Precious Metals & Miners Start Bottoming Process

Precious metals and their related mining stocks continue to under perform the broad market. This year’s heavy volume breakdown below key support has many investors and trader’s spooked creating to a steady stream of selling pressure for gold and silver bullion and mining stocks.

While the technical charts are telling me prices are trying to bottom we must be willing to wait for price to provide low risk entry points before getting involved. Precious metals are like any other investment in respect to trading and investing in them. There are times when you should be long, times to be in cash and times to be short (benefit from falling prices). Right now and for the last twelve months when looking at precious metals cash has been king.

Since 2011 when gold and silver started to correct the best position has been to move to cash or to sell/write options until the next trend resumes. This is something I have been doing with my trading partner who focuses solely on Options Trading who closed three winning positions last week for big gains.

In 2008 we had a similar breakdown in price washing the market clean of investors who were long precious metals. If you compare the last two breakdowns they look very similar. If price holds true then we will see higher prices unfold at the end of 2013.

The key here is for the price to move and hold above the major resistance line. A breakout would trigger a rally in gold to $2600 – $3500 per ounce. With that being said gold and silver may be starting a bear market. Depending what the price does when the major resistance zone is touched, my outlook may change from bullish to bearish. Remember, no one can predict the market with 100% accuracy and each day, week and month that passes changes the outlook going forward.

The chart below is on I drew up on May 3rd. I was going to get a fresh chart and put my analysis on it but to be honest my price forecast/analysis has been spot on thus far and there is no need to update.

Gold Daily Technical Chart Showing Bottoming Process:

Major technical damage has been done to the chart of gold. Gold is trying to put in a bottom but still needs more time. I feel gold will make a new low in the coming month then bottom as drawn on the chart below.

Silver Daily Technical Chart Showing Bottoming Process:

Silver is in a similar as gold. The major difference between gold and silver is that silver dropped 10% early one morning this month which had very light volume. The fact that silver hit my $20 per ounce level and it was on light volume has me thinking silver has now bottomed.

But, silver may flounder at these prices or near the recent lows until its big sister (gold) puts in a bottom.



Gold Mining Stocks Monthly Investing Zone Chart:

Gold mining stocks broke down a couple months ago and continue to sell off on strong volume. If precious metals continue to move lower then mining stocks will continue their journey lower.

This updated chart which I originally drew in February warning of a breakdown below the green support trend lines would signal a collapse in stock prices, which is exactly what has/is taking place. While I do not try to pick bottoms (catch falling knives) I do like to watch for them so I am prepared for new positions when the time and chart turn bullish or provide a low risk probing entry point.

While we focus more on analysis, forecasts and ETF trading another one of my trading partners who focuses on Trading Stocks and 3x Leveraged ETF’s has been cleaning up with gold miners.

Gold, Silver and Mining Stocks Conclusion:

Precious metals continue to be trending down and while they look to be trying to bottom it is important to remember that some of the biggest percent moves take place in the last 10% of a trend. So we may be close to a bottom on the time scale but there could be sharply lower prices yet.

The time will come when another major signal forms and when it does we will be getting involved. The exciting this is that it could be just around the corner. So if you want to keep current and take advantage of the next major moves in the market be sure to join our newsletters.

From our trading partner Chris Vermeulen


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Gold Stocks: Its Time To Be BRAVE!

By David Banister, Chief Strategist the Market Trend Forecast.........

I used to half joke with some of my investing friends that the best time to buy stocks is during or right after a crash. Think 1987, 2000-2002, 2008-09, and now perhaps Gold Miners?? Well, before we get too far ahead of ourselves, lets examine evidence of a “Crash”: I like to use crowd behavioral, empirical, and technical evidence in combination.

1. In a recent money managers poll, virtually nobody was bullish on Gold or Gold stocks, and over 80% of those polled were bullish on the SP 500 and US stocks.

2. The percentage of Dumb Money traders (non-reportable traders) in the futures markets with short positions on Gold is at all time highs, they tend to be very long at the highs and very short at the lows.

3. The insider buying ratio of Gold Mining stocks to sellers is running over 10 to 1, the highest since October 2008 when Gold bottomed out at $685 per ounce from $1030 highs. Quoting Ted Dixon, CEO of Ink Research, “such a high level of buying interest among officers and directors within their own businesses in the resource sector has correctly foreshadowed a recovery in share prices in the past: That high point of nearly five years ago came about six weeks before the Venture market bottomed on Dec. 5, 2008…While the excitement that surrounded mining stocks as recently as two years ago has waned, experienced value investors recognize that such periods of investor neglect often give rise to the best deals” Source: Theglobeandmail.com

4. The ratio of the HUI Gold Bugs Index to the SP 500 is at multi year lows and in near crash mode on the charts. The RSI Index (Relative strength) on the weekly charts is at 10 year lows at -13.71, which is off the charts low!!

5. Most trading message boards I view at Stocktwits and others are universally bearish on Gold and Gold stocks.

6. Gold is in a wave B or Wave 5 down re-testing the 1322 lows which we have discussed here for weeks as very likely if 1470 was not taken out on the upside… this is a normal sentiment pattern and re-test.

7. Gold has been in a 21 Fibonacci month correction pattern off a 34 Fibonacci month rally from 686-1923. In August of 2011 I penned articles from 1805 right up to 1900 warning of a massive wave 3 top forming. Everyone was bullish, now it’s the complete opposite.

8. Currency debasement continues around the world with negative real interest rates. This is bullish for Gold once this correction has run its course.

9. Hulbert Digest Gold Sentiment index is at an all time low (gold newsletters at -35 sentiment readings!!)

10. Gold -Silver put to call ratios are at all time highs

I could go on and on with headlines and such, but you get the idea. This is the same type of sentiment I wrote about on the stock market on Feb 25th 2009, here is that article... and nobody on the planet was bullish.

Below is a chart showing the Bullish % index for Gold Miners, as you can see the last time we were at 0% was late 2008 when Gold had bottomed out and insiders were also buying like crazy like now:



The GLD ETF chart also shows a likely re-test or slightly lower of the 1322 futures lows of April, when Insider buying hit 10 year record levels:



Obviously Gold could end up going a lot lower than we think, and the Gold Mining stocks could sink further yet. But for those with a 3-6 month horizon, we expect the 21-24 month Gold correction to complete by no later than October 2013. During the next several months the opportunities to buy some miners on the cheap will potentially make some investors a lot of money in the coming few years.


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Weekly Precious Metals Recap with Mike Seery GLD SLV

The precious metals fell out of bed this week especially gold which finished down for the 6th consecutive day trading far below its 100 day moving average all due to the fact that the U.S dollar hit another contract high today trading up nearly 70 points again today as investors are fleeing out of gold and taking that money and placing it in the U.S dollar and the S&P 500 which is hitting another record high again today.

Gold futures for the June contract settled last Friday at 1,436 finishing down about $70 for the week trading at 1,362 hitting a 2 year low with a possible retest of 1,321 which was hit on April 16th of this year. Investors see no reason to own gold at this point in time when you can buy the stock market which seems to go up every single day, however the real story is large hedge funds including George Soros which have been liquidating their gold positions in recent weeks and that is also putting pressure as investors are taking money out of the ETF gold market.

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Silver futures for the July contract were down another $.38 at 22.36 an ounce trading below its 20 day moving average and is trading $6 below its 100 day moving average which tells you this trend is very strong to the downside and if gold continues to go down its going to be difficult for silver to rally. Silver looks bearish here in short term after settling last Friday at 23.65 finishing down about $1.00 for the week also hitting 2 ½ year lows. The next major support in silver which was also hit on April 16th of this year is at $21 and if that level is broken you could possibly see silver heading down to the 18/$19 level especially if gold continues to fall out of bed.

Copper futures were a different story finishing up 300 points today in the July contract after settling last week at 3.35 a pound down slightly for the week, however its following the S&P and the housing market more than silver and gold at this point as investors see no reason to own gold because it actually has no real commercial usage but copper is used in housing and many other products with improving economies around the world copper demand should increase but at this point in time I would avoid copper because it does not have a trend while silver and gold have a trend to the downside so if you’re looking to get short this market I recommend selling silver and gold in place a stop above the 10 day high therefore minimizing your risk in case the trend does change.

Trend: Lower  – Chart structure solid in gold and silver 


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Is $1300 Gold Right Around the Corner?

The price of gold plummeted this week with losses of over 5% as investors jumped out of this once precious metal and into U.S. and Japanese stocks. If gold closes where it is currently trading at $1,363 on the spot market, it will represent a new low weekly close for the year. Such a close would indicate further downside pressure for this metal. Technically, we cannot rule out a test of the $1300 level.

If June gold extends this month's decline, April's low crossing at 1321.50 is the next downside target. Closes above the 20 day moving average crossing at 1440.00 are needed to confirm that a short term top has been posted.

Going into Fridays session first resistance was the 20 day moving average crossing at 1440.00. Second resistance is May's high crossing at 1487.20. First support is Thursday's low crossing at 1368.00. Second support is April's low crossing at 1321.50.

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How to Spot & Time Stock Market Tops

Since the middle of April everyone and including their grandmother seems to have been building a short position in the equities market and we know picking tops or bottoms fighting the major underlying trend is risky business but most individuals cannot resist.

The rush one gets trying to pick a major top or bottom is flat out exciting and that is what makes it so darn addicting and irresistible. If you have ever nailed a market top or bottom then you know just how much money can be made. That one big win naturally draws you back to keep doing it much like how a casino works. The chemicals released in the brain during these extremely exciting times are strong enough that even the most focused traders fall victim to breaking rules and trying these type of bets/trades.

So if are going to try to pick a top you better be sure the charts and odds are leaning in your favor as much as possible before starting to build a position.

Below are a few charts with my analysis and thoughts overlaid showing you some of the things I look at when thinking about a counter trend trade like picking a top within a bull market.

Utility Stocks vs SP500 Index Daily Performance Chart:

The SPY and XLU performance chart below clearly shows how the majority of traders move out of the slow moving defensive stocks (utilities – XLU) and starts to put their money into more risky stocks. This helps boost the broad market. I see the same thing in bonds and gold this month which is a sign that a market top is nearing.

That being said when a market tops it is generally a process which takes time. Most traders think tops area one day event but most of the times it takes weeks to unfold as the upward momentum slows and the big smart money players slowly hand off their long positions to the greedy emotion drove traders.

Look at the chart below and notice the first red box during September and October. As you can see it took nearly 6 weeks for that top to form before actually falling off. That same thing could easily happen again this time, though I do feel it will be more violent this time around.



SPY ETF Trading Chart Shows Instability and Resistance:

Using simple trend line analysis we see the equities market is trading at resistance and sideways or lower prices are more likely in the next week or two.



Stocks Trading Above 150 Day Moving Average Chart:

This chart because it’s based on a very long term moving average (150sma) is a slow mover and does not work well for timing traded. But with that said it does clearly warn you when stocks are getting a little overpriced and sellers could start at any time.

General rule is not to invest money on the long side when this chart is above the 75% level. Rather wait for a pullback below it.



Stocks Trading Above 20 Day Moving Average Chart:

This chart is based on the 20 day moving average which moves quickly. Because it reacts quicker to recent price action it can be a great help in timing an entry point for a market top or bottom. It does not pin point the day/top it does give you a one or two week window of when price should start to correct.



How to Spot and Time Stock Market Tops Conclusion:

As we all know or will soon find out, trading is one of the toughest businesses or and one of the most expensive hobbies that one will try to master. Hence the 95-99% failure rate of individuals who try to understand how the market functions, position management, how to control their own emotions and to create/follow a winning strategy.

With over 8000 public traded stocks, exchange traded funds, options, bonds, commodities, futures, forex, currencies etc… to pick from its easy to get overwhelmed and just start doing more or less random trades without a proven, documented rule based strategy. This type of trading results in frustration, loss of money and the eventual closure of a trading account. During this process most individuals will also lose friends, family and in many cased self-confidence.

So the next time you think about betting against the trend to pick a top or a bottom you better make darn sure you have waited well beyond the first day you feel like the market is topping out. Stocks trading over the 150 and 20 day moving averages should be in the upper reversal zones and money should be flowing out of bonds and other safe haven/defensive stocks to fuel the last rally/surge higher in the broad market.

Also I would like to note that I do follow the index futures and volume very closely on both the intraday and daily charts. This is where the big money does a lot of trading. Knowing when futures contracts are being sold or bought with heavy volume is very important data in helping time tops and bottoms more accurately. And the more experience you have in trading also plays a large part in your success in trading tops and bottoms.

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Gold still has downward pressure to look forward to.....right?

Outside of a late week Currencies surge, there were very few fireworks to report in last week’s business. This week however, may be a different story.

Thursday and Friday of last week provided some decent movement in the Dollar and Euro, but it appeared things began in the Japanese Yen, then spilled over. Throughout the last several weeks, there have been multiple attempts to push the Yen to new lows for the year, but it always seemed that somehow the plan was foiled. After the selling pressure triggered stop-orders below support, all other Currencies had to react. There was a firm rebound in the US Dollar and an inverse move in the Euro Currency. Surprisingly, the swings in the Currencies had very little impact on outside markets. In fact, most other sectors of the markets were rather stale and choppy. A Treasury Bond auction had some impact on the 30 year bonds and 10 year Notes, but there was little else in the week that provided any excitement. The same goes for the Gold Futures. Normally, traders would use the direction the Dollar or the Stock Indexes as a guide for what to expect in the Metals, but those former relationships are no longer in play on a day to day basis.

This week, there are a few decent reports in the US and Europe that should provide some decent movement. In the United States, Retail Sales, CPI, PPI, Empire State Manufacturing, and Philly Fed reports will be worth watching. In Europe, traders will be following economic data out of Germany along with European GDP figures to provide sustained market direction in at least the Currency sector, but I am unsure whether or not it will carry over into the Metals.

The Weekly Chart of June Gold shows the Futures prices consolidating around $1425. I still believe that Gold Futures may have some further pressure ahead while the US stock indexes remain stable and strong. One thing that will be interesting to watch would be if the Gold Futures ever return to being a “flight to safety” vehicle if the stock market corrects. I will keep a tight watch on that former relationship as the stock market continues its questionable rally into uncharted territory.




Posted courtesy of our trading partner Adam Hewsion at INO.Com


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Correction near but Bull Market has LONG waves to Go!

Are you using Elliot Wave theory in your trading? Today David Banister of Market Trend Forecast is laying out the Elliot formations in detail. Do yourself a favor and take a few minutes to make sure you are looking at this market through his eyes. Can any of us call the pull back exactly and reliably? No, of course not. But we should all be taking this into consideration.

The SP 500 has been on a tear as we all know especially since the SP 500 bottomed at 1343 several months ago. My work centers around forecasting using Elliott Wave Theory along with other technical indicators. This helps with projecting the short, intermediate, and longer term paths in the stock market and also precious metals. This larger picture Bull Cycle started in March of 2009 interestingly after an exact 61.8% Fibonacci retracement of the entire move from 1974 to 2000 lows to highs. At 666, we had completed a major cycle bottom with about 9 years of movement to retrace 26 years of overall bull cycle. That was a major set of 3 waves (Corrective patterns in Elliott Wave Theory) from the 2000 highs to 2002-3 lows, then 2007 highs to 2009 lows. Once that completed its work, we were free to have a huge new bull market cycle off extreme sentiment and generational lows.

It’s important to understand where we were at in March of 2009 just as much as it is today with the market at all time highs. Is this the time to bail out of stocks or do we have a lot more upside yet to go? Our short answer is there is quite a bit more upside left in the indexes, but there are multiple patterns that must take place along the way. We will try to lay those out for you here as best we can.

Elliott Wave theory in general calls for 5 full wave cycles in a Bull pattern, with 1, 3, and 5 bullish and 2 and 4 corrective. We are currently in what is often the most bullish of all the patterns, a 3rd of a 3rd of a 3rd. In English, we are in Primary wave 3 of this bull cycle which will be 5 total primary waves. We are in Major wave 3 of that Primary 3, and in the Intermediate wave 3 of Major wave 3. That is why the market continues its relentless climb. This primary wave 3 still has lots of work to do because Major wave 3 still has a 4th wave down and a 5th wave up to finish, then we need a major 4, then a major 5.

That will complete primary wave 3. This will then be followed by a Primary wave 4 cycle correction that probably lasts several months, and then a Primary wave 5 cycle to finish this part of the bull market from March 2009 generational lows… and all of that work is going to take time. Once that entire process from March 2009 has completed, then we should see a much deeper and uglier correction pattern, but we think that is at least 12 months or more away.

What everyone wants to know then is where are we at right now and what are some likely areas for pivot highs and lows ahead? We should complete this 3rd of a 3rd of a 3rd here shortly and have a wave 4 correction working off what will likely be almost 300 points of upside from SP 500 1343. We could see as much as 90-120 points of correction in the major index once this wave completes. Loosely we see 1528-1534 as a possible top and if not then maybe another 30 or so points above that maximum into early June. This should then trigger that 90-120 point correction, and then be followed by yet another run to highs.

We could go on but then we will lose our readers here for sure, and as it is… this is all projections and postulations, so it’s best to keep the forecast to the next many weeks or few months. Below is a chart we have put together showing the structure of Major wave 3 of Primary 3 since the 1343 lows. Once that Major wave 3 tops out (see the blue 3) then we will have Major 4, then Major 5 to complete Primary wave 3 since the 1074 SP 500 lows. Whew!



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How to Trade Gold, Silver & Precious Metal Miners....It's not that Difficult!

How to trade Gold and other precious metals related investments is not that complex. But you must be willing to wait for price to provide low risk entry points before getting involved. Precious metals are like any other investment in respect to trading and investing in them. There are times when you should be long, times to be in cash and times to be short (benefit from falling prices).

Since 2011 when gold and silver started another major bull market correction the best position has been to move to cash or sell/write options against your positions to protect your investment until the next trend resumes.

If you take a look at the chart below of gold you will notice that in 2008 we had a similar breakdown in price which purged the market of investors who where long gold. And if you compare the last two breakdowns they look very much the same. If price holds true then much higher prices are likely to unfold at the end of 2013.

The key here is for the price to move and hold above the major resistance line. If it can do that then we are looking at a possible breakout to $2600 – $3500 gold. With that being said gold and silver may just be starting a bear market. Depending what the price of gold does when my resistance level is touched, my outlook may change from bullish to bearish.

Also with last weeks economic numbers getting better in the USA I do have concerns that gold may be starting a bear market but we will not know for several more months yet.



How to Trade Gold Daily Technical Chart:

Major technical damage has been done to the chart of gold. This can be seen as bullish or bearish price action but until price and volume pattern unfolds which puts the odds on the bullish or bearish side I remain neutral.



How to Trade Silver Daily Technical Chart:

Silver is in the same position as gold. The question is if this is a shakeout or breakdown......



How to Trade Gold Mining Stocks Monthly Chart:

Gold mining stocks broke down a couple months ago and continue to sell off. If precious metals continue to move lower then mining stocks will continue their journey down. The chart below made in February and it has in most part played out as expected. While I do not try to pick bottoms (catch falling knives) I do like to watch for them so I am prepared for a new position when the time and chart become bullish.

How to Trade Gold, Silver and Mining Stocks Conclusion:

In short, precious metals continue to be in a down trend. While they look to be trying to bottom it is important to remember that the largest moves take place in the last 10% of a trend. So we may be close to a bottom but there could be sharply lower prices yet.

The time will come when another major buy or short signal forms and when it does we will be getting involved. The exciting part is that it could be just around the corner.

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