Tag Archives: silver

Precious Metals Risk Management

By Biiwii

[edit]  Profit booked on JDST and partial DSLV.  Off to NFTRH.com for an update.

As noted in NFTRH 352:

I thought about releasing my JDST position on Friday because it is very profitable and because it appears that capitulation is in the air. But then I thought about the margin clerk and all those names he may be preparing to call upon on Monday. I thought about how my main intent is not to profit from the precious metals decline but to be intact for buying its bottom. I am not now nor never have been a bearish trader of great skill.

I released a portion of JDST on Monday’s pukage because it had me weighted too net short (ref. the bit above about my lack of bear trader skills) after Monday’s big shoe dropped.  I thankfully kept the rest of the position, which is today at a 100% profit.  But that is still not the position’s primary objective.

Due to this disgusting chart’s measurement, I decided to buy 3x Silver short DSLV (now nicely profitable as well) a couple days ago as silver bounced.  After discussing the favorable trend developing in the gold and silver CoT structures last weekend #352 noted the following bearish technical situation in silver due to a loss of critical support.

silver

The CoT are simply representations of what the various traders are doing on balance. The ‘commercials’ (incl. a large contingent of companies within the gold industry) tend to be net short but that does not force the large speculators to buy. These large entities buy, gold sector promoters tout it and then the whole thing gets cleaned out. Don’t personalize it. That is emotion. Use it. Anyway, technically silver can easily swoop down into the 13’s if a capitulation event comes into play. Understand that these price objectives on Au and Ag are not predictions; they are measurements.

I expect the macro to turn over the next several weeks to few months.  But for right now a process needs to finish up in the precious metals.  We will need to see what the heretofore perma bulls are saying.  Some have already switched bearish, which is positive.  But others continue to live in denial and I think this process wants to address that.

So I use the bear funds as hedges with a plan to (very) slowly add quality junior miners/exploration near the targets we have laid out, and hopefully these bear funds turn out to be profit vehicles if I can use enough patience and get the timing right.  So we’ll see how that goes.  They could be sold about 2 minutes after this post goes up or they could be held into a final swoosh.  They are dangerous vehicles, however, and not for long-term holds.

I don’t pretend to be a fancy trader because I can be a Keystone Kop in that area sometimes.  One thing I do pretend to be is a hard core risk manager and that has been working out very well.  Hopefully soon, the other side of ‘risk manager’ can emerge.  That would be ‘risk taker’ when RvR gets compelling (ref. Q4 2008).*

* As noted a million times already, the macro funda (for US players, anyway) are not currently what they were in Q4 2008.  Not nearly, as long as the stock market remains aloft and Treasury yield spreads remain depressed, and as long as market participants take the Fed seriously.

Precious Metals Extremis?

By Biiwii

The precious metals, which happen to be my anticipated next big macro (long) trade have been bearish since HUI lost 460 for the last time back in oh, what, 2012?  And that was being lenient.  Not being a cycles guy, I was not able to time the top.  I merely observed support parameters and informed NFTRH subscribers of technical violations first, and early eLetter readers subsequently as well (the eLetter was launched after the bear market began).

So now here we are, with the precious metals doing what they usually do when looking to end a bear phase; they are becoming extreme, as in waterfalling…

gdx

There is a solid contingent of analysts and writers now bearish on the precious metals.  There are also the perma-pom poms and idiotic hallucinations like the “drop dead gorgeous bull wedge” on GDX above (it failed as expected about 15% ago).  There have still been too many of these guys out there, obsessing on the precious metals every step of the way calling play-by-play for transfixed gold bugs.

Anyway, what there also is is an HUI target from 2012/2013 of around 100, based on the old monthly H&S top.

hui.mo

This is cross referenced with a gross looking pattern on the weekly chart.  Below is the blown up view of a more detailed chart, showing the pattern.  Here’s the NFTRH 351 excerpt that went with it…

Below we blow up the above chart (no pun intended) to show the breakdown.  The little pattern measures roughly 210-150 = 60; 160 (breakdown point)-60 = 100.

 What I find interesting here is that for years now, the big H&S top on the monthly chart has had a target of 100 (+/-).  While nothing in TA is set in stone (it’s an art based on probabilities, not a science), confluence adds to the probabilities.  The weekly and monthly charts each have independent patterns indicating the same general target.

hui.wk

For years now the sector has been bearish, but at the same time, being a macro trend trader (i.e. my desired mode is not this daily and weekly trading I have had to do in the mature stock market bull, it is to try to anticipate a big new trend or macro theme and be positioned for it) I am thinking like a predator or hunter, as has been advised in NFTRH.

In a situation like this, all you can do is have patience and your best laid targets and plans.  I hold exactly 5 junior miners (as of this writing), all of which have charts that are vastly better than HUI and GDX (and GDXJ for that matter) above.  I also have been shorting NUGT and holding JDST for full protection against what has been an uninterrupted bearish technical view and an incomplete macro fundamental view.

I know that NFTRH subscribers are prepared and hope that eLetter readers and website readers are prepared as well to the extent they have been able to read gain information and between the lines.

While I have conflicts going on (like the still <barely> intact Semiconductor market leadership vs. the deplorably bearish looking Palladium-Gold ratio) I think we are heading into Extremis, Q4 2008 style.  Timing?  Not sure.  Only regular work will help tell that story.  A short-term bottom could come about in the PM complex at any moment, before THE bottom.  However, THE bottom could come sooner rather than later if that waterfall continues to spill.

Regardless, whether it is measured in hours, days, weeks or even months still, it is time for the real gold bugs (the ones who long ago tuned out the cartoon characters the sector holds aloft) to be ready to act.

Hype in the “Community” is Always Punished

By Biiwii

IKN has been pointing out the stupidity of some Apple Watch gold consumption hype and most recently, the non-flight to quality amidst Greece blah blah blah… He is at least as sensitive as I am to this stuff.  More so, maybe.

While I have personally tried to tone down the criticism of the cartoons in the gold “community”, I find it difficult with one writer in particular leading the naive into the GDX (with its “drop dead gorgeous bull wedge”), into the Indian Wedding and China demand stories and as a topping on the cartoonish cake, the ‘US jobs will drive inflation so make like the smart money and BUY GOLD before the big institutions do!’ garbage.

I get irritated by this stuff.  Some people call me sanctimonious (while cherry picking and misinterpreting a chart I put up) and I call myself judgmental, for sure.  That is not really a great trait to have, but at least I know who and how I am.  Speaking for the defense, this is mostly applied when I think that people are being misled to their potential harm by stuff that they are reading and assuming is authoritative.

News flash:  Nobody writing on the internet in general and the financial media in particular, is authoritative.  Present company included.

Last year at this time Ukraine, Russia and eventually Ebola were stoking up.  NFTRH kept a constant warning in force that the rally in the precious metals complex was happening for the wrong reasons (i.e. trade it, but don’t bite on the b/s).  Right out front beating the bull drum were some of these entities about which I am highly critical today.  The result for last summer’s unsuspecting true believers?  New freaking lows in gold, silver and the miners.

It was interesting because last summer NFTRH experienced a temporary net decline in subscribership.  I thought it was just a typical summer drop off, but I also could just feel certain gold aficionados in the base getting fed up with me.  You can always sense when gold bugs start dropping off.  It tends to happen when I don’t tell them enough of what they want to hear.

This summer (so far, anyway) there has been no drop off and indeed there has been a slight increase in net subscribership.  The only way I can explain it is that we have been fully prepared every step of the way for the bearish things happening to gold, silver and the average* miner.  That along with the fact that we have been bullishly managing markets that have deserved to be managed, unlike the precious metals to this point.

In other words this summer I am not being punished for being negative because precious metals prices are not running upward, making charlatans with nicer things to say look like gurus.  People are valuing what is, as opposed to what they ideally might want to be.  Oh and also I think that the last several years have been a process of winnowing the real hard ass gold bugs out of the base and leaving a group of well rounded market participants.  I like that.

This is not a ‘trash the precious metals’ post.  Changes are coming, but first you need to be intact, have several macro fundmental and technical indicators cross referenced and in line and be prepared to be brave when the sheep (funny how the most dogmatic “community” on earth calls regular people “sheeple”, isn’t it?) are being sheared.

* I am fully aware that there are standout exceptions, which is why I currently hold 3 junior gold stocks (alongside a short against NUGT).

Silver-Gold Ratio & USD

By Biiwii

Okay, one last precious metals short-term micro management exercise before moving back to a more generalized market view.

Actually, this one is pertinent to many other items as it is our gauge for the probabilities of an anti-USD ‘inflation trade’ bounce.  Silver-Gold ratio is still alive despite silver’s hard down this morning, and Uncle Buck is still below his MA 50 despite today’s strong bounce.

sgr.uup

Gold Ratios Today; Ag-Au & Au-Pd

By Biiwii

A couple of our most recently watched gold ratios..

Silver-Gold ratio bounced today, keeping the hopes of the ‘inflation trade’ alive.

sgr

Gold was down hard today, but the problem for the Palladium-Gold ratio is that the cyclical metal, Pd was down harder.

pall.gold

Here’s the weekly view, showing what looks like a shoe-in that a negative macro signal is going to come about.

pall.gold.wk

<Insert here > the usual caveats about tolerances on timing and individual indicators not being taken in a vacuum; but if this indicator is going to work as it has before, it’s message is not a pleasant one.  And no, I don’t have a clue about how this squares with the bullish things I am seeing in the Semi Equipment sector, another ‘canary’ that chirped the post-2012 up cycle.

It’s why you’ve got to love this market I guess.  It’s wonderfully dysfunctional IMO mostly thanks to the historically vigorous levels of policy input post-2008.

Gold and Silver, and…

By Biiwii

[edit] Whoa!

au.ag

This is odd, but not illogical, given the dynamics in play for the gold and silver CoT data and a possible counter-trend setup we have been watching for in the ‘inflation trade’.

au.ag

Here is the CoT chart for silver that was used in NFTRH 348.  Not so bad is it?  The extreme was set at the first set of arrows, but Silver CoT has improved greatly over the last couple of weeks.

cot.ag
Courtesy of COTbase

Silver would likely lead gold if a bounce in commodities and certain global markets were to take place.  Meanwhile, the actual bullish stuff is elsewhere as the US stock market has re-found its momentum leaders and Europe declines to the upper end of its buy range.

Gold’s Ratio Signals

By NFTRH.com

A brief snapshot of counter-cyclical gold’s macro signals vs. other metals (and broad commodities) that are more positively correlated to economies, using weekly charts…

Each week NFTRH updates many charts of nominal US and global stock markets, commodities, precious metals and currencies over multiple time frames.  But we also cover economic data and indicators, with the first macro chart below (Palladium vs. Gold) still barely holding its economic ‘UP’ signal from January, 2013.  At that time a coming economic up phase did not seem likely, but PALL-Gold and fundamental information gleaned from a personal source in the Semiconductor Equipment sector gave us a good risk vs. reward on that stance.

While it can be argued that using an indicator like Palladium (positive economic correlation) to Gold (counter cyclical) is subject to the discrete supply/demand fundamentals of the two assets, it has worked to signal up and down economic phases, with the most recent shown in Q1 2013 (green arrow).  This indicator has been whipsawing since topping out a year ago and the moving averages are near a trigger point.

pall.gold

A related indicator is Gold vs. Commodities.  Gold-CRB made an impulsive rise in late 2014 as the global deflationary phase topped out.  As policy makers (ECB, BoJ, China Central Planning and US with ongoing ZIRP) continue to promote inflation 24/7, 365 Gold-CRB has dropped as it should when inflation is starting to ‘work’ and inflation expectations start to take hold.  But a problem for hopeful inflationists is that so far at least, counter-cyclical Gold-CRB appears to be in a bullish consolidation.

gold.crb

If cyclical PALL-Gold were to break down and counter-cyclical Gold-CRB to hold support and resume its uptrend the indication for the global economy would be negative.

Another chart worth considering is Gold vs. Copper, the traditionally cyclical red industrial metal.  A series of higher highs and higher lows began in late 2013 and is still in play.

gold.copper

To put perspective on this, behold how bearish nominal Copper is and has been by viewing this monthly chart similar to those we have reviewed in NFTRH for years now to maintain a big picture bearish outlook on this metal.  We have allowed for the current bounce/rally/bear flag, but until $3/lb. is exceeded and held, this is a very bearish picture.

copper

Finally, let’s review Gold vs. its primary running mate, Silver.  Actually, flipping Gold vs. Silver over to the Silver-Gold ratio works best visually at this time.

We are allowing for a bounce in Silver vs. Gold.  This could come about if the Fed rolls over again today and plays nice with its language.  Or it could just come about simply because it is due.  This would go hand in hand with a resumption of the mini inflation bounce implied in TIPs vs. regular Treasury bonds and in nominal Treasury bond yields.  The message of Silver-Gold however, is similar to the charts above on the bigger picture because it is locked below very strong resistance.

sgr.wk

Bottom Line

I consider Gold vs. Palladium and Gold vs. Copper to be indicators on the global economy whereas Silver vs. Gold is more an early indicator on inflationary pressure.

The conclusion is that the economy is in danger of decelerating (Pd-Au, Au-CRB, Au-Cu) amidst a dis-inflationary environment (Ag-Au).  The timing could be by this fall.  First, a resumed bounce in the ‘inflation trade’ has a chance to get reanimated.  But that is not the dominant longer-term trend.

Ag-Au & Pd-Au Today

By Biiwii

With respect to the two metallic market indicators in the previous post, I find it interesting that they are diverging today.  The markets are down, people are concerned about a stock market correction (gotten a look at market sentiment lately?), Greece, the Fed and whatever else they can find to upset themselves with.

But today Silver has been trying to bounce vs. Gold while Palladium is more in line with the bearish festivities going on today.  Silver is trying to sniff out an inflation play, while Palladium is still on the message that an economic signal may be coming in the next few months.  It’s only one day (not to be taken in a vacuum), but both ratios have been dropping for somewhat similar reasons, as they both tend to be cyclical.

Of course, it’s FOMC week so we might expect some whacky things.

slv.gld.pall

NFTRH 347 Out Now

By Biiwii

There is short-term and there is long-term.  Short-term, an indicator of positive inflationary cyclicality looks set to bounce.  Long-term, it is locked well below key resistance.  Joining this long-term Gloomy Gus indicator is another that we used in 2013 to gauge an oncoming economic UP cycle.  It is working its way toward economic DOWN, slowly but surely over many months.

There’s lots of other valuable stuff in #347 as well, including market calls/opinions, stock highlights, interest rates and well, the most comprehensive kit and kaboodle you’re going to find out there.  But then, I am biased.

NFTRH 347 really helped me get my orientations focused.  That’s why I love doing this work.

nftrh347

Stocks Upbeat, US Dollar Downbeat

By Biiwii

US stocks poised for upbeat day as dollar slumps

Well okay, the media has its rationalization, but stocks were obviously at a bounce point yesterday.

Stepping away from the stupid noise that the media inject each and every day, there is a tie-in between the US dollars’s resumed correction, a speculated upon ‘C’ leg up in commodities, the fact that silver vs. gold has room to bounce (but is big picture bearish) and oh yes, this chart’s all-important message…

tyx

‘Inflation expectations’ appear to still be well in play.  But at around the time the ‘Continuum’ above reaches the limiter (AKA 100 month EMA), other indicators should also be at potential termination points.  We finely detailed the plan in an NFTRH update this morning, but for our purposes here, we’ll just note that all of this is counter-trend as it stands now.  So don’t get lost along the way.  Stay on your indicators.

Gold Isn’t Cheap…

By Steve Saville

Gold Isn’t Cheap, but nor Should it Be

Although it is not possible to determine an objective value for gold (the value of everything is subjective), by looking at how the metal has performed relative to other things throughout history it is possible to arrive at some reasonable conclusions as to whether gold is currently expensive, cheap, or ‘in the right ballpark’. In particular, gold’s market price can be measured relative to the prices of other commodities, the stock market, the price of an average house, the earnings of an average worker, and the real (purchasing-power-adjusted) money supply. In a recent TSI commentary I looked at the last of these, that is, I looked at gold’s price relative to the real money supply, and arrived at the conclusion that gold’s current price was about 20% above ‘fair value’. I’ll now take a look at gold relative to other commodities.

Continue reading Gold Isn’t Cheap…