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Rest Times

Monday August 06, 2012 10:13

I’ve taken the last few weekends mostly off and skipped out on the free weekend letter.  I’ve got no particular reason for it, I just felt like I needed a little break to enjoy friends and family and the unbelievable weather we’re having this summer.

I’ll likely take a few more off as well but I thought I’d get one out this weekend as this particular Saturday mornings is pretty slow, at least after a family breakfast and couple hours of playtime with four of my really cool fun little nephews.

The markets have been mostly taking some time off as well as they are not trending up, or down, rather they are relatively rangebound which is good for short-term trading which we’ve been taking advantage of when we can.

Let’s take a look at the precious metals charts whom are building out nice bases still and in this time they are basically doing what I’ve been doing, resting and taking some time off getting ready for a massive push.

Metals review

Gold fell 0.85% this past week after hitting a resistance level just under the $1,640 level.

We took a trade in GLD on the breakout above $1,600 and sold around the top.  Now we are looking to enter another GLD trading position for a few months as the seasonal time for gold to move up begins now and the stars seem to be aligned for gold.

That being said we always have to use stops and in this type of market, tighter stops are best with uncertainly and rhetoric coming out of Europe still while most anyone who’s voice seems to matters is on the beach, but they are still talking.

Perhaps they are a few sangria’s in and have more bravery than normal, hence the bold talk of saving the Euro and the whole system in general.

The buzz will soon wear off and the hangover is going to be massive.

Gold is holding it’s support area and heading higher now and I’m looking for a possible entry point.

Volume in both the GLD ETF and the futures has been heaviest on days lower which has me cautious on a trading basis.  I’d prefer to see a little consolidation and then maybe take a trade on a break above $1,635 or so.

Silver rose 0.22% this past week and has much the same chart as gold right now.  We also traded SLV on it’s breakout and then sold pretty near the top.  I’d have much preferred to see a larger move out of both gold and silver but it wasn’t to be, yet.

We’re getting close to the start of a big move from what I can see and I wouldn't mind taking a ride with a few trading positions.

Volume has been higher on down days than up days for both the SLV ETF and the silver futures which means there are more sellers than buyers still.

As long as silver can remain above $27 we should be good.  It’s definitely time to fill up the rest of your allocation for physical gold and silver.

Platinum fell by 0.25% this past week and is nearing the end of this large triangle pattern.   The $1,385 area is strong support thus far while the breakout point on the upside is the $1,430 level for now.

Any upside breakout should see a very quick move to the 100 day moving average which coincides with chart resistance at the $1,500 level.

Volume is strongest on down days so far in both the PPLT ETF along with the futures market.  Any break needs high volume to confirm the move.

Palladium rose 0.87% for the week past and is also in a large triangle pattern which is getting close to a resolution.

I know these consolidation patterns can be boring and take time but they are what is needed for the big moves.

The longer the base the larger the move to come.  Enjoy the time off and lack of volatility, it will be back before we know it, but hopefully not until the sun and warmth have gone.

The $560 level is support while a breakout above the $590 level would be  a buy signal as long as volume is strong.

Volume in the futures is pretty stable here in this base building process while the PALL ETF saw heavy volume as palladium topped out Tuesday and fell the Wednesday and Thursday.

Fundamental Review      

Some of the biggest news lately has been the recent high frequency trading errors which cause over $440 million in quick losses to the company involved.

It’s a dangerous space which literally profits off of us.  Every single trade we make these high frequency computers steal, yes steal, pennies off of us in between the bid and ask price. 

It’s not a lot to us, but to them it adds up to huge gains over the space of a day when they can do thousands of trades or in many cases hundreds of thousands.

These high frequency computers make our job a little harder but a sound trading plan and excellent entries and exits still trump them and make much more money on a single trade.

The market isn’t great for swing trading right now but these large bases are leading to some huge moves coming in the not to distant future.

One of the most important and key abilities of a good trader is to be able to recognize and sit out these periods and wait for the trend to emerge where the big money can be made.

South Korea has joined other central banks and bought 16 tonnes of gold which ups their gold reserves by 30%.

I’ve talked many times in the past about the issues in South Africa and the reasons why I’m not an investor in gold mines operating there.  One of the country’s largest gold producers is looking to expand their resources out of the country.  They are looking to South America, British Columbia, the Tien Shan gold belt, Australia and the Philippines.

They see that South Arica is not the frontier that it used to be and admit that “in South Africa a lot of the gold mines are getting older and mature and they’re getting deeper and further away”.

Another CEO of one of the world’s largest gold miner has been let go after a shareholder revolt.  The facts are that gold miners have been under-performing in a huge way and heads need to roll.

I know our mining portfolio is not doing great but it’s at bargain prices right now.  This makes me very unhappy but if I were a new investor to the space I’d be right giddy!

Have a great weekend and week ahead and thank you for reading.

If you found this information useful, or informative please pass it on to your friends or family. 

By Warren Bevan
http://www.preciousmetalstockreview.com/ ,
warren@preciousmetalstockreview.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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