Sunday pre-game 2/10/13

 Hello friends -
I haven't been trading much, partly because I've been busy with other stuff, and partly because I'm convinced gold and silver (as you'll see below) are going to break up or down by the end of this month and I'm waiting for a signal. (I want nothing to do with the palpably fraudulent stock market; it will grind higher until it or the bond market collapses in a major way.) But though I'll be keeping an eye out for trading opportunities, my guess is that the first half of 2013 will be a snoozer, playing out much like the first half of 2010, with stocks peaking in the spring, and gold holding its own, surviving periodic beat downs, and not making headlines. My guess is that $2000 will be challenged this fall.

Short term, silver looks ok, definitely better than gold. Let's see if it can bust out of the wedge on the weekly (log) chart:

Silver, linear daily; note the purple band has crossed $30.

I have been following the 34-week and 55-week moving averages for a long time now. Note that throughout silver's secular bull market, the 34-week MA (pink) has generally remained above the 55-week (green). The pink crossed the green in July 2003, marking the beginning of silver's long-awaited ascent over $5. It has fallen below only twice since: Oct 2008, then in Jan 2012. Well, unless silver gets smashed, pink will cross green in the next 2 weeks (it will happen this week if silver is up). If it happens, I'd weigh it pretty heavily with respect to gauging when silver's correction will end.

Gold on the other hand is looking weak. If it doesn't close February above the 21-month MA (broken only once), I'd bet on a further downward close at the 36-month MA.
This is already shaping up to be the longest correction in the present bull market (see green and purple dashed horizontal lines below), but that shouldn't be surprising as I mentioned before. First, gold hasn't corrected with respect to price as much as in 2008, so it should correct more with respect to time; and second, $2000 is highly symbolic.

 The "10-yr yields in gold" chart did not break out of the parabolic channel this week. I'll be watching that too.


GM Jenkins said...

I wonder if anyone (Nick Laird?) has looked into whether gold performs poorly before State of the Union addresses, G7 meetings, etc. and whether that can be due to chance.

Warren James said...

@GM, Interesting that the parabolic yield chart is still holding. Good observation about 'correct more with respect to time'.

Can it be argued that the sideways trading we're seeing @ the minute, is just a giant consolidation?

GM Jenkins said...

Can it be argued that the sideways trading we're seeing @ the minute, is just a giant consolidation?

The Prophet of Gold (or the doddering semi-literate grandpa, depending on your perspective) is putting his ass on the line that it is indeed a giant consolidation, and that it will be over very soon.

Cottonbelt said...

The inflection of time & price, likely more important than we realize – yet another tool associated with my trading activity … Gann’s ’45 Years in Wall Street’ worthwhile and one of the better modern-day practitioners is J Cooper currently residing @ Minyanville

GM Jenkins said...

Speaking of the State of the Union, John Derbyshire nails the "Stalinist extravaganza" in his fine bok "We Are Doomed"

"You know how it goes. We’re shown the House chamber, where the nation’s highest civilian and military officials wait in gathering expectation. The Sergeant at Arms announces the President’s arrival. The great man appears at last. In his progress through the chamber, legislators jostle and maneuver to catch his eye and receive the favor of a presidential greeting."

"On the podium at last, the President offers up preposterously grandiose assurances of protection, provision, and moral guidance from his government, these declarations of benevolent omnipotence punctuated by standing ovations and cheers from legislators of his own party, and often from the others too, after every declarative clause."

GM Jenkins said...

Cottonbelt, I've mentioned Gann here before. I should read that book, I like the conceptual sound of partitioning movement into time and price. On th eother hand, what I've heard of his rather nutty religiosity turned me off somewhat, perhaps unfairly.

Edwardo said...
This comment has been removed by the author.
Edwardo said...

The squaring of price and time is certainly a big deal in the world of Gannalysts.

As for JS, while it's true that he certainly isn't the soul of eloquence -from time to time I've resisted the urge to suggest he acquire some editorial assistance-
he still manages to get his points across. In the meantime, his recent timing calls, uncharacteristic as they are, strike me as quite curious.

My own view is that if one wants to operate with the idea that charts have much to say about "gold" then the pattern that has played out over the last year and a half looks more like a consolidation pattern than a top. Perhaps it will morph into something else, but that's how it appears to this observer.