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The Catalysts are Finally Here and Now
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Being host most of last weekend didn’t allow me to fulfill my newsletter duties so I will be including some of last week’s most important events in this week’s letter. Luckily our unbroken streak of rainy weekends looks to be intact so another weekend in the office won’t hurt that much.
As bad as things can feel in the precious metals markets these days, the fact that they can’t get too much worse has to console some. Gold especially and silver are looking good technically with gold bouncing around strong support after its second run at the venerable $1,000. Palladium looks to be holding while platinum is anyone’s guess at this point.
Metals review
It has been quite a couple of weeks of downside volatility. The price has dropped some $70 from the peak of the last run to $990. The green line depicts the major battle area for $1,000. While it is $990 instead of $1,000 it does represent that milestone. Therefore we have had our second test of the $1,000 according to this chart.
As usual the price dropped violently and scared many people into questioning both the direction of the market and their sanity. Nothing has changed as gold continues to work perfectly towards ever-increasing higher prices.
The drop brought gold to a significant Fibonacci supportlevel and it looks to have bottomed there. This level also happens to coincide with the 50 day moving average as well as the short term uptrend line depicted in orange.
The moving averages are mixed but with the 25 day above the 100 and the 50 day close to moving above the 100 we are posturing for a very strong move up which coincides with everything else mentioned about this particular chart. RSI is above 50 which is bullish, MACD crossed over bearishly but seems to be turning back up here and can still maintain its uptrend line. Slow STO is at 20 which in the past has led to very nice price increases. Please, if you find yourself panicking then you are not meant to be in this market. Everything in this chart is constructive and very healthy. We may violate support but chances are it will just be a bear trap so stay focused on that thought and take advantage of it. The two catalysts for stocks to move up are very near to completion as mentioned below.
Silver has also taken a scary ride down the rollercoaster. As the short term Fibonacci lines indicated the support at $17.35 held just barely. There is a nice uptrend line in blue at that level which also was tested and if it holds will be one notch stronger the next time it is tested.
The moving averages are mixed right now but the 25 day is above the 100 day and the 50 day is moving up and very near to crossing the 100 day. If that occurs and the 100 day can turn up as well that will signify strength.
It’s interesting how as the three lines drawn from the peak are broken it is always followed by a scare down move BEFORE the trending move up begins. This tends to scare people out and then they don’t enter the market when they should and miss the move up until near the peak when they enter again just before the price moves lower. So many people have been trading this market wrong. It moves almost counter intuitively but if you can study past moves, have patience and forget your emotions you can make a killing in the precious metals. Margin will ruin you though so if considering futures, options on the ETF or any other trading means please take heed.
The RSI has turned up from about the 40 level, MACD has turned down but is just holding its uptrend and the Slow STO is very low and accordingly at a good entry point.
Platinum broke down out of its bullish triangle on reports of stable power supply and decreasing demand for the precious metal. These are just reports and as with the financial crisis everything is rosy until it’s not. The fundamental remain strong except for errant reports and speculation. Traders were stopped out and the metal continues its downward trend having fallen over $300 in two short weeks.
We will see where this ends but the blue lines depict support, although not very strong at $1,750, $1,680 and $1,600 being by far the strongest.
All three moving averages have turned down with bearish crossovers being completed signifying downward continued pressure. Notice the trend lines drawn on all three indicators could not be bested near the end of the triangle pattern which should have tipped us off to a potential downward move which was followed through. The indicators remain bearish but are very oversold, but markets can remain like this for a very long time. Indicators cannot be relied upon for anything else but to show potential. The market is always right and once this one settles down it will present an excellent buying opportunity to make a lot of money.
Much the same applies to palladium. The triangle was broken to the downside and support lies here and now at $386. The indicators are quite low but still have room to run down. The precious metals remain extremely volatile and investors must wait for inevitable violent corrections and enter when a sign of a bottom appears as most people are ready to jump from their office windows.
Sincerely,
Warren Bevan
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