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Trading Blog Wednesday, November 27, 2013

11/27/2013

MARKETS UPDATE (2:15 pm EST)

I am going to hold off on short selling silver today as short-term technical factors indicate it may not be ready to turn down just yet. Silver tends to be more volatile than gold so I am a little more cautious about trading it short-term. If it does rise some more this week it will be an ideal short sell as long as it doesn't close the week with a clear break above $21. Holding my short position in gold but still on the sidelines of silver.

The broad stock market has been fairly stable this week (the NASDAQ has been rising, but the DOW and S&P 500 have been relatively flat), but it is looking overbought and toppy as we move into the center of this week's time zone when reversals can occur. I am still expecting some sort of correction now which should present an opportunity to buy into this market (as long as the correction doesn't fall below 15,850 in the DOW and momentum remains strongly bullish). Still on the sidelines here.

Crude oil prices dropped severely today (on news of more rising crude oil supplies in the U.S.) and traded briefly near $91.80 at 1:00 pm EST but are now settling just above $92 (at 2:00 pm EST). I had been intending to sell short a rally into this week's reversal period, but instead the price is dropping strongly and is forming a new cycle bottom. As I have mentioned in recent blogs, the cycle picture in crude oil charts is currently not clear, but this new low now negates the idea that a new cycle began at $93 on Nov. 14. Instead, it could be starting with a low that forms this week. Momentum remains bearish, but the cycle picture is still ambiguous so I am staying on the sidelines of this market for now.

Trading Blog Tuesday, November 26, 2013

11/26/2013

GOLD TRADE ALERT (2:15 pm EST)

It is looking like a good time to start shorting the precious metals. Technical and cycle analysis continues to be strongly bearish (short-term) and we are getting our expected bounce this week as prices are rallying into areas of some resistance. There is resistance for gold at $1250 -$1275 and for silver at $20 -$21 so these areas can serve as general stop loss zones for short selling (we don't want to see weekly closes above these prices). I am going to short sell gold today and wait until early tomorrow to short sell silver as silver looks a little more bullish than gold at the moment and may rise a bit more. Going short with gold today and still on the sidelines of silver (may sell short tomorrow).

Trading Blog Sunday (night), November 24, 2013

11/24/2013

MARKETS UPDATE (11:30 pm EST)

The Federal Reserve, Janet Yellen, and Goldman Sachs (as well as a few other big banks) are three major factors influencing the markets right now, and we need to keep a close eye on all of them as we trade into the coming new year. My main concern with the Federal Reserve is whether or not it will start tapering QE (quantitative easing) and, if so, when it will start and how severe it will be. As anyone who has recently been following the broad stock market knows, the mere hint of the Fed scaling back QE is enough to send investors into panic selling. It is not unreasonable to assume that when QE tapering actually begins there will be a major correction (and very possibly a crash) in the stock market. Earlier this month at her nomination hearings, Janet Yellen, the likely successor to Ben Bernanke as chair of the Federal Reserve, made clear her enthusiastic approval of the current level of the Fed's bond purchasing program. She stated that there was "no set time" to begin QE tapering, which calmed the fears of many investors and sparked a strong rally on Wall Street. A week later, however, it was revealed that during its recent October meeting the Fed was seriously considering reductions in QE as soon as "at one of its next few meetings" even if no improvements are seen in the labor market. This, of course, spooked the markets, but they recovered quickly and continue to look bullish. Perhaps investors are feeling that the Fed is now bluffing with its taper threats (in order to appear fiscally responsible), and the market will not react strongly unless the threat is confirmed. Only time will tell how much influence the more austere voices at the Fed will have over Janet Yellen's dovish tone once she assumes the position of Fed chairwoman. Unfortunately, this means the issue of QE tapering is now a "wildcard" factor in trading the broad stock market and will have to be watched carefully.

The broad stock market is looking very bullish as we move into a holiday week. Holiday weeks tend to be bullish so I would not be surprised to see the DOW rally some more into Thursday. This week, however, is another time period when market reversals are likely (strongest on Wednesday), so we could see a rally top at any time. I am watching for any pullback now to go long as all technical signals in the charts of the DOW, S&P 500 and NASDAQ are very bullish. There is a strong support level in the DOW around 15,850, so any pullback that holds above that area would be a good buy spot. On the sidelines and waiting to buy.

Directional momentum in crude oil is still very bearish, although other short-term technical indicators suggest the possibility of rallying into next week. If prices do rally, I will be looking for a spot to sell short as long as momentum remains bearish. As I mentioned in my last blog on crude oil, the cycle picture of this market is not clear, and there is a possibility that crude is starting a new cycle now with the recent bottom near $93. We need to see more bullish momentum signals, however, for this idea to be supported. One thing to keep in mind is that the broad stock market and crude oil generally tend to move in the same direction (except for short-term divergences). The currently strong and bullish stock market may be foreshadowing a bullish change for crude. On the other hand, crude's strongly bearish momentum might be signaling an imminent correction in the DOW. Next week's price movements could tell us which market is correct. Standing aside crude oil for now.

Gold and silver are falling into next week's reversal zone and we may see a short-term bounce before the week is over. Such a bounce would most likely be weak but may give us a good entry point to short sell the precious metals. As I stated in my last blog, the technical and cycle picture for gold and silver has turned very bearish short-term, and we may now be witnessing the final downleg of a long-term cycle in precious metals before they reverse and turn very bullish. Goldman Sachs has recently been suggesting that investors get out of gold. I will explain in my next blog why I think they are saying this. (Hint: What big bank is likely responsible for the recent manipulation of gold prices down?). I am out of this market and possibly looking to sell short next week.

Trading Blog Thursday, November 21, 2013

11/21/2013

GOLD AND SILVER TRADE ALERT (1:45 pm EST)

Cycle, timing, and technical signals in precious metal charts have now become overwhelmingly bearish, and I am therefore going to bail out of my long positions in gold and silver today. Directional momentum is still mixed bullish and bearish in silver charts, but gold is 100% bearish, and the two major gold and silver mining company stock indices (HUI and XAU) have both turned 100% bearish this week. Precious metal mining company stocks often lead the prices of the metals themselves, so this is a very bearish sign. Gold has broken below an important level of support at $1250 which indicates that this market could remain bearish for at least another month (probably longer). Prices will very likely break $1200 and possibly approach the $1100 area, so short-term traders that are long are advised to bail out now.

I want to emphasize here that the long-term technical and cycle picture of gold and silver remains very bullish. Current global economic, political and social factors are also pointing towards an imminent bullish precious metals market. What we are seeing now in these metals is the bottoming of a long-term cycle. Once the bottom is in, gold and silver prices will start a long-term uptrend that should take prices to new all-time highs.

Short-term technical signals indicate that gold prices may rise a bit into tomorrow or early next week, and if they do, I will consider going short to make up for some of the loss of bailing out today. Again, I want to emphasize that I am short-term trading here. Very long-term traders (for example, those holding gold coins or bullion) should consider holding their investments as I don't feel the final correction will take gold below $1000, and (as stated above) once it bottoms, gold will be starting a strong long-term uptrend. While it is still possible for the final bottom to occur this year, cycle studies are indicating the possibility of it being pushed into early next year. The cycle timing will become more clear as we move into December.

Trading Blog Wednesday, November 20, 2013

11/20/2013

MARKETS UPDATE and GOLD AND SILVER ALERT (10:45 pm EST)

My last blog (on Sunday night) in which I bemoaned the difficulty of trading financial markets that are being manipulated has turned out to be prophetic as today's precious metal prices dropped dramatically in part due to 1,500 gold future contracts being traded on Comex in one second early this morning (Wednesday) at 6:26 am EST. This triggered an immediate $10 drop in price and halted trading for 20 seconds. Mark O'Bryne, executive director at GoldCore stated today (as reported on MarketWatch.com) that, "Some entity appeared determined to get the gold prices lower and they succeeded - for now." He further stated, "Such trading action makes traders on the Comex very nervous to go long and prevents gold getting some momentum and animal spirits." After the $10 drop, gold prices were stable until later in the afternoon when the minutes of the Federal Reserve's recent October meeting were released to the press. These minutes reveal that even though the Fed voted 9 to1 on October 30 to continue its 85 billion-per-month asset purchase program (QE), there were much less market friendly ideas being proposed behind the scenes. At the meeting Fed officials were considering plans to reduce QE even before any further signs of improvement in the labor market, and some were suggesting that the decision to start tapering could come at "one of its next few meetings". These austere proposals are in direct contrast to the dovish fiscal tone Janet Yellen expressed just last week during her confirmation hearings, and this rattled both the broad stock market and the precious metals market today. Many investors correctly see the start of tapering as the government being fiscally responsible, and this can act as a depressing factor on gold prices as it makes gold less appealing as a hedge against inflation.

This one-two punch to the precious metals today (early morning trade manipulation and the afternoon revealing of austere chatter at the Fed meeting) sent prices tumbling and triggered more bearish technical signals. Directional momentum is now heavily bearish. Unfortunately this means we need to bail out of long positions with the idea of reentering when the cycle bottoms. Short-term signals indicate we may get a small bounce here into Thursday and Friday which would give a better exit point. Unless gold can work its way back up towards $1300 by Friday (possible if today's reaction to the Fed is temporary), we have to consider the precious metals as short-term bearish and will be bailing out of long positions tomorrow or Friday.

The broad stock market was also alarmed by the Fed's hawkish tone today, especially after the suggestion of more QE from Ms. Yellen just last week. The DOW dropped more than 100 points in the afternoon but then recovered a bit and closed with a loss of 66 points. It is too early to tell if this reaction to the Fed is going to be severe. If there is more news about the Fed seriously considering the tapering of QE soon, then we could get a substancial correction here. Otherwise, i think this correction will be shallow and brief. Still on the sidelines of this market.

Trading Blog Sunday (night), November 17, 2013

11/16/2013

MARKETS UPDATE (11:30 pm EST)

Before discussing the markets I would just like to mention that in my 10+ years of analyzing and trading the stock markets, gold, silver, oil and currencies, I have never encountered a more difficult trading environment than that of the last year or two with the last six months of this year being exceptionally frustrating. This is almost certainly the result of an increasing manipulation of the markets, the most obvious and overt example of this being the establishment of the Fed's QE policy during the 2008 global financial crisis. A more "covert" manipulation of gold prices was seen just last month when 800,000 ounces of gold were unloaded overnight on COMEX "coincidentally" just before the markets opened on the first day of the U.S. government shutdown (Oct.1). Market manipulation has a "wildcard" effect on normal technical analysis, and in the case of the broad stock market has resulted in an extra lift and buoyancy to rallies in stock indices while delaying and/or truncating any normal corrections. The Oct.1 gold sell order was a more short-term manipulation that seemed designed to sink the price for just one day and avert a gold breakout (possibly to deter a panic selloff in the broad stock market due to the government shutdown). We are living in volatile economic times when divisive political environments are also threatening the stability of markets. My point here is not to whine that "it ain't easy tradin' these days" but to suggest the need to keep these factors in mind when making trading decisions.

I would also like to mention the importance of not getting too frustrated with short-term trading and forgetting the bigger, medium and long-term picture in these markets. For gold and silver, that picture is still very bullish; for the broad stock market it is looking quite bullish (possibly a blow-off) medium-term, but not so good long-term (the market is, after all, being sustained by QE, i.e money created out of thin air).

The broad stock market had a very bullish rally last week fueled by Janet Yellen's promise of more QE if she is chosen to succeed Ben Bernanke as Federal Reserve chairwoman. The DOW, S&P 500 and NASDAQ all made record highs and broke some important resistance areas triggering many bullish signals. Our strategy now is to get long on any pullbacks (which may be very minor). If we get no pullback this week, there could be one coming up the following week based on cycle analysis. Standing aside and waiting to go long.

It looks like crude oil made a significant low last Thursday at $92.50 right in the middle of its reversal zone, which means we could see more rallying in this market (I had expected a reversal from a high). The rally may be short-term, though, as there is another time window for a reversal in the last week of November. There is some ambiguity in the cycle analysis of crude oil at the moment, but the extent of this rally over the next week or two should make this more clear. If directional momentum in crude remains strongly bearish (it is currently 100% bearish) then I will be looking to sell it short on any rally into the end of this month. There is also a possibility that Thursday's low was the start of a new cycle in crude, but this can't be confirmed yet. A new cycle would be bullish and would be confirmed by bullish momentum signals. We will have to wait and see how this unfolds over the next two weeks. Still on the sidelines here.

Gold and silver are showing mixed bullish and bearish signals at the moment, and our long positions are still at risk of a further correction. Because the longer-term picture of these metals is so bullish, the big question here is do we want to "ride out" any further corrections, or should we bail out now and reenter at a lower cycle bottom? If gold turns bearish again it could possibly bottom in the $1000-$1100 area, so traders can gage their risk aversion from those levels. There are some technical factors indicating these metals could be very volatile next week which makes calling this market very difficult right now. Gold still needs to clear the $1300 area and then $1350 to be really bullish. I am starting to think that the final bottoms are not in yet for gold and silver, but we could see a brief rally before the final downturn. An ideal pattern to see now would be a short rally off of last week's lows into the reversal zone in the last week of November and then a downturn to the final lows. I am staying long for now but am prepared to bail out next week if signals turn more bearish.

Trading Blog Friday, November 15, 2013

11/15/2013

BRIEF MARKETS UPDATE (2:00 pm EST)

I am not making any changes to my market positions today (still out of crude oil and the broad stock market and long gold and silver).

The broad stock market has been very bullish this week, and this is undoubtedly the result of news coverage of Janet Yellen, Ben Bernanke's likely successor as Federal Reserve chairman (chairwoman), as she undergoes extensive questioning by the Senate Banking Committee. Ms.Yellen has essentially given a big thumbs up to the continuation of the Fed's policy of quantitative easing (QE) by saying that there is "no set time" to start tapering. Wall Street's elation is causing this market to push the limits of our time window for a correction, but it could still turn here. If a correction occurs now it may be brief and small but would give us a better entry point to go long.

Gold and silver both bottomed on time for a reversal early in the week, but their subsequent rallies have not been strong so there is still a danger of prices falling back unless rally momentum picks up quickly.

I will analyze and discuss the markets more extensively this weekend.

Trading Blog Wednesday, November 13, 2013

11/13/2013

BRIEF MARKETS UPDATE (7:00 pm EST)

The DOW and S&P 500 were bullish today and both made record highs seemingly inspired by preliminary talk about the confirmation hearings for Janet Yellen's Federal Reserve chairwoman nomination scheduled for tomorrow. Ms Yellen is generally thought to favor the Fed's bond-buying economic stimulus policy (QE), and her nomination is fueling optimism in the markets. Despite these highs, the broad stock market is overbought and looking rather toppy, and we are still in a time window for a significant reversal (it could extend into Friday). If the market is going to turn down it has to start doing this by the end of the week or we will have to assume the buoyant stock market (fueled by dreams of endless QE) has averted another correction. Momentum continues to be strongly bullish so we are looking for an ideal entry point to go long. On the sidelines for now.

Unlike the broad stock market, crude oil is falling this week. Crude may have made a top on Monday at $95.38, but it is still possible for it to climb higher before we leave the reversal zone for this market (which ends next Monday). Momentum remains very bearish in crude oil and we are looking for a point to sell short. Still on the sidelines here.

Gold and silver are still testing their support zones with silver very close to that $20.50 level we do not want to see breached. There is still time for a reversal in precious metals here, but it has to be soon (by Friday) to avert the risk of a further drop in prices. The U.S. Dollar Index fell strongly today so this may act as a bullish stimulus to kick the price of gold and silver up. Still holding our long positions in gold and silver.

Trading Blog Sunday (night), November 10, 2013

11/10/2013

MARKETS UPDATE (11:30 pm EST)

Even though the U.S. Labor Dept. jobs report last Friday gave conflicting information (a much better than expected increase in the number of jobs created but also a slight increase in the unemployment rate) the DOW responded positively with a 100 point gain early in the day. It then abruptly added another 60 points near closing time. This belated surge was likely the result of Ben Bernanke's late afternoon speech in which he commented that there is still an "awful lot of slack" in the labor market and suggested that there is plenty of room for the jobless rate to fall further. Such a comment, of course, suggests a continuation of the Fed's stimulus program and a delay in QE tapering. A giddy surge in the DOW was therefore not surprising.

Despite the DOW's bullishness, I am still expecting some sort of correction in the broad stock market to begin early next week, and I will look for the low of this correction as an entry point to go long in this market as long as directional momentum remains bullish (at the moment it is 100% bullish). As I mentioned in a recent blog, it is looking like the major correction in the broad stock market that I had been expecting this year is being pushed into early 2014. We may get a healthy "Santa Claus" rally first, and so I am now on the lookout for a good entry point into a long position. On the sidelines for now.

An ideal short sell in crude oil may be setting up now if prices continue to rise into next week and momentum remains bearish. As I mentioned last week, many markets could significantly change direction in this week's Monday-Wednesday time frame, and for crude oil this reversal zone could extend into Friday. I will therefore be looking for a top by the end of the week to sell this market short. Still on the sidelines here.

The bearish behavior of precious metals last week has put our long positions in jeopardy (short-term) as gold and silver prices are challenging our stop loss areas. Timing factors, however, point to a reversal in prices this week so I am hoping for some sort of bounce here. There could be a lot of volatility this week in markets accompanied by false technical signals, and this may challenge my decision to "ride out" the current correction. The price levels we don't want to see breached now are the lows from October 15 because this would indicate the short-term cycles turning bearish. Those supports would be $1250 in gold and $20.50 in silver. One short-term bullish indicator for gold right now is the fact that the U.S. Dollar Index appears to be making a short-term "blow-off" top against a strong resistance level at 81.5. If this is true and the dollar backs down, it could trigger an upward bounce in gold and silver. We will have to wait and see how this plays out over the next five days. Still holding long positions in gold and silver.

Trading Blog Friday, November 8, 2013

11/8/2013

BRIEF MARKETS UPDATE (2:45 pm EST)

There are several variables influencing the markets today including a speech to be given by Ben Bernanke later in the afternoon around 3:30 pm. Investors seem to be debating the meaning of today's conflicting jobs report that showed many more jobs yet a higher unemployment rate and a very low consumer-sentiment index. So far, the DOW likes the news (but Mr. Bernanke hasn't spoken yet). I will analyze and discuss the markets in a little more detail later this weekend, but I want to post some short comments before the markets close for the benefit of traders who may be anxious about the lower prices in gold and silver today.

I am not making any changes to trade positions today (we are out of the broad stock market and crude oil and still long in gold and silver). Precious metal prices are now challenging our stop loss areas, and normally this would be a signal to bail out of long positions. However, as I mentioned in my last blog, the first half of next week is a time zone when strong market reversals can occur, and gold and silver are now moving down into it. Even though gold has broken through the $1300 level, there is still a strong zone of support down to at least $1200. Silver is also approaching its next support level just above $21. Momentum in both metals has not changed and is very bullish in silver and mixed bullish and bearish in gold. Gold and silver mining company stock indices are also unchanged and are reflecting this same momentum (mostly bullish). For these reasons I am staying long in the metals today. In terms of short-term cycles, a critical support area for gold is now at $1250 and for silver at $20.50. Any close below those levels would be a strongly bearish signal (short-term).

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