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Gold and Silver Pausing for Profits in Longer Term Rally
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“ It is normal to expect any market to produce a profit-taking event after major rallies. Gold and silver are no different than the others. We normally see two of these per year. One arrives in the fall and one in the spring. While this fall’s selling seemed tardy, do not forget precious metals have been busy rising and making serious money for traders and investors.”- Traderrog
Daily December, 2007 Gold Futures in B Corrective Wave
We had forecast in our newsletter Trader Tracks that gold would encounter very hard resistance at $850 and this proved correct. Gold had a marvelous trading-profit-taking run from an October support near $740 to the $850 nearby resistance.
Gold is now moving through a normal A-B-C correction having completed an A wave down and beginning a new B wave up. We expect gold to sell again in the (C wave) for the near term, back to $800 support. When these correction legs are complete gold could either:
- Continue to sell lower as some of the 225,000 thousand December longs currently in the red elect to sell out and stop their losses or,
- Traders could power-into this market with more buying as the ETF’s need additional gold to back-up open and future positions. New brides in India are right in the middle of their wedding season needing more gold in large amounts to fulfill demand. Jewelers are reluctant to buy at these higher prices but, must have raw gold for their end-use products.
Technically on price, time, and cycles, gold has a possibility, not a PROBABILITY of selling down to $750 major support. Should this occur, price will not violate any important support levels in the continuing longer term rally march to and above $850-$873. There would not be a technical violation of price at $750 and this is important for traders to keep in mind. If this occurs, we would have an opportunity to trade gold on the next up-leg long from $750 to $850 and most probably even higher.
Daily December, 2007 Silver Futures on 11-14-07 Show an A-B-C
Correction Completed and a New Wave One Underway.
Silver is ahead of gold in this trading cycle. Frequently, they change positions with one leading the other in the same direction with slightly different time-tables. These cycle shifts induce another layer of technicals to observe and can often get some traders off-track in confusion.
Silver traders appear to be the most favored in this longer term rally journey for now. Several of our top analyst friends have stated silver has more upside room and power than gold for several reasons. The weaker commercial factor for silver applications is the one sticking point slowing this market down. However, in our view, the “Silver is Money” and the “Silver is a Precious Metal” will overcome thousands of negative slower markets for business and commercial applications.
Trading the silver ETF is an excellent market for those preferring shares instead of futures. From our viewpoint, we like them both for different reasons.
During this past silver rally cycle both our junior and senior stock choices provided our readers with an excellent performance. We expect more of the same in the long term bull market for precious metals.
U. S. Dollar Selling Means Gold and Silver Buying
“The weakening dollar is an excellent barometer for precious metals rallies and gives us one of our top-notch indicators for market evaluation and trading.
U.S. Dollar Daily December, 2007 Futures
Index on 11-14-07 Supports at 75.50.
A few years ago we tried to purchase some U.S. Dollar Put Options when the index was near 118-119. The market was so obviously selling at that point we could not get the trade filled. Option sellers are not in the business to hand over thousands of dollars in easy trades if they can avoid it.
Our preference is to not trade the U.S. Dollar as we like three other favored currencies to the long side and switch positions and trades among those three. Originally, trading the dollar was of concern as the volume was too low in our view. With its steady selling performance of late, volumes are now double or higher from the norms of 3-4 years ago. We still do not like the market and prefer the smoothness and steadiness of our other choices.
However, one of top larger traders has been shorting it of late and closed out several short positions on our advice just before the dollar’s recent support and attempt at a mini-rally.
We give the current dollar support credence only as a normal basing breather before more selling is encountered. The dollar’s march to the cellar and the inverse trades for rallying precious metals can go on for months or, years.
Daily December, 2007 Copper Futures on 11-14-07 Support at 3.05 and Mini-Rally.
“Dr. Copper got its name as this market is an excellent overall indicator of strength in business and commerce. Copper has iterally thousands of applications and when it sells it means most business is weakening for some reason.” - Traderrog
Our primary global copper market is China. They vascillate between massive orders, which drive the price higher and then buy nothing for a few weeks or, months. When the orders are delivered, they merely throw it on the ground in storage for future uses. If China bought steadily in the volumes they need, the red metal’s prices would climb to the sky. Supply is not large enough to keep them satisfied. There is major price support for copper at 2.90.
China has been buying copper for the electrification of their country and for thousands of commercial uses such as housing, commercial buildings and autos. Electronics require a large amount of copper as well.
Lately, China’s copper buying has slowed and copper prices have weakened. However, they still require a lot of copper and will continue to order, perhaps at lesser demand rates. They are investing billions in copper mining and smelting.
The largest weakening for copper occurred in U.S. demand as housing, commercial buildings and autos have all fallen into the recession ditch. Mining strikes, shortages, and ship-transportation bottlenecks are all helping to support copper’s prices.
Daily January, 2007 Most Active Crude Oil Futures 11-14-07 Sell and Base.
“Crude oil like copper is another of our favorite indicators for rallies in precious metals. Oil futures traded briefly this past week over $100 in Asia. Oil was overbought on technicals and is now pausing for profit-taking.” - Traderrog
For those who claim oil is going back to $40 we would kindly suggest they review current supply and demand numbers. World-wide daily production of crude oil is 85mm barrels and demand is 88mm barrels and continues to rise.
Some sharp analysts and oil traders still have fresh memories when oil rose to lofty heights some years ago and then crashed to $12 a barrel. They do not believe $12 any more but still are stuck at a chance of $45. We think a hard recession could take oil to $75 and an all-out crash-and-burn depression would see prices at $50-maybe.
We have discovered very accurate sets of oil price support and resistance levels. They continue to perform giving us good forecasts for suggesting energy shares in oil, natural gas, unleaded gasoline, heating oil, jet fuel, propane and coal. Our forecast for oil is above $100 per barrel in 2008. Oil rallies usually means precious metals rallies. We have more definitive pricing forecasts for our readers and traders.
“Do not be discouraged when these periodic market adjustments occur. They are totally normal and will be with us as on-going trading adventures. This is why we recommend trading and not total buy and hold positions.” – Traderrog
Roger Wiegand
Editor Trader Tracks Newsletter
& The Rog Blog at webeatthestreet.com
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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information.
Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a modestly priced trial subscription 718-457-1426 Monday through Friday, 9:30am to 5pm or, e-mail Claudio at cbassi@miningstocks.com
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