Commodities had a nice punch upward Friday and the technicals are continuing to look strong from the November lows. A couple things look good technically:
1. GLD broke resistance as well as a long term trendline which it has been flirting with for a year.2. The 50-dMA now has an upward slope and is approaching the 200-dMA, which would form a "Golden Cross."
Isn't this a flight to safety of sorts? We're sort of running out of asset classes to trust and all the liquidity has to go somewhere. A lot of people are saying the US dollar will benefit, but gold is/was extremely oversold and was due for at least a technical bounce. And I would add that commodities tend to move for prolonged periods of time and tend to overshoot both on the upside and the downside... at least that's the conventional wisdom.
The other side of the argument is that goldbugs tend to be nutjobs with overdeveloped limbic systems and you can never predict what they'll do... they might cash out all their holdings en masse to go buy ammo and Spam.
Eric and I are having a discussion on liquidity and commodities.
Liquidity: There's more liquidity today than there was 2 months ago and nobody is going to give it away. No loans, no mortgages. So it has to somewhere. Sure relative to two years ago there is very little liquidity, but not compared to 2 months ago.
GLD has gone from 68 to 88 in 2 months-- that's a bull market in anybody's book-- only TLT comes close and the technicals on TLT aren't as good.
Is TA any good for GLD? Maybe not since so much emotion goes into the gold trade, more than any other asset class it seems. But nobody can argue that the year long trend has been broken. What happens now is only a guess. It's risk/reward.
New liquidity will be hitting the market and there will be more in two months than there is today. Where will it go? Mortgages, car loans, Treasuries? Maybe, but my guess is that some will go to commodities, too.
GLD has gone from 68 to 88 in 2 months-- that's a bull market in anybody's book-- only TLT comes close and the technicals on TLT aren't as good.
Is TA any good for GLD? Maybe not since so much emotion goes into the gold trade, more than any other asset class it seems. But nobody can argue that the year long trend has been broken. What happens now is only a guess. It's risk/reward.
New liquidity will be hitting the market and there will be more in two months than there is today. Where will it go? Mortgages, car loans, Treasuries? Maybe, but my guess is that some will go to commodities, too.
.png)
"The other side of the argument is that goldbugs tend to be nutjobs with overdeveloped limbic systems and you can never predict what they'll do... they might cash out all their holdings en masse to go buy ammo and Spam."
ReplyDeleteThat is my favorite part.
I was reading another post, somewhere and they pointed out that the downtrend was actually much higher. I can make a very nice 5 wave EW out of that.... of course I can make an EW out of a shoe, I think.
I'm not sure my description of liquidity and your's line up. I see liquidity being "Cash Available to access"... I kind of see this as if Our credit limit was 50K, and now it is 25K. That 25k didn't go anywhere, but up in smoke.
The new Lequidity, hopefully is going to stop it from going to 20K.
My thesis was that money was coming out of Europe and Asia Into commodities. Which is more Money shifting than anything.
Gold has been on a tear the last ten years.
ReplyDelete