Wednesday, June 23, 2010


Hourly Action In Gold From Trader Dan

Posted: Jun 22 2010 By: Dan Norcini Post Edited: June 22, 2010 at 1:49 pm
Filed under: Trader Dan Norcini

Dear CIGAs,

In one of the more marvelous market displays I have seen in many years, gold was able to shrug off a major technical reversal sign and actually attract enough buying to not only minimize downside movement but actually bounce higher. Considering the extent of speculative long side exposure, and the nature of today’s computer algorithms, its ability to remain firm is astonishing and probably says more about the overall psychology towards the metal than any comments I could make. Investors and traders at the Comex are not panicking out of gold in spite of the formidable technical resistance that surfaced yesterday.

The same goes for the HUI which moved higher while the broader equity market moved lower based on the action of the S&P 500. Again – this is remarkable stuff for gold.

While the record high of yesterday’s session is serving as our new upside technical resistance level and holding price in check for right now, the fact is gold did not fall apart – that alone has to have unnerved those dwelling in their bear dens which is why we saw them begin covering when gold held yesterday’s session lows and refused to break down any further. One day does not a market trend make but for the sheer audacious of the bulls’ performance, you have to tip your hat to their gritty determination to stand firm and refusal to run.

As far as open interest readings go – yesterday’s sell off was accompanied by a rather mediocre drop of a bit under 2,200 contracts bringing the overall number down to 600,895. Considering the extent of the volume of contracts traded yesterday, it is evident that there was a determined selling cap shoved in place even as some of the weaker shorts were forced out on the initial spike into a new record high price. I am a bit surprised that volume yesterday came in where it did; I had expected to see something closer to 200,000. Perhaps that is also why we are seeing gold holding up so well today. Fear by the long side did not apparently materialize during the plunge. As a matter of fact, volume in today’s session is actually more impressive. This is an interesting development which bears further scrutiny over the next couple of trading sessions. If this is the best that the bears can do with all the technicals in their favor, they are in trouble. They will need to take the market down below yesterday’s low on better volume to tip the market convincingly in their favor. I still cannot get over the amazing resiliency being displayed by gold today. This is definitely not the same gold market as back in 2008.

The HUI needs to climb back above 490 to turn the charts a bit more friendly and prevent more of the momentum oscillators from turning lower. Some are still rising but a few are flipped over into bearish territory.

Have to keep the comments short today due to time constraints.


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