Sunday metals pre-game, 1/26/14


I'm still skeptical about the rally. Opened small long positions in gold and silver on account of the reversals on my benchmark 3-line break charts, which have been highly accurate in predicting when "legitimate" intermediate cycle reversals have occurred in gold and silver, respectively:

Very interestingly, the Dow/GDXJ ratio (above left) three-line break reversal disappeared intraday on Friday, when GDXJ was absolutely slammed at 10 am out of nowhere. However, GDXJ recovered enough to pull off the ratio reversal by a hair.

But gold stopped right at its 20-30 wk moving average "ribbon":
 And with the 100-day MA (pink) just 1% away, there's some resistance to look forward to. Even if that's cleared, the more important 144-day (or 150-day) MA is moving sideways right below the psychologically important $1300 level. A break through there would be a much better buy signal, but it won't be easy...
 Also, will silver be able to break out of the parabolic down cycle I've been tracking? Still waiting for that...

Note (1) this is a parabolic formation on a log chart (extra bearish, if you will), and (2) any three points determine the parabola, which now has been touched intra-week 12 times. . .



 Perhaps the most likely scenario is a rather short (~4-6 week?) rally here, followed by another sharp drop. Perhaps the "10 yr yields in silver" ratio (above) will fall to the green trend line (yields appear to have entered a downtrend) before climbing up to the dotted wedge that has coincided with the true bottoms in the gold market. Remember that silver has tracked commodity indices very closely, and the Canadian dollar's action (among other things) tells me commodities aren't out of the water just yet. Very interesting divergence with gold here (h/t Elmer H.):

12 comments:

Elmer Habavilo said...

GMJ - Since early 2003, it looks like the CAD has been a pretty good leading indicator for gold-- i.e. when the CAD is moving up/down, gold is moving up/down a couple of weeks or months after. Barring a fairly major geopolitical event or trend (e.g. 2008 crisis, or 911). i think CAD may have hit a fairly sturdy bottom at around .894 last thursday. We'll see.

Regards,
EH

ssgtrader said...

Yap, the way silver is diverging from gold doesn't give me any warm felling. I think maybe PM is really going down breaking the long term uptrend. I will be taking this opportunity of stock correction to switch back to stock.

Elmer Habavilo said...

SSG - i understand what you are saying about the lack of the warm feeling. I think gold can go up without silver following to some degree. The ratio can go to 70:1 or 80:1 even. Im still watching food inflation in europe and the usa for clues re. gold/ USD value. You purport to be in China by the way? that is where you are located?

Im also looking at the Canadian dollar for clues on gold. The bottom at .894 is still holding. See www.finviz.com for charts on CAD and other food commodities if you dont have other access.

Fuddman Elmer "Hobbesian" Habavilo

ssgtrader said...

I am in Singapore = SG. I feel maybe this is just a technical rebound to kiss 200MA before heading down again. My switch to NDX was quite timely.

ssgtrader said...

my NDX entry was right at the low, hopefully it will continue its parabolic rise to test min the all time high

ssgtrader said...

The weekly charts for PM are not good. There is a death cross in all the charts which I think needs to take a long time to repair. Than again if gold really break below the long term uptrend, I will not be so keen in this sector for a long long time.

Gary said...

That's it, a lower low for the S&P, the 5 year bull is over.

Many will now be surprised and bewildered as gold (yes, even the paper price) and the miners have a great run over the next 3 years. That surprise is what comes from blind faith in those who favour their own twisted agenda over facts.

Fun times ahead.

ssgtrader said...

That's was what I was hopping when I entered gold end Dec 2013. But so far PM has been dissappointing. You would imagine miner should put in a big white candle yesterday with Dow down 300+, but instead it put in a small red candle. I am not so convinced with the PM right now.

Elmer Habavilo said...

Agree with Gary above... s&P looks like it has topped for now at 1850... theyll need more QE to get it back up and even maintain it in the range where it is now... CAD looks like it has bottomed at .89... i know ive said that a couple of times before, but this one looks convincing. If im wrong this time around, I'll stop calling it. Its hard to say but it looks like gold has double-bottomed at 1180, and this looks like a rebuilding year, so i stick to my original call of 1600 for YE 2014

ssgtrader said...

I missed the NDX trade at 3412 region. Saw it coming to those level but missed because it went below my mental support around 3435 by quite a bit. I think stock still has quite a way to go, I maybe wrong, but I will patiently wait for a good pull back to enter. If not I will sit on my fingers till something that come to a good support or resistant to act.

ssgtrader said...

I missed the NDX trade at 3412 region. Saw it coming to those level but missed because it went below my mental support around 3435 by quite a bit. I think stock still has quite a way to go, I maybe wrong, but I will patiently wait for a good pull back to enter. If not I will sit on my fingers till something that come to a good support or resistant to act.

ssgtrader said...

Just went to take a look at HUI chart, it is nothing like the 2005 and 2009 strong rebound from strong support leading to a fast and furious rally. It looks more like 2000 type, maybe end 2014 it will still close below 200DMA a side way year.