Levels To Watch Today

476
Mon, Aug 8, 2011 - 10:19am

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.

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.

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.

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:

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.

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!!

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  476 Comments

Vypuero
Aug 8, 2011 - 11:24am

$1,722

That is my guess = $1,722

Magpie
Aug 8, 2011 - 11:25am
Animal Sacrifice
Aug 8, 2011 - 11:25am

My Gold Guess

US$1710.56

SilverLeaf
Aug 8, 2011 - 11:25am

Anyone notice the $2 gap between SLV and silver spot today?

Normally the gap is around a buck. In the last half hour, it widened to $2 and is starting to close again. Instead of tracking the spot price, seems like SLV is being pummeled to bring the spot price down. It doesn't seem to be working, and it looks like the gap is closing again to around $1

Adam Smith
Aug 8, 2011 - 11:26am

Thoughts on Loss of Control

I have been thinking about this at some length and would appreciate others' thoughts and comments. At what point does the EE/TPTB "lose control" of the PMs? (i.e., lose the ability to manipulate the markets at will). Will this ever occur? IMO it will and I suspect that we are nearing this point. Will it be Santa's Au $1764?

Obviously the implications of this are huge. For those of us who believe that the PM markets have been manipulated, it follows that there is a major event that will take place when and if the loss of control occurs.

Our fellow Turdites are well versed in the buy physical and take possession mantra that will sustain us through this course. Is it possible to trade this event? Is it possible to estimate its time of arrival to any degree? I am very interested to hear the thoughts and opinions of the sound minds on board (and the unsound minds as well).

ewc58
Aug 8, 2011 - 11:27am

Hi BagOfGold

Can you let us know if you and Mr. Gneiss have your forum up and running yet? Sorry if I missed an earlier announcement but I'm looking forward to following it and contributing when I can add something of value. Thanks and good luck.

Ed

thecoloredsky
Aug 8, 2011 - 11:27am

Contest

I'll go with $1720.24. no rhyme or reason.

BostonMatrix
Aug 8, 2011 - 11:27am

yip, great spectator sport

yip, great spectator sport today. the only thing more fun than watching gold go up is watching JPM go down - currently $35.7.

silver isn't quite sure what to make of the news yet.

¤
Aug 8, 2011 - 11:27am

GDXJ

I've been watching it for awhile and relative to the sell off of last week and todays sell off it appears it has bottomed. (jmho)

Just called my dad and had him sell this other PM fund he had (it did well) and convert it to GDXJ about a hour ago with his totally AGA broker.

I also had him sell off something else he had going on in Scottrade and convert that into some more GDX that I already talked him into 6 months ago. He holds a few miners individually he picked out also.

IMO the mining shares in GDX and GDXJ have sold off as much as they are going to or pretty close to it (barring a complete global market meltdown to unprecedented levels of course). I can't help but think after reading bits and pieces here and there about JPM and GS starting to publicly extol the value of gold and the investment qualities that the tide is about to turn in the mining shares.

I'm convinced the big banks are going to try and do a slow 180 on the PM's bashing and start to go the other way. I think they probably have positioned themselves nicely by this point and now it's time for them to go with the flow a bit and profit and then defend another level.

GDXJ looks like a steal and possibly as close to basement price for the miners your picking up in that fund. jmho

pbreed
Aug 8, 2011 - 11:27am

Contest

1699.99

The EE Will try to beat it down under 1700

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