Jul 14/15 – New CNBC show

2015-07-14 10am EDT  |  #CNBC #gold #smart money index

Gold sentiment sure is terrible. I knew things were bad, but when CNBC announced their new TV show (pictured above), I was a little taken aback by the full extent of the pervasive bearishness.

I guess their negativity is well warranted. To say gold has been a disappointment is like saying Lindsay Lohan is a casual drinker.’

We are once again bumping along the $1,150 support level. This is the third time, and the traders amongst us are worried, as we know there is no such thing as a triple bottom.’ The more often it hits a support level, the more likely that support will ultimately fail.

Although triple bottoms’ are the unicorns of the investment world, I want to believe we will hold this support level. I realize I am talking my book, but bear with me for a bit.

Sentiment is bad, that much we can agree on. But we can’t expect gold to bottom with everyone all bulled up. Isn’t this sort of negativity a precondition to the ultimate bottom? I would be more worried if we were hitting these levels and lots of investors were calling for gold to rally. Instead we are seeing complete, and utter disgust towards everything gold related.

This comes at a time of year when gold has traditionally rallied. Have a look at gold seasonality chart:

We are about to embark on the most bullish period for gold. I am not sure CNBC and the rest of the gold bears are choosing the best moment to get negative.

As for the speculative positioning, there is clear apathy regarding gold’s prospects.

On a relative basis, we are at approaching the lows of the speculative positioning. Again, probably not time to get short gold.

I don’t know what will cause gold to rally. I am hard pressed to come up with a reason. Yet I suspect the bottom will come when investors are not expecting it. It will not occur in some calamitous, emotional big puke lower, but instead in the quiet boring market filled with the abject apathy we are currently experiencing.

Something to think about

Although we have had a couple of decent up days in the stock market, I am not sure we have returned to the days of old. Something doesn’t feel quite the same during this rally.

One of the differences has been the nature of the intraday trading. During this bull run, we would often open unchanged or slightly lower, and then chug higher all day to go out near the highs.

Lately the market has been selling off towards the end of the day. There is an indicator known as the “Smart Money Index” which measures the relative performance of the first half hour of trading versus the last half hour. The thinking is that the public (dumb money) buys the open, while institutions (smart money) buy the close. By measuring the difference you can observe the relative flows between the two groups.

My recent feeling of unease is evident in this chart. The Smart Money Index has been plummeting for the past couple of months.

Who knows if this means anything more than some institutions are lightening up on stocks. This might be merely a coincident indicator of little predictive value.

But, the trader in me is worried that for the first time in a while, stocks are acting heavy – even into the rallies.

Thanks for reading,

Kevin Muir

the MacroTourist