Sell Paper Gold, Buy Treasures… and buy real gold

The equity market looks pretty benign today, but the bond and commodity markets have all kinds of interesting activity.  The commodity markets continue to get punished.  Copper is continuing its sell off from yesterday.  Perhaps even more interesting is the action in GLD.  After its initial plunge in March, GLD rallied fiercely back to the trendline it had broken.  Today (and this week generally) it is selling off hard.  Is this the “kiss goodbye” (as Chris Kimble calls it), signalling new lows to follow?

On the other side of the inflation question, Treasuries are also selling off hard.  What’s up with that?  However, instead of being rejected at a major trend line, 30 year Treasuries (TLT) have retreated to one.  We will see if it holds.

If TLT fails to find support here, it bodes very poorly for the price as there is a multi-year Head and Shoulders in place.  To further complicate the conflicting signals out there today, JNK is also selling off after hitting resistance.  Turns out all the fun is outside of equities today.

Still watching copper…

Yesterday, I posted charts on JJC and FCX – two equity options that roughly track copper.  Both have multi-year Head and Shoulder formations in place.  Both violated bottom support and have bounced back above both the neckline and even their short-term downward trendlines.  So was the breakdown a “head fake”… will copper continue to rally?  I don’t know.  However, I do think that Copper futures perhaps give us a better read on copper.  It is a cleaner chart.   Copper futures (/HG) also has a multi-year Head and Shoulders in place, and also formed a multi-year pennant (like JJC).  However, Copper futures never violated the neckline. They have since have rallied back to the old support in its pennant pattern – where it should find resistance.

This is the chart I will be watching to get a better read on FCX (which I am currently short).

Copper Bounce: Dead Cat or Fall Breakdown?

Copper crashed decisively to the downside of long-term support a few weeks ago.  It broke under a pennant pattern, then below the neckline of a 4-year Head-and-Shoulders pattern.  FCX, unsurprisingly, has a similar-looking chart pattern.  Both copper and FCX have rallied over the last week or two.  Both have rallied back to short-term trendline resistance.  It will be interesting to see how they react from here, as I think these two cats might provide a more accurate “growth expectation” reading than equities more broadly.

Here is Copper (JJC):

Here is FCX.  First, short term:

Then, long term:

As a bonus, how about the resistance Nasdaq (QQQ) is facing?  That might be meaningful.

Though I’m growing increasingly skeptical of how much “investor sentiment” (or even activity!) effects the current ponzi picture.  Those are big checks Mr. Bernanke is handing out to the Primary Dealers.

 

AAPL: Yep, that’s a breakout

Not really any doubt left.  The next major test will be the underside of the rising (multi-year) wedge – but that is a pretty steep ascending line that AAPL may actually never catch up with.

One interesting possibility from this level is an inverse Head-and Shoulders.  If the stock were to sell-off from here and return to the 420-ish level, then rally back above this 460-ish level, we’d have an “inverse Head-and-Shoulders”, and other pretty bullish pattern.  As is, despite my deep-seated loathing for all things Apple, this breakout looks legit.

 

AAPL ready to break out?

AAPL broke under its long term trend line support in recent months, but it has also formed a falling (bullish) wedge.  It appears to be flirting with a break out.

AAPL has pushed higher since I took this screen-grab, and is fairly comfortably above the trend line resistance as I write this.

 

Daily Reading on the Financial Markets: 4/25/13

Jim Quinn at Burning Platform references one of my favorite books, “Brave New World”, as he discussing the abnormality that passes for normality in the modern world.

Matthew O’Brien at the Atlantic on the Reinhart-Rogoff calculation error that has the argument for austerity on its heels.

As a result, it looks like Krugman’s camp of money printers have won, and the pro-Austerity crowd have lost the debate on fiscal policy.

Charles Hugh Smith isn’t very pleased about that.

Mark Dow and Michael Sedacca at Marketwatch on what impact the Fed has on money supply, emphasizing the difference between inside money (created by the Fed) and outside money (created by banks) with the point being that the Fed’s QE creation of inside money is just a small fraction of the total money supply.

Zero Hedge wonder how a trailing 12-month earnings growth chart can look like this (below), at the same time as the S&P surges to new highs.

Is the Market blind? Or has Copper lost its Doctorate?

There are some pretty fascinating divergences happening at the moment.  The current weakness in copper compared to strength in most risk assets is particularly striking to me.  For the first time in over five years, Dr. Copper and other risk assets (stocks, high yield bonds) are moving aggressively in opposite directions.  A case can be made that copper has lost its predictive ability because cap-ex spending is not central to the current global growth story.  Perhaps that is so.  Or perhaps “risk assets” have simply lost their ability (or desire) to discount future risk?  Either way, the current divergence is strikingly inconsistent with the historical correlation between U.S. stocks (SPY) and copper (JJC):

Apple falling wedge still in play?

Apple has broken under significant price support in the $430 area.  A case can be made that this warns of a much bigger drop to follow.  There is also a case to be made that a “falling wedge” is still in place for AAPL.  A falling wedge is usually a bullish price setup, if the stock can break to the upside of resistance.  AAPL is closing in fast on the bottom support level for the wedge.

Gold support lines

Gold fell out of bed the other day and much was made of it.  I hold some physical gold, though not enough to consider myself a “gold bug” by any stretch of the imagination.  I have always viewed gold as a hedge, not an investment.  I still do.  GLD is an investment (trade, perhaps more accurately).  But the physical stuff is a hedge to me.  It’s there for when the Dollar is worth 20% less in one day… or the value of physical gold starts to completely separate from the listed price in the paper market (as we’ve seen happen in Argentina with the value of U.S. Dollars).  Anyway, here are the support trend lines in gold, as I see it.

FCX following Copper lower?

Copper had a very anemic bounce yesterday and is pushing lower again today.  FCX is following suit, but out of a different pattern.  Boy that sure looks like the same Head-and-Shoulders that threatened last summer, except now FCX has actually broken the neckline.