After last week's rocket move higher in precious metals and other risk assets, this week proved to be the hangover we expected. The yield curve (2's/10's) crashed to new lows, thoroughly cementing that a brutal recession is coming this winter. The U.S. Dollar recovered and held the 200 DMA, while St. Louis Fed President Bullard extinguished all hopes of an early Fed pivot. He stated that interest rate hikes must get to the 5-7% range and what the Fed has done so far has had "only limited effects" on inflation.
Daily Dollar Chart
Daily 2's/10's Yield Curve
Last week traders, speculators, and investors rushed out, snatching up copper, gold, and silver like the world's end was here. Last I checked, there was no "Fed Pivot," no "silver short squeeze," while U.K. CPI y/y hit 11.1% and the unemployment rate remains near multi-decade lows.
The reality is that bull markets are much easier to trade than bear markets like the one we are in now. Violent bear market bounces often trigger traders' emotions and make them drop their guard and frantically buy at any cost. With the level of "crowding" seen in precious metals over the past two weeks, it would be wise to wait for those weak hands that recently bought at the top to either get stopped out or liquidate and chase the next money-making (bored-ape) narrative. To further help you develop a trading plan, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold that can easily apply to Silver." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.
Daily Silver Chart
One strategy an individual could use is to look out to the March 1000 oz silver futures contract and scale into what I expect to be the liquidity crash the Fed is creating. Consider buying the March silver 1000 oz contract at $19.50, $18.50, $17.50, $16.50, and $15.50, leaving an individual with an average price of $17.50. We prefer a scale approach, as when markets crash, it's often difficult to predict the ultimate bottom. We are also building calculated call spreads for individuals who prefer options in April, which should be past the last Fed rate hike. If you have never traded futures or commodities or would like to learn more about taking delivery, I just completed a new educational guide that answers all your questions on transferring your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. You can request yours here: Trade Metals, Transition your Experience Book.
