Hey, look, what do I know? I'm just an idiot with a Mac G5-based 1100-node supercomputing cluster that runs off of 324 dual-quad core 2.8GHz Xeon processors and offers me a sustained performance of just over 12 teraflops. But though I'm looking to take an aggressive long position in gold and (eventually) silver, now is not the time. Especially if you're considering calls. I've sold the last of my puts, mind you -- I wouldn't bet on too much more downside (see above chart), and a relief rally may start next week -- but I'm confident a new low will be made in the next month.
The Commodities Channel Index (not to be confused with the Continuous Commodity Index, which measures the price of a basket of commodities and which I follow) is an indicator that looks at how the current price differs from its average price over X days (I set it to 50). It's based on average absolute deviation units, so it's interpretable over time. Anyway, if you'll look at the chart below, whenever it dips violently, there's always a second shoe to fall. Interestingly, the last time I busted this chart out (last spring) when the index was at its lowest point in decades (note: quickly approaching that level now), that was the only time in over a decade that gold hit the green line but didn't go on to make a new low, but even then price soon dipped violently again before moving sideways for the next few months, giving options buyers plenty of time. I'm posting two versions, the first over a shorter time frame so the resolution is better.
I think it will move essentially sideways until the end of the first quarter. Here's what I think will happen until April. Oil will outperform gold which will outperform other commodities including silver.
I see the "Gold Safe Haven Quotient Chart" testing the dotted purple Fib support line. That's my guess as to when equities will have a major correction, by the way.
I dont see the $GOLD:$CCI ratio going down much more:
Silver got smashed right as the 34-week MA (pink) was ready to cross the 55-week (green), which, when it happens, will be bullish. Interestingly, the last time these lines looked ready to cross was last October, after the post QE-3 bump, but silver got kicked in the teeth immediately then too.
The purple band has to be watched. If it's broken, I might buy SLV puts, as I'd guess $27.50-$28 would find strong buying.
But the weekly log chart suggests that silver's correction will be more violent than gold's. Importantly, the red dotted line was broken.