It’s been a while since I wrote about real money. The last post on the subject was on June 14.
Take a look at that post, every technicality that I examined, and the cautious stand I said I had taken proved to be dead on. Am I bragging? You bet I am! I have earned it – analytically and monetarily.
OK, enough wallowing in past glories!
I truly feel for precious metal enthusiasts. It must be very painful to be so convinced that they are right, thinking that every paper currency will go the way of Mugabe-Dollar and still watch their beloved metals languish.
I believe they are right. I think all, or at least most, paper currencies are just intrinsically less valuable than Gold. But being right and making money in the market may, at times, be very different things.
Long time readers know that I am a gold enthusiast. I regard it as real money. I have said many times that I think part of one’s saving should be in Gold. Our long time readers also know that I have been sceptical of the Gold-to-the-Moon dreams (delusions?) of gold bugs and hyper-inflationists.
But my thinking (and their thinking) is of no significance in the market. What the price does matters and, for that, I look at charts.
Let’s start with a weekly chart
If there is a raging bull market in the yellow metal, I fail to see it. All I see is a large corrective pattern that has frustrated the hell out of gold bugs (and caused the to cry manipulation time, and time again), and has richly rewarded swing traders with a bit of discipline.
The weekly chart looks weak. The conclusion of the ongoing mid-term downtrend will very likely tell us what to expect for weeks, and, maybe, months.
It will be technically ominous if the current mid-term downtrend drags on enough to cause a new low in the weekly cycle.
So, from a longer term perspective, I shall watch the charts and see how things evolve. It is hard to remain objective, and resist the pull of mass euphoria, or despair, but I don’t know of any other way to make money, consistently and on-balance, in the markets.
Shorter term, we can look at the daily chart
This is not a very pretty chart. It’s not overly ugly either. The low of April is technically important. It coincides with the now-flat 233 MA. If that low is broken, the April-June uptrend becomes counter trend in nature. I think, depending on individual’s risk tolerance and trading style, a decent buy signal (you should decide on your own as a trader) can be taken on the long side with stop a close below the April’s low. I will play it with options to limit my exposure and increase my leverage. I haven’t decided whether I would sell puts or buy calls. Maybe I do both.
Notice that gold miner ETF, GDX, has been underperforming GLD. It has been a long-time belief of mine that in a healthy commodity environment, producers should lead the commodity they produce. There are other opinions on that subject, but, for me, any move in a commodity not substantiated by the producers is suspect. That does not mean that I will not trade, just that I will be more paranoid than I normally am.
So, if GLD is not gonna drop like the heavy metal that it is, I would like to ideally see gold diggers firm up and rally.
Quite a while back, on April 11, I did a post on gold and presented 4 wave scenarios. Three of them are still tracking without a convincing resolution, which basically tells us how frustrating it must have been for the convinced and the believer.
I can possibly use this 60-minute chart to fine tune an entry
Silver fared poorly as well
In the same post of June 14, I said that I had sold my position in SLV and added
14 is an obvious area of support. After that, we have the rising trend line. Silver has been outperforming Gold, and it would be interesting to see if that outperformance continues.
I shall be patient and try to pick my entries so that I risk as little as possible. During the previous run, I mainly used the ETFs. This time, if I decide to play, I may concentrate on using options.
SLV cut through 14 and its MAs with ease. I don’t really know what level of conviction is needed to hold on to something that’s falling so fast and letting profits turn into losses.
Well, different players, different styles and objectives.
Here as well, the April low is of utmost importance and should not be violated or the bullish case gets a real smacking in the head
There are positive divergences on the 60-minute chart above, and a channel/falling wedge.
A break t the upside of the channel/wedge (or any other buy signal) may provide a low risk trade with the April low being the obvious price point for a stop
I may even sell some puts (or put spreads) as soon as Monday. I Have not decided yet, but if I do, I will not hang on with prayers on my lips if the April low is violated decisively
As I said in my previous post on precious metals
When it comes to precious metals, the world has a huge surplus of experts. I shall ignore every single one of them, and let the charts get me in, or out