As expected, there was improvement this week in the gold and silver CoT data. Silver did not do much but it had been improving much more steadily than gold, which mysteriously (ha ha ha) took a sizable hit a week ago Thursday. This data includes that hit. The goons did some covering on that day. Click graphics for full view…
Guest Post by Ino.com
Gold, Silver & Copper
We are operating to parameters on a would-be gold sector bottoming process, which has been a year+ long grind (‘grind is good’ as it absolutely ruins peoples’ nerves over time) and which by the way, everyone sees now as either a final bottom or a consolidation before the final and spirit destroying wipe out, depending on their Team’s hopes and aspirations (bull or bear).
About a year ago NFTRH projected two possibilities (within the context that it was only in the realm of potential) and they were a ‘W’ bottom or failing that (it promptly failed) an Inverted Head & Shoulders on the HUI. Today a new pattern has joined the IH&S and it is a Symmetrical Triangle, which would be a consolidation before the final crash.
I used this morning’s bump to cover the DSLV short (i.e. silver 3x long) position at a shade below break even (-.5%). The reason being that it is in a series of lower lows and lower highs. I think that silver is going to be a buy soon, but unless it paints a green circle above 19.70 the potential is there for lower prices first. I don’t want to be leveraged in that case. I’ll just stick with a few normal and relative quality mining positions for now. Here’s the current silver price from BullionVault (you can pull this and the gold chart live any time using the link above).
From a post on August 6: “I could miss the opportunity of a life time (always a bad way of thinking as a trader) but I am not going to take the chance that this is a little bear flag forming on SLV. I took my modest 3% from shorting DSLV and booked it.”
It was a bear flag.
Well, they say you’ve got to take risk to make gains so today I shorted DSLV again after silver plunked the parameter NFTRH has had on watch for weeks now, support at 19.50 to 19.75. What is good about the trade is not its surety of profit, but its well defined stop loss. But if silver holds the support zone and heaven forbid turns up, the profit should be a lot bigger than the humble 3% last week.
With today’s hard down, the parameter is whisker thin, which means the stop is intolerant. But silver no longer has the issue we (NFTRH) were concerned about as it got too pumpy both nominally and in relation to gold. So I’ll consider myself a bull coming in to replace the momo’s who have been scattered to the hills again.
Outside of the sound practice that is physical gold ownership in a time of monetary gamesmanship, the precious metals sector is all about speculation, at least according to 9 out of 10 chart jockeys and momentum junkies micro managing every short-term twist and turn.
Indeed, NFTRH manages gold, silver and the gold stocks on down to the short-term views as well, but that is only because the long-term views have stated that this is a time to be paying attention. Do we pay attention because we have waited so long to promote our orthodoxy and finally be right as gold bugs? No. We pay attention when a chart tells us to pay attention.
While we manage the shorter-term views (both macro fundamental and technical) rigorously in the weekly report and interim updates, here I’d like to dial out to the big monthly picture with 3 large (click to expand as needed) charts of HUI, Gold and Silver to see their stories, which are the reasons we are managing shorter-term views.
HUI Gold Bugs Index
First HUI monthly reviews the warnings to the analysis from 2012 and 2013. They were very clear and should have kept people out of much of harm’s way with respect to gold stock speculation.
Guess who’s now getting over sold at a support area after becoming hysterically over bought as a short-term caution signal for precious metals (and broad market) investors back in late June? Why, it’s old friend the Silver-Gold (SLV-GLD) ratio, now reset and no longer an issue from an over done speculation standpoint.
Also of interest is that the gold miners (and even the silver miners ETF) did not break down from similar looking patterns.
Of more interest still? Will the stock market gain a favorable tail wind if silver starts leading gold? That is the traditional correlation, but there has not been much traditional in that relationship over the last couple of years, so we’ll let it play out. For now, we are on a stock bounce that is sticking to its original goals as we laid out well ahead of time.
I could miss the opportunity of a life time (always a bad way of thinking as a trader) but I am not going to take the chance that this is a little bear flag forming on SLV. I took my modest 3% from shorting DSLV and booked it. This little trading account that I reserve mostly for shorting has been on a hot streak lately and now, with no positions open none of it can be given back.
I know I know, I said I’d try to have the strength to hold it for a silver rally but it’s my money and now it’s my profit. I hope to revisit the trade again because seldom do these impulsive declines just stop in their tracks. Silver remains suspect for the very short-term below the moving averages.
No, not against the SPY, which has not bounced as far as hoped. But against silver… errr that is against the 3X bearish silver ETF, DSLV. It’s a hyper long in silver. Crazy, I know. But the 19.50 to 19.75 support target was there for a reason, which was to see the punishment of the hype surrounding an over bought silver-gold ratio. That is all cured now.