Sometimes the answers are right in front of your face.
If you've been reading along in the comments of the past few days and/or if you're a subscriber at TTM, you know I've been watching the price of platinum and the growing OI in gold. Both were signs that the lows for the December selloff were in. In hindsight, I just wish I'd moved sooner.
Here's what I mean. If you can, you should print off all six of these charts. Take the hourly PL and hold it up to a light source with the hourly silver. Do the same the hourly gold. Then repeat this exercise with the daily charts. I know it's no longer the holiday season but "do you see what I see"?
Note how closely gold, silver and platinum tracked each other through 2012. However, suddenly on 1/3/13, they began to disconnect. Now, maybe there's some fundamental reason for this that I'm overlooking? Maybe, though, the beatdown at year-end and following the FOMC minutes was a deliberate washout attempt on gold and silver only? I'm going with the latter. And maybe now it's simply time for gold and silver to catch up?
And it's not just platinum, take a look at the broken correlation from the euro and copper, too.
Further confirming this is the change in open interest, particularly in gold.
Gold total OI bottomed on 12/27/12 at 423,459. Price that night closed at $1664. Since then, though price fell as low as $1626 in the wee hours of last Friday morning, total OI has risen. At the close this past Tuesday, price was $1662 but the OI was UP to 441,304. (Remember the adage: "In a bull market, volume precedes price".) So, OI is up 4% while price was flat. Here's another nugget to chew on: The last time OI was this high was on 12/3/12, right after the beatdowns that commenced with Dec12 expirations. Back on 12/3/12, the total OI was 441,062 and what was price that night? $1721. To me, this is a very bullish signal.
So, what can we begin to conclude? Today's action is just another sign that the very nasty selloff that began on 11/28/12 concluded on 1/4/13. Gold fell from 1755 to 1620 (7.7%). Silver fell from 34.50 to 29.25 (2X at 15.2%).
We'll know it's truly over and begin to sound the "all clear" when gold is back above $1705 (currently the 50-day MA is 1700 and the 100-day is 1717) and silver is back above $31.50 (though the Mar13 silver 50-day is near 32.08 and the 100-day is 32.56).
As I close, I see that this morning's rallies are extending. Gold is 1675 and silver is 30.75. Very nice and a very good sign. Let's keep it rolling!