I apologize for being out of commission lately. Frankly, I haven't had much to say since pointing out the obvious on Friday, April 12, that hugely important support had been broken and all bets were off. I've found all the subsequent talk about the "8 standard deviation event" (or whatever) that followed mildly ridiculous. I'm not sure how one gets those numbers, but had the ensuing crash been spread out over a few days, far from being a one in a trillion event, it would've been positively expected.
I mean, going back to the Screwtape silver symposium way back in February of last year, on the topic "When to buy silver?", our very own JdA warned that the day would come when
"you can say hello to $22 silver before you can mutter "I think I'd better log into my trading account". That's when you should buy."
Granted, she's hated silver ever since I brewed her some homemade "Silvershlager" and turned her blue, but I don't think she was predicting an 8 std deviation event.
[As an aside, looking back, I see that my contribution to the symposium was an exhortation to buy silver. And, in fact, those who took my advice would've made a 10% profit over the following 2 weeks. I also distinctly recall telling my readers to sell at precisely that point, but only in my subscription letter.]
Anyway, speaking of "standard deviations," back on Dec 31, I half-seriously expressed my 2013 prediction for silver in those terms. I felt at that time that a yearly close at the conservative blue trend line would've constituted a 3 standard deviation event.
One unfortunate side effect of the crash is that I've really had to rethink how to trade the metals going forward, or even if I want to keep trading them. My modus operandi has primarily been to use the data of the past 5-10 years (in conjunction with the assumption that the bull market has a long way to go) to find key levels to guide my trades, but as of now I'm waiting for a new pattern to approach.
As such, I'm primarily eyeing various weekly and monthly three line break charts, which have an inherent lag to them, but importantly, when a reversal does occur, I can be fairly confident that it isn't "false."
So, looking at the gold monthly three line break chart (something I mentioned in my previous post), April needs to close below $1439 for a correction to even appear on this chart. (Now wouldn't that be funny if gold recovers from here, and the "8 std deviation event" doesn't even register on this important chart!)
And below that, the weekly three line break chart of the GLD /DOW JONES ratio, which I've mentioned will require a reversal before I'll be open to arguments that the long correction since 2011 is over.
Of my old charts, here's one where I had looked for significant envelopes for the price action over a decade. Note that the crash stopped exactly where it did in 2008, and, in fact, the post-2011 correction is starting to look like a "stretched out" version of the 2008 correction. A pattern to keep an eye on…
I have other charts but no time, so they will have to wait till next week. Let me just update the "10 yr yields in gold chart", which can be interpreted as how much gold the Treasury would have to give you every year for lending it $1000. Or alternately, the "real" (vs. nominal) yield. My hypothesis is that it cannot be allowed to rise.
Even though the parabolic channel (left) that I had used to extrapolate prices (and impending doom) did not survive recent events, we see that we're in a tight range -- and in fact, the weekly three line break version of the chart (below) shows that despite the gold crash, nothing has been added to the chart. The final red bar is almost one year old...