This is the current Stage and Trend table
“But did thee feel the earth move?”
— Ernest Hemingway (For Whom the Bell Tolls)
Did you see how the earth beneath silver move?
Tectonic if you ask me.
Let’s do a post mortem
Let’s review the anatomy of the tectonic move
I posted this chart in the premium post of April 22
“Because of parabolic nature of silver’s rise, it is hard to pick tight exit points based MAs
One thing I personally would do is to switch from any leverage double ETF I might have into a single ETF like SLV. Another think I could do could be selling some out of money call and buying at money or close to money puts. I could also use a 60-min chart and use its MAs or successive short-term higher highs as stops. This has been wonderful ride. I don’t want to just sell out and leave, but would like to keep as much as possible and having some sort of trailing levels is one way of doing that. Using options with part of the position can help as well.“
“I will keep trailing the price till it breaks me out of my position. I am thinking of 13-21 EMAs as immediate support. I can alternatively use the small uptrend line as my immediate support. I have marked the trend line with a red arrow. I am picking 144-145 as my immediate support level for now.”
and this for SLV
“I have 42-43 as immediate support. There all sorts of opinions where silver would go from here. From the uber-bears that have been saying a crash in imminent for months and months to those who see it at 100 or 200 dollars an ounce.
To each his own is my motto
I personally just want to make sure that I have a position that I can handle and just let the market get me out. I can easily sell calls and perhaps buy puts and set a collared position with options.”
“We seem to be having a correction getting started in PM ETFs. In fact, PM mining ETFs have been behaving poorly for quite some time falling out of step with the metals.”
In the same post I showed this chart
“One issue with accelerated trends and vertical moves is that they become hard to count as they do not correct enough to form discernible swing/waves. Another issue is that they can correct sharply and deeply and still maintain their larger trends.”
“I have support for SLV around 40-41. I would become seriously suspicious of SLV’s prospects if 40 fails”
Did I for sure know there was a top pending to unravel so soon? No.
But that’s what risk management and a bit of common sense is for. Any premium one might have paid on puts after building in 10s of percentage of profit would just be a nominal insurance fee. It’s easy to get caught in the euphoric moment and look for lofty and loftier targets. It is just as easy to forget about risk and risk management.
Notice that on the chart I had marked two shorter-term trend line with red arrows. Notice that they are quite a few point down from where price was. That’s how much technical drop a trader needs to put up with just to see if the short-term uptrend holds or not. As I mentioned to a subscriber via an email:
“my goal is to capture 60-70% of the trade
trailing stops, occasional pruning for size, buying outs, selling calls, stuff like that can help me reduce my anxiety”
In hind sight we know it all. we are oracles of the past. The future, well, I think only prophets and delusionals know the future. To borrow from Alexander Elder, we not get the luxury of trading the ledt side of the chart. We must act on the right side of the chart and there no certainties on that side.
That reminds me of this quote of excellent insight
“The sharp edge of a razor is difficult to pass over; thus the wise say the path to Salvation is hard.”
– From Katha-Upanishad aka Death as Teacher
So we got to be saved and keep some profits by being prudent, but what now?
Silver is in an OEW mid-term downtrend
A first area of support is the area of Minor (dark blue) wave 4, which is 27-30 area. There may be quite a few shell-shocked longs trapped all the way to to the top and that may create a sizable overhead supply causing a dragged-out correction
GLD has not confirmed an OEW downtrend yet
GLD has dropped to 13-wk EMA, on heavy volume. I think there is a good chance that after the hurried dash we had to dump SLV and GLD, we get a low soon and an attempt at a bounce.
This is a daily GLD
GLD is not in a confirmed mid-term downtrend — not yet, anyways. But that may be very small comfort as GLD can drop to 140 without threatening the current mid-term uptrend. I think GLD is lagging SLV the peak of Major (black) 3 wave. I think GLD is in a Minute(green) 4 correction, and will have another attempt to at least challenge the high. This drop may be just the first leg of a correction, but if GLD has not peaked its Major wave 3, then it is very likely that it will not confirm an OEW downtrend just yet
I shall be proven wrong about my thinking if GLD makes it below 138-139, some 4-5% lower from here. If that happens Major 3 is in and we are correcting major 4 and GLD has been in sync with SLV and I am wrong.
If I am right, I may get a good push up to challenge the prior high. So, 138-139 is the cut-off for any trade from oversold conditions. Notice that GLD came to rest on an uptrend line that started late Jan 2011 which also coincides with 55-day EMA. I would be taking a trade if GLD moves below the trend line while having 138-139 in mind as a stop
I humbly suggest that new subscribers read the three premium precious metal post of
That is the way I look for clues and make different scenarios as I deal with the uncertainty of the future. I am not a guru. I do not believe in gurus. And I am the first to admit that I have no knowledge of the future. All I have is a simple knowledge of charts and a desire to identify risk levels and scenarios.
I have launched a MIDAS resistance curve (yellow) for GLD. It’s currently around 139
The channel on the chart is an adaptive channel and its mid-line is 55-day EMA. The lower boundary of the channel is around 131 at the moment. If this is not Minute wave 4 as I think it is, and if it is Major wave 4, I would expe
PM mining ETFs started acting poorly way ahead of PM metal ETFs.
Many times I have said as long as gold does OK the rest of the PM area may get by somehow. I have also been saying that I would want “more than just getting by”.
When gold finally started its correction, which we suspected and mentioned in the post of May 2, all hell started breaking loose.
We had repeatedly noted the poor performance of PM mining ETFs. On the MAI chart of those ETFs. I had said that there was room for improvement and that composite trend (as measured by OEW indicator) and composite posture (as measured by MAI) was not acceptable as they were. The internal trend and structire of the ETFs components did not improve, and when gold finally petered , they stopped getting just by and fell.
GDX was doomed when it broke out of the double fork to the downside.Daily resistance is at 59 and then 61
GDX’s McClellan has fallen to oversold levels
Notice that since Feb 2010, the area around 233-day EMA has absorbed corrections. I have marked past occurrences with black arrows. GDX is at 233-day EMA righ now. Failure to hold now, or after an oversold bounce may send GDX into a fast a furious drop.
MAI and OEW indicators have taken a hard beating
In the post of May 2, I said:
“For quite some time, I have been saying that both daily and weekly MAI needed improvement. GDX could never improve those. Now, we have mid-term OEW dipping which means some of the constituents have entered into confirmed downtrends. This is not a disaster yet, but it is hanging on to neutral and urgently needs buying to turn things back up”
So, the buying, which was needed urgently, did not come and the neutral situation broke into a disaster.
Now, OEW is dredging the bottom of its range. That means most of its components are in mid-term downtrends.
I was curious to see who might still be in a mid-term uptrend because they may, I emphasize may, be good candidates when teh PM area firms up to run for another uptrend
The ones that are still uptrending are
EGO (Eldorado Gold)
RGLD (Royal Gold)
TRE (Tanzanian Royalty Exploration)
This is not a blank check to go and buy these but a possibly interesting situation of some miners still hanging on to their uptrends. I leave it up to you to do further investigation in those or any individual miner if you are interested to monitor individual stocks
The other mining ETFs are in similar situation: broken down prices, and oversold internals
GDX’s weekly MAI is down to neutral. It would good if it could stay above or around neutral as GDX works on some sort of a bottom
Weekly MAI is down to neutral. It would good if it could stay above or around neutral as GDXJ works on some sort of a bottom
SIL’s McClellan has just crashed into deep oversold.
Almost all components of SIL are downtrending
The only ones still hanging to their mid-termuptrends are
OKOFF (Orko Silver)
Again, this is just an observation and not an endorsement of any stocks. If you are interested in picking stocks, you can take a look at the technicals for yourself
All three mining ETFs fell out of the forks I had going. Let’s have some down swing forks
There is hype, propaganda, conjecture, and there is the cold hard facts of technicals and price levels.
For every ounce of gold, there are tons of experts. Some say gold will crash to pennies, some say there shall be backwardation widening upward from here to eternity, and some say so many other things that fall between those extremes.
I shall ignore them all and play my own game and manage my own risk. That policy has served me well — so far!
In a post of April 12, when things looked good and healthy, I said:
“So far, so good, but complacency is not an option, it will be an abomination — outright sacrilege to let fat profits evaporate, or, even worse, turn to loss.
This is a volatile area, 10-20% drops or more are just routine and common place. If I were losing sleep over it, it would mean that I had more skin in the game that I could handle being peeled by the market. I would reduce for size, or set partial stops tight to reduce for size so that I could sleep well. To me not losing money is more important than making it — I like to sleep well is what I am saying “
That is the bottom line of my approach: manage risk and let profits take care of themselves
Enjoy the Rest of Your Weekend!
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