A bevy of gold and silver miners are printing 52-week highs today. I believe this is significant because miners tend to lead the physical metals. This, in turn, suggests that gold and silver are probably close to their next legs higher. As I've said before, the intermediate and, arguably, the long-term trend has turned in the bull's favor. Don't try and outsmart the market by trading all of the day-to-day noise. Sit tight and be right. This move will play out for months and probably years.
Once again I'm sorry for the lack of posts recently. I've been out of town and away from a computer. To be honest, there wasn't a whole lot of action in the metals or the equities as most of the movement while I was gone fell into the "noise" category if you know what I mean. Well, at least until yesterday that is.
Two very important dates are now behind us: July 26 (Comex gold expiration) and July 27 (FOMC announcement). First, Comex gold expiration has always been a "play thing" of the bullion banks. Prices tend to get pegged or massaged in the days and weeks leading up to expiration based on max pain levels in the options markets. Very rarely do the metals rally into expiration. For that reason alone, I wasn't surprised to see gold and silver drift down in uninspiring trade. Keep in mind also that Silver trades on the heels of gold, just in a more volatile fashion. As gold goes, so does silver.
The second date, July 27 (yesterday), was the usual FOMC day where gold and silver get smashed the moment the announcement is made (the first reaction is literally always lower, regardless of the statement). FOMC days are a cluster and I would never recommend trying to trade an announcement. After the initial smash lower, there tends to be huge volatility in both directions. So it is likely that you will get whipsawed out of a position based on knee-jerk reaction trading. Also, it usually takes a day or two for the metals to settle down after the announcement.
So now that those two days are behind us, there really aren't any more wild cards in that I'm seeing in the short-term which should bode well for the PM sector. That said, let's take a look at some charts and see what's going on.
After reaching a new 52- week high of $1377 on July 6, gold has pulled back in a fairly orderly fashion on innocuous volume. Each of the last three pullbacks has now established a nice upward-sloping trend line, shown above. Yesterday, after the FOMC announcement (and the usual knee-jerk smash), gold reversed higher and jumped off that trend line, leaving a decent gap on the chart. Technically speaking, it's great for the bulls that the trend line acted as support once again. Don't be surprised if gold corrects a bit to fill that gap, but I think this chart is very supportive of a continued move higher.
Silver, to me anyway, is painting a much cleaner chart than gold. After printing a new 52-week high on July 3, just above $21, it too began to correct on light volume. For the next three weeks, it painted a beautiful pennant consolidation pattern (shown above). Yesterday it exploded higher in a no-doubt bullish breakout. I would put a conservative price target of $23.00 on the current advance based on the size and duration of the pennant formation. I'll explore the longer-term charts in a future post to see what that means in the big picture. But for now, the daily chart looks awfully bullish.
Moving on the miners, they too saw a healthy bounce yesterday post-FOMC. As you can see above, the 50 dma has been providing support for several months now. As a result, I would continue to expect this going forward. If you're looking for an entry point, waiting for a pullback to this level makes sense. Aside from a brief blip in May, the RSI mid-line has acted as support for the last six months so keep an eye on this as well if you're looking to get in. Overall, I really like the action in GDX. It's been grinding higher all year, with brief, shallow pullbacks along the way. I see nothing bearish on this chart.
Last but not least, I wanted to share the daily chart of Platinum - the much less talked about precious metal. I tweeted about this yesterday, so this chart may look familiar if you follow me. Talk about a beautiful cup-with-handle formation! Everything on this chart is working in the bull's favor. From the tight price action, to volume increases at exactly the right times, to yesterday's breakout - very, very nice. I don't post on Platinum too often, but the chart was so compelling that I wanted to show it.
That's all for today folks. Thanks so much for reading!
Regular readers know that I prefer to focus on longer-term charts since I'm not a trader. I think daily charts reflect too much noise and oftentimes give false signals. Weekly and monthly charts filter out a lot of that stuff and do a better job at showing more meaningful trends.
With that in mind, today's post will be annotated monthly charts of gold and silver. The gold chart, shown above on a log scale, is sooooooo close to definitively breaking out to the upside. Rallies in June and July have stopped precisely at the line of resistance originating from its 2011 peak. The monthly MACD and RSI have both undeniably turned higher after a brutal couple of years. In fact, the RSI has just pushed above the midline (bullish) for the first time since 2013. Volume has been increasing on the rallies which is what bulls want to see. The final nail in the bear market coffin will come when Gold can manage a monthly close above that descending blue trendline. If and when that happens, it has a clear shot, from a charting standpoint, at recapturing its 2011 highs.
[It's worth noting that if you plot the same chart above using a linear scale instead of a log scale, gold has already broken above that descending line of resistance.]
Moving on to silver, you can see that it's bottoming process is a bit more advanced that gold's. It has no doubt broken above its long-term line of resistance. It even backtested the line in May only to explode higher the following month. Bulls couldn't ask for a better chart formation. Similar to Gold, Silver's momentum indicators are moving higher in unison. The MACD has now printed a bullish cross-over signaling that the long-term momentum has shifted in the bull's favor.
From a support and resistance standpoint, Silver has already cleared the biggest hurdle now that it's overcome the long-term resistance on the chart. I'm seeing a bit of congestion in the low $20s and then again in the low $30s. Both areas will likely act as intermediate resistance but nothing too major.
All in all, both metals are painting a very bullish technical picture. Throw in some extremely strong fundamental arguments for higher prices, and we have a winning combination.
And just for fun, I'll leave you with this 50 year chart of Silver..........
This is another post where I'm going to let the charts do the talking. I'm seeing extremely bullish formations across the commodities complex. While it's taken longer than I ever expected, the Fed's easy money policies of the past 8 years are finally starting to manifest themselves in commodity prices. I don't care if demand is falling off a cliff (which it is in many areas), when you print $Billions ($Trillions?) that money has got to go somewhere.
First I'll look at the precious metals, including Platinum and Palladium:
And now moving on some big-time industrial commodities:
And lastly, Copper has slowly started to turn things around. I assure you this due to central bank policies and NOT a sudden upswing in demand.
I have to be honest - I did not think Brexit had a chance. Apparently Wall Street didn't either because trading on Friday was a disaster for equity markets around the world, with banks taking a particularly hard beating. There was a very clear flight to safety with defensive sectors like Utilities and precious metals outperforming. Speaking of precious metals, gold, silver, and the miners had a terrific day as you will see below.
The tide is turning folks. Equity markets, depending on how one measures valuation, are at or near all-time highs. Earnings have been declining for months and yet stocks continued to march higher (at least until yesterday). Precious metals have been bottoming for over a year as both fundamentals and technicals continue to tilt in the bull's favor. In my post from Wednesday I commented, "I feel like there is going to be a huge move soon, possibly in [both equities and precious metals], but I have no idea which direction it will be." Well, I think Brexit has given us the answer.
Today's post will be chart-heavy with annotations and a few comments smattered about. My takeaway from Friday is nothing more than a confirmation of what I've been saying for over a year: equity markets are topping and precious metals are bottoming - it's time to position yourself accordingly.
First up is a look at the S&P 500 daily and weekly charts. Friday did a ton of damage to the bullish thesis. If the 7-year bull market is still intact, it's going to be a long, hard slog to repair what has happened in a single trading session. 2100 has become a very clear line of resistance - just check out the weekly chart to see what I mean.
And on to the Nasdaq. Same story, different index. Down 4% in a single day with massive volume to boot.
And a quick peek at Financials. Lots of room to fall to that lower line of support.
I specifically wanted to show you a couple charts of our old friend Deutsche Bank. It's now trading just pennies away from all-time lows. The word FUBAR comes to mind...
Now we head to the stars of Friday's show: precious metals and miners. First, we start with gold.
And now a look at gold's more volatile sibling, silver. Silver's move on Friday stopped right at big-time resistance. Look back at 2013 and 2014 and you'll see that $18.50 provided support for a long time. Once that level was breached in September 2014, it became resistance with lots of overhead supply sitting on top. Also, I would like to note the curious lack of volume on Friday. Not sure what it means, if anything. Overall, silver continues to paint a very bullish picture on the charts.
The gold miners continue to look good as well.
I'm going to end with the WTF chart of the day. Take a look at the FTSE weekly chart. If you're not familiar with it, the FTSE is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. In other words, it's very similar to the Dow Jones Industrial Average. Did you know that after Friday's bloodbath the FTSE still gained 2% on the week?
First, my apologies for not posting much lately. To be honest, there hasn't been a lot of new developments over the last several weeks. Equity markets and precious metals alike continue to churn sideways. I feel like there is going to be a huge move soon, possibly in both markets, but I have no idea which direction it will be. The S&P 500 still has not made a new 52 week high in over a year, but at the same time it continues to float just a hair below all-time highs. Gold and Silver saw an explosive move higher to start the year but they've essentially moved sideways since February. That's not a bad thing, by the way. They definitely needed to consolidate their gains, but it makes it really difficult for bloggers like me to tease out any useful insights!
Anyway, here are the charts prior to the Brexit madness. I've added support and resistance lines as an FYI. As of today, gold, silver, and the miners are all firmly within their up trends. What happens tomorrow is anybody's guess.
If you follow me on Twitter (@goldsqueeze1) then you may remember seeing this tweet from May 18. I've been watching the GSR closely since the start of the year because there's been a significant trend shift from bullish to bearish. (Note: a bullish GSR means that gold is outperforming silver and a bearish GSR means that silver is outperforming gold.) We saw the first signs of the sea change back in April which I wrote about at the time. As is usually the case, long-term trends don't die easily. Once the uptrend was definitively broken, the GSR fought all the way back to test the underside of its previous trend. See below:
Since the backtest, the gold:silver ratio has really started to break down once again. Momentum indicators are mess, especially the MACD which is sitting at 3 year lows. The behavior of the GSR suggests that it's heading lower, perhaps significantly so, over the next year or two. Again, this doesn't mean that gold will fall and silver will rise. It just means that silver will start outperforming gold on a relative basis. If you believe that gold and silver have now entered a new cyclical bull market (as I do), then both metals should rise over time with silver posting out-sized returns.
You may be wondering why I boldly claim that a "major move" is coming for silver. For that explanation, let me direct your attention to the following chart:
This is the same weekly chart of the GSR, but taken back a few more years. The similarities are eerie. First, there was multi-year uptrend from 2008-2010 with a nearly identical slope to the uptrend from 2012-2016. Second, its MACD in 2010, just like today, was stuck on the zero line, unable to push into positive territory. And lastly, there was a definitive break of trendline support right when silver started breaking higher. Here's the silver chart with my annotations. Again, it's hard to ignore the similarities.
Will history repeat? Will it rhyme? If it comes anywhere close to what we saw in 2010-2011, then you most certainly want some exposure to silver in the coming months.
This is a bit of a follow up post to my May 27 entry titled USD at a Critical Juncture; What it Means for Gold. My basic argument was that the USD and gold have been perfectly inversely correlated for the last couple of years so whatever direction the dollar decided to go, gold would do the exact opposite. After weeks of strong rallies, the USD was running headlong into massive overhead supply on the chart. Would the dollar continue its rally and power through? Or was the recent move just a relief rally in a larger downtrend? Well, we got our answer on Friday.
Here's a daily chart of UUP, the USD ETF. I'm using an ETF to show Friday's damage to the chart because it shows volume. First and foremost, that neat little uptrending channel for the month of May has been completely demolished. We got a couple clues that not all was right when UUP slipped below lower support on Wednesday and Thursday last week. That trendline break was more than confirmed Friday when the atrocious jobs report was released. In an instant, all chances of a June rate hike were erased and the dollar got crushed. Folks, this is a massive daily move for the world's reserve currency. Not only did it emphatically break below its recent uptrend, it also lost its 50 dma on significant volume. The RSI dropped decisively below its midline and the MACD just posted a bearish cross. Tying this all together, the short term trend just changed from bullish to bearish in a single day.
Looking at the weekly chart of the USD, you can see that it's been behaving in a very predictable manner since late 2015 when the downtrend started. Last week's reversal was precisely at the upper channel line. And what happened the last two times the dollar touched the upper channel line? The next move was to the lower channel line. Will the pattern repeat? If it does, then we're going to see some fireworks later this summer, and here's why. If the dollar continues to move towards the lower bound, then it's going to encounter major support at 92 along the way. The lower bound, however, will likely be below 92 by the time it gets there. So if 92 doesn't hold, and we get a weekly close below that lower blue line, things are going to get ugly for the USD. There is literally no support on the chart from 92 all the way down to 82, or an 11% air pocket. Remember what I said above, that a 1.6% drop for the world's reserve currency is a massive move? Well how about an 11% drop? Talk about chaos in the currency markets. And then of course I would expect an equal-but-opposite move in gold and silver - which is exactly what we saw on Friday.
Just to throw one caveat in, I would not be surprised to see the dollar rally in the very short term to try and close that gap from Friday. Look at the UUP chart above and you will see several large gap downs followed immediately by a brief rally. In every case, however, the rally fizzles and the dollar makes new lows. I think that's a real possibility here before a bigger move lower occurs.
Either way, Friday confirmed that the dollar is still firmly in a downtrend which should be friendly for gold, silver, and the miners.
I'll start off today's post with a weekly chart of the US Dollar. As you may know, the dollar has been rising for about the last month after testing, for the fourth time in a year, the 92-93 level. After yet another stick save, bulls have managed to push the dollar back to the underside of its 52 week moving average.
From the bear's point of view, I'm seeing seeing resistance at the 52 week moving average as well as a mountain of overhead supply, highlighted in the green box. From the bull's point of view, I'm seeing the momentum indicators, RSI and MACD, each about to make positive crosses, suggesting that bulls are slowly wresting control from the bears. The next few weeks will be telling as these open issues should be resolved.
Moving on to why this matters to gold investors, I present the following one-year chart of gold's performance relative to the US Dollar:
Practically mirror images of each other, right? It's pretty self-explanatory then why gold's fate rests in the hands of the dollar. If the 52 week moving average and overhead resistance proves too much for dollar bulls, then it will resume it's decline and gold should (emphasis on "should") rally. Conversely, if the bulls manage to push this thing higher, then gold will likely continue to fall.
Of course all of this will be influenced heavily by our illustrious central planners, I mean Fed, when they meet next month. Will they raise rates? Won't they? Is it already baked in? Blah, blah, blah.
The point here, folks, is to watch the dollar as it will be our tell on the future movements of precious metals.
I wanted to provide a chart update on gold and silver after yesterday's drubbing. But before I do that, I want to say that I really blew it with my "No Time to Get Cute" post from a couple weeks ago. I couldn't have top-ticked the market any better, huh?
OK, with that off my chest, let's move on to the daily chart of silver and see what it's telling us. As you can see above, I've drawn the Fibonacci Retracement levels, something I haven't really done in the past, mostly because gold and silver were in a bear market for so long! Now that we have an uptrend on our hands, we can look at Fib levels to evaluate where potential reversal points may occur during a correction. What's interesting is that the 38.2% retracement level is identical to Silver's 50 dma. And, as expected, silver bounced as soon as it hit this level. From a technical point of view, that's good to see, especially since it found support at its 50 dma back in late February and again in early April. Bulls will want to see this trend continue. Time will tell. Relative strength and MACD look sick at the moment and volume has been picking up recently on the big down days. So between dual support at $16.35 and weakening relative strength, we should see a good battle between buyers and sellers at current levels. At the end of the day, silver probably needed to cool off and reset its momentum indicators before the next move higher.
Gold has hung in there a little better than silver of late and it too has found support at its 50 dma. As of this writing, it's only down about 4% from its high back in early May so I'm not sure it can even be considered a correction at this point. Since I added the Fib levels to the Silver chart I thought I might as well add them to the gold chart too. Right now gold is well above the 38.2% level, but if it loses its 50 dma, then $1205 seems like a reasonable place for support. Like silver, its momentum indicators look weak and volume is picking up a bit on the downside moves.
So to wrap things up, gold and silver are in a precarious spot in the short-term. The next two weeks should provide clarity on whether both metals will continue to correct or if the next move will be higher now that they found support at their respective 50 dmas. On the longer-term charts, gold and silver still look very bullish - it's just a matter how long and deep the current correction turns out to be.