Wow, what a brutal day today was, particularly in silver. The short-term charts of silver and gold both look awful and both look to head even lower. However, a trading opportunity may be about to arise so pay attention this week.
First up, the POSX is trying to rally but it has having a devil of a time getting by the 76.60 area on the chart. Note how quickly buying enthusiasm dries up each time it reaches near that level. One more failed attempt at that level may inspire the dollar bears and, as we all know, a weakening dollar adds buying support to the PMs.
So, what does this mean for the PM trade? Both have been savagely beaten over the past three trading days. Silver is down about 9% and gold is off about 4.5%. Yikes! Hold on, though, a brief interruption is necessary:
[ Why was gold taken down? It looked so good last Wednesday. That's the point. In hindsight, do you really think The Fed was going to allow gold to make new all-time highs at a time when they are supposedly showing their "hawkishness" regarding additional QE? How could that be spun by their friends at CNBS? I can just hear LIESman: "Fed chairman The Bernank said today that all is well, inflation is under control and that the economy is just in a 'soft patch'. In other news, gold closed tonight at an all-time high of $1565". Not happening. Solution: Lower margins on gold to suck in some additional longs then have The Empire put the hammer down by creating extraordinary amounts of new paper. Did you see the CoT report from Friday?? Through last Tuesday, The Empire added an additional 9,805 new short contracts. That's almost ten fucking thousand! In a week! Then, add some more on Wednesday and Thursday to get the ball rolling downward but cover some on Friday and today while spec longs are liquidating because of margin calls. (Just watch, the CoT this coming Friday will show about a net neutral to the Empire cumulative short position.) Oh, and don't forget the secondary benefit: Trashing gold provides cover for JPM to hammer silver. Taking 10% or so out of silver this close to first notice day has the effect of "persuading" those considering standing for delivery to instead roll out of July contracts and try again some other time. In the end, when you own the arena and you make the rules, it's pretty tough to lose and The Fed, through The Empire, just won again.]
OK, back to the possible dip buying opportunity. As mentioned above, the short-term charts look lousy so expect further weakness in the PMs tonight and tomorrow. Maybe the POSX will take another stab at 76.40, too. However, big moves in short periods of time invariably create overbought or oversold conditions and we are very close to oversold in the PMs. Both are also closing in on pretty stout support levels, too. Therefore, IF you are inclined to gamble a bit, a trade opportunity may be about to present itself. IF you get a chance tomorrow or Wednesday to buy some gold below 1480 and/or silver below 33, you stand a pretty good chance of catching a tradable bounce. Gold could easily spring back toward 1515 and silver looks like 34.50-35.00. It's not much, I know, but when you're in the doldrums, you've got to take what you can get.
Have a great evening!! TF
p.s. Due to popular demand, we've opened two new forums. First, there's now a forum for foreign currency trading. Not my specialty but, if it's yours, go there and check it out. The other is a forum specifically designed for members to add their own charts on anything/everything they follow. Have at it!