Random Notes

Notes for the day … not in any particular order.

Lumber futures:   Prices up over 180% in five months.

2020-08-12_11-40-37-notesInterest rates are rising.  10-yr rates up.  Similar set-up as August, 1987?

Frustration with the mindless herd growing.

Biotech testing yesterday’s move lower.

Moderna (MRNA) has formed a wedge and is near a downside breakout.

Drunk and ‘working’ from home.

Internet censorship:  Oppenheimer Ranch Project no longer monetized.

Silver and gold, future test of new lows?  At time stamp 2:58, Sajad hints at same ‘testing the lows’ scenario as was posted with Silver Up, Then Down on July 25th.

 

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Silver … Straight Up. Now What?

From bottom to top, silver has exploded over 147%, in less than three months.

In the process, a wide high volume trading range has been created.

So, what happens now?

shutterstock_55919800A likely answer is, go back to silver price action under similar conditions.

That behavior can be summed up as a ‘test’.  It’s the nature of the markets to test wide, high volume, (near vertical) price action.

Just what does test mean?

The financial pundits will typically call this type of action ‘consolidation’, but that’s a misnomer.

A test can pass or fail.  If the silver market retraces from here … or goes a little higher before a retrace, the nature of the retrace price action is important.

Using the SLV chart shown at the bottom of this post, we’ll be looking for how SLV behaves if and when it comes back to the resistance area … which may now be support.

The last update on silver hinted at a potential new low coming some time after the current run.  ‘Some time’, may be months or years.

Let’s step aside briefly and discuss market reality:

Completely contrary to what is espoused in the financial media, money is not ‘at work’ in the markets.  It’s ‘at risk’.

Fotosearch_k0729352Upon entering a position, any position, a tacit agreement has been made by the new entrant and the other participants.

That agreement is to voluntarily walk into what’s essentially the Roman Coliseum.

The longer you’re in the ring, the more chance you have of being gored, mauled, or eaten alive.

So, how does one minimize that risk? 

The answer is (from this firm’s perspective), wait for the set-up, no matter how long and then move quickly.

Here’s a prior update that’s a good example of how a trade opportunity was identified seven months in advance; then executed for a 155%, gain in just five days.

End of digression

As for silver, it looks like time to wait.  Bullish sentiment at this juncture may (if not already) have reached an extreme.  Price action typically reverses at high sentiment levels.

The SLV chart has two prior reversals identified.  Those reversal actions are similar but not exact.  If silver is to re-test the recent lows, we’ll be looking closely at how it behaves as it returns to potential support levels.

2020-08-08_8-01-01-SLV-Weekly-1-bar-notes

 

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Dollar Death, Not Yet

The latest financial fad, the ‘dollar destruction’ narrative, appears to be losing steam … at least for now.

shutterstock_536563939

On the other side of the spectrum are the precious metals markets with their ‘all bets are off’, ‘this is it’, narrative.

Of course, it’s a dog pile of expert opinion on the whys of the dollar destruction.

Why not join nearly everyone else on the #MeToo, fiat currency bandwagon?  A safe bet no doubt; we all know how important it is these days to “stay safe”.

So, what’s really going on?

Since this site follows principles laid down a century ago, by Richard Wyckoff, it’s not important to know the “why”.  That reason changes daily if not minute by minute.  The truth behind the move will eventually come out; long after the trend has reversed.

As trading legend Ed Seykota inferred, if you want to make money, fundamentals are essentially a waste of time.

2020-08-06_17-09-41-UUP-Weekly-Force-Index-notesWhat we see is downward thrust energy on the dollar proxy, UUP is declining.  Downward enthusiasm is waning.

Does that mean go long on the U.S. Dollar?  Well, that’s up to the reader.  What is being presented here, is the latest hysteria is at least slowing down or coming to a pause.

As Jeremia Babe reports at this link, were just one or two innings into the greatest financial collapse of all time.  The dollar may go through wild excursions before potentially coming to its long awaited fiat demise.

 

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Silver Up, Then Down

Let’s take a look at silver’s upside breakout.

First off, silver spikes as seen in the chart below, are nothing new.

shutterstock_6325966

Even trading genius Ed Seykota lamented in his interview for Market Wizards (1989) about getting ‘impaled’ on numerous silver spikes.

It’s just the nature of the very thin market.

For example, as of this post, there are 176,008 silver futures contracts active (Open Interest) out to January 2021.

That compares to 835,037 active gold futures contracts for approximately the same time-frame.

So, at this point, the gold market has over 370% more active futures contracts than silver.  Silver is indeed a thin market; therefore lending itself to radical (spike) moves.

The spike lower in March and then higher over the past week, is quite evident.  However, if we pull out and look at the big picture, there’s trouble ahead for the bulls.

2020-07-25_12-38-36-SLV-Weekly-1-bar-landscape-notes

On the SLV chart is a massive multi-year resistance zone in the 23 – 26, area.

Not only that, it’s a 38.2%, Fibonacci retrace of the entire down move from the top in April of 2011, to the bottom in March this year.

Thus, price action itself implies that silver (SLV proxy) is still in a bear market.

The chart allows for the probability of further downside action once the upside objectives are met.  We can see a hint of that downside objective (circled) as somewhere below the 2009, lows.

Of course, expect the market and analysis hysteria to ramp up as (or if) SLV approaches the 25-area.

If or when that happens, we’ll be looking for clues that a reversal is imminent or if by some other measure, “this time is different”, suggesting that silver will continue higher.

 

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Preparing For Gold Hysteria

Fotosearch_k44766586-1For there to be a lasting blow‑off capitulation up‑thrust (and reversal downward) in gold, the stage needs to be set.

Reports like the one at this link help to set the stage for investor panic.

Personally, I appreciate Greg Hunter’s weekly wrap up and have watched it for years.  Mr. Hunter was an investigative reporter, unique in his style and ideas … as is typical of someone with an edge or focused capabilities, he found himself on the receiving end of a corporate pink slip; or as he put it, ‘We have chosen not to renew your contract’.

On the flip side and by definition, Mr. Hunter’s guests are part of the masses; they are in the public eye.  In that case, their ideas are public and mainstream.  In the final outcome, the total of all mainstream and public (trading) ideas must result in loss.

Will this time be different?  Will gold and silver see a blow‑out move to the upside and keep on going?  Certainly, it could happen.  Anything can happen.

As has been reported previously, sentiment indicators do not favor a long term sustainable upside move.  There is too much bullishness.

What’s more likely, is some kind of penetration above known resistance with the attendant mass hysteria about “This is it!”

If and when that happens, we’ll be on the sidelines monitoring volume and price action … with an eye on going short.  If so, we’ll be positioned for a potentially dénouement down move in the precious metals and mining shares.

For technical research and analysis of the precious metals and other sectors, please visit our parent site at ten-trading.com