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.
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.
RSS Feed