Saturday, 30 July 2016

Gold Bull Market's Final Technical Hurdle

The gold spot price is about to cross the final - and most significant - resistance point, marked as
"D" in the chart below.

Daily gold spot chart for the last 12 months as of end of July 2016
Daily gold spot chart for the multi-year gold bear market from 2011 to 2015 (inclusive)
(Click chart to enlarge)

Before analyzing this final technical hurdle, let's first look at the 1st 3 preceding important resistance, which all occurred this year 2016. They are marked in the chart below as "A", "B" and "C".

Daily 12-month gold spot price as of end of July 2016
Daily 12-month gold spot price as of end of July 2016
(Click chart to enlarge)


After an extended gold bear market that lasting for some 4.5 years, it finally comes to an end (Some say, "not yet!". Will deal with this later). The start of this gold bull market is confirmed by the crossings of these technical price points. Let look at each of them in detail.

A   This is the price where the rising gold price intersects with the intermediate downtrend line (marked as "DTL1") on 11 Feb. What's even more significant is that this intersection accompanies the formation of a bullish cup-and-handle pattern. Look at the big price spike, this is the market's indication of this important price point.

This day - 11 Feb - isn't just an important turning point for the gold market, it's also an important turning point for the equity market as it marked the bottom for equity indices like SPX for the year (so far). On that day, the Fed turned its hawkish tone into a dovish one. This is the macro-economic force that drives this technical.


B   Less than 2 weeks after "A", the gold market gets another nice confirmation at "B" - a golden cross for gold market. This isn't a very significant technical price point, but it's still a nice additional confirmation for the gold bull.

Again, its technical importance is indicated by a larger than average price rise.


C   This price resistance is significant for several reasons. The 1st is that it's a psychological round number of 1300. The previous price resistance is another round number 1200. The other significance is that this is the price peak of previous year, and it also has quite a bit of congestion at this level in year 2014.

Because of the strength of this resistance, the price failed its 1st attempt to punch through this level at "C1". After this failed attempt, the gold price retreats to its previous strong resistance, which now acts as strong support at "E". The strong rebound from "E" on 3 Jun confirmed it. Actually this support is doubly strengthened by being the last resistance as well as the 200 day support. In other words, it has 2 supports, not 1 at "E".

After the strong rebound from "E", as the price continues its upward march, it fails once again in its 1300 resistance. But Brexit helps it to break out in one fell swoop. Nothing quite like fear in sending the price of gold soaring.

Needless to say, its price spike at "C2" is exceptional. It takes a big battering ram to punch through a strong wall.


D1  As the price marches upwards after Brexit from "C2", it meets strong resistance at "D1". In fact "D1" is probably the strongest, and the most important resistance of all.

It provides strong resistance because not only it's the peak of 2015 (indicated by the orange line "R1"), and more importantly, it also intersects the long term downtrend for the previous bear market. I would be shocked if it could clear this level on its 1st attempt (unless there was a Brexit-like event occurred at the time).


D2  When price broke through "A", few people believed that the gold's bull market was upon us. By the time the price broke through "C2", there're few doubters left. That is, only the most conservative of technical analysts would still waiting for "D2" to confirm that gold is in a bull market. Technically speak, because we failed at "D1", gold is still in the bear market. We have not broke out the long term downtrend line as far as these hard-nosed technicians are concerned.

In order to convince all technical analysts, including the last few remaining ones, we need to beak out of "D2". But "D2" isn't a fix price level like "A" or "C", but a break out point above the downtrend line "DTL2". Once we punch through "D2" (preferably also rising above 1380), we have truly cleared the final technical hurdle for gold market, and decidedly and unambiguously in a bull market. There will be nobody left standing to say that we're not in a gold bull market.

Because of the strength and importance of this resistance, it will take more than once to beak through it just like it took gold price 3 attempts at "C" level to clear it. In fact, it took Brexit to achieve it. Nobody knows if it takes another "black swan" event like Brexit to pierce "D2", or several attempts (and we may see "D3" and "D4"). Time will tell. But i'm confident that this final technical "bear" hurdle will be overcome sooner or later.

____________________________________

In the period between the start of this year and Brexit, the U.S. 10-year bond yield range bounds between 1.64% to 2.3% levels. After Brexit, gold moved above 1300, and 10-year bond yield plunged to 1.3%. It has recovered since, but has not been able to breach the 1.6% level. This strong support for 10y bond yield early in the year pre-Brexit is now a strong resistance. This is a very bullish sign for gold.

You could say that this 10y yield level of 1.6% is equivalent to the 1300 level in gold. If yield goes back above 1.6%, gold will drop back below 1300, and vice versa. Keep an eye on this yield level. It's the bond yield that drives gold (and equity) prices, and not the other way around.

10-year Note yield for 2016 as of end of July
10-year Note yield for 2016 as of end of July

I don't really need a breakout of "D2" to convince me because while i rely on technical analysis (for the purpose of short term trading and secondary confirmation), the fundamental, macro-economic factors were all that i require to convince me that we're having a bull market that will last for at least 2 years (probably 4 - 6 years) long. The exact timing will be provided by technical analysis as the gold bull run unfolds in all its twists and turns. So keep your eyes on the chart.

For those who waits for "D2" to cross, they play the safest game, but they lose out on all the impression gains of gold price rise so far this year. Investors like George Soros saw this gold-friendly macro-economic environment coming as early as 2014. So this early bird benefited from the early impressive bull run. Having said that, while those who wait for "D2" to cross have missed out some 25% gains, but there're still a lot more gains coming. In fact, Soros topped up more gold this year (along with Stan Druckenmuiller, Ray Dalio, etc among the growing parade of Wall St billionaire gold investors).

To read the follow up (part 2) of this article 



Wednesday, 27 July 2016

Funny Caption 35: Bulldog in a Bar

Bulldog sits on a stool in a bar


"Ah...nothing's quite like a cold one on a dog day afternoon."

"Have you seen my bitch here earlier?"

"Your beer has gone to the dogs: warm and tepid, mate!"

"Just curious, do you know how to do a Bloodhound Martini?"

"Hey bartender, you wouldn't believe what I saw in a bar yesterday!"

"Have you heard the one about a priest, a rabi and a minister walk into a bar?"




Tuesday, 26 July 2016

Why i Buy UEC (Uranium Energy Corp)


All that glowing chatter on the streets (not Wall Street, mostly on the main streets of Canada and Australia) about U3O8 has radio activated my hormones. These chatter is actually rather quiet, which is what i like. I like to buy stuff when not many people are talking about. Why buy umbrellas when everyone is talking about rains?

Google search trend on "Uranium price"
Checking of uranium price is close to decade low

One chatter - well, loud spiel - came from Dr. Kent Moors, supposedly the world authority on energy (so he claims by citing his numerous appearances on the major news media like CNBC, Bloomberg, yada yada yada). He actually started his sales pitch on the uranium renaissance in 2014, saying that the uranium price spike is neigh. Part of that was the speculation of Japanese restart in nuclear energy solution.

What piqued my interest wasn't due to Dr. Kent. After all, he's just drumming up for newsletter subscription. I didn't subscribe to his newsletter, but i worked out one stock in his teaser article, and it's UEC (Uranium Energy Corp). What made my ears perked up was the fact that Li Ka-Shing (aka Uberman), the richest man in HK, put his money in UEC in 2014. I couldn't remember if Dr. Moors mentioned Li, but i know for a fact that Li bought UEC.


Uranium U3O8 historical price chart from 1988 to 2016.
U3O8 chart from 1988 to 2016. A blip is registered in 2014.
(Click to enlarge)

As it turned out, the year 2014 was a year of dead-cat bounce for uranium spot price, which resumed its downward trend afterward. I didn't follow Li immediately. As usual, billionaire like Li isn't a trader, but investor, and so his timing is usually lousy. Like George Soros' initial entry into ABX in 2014. Soros' gold call was correct, just 2 years too early. Similarly, i think Li was 2 years too early. Maybe more.

So why Sir Li bought uranium shares? Here's what i think. There's no secret that Chinese government wants to clean up the pollution, and nuclear energy is the only practical solution (even Greenpeace is on-board with the nuclear option as a viable solution to climate change problem). Unlike the West, there's no luxury in debating the nuclear issue in China.

Sir Li, being the richest man in HK, does a lot wheeling and dealing in China as one can imagine, he must have heard about that. While building more nuclear reactors is an official policy, still it's better to hear it straight from the official horses' mouths. It's more reliable than official media. Not that one should disbelieve how serious Chinese government wants to clean up their air because this is one issue that would undermine the legitimacy of the Chinese communist party.

At this point i decided to get into UEC (@ 90 cents). Can it go further down from here? Sure. Maybe uranium spot price will never recover. Sure, why not? Investment isn't about timing perfectly, which isn't possible. Anyone say otherwise is a liar. All i can do is gauging that the downside to upside is small enough for me to take a punt.

UEC (Uranium Energy Corp) price chart from 2007 to 2016.
UEC price chart from 2007 to 2016.
(Click to enlarge)

Technician would point out that i should wait for the price to break out the downtrend line in UEC before i buy. Well, i would rather be 1 year earlier than 3 months late to the uptick. I did that in ABX gold purchase (bought some in Dec 2014 not long after Soros' purchase, and some more in Oct 2015. Soros loaded up his golden truck in 2016) than buying it in July 2016.

Maybe it's my imagination, looking at the chart, this is the 1st time that UEC's price actually doing something that resembles a basing pattern in the last 13 months or so. The closest thing of one other basing pattern in this share occurred for a few months in 2009, and look at what happened after that.



Sunday, 24 July 2016

Funny Caption 34: Hanging Wingman

Soldier hanging on airplane's wing


"Severe military budget cuts."

"A misunderstood wingman."

"Aerial gunner."

"Military hanger."

"Misguided missile."

"Low level combat."




Wednesday, 20 July 2016

Wilayah Mosque, KL

 The Jewel of Kuala Lumpur 
Brochure cover, Wilayah Mosque, KL, MalaysiaI was very keen to visit some major mosques in KL (for its architecture). Jamek Mosque was in the middle of renovation and was off limit to visitors. I only just heard of Wilayah Mosque, aka Federal Territory Mosque (Masjid Wilayah Persekutuan). One reason that i haven't heard of it, or more to the point, didn't visit it in the 1980s and mid 1990s when i visited KL is because it wasn't completed until year 2000.

The name "The Jewel of Kuala Lumpur" is given by the brochure that promotes this mosque.



Wilayah Mosque, KL, Malaysia


When i saw some photos of this mosque online, the first thing that popped into my mind is the Blue Mosque (aka Sultan Ahmed Mosque) in Istanbul that i visited some 15 years ago. The impression of resemblance comes mostly from its cluttering of domes. Interestingly, the Blue Mosque doesn't have blue domes, but this mosque does! The Blue Mosque is named because of the blue tiles inside, not the domes.

The resemblance isn't a coincidence as it turned out. This mosque, according to the official source, is inspired by the Blue Mosque in Istanbul. But there're many significant differences.

Blue domes, Wilayah Mosque, KL, Malaysia
Unlike the ancient Blue Mosque in Istanbul, these dome are made up of modern material of glass fibre fabric mixed with epoxy resin, making it light and durable (and probably easier to maintain)


Blue domes, Wilayah Mosque, KL, Malaysia


Blue domes, Wilayah Mosque, KL, Malaysia
Blue domes of various sizes with smaller ones surrounding the larger ones that are the main external features the Blue Mosque.


 In the Number of Minarets 
But if you look closely, there're many differences you can detect. Take the minarets. In the Blue Mosque, the pillars are round (i.e. they have circular cross sections) with conical spires, which make the entire minarets look like space rockets, which is based on Ottoman (or Turkish) design, naturally. The minarets in this mosque have square pillars and balconies, which are based on Egyptian tradition. In this case, the bottom 2 sections have square cross sections while the top 2 sections have octagonal sections. Both the 4 and 8 sided cross sections represent Egyptian architectural designs at 2 distinct periods.

Wilayah Mosque, KL, Malaysia Wilayah Mosque, KL, Malaysia Wilayah Mosque, KL, Malaysia

Here are some quick facts regarding minarets. Various scholars have different interpretations of the origin of the word "minaret".

Some believe it comes the word manār or manāra in Arabic, meaning place of fire or light. The term manāra, on the other hand, may have came from the Aramaic language, which when translated means “candlestick” (Aramaic is the forerunner of Hebrew and Arabic languages).


Courtyard, Wilayah Mosque, KL, Malaysia
View of one of the minaret from inside the main courtyard

Other scholars believe that the term manāra may have the meaning of "light house" or "beacon" (many nautical words have derived from Arabic words, especially from the Islamic Golden Age between 8th to 13th century. Travelling in desert is similar to travel at sea. At night, both groups of travelers rely on stars to help them to navigate. Camel is known as ship of the desert for that reason).

Wilayah Mosque, KL, Malaysia


There's a strict code governing the number of minarets of a mosque. For example, 1 minaret indicates that the mosque is built by an individual or private organisation; 2 minarets suggests it's built by a community or in this case government; 4 minarets indicates that it's built by a sultan; in the case of the Blue Mosque, it has 6 minarets, this was the Ottoman sultan's way of declaring their supremacy over all other sultans. Only mosque in Mecca has 7 minarets. Just as hotel has a star-rating system, mosque has a minaret-rating system.

Skyline, Istanbul, Turkey
Skyline of Istanbul with 3 mosque erected with prominent minarets. Guess which one is the Blue Mosque.


Apart from Turkish and Egyptian architectural elements, Islamic architectural traditions such as Moroccan, Iranian, and last but not least Indian (i.e. Mughal) style also being incorporated into this mosque. This blending of architectural styles is deliberate, expressing Malaysian inclusiveness and openness (at least, in the religious sphere). Truth be told, Malaysian version of Islam is far more liberal than those in the ME.


Moat, Wilayah Mosque, KL, Malaysia
Moroccan arches form a prominent part of the mosque's exterior.
The mosque is surrounded by moat, which makes it seems like it's floating on water.

Entrance, Wilayah Mosque, KL, Malaysia Entrance, Wilayah Mosque, KL, Malaysia


Entrance, Wilayah Mosque, KL, Malaysia


While the mosque is open to public. but i saw a sign at this entrance indicating the appropriate attires are required to enter. As the day was very hot (just about every day in KL), i wore shorts. I knew there was a good chance that i wouldn't be allowed into the mosque in shorts, but i couldn't bear the heat if i wore pants. Besides, i was quite happy looking at the exterior architecture.

As i was about to leave, a young lady in headscarf approached me and invited me to visit inside the mosque (my DSLR camera was a dead giveaway that i was a tourist). I told her that i wasn't appropriately dressed for the mosque. She said it wouldn't be a problem. They have something we could put on.

Interior, Wilayah Mosque, KL, Malaysia
180° pano of the interior of the mosque
(Click to enlarge. You must!)

Wilayah Mosque, KL, Malaysia
Ada in her appropriate mosque-attending attire.

Interior, Wilayah Mosque, KL, Malaysia
Interior, Wilayah Mosque, KL, Malaysia
Top:  Names of prophets in Arabic calligraphy along the circular architrave.
Left:  "Allah" in Arabic calligraphy in the pendentive. Often seen in large mosques.

Courtyard, Wilayah Mosque, KL, Malaysia
Courtyard

And as expected, the mosque is built atop a hill to give it a commanding position. From here one can have a nice view of the surrounding. You could spot the Petronas Twin Towers from here (right photo below).

Aerial view, Wilayah Mosque, KL, Malaysia Aerial view, Wilayah Mosque, KL, Malaysia Aerial view, Wilayah Mosque, KL, Malaysia

Interior, Wilayah Mosque, KL, Malaysia

Wilayah Mosque, KL, Malaysia Wilayah Mosque, KL, Malaysia Wilayah Mosque, KL, Malaysia


 

Monday, 18 July 2016

Funny Caption 33: Office Ladder

Office ladder


"This way to the express ride to ground floor."

"The end of a corporate ladder."

"Stairway to instant news headline."

"Exit stage right."

"3-step program to everlasting financial freedom."