lookitthat, a PM bounce

davefairtex
By davefairtex on Fri, Jun 28, 2013 - 1:59pm

Today for the first time in quite a while I'm seeing buyers.  Not simply bots that are content to run stops, but actual buyers that are actually buying breakouts.  They aren't going nuts, but there is steady pressure all day today - upward pressure.  And whats even better, the gold/silver ratio has finally (seemingly) topped out.  Currently silver is up +5.19% and gold +1.2%, with silver acting strong all day, even in the face of a dollar making new highs.

It could be end-of-quarter fun.  Traders who have made bucketloads of money on gold and silver shorts could be closing them out.  Yesterday, gold & silver mining stocks rallied in the face of yet another gold hammering, a very curious event.  Perhaps that was the "tell".

Mining stocks have absolutely gone nuts.  This behavior is for sure short covering.  People don't just wake up one day and decide Goldcorp or Newmont is suddenly worth 7% more than it was yesterday.

The primary question, however, is what happens the following week.  Often these short-covering rallies are one-to-two day wonders, who end up giving back their gains relatively rapidly, only to find the price back at the lows one week from now.  These sort of bounces have happened all during the big move down this year.  Follow-through is critical.

Still, the gold/silver ratio move has me positive.  Its something I've been waiting for.  For PM to rise, usually, silver must lead gold.  And silver was strong all day long.

Some price levels to watch:

Gold 1325 - that's the 20 day EMA, which gold has been unable to break above all during the move down.  That's also resistance, the most recent strong support level that got busted on the way down.  If gold can get above that, things could get exciting.  Gold may also run into some trouble on the way at 1275. which was minor support.  If it can't get above that - we probably re-test 1180 again, because a failure to move through 1275 will get the shorts all excited and they'll all pile in again.

Silver 20.81 - that's the current value of the 20 EMA; like gold, it acted as a "cap" all the way down this year.  Silver's first step towards recovery (besides admitting it has a problem) is getting above that 20 EMA.

All these "levels" are about people, fear and greed.  For instance, at 1325 there are a bunch of people who bought gold at 1325, and have seen it drop all the way to 1179, and all during this time they have vowed to "get the hell out" as soon as they can get even again.  Those people represent "selling pressure" - trapped longs wanting out, and their positions have to be absorbed by new longs willing to buy them out at that price point.  Often it takes a few tries to get through strong resistance.  Price bounces off, retreats, and then tries again.

3 Comments

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 507
JPM Status

Dave,

Is JPM still long? I heard they switched from being massively short to net long a few weeks back. I know they are considered "smart money." It seems odd that they bought and the price continued its slide.

Grover

SPAM_whipperbubba's picture
SPAM_whipperbubba
Status: Member (Offline)
Joined: Jun 26 2013
Posts: 6
Gold/Silver

It is hard for anyone to pick tops and bottoms even the professionals.  If you are buying gold or silver eagles you can get them at discounted prices through www.spoteagles.com.

SilverDad's picture
SilverDad
Status: Member (Offline)
Joined: Jul 10 2013
Posts: 9
Futures

Is anyone here trading futures?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments