Overnight action in gold just as intense as yesterday. All night in fact. A big tug-of-war going on.

Finally got a 100 point + pull back ! Gee, that was a long time coming. Was it a one day wonder?

At the end of October gold breakout, I mentioned the inverted head and shoulder target of around $650. On the way to this target, gold has formed a larger inverted head and shoulder with a new target of $716 or so.

Any explanations as to why gold just plummeted from $640+ to $632+ in a blink of an eye?

Durable Goods - -8.3% vs. -5.0% consensus. BAD.

Consumer Confidence - 102.9 vs. consensus of 106.0. Worse than expected.

Existing Home Sales - 6.24M vs. consensus of 6.14M. Better than expected.

IMO, key number was Durable Goods. Buy stocks, sell gold? Who's speaking today?

tm - when the price of gold falls that abruptly (without any real reason), the seller is NOT looking for the best price fill for the order, but is looking to affect the PRICE in a negative manner. If the price then adjusts higher over the course of the day, the plan failed. So who sold? The usual suspects, I guess.

tyro_mon,

One explanation may be unprecedented electronic trading involving increasingly more complex algorithms with ever-widening variables: greater risks for greater rewards. Even daily currency moves can be 0.5% or greater and I don't remember this happening very frequently, say 10 years ago. Eventually there will be a "perfect storm" and the players will be shaking their heads wondering how all their capital disappeared.

Oils the real winner this morning...

I see that some of the shorter term moving averages on the price of oil are flattening out.

Does this mean we will breakout from this bottoming process?

Or just another bounce off of say $62 as we run up to tomorrows inventory report?

A bounce is the most likely outcome - however a move above this may surprise a lot of people - and would not be good for the US indices.

But it is the end of the month - and strange things happen.

Off topic - Does anybody know where I can get P/E's and earning's growth figures by country index?

Canadian energy trusts have rebounded, but there is talk they cannot raise capital to acquire properties and keep their business going.

Can't they simply convert back to corporate structures? And don't the better ones, therefore, still have good prospects?

Anyone know what's up with Aurelian's dismal performance over the last couple days????

Jock, There is a view that they're still expensive relative to Cdn seniors on a P/E or P/cf basis and that any premium would collapse on conversion, just as valuation used to spike when a company announced it was converting to a trust. The size of the premium is open to interpretation. However, I think the larger trusts are still cheaper than Encana.

My guess is that over the last two weeks they've established a wide trading range which they'll be in for a while, barring any significant change in oil & gas prices. Below $55 oil you need to watch for payout cuts.

Funny how when Ben speaks - certain assets often move in certain directions to get 'his message' -

Todays message was 'prices remain uncomfortably high' = oil should go down.

---

Jock:

From what I hear from the pundits lately - the focus is going to be on which Energy Trusts have large tax pools.

I also tend to think that the minority Conservative government in Canada is going to offer some kind of incentive to allow these Trusts to convert back to corporations - so they can raise capital again. (They need to ensure voters in Alberta remain loyal)

There is even some talk of reducing or removing the foreign withholding tax.

There may still be some tax loss selling to come - however those that sold in the 1st week of November I believe can buy back again in December.

Hope this helps...

Thanks, SC67 and Tradesman. As usual, nothing is simple! Sounds as if trusts either convert or become a wasting asset. And if they convert, their equity price falls. I guess rising oil prices would help them hold out longer before conversion, and the opposite on falling oil prices. I have also read that their wells tend to be "hand-me-downs" from the majors and not prime.

leewar
Aurelian, Corriente Resources and others are down because of the elections in Ecuador.

From Cannacord Capital Nov 28 daily letter:
At time of writing, and based on several news sources, with 48% of the ballots counted, Rafael Correa had nearly 68% of the votes compared to 32% for Alvaro Noboa, according to Ecuador's Supreme Electoral Tribunal. A final result may not be available until late Tuesday, however given the preliminary results it appears that Mr. Correa is headed towards presidential victory.
Rafael Correa holds an undergraduate degree in economics, a master's degree in economics as well as a master's and doctorate in economics from the University of Illinois.
He is a leftist economist running on an antiestablishment, nationalist platform. Mr. Correa served as economy minister for less than four months last year until outgoing president,
Alfredo Palacio, fired him for attacking the World Bank without consulting him first.

During the election campaign Correa stated an opposition to a free-trade deal with the
United States and has called for Ecuador to cut ties with the World Bank and the International Monetary Fund. He toned down his statements in the month prior to Sunday's election, but wants to hold a referendum to rewrite the constitution to reduce the power of traditional parties.

Our basic understanding of the Ecuadorian government is that it consists of a president
and a vice-president who must seek support from and interact with a 100-member congress. The congress in Ecuador is described as Centrist. Noboa's party has 28 of the 100 Congressional seats. Lucio Gutiérrez, who was ousted from the presidency last year after Congress accused him of meddling with the Supreme Court, and his party won 24 seats in Congress last month. Combined they have the voting power to stall Correa. There
is no indication whether the two parties would cooperate in the Congress.

Very strange intraday trading today...
Anyone else notice?

Many stocks have just gone dead...

While other stuff like oil and gold is smacked down - but bounces back...

Dennis Gartman's "Not-So-Simple" (But Really Utterly So) Rules of Trading
R U L E # 1
Never, ever, under any circumstance, should one add to a losing position ... not EVER!
Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out; this is what took Sumitomo Copper out, and this is what takes most losing investors out.
R U L E # 2
Never, ever, under any circumstance, should one add to a losing position ... not EVER!
We trust our point is made. If "location, location, location" are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position.
R U L E # 3
Learn to trade like a mercenary guerrilla.
The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand.
R U L E # 4 DON'T HOLD ON TO LOSING POSITIONS
Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important.
Holding on to losing positions costs real capital as one's account balance is depleted, but it can exhaust one's mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position.
R U L E # 5 GO WHERE THE STRENGTH IS
The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower.
We can never know what price is really "low," nor what price is really "high." We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we've no idea how high high is, nor how low low is.
R U L E # 6
Sell markets that show the greatest weakness; buy markets that show the greatest strength.
Metaphorically, when bearish we need to throw our rocks into the wettest paper sack for it will break the most readily, while in bull markets we need to ride the strongest wind for it shall carry us farther than others.
R U L E # 7
In a Bull Market we can only be long or neutral; in a bear market we can only be bearish or neutral.
In a bull market we can be neutral, modestly long, or aggressively long--getting into the last position after a protracted bull run into which we've added to our winning position all along the way. Conversely, in a bear market we can be neutral, modestly short, or aggressively short, but never, ever can we--or should we--be the opposite way even so slightly.
R U L E # 8
"Markets can remain illogical far longer than you or I can remain solvent."
The University of Chicago "boys" have argued for decades that the markets are rational, but we in the markets every day know otherwise. We must learn to accept that irrationality, deal with it, and move on.
R U L E # 9
Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly.
Thus, when things are going well, trade often, trade large, and try to maximize the good fortune that is being bestowed upon you. However, when trading poorly, trade infrequently, trade very small, and continue to get steadily smaller until the winds have changed and the trading "gods" have chosen to smile upon you once again.
R U L E # 10
To trade/invest successfully, think like a fundamentalist; trade like a technician.
It is obviously imperative that we understand the economic fundamentals that will drive a market higher or lower, but we must understand the technicals as well. When we do, then and only then can we, or should we, trade.
R U L E # 11
Keep your technical systems simple.
The greatest traders/investors we've had the honor to know over the years continue to employ the simplest trading schemes. They draw simple trend lines, they see and act on simple technical signals, they react swiftly, and they attribute it to their knowledge gained over the years that complexity is the home of the young and untested.
R U L E # 12
In trading/investing, an understanding of mass psychology is often more important than an understanding of economics.
Markets are, as we like to say, the sum total of the wisdom and stupidity of all who trade in them, and they are collectively given over to the most basic components of the collective psychology. The dot-com bubble was indeed a bubble, but it grew from a small group to a larger group to the largest group, collectively fed by mass mania, until it ended. The economists among us missed the bull-run entirely, but that proves only that markets can indeed remain irrational, and that economic fundamentals may eventually hold the day but in the interim, psychology holds the moment.
And finally the most important rule of all:
R U L E # 13
Do more of that which is working and do less of that which is not.
This is a simple rule in writing; this is a difficult rule to act upon. However, it synthesizes all the modest wisdom we've accumulated over thirty years of watching and trading in markets. Adding to a winning trade while cutting back on losing trades is the one true rule that holds--and it holds in life as well as in trading/investing.
>
Dennis Gartman: This is what I have learned about the world of investing over three decades. I try each day to stand by my rules. I fail miserably at times, for I break them often, and when I do I lose money and mental capital, until such time as I return to my rules and try my very best to hold strongly to them. The losses incurred are the inevitable tithe I must make to the markets to atone for my trading sins. I accept them, and I move on, but only after vowing that "I'll never do that again."

Food for thought.

t3d

Durable goods number can't bode well for the $usd. The gap between expected and actual existing homes sales is, imo, negligible. You only need to look around your own neighborhood to know which way things are going-even the refi companies are off the radio.

(Long XAU)

thanks for the info bobj.

t3d:

Thanks for the good read.

Expected to see some rebound in the $ today, but see only continued weakness. Have the boys lost control here? Are bigger forces at work? Look at the chart. Flatline. Where are the fibulators? "Clear..."
Gold hasen't responded accordingly, but silver seems on a tear.
Something is afoot.
We live in interesting times...

Rigdon

You know you may be right about them 'losing control' - or at least I sense the Cb'ers are getting frustrated.

In fact Greenspan seemed to be frustrated today when he issued a PR saying "Gold prices are not a good measure of inflation".

It's almost as if they have given up trying to surpress the price - and if it moves up - they will just attribute it to 'Speculation'

However - I don't trust these guys - they like to jerk these leveraged currency players around.

So I see one 'fly in the ointment' for all this excitement about the Euro and gold that no one is really speaking about and it is this:

Currency option traders are about the most bullish on the Euro as they have been in about three years

So if the Euro stalls out here or reverses this will catch these guys off guard.
As a minimum it could indicate some kind of a short term peak in the Euro - since everyone is already bullish.

---

As far as trading - its too bad that GLG's gone - as that was a really good trader - its been hard to find a replacement for it with such nice swings.

Anyone got any gold stocks that swing like GLG used to???

Tradesman
Thanks.
When Greenspan gets called off "the bench" to make such a pronouncement, I think one might say that it is a strong contrarian signal, and the game ain't going so well.
Is he suspending the laws of economics? This time is different?
The old boy is: 1. out of touch, 2. still working for the powers to be, and 3. too old to worry about his reputation..except to try to influence how he will go down in history (ego never grows old).
If the euro trade is overcrowded, obviously caution is advisable. Overcrowded buses move slowly, doors open slowly, exit is difficult.
Aren't there other opportunities founded in a weakening dollar? Gold?
My GLG is now GG. I am holding it figuring that the worse news is out. If you look at a chart, it appears to be basing. I think better times are ahead.
AEM might serve as a serogate though I haven't tested that thesis.
CB's have to now be getting nervous. Buying dollars and selling AU into a rising market (that continues to rise), at some point,looks stupid.

Should have added: no one wants to "look stupid".... more than anything. I have seen people pay a lot of money to avoid "looking stupid". Crazy as that is.
Me? I know I am stupid, so I I'll just keep the money. Thank you very much.