Friday, August 31, 2012

Fri, Aug 31: /SI, /GC, MA. Reaction to Bernanke.

The New York equity markets rallied today, Fri Aug 31, reacting to a non-committal speech (re: further quantitative easing [QE]) by Ben Bernanke at Jackson Hole with moderate gains of about half a percent.

There was more drama in the precious metals markets, as might be expected given these securities' recent use as betting vehicles on QE. The brightest fireworks happened in silver futures (/SI), which rallied to close right on the resistance point of a robustly-defined, 15-month price channel.

/SI. Jan 2011 to present. Daily candles.
Of note is the particularly robust definition of this 15-month channel. The upper line, to a dime or less, connects the intra-day highs of May 1, 2011 (the multi-year high in silver) and two subsequent local maxima (mid-Aug 2011 and late-Feb 2012). The lower parallel line connects a few local minima, again to remarkable precision, and was only violated during silver's catastrophic sell-off in September 2011, and then only on an intra-day basis.

In short, this price-channel set-up is about as elegant as might be imagined. But that does not imply that today's close of $31.79 is destined to be another local maximum; price may break through on its bullish momentum, in which case a continuation of the rally is likely, possibly after a throwback to today's price.

Gold futures (/GC) also rallied today. Further quantitative easing risks debasement of paper currencies like the US Dollar, and so the price of gold (which is quoted in USD, after all) stands to gain. Today's price action propelled gold futures through the resistance end of a three-month price channel. On the four-hourly-candles chart, gold is further above its 200-period simple moving average (SMA) than it has been since the winter.

/GC. Dec 14, 2011 to present. 4-hourly candles.
Mastercard Inc (MA) has quite intriguing price action on its daily-candles chart: volatility is sharply reduced over the past month, price is struggling to hold the support of a two-year channel, and value is about as close to the 200-period SMA as its been in 18 months. All three observations suggest that bears are poised to get the upper hand, although any pull-back is likely to be temporary, with price action having been above the 200-period SMA since January 2011.

MA. Sept 2010 to present. Daily candles.