***DECEMBER 2010 Gold and Silver Stocks/Options/Futures trading thread***

ProofCollection

This is a continuation of the monthly trading thread for discussing relatively short or near term movements in precious metals and related securities.

November was a good month posting a $27 gain while establishing a new all time high. I was up over 200% at one point, but I got too excited and over-leveraged with silver which is highly-leveraged and took almost a $5 dive from its peak in about 2 days. I had a sell point about $.50 higher that would have preserved my profits, but alas it was not meant to be. My futures trading account took about a 30% hit. But December should be a lot better as the final stage of the parabolic move continues, and I'm going to try not to over-leverage so much. I should note that over-leveraging did allow me to triple my account at one point... It's just hard to play so aggressively and then protect your profits.

These last 3 months or so of the parabolic move should be explosive and will probably lead to at least $500 higher gold ($1900-2000) with some large $100 weekly moves (in both directions). Near term, I think gold is ready to rock and should run solidly until mid-December, and there's no reason why we don't see $1500 by the end of the month (year).

For silver I have a near-term target at $30.30, but I don't have a longer-term target, although $50 should be no problem.

Monthly gold:


Weekly gold:

ProofCollection

Gold and silver looking good, should have a solid 2 weeks or so of upside. Support at 1370.6, 1381, resistance at 1397.9, 1408.1, 1435.2. I expect these next 2 weeks to be very swift...

roadrunner

VIX - vapo-rized rub

VIX didn't disappoint today by springing back from that broadening top pattern formed over the past 6 weeks. Thanksgiving is now passed so serving up some "cooked" silver to SaintGuru will have to wait. Cotton and oil leading the commodity's charge today.

roadrunner

ProofCollection

A great day for gold, we finally saw that big move I was expecting. Of course, we'll need to see some more immediate upside to know it's all for real, but it's definitely coming. 1394 is the next major resistance point.

Palladium also had a great day, and is well on its way to $800.

Copper also knocking on $4.00 again.

Today seemed to be really good for mining stocks, with SLW making new highs and headed to ~$42. The next few weeks are going to be great for PMs and mining stocks! A speculative mining stock I won, EVOGF had a great day today.

Support at 1380.9, 1389.6, resistance at 1396.2, 1404.9, 1420.2.

A $20 move for Thursday would not surprise me.

ProofCollection

So Thursday saw a false breakout over 1394, the 2nd attempt. Friday should see the 3rd and final attempt at this breakout level which will send gold running. I suppose there is a chance we'll need a 4th attempt, but 3 should do it as the charts are loaded with energy. There should be little resistance at the previous high. Silver and Palladium have made progress while gold has been stuck at 1394, so I think it's pretty clear that gold will eventually penetrate that level and make up some ground, and then some.

roadrunner

I like the bullish price action in the gold stocks and GLD but not the volume over the past week or two. It's not what one would expect on a new up breakout. A select few miners have it, but most don't. Action looking a shade toppy to me with waning momentum in many cases. Silver, gold, and numerous miners about finished rebuilding cup patterns again....time to add handles?

Lightened up on miner positions that recently jumped such as EGO, HMY, XRA, XPL, EGI, ANO. They all had nice chart patterns showing them ripe for a bounce. XRA was ready to fall off the chart before it turned. Surprised that IAG made zero progress so I'm continuing to hold on that one. It's been consolidating for 12 months now. The lousy 3rd qtr report is still weighing heavy on it.

roadrunner

ProofCollection

We finally got the $20 move I was waiting for, just about everything metals or commodity related went nuts today. The interesting thing is that today's move didn't register as a trend, so today's move could be part of a consolidation. This means that the charts are still loaded with energy to start a big trend. Of course the direction could be down, but I think the odds are strong that it will be up, and that's where my money is. If this means what I think it means - next week could be HUGE. This week is the highest weekly closing ever, and is less than $10 from the ATH. The previous high should provide little resistance to further upside motion.

Palladium - who knew it was going to be such a winner? It has DOUBLED in the past year, silver has done almost the same.

Last fall, the big gold move kicked off with India buying a bunch of IMF gold. Perhaps this article will kick off the next phase?
China Massively Buying Gold

For Sun night/Monday, support is at 1395.2, 1406.1, and resistance at 1426.9, 1437.8, 1469.5.
For silver, support is at 28.85, 29.17, resistance at 29.745, 30.065, 30.96.

SP500 overall looks bullish but needs a day or two to consolidate, but could consolidate upward. As far as mining stocks, SLW has been the star (and should continue to be), HL and THM and FRG have done well, but AUY and IAG are stuck. I wish I knew what to do with these as I feel they have some catching up to do. Maybe the world is waiting for me to sell my shares so they can finally go up. And my uranium play, UEC has done VERY well recently.

roadrunner

AUY has done quite well the past week tacking on 13%. I'll take that any day. Only Barrick has moved up more as I see it. Yamana has a huge amount of reserves/resources considering that only about 1/3 are gold. Their silver and base metal contributions really bring down their net cost per gold ounce (around $115 last quarter). I like Yamana and it looks to be breaking out of a 6 month cup and handle with 14 on its mind...then 16...then finally 20. It's volume is running in the right direction. They also had a fantastic 3rd quarter which all bodes well for them. After peaking out at around 19-20 back in 2008 it's nice to see them finally back on track. EGO had a similar +13% week but IAG just stunk up the place. But I think IAG will wakeup after everyone realizes that it's the only major train still left at the station. A number of miners seem to be right at key chart resistance and/or breakout points. Interesting times indeed.

Gammon was the high flyer among the smaller intermediates this week gaining 22%. It too broke out of a combined 7 month consolidation triangle/cup and handle/IH&S. I owned the stock several times during this period but finally tossed in the towel on the last move down in later-November (ie the final head fake) thinking that it would remain a dog until it finally turned in a decent quarter. On November 29th they hired a former high ranking and well-travelled Mexican politician (ex-Ambassador, senator, governor, etc.) to their board of directors as a Govt relations expert. Seemed to have worked wonders as from that date the stock has moved skywards. If they get the El Cubo mine out of mothballs following its labor strike issues, GRS will really fly. This ex-dog now seems to be having its day. The chart patterns were pretty obvious, but didn't have the patience to hang in while others were already taking off. With the Mexican miners one has to wonder what effect the drug cartel violence could have on their operations.

Gammon chart

roadrunner

ProofCollection

Thanks RR. I am encouraged by AUY. When I was slamming their performance, I wasn't referring to the last week which has been good, but just their performance since I bought them... I didn't buy them optimally, and I think this week's gain put them back to just slightly above break-even for me, and they've been at this point and lower several times in the last 6 months. Each time I think they are ready to break out, and they disappoint. They have failed to gain relative to the price of gold and silver. This will eventually change though, and I think we are at that point now with gold about to zoom through $1500, although I've thought and said similar before.

roadrunner

silver and gold miner specs

That's an interesting link on the Kitco forums (miners/stock due diligence thread) where they came up with a simple model to evaluate miners based on their known reserves/resources. Tried linking it here but it won't follow through. Note that Yamana ranks pretty high on that list with 118 MILL gold equivalent ounces. GG and AEM are in the same approx range. Easily puts AUY within the top half dozen or so gold/silver miners. I feel the same as you with AUY's disappointment over the past 2-1/2 yrs as they've cycled in a long consolidation while gold moved on to make consecutive new highs. But that story is the same for many of the miners. AUY seems to be trying to form a 1 year cup. Then "should" climb to complete a 3 year cup in 2011. At least that seems reasonable to me. For miners spread out across the world my biggest concern is which nation's will try to grab a bigger share of the royalties as natural resources become more in demand and higher in price. There's probably no such thing as a totally safe jurisdiction, only varying degrees of security. I would have placed Canada, Australia, and the US in the "absolutely safe" category but more recent rulings and proposed bills against miners has changed my mind (environmental/permitting, taxation & royalties, etc.)

While I like AUY and some of the other intermediates, I think I will continue to try and concentrate more on the juniors in GDX and GLDX where most of the action will probably be coming from. Too bad the US market doesn't have something to take more advantage of the junior miners on the Toronto exchange....but those 2 funds come close.

roadrunner

roadrunner

With all the bullishness shown in silver, gold, pall isn't about time for platinum to make a run to $2100 to even the score? Cup n'handle time?

GSR hit a low of 46.7 on Gld/Slv ratio. A couple of the better gold analysts I read who have been dead on since Nov 2008 are calling for one more leg in gold up to the $1470+ to $1525 area. Seems reasonable to me. That would take into early January, probably with a new intermediate S&P as well.

$1444 and $1521 are the next 2 gold angels lined up.

roadrunner

ProofCollection

Didn't get a chance to post yesterday but gold and silver had great days, and continued to tack on gains overnight. More upside is possible, the fuel for the 'fire' is likely to be the vote in Ireland on whether to accept the bailout. I think either result is positive for PMs. Vote scheduled for 10:45am EST AFAIK. BTW, gold is up $100 since 11-17.

Copper has been the star overnight, taking off from under $4.00 to a high of $4.1315, about $.13 from what I believe is the all time high.

There is a minor bottom being called for on Wednesday, but again this is something to dip down into or climb out of... perhaps the response from the Ireland vote will be PM negative and it will bottom tomorrow... I don't expect that, but it's possible. The next few days could be quite volatile. I do think there is a strong possibility of a $50+ day coming in the next week...

Support for gold at 1413.1, 1421.3, resistance at 1432.7, 1440.9, 1460.5.

roadrunner

This pullback "so far" today stopped at uptrend lines anchored back to the Nov 28-30 bottom area. Worked pretty well with gold, silver, plat, pall, and copper.

roadrunner

percyb

<< <i>This pullback today stopped at uptrend lines anchored back to the Nov 28-30 bottom area. Worked pretty well with gold, silver, plat, pall, and copper.

roadrunner >>



What's the support for silver?? Isn't the 200 mda down around 25 or so?

roadrunner

That was possibly only the first pullback point. Who's to say if this stops at 10 dma, 20 dma, 50 dma, etc. But the 20 dma has held since back to August. Lots of lower gaps in SLV that could be filled. As PC mentioned there's a cyclical bottom due mid-week. The golds, silvers, ags, pgms, gassers, rare earths, and oilers appear to be out of steam for the time being. Bond auctions this week from Tuesday-Thursday (3,10,30 yr). Can't have a successfull bond drive if metals & commods are allowed to run. Too many newbies who just jumped in thinking $1450-$1500 was a lock. So time to shake the tree a bit and see who falls off. Safe haven trades back in play, inflation trade off. Dollar looks to be ready to run to complete it's next leg up while the rock currencies falter. While the S&P had an up day, it's going to have to fight hard to stay up but the $6-8 BILL per day POMO on Thurs/Friday should help. Don't see the VIX staying down while GSR is sling-shotting upwards. The GSR bounced right off it's 25 yr up trend line at around 46.3. It could bounce nicely from here after a down leg from 68 to 46.

Miners look like they swallowed something that will take more than just a day or two to pass.
Now looking for a good opportunity to fully reload.

roadrunner

ProofCollection

<< <i>Miners look like they swallowed something that will take more than just a day or two to pass.
Now looking for a good opportunity to fully reload. >>



Yes a cyclical low is due on Wednesday, although the cycles can be off by a day or two. Today's action was a 38.2% retraction of the move up from ~1350, so the retracement is probably over, but could last into Wednesday a little bit (even if just the early morning hours) and re-touch the lows of today. I think it is fairly safe to re-enter here at 1400 gold and 29 silver. It may not be the exact bottom, but it will be close enough. These moves re-energize the charts for more upside.

It was interesting, this morning when I saw everything peak it occurred to me that I should lighten up considerably - I felt the correction coming in my gut - but with the Ireland vote news coming out I thought there was a decent chance of an over-reaction mega-move (up) that I didn't want to miss out on. Luckily I was positioned such that I should be able to ride this move out with minimal damage.

Support for gold is at 1338.7, 1374.5, 1388.2, resistance at 1410.3, 1424, 1446.1, 1481.9.
Support for silver is at 27.037, 27.853, resistance at 29.302, 30.118, 31.567.

roadrunner

Those were some wicked bearish engulfing candles seen today in GLD, SLV, GDX,GDXJ, GLDX, etc. In the case of GLD and SLV they swallowed up the last 2 up days. The timing of these peaks seems very evenly spaced out from the Oct and Nov mid-month highs. And each of those 2 previous pull backs lasted 5-6 days before coming turning. And each of these 3 one day hits has produced very large neg. candles that don't appear anywhere else in the pattern. The move back up in the GSR was pretty strong as well. I don't think this will be recovered in only 48 hours. Could be weeks but let's take it day by day to see how quickly the euphoria is burned off. RSI and other momo osc reached about the same levels as the Oct and Nov peaks before falling back. Volume has never been good in this recent run up with only the best of the senior and junior miners making new multi-month highs...most didn't. And this has been an across the board commodities hit today with all the PM's and even copper getting splunged. I look at platinum, as well as most of the grains and softs as indicative of the correction that occured since November 8th. While silver, gold, and pall made new highs, it wasn't by much. Expanded (ie higher) B wave corrective waves are getting pretty common in the PM's and don't necessarily give the all clear signal for an extended run.

roadrunner

gsa1fan

Seasonal sell off? Almost same move last year. Almost same dates. 12-4-2009

ProofCollection

RR, I think you have to keep the bigger picture in mind here, as it is the longer term charts that are in control. Gold increased $100 in 2-3 weeks. Gold is only down $30 from where it opened on Tuesday. This is nothing, and it's even to be expected. In this final stage of the parabolic move, the volatility will be nerve-racking.

Further weakness will be worrisome, but so far this is nothing to get excited about. In general, stocks are not looking bearish either, to mining stocks should be just fine.

roadrunner

Gap filling targets from the past 8 days:

GLD - $133.9 (met)
SLV - $27.95 (met)
GDX - 61 (met)
GDXJ - 41 (met)

roadrunner

cohodk

<< <i>Those were some wicked bearish engulfing candles seen today in GLD, SLV, GDX,GDXJ, GLDX, etc. In the case of GLD and SLV they swallowed up the last 2 up days. The timing of these peaks seems very evenly spaced out from the Oct and Nov mid-month highs. And each of those 2 previous pull backs lasted 5-6 days before coming turning. And each of these 3 one day hits has produced very large neg. candles that don't appear anywhere else in the pattern. The move back up in the GSR was pretty strong as well. I don't think this will be recovered in only 48 hours. Could be weeks but let's take it day by day to see how quickly the euphoria is burned off. RSI and other momo osc reached about the same levels as the Oct and Nov peaks before falling back. Volume has never been good in this recent run up with only the best of the senior and junior miners making new multi-month highs...most didn't. And this has been an across the board commodities hit today with all the PM's and even copper getting splunged. I look at platinum, as well as most of the grains and softs as indicative of the correction that occured since November 8th. While silver, gold, and pall made new highs, it wasn't by much. Expanded (ie higher) B wave corrective waves are getting pretty common in the PM's and don't necessarily give the all clear signal for an extended run.

roadrunner >>




I think the entire commodity complex from corn to oil to silver is going to take a breather. Will last for several months. Rising interest rates have helped the dollar, disappointing those who thought when bonds went down they would take the dollar with them. Bonds and currencies probably stabilize into the first quarter which should take the buying pressure off commods.

Will look for 3 black crows on GLD/SLV tomorrow. Momos never confirmed the rally of the last 2 weeks. Double tops, trendline breaks and rising wedges are possibly (probably) in the offing.

percyb

<< <i>


I think the entire commodity complex from corn to oil to silver is going to take a breather. Will last for several months. Rising interest rates have helped the dollar, disappointing those who thought when bonds went down they would take the dollar with them. Bonds and currencies probably stabilize into the first quarter which should take the buying pressure off commods.

Will look for 3 black crows on GLD/SLV tomorrow. Momos never confirmed the rally of the last 2 weeks. Double tops, trendline breaks and rising wedges are possibly (probably) in the offing. >>



How do you feel about copper and nickel and zinc?

Justacommeman

<< <i>

<< <i>
I think the entire commodity complex from corn to oil to silver is going to take a breather. Will last for several months. Rising interest rates have helped the dollar, disappointing those who thought when bonds went down they would take the dollar with them. Bonds and currencies probably stabilize into the first quarter which should take the buying pressure off commods.

Will look for 3 black crows on GLD/SLV tomorrow. Momos never confirmed the rally of the last 2 weeks. Double tops, trendline breaks and rising wedges are possibly (probably) in the offing. >>



<I think the entire commodity complex from corn to oil to silver is going to take a breather> Agree.

<Will last for several months> Disagree

<Rising interest rates have helped the dollar, disappointing those who thought when bonds went down they would take the dollar with them>

Bonds took a dump today and I found the close on the dollar very very weak. Inverse hammer.

Will look for 3 black crows on GLD/SLV tomorrow>

Black crows are rare and should be paid attention to. However, there is no way GLD or SLV can have a black crow candle tomorrow. The second candle has for each a long bottom wick. A traditional 3 black crow pattern has no bottom wicks, at least from how I've traded them. Also a 3 black crow pattern needs a forth confirming pattern. Agreed, that the the last two days candles are far from buliish, but they are non confirming. So far.

JMHO. MJ

ksammut

Silver trying to come back tonight?

ProofCollection

Today took gold down just a bit more which I really wasn't expecting after achieving the 38.2% retracement, so it did some damage. But, as today was scheduled as the day for the low, at this point I have to believe that it is in, barring a possible quick touch of support at ~1367.9 tonight. I'd say load up the wagons tonight, but be prepared to weather a dip to 1368, or if you're more conservative, buy at 1368 with a few points for a stop loss. From here I think we've got a good week or two worth of upside, but there is an "XAU" bottom forecasted for Dec 15 and nothing else until early next year. I suppose the other possibility is a week-long consolidation between 1370 and 1430 to re-charge the longer term charts a bit more. Getting over $1400 will be a key indicator that the correction is over.

Support for gold at 1353.3, 1367.9, resistance at 1386.6, 1401.2, and 1419.9.

Copper is on an absolute tear, and is unaffected by the moves in gold and silver. Palladium is actually hanging in there a lot better than GC and SI, and is probably a decent indicator that further downside is limited.

cohodk

Justacommeman

Compelling chart Dave. MJ

roadrunner

I think that silver will correct or stabilize for quite a bit longer than gold. This would coincide with allowing the GSR to move back up into the 50's once again. Gold could continue to move up higher in this scenario while silver stays in the mid to upper $20's. Gold still looks like it has one more leg left to complete. The action since November has not been bullish. And as far as I see it, that's when this correction for gold actually began even though a slightly higher-high occured due to the QE2 induced rally. Assuming that, all gold needs to do is to perform a week or two C leg down from here to finish a 4-5 week ABC. Using the USERX chart as a proxy for the gold market it looks to me to have a 3rd up leg left to go in this current sequence. What's more the highest that gold got relative to its 200 dma was 17% back in November. On this current leg it only reached 15%. The previous two major gold rallys ended in the 25-35% range...not in the teens. And likewise GDX tended to end around 35-45% > 200 dma but only reached 27% last November...peaked this past week at +24%. Seems like there is more here for GLD and GDX. The moves have not been well bought into and there was no euphoria that the move would never end. Silver reached a lofty 55% in November and could indeed be consolidating for a while. It only reached 48% above its 200 dma in March 2008. But I'd bet it went far higher than those levels in 1979-1980.

I would agree with MJ that this correction will be short term such that gold makes a run higher to $1475-$1525+ into January. Silver may or may not ride along. Cohodk's silver trend chart assumes silver will continue to run into a channel that is linear. But at any time it could go parabolic and leave that upper channel line behind.
Copper is hanging in there as it goes along with the main stock market as a growth item vs. a more speculative asset/currency alternative. I also think gold miners like Yamana have hung in there better because they have a nice percentage copper component to their production.

USERX

roadrunner

ksammut

<< <i>I think that silver will correct or stabilize for quite a bit longer than gold. This would coincide with allowing the GSR to move back up into the 50's once again. Gold could continue to move up higher in this scenario while silver stays in the mid to upper $20's. Gold still looks like it has one more leg left to complete. The action since November has not been bullish. And as far as I see it, that's when this correction for gold actually began even though a slightly higher-high occured due to the QE2 induced rally. Assuming that, all gold needs to do is to perform a week or two C leg down from here to finish a 4-5 week ABC. Using the USERX chart as a proxy for the gold market it looks to me to have a 3rd up leg left to go in this current sequence. What's more the highest that gold got relative to its 200 dma was 17% back in November. On this current leg it only reached 15%. The previous two major gold rallys ended in the 25-35% range...not in the teens. And likewise GDX tended to end around 35-45% > 200 dma but only reached 27% last November...peaked this past week at +24%. Seems like there is more here for GLD and GDX. The moves have not been well bought into and there was no euphoria that the move would never end. Silver reached a lofty 55% in November and could indeed be consolidating for a while. It only reached 48% above its 200 dma in March 2008. But I'd bet it went far higher than those levels in 1979-1980.

I would agree with MJ that this correction will be short term such that gold makes a run higher to $1475-$1525+ into January. Silver may or may not ride along. Cohodk's silver trend chart assumes silver will continue to run into a channel that is linear. But at any time it could go parabolic and leave that upper channel line behind.
Copper is hanging in there as it goes along with the main stock market as a growth item vs. a more speculative asset/currency alternative. I also think gold miners like Yamana have hung in there better because they have a nice percentage copper component to their production.

USERX

roadrunner >>



I believe silver will outperform gold in both the short and long term. As time goes on, it will become more apparent that there is a silver shortage. Large investors, hedge funds, and possibly countries will take delivery forcing silver to move much higher. To some degree, that has been happening already.

cohodk

roadrunner

I see the "bearish" rising wedge in gold. I also see the parabola that it is rising too. Eventually the parabola wins. The peaks from 2006 and 2008 to which the wedge is anchored could be already obsolete. There's also still room in there to get another up leg out of gold to hit that +25% > 200 dma. It could even extend beyond the wedge a bit. Didn't we see a similar but shorter bearish wedge used from 2008-2010 that suggested gold was all done in the $1200's?....yet it defied the wedge and broke to $1400+. I think gold is going to continue to disappoint a lot of bearish wedges.

While I can agree with the lower wedge channel line, I'd prefer to draw a parallel channel to that that includes the Oct. 2007 breakout/swing point, and the Feb & Dec 2009 highs. That parallel channel allows room for a move to >$1500. That's a more logical and current path than to bank on a 4 year old line. Much has changed in the past 1-2 yrs. One could also discount that entire wedge since it's critical that it includes the massive and one-off 2008 wash out. To me, that dip should effectively be removed such that you really end up with a smooth line and a parallel channel. Bearish wedge gone. With the drop removed you have a slowly rising parabola but with gold still within a 2 year rising parallel channel. That wedge is fundamentally based on a dollar and TBond safe haven play which worked in 2008. Such a safe-haven play today seems more remote based on what we know about sovereign debt, otc derivatives, suspended FAS157 acctg, fiat currencies, and QE1,2,3,4.... Still, I'm not going to ignore that wedge as it is there. But I will still accumulate on pull backs.

The gold peaks of $676 and $1226 reached +25%>200 dma. The $1033 peak reached +33%. I would draw your upper wedge channel to include all 3 peaks and not leave the $1226 out. They were all legitimate oversold peaks at >25%. I would probably leave the $1033 point slightly above the line since it was seriously overbought. Doing that would adjust the wedge such that it has already expired and gold has broken out but at only +17% above the 200 dma. The +25% point is now $1545. Given multiple ways of drawing that wedge I would either do it this way or anchor it at the $1033 point leaving former highs behind. Either way the wedge would have expired. The $676 and $1226 highs are of exact equal importance as +25% highs, yet as currently drawn the $1226 high is not even considered a significant high based on the "over-exuberance" of the $1033 high...which incidentally was also followed by an over-exuberant low. I'd tend to soften the effects of each of those exuberant points. Another way to label a wedge is to call it a rising set of cup and handles where the right side of the cup keeps running higher than the left. I see those as bullish breakout patterns. And none of this means that the next few weeks might not be followed with another cupping consolidation pattern.

I believe silver will outperform gold in both the short and long term. As time goes on, it will become more apparent that there is a silver shortage. Large investors, hedge funds, and possibly countries will take delivery forcing silver to move much higher. To some degree, that has been happening already.

ksammut, I can't disagree with your statement as a true supply squeeze trumps all charts. My comment is only based on the GSR and the current charts.

roadrunner

cohodk

Roadrunner,

One of the blue trendlines will be broken. If its the upper line then PC gets his parabolic $500 run. Frankly I dont see any reason for a panic buying spree that causes this, buy who knows. If the lower line breaks, then it doesnt have to mean the run is over, it just means that the "guaranteed" up move in gold will take a breather. Just as gold could go to $2000 in the next year, it could also trade sideways and rest for awhile.

A year ago I showed the rising wedge in GS. It certainly wasnt the "death" of GS, but did foretell of sideways price action. GS is currently at the same level as 18 months ago, yet did drop 30% from its high. Silver has dropped 30-40% everytime it has made a parabolic move, while gold has dropped about 20%. Will they do so again? We'll find out. But whats wrong with $1000-1100 gold? The overall uptrend will still be intact. Lets not rush a good thing, eh?


Here is a possible trend channel.....

roadrunner

I'd still like to see the $1226 high given equal weighting in any line that is drawn. The $1431 is being heavily overweighted considering that it's only 17%>200 dma. That's more like an intermediate high of a 2nd leg up. While it is an all time high it's not an overblown one like the $676, $1033, and $1226. It's not that I'm trying to push gold up at the moment. The various signs of being significantly overbought aren't quite there for gold at the moment. A nagging feeling overcomes me that this round is not yet finished for gold...even commodities in general. I don't see the SM going off on a bonanza run and leaving commods behind. The upper blue channel line can be broken on a simple move higher without gold going vertical. It can grind that out over the next few months after this pullback is complete.

I've mentioned before that extended gold rallies have usually begun when the 10 to 2 yr TBond ratio falls back to the 200 dma. It's currently done that. It might have further to fall or consolidate time-wise as the yield curve steepens but it's giving a clear sign that an opportunity of some sort is fast approaching.

USTBond 10 yr vs 2 yr rate - 2nd chart is weekly

roadrunner

cohodk

I'd still like to see the $1226 high given equal weighting in any line that is drawn

Ok. Draw a line from the 1034 peak to 1226 to the highs in June. I think you will see this line was broken to the upside early Oct and then tested to the downside in late Oct and mid-Nov. The break of this line simply projected the run to the primary upper line. It does show importance as evidenced by the tests in Oct and Nov, so a break below will most likewise project a test of the steeply rising lower trendline. Gold needs to stay above this line and more importantly the Oct /Nov lows. Otherwise a test of the 200dma and steep trendline will be in order. Thats only a 15% drop, so no big deal, right?

roadrunner

For gold to correct back 15% ($1216) would require to break below the more recent breakout level of $1260 which has quite a bit of support on multiple levels and took 3 attempts over 4 months to crack it. First, gold is going to have to break under the 200 dma which has held since January 2009. I would venture that a +25% move to come will be needed to reset to < 200 dma (now at $1245 but will likely be at $1260 in 1-2 weeks ahead, offering more resistance at that level). The 150 dma has held tight as well and is currently at $1276. I could see a further reset to $1329-$1365 but would be surprised to see anything much deeper. $1300 might not be penetrated again.

The current gold currection looks similar to the expanded correction that gold did in May-June of this year where it peaked out higher on the corrective leg. That correction pulled back 8.5% to $1155 (50% FIB) when everyone was expecting a much deeper drop to <$1044. A similar pull back this time would be $1310. Since the 50% FIB has already been used I'd select the 38% which would pull it back to $1326 (-7.5% from the peak). That number fits much better with the current low of $1329 which I don't think will be violated. If I'm wrong, then $1280-$1300 looks like worse case. I also like the fact that the apexes of the last 2 consolidation triangles were at about $1345-$1360.

The current move doesn't look anything like the final assault on $676, $1033, and $1226. So far we have this zig-zag pattern looking like a complex 4th wave rather than an exuberant peak where the price falls off the cliff for an extended period.

roadrunner

ProofCollection

I'm surprised by the discussion here and the amount of concern and significance given to a ~$40 pullback from a fresh all time high that came after a ~3 week $100 move.

Below is the weekly chart for gold with crude below it where you can compare crude's parabolic move to where we're at in gold. As you can see in crude, the big move above the second channel lasted 12 weeks, or 3 months, which is about where I believe we are at now in gold, give or take a few weeks.

Gold is kind of taking its time and dragging this move out, but the move is under way.

cohodk

I'm surprised by the discussion here and the amount of concern and significance given to a ~$40 pullback from a fresh all time high that came after a ~3 week $100 move.


I see nothing wrong with rational discourse. Would it be better to discuss after a $100, $200 pullback? Every $500 rally starts with a $50 run, just as a $200 drop starts with $40.

Just as with your chart of oil above. It hit a new high, then started to fall. You might have said why be concerned with a $5 drop from 147 to 142 after it just hit a new high. Just a few days later it is down another $12 and the next week down $8. Suddenly something that looked like it was going to $200--even Goldman Sachs said so--had dropped $25 (17%). The investor who was not concerned about oil and listened to all the pundits, got destroyed. Now Im not trying to compare this gold, but merely presenting the view of a cautiously optimistic investor.

ProofCollection

<< <i>I see nothing wrong with rational discourse. Would it be better to discuss after a $100, $200 pullback? Every $500 rally starts with a $50 run, just as a $200 drop starts with $40. >>



Nothing is wrong with the discussion, but it's a lot of "they sky is falling" hyperbole after a rather insignificant move. Gold stops going up for a few days and everyone thinks the rally is over. Gold spends a majority of the time oscillating within a ~$30 price band, so I'm surprised that people, especially experienced traders such as yourself, view this consolidation as anything more significant than what it is, until shown otherwise.

ProofCollection

The consolidation continues, and will probably last until next Wed. Today's attempt lower fell short of Wednesday's low and bounced right back, so this indicates that the low probably is in as previously predicted for Dec 8. The next low is scheduled for Wed Dec 15. 1397 remains a key level.

Support for Mon is at 1336.3, 1380.9, resistance is at 1396.7, 1421.3.

roadrunner

Gold has more left in the tank

Article by Radomski charting gold vs. corporate bonds. This ratio has often confirmed breakouts and a strong trending move in gold. The current breakout of a 2-1/2 yr triangle shows gold only part of the way done with the current rally if compared to the runs of 2005-2006 and 2007-2008. Interesting that this ratio considers gold only consolidating from 3/08 to 7/10. Only in the past few months has gold made a true breakout move against bonds. I wouldn't fight this trend. Each of these 3 breakouts started in July with the last 2 ending the runs in Feb/March. Those 2 earlier breakouts occured on the 3rd leg up. Then a pause, then the 5th up into a top. Using the same logic, the current move has just completed leg #3 up and is pausing in leg #4 before leg #5 occurs. The rather stunning rise of gold since the $1155 bottom in July would seem to support a very bullish 3rd leg ascent. The 5th leg should be no less bullish if previous history applies. Leg #3 was +276 ($1155 to $1431). A similar move from an est. bottom of $1325 would mean $1600. Just for comparison I calculate leg #1 at +$266 min ($960 to $1226). Assuming a Fib 1.6X the current continuous upmove to complete all 5 legs ($960 to $1431), that would mean a minimum of $211 for leg #5. Even from $1260 strong support that would give $1481. Radomski sees $1300 as worst case bottom for the present move...assuming the low isn't already in.

The author also highlights a GDX/SPY volume spike this week but I don't see one. The huge spike back on November 8th was clear as a bell. This week's is quite fuzzy.

On a cherrier note, commercial bank otc derivatives increased by $10 TRILL since the last time I looked at them. Now at $223 TRILL total. If you toss in the bank holding companies the number jumps to $295 TRILL. 84% of them are interest rate contracts.

roadrunner

roadrunner

The FED's newest round of POMO's starts this week with 3 days of sizeable purchases totaling around $24 BILL. The follow on weeks are similar through January 12th resulting in 18 POMO days at >$100 BILL.

FOMC meeting Tues-Wednesday.

roadrunner

ProofCollection

Nice gains in metals overnight. Silver back knocking on $30 again, and gold about to overcome the $1397 level decisively... More interestingly, copper is about $.06 away from what I believe is an all-time high... my charts don't go back far enough to see if it's ever traded higher than $4.2605.

57loaded

will there be anything of importance in the upcoming (Thursday) CFTC's plan to limit traders' speculative positions? does anyone have an idea of what it will contain?

ProofCollection

Just saw the article you were talking about.

At first I thought this could have a big impact, but seeing that it is just the first draft a plan of new regs to be implemented by next July, I don't see that there will be any big immediate effect, as most futures positions held now will be long closed or filled by next July.

ProofCollection

A good solid day for gold but we didn't pentrate 1397 definitively yet... Actually it's a range, 1397-1400... I see 3 attempts so far, so I expect the next attempt to take us back through 1400 and onto new highs. Silver had a great day with pretty much a $1 gain. Tuesday should be another great day for PMs.

I'm still weary of what will happen around Thursday with a low predicted on the XAU, but I don't think it will be too serious.

Support for gold at 1383.9, 1392.1, resistance at 1403.3, 1411.5, 1430.9.
Support for silver at 28.807, 29.273, resistance at 30.052, 30.518.

The big story I think is still copper, which peaked at less than $.04 below an all time high, and is poised to make new highs.

1201reset

Did the JP Morgue really just throw-in the towel?

Linky

Quote:

"JPMorgan has quietly reduced a large position in the US silver futures market which had been at the centre of a controversy about its impact on global prices for the precious metal."

_Reset

roadrunner

JPM can always start piling up on silver derivatives since those are non-transparent on the OCC reports. And from what I've seen, it does appear that the number has been growing. The former peak that was held in mid-2008 was $190 BILL in otc silver derivatives. With 50-1 leverage that can be accomplished with less than s $4 BILL outlay. And if they didn't have it you can bet the FED or Treasury would be happy to make the loan at near 0 interest rate to get 'er done. Keeping silver in check has been a pillar of keeping TBond & dollar prices up. They might keep their own position reduced but why not enlist other banks to pick up the slack by going 1500-3000 contracts each? To let silver go now means $50 silver for starters.

Interesting week with 3 POMO auctions, 1 TIPs auction, and an FOMC meeting.

roadrunner

ProofCollection

What looked like a good day for gold ended up going nowhere. It's typically quite positive for gold (or anything) to break above a resistance level and then come down from above to test that level, which is what we saw with gold and ~1397 (give or take a few). Although this may be just another day in a triangle consolidation that has a few more days to play out. Although the short term charts are loaded with energy, so I'm a little conflicted. So it remains to be seen how this will play out, but I think the downside is limited from here for the near future, and we could still be in for some big upside.

All in all though, with all of the headwinds facing gold (fed week), gold held up well.

roadrunner

Seems to be a decent divide right now between the gold bulls. A number of them are pointing to some very overbought signs in various markets flashing warning signs for PM's and commodities in general. Then again, hasn't this been the case since $930 when another "big" correction was always just around the corner? None of them really played out since fall of 2008. Just routine corrections in a rising bull. Bob Hoye has flashed a warning of his proprietary momentum indicator reaching very high levels this week stating that this signal has always been followed major down drafts within days/weeks/or a few months. His signal calls for an across the board major drop in stocks and commodities. His signal has also appeared prior to October '87, Jan '80, Nov '07, and nearly all other key market points. It has always been followed by a major down move. Hussman said basically the same thing this week but in different terms. He sees the markets generally way overbought. And today trader Jeb suggested that gold could be forming a double-headed H&S. Way too many conflicting views out there right now.

I'll keep it simple and buy the dips. With the benfit of POMO "bucks" until January 11th and other liquidity programs, I don't see why the PM's wall of worry cannot be further climbed into next year.

roadrunner

ProofCollection

Sold all of my futures and options today with the morning's dip. It's apparent to me that we'll probably see a low on Thursday as predicted. Naturally I'll be wrong this time since I'm acting on it, but I gotta try. Although the low might not be much lower than we saw today, I think we'll see 1378 for gold and 28.60's for silver on Thursday.

cohodk

<< <i>

<< <i>I see nothing wrong with rational discourse. Would it be better to discuss after a $100, $200 pullback? Every $500 rally starts with a $50 run, just as a $200 drop starts with $40. >>



Nothing is wrong with the discussion, but it's a lot of "they sky is falling" hyperbole after a rather insignificant move. Gold stops going up for a few days and everyone thinks the rally is over. Gold spends a majority of the time oscillating within a ~$30 price band, so I'm surprised that people, especially experienced traders such as yourself, view this consolidation as anything more significant than what it is, until shown otherwise. >>



I dont think I ever mentioned that the sky is falling. I think you would agree that a 15% correction--that I alluded to--certainly is not "the end". I merely posted a chart with a long term trendline that was reached. I know that you are calling for a $500 run, but I think just as likely would be a $200 drop. My call may even be a bit less extreme than yours. You have been extremely bullish on gold and it has paid off for you--I think. Bull markets are exciting and greatly rewarding.

Gold spends a majority of the time oscillating within a ~$30 price band

And that is precisely why I dont trade gold much. Quite franky it is not much of a "trading" vehicle. Oil, which I mentioned to you via PM, is much more volatile, and has similar, if not better, fundamentals.


I hope your call for $28.60 silver is correct. The ZSL I bot yesterday should do quite well.