Rumble In Eastern Europe

April 24, 2014 - 4:27pm

 by Gary Wagner

Yesterday we said, "We're thinking that the Russians are speaking foolishly while acting wisely. So far, anyway."

Today we'd like to augment that, since some of the driving force behind gold's bump up is due to the Ukrainian crisis.  

Elections are due in Ukraine about a month from now. The Russians are nearing an inflection point. If they wait to take military action, they're risking very deep world disapproval for interfering in a due process election. However, if they wait, they also risk facing an actual democracy in what will probably be a more pluralistic, yet still free, Ukraine, which will show more resolve in the face of the czarist threats.

And, as mentioned yesterday, and previously elsewhere in our newsletters to you, the Russians will be slapped with some painful sanctions that might hurt them 10 or even 20x more than they hurt the West, and for many years, even decades.

Anxiety over these possibilities - good, bad or indifferent - saw traders enter at the low of 1267 in order to start unwinding their bear bets and bring some of their positions into upside speculation. This is the classic short covering move.

Agreeing with us was Steven Scacalossi, the head of global metals sales at TD Securities in. "Risk appetite is being hit with expectation that the West will introduce more aggressive sanctions against Russian interests."

In other news, the durable goods report came in much stronger than expected, another indication that the U.S. recovery is good to very good now, although spotty sector by sector. While durables were up, new home sales for March (reported in April) were down drastically year on year. Housing and a generally improving economy go hand in hand.

But, due to Ukraine's problems, home sales didn't move the needle on the meter down but good news on the durables couldn't stop today's rise in gold.

As always, wishing you good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

This morning we sent out a special trade alert:

BUY GOLD AT THE MARKET 

After hitting a low to the 61 % retracement level and a double bottom we have identified this pattern: a “Three River Morning Star”.

This is an aggressive buy signal.

 Conservative traders should wait until this pattern confirms which would be: Tomorrow’s candle must be green with a higher high, and a higher low

Please note stop placement correction: Place stop below today's low  of 1268

 

Gold Market Forecast

We were looking for technical evidence that this current correction has run it’s course. Today we got just that. First we had a wild trading range taking gold prices to an intra-day low of 1268.78. This is just a few dollars shy of our projected target of 1262. Second we have identified a “three river morning star ” candlestick pattern. If you recall from yesterday’s show, we were looking to see if this 3 day pattern would emerge from the current action in gold; it did indeed un fold today. On today’s show we will detail the buy signal we issued and discuss what is needed to turn this aggressive buy signal into a conservative signal