Friday post-game 5/18

I was supposed to be taking some time off, but I ended up following the markets closely this week. The month's not over yet, but the monthly charts-in-progress look interesting. Gold finally hit the bottom of the channel on this old standby chart:

What's next, pt 2

Everything points to a strong PM bounce ahead, but I closed the position I opened yesterday (at a decent loss) once I learned about the latest JPM bullshit. No leverage for me for awhile, as this ship might be sinking and I don't want to be aboard when it does. (The diddlyshits onboard generally don't end up on the lifeboats, you see, packed as they are with the fat asses of our banking overlords, their whore wives, and the chandeliers and silverware they've stolen).

A lot of the post-2008 charts are, frankly, useless for the time being. We need to wait for the new macro-trend to develop (what I expect will be a macro uptrend), and that won't happen overnight, so my posting will be sporadic for awhile. All I can point you to at this time are the very long term charts and moving averages, which reveal fundamentals-based growth patterns that shine through the miasma of short-term manipulation and frenzied speculative bullshit.

But, since you ask, the likely short-term scenario, assuming the ship doesn't keel over entirely, is a bounce followed by one more scare. Check the CCI indicator on the gold chart: when it gets this low (currently, -250), there's always another shoe that falls. Also note the (Fibonacci) 377-day MA (blue): 

.  .  . similar to the 89-week MA on the weekly chart (black, dotted):

And the 21-month MA on the monthly chart (green, dotted), where the correction thus far looks like mere noise 

(and exposes the amateurish gloating of naysayers like Roubini for the fearfulness it is. Were their interests and egos not on the line, they wouldn't be talking such amateurish smack while the game's still in progress).

I still expect $1550-70 to hold.

The fact that silver has been down an almost unprecedented 13 of 16 trading days (with only marginal up days in between), yet still hovers around $29 is a very encouraging sign; it probably confirms that the ultra-bullish picture you'll hear from The King World Crew™, while undoubtedly inflated by book-talking hyperbole, is nonetheless based on some strong fundamental truths, and that a move to the $22 level (red circle) may not be in the cards. I'm going to stick with $27.50 coinciding with the gold low. 

Alright, I'll be back when the fog clears up a bit. Till then, any specific inquiries on where we're headed should be directed to Warren's secretary, who has Bernanke on speed dial, or Louis Cypher, provided that Dimon, Blankfein, Masters et al. have forgiven him for the aye aye heads they regularly find in their beds.

What's next?

Alright, well we've been waiting for a strong move one way or the other, and it looks like we got it today. But this is looking like a washout to me here. For one thing, both gold and silver have RSI's at 30, and miners are trading at absurdly low historical levels relative to bullion.

I don't see an immediate recovery, but I don't see a lot of downside either, and if we fall another 3-5% or so I'm looking to buy calls. 

In gold, let's go back to a multi-decade long term weekly chart. We see that, although this bull market "officially" is thought to have started in 2001, it wasn't until 2004 that the $415 level was touched again. That level had been struck several times in the 1990's, so it really was nothing special. Then, half of 2005 was a long consolidation culminating in a "triple bottom" at $415 (circled). I've drawn a conservative blue trend line starting there, that was only broken in 2008. My wager is that that blue trend line will only be broken if there's a real 2008-type scenario repeat, where the financial system is believed to be on the verge of collapsing (assuming gold this time doesn't pick up the safe haven bids right away). I'm betting 2008 isn't happening here (on the contrary, how many of these "eurozone will collapse" scares have we had?), which is why I'm thinking this is just the last stages of a big and protracted washout since the $1900 peak. I think we move more or less sideways to the blue line, or the 89-week moving average (black, dotted) right below it. (Funny how the best fits often seem to be Fibonacci numbers.) Check how the 89-week MA has also only been violated in 2008, going all the way to the rounded bottom in 2001.

 Then we have the 21-month MA (another Fibonacci number, green) which I spoke about on Sunday. It's at $1560.

 So I'm thinking the $1550-$1570 range is a good buying opportunity, which is only 3-4% from here. Assume silver has greater downside, and $27.50 is looking good for silver, suggested also by this chart:

 I drew the bottom of the (perfectly) parallel downward channel since April 2011 as a dotted line, because I don't think it's in play: too many strong levels of support would have to be violated. The ~$22 level, where the dotted bottom of the descending wedge hits a long term trend line sometime this year, however, is a nontrivial possibility, I suppose.

I should also add that it's not *impossible* the bottom is in today. Evidence for that is the gold silver ratio:

As well as the 3 year silver weekly chart:

The Prestige

The discussion over at Chris Martenson's blog, has reached page 25 30, and seems to be drawing to a close. Reading through it to the end is an acheivement worth smiling about, same goes for comprehending it (two separate things). **

In that thread, you'll find a number of contributions from folk who know much more about the precious metals markets than most of us ever hope to know in your lifetime, and a feast of opinion and perspectives which will unsettle your stomach because of the variety.

Sunday pre-game, 5/6/2012

Quick update. I pointed out last week that I'd be surprised if the weekly euro-gold chart, which was right at a critical trend line, broke down. It didn't.

That's allowing me to interpret the weeks ambiguous action in dollar-gold more charitably. Here's an old daily one. Note the 144-day moving average is now resistance, and price is sandwiched between it and the final trend line of the steep post-2009 move:

The gold monthly chart (going back all the way to early 2001) shows how atypical the past several months have been. For the entirety of this trend upwards, there hadn't been more than 2 red months in a row. Even during the cataclysmic seeming action of mid-2008. Now we've begun the fourth red month. Still, the monthly drop has been very controlled. Also note that there have been two instances of 5 out of 8 months red. Both marked very important bottoms. Well, 5 of the last 8 months have been red.

The 21- and 36- month moving averages appear significant. The former (green) is tracing the lower part of the channel, and the latter (red) was where the only monthly close out of the channel landed, in 2008. If gold keeps consolidating above the 21-month MA, that's not necessarily a bad thing ... it would herald a move to $3000 within a year.

The silver charts all smell like farts. Here's the weekly chart I've posting regularly:

No, silver won't drop to $15 (barring some cataclysmically deflationary event) but I want nothing to do with trading it until I get some clues which way it's headed. Of course, gold will almost certainly follow. Patience here is warranted.

The CCI fell through it's 61.8% fibonacci line, but is right at the last blade of its fan. If there's a big rosk-off sell-off ahead, the $506 level, at the 50% retracement, looks like a good time for a QE3 announcement.

A study in gold

The highway is for gamblers, better use your sense; take what you have gathered from coincidence. The empty-handed painter from your streets, is drawing crazy patterns on your sheets.

Random silver charts

As a licensed practitioner of chartistry, I find boring seminars to be a great source of inspiration. The great thing is that other people in the room see me manically working on this stuff and think I'm doing something urgent and serious. 

So, first I set out to make the most pessimistic silver chart possible, assuming silver will maintain its bullish secular trend. Here's what I came up with.