Amazingly money flow as computed by every trade tick volume analysis in ABX went to a new high on Friday! This is true in general with the better gold stocks, but even the doggy ones have better such numbers than do the major industrial companies. This is a little hard to believe but it shows you why you shouldn't care who is doing what. Price is based on fundamentals and sentimentals with the fundamentals used to rationalize the excesses of sentiment. That's why the very old pros put so much stock in psychology or should I say in money.
ABX is the premier gold company in the world. They have earnings, earnings stability, an aggressive growth/acquisition strategy, and even pay out a dividend. That borders on the impossible in the greatest gold bear market of all time. If a company can make money in the worst of times, you have to believe they are fundamentally strong.
As a side note let me express some observations about Thursday and Friday's action. On Thursday about 2PM EST traders on the NYSE got wind from the international whisper circuit that the Soviet Union was going to expel NATO representatives. The cognoscenti trying to benefit from the self-fulfilling expectations put together a scenario from the re-discounted past by connecting the head bone to the toe bone. The mechanism was that if the Soviet Union re-invents their decrepit sub-Husseinian military, the rational expectations of all the scalpers would be to rush into the dollar and out of the ruble. Another absolute truth by these cognoscenti is that the dollar and gold are rigidly and inversely related. Presumably this has something to do with the fact that all the gold is under Manhattan. Don't ask me how the cognoscenti reached their insightful conclusion.
In any event on Thursday afternoon at the close you could see in the every trade data in each of the major gold stocks engineered short sales of several blocks ranging in size between say 10K and 50K. An engineered short is accomplished by nominally creating an uptick with small market orders to buy to create an uptick to initiate a short position. There isn't anything illegal about this, but it does show a kind of opportunism which is possible under illiquid states.
I mention this because it is extremely dangerous to do this in a market that is hyper-sensitive to the upside. Such individuals whether they are specialists, floor traders, brokers, or the public, have been habituated into believing that the gold market is dead, so there is little risk. This tells you all that you need to know about the professional psychology of the market. It is totally bearish. When the pros are bearish and you have a bull market, you have the potential of dynamic upside. My money numbers say it is a fundamental bull market but the market lacks sentiment. The professional opinion historically has been worse than that of the public, and can be confidently used as a contrary indicator.
On Friday, the golds were gapped down on nothing volume. Maybe Thursday's shorts covered during the day, but I tend to doubt it since the pros are bearish and they know it's headed straight down. After all, aren't currencies sinking and won't that cause a scramble into dollar denominated assets delivering more "deflation"? For some inexplicable reason towards the close the gold stocks got a short covering rally. Maybe "deflation" was no longer operational in the afternoon, after all the FED was buying T-bonds. Right near the close as the golds were screaming upward you could see this strange pattern. Several blocks of 10K to 50K in the major golds and very similar if not exact in size to Thursday's copy, were seen jumping in on cold upticks. Wonder if someone was getting concerned? Hell, 9/16 in one day on 200G's may be small change, but a man has got to know his limitations. |
