Sunday pre-game, 8/19/2012

 Hello friends. Please note I won't be blogging till September, as I will be in an undisclosed location tending to undisclosable matters.

For the past 4 months, my gold trading strategy has worked like a charm: buy when price falls between the 21-month moving average (green, dotted) and the brown dotted trend line. However, after one last scalp this week, I am done with this trade, as I think gold is ready for a big move either up or down, and I have no problem waiting a little bit in cash here. Jackson Hole looms. I should say, I'm inclined to to agree with Jim Sinclair: "Now the media has everyone looking at Jackson Hole for Bernanke to act. That is not the way it tends to happen."

 Here's the daily analog of the above monthly chart:

 The 40-day EMA used to be a good selling point, but encouragingly, it appears to be support now (note Tuesday's close right on it):
 Lately, I've been looking at 0.75% from the infamous 144-day MA (red line) as a good selling point. Of course, the 144-day MA was so important for 3 years as support. I ran into my good friend John Embry in the cat food aisle at Target yesterday, and he mentioned that the bullion banks have locked and loaded their algorithms to defend the 0.75% barrier to the death. They simply haven't allowed gold to close above it since March 12. But when it does, he remarked that the move will "set your hair on fire." (At which points he believes the long-abused mining shares will triple in value -- not in weeks or days, but hours.)
 One reason why I lean bullish is that gold in euros (weekly) is only 3.7% from its all-time high, and unlike gold in dollars, it hasn't yet broken its post-2008 trend line. (In contrast, a +3.7% increase in $GOLD wouldn't even take it to the critical $1680 level). Can gold in euros really tank from here? Seems unlikely to me...
 One very interesting trend since the beginning of the 2011-2012 gold correction has been the surprising (and major) outperformance of the $SPX to the gold miners. That ratio is right at important trend line support; let's see if it can fall through. Note, when GDXJ was unveiled in late 2009, gold was at $1100. Gold is now 45% higher, but GDXJ is 20% lower. What's also remarkable is that there was a huge sell-off in GDXJ in February 2010 (when the usual suspects were calling gold's blast-off through $1000 to $1200 a blow-off top), but now the 200-day MA of the $SPX:GDXJ ratio hast touched the highest point it reached back then.
I haven't traded silver since an important trend line was broken 6 months ago. I saw even odds between up, down, and sideways, and trading shouldn't be gambling. The silver chart still looks neutral-bearish, although the updated version of a daily linear chart I've been posting for several weeks now (magnified version) looks fairly encouraging:
 But, following Dan Norcini's insight, I'm looking at the $CCI as a proxy for silver's prospects. I mentioned a month ago that it was dicking around between its 200-day MA and its 61.8% Fibonacci line after hitting the 50% Fibonacci line months earlier (actually 50% isn't Fibonacci, but if we chartists were mathematicians, we'd be eating ramen noodles instead of designer cupcakes). Well it's continued to do that but it's getting squeezed, so I'll be keeping my eye on which way it breaks during any respite from my undisclosable activity at my undisclosed location...


Kid Dynamite said...

"I ran into my good friend John Embry in the cat food aisle at Target yesterday"

top notch...

Funky Tape said...

What a fortuitous event running into Embry at Target. I bet you were more surprised about which cat food he bought...the undervalued one or the manipulated one...than you were his thoughts on the miners.

And great charts as usual, brah.

Anonymous said...

I have always thought his hair was false, so, please do set it on fire.

Funky Tape said...

Don't look now, but the cartel just removed the cap and now are allowing the metals to move up. I mean, it's so obvious.


Kid Dynamite said...

I'm hearing rumors from my friend in London who talked to his friend in Switzerland who has SERIOUS connections to the PHYSICAL SILVER market in London, that there is a HUGE SHORTAGE OF PHYSICAL SILVER.

I am going camping for 2 days, gents, and I think there's probably an 80% chance that both JP Morgan and the evil CME will be bankrupt by the time I return on Friday afternoon.

soldier on,
KD (/sarcasm)

Daniel said...!