Dollar gaining strength - how long before Fed intervention?

[pmbug]

The dollar index broke through 80. The Euro fell below 1.30. How long before the Fed intervenes? A stronger dollar is going to hurt the export economy and prospects for some growth, so I expect they will act at some point to weaken the dollar.

 

[dontdeBasemebro]

However long it takes him to gas up the helicopters.

Between the Euro collapsing, possible US QE, Fed bailout of Europe, and war with Iran and/or oil disruption the timing of all these events and their impacts to the price of metals is going to be an intense exercise in threading the needle. We may only have minutes to hit bottom and then watch the metal fly. Better stay close to an internet connection and have the coin shops on speed dial.

 

[DSAbug]

Consensus seems to be Feb-April..

 

[pmbug]

If the dollar keeps rallying at this pace, I don't see the Fed waiting until Feb-April.

 

[DSAbug]

If the dollar keeps rallying at this pace, I don't see the Fed waiting until Feb-April.

Other than golds and financials.. the market isn't really all that bad. At least not the indexes. It might take more of a drumming to get intervention.

 

[pmbug]

I believe the relative strength/weakness of the dollar in the FX markets (and consequent impact on the import/export economy) will be the primary consideration, not how the market is reacting.

 

[ancona]

Something weird is going on here, because with silver down well over a buck, and the dollar catapulting, it looks like some serious deleveraging is going on. The banks all deny any problems and swear their balance sheets are rock solid, but this feels like risk off to me. What say the crowd on this?

 

[ancona]

Now down a buck seventy!?!?! Yeah.....something is up here. I wonder what the Brotherhood of Darkness is up to now?

 

[swissaustrian]

I agree, the FED won´t watch the $ strength for long. This is devastating for US exporters. It´s actually good for Eurozone exporters.
China won´t be happy about it aswell. Their Yuan/dollar peg will hurt their exports to the Eurozone.

A great trade will be shorting USD/CHF, because I don´t expect that the SNB will hold the EUR forever. Finally, they´ll have to let EUR/CHF below 1.20.
USD/CHF is at nearly 0.95 up from 0.7 in august. I have placed a buy order for shorts at USD/CHF 0.9

Silver´s long term support at 30 was broken. Plus oil fell off a cliff.

 

[DCFusor]

As a guy currently picking up pennies in front of this steamroller, I'm reminded of my rear view mirror text "Warning, objects in mirror are closer than they appear".
Short Euro, Gold (yeah, sorry), FXI (china), and raw materials at the moment.
All on a hair trigger to close the trades, but very nicely green right this instant.

Over the last few months, it been more like short the pops, cover the drops, not buy the dips and sell the rips - on almost everything. More work doing that - the timing is harder, but it's what my logs show is making the most money.


This almost has a flavor of "lets see what happens if we convince everyone we're not going to print". That of course does not mean they won't -- just testing the waters.

 

[swissaustrian]

People are buying the dips in gold.

 

[ancona]

"This almost has a flavor of "lets see what happens if we convince everyone we're not going to print". That of course does not mean they won't -- just testing the waters. "

I think you're on to something DC. The Fed knows they cannot let this puppy flounder too long, because it reinforces itself after a fashion, and that makes rescue twice as hard. Kind of like the Greek problem. If they had simply allowed them to default two years ago, we might not have ended up in the mess we're currently in.

 

[swissaustrian]

Politically speaking, the FED needs a full blown panic to calm down it´s critics. If stocks falll down quite a bit (let´s say SP 500 < 1000), everybody will be screaming fro help in DC.

 

[DCFusor]

Sure, but I can't make myself call it a dip till it turns back up for at least a day (no matter what I'm trading). Hasn't happened in the last 5 days, so it's not yet a dip - it's a downturn, until it turns back up.

EG, buying now is catching a falling knife. Use kevlar gloves if you must do that.

You can nearly always afford to miss that first little bit of "up" after a downturn, and safely catch the middle of the move, if you're an active trader who watches all day as I do. Better risk/reward ratio that way. I use pretty tight stops at first doing that, in case that turn back up is a head-fake bounce - having learned very expensively during the crash about that one.

Patience is just as important in opening as in closing trades. The right amount is "magic".

 

[swissaustrian]

I´m not buying, just watching the ticker and everytime we come close to gold $ 1600 somebody buys.
Gold is now below the 200 dma (1614). It hasn´t been there since early 2009.

 

[DCFusor]

Sure, there are always "bargain hunters" who jump in at whatever level they've defined. The big trick to trading is figuring out whether they can hold at a support, or will give up (or run out of money) and it turn right back down after the "dead cat bounce". Try losing about the price of a home on mis-calling that one, and like me, you get shy after that 3rd degree burn. (2008) I wasn't as quick then...

This is why I wait for a confirmed turn back up - I'll leave a little on the table to have better confidence it's a real turn back up that's going to stick.

Actual news of printing would do it for me, but I don't see that tll as you say, the Feds critics get a nice bashing. At the moment, it feels to me like they are glorying in NOT giving into the crack-whore banksters who assume the game will forever be rigged in their favor. This kind of panic and hysteria can be fun to watch if you're sitting in the right place.

There's some real volume on the paper gold (GLD, IAU) charts the last couple days, not vapor. Interesting. Perhaps they're trying to shake enough people out that they actually have enough gold (or at least closer) to match the paper ownership?

I don't have a clue - while the theory is interesting, right now I have to adopt another cliche - "the ticker is the truth", to survive. I have to make money right now to eat right now. No way I can afford to eat my seed corn for any length of time - gotta keep my trading stake pretty intact.

 

[swissaustrian]

Ok now 1600 is substantially broken. That´s not good at all.

 

[oppie2005]

As you guys know, im a noob. I was intending on making my second purchase of silver within the next week, but after watching the ticker, and reading the comments here, is this not a good idea?

 

[ancona]

Oppie, I would wait to see what happens. This looks pretty serious today, and if it goes in to tomorrow, there may be a better entry point. There are others here who know a hell of a lot more than me about the markets, so I would wait until some of them chime in.

 

[DCFusor]

From my warped point of view (just ask anyone) you don't set a time so much as you set a set of conditions that trigger buying. As in, if it's still going down, wait for that to be over with, so you can afford more. Or think about averaging into a position if for some reason you're worried you'll spend the money otherwise and need to lock it up so you won't.

I'd wait and watch, myself. But everyone has to have their own plan that works with their own methods and psychology. If you're likely to just sell it at a loss if it keeps heading down, you shouldn't buy it now - in my opinion. If you know you're going to hold "forever" then...anytime is OK, but some times are better than others.

I'll report after I close my shorts, if that helps, but....I'm (very) not perfect either, and tend to close trades whenever the money is good enough, and very quickly when they look "too good to be true" which is about what my shorts look like right this instant. Gheesh, up ~30% in ten days on GLL? Too good to be true...but to not be totally heretical, that's a hedge against my longs. Probably about time to take the money and run on that one.

Frankly, this market has been so insane and hysterical, it's possible to open short and long trades at the same thing at the same time, and close them both green within days of one another...so rational analysis is kind of out the window just now - it's all surfing, not designing boats.

 

[DSAbug]

this is a day you buy.. not balls out but definitely a day you have to buy if you believe in the gold bull.. down $95 since the fed

 

[oppie2005]

my intent is to hold "forever" as the gloomy economic situation seems to only be getting worse. I've got ALOT to learn still, and i appreciate everyone's help that i've been given thus far.

DC, you said you would watch and wait. Is there anything specific that you are watching for? In this specific scenario, what are some of the things to look for and to watch specifically. Is there news or information somewhere that i should be seeking?

 

[oppie2005]

this is a day you buy.. not balls out but definitely a day you have to buy if you believe in the gold bull.. down $95 since the fed

since the fed what? i dont mean for this to sound snappy or anything, but feel like this was suppose to say more?

 

[pmbug]

As you guys know, im a noob. I was intending on making my second purchase of silver within the next week, but after watching the ticker, and reading the comments here, is this not a good idea?

DCFusor et. al. are talking about buying/selling paper metal - trading. If I understood you correctly as wanting to buy physical metal, I would suggest continuing with a dollar cost averaging plan. The paper/spot price is diving right now and may go down to $25-26 according to traders comments that I've read (I'm not a trader). This assumes continuity in the confidence in the system which I'm not so sure still exists. The paper markets could crash completely in the weeks ahead. That doesn't mean though that you are going to be able to buy physical metal on the cheap. Dealers are going to withdraw inventory or jack up prices as the market for physical metal separates from the paper markets. I will likely pull the trigger on some physical if the paper markets fall to $26 and the dealers are still selling. I'm trying to watch the online dealers daily now for indications of increased premiums or supply shortages (whether caused by inventory withholding or actual sales doesn't really matter to me). $.02

 

[DCFusor]

Since the fed said they weren't going to be printing anytime soon. No more QE for now. Might be a head fake, but the market had priced in more QE on rumors.

Silver and gold are right now at "attractive" levels if you think their upturn will resume soon. Honestly, that's anyone's guess right now. No point in arguing that one because everyone will be right at some time-frame. The dictionary (not the market) definition of volatility applies in spades right now - beta is through the roof, in both directions.

I wait for a real upturn - a few bars in a row on whatever timescale I'm trading something at. For longer term things, those are day or week bars. For swing trading, maybe 10-30 minute. For day trading? I'm watching literally tick by tick, and looking at block sizes trade by trade - it's hard work.

The timing is all fractal - self-similar at many time scales. But if you're trying to pick an entry based on short times, you'd better be ready to get out in similarly short times - takes a long term trend a long time to get established (substitute the word "long" with whatever time frame you want to work with).

Edit - the like button went away here, but do look at what PMBug is saying - he's totally on it.

 

[oppie2005]

DCFusor et. al. are talking about buying/selling paper metal - trading. If I understood you correctly as wanting to buy physical metal, I would suggest continuing with a dollar cost averaging plan. The paper/spot price is diving right now and may go down to $25-26 according to traders comments that I've read (I'm not a trader). This assumes continuity in the confidence in the system which I'm not so sure still exists. The paper markets could crash completely in the weeks ahead. That doesn't mean though that you are going to be able to buy physical metal on the cheap. Dealers are going to withdraw inventory or jack up prices as the market for physical metal separates from the paper markets. I will likely pull the trigger on some physical if the paper markets fall to $26 and the dealers are still selling. I'm trying to watch the online dealers daily now for indications of increased premiums or supply shortages (whether caused by inventory withholding or actual sales doesn't really matter to me). $.02

Yes, i was talking about buying physical i dont want anything to do with something i cant touch or hold. So, as long as my local dealer is still selling, then it wouldnt be necessarily a bad thing to go ahead and make my purchase as planned?

Also, PMBug, Since you have alot more experience, and i assume understand alot more of what everyone is talking about, Does this appear to be that point where the paper and physical does actually separate? If it is, Does this mean that physical will be going up in price and will be much harder to obtain?

 

[pmbug]

If you are buying for the long term (ie. not spending funds that you might need within the next year or so - no forced liquidations), then I wouldn't worry about buying physical today, tomorrow or next week.

Is this the long awaited death of the paper stranglehold on the physical market? Too early to tell yet, but it certainly feels possible right now. When it happens, I expect physical supply to dry up initially as dealers withhold inventory waiting for the paper markets to return to the ~ $25-30 range. When it becomes clear that the paper markets are completely broken, I expect them to start selling with premiums sufficient to guarantee them a profit and allow them to acquire new inventory. It will take a while for the physical market to establish some equilibrium as the supply chain for physical works itself out. Yes, I do expect that prices will rise quite a bit once this boulder starts rolling down the mountain.

 

[ancona]

I don't think it was a Fed head fake, I think the Fed is keeping their powder dry because they have a hell of a lot more info on the European situation than we do. A thousand points in the market means nothing if Europe is in a smoking pile of wreckage. Right now, they are busy propping up the completely illiquid European banking system. We had all better pray that teh Brotherhood of Darkness does not cock this up.

 

[oppie2005]

oh ok. Im only using money that i wont be needing anytime within the next few years. This may come out wrong, but Most of the money that im using to purchase silver with is my two boy's savings accounts, with some that i've put back here and there for purchasing. Im not using their savings accounts to buy me some silver though, their money goes to buying them silver to ensure their money isnt lost when all the blocks finally come tumbling down. It just happens to be stored along with mine to keep them from playing with it and losing it.

Once again you guys, I really appreciate the information that you give me and all your advice. It is quite helpful to a noob

 

[DCFusor]

You should then think about things other than just silver - other PM's specifically, some of which are potentially in more shortage longer term and perhaps less volatile. As a physicist type, I think palladium and platinum are worthy candidates for longer term as well as gold/silver. They have a nice blend of PM-ish-ness and actual industrial uses (catalysts etc).

And while I agree it's too early to tell if we're at the death of paper PMs - if you trade paper, any reasonable trading scheme would have you out of it now anyway - I am at this point. If it craps from here, well, I'll have been out of it due to the normal way my trading system works. I might have picked up my last paper profits, but I DID pick them up. Heh.

My take is that sure, some of the paper stuff - and even major ETF's will fold up. MF sure caused a major breach of confidence, and that's required to keep that market alive. Just when is an open question at present. But those fantastic financial engineers will create more paper as long as they are able (sarcasm).

 

[oppie2005]

You should then think about things other than just silver - other PM's specifically, some of which are potentially in more shortage longer term and perhaps less volatile. As a physicist type, I think palladium and platinum are worthy candidates for longer term as well as gold/silver. They have a nice blend of PM-ish-ness and actual industrial uses (catalysts etc).

ok thanks. i havent looked into those two at all. silver is just my entry point into PMs, as i made my first purchase not that long ago. im still trying to figure everything out, but knew i needed to get into something, and quick.

 

[DSAbug]

I hope some of you were buying when it hit down 90 on the futures.. I didn't buy large but I did get 3 ounces.

 

[DCFusor]

'Zactly - I hope any noobs here also realize that in even my case, a dual strategy is used. My core physical PM holdings aren't considered for sale - now or later, unless I actually have to. And my threshold for "have to" is about 1 calorie away from actual starvation.

Not to boast, but my cost basis on those was largely from around 2007 - I was taking my paper profits in the boom off the table and into phyzz...easier to hold something that's going down when it's so green its ridiculous almost no matter what.

I have yet to hear of anyone who just dollar cost averaged in over a long term complaining about even fairly major corrections - you do fine in the long run.

I simply *also* do the run and gun cowboy trading thing in paper PMs - and paper other stuff, it's how I make my daily spending income. It's a lot more work, but I enjoy the labor.

It's quite possible for more than one plan to work, and one of the things I really like about this place is that a lot of people seem to realize that. And this thread is a great example - you got good advice as soon as you let us know where you were coming from with this - my advice would have been wrong for your plans and situation, but it's not the only possible valid advice. Now, that's cool.

 

[DSAbug]

since the fed what? i dont mean for this to sound snappy or anything, but feel like this was suppose to say more?

Gold sold off after the fed announcement yesterday.. The low was around -$95 on the futures in less than a day. Moves of that size are panic. Whenever we have big moves like that, I have a rule that I have to add... Doesn't always work but typically it works more often than not.

 

[DCFusor]

I tend to agree, Derek. Reversion to the mean or trend is the norm when something really emotional happens and is obviously overdone (this would be one of those) - it's a good odds bet. I'm watching right now to see if the mid-day bounce is dead cat "bargain hunting" and will be sustained, or not. So far it looks like stalling out, so I'll wait a bit more...sigh, a heck of a lot of trading is just that - hurry up and wait, which applies in an entirely different way when investing.

 

[DCFusor]

Ok, as promised - I almost completely closed my shorts on gold and euro just now. Not that I think I couldn't have squeezed a little more out of those trades, just that I think we might get a nice little bounce to reopen shorts on them...( I tend to not quite close that sort of trade, having just a little still open makes it easier to watch in my software tools - ).

While there might be some opportunity cost to having taken that money off the table, I'll sleep better, and tomorrow is another day. Those were both entering the "too good to be true" range.

Something I've learned about shorting - don't kick them when they are down already. At some point, something or someone steps in with support. The first part of the move is always best.

 

[swissaustrian]

Ok, as promised - I almost completely closed my shorts on gold and euro just now. Not that I think I couldn't have squeezed a little more out of those trades, just that I think we might get a nice little bounce to reopen shorts on them...( I tend to not quite close that sort of trade, having just a little still open makes it easier to watch in my software tools - ).

While there might be some opportunity cost to having taken that money off the table, I'll sleep better, and tomorrow is another day. Those were both entering the "too good to be true" range.

Something I've learned about shorting - don't kick them when they are down already. At some point, something or someone steps in with support. The first part of the move is always best.

I think sooner or later gold will surge even if the dxy goes up (and EUR down): We´ll have some sovereign defaults in Europe (Greece first).
Money markets are already post-Lehman mode. Gold lease rates are negative. Technically it´s becoming oversold. From all we know demand is still strong. Todays´s extreme weakness was due to some special circumstances imho:
1. oil collapsed after the Iran rumors got calmed down and OPEC indicated it had to tighten suplly in order to keep the current price level. Oil´s intraday movements clearly affected both gold and silver.
2. The long term 200 dma trend line at 1614 got broken for the first time since 2009.
3. Once the psychological barrier of 1600 fell, all limits were off. Several stopp losses got triggered and we went down to 1562. 1550 is a strong support. Maybe gold is even going down to the next support which is 1450. But I think that´s probably it.

 

[DCFusor]

If we hit that lower number and turn - I'll be backing up the truck and it'll be phyzz too. I can afford to raise my cost basis on my core phyzz that much.

But for me, though I do some TA (because enough others do that it has a self fulfilling nature) - it's more a shape on the curve I like to see, rather than a particular price level.

Lets say something is tanking, and I want to buy when there's blood in the streets, that old saw - because I know it will rise again. What I like to see is a good hard drop - shake out the weaklings and all that, maybe a bargain hunter's bounce on the way down - and you really want to avoid buying on a dead cat bounce that's just a pause in the thing going down further.

A fairly good rule is to look at how far it's dropped from trend since the start of the drop. Say that's 13% (just to make up a number). I'd like to see it recover about 10-15% of that drop before I buy again - I'm willing to miss that much of a move to be safer. So it would have to hit some scary low number, then recover about 10%+ from there (which would be 1.3% - 1.9% gain off the bottom in this example case). That's usually fairly safe. Perhaps some new meaning of the word safe with which we were previously unfamiliar, but the strategy has worked well for me in a lot of trades. Even my mileage varies on this one, but it's often a good shape to see to pull the trigger on.

What's been working for me of late is to be less twitchy than the day traders, but a lot more agile than the "investors' or longer term (months) swingers. It's my niche it seems.

You seem to catch a lot of times when neither is "getting it" that way. This timing of course changes with the mood of the markets - the ideal timings all get faster the more nervous everyone is, and slower when things get more stable. Recognizing that has been very key to the success I've had. When I don't pay enough attention to that, I don't do well.

 

[mmerlinn]

Gold will stop dropping about 1550 and then bounce some. Silver is likely to stop at 26. Both are likely to trade in the ranges 1550/1600 and 26/29 for several weeks before making another major move up or down.

My guess is the next major move is up, but not til sometime after the first of the year. In the meantime lots of choppiness as it gradually trends higher.

 

[pmbug]

The Dollar Index has blasted through key resistance at 80, threatening to “unwind” carry-traders who borrowed dollars for next to nothing in order to speculate on other assets. Chief among those assets is gold, which got savaged yesterday in a $100 selloff that seems hell-bent on testing September’s key low. The low lies at 1543, basis the Comex February contract, but we doubt that it will hold. In fact, earlier, we had told subscribers there was a 60% chance that February Gold was about to dive to at least 1459, a technical target derived from our proprietary Hidden Pivot Method. We shall see. In any event, gold and silver – as well as crude oil, the euro and the commodities complex– will come under heavy selling pressure if the short-squeeze on the dollar continues. ...

More: http://www.rickackerman.com/2011/12/a-devastating-dollar-short-squeeze-is-gathering-steam/