Looking To BTFD In Silver and Gold
Wow, this is crazy, isn't it? There is so much crapola going on in the world that, seriously, I don't know where to start. So, I guess I'll start where I'm most comfortable...with the ruler and the sharpie...and wait till you see what I've found!
As I've mentioned quite a few times as of late, this 20%+ equity rally over the last three months makes me nauseous. While I feel that the perfect 45-degree rally is a clear sign of Fed manipulation, others argue that it is the rational result of The Great Global Liquidity Flush of 2012. Maybe they're right? Maybe we're all right? Who knows? All I know is that the charts don't lie and they are what they are.
To that end, below is the most important chart of the day...perhaps of all 2012 to date. Note that since the panic beatdown and collapse of December, gold has been in a similar pattern to stocks. Take a look:
From this chart, I think we can deduce several things:
- Since it's not just gold and equities that have this 2012 pattern, there really is a Great Liquidity Flush happening and it will likely continue throughout the year as the central banks desperately try to maintain the illusion of recovery and hope.
- The Cartel is still active in trying to manage gold's ascent. Note that this range rises a perfect $100/month.
- If we expect The Great Liquidity Flush to continue then this chart pattern should continue, as well.
- The current floor of the channel is at $1720. This means that by late April, the floor of the channel will be at the old all-time highs for gold, near $1920, and the top side of the channel reaches there by late March.
- Buy gold. Buy it on the dip or buy it on the rally. In the end it doesn't really matter. Just buy it.
Now, the next question is: Can we get a dip to buy? Maybe. In fact, I kind of like our chances that we'll get that dip, sometime between now and Thursday afternoon.
First of all, the POSX is rallying. In fact, at 79.30, it's actually above the level at which it was trading pre-Greece on Monday. Interestingly, the metals are holding in there today even while The Pig strengthens. I have a hunch, however, that a few WOPRS may eventually trip into "sell" and take the PMs down a few dollars.
So, where might that dip take us? In gold, I will be very excited if we can get a dip to 1740-45. You can clearly see that area on these two charts:
In silver, the BTFD area is also clearly defined. Take a look at these two chart first:
And now check out this hourly chart. If a dip develops to 33.70-33.80, it sure looks like a solid buying opportunity. The only thing complicating matters somewhat is the pending expiration of the March options at the close tomorrow. Keep that little item in mind if you are attempting to trade today and recall how SLV call holders were treated when their options expired back on Friday.
Lastly, I'm trying really hard to bring myself up-to-speed on this Greek "bailout" deal. If you want to take a crack at it, too, try reading this:
and then consider this:
What I can't figure out is why a powerful hedge fund would allow themselves to get screwed in this deal. Why wouldn't a loose consortium of hedge funds band together and deny the deal? Because the ECB and the Fed are so afraid of a CDS trigger, couldn't these funds force them to sweeten the deal in a sort of 80s-esque "greenmail" attempt? They could even short JPM and GS, profit from putting the squeeze on and then close those positions right before they accept the sweetened deal!
Anyway, it seems to me that there is a palpable sense of desperation to avoid CDS triggering through a Greek default. In the next few weeks and days, there will be some wild volatility as markets react to "deal on" and "deal off" rumors but, in the end, a deal will be struck that will be much more costly than that which was announced yesterday. Costly = more euro and more dollars. Costly = continuation of the Great Liquidity Flush of 2012. Costly = gold and silver continue to rally and perhaps even accelerate to the upside.
Of course, I could be wrong. Maybe default is inevitable next month. Gonzalo seems to think so:
However, this event is PM-positive, too, as breaking up the euro will also drive the PMs significantly higher. Maybe not so much in the near term but definitely in the longer term.
So, there you go. That's all for now. Crude is still over $106 and, the more time it spends at $106+, the more certain you can be that it is headed to at least $115. Got UCO?
More later. TF