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Gold and Silver on the Verge of a Big Move

The past few months have been tough for those holding precious metals stocks, PM futures contracts or physical bullion. With silver is trading down 41%, precious metals stocks down 30% and gold 15%. It has people scratching their head.

The question everyone keeps asking is when can I buy gold and silver?

Unfortunately that is not a simple answer. With what is unfolding across the pond and the bullish outlook for the US Dollar index the next move is a coin toss. That being said, I do feel a large move brewing in the market place so I am preparing for fireworks in the first quarter of 2012.

If you step back and look at the weekly trend charts of the dollar index and the SP500 index you will see the strength in the dollar along with a possible top in equities forming. What these charts are telling is that in the next 3 months we should know if stocks and commodities are going to start another multi-month rally or roll over and start a bear market sell off.

With the holiday season nearing, hedge fund managers sitting on the sidelines just waiting for their year end performance bonuses, I cannot see any large sell off start until January. Sell offs in the market require strong volume and the second half of December is not a time of heavy trading volume.

This leaves us with a light volume holiday season, major issues overseas and no big money players willing to cause waves.

So let’s take a quick look at the charts as to where the line in the sand it for the dollar index, gold and silver.

Dollar Index Daily Chart

This week we have seen a strong shift of money out of risk on assets (Bonds) and into risk off (Stocks). This shift is happening before the dollar has broken down indicating the dollar may be topping and could be an early warning of higher stocks prices going into year end. Also note that light volume market conditions also favour higher prices.

 

Gold Price Daily Chart

Gold could still head lower but at this point it is holding a key support level. If we see the dollar breakdown below its green support trendline then I expect gold to have a firm bounce to the $1675 – $1700.

 

Silver Price Daily Chart

Silver continues to hold a key support level. If the dollar breaks down the silver should bounce to the $31.50 – $32 area. But if the dollar continues to rally then silver and gold may drop sharply.

 

Mid-Week Trend Conclusion:

In short, I think the best thing to do is enjoy the holiday season with family and friends. Trading right now is not that great and with the market giving mixed signals. I am keeping my eyes on the market in case it flashes a low risk setup and I will keep you informed if we get one.

I am still bearish on gold and silver longer term but the next week or so its likely we see higher prices.

Be aware that Monday is a holiday and once January arrives the market could go crazy again. If you want all my swing trades that I personally do be sure to join my alert service www.TheGoldAndOilGuy.com

Happy Holidays to you and your loved ones!

Cheers,
Chris Vermeulen

SP500 Pierces, Bonds Rally, Dollars Fall Out the Window

Sept 23, 2010
It’s been a wild ride the past few days. Now, thanks to comments from Obama and FOMC, it seems like everyone is waiting to see what the market will do from this pivotal point onward.

Since the market topped in April and has since been trading sideways in this rather large range, everyone has small positions at work but waiting for a decisive move before fully committing to one side. There could be a few opportunities in the coming days using bonds, the dollar and the SP500 if all goes well which I explain below.

Lets take a look at the charts…

SP500 – SPY ETF, Daily Chart

There has been a lot of talk about a sharp rally if the SP500 could break the 1130 level or the neckline everyone is talking about. Well this week Obama was on TV and the market rallied into that, then again after. I don’t really thing investors or traders were buying things up as he said the same boring stuff he always says without anything new. I feel there could have been another force at work, which we can discus another time .

Anyways, the market pierced those resistance levels and I’m sure a ton of traders have switch their view on the market from bearish to bullish. While I prefer to trade with the trend I can’t help but feel this market is still range bound, which is why I am still bearish at these shakeout levels. The SP500 did break resistance BUT the following candle did not close above the breakout candles high to confirm the move.

That said, the market is now trading back down at support and the next couple of days I’m sure will shed some like on the direction.

20 Year Bonds – TLT Fund, Daily Chart

We have seen the bond price pullback in a bull flag formation. It touched support before bouncing to break short term resistance as it looks to have started another rally. The chart below overlays both the candlesticks of the bond price and the SP500 which is the white line. You will notice they have an inverse relationship. If bond prices continue to rally then lower SP500 could start to rollover.

US Dollar – UUP Fund, Daily Chart

The dollar has fallen sharply the past 10 trading session and it looks to be oversold for a couple reasons. The past couple days the price has dropped straight down and gapped lower. This recent drop has reached a gap window which will act as support and could provide a tradable bounce in the coming days depending how things unfold.

Mid-Week Market Analysis Conclusion:

In short, the SP500 is flirting with resistance and has yet to confirm the breakout. Bond prices look to be headed higher which will makes me think equities could start to sell off any day now… It’s also important to note that the big banks GS and JPM shares have been under pressure and they tend to lead the broad market. Another point to add is the fact the oil has not rallied even though the dollar dropped like a rock? What happens if the dollar bounces? Could oil finally start its next leg down?

Gold and silver continue their steady grind up. The price action reminds me of the 2009 Nov –Dec move. Once that train de-rails its going to have a sharp correction…

You can get my ETF and Commodity Trading Signals if you become a subscriber of my newsletter. These free reports will continue to come on a weekly basis; however, instead of covering 3-5 investments at a time, I’ll be covering only 1. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis as it allows me toe get more into across to you quicker and is more educational, and I’ll be covering more of the market to include currencies, bonds and sectors. Before everyone’s emails were answered personally, but now my focus is on building a strong group of traders and they will receive direct personal responses regarding trade ideas and analysis going forward.

Let the volatility and volume return!

Chris Vermeulen
www.TheGoldAndOilGuy.com

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