SP Futures and Gold Daily Charts at 2:30 PM EDT: Smoke and Mirrors
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The spike in the overnight futures based on the vague assurances from China to revalue the yuan higher, a strictly political move to pre-empt the discussion at the upcoming G20 meeting, was a way to justify a classic ‘wash and rinse’ in the price, and bring in some coin for the needy Wall Street banks.
This is the method by which the moral hazard of bailing out the Too Big Banks has provoked the unintended consequence of strangling the economy and the very markets which the bailouts were intended to save (at least on the storyboard). They are unable to make their expected outsized returns using conventional business means, so they must resort to soft control frauds, generating market inefficiencies to support their unsustainable existance. They ought to have been broken up and liquidated where necessary.
As I suggested last night, the spike higher was utterly artificial, and worth fading to the short side. But while it stays above the trendline now around 1110 I would not lean on it too hard, since the threat of a snapback rally in the last hour is always there on these thin volumes. If it breaks down, we are probably heading down to the 1060 support in a roundabout way.
There is also an FOMC rate decision coming up on the 23rd, Wednesday, so we will see some artificial action around that. It is also the day that GTU closes its shelf offering which should take some of the pressure off the unit price.
As a reminder this is the option expiration week (June 24th) for gold and silver July contracts at the COMEX. Even so, the pullback in the price of gold is well within the range of the handle. Short term it is relatively easy to manipulate the price within a certain range of the primary trend, given the current state of regulatory capture at the CFTC. At some point the primary trend will take a much steeper slope as we head towards a commercial failure to deliver. But no one can accuse the people in New York and Washington of long term thinking when there are short term profits to be made, and campaign contributions to be pocketed.
