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Trading Blog Tuesday, April 30, 2013

4/30/2013

BRIEF MARKETS UPDATE (1:00 pm EST)

My access to chart analysis data has been restored today, and I now have a slightly better picture of the markets that were discussed on yesterday's blog. Both gold and silver metal prices remain mostly unchanged today, and the signal we would like to see for selling short has not yet appeared in the charts; however, several indices that track gold and silver mining companies are showing this bearish signal in their charts today, and since the precious metal mining company stocks often lead the metals, this may be pointing towards the correction we want to see now in the price of both gold and silver. Silver is still looking a little stronger (less bearish) than gold right now so I am going to wait either for the price to move closer to $26 or for that sell signal to appear before shorting it. We went short in gold yesterday and are still holding those positions, but we will remain out of silver for now.

The broad stock market and crude oil continue to manifest mixed signals, and we are still out of both these markets.

Trading Blog Monday, April 29, 2013

4/29/2013

GOLD TRADE ALERT (1:45pm EST)

I am having trouble today accessing the technical charts I normally use for market analysis which is preventing me from getting a full picture of momentum signals in the precious metals markets at this time. In Friday's blog I stated we would watch those signals as a cue to short sell. Both gold and silver are up a bit more today, and since gold is quite close to resistance around $1500, I am going to establish a short position today in gold anyway (with a stop loss around $1520) and hold off, perhaps until tomorrow, to go short in silver. (This may allow silver to get closer to its resistance at $26 and will also allow me time to access momentum charts). It is important to remember that silver is more volatile than gold and needs to be traded carefully. Even though we are anticipating a decent correction in gold here, the drop may turn out to be minor, so we need to be alert for any pauses and change in momentum should they occur. Establishing a short position in gold today and staying out of silver for now.

Our positions in the other markets are unchanged today (see Current Positions page). Just a quick note on crude oil: As I mentioned in my last blog, there is a good chance that crude is now shifting from bearish to bullish, but I can't confirm this without seeing the momentum charts, so we are still standing on the sidelines of this market.

Trading Blog Friday, April 26, 2013

4/26/2013

MARKETS UPDATE (2:55 pm EST)

Silver and gold are edging up some more today towards their former breakdown points at $1500 in gold and $26 in silver, and this is looking like a very good setup for short selling the precious metals. There is still some bullish momentum indicated in some parameters in the charts of both gold and silver right now, and I would prefer to see this turn bearish before selling short. We will therefore wait for this signal (which could come over the next several days). On the sidelines and waiting to go short here.

Crude oil dropped close to $92 intraday today but appears to be closing close to $93 which is well above the $91 price we wanted to see it close under to consider short selling (as stated in last night's blog). We will therefore remain on the sidelines of this market for now and watch how the price pattern develops over the next week. As I stated last night, momentum indicators are still mostly bearish in crude, but this week's dramatic surge in price could be indicating that this is about to change and become bullish. Standing aside here for now.

The broad stock market has not changed much since Wednesday and continues to give a mixture of bullish and bearish signals. We are currently in the center of another timing window that would suggest a reversal in market direction, and since the market has been rising this week (especially the S&P 500 and NASDAQ), this could be a bearish sign. We will need stronger bearish momentum signals to verify this, however, so for now we remain on the sidelines.

Trading Blog Thursday (night), April 25, 2013

4/24/2013

BRIEF UPDATE ON GOLD, SILVER and CRUDE OIL (11:30 pm EST)

I was traveling today and did not get a chance to look at the markets until later in the evening, hence this delayed post. I was surprised to see such a huge jump in gold and silver prices today as I'd expected a more gradual approach back up to the underside of their breakdown areas. We need to be careful with our shorting strategy here. Even though such a sudden surge could be the start of a breakout above the resistance (formerly support) zones at $1500 in gold and $26 in silver, this is considered highly unlikely at the moment. That $1500 level was widely recognized as very strong support before the crash, and we can assume that there were many buyers near that price who took a big loss when the crash unfolded. These "shell shocked" buyers are now anxiously waiting and hoping to break even by unloading their long positions should we approach that $1500 price area again, and this is the bearish force that should thwart any breakout. We will wait to see tomorrow's early market behavior before attempting any short selling.

The price of crude oil also surged up today, and even though momentum indicators are still strongly bearish, it is considered too risky to short sell this market right now. (Should the price drop severely tomorrow and close below the $91 area, we may reconsider selling short). Out of this market at the moment.

Trading Blog Wednesday, April 24, 2013

4/24/2013

MARKETS UPDATE (2:45 pm EST)

Over the last several days I've been analyzing the nature of the gold and silver market plunge to get a better idea of how we need to move forward as traders in these metals. Many of the sources I follow seem to agree that there is a good chance the correction is not over. Various factors are suggesting that the rallying of gold since the low on April 16 is a temporary relief rally that could soon be over and followed by a drop to new lows. Interestingly, silver has not rallied very much from its low, and this has bearish implications. The severe nature of this crash in gold and silver is making the prospect of a speedy recovery highly unlikely in the short to medium-term time frame. (The long-term bullish picture of these metals, however, is still intact -so far.) The former strong support levels at $1500-1530 in gold and $26-27 in silver that were broken have now become areas of strong resistance, and it may take some time to break back through those price levels. Although I stated in a previous blog that it was too late to sell this crash short, the current relief rally in gold is creating a potential shorting opportunity that could be profitable. If gold prices fall further, they could approach the $1000 area, which would be a $400 drop from where they are now, and this would be worth going for as a short sell. If gold can rally back towards the $1500 area (or even $1450) we will consider this shorting option. (Although less likely, silver rallying back up towards $25 would also be a great shorting opportunity.) There are many theories right now attempting to explain why precious metals have suddenly turned bearish and crashed, and many of them point to price manipulation at very high levels in the financial world and in governments (globally). These are too complicated to discuss here (they can be found on the Internet), but if they are valid, they reinforce the view that we are seeing a serious correction in gold and silver and that prices have not yet bottomed. At the moment we are looking towards the $1000 area for support in gold and the $20 area for support in silver. Still out of these markets but possibly looking for an opportunity to sell short.

Signals are still mixed in the broad stock market, and it is not clear yet in which direction this market wants to go. Momentum in the DOW is strongly bullish, but the S&P 500 and NASDAQ are flashing strong bearish signals. We will stay out of this market for now.

We are still watching that rally in crude oil, which we had intended to sell short. Momentum indicators are still bearish, but today's price surge is making me a little concerned that we could be seeing some sort of breakout rally. We will wait over the next few days to see if this rally continues to gain strength before establishing any positions.

Trading Blog Friday, April 19, 2013

4/19/2013

MARKETS UPDATE (3:15 pm EST)

Gold and silver appear to be taking a breather from their dramatic plunge as prices are rising significantly from Monday's lows into the end of this week. The big question, of course, is whether or not the correction is over. Gold moved down to $1322 on Monday and silver touched $22. While it is possible these are the bottoms, momentum indicators are still strongly bearish, and other technical signals are suggesting the correction may not be over yet. We will, therefore, stay on the sidelines for now and wait for clearer bullish or bearish signals.

The broad stock market is confirming my bearish suspicions discussed in the last blog (April 16). Strong bearish momentum signals appeared yesterday in charts of the S&P 500 and NASDAQ indices (but not yet in the DOW).
Because the industrial commodities copper and crude oil also continue to look bearish, we may be seeing the start of a serious correction in all of these markets right now (copper and oil prices often reflect the overall condition of the economy). If this turns out to be the case, we will be looking to sell the broad stock market short. Despite what Wall Street pundits and the mainstream media may say about the strength of the stock market now, cycle studies, timing factors, and technical analysis indicate an ongoing possibility of a substantial correction, and we need to keep an eye out for any signs that this is happening. As mentioned in previous blogs, we also need to temper any bearish views with the knowledge that these markets are likely being manipulated, and that the manipulators are trying to keep the market bullish. Such mixed directional signals obviously make this market hard to call, and we will remain on the sidelines until directions are more clear.

As mentioned in the last blog, the crude oil cycle has turned bearish, and our strategy now is to sell short any short-term rallies (as long as momentum remains bearish). A rally may be starting now as the price of crude jumped up today (intraday) to break $88 from a low below $86 on Thursday. Out of crude for now, but looking to sell short.

Trading Blog Tuesday, April 16, 2013

4/16/2013

MARKETS UPDATE (10:30 pm EST)

There are major important shifts occurring now in all the markets we follow which is necessitating some changes in our trading strategies going forward.

The big news over the last several days in financial markets has been the breakdown of gold and silver. In anticipation of this we sold our silver long positions on April 4 and our gold longs on April 12 and thus managed to avoid the silver plunge and at least the major portion of gold's drop. In my last blog I was contemplating selling gold short on any brief relief rallys (wishful thinking) should they occur to take advantage of the extensive "crash" unfolding. Unfortunately no such opportunity has presented itself as the plunge has been rapid and steep and the correction has gone too far to make short selling a viable option now. There is strong support for gold around $1000 and for silver around $20, and while prices could drop to those levels (silver has already touched $22), they don't have to, and the correction may even now be leveling off at current prices. We will have to wait and see what happens as the momentum in both gold and silver is still strongly bearish. We don't want to forget, however, that once this correction bottoms, it will be another "golden" opportunity to go long. Standing aside gold and silver at the moment.

Interestingly, crude oil (often referred to as "black gold") has also been plunging since last Friday, and as I mentioned in Sunday night's blog, this market is now turning bearish.  We will now look to sell short any short-term rallies in crude as long as momentum indicators remain bearish. A short-term cycle in crude may be bottoming now, so we will be watching for the subsequent rally.   We are out of this market for now.

Have I mentioned that the broad stock market has been hard to call recently?  Seriously, this is probably the most consistently manipulated (overtly and clandestinely) market we follow on the website, and the simple reason for this is that governments, politicians, and many big money people do not at the moment want another stock market crash. I believe there is a limit, however, to how long markets can be artificially propped up when cycle patterns, timing factors, and technical analysis point towards major overdue corrections. Unfortunately, when natural corrective market forces are suppressed for too long, like repressed anger they tend to assert themselves explosively and manifest as "crashes" more severe and damaging than what otherwise could be a gentle rising and falling of alternating bullish and bearish forces in a free market unencumbered by goal driven intervention.   But enough of my rambling; lets move on to our trading strategy for this market.

Momentum indicators are still strongly bullish in the DOW, S&P 500, and NASDAQ.   We have just moved out of a time zone for a likely reversal but are moving into another one towards the second half of next week.   This means we could see more upside price movement into that window before seeing a reversal. On the other hand, yesterday's big drop in prices could be the start of the correction we've been anticipating.  In recent blogs I've been short-term bullish on this market, and we've been waiting to buy any significant correction, even a small one, mostly based on the market's consistently bullish momentum and my reluctance to go against market manipulators (like the Federal Reserve) who seem intent on propping up the market at any cost.  Two market developments over the last few days, however, are causing me to abandom this bullish view for now. First, as mentioned above, crude oil has suddenly turned bearish. This might be heralding a breakdown in the broad stock market because crude and the broad stock market tend to move in the same direction. The second development is a possible breakdown in copper prices.  The price of copper has been in decline since February of this year, but chart analysis over the last few days is indicating a possible imminent severe breakdown. As I've mentioned in previous blogs, the price of copper is often an accurate bellwether of general economic conditions.   Copper and crude oil are both important industrial commodities, and the fact that both seem to be turning bearish right now is not a good sign for the economy in general, which doesn't bode well for the broad stock market. For these reasons we are still standing aside the broad stock market and we are changing our view from bullish to neutral for now.

Trading Blog Sunday (night), April 14, 2013

4/14/2013

MARKETS UPDATE (11:30 pm EST)

Our main attention at the moment is focused on the precious metals markets due to the severe breakdown of gold and silver at the end of last week (which is continuing in the overnight market right now- Sunday night). If you've been following the blog over the last month or so you will know that we were expecting a strong rally in precious metals as long as the strong support levels at $1500-1530 in gold and $26-27 in silver were not clearly breached, and that breaking below these supports could lead to a serious decline. Unfortunately, the supports have broken down, and we now need to revise our trading strategies to accommodate this bearish reversal. We sensed this weakening in the market the week before last and sold our silver long positions on April 4 and then unloaded our long gold positions last Friday, so we are fully out of these markets now. Technical analysis shows little support for gold prices until the $1000 level is approached, and while this does not necessarily mean gold will drop that far, there is plenty of room here for a deep correction. Several sources that I consult for my analysis of the markets seem to feel it is likely this drop in the price of gold right now was engineered by various market manipulators to quickly devalue gold (for reasons to complicated to discuss here) by shaking out a lot of holders (like us) at a widely recognized stop loss level around $1500. I've briefly discussed the manipulation of the broad stock market a few times on the website and how it can interfere with the normal flow of market cycles and make our market timing more difficult. Though less frequently done, the manipulation of gold prices can also upset market timing strategies, but if we are nimble and flexible in our trading, we can take advantage of a strong change in direction. We will therefore be considering short selling gold on any short-term rallies should they occur now. (There is a possibility we could see a "whipsaw" type behavior in gold prices at this juncture, that is, a snapping back of the price above the $1500 level and a subsequent strong rally, but this is considered highly unlikely at the moment.) I will also repeat here what I said in the last blog that once this correction has finally bottomed, it will be a great buying opportunity in gold because it will likely mark the ending of a major long-term cycle and the beginning of a new one (very bullish). But for now, we are bearish.

The broad stock market continues to look quite bullish, but we are still waiting for some sort of correction (it may be small) to give us a better entry point into the market. There are currently some bearish indicators in the NASDAQ that suggest a fairly significant correction is imminent. Still on the sidelines here.

In last Wednesday's market update I stated that we were looking to go long again in crude oil as long as the overall picture of this market remained bullish. That situation has changed as the price of crude is now plunging below $89 and major bearish momentum signals have appeared in the crude oil charts over the last few days. As with gold, some signifcant support levels are being broken here, and we will have to wait and see what kind of pattern develops before we reenter this market. Out of this market for now.

Trading Blog Friday, April 12, 2013

4/12/2013

GOLD TRADE ALERT (2:45 pm EST)

It's looking like the precious metals have finally decided in what direction they want to move, and unfortunately it is down. We have been concerned about the possibility of gold breaking the $1500-1530 area and silver breaking the $26-27 zone. Today gold broke below $1500 and silver broke $26 (although both seem to be closing the day slightly above these numbers). The breaching of these support levels and the fact that momentum indicators are remaining bearish has increased the danger of a severe plunge in gold and silver prices and it is considered prudent to sell our long positions in gold now. Fortunately, we exited our silver longs last week, but anyone still holding long positions in silver would also be advised to exit now. There is a possibility that the strong drop today is being engineered by market manipulators to flush out investors just below the strong stop loss points mentioned above and that prices could quickly snap back above those levels over the next couple of days. However, the strongly bearish momentum signals now present in the gold and silver charts suggest that the danger of a significant plunge here is real, and we will want to see a bullish change in those signals before we can feel comfortable with long positions. As I've mentioned before, if prices plunge now it would likely be short-term, and we would be looking to buy the bottom as the mid-term and long-term picture for precious metals continues to be bullish.

There is no change to our positions in other markets today (broad stock market-out; crude oil-out; holding long positions in the Swiss Franc). I will comment more on these markets later today or over the weekend as I want to get this gold alert posted as soon as possible.

Trading Blog Wednesday, April 10, 2013

4/10/2013

MARKETS UPDATE (1:45pm EST)

As I've stated in several recent blogs, I am not going to underestimate the ability of market manipulators (including the Federal Reserve) to keep the broad stock market going strong even when cycle, timing, and other technical indicators point to major corrections that are overdue. My observations of this kind of interference with the natural flow of economic cycles over the last four or five years (especially in the DOW) show a tendency for corrections to be truncated and rallies to be exaggerated. This pattern may be manifesting in the markets this week with a sudden bullish surge in the DOW, S&P 500, and NASDAQ after a minor corrective dip last Friday. We had been planning to go long on that dip if it had been deeper, but that opportunity did not present itself and we are still out of this market. I am reluctant to jump in right now because prices are rising steeply, and we are in the middle of a time window where major reversals can still occur, so we will wait and watch for a better entry point to go long (as long as the market remains bullish). For traders who are (understandably) frustrated watching the DOW rise and not being in it (yet), I would suggest trading crude oil right now as its price seems to be less manipulated (at least at the moment). Also note that because we are bullish on crude right now (see below), any "wild card" influence from possible tensions in the Middle East would not be a risk factor as it would tend to push prices higher.

Unlike the broad stock market, crude oil is taking the significant correction we were expecting and is still looking bullish, so we are watching carefully now to reenter this market and resume our long position. We may do this over the next several days. On the sidelines here and waiting to go long soon.

Unfortunately, we are not out of the woods yet for the risk of gold and silver breaking their major supports ($1500-1530 in gold and $26-27 in silver). Current momentum is generally bearish with gold seeming reluctant to clear $1600 and silver shy of $28. This bearishness is the reason we sold our silver long positions last week. There is still the possibility of a strong rally from here, but there is also a chance of further downside before the rally can really take off. If gold can close above $1620 and silver above $31 by the end of the week, things will be looking bullish. Otherwise, we may have to consider selling our gold longs and waiting for a better entry point for the rally. I know this is very frustrating as we've been waiting a long time to make a profit here, but when markets are indecisive there is not much we can do except keep a close eye on their "mood" (bullish or bearish) and take action when the signals are pointing strongly in one direction. As I've mentioned before, despite this short-term volatility, the medium and long-term picture for gold and silver continues to be very good. I have some of my assets in bullion gold coins and have no intention of selling them any time soon. (Please note that this does not apply to gold ETFs which we buy and sell more frequently.) We are still holding our gold long positions and standing aside silver for now.

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