that is not only precluding a sell off in the gold market but is also allowing it to work higher against the tide. It does however make it more challenging for the gold bulls to beat back the selling that the Comex gang is hurling their way. That is why you have to be the more impressed by the tenacity of the gold bulls who are counterpunching and making quite a battle royale at this critical technical juncture on the price chart.

Remember how back in February through March, the banks were capping the rise in gold at the $1130 level? Gold spent more than a month knocking up against their selling before it finally kicked down that door and then went on the climb past $1170 before retreating a bit. Now these same banks are trying to hold the metal at the $1162 level in order to prevent a climb past $1175 which will open the door for a run at $1200. As long as gold continues climbing higher in terms of other various foreign currencies, the gold bears will have their work cut out for them.

The HUI (gold and silver shares) is following the broader equity markets lower but is also seeing a fair amount of buying tied to the performance of gold with the silver issues getting tugged lower due to silver’s downdraft today. Once gold can take out $1175 and begin a push towards $1200, the gold shares will follow it higher irrespective of what the broader equity markets are doing.

Back to the bonds for a moment – the huge surge of money into the sector enabled the long bond to break out above last week’s high on what looks like pretty decent volume so far. The level near 118^20 has been formidable resistance on the charts and it appears to be holding even now. However, should it give way before the day’s trading is wrapped up, bonds have a good chance to take a run to this year’s high near 119^20. One thing appears to be certain for now, the bond vigilantes are going into hiding having failed to take out the bottom end of this year’s trading range. If the bulls can take price through that February high, they will more than likely be able to set up a charge towards 124. Needless to say, the feds are LOVING this right now as they can issue more and more debt and still have the market buy the crap even as the Dollar moves higher. Who says that someone else’s misery is not another’s blessing? Obama and Bernanke should both be genuflecting towards Europe each and every day and giving thanks for its misery. Were it not for that, both would be watching bond sales plummeting and the Dollar swooning.

The Dollar is winning the “which currency stinks the least” race for today. It has to close through 82.50 to give it another leg up on the charts and the potential to run towards 83.15 or so.

Considering the broad weakness in the stock market and the fears circulating in many of the pits today, crude oil is hanging in their rather surprisingly. Let’s see if does move lower from here and if so, whether it can maintain its footing above $80. That will tell us whether rising gasoline prices are going to be with us for May.

DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/04/April2710Gold.pdf