Gold and silver are starting off the New Year with a sell off, from what I am reading is that many professional traders expected this move but were looking for it between Xmas and new year when in fact at that time gold and silver rose and silver down right soared. This is an expected pull back from overbought levels and is extremely healthy to shake out the weak hands in the first few weeks of the year there is also re-jiggering by funds and some new shorts are seemingly being emboldened by the theory that the economy is actually improving.
Some of this is rebalancing associated to the changes in the commodity indices that but there is definitely a bit more to it than that. For whatever the reason, commodities are experiencing a general wave of selling today after the CCI went on to make yet another all time high yesterday. It’s not just gold and silver; crude oil, the grains, the meats, etc, all are seeing a wave of selling as the algorithms trip into the sell mode for the time being. We’ll just have to wait and see where the buyers surface in the sector. The “buy commodity” strategy will be in effect as long as the FOMC does not change monetary policy or scale back its QE2 program which based on today’s release of their minutes, suggests is not going to happen anytime soon see article previous post.
Silver needs to find enough buying support to climb back above the $30 level to cement that as a base and prepare it for a leg higher right now it has found support at the 20dma and this has been a great support area since 8/10, failure to hold it will cause a drop to next support at 28.45 to 28.65 area. I wouldn't like to see it any lower than that or I will have to sell out and reevaluate at that point.
Gold is sitting right on the 50 day moving average which has been a great area of support since 8/10 as well. In the bullish scenario it needs to hold this and climb back above $1400 to give the gold bulls some momentum for another push to $1420. I would not like to see gold get a close below $1380 as that would lead to a deeper setback towards $1365 area.
Momentum has been declining in gold which has been making a series of lower highs as the price has moved up this is disconcerting and something I am watching closely as I am sure are the hedge fund guys who are all about MoMo. From what I am reading the physical buyers of gold are still buying and they would prefer cheaper prices for entry. As we all know this is a small market and is far easier to manipulate than the SPX.
Yesterday I read that the US debt topped $14 Trillion which has got to make you wonder what people are talking about when they say the economy is improving.
I heard on CNBC, "that as long as there is demand for US Treasuries, it shows that the US can continue to run these deficits because it is obviously not hurting demand for our IOU’s".
But they don't tell you that most of the demand is coming from the Fed itself. Taking money from Peter to pay Paul. ARE THEY OUTTA THEIR MINDS. The current crop of financial talking heads seem to think that being a creditor is a curse while being a debtor is a blessing. I must have missed something back in COMMON SENSE SCHOOL (Since I didn't go to business school).Continue to short the bond market.
All the interviews heard and articles i read from people like Robin Griffiths, Jim Rogers, , Jim Rickard's and countless others remind me technicals win in the short run but fundamental realities always win in the long run – always. I have to keep in mind that the Fed has powerful allies (REALLY DEEP POCKETS) on its side – those who want to do business with it. There are lot of people who want the current policies to continue, why because they are making loads of money from them what else and these are the very people we have to contend with in the markets. To be successful as a long term investor (Know your opponent/enemy), I have to recognize the fact that they will bully and push markets wherever they want, they can push pain a lot longer than I can stand it.
I have to exercise price discipline, have exact entry and exit points, take profits on the way up and then add at support levels. Set stops below the new entries, be vigilant. This ain't 1980-2000 (reference to US equity bull market) and you just cant buy and hold, because even in this current 10 year Gold bull market that has seen gold go from 300 to 1400 hundred plus we have had long periods weeks where it looked like the end of the bull.
"All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved." -Sun Tzu
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