Sunday pre-game 4/8/12

Many kind readers have inquired as to my whereabouts over the past several weeks. Unfortunately, I can't divulge too much sensitive information therein. Suffice it to say, however, that James Turk has called my recent activity "super bullish for gold."

I will proffer one clue. Perhaps some of you have read Jim Sinclair's recent post, entitled "Golden Idea," wherein he offers the following challenge:
What we need is the second coming of a determined trader so convinced of his/her opinion and feel for the market that taking on the gold banks would seem like a divine calling … Is [there] no-one with cojones that are big and well-financed enough to say enough and take them on for mega profits[?]
Well, let's just say that my cojones are some of the best-financed in the entire precious metals space, and I'll let you connect the dots. So, I hope you can understand my blogging endeavours must continue to be sporadic for the next few months. But, seeing as there are delays here at Terminal 3 in Dubai, and that Sheik Ahmed has just gone off to smoke a cigarette laced with hash, I'm happy to say I'll have an hour or so to give you my impression of where these markets are headed.
Gold might be at its most important point since this leg of the bull market began in 2009. The weekly chart shows why:
I didn't want to see gold fall below that red dotted line (note that these lines had captured every weekly close in the market until … last week). A second weekly close below the red dotted line would confirm last week's action and be rather bearish, I'm afraid. So, I'm not trading until we get safely back into the channel.
The monthly gold chart shows the 21 month moving average (yellow) as a potential stopping point for further damage, if it should get that far, and thus a good possible entry point for patient traders and bargain hunters.
On the other hand, I'm really digging the weekly silver chart. How well silver has withstood the sell-offs (and almost certain bear raids on gold) these past 6 weeks is a rather bullish sign for all the PMs, since silver generally gets kicked hardest of all and finds its teeth scattered furthest from its bloody carcass.
Recall I called a bottom in the market 4 weeks before the 34-week MA crossed below the 55-week MA. That's held up nicely, while we've also managed to stay above the grey trend line (or "zone") that makes the bottom half of a pennant, about to resolve:
The daily chart shows a nice sloping inverse head and shoulders that's managed to touch (but not enter) the pink zone. (I've been writing erotica in my spare time- maybe you can tell.) Note how it's getting squeezed back into the channel. So the next few weeks will be critically important for silver as well.
In fact, given how likely it is that some resolving event is lurching its way towards us (and that Sheik Ahmed is back and doing tequila shots with the pilot) I should probably stop here, but for those inveterate gamblers who are trying to trade this uncertainty, there are a few more bullish inverse head and shoulders patterns I've spotted:
Almost perfect in the CCI:
I'd say you really can't be bullish on commodities until these moving averages (200-, 233-day) are broken again to the upside. Note how CCI fell below them during the late September cataclysm, which was when they started sloping downwards for only the second time in over 10 years. We've been in a commodities correction since that day in September, don't be fooled about that, and the deflationists are still winning. But if the second shoulder should stop here . . .
Here's my chart of gold vs. the CRB commodities index, which I take to be a relative measure of gold's safe haven status at any given time (under the assumption that all commodities can sponge liquidity evenly, so gold's over-performance means people want a safe store of value). Note the step-function-like performance (and more importantly, the *dates* of the steps up), and the nice inverse head and shoulders in place since October that appears to augur the next big step in the months ahead.
Finally, my old stand-by, the "US 10-yr yield, paid in silver" chart appears to have broken down while I was away, much to my dismay. However ... recall that the ratio also fell *below* the purple channel in August, and so we might be seeing a mirror-like repeat of the moves out of the *black* channel in 2008. I'm watching this one closely, also noting that the current level (0.69 ounces) has proven resistance repeatedly, almost as if the Treasury can't afford any more silver than that . . . We shall see.

Till next time,


Warren James said...

Hiya GM, great to see you back in fine form. Shame about the 'US 10-yr yield paid in silver' breaking down, that was one of my favourite charts, I wonder if the action will now swing back in line into parallel with the trend from years prior.

Oh boy, your little black book must be an interesting one ;0

Jeanne d'Arc said...

Great to have you back, GM! I see that you managed to hit all your Grand Tour objectives in a single sitting. Well done on the centaur, especially. They're not always easy to find nowadays.

Now you're back, does this mean I can stop acting as locum for you on the TA, and go back to hounding the cult merchants of silver propaganda, as is my wont...?

Dan D. said...

Good work and analysis.

Dr Durden said...

Your charts are always the bomb diggity, yo. Sure saves me the work of crafting them myself. So thanks for that.

Sentiment is sour grapes:

"The trend is the trend until the trend is not loger the trend. " - Me

Jeanne d'Arc said...

@Dr D

Let me be Devil's Advocate for a moment. If what your Google Trends charts are saying is that fewer people are searching for coin purchasing services, then surely that would be the ideal time to buy?

In other words, as a good contrarian investor, then the best time to jump back in is when all the hype has gone, sentiment is low, and Google Trends is saying no-one's interested any more?

Similarly, Google Trends was screaming at coin buyers to exit at the height of the silver bubble in April 2011.

Just a thought...

Dr Durden said...

Yes, essentially. There's this common consensus that "no one owns any physical gold and silver." But everyone I know uses Google as a search engine. So when the word on the street is "buy some gold now" and people that normally wouldn't buy it start looking for it, the spot price has to be going up.

As well all know, retail gets it wrong every time. It's not the only sentiment indicator I use, but I think it does paint a picture in the rearview mirror.