Levels To Watch Today

After a very interesting and exciting overnight, the metals are pulling back a bit this morning. This will present some opportunity if we interpret things correctly and are prepared.

As mentioned last evening, The POSX and the long bond are both up today on the bad news of the U.S. downgrade. That makes a lot of sense, doesn't it? However, as of this morning, the U.S. dollar is still the world's reserve currency and, consequently, it still receives the "flight to safety" bid. It's all short term nonsense and we're not too concerned with the short term around here. Today's short term trade in gold and silver are also of little consequence. Well, I shouldn't say that. They are of major consequence if you're looking to buy and add to positions today. In the long term, though, where gold is trading this instant has zero impact on where it will be one month from now or six months from now.

Let's start with silver. DO NOT FORGET THIS: Margins in silver are now quite high relative to gold and open interest is still down 20% from late April. This implies two things:

1) Buying tends to dry up after thrusts higher. We've seen this over and over again for the past three weeks. This lack of follow-through allows the monkeys to come in and easily beat it back.

2) The current silver longs are what we consider "strong hands" that aren't easily frightened and most have a cost basis back in the mid-30s.

Taken together, you get a silver market that is consistently moving two steps forward and one step back. Actually, it's more like three steps forward and 2 steps back! Expect this to continue into the near future. For today, silver is over $1 off its highs and has pulled all the way back to 39.10 as I type. The chart I'm posting below is already obsolete but I'll post it anyway.

paper_8-8amsilv.jpg

Gold is where I'm most interested these days and, boy oh boy, are these charts interesting. First up, let's revisit the weekly chart that Trader Dan gave us a few days ago. Note that gold is now clearly above the top trendline, which looks to be somewhere between 1680 and 1685.

large_snapshot-805_2.jpg

1685. Keep that number in mind. OK, now look at a 15-minute chart. 1695 looks to be your initial support but there's 1685, waiting to contain the downside for us.

paper_8-8amgold15.jpg

Now look at an hourly chart. Remember how gold first touched that top channel line on the weekly chart back on Thursday? Do you also remember the old adage about "what was resistance is now support"? Well, you can see it quite clearly here:

paper_8-8amgold1.jpg

And for good measure, here's an 8-hour chart which takes us back to the beginning of this move last month. Let's watch the upper boundary line very closely as it already has served to contain last night's rally.

paper_8-8amgold8.jpg

I see that things have perked up nicely since I last checked 15 minutes ago. Gold is back to 1703 and silver is back to 39.47. I haven't made any trades yet today and I don't plan to. I am, however, watching that Sep silver spread of mine very closely.

Have a fun day. More later. TF

P.S. Time for another contest. Please post your guess for the Comex closing price of the September gold contract for this coming Friday, the 12th. The winner gets a hat!!

476 Comments

raulv's picture

first?

first?

YES!

Now.. can I have a hat?

Umm.. nope?

Darn!

dmunjal's picture

Makes no sense

Imagine what kind of moves we'd see if people actually sold the dollar and the long bond on news like this?  I do like the fact that silver is getting a bid even though oil isn't.  People are giving silver more credit for a currency than a commodity today.

Colonel Angus's picture

Real risk is in tomorrow...

...as the Bernank can send PMs on a moonshot if he announces QE3. If he disappoints and nothing changes, we may see everything going down, and that could even include the real money. However (and this is my guess) if he puts in some cryptic language, he just might be able to stabilize everything. But QE3 is lurking out there. As is the next ratings downgrade. Catch-22 for Bennie and the Inkjets.

Anyone want to lay some odds on the three possibilities? Did I miss other things that could happen?

ewc58's picture

And freaky Fannie and Freddie

are roiling an already roiled market today... The bad news bears who keep on giving...

Hello DJIA - 300+

Turd Ferguson's picture

Please note the P.S.

MODERATOR

NEW CONTEST!

vaga222's picture

Dollars Coming Home?

Could the dollar strength be due to the same effect that we saw in the Yen after the earthquake, all of the institutions are having to sell everything to get liquidity which means all the selling of foreign assets causes a spike in the number of dollars returning to the country which appears in the market as dollar strength?

My guess for gold close is 1726 yes

ewc58's picture

The Biggest Loser: on a binge

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ewc58's picture

My contest entry

$1744

Thank you Turd

HeNateMe's picture

CONTEST

1755

Shill's picture

Contest

Lock me in for $1738 Turd.

Battle Beagle's picture

Gold Price: $1723.30

Gold Price: $1723.30 for the Friday close.....

and just because, I'll say silver closes at $42.22

CaptainOverkill's picture

Contest, huh?

Sure, why not.

I'll say $1778.63 (got the last two numbers by rolling some dice!)

Fishdog's picture

Friday close

1788.

mojine's picture

CONTEST - The Close Friday will be ....

$1776  - Why not?

NW VIEW's picture

My Guess

$1688.10

paulindoon's picture

What the heck - I say Friday

What the heck - I say Friday Au @ $1737

Captain Hank Murphy's picture

Let's do this

$1739

silver at 44$ :D

Leprechaun's picture

My guess...

I'll say it'll be $1,575 at the Friday close

(After we've seen $1,750+...)

modi's picture

Contest

$1695

Don't underestimate the power of the EE ;-)

Silver2500's picture

$1717 for both the gold and

$1717 for both the gold and wheelbarrows!!!

swefred's picture

1749.54

1749.54

Silver2500's picture

And here comes the EE

And here comes the EE attack!!!

CHOWT's picture

I'm guessing 1742.  No wait,

I'm guessing 1742.  No wait, I'll include the fudge factor.  Fudged down to 1737.  Final answer.

Strongsidejedi's picture

silver and gold price action

FUTURES DATA

DAX30 DOWN -6.5%!

CAC 40 down 6%

NASDAQ 100 down 4%

Looks like the directionality is clear for the next few days.... it's down on most markets and up for gold and silver

Gold and silver are holding in there at 1%-2% up.

DXY is at 75

S&P finally grows some spine and downgrades Fannie Mae and Freddie Mac.

ewc58's picture

Eric O

Hey bro I notice that AUMN has fallen all the way to 55% off its 52wkh, is this a miner you cover in your Gold Miners forum or have any strong feelings or insights about one way or the other? I know them fairly well but haven't done any recent homework, wondering if you have. Thanks matey.

You cracked me up about with your Mother in Law/Skydiving comments yesterday. I'm glad they all came back in 1 piece.

Colonel Angus's picture

Contest

$1753.50..and you know that Colonel Angus just needs a hat to show his status...come on Comex

Strongsidejedi's picture

Estimate on Friday gold close

I'm guessing that we'll be higher than Sinclair's angel (1760+) and then sink back in the last hour.

1755

Captain Hank Murphy's picture

About to dump my SDS

if SDS hits 27.50 today I am jumping ship and taking my winnings. Lots of miners on sale today.

eddie's picture

1761,43

1761,43

Dr Durden's picture

$1712 The 10 year just took

$1712

The 10 year just took out it's overhead. Shizzam, you cannot make this stuff up!

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