Monday, March 22, 2010

Precious Metals are in a Key Technical Range

Gold and silver are both in a fairly tight consolidated trading range over the past several weeks, keeping both metals bound within a compressed psychological battle between mid-term bulls and mid-term bears.

This range is extremely important, and is probably the largest hurdle that needs to be overcome before a sizeable move to either the upside or the downside.  Our opinion is still that the downside is more probably than the upside, and if the range is broken down it should usher in a move to the $950 area at minimum, with our downside target somewhere around $650.

On the other side of the coin, a break to the upside would make this small multi-week uptrend in gold an impulsive-looking move rather than a corrective one.  This would indicated that there was still a larger degree impulsive move to the upside, which would probably take gold on to new all time USD highs at the $1300 mark or so.



Aside from that, the technicals on gold stocks themselves are looking long-term over-extended, with the Advance Decline level on the XAU hitting a level 75% higher than it has ever in the history of the index, despite the lower-high made in December 2009.  See here:


What's more, we are at what I would call a "very respectable" level of complacency in market investors of every ilk, with fund managers holding less than a 4% cash position at the beginning of 2010 (a record beat only by the market top in 2007 @ 3.6%), and the VIX just recently moving down to what I call the "relax" range.  The RSI reading on the VIX is also extremely oversold, to a level hit only twice previous since 1988 - this in itself is not indicative of an immediate "market crash" or anything, as the VIX can stay "oversold" and have a slowly trending upward price movement momentum against a slowly falling actual value.

But here is the VIX portrait for March 2010:


While we still think downside is the higher-probability in the markets, irrational exuberance and "hope" takes a lot longer to fizzle out than raw fear does to bottom and reverse.

Keep your stops fairly tight out there.

Derek Blain.

20 comments:

  1. Hey, Derek,

    Stick you voodoo analysis up your rump. Doesn't work, dude.

    ReplyDelete
  2. You were wrong about the markets tanking.

    And you will be wrong about gold tanking as well.

    ReplyDelete
  3. Looks like a small head and shoulders pattern from early Feb to now? This could bring the move down to 1050 and stay within the channel. I will probably nibble at that level.

    ReplyDelete
  4. Make your life a lot easier, own some gold and silver, and then buy more every few months, if your think a chart is going to tell you when to buy or sell at this point in the cycle, you are going to make yourself crazy or broke.

    Many of the gold and silver mining shares are still so cheap at this point that buying here is a gift, and again, buy more down the road if higher or lower, and you will be very happy!!!!

    ReplyDelete
  5. Its funny how the "sheep" start to blame Derek for his "calls."

    Since we are not the Universal Being we do not know the exact future, but knowing charts, truths and "set UP" moves by the "rogues" that control Wall Street we get a better idea of what the future will bring.

    There is no question in my mind that this market, gold etc will tank. I am long ES, YM, TF still as the key levels have not been breached (1126.25, 10364 you figure out TF) and no 1-2-3 top has been made.

    The key dates are for me are March 22, April 16, May 19 and August 10.

    Copper, Cotton, beans ( Apr 28 or May 28 high), corn etc will tank before the mkt do.

    The key is the US index.

    As I stated the mkt will likely continue to 1200-1220...my high is 1211.75 or 1218.25 till these dates above. The final date for the indices to start tanking is August 10.

    My forecast is August 10 then a big waterfall effect.

    Intially I called the Jan 21 drop and also told you that March 16/21 would bring another drop, but 1148 was breached and this should not have happened. The YM caught up and finally made the new high.

    Having watched the mkt tank in 2008, the setup was from Feb 27,20007 all the way to Oct 11, 2007.

    Now the "Setup" has been from Jan 11, 2010 or Dec,2009 just when the 1126.25 was breached...till probably August 10 2010.

    Watch the dates.

    Gold will tank to $640-614 and should get up to $1182/1185 some time during those dates.

    US index will test the 77/76 range and then up to 95 and the CAD will make a high of 1.02-1.05 by one of those dates.


    The key is the US index. If this falls below the low of 2008 ( 71 cents) then Gold will go up and I am wrong.

    But for some reason, I think I will not as having traded the same pattern in 2007/2008 I see it coming again.

    "The sheep must be slaughtered before the feast can begin."

    You can be sheep, I chose not to.

    To make $720 million like Michael Burry Michael Lewis new book (Burry a self taught trader and went against Wall Street and he has asperger syndrome) you have to go against the "Set up" and in time you will be greatly rewarded.


    Good luck trading

    ReplyDelete
  6. TA does not work on manipulated markets.

    I find it odd that many of you seem to ignore the fact that gold was over $1000 an ounce when the DOW hit 6500. Why would you expect real money to lose value when everything else on the planet is collapsing this time around?

    ReplyDelete
  7. I bought gold in 2001, told it was a relic and was laughed at. Things are really to much like
    Rome before it fell. Wish you all the best.

    ReplyDelete
  8. Just a word of caution, or THINK before you STOP!

    Back in the 1950's a truly novice 'investor' came to the market by chance. He made a name for himself, by making himself a millionaire (a princely sum in those days),and wrote a book detailing his method.

    That a person could do this was considered unbelievable, so much so that Barron's sent an investigative reporter to expose him. It was found genuine.

    My point in bringing this up is that one of the key features of his success was the way he used stops to protect himself. His book did much to publicise using stops to the masses from that time, But, as you can figure, when the masses start using something that can appear successful, then 'ways and means; are used to thwart them.

    Like many such devices, and TA, they were little known, and even less used, especially by the none professional, at the time.

    Today it is totally different. Stops to cover a down, or an up (on stop) are well used, so much so that they provide a wonderful opportunity for the 'manipulators'' to pick up your stock cheaply - especially when you keep your stops close, or forcing you to buy when an 'on stop' is breached. This along with up to the minute info on the short positions make taking your money easy.

    You can jog along happily for a considerable time comforted by your stops, then, out of the blue, one day when you least expect it - 'wham bam, thank you mam'.

    Markets can open up - especially on a Monday after some event exposed at the weekend, or on any day where the news broke after hours, or even where the fall is so sudden and fast, during trading that the stop could not be exercised.

    So, once again, THINK before you STOP. They can be used against you and quite often are.

    ReplyDelete
  9. I am referring to this anonymous writer who wrote the following comment followed by a few questions and would appreciate a response from him:
    Anonymous said...
    Its funny how the "sheep" start to blame Derek for his "calls."

    Since we are not the Universal Being we do not know the exact future, but knowing charts, truths and "set UP" moves by the "rogues" that control Wall Street we get a better idea of what the future will bring.

    There is no question in my mind that this market, gold etc will tank. I am long ES, YM, TF still as the key levels have not been breached (1126.25, 10364 you figure out TF) and no 1-2-3 top has been made.

    The key dates are for me are March 22, April 16, May 19 and August 10.

    Copper, Cotton, beans ( Apr 28 or May 28 high), corn etc will tank before the mkt do.

    The key is the US index.

    As I stated the mkt will likely continue to 1200-1220...my high is 1211.75 or 1218.25 till these dates above. The final date for the indices to start tanking is August 10.

    My forecast is August 10 then a big waterfall effect.

    Intially I called the Jan 21 drop and also told you that March 16/21 would bring another drop, but 1148 was breached and this should not have happened. The YM caught up and finally made the new high.

    Having watched the mkt tank in 2008, the setup was from Feb 27,20007 all the way to Oct 11, 2007.

    Now the "Setup" has been from Jan 11, 2010 or Dec,2009 just when the 1126.25 was breached...till probably August 10 2010.

    Watch the dates.

    Gold will tank to $640-614 and should get up to $1182/1185 some time during those dates.

    US index will test the 77/76 range and then up to 95 and the CAD will make a high of 1.02-1.05 by one of those dates.


    The key is the US index. If this falls below the low of 2008 ( 71 cents) then Gold will go up and I am wrong.

    But for some reason, I think I will not as having traded the same pattern in 2007/2008 I see it coming again.

    "The sheep must be slaughtered before the feast can begin."

    You can be sheep, I chose not to.

    To make $720 million like Michael Burry Michael Lewis new book (Burry a self taught trader and went against Wall Street and he has asperger syndrome) you have to go against the "Set up" and in time you will be greatly rewarded.


    Good luck trading

    March 22, 2010 9:58 PM
    The Q's are : do you see the 1200-1220 S&P by Aug 10 this year before the tanking of the indices takes place and then how low can they get to? Afterwards, will that be the final washout and time to load up for moon journey?
    And 2} do you see 640-614 gold between now and Aug.10 but where will USD be? Certainly not 76/77? So if you could clarify individually how you see the picture unfold would be of great interest and edu. Also if you have and email or website where you could be contacted. Thanks and good luck.

    ReplyDelete
  10. My longstanding April retest and bottom scenario is looking more probable:

    http://goldwetrust.up-with.com/precious-metals-f6/gold-as-an-investment-t60-195.htm#2856

    I say $1000 - $1050, Derek says $950 at least. I don't put much weight in the $650 scenario, very low probability and if we get that, then you will have worse problems to worry about than the price of gold.

    ReplyDelete
  11. Derek,
    Again, 5 for 5 with me....since I recently found your articles.
    Good call!,/appears we're going down.


    Anon
    " I don't put much weight in the $650 scenario, very low probability and if we get that, then you will have worse problems to worry about than the price of gold."

    If it hit's Derek's progno, then the first problem everyone will have, is FINDING any to buy.
    If it START's to get to 7/750.00 , time to load the wagon, we won't get this shot again, before implosion.

    Secondly, I think(not assuming, words in your mouth), you must be thinking we will be head long into the path of Hyper Deflation.
    ( i.e.) Worse problems.

    ReplyDelete
  12. When the dollar gets to 83.50 area you had better buy all the PMs you can.Derek is hedging his bets
    and won't declare decisively one way or the other.
    He favors the Bear scenario but isn't sure.
    I'm afraid he has shot himself in the foot!Get ready for the monster of all PM rallies!

    ReplyDelete
  13. @ 4:30 Anonymous

    One can only "declare decisively one way or the other" if the market is indicating just as decisively the probability of a larger move. Even today's down-drop was muted in its break of key support. It is only $1.00 within our high-odds downside closing range, and the next few days will be extremely telling as to gold's next major move.

    The downside is looking more probable, yes, especially in the context of the terminal trend formation at the December 2009 all-time high, however today's break of key support would have triggered a slew of stop-outs and there was certainly heavy activity buying into those stops to level the price for sideways consolidation.

    In the end, it is not only difficult technically, but extremely foolish and egotistical to throw oneself at one side of the trade or the other and "fully commit" without proper signals from the market to do so. As these signals are not clear, though indicating further downside, my forecasts are indicative of the signals, not my opinion or anyone else's.

    The next several days should clear things up nicely - if this is a true head and shoulders break and an impulsive downward move the selling activity will indicate it clearly. I will post my thoughts to Kitco on Thursday or Friday.

    Derek.

    ReplyDelete
  14. I believe Derek may be proven correct with his $650. call on gold as we are facing much more deflation than inflation and cash may well be king for a time despite it's "hollowness". Look how the dollar responds to crisis in Greece and then what about Portugal and Spain next? For safety most in the world still flee to the de facto dollar as has been proven recently. Look at our current debt to GDP RATIO @ 83% and fast approaching the line in the sand 90%.

    We will face another Great Depression it appears followed by very high inflation years down the road.

    We have met the enemy and the enemy is us!

    http://www.marketwatch.com/story/our-debt-time-bomb-is-ready-to-go-ka-boom-2010-02-02

    Carl

    ReplyDelete
  15. Poor Carl You have my sympathy! The big bad Bear
    has you by the neck and Derek by his left foot
    while Goldilocks rides the Bull up the hill to
    fame and fortune.Eventually Daddy Bear may have us all but not quite yet!

    ReplyDelete
  16. Approaching my buy target in C$ probably get filled tomorrow. Carl, a couple of down days does not a downtrend make. This entire move from the december high down has been corrective in nature.
    The statement that cash is king is absolutely laughable. I suggest you look at the price of gold in any currency other than the USD and you will realize that cash is a curse, not king. I use the C$ EU$ BP$ JY$ gold charts and a composite weighted mix of them all to get a true picture of whats going on as far as the worlds appetite for the PMs and i can tell you the PMs are in an orderly textbook corrective wave...but if youd like to panic and sell thats up to you... Jerry

    ReplyDelete
  17. If anyone wants wants to KNOW the FUTURE leave your email after you post my comments.

    Know TIME know the FUTURE. I know the FUTURE in every Commodity, the year it will make the high or low and even the month...the day I do not know as YET. This is out to the next 100 years.

    1126.25 and 11364 are 2 important numbers on the ES and YM respectively.

    The US should be like the Congo, abject poverty with all the 50 Trillion dollars in UNFUNDED liability, but its all a GAME, the Eurodollar the biggest mkt ( 10 times the size of the stock mkts) and NOBODY KNOWS IT.

    How come your stock mkt is going up and America is more broke than Haiti??? Becuase America controls the world with its GUN. Its controls he money/internet/IMF/banking..I should state the people who are controlling these instituions control America and Americans ( black and white...too stupid to get it.) Its all a lie..game...facade...PLOT!!!

    So if you want to make money in the mkts...remember its a game, scam, controlled by Bolsheviks/Herzl people/socialists and Obama is not to blame. See his sidekicks and they are controlling him and America. No President can go against Israel ( Zionism is not a religion, ask a Sephardic observant Jew) for if he did he would be shot.

    The whole goal of these people is to make all the population of America poor and this is the 2nd stage, globalization was the first. Depression will happen in 2032, but these same folk have made "Communist China Rich" geez I thought they were the enemy for 55 years and also made India rich, when for 55 years India was a buddy of Russia.

    Your gov't is controlled by the friends of Israel..pharisees, not caannites. ADL ( Anti Defamation League) was founded in 1913 just like the crooked Federal Reserve.

    Why do Americans owe Chinese and Indians and everybody else a living?? They don't, but the people controllong America, do not care about America..they care about Israel...Jesus does not care about Israel nor does any observant Jew who knows the real Torah NOT the Babylonian Talmud.

    Why after so many years of supposed "Buy and HOld' most Christian Americans are BROKE!!!

    Bernie Madoff was set up....if you believe he is the real crook you are dead wrong....Jew takes a fall and he has no Idea how it came about...just look at this face..completley disbelieving. Maybe I'll go see him in prison. Try and get a pass...YOU won't.

    Leave your email here and if you want me to get back to you. ONLY Sovereign funds and wealthy "Goyim" families can leave their emails. But I will also take Arab, Christian Europeans, Asian etc funds. My terms are non negoitable as you can see Dubai lost over 40 Billion listening to Wall Street and Al Waleed is down 15 billion, Iceland is broke...yeah go ahead and give the "crooks" your money.

    Britain is worse off than Portugal( Friend of the US, friend of the Strauss-Kahn who runs IMF...Khan is Muslim, Kahn is Jewish). They is a difference between a Zionist and an observant Jew who knows Israel should not exist and when the Messiah comes then he will bring rapture..NOT before.

    Democrats and Republicans are both crooks and so is the Tea party.You need a dictator to bring good wages back to the people, root out political corruption and get rid of the Enemies of the state.

    China is run by a dictator and the US trades with them even though they are Communists and supposedly a sworn Enemy of the US or so I was told for 55 years.

    "The future is know to those that believe in the RebEL Jesus/ or the spiritual Universal being and YOU do NOT have to be religious to get it." For all religion on earth are apostate, with the Talmud/Babylonian one the worst of the lot.

    To know the "Future" you have to question the "Present." The truths your are being told are all lies.

    ReplyDelete
  18. Gold will get to $640-614 but after August 10...probably Jan 2011-April 2011. They should be some waterfall effect after one of those dates I mentioned above. It should get to $1182/1185 before the drop.

    When you see a report by Goldman/J.P. Morgan indicating ES to 1400 by end of year and we are in May/June..they you are being "Set Up."

    Shit, I should charge $1 million a person for this advice...maybe then those Sovereign funds and Countries would not have lost over 5 Trillion dollars...to WHOM...WALL STREET. And I would have made $250 million....RISK VS REWARD....but NOBODY listened.

    And they scammed YOU with the bailout by the gov't to the tune of $700 billion. Paulson ( after making $200 million) comes to the gov't as Treasury Secretary ( Paulson is Jewish) from Goldman and then proceeds to give his buddies 700 billion while using Neil Khaskhari ( Indian US citizen) also from Goldman to come up with the number for the bailout.

    Khashkari told the Britain Financial Times that he MADE UP THE NUMBER OF $700 BILLION to give to the Congress to pass the bailout and Paulson said "GREAT."

    Truths as "Lies" and YOU "sheep" keep getting slaughtered.

    ReplyDelete
  19. Analysts try to compare this Ending of a credit cycle with the last 1930's Ending of a credit cycle and the same waves pass through like a set of five big ones coming ashore on the ocean, but today we have no constraints imposed by a gold standard. We are on an oil standard (Black Gold, backs the USD) and THAT is the key to understanding why the world is going to continue importing US inflation. The next shift is to a quasi-backing of USD by natural gas as oil runs down an OPEC fragments and Saudi's hit water they pumped in to create pressure. So as concentrations of wealth move to China and Dubai, China from manufactured goods sales and Dubai from oil sales, the physical metals markets should shift to there, in time. All the paper pushers in NY are going to be trying to push paper to themselves and play "what shall we peg this to?" while the foreignors say.......just put that metal on a pallet and ship it. Then the jig hits the rig and the woman stops grinding at the mill and the golden bowl is broken. So when 1/5th of wallstreet is made up of financial companies.......this is one giant casino with wholesale manipulated price controls instead of commie retail price controls. USD is "tickets" and welcome to the USSA. Love in your heart is wealth, faith is the bank they want to breakdown and rob out so be bold for the truth.....get you some. Make sure you die so well, get born while you're alive now. Spirit of Truth in you lives forever.- Isa 53, Ps 22. There's the gold to load up on.

    ReplyDelete
  20. Derek,

    Your prognosis on gold price seems to be head on. The major turning point for gold is April 16th. It should test its support 1048 by then and then take a U-Turn to test the upper resistance channel of 1300-1500 by Oct-Nov.

    Good Luck.

    Ajay

    ReplyDelete