Gold's Little Brother Is Talking
Aug 21, 2012
- Early this morning, gold may have achieved an upside breakout from a key symmetrical triangle formation. Please click here now.
- This chart provides an overview of the situation; there is a symmetrical triangle (highlighted in black) sitting within a giant drifting rectangle (highlighted in green).
- To view the possible breakout, please click here now. FOMC minutes are scheduled to be released on Wednesday. While that report could create some significant price volatility, there’s no question that this morning’s technical breakout is a very bullish event.
- The price of oil is rising in a near-perfect uptrend. Please click here now. Short-term traders can add to positions around the green horizontal lines on the chart.
- The next upside resistance band sits at about $103. I’ll reduce my position by 5-10% in that price zone.
- Higher prices for food and energy put a lot of upside pressure on the gold price. In the biggest picture, natural gas has stopped falling and may be forming a significant bottom. Oil is almost $100 a barrel, and last night soybeans surged to over $17 a bushel.
- All of this price action is being factored into the gold chart, and an upside “price geyser” is now a realistic possibility.
- Please click here now. Silver is in a trading range between about $30 and $34. This morning marks the 2nd day in a row that it is above important highs near $28.50.
- Silver seems set to perform well against the dollar, but it also appears to be ready to make gold look like a bit of a slug. Unlike most silver investors, I have no interest in selling silver for “dollars of profit”.
- I view silver primarily as a currency. Gold is the ultimate currency, and I think silver is best viewed as “gold’s little brother”. I sold silver for gold in the first quarter of 2011, and now it’s time for me to buy silver with gold. Here’s why:
- Please click here now. This is the daily ratio chart of silver versus gold. I’ve talked in the past about the importance of silver investors taking pride in their mighty metal.
- Most investors use “gold:silver” ratio charts when analysing silver. I like to always put the item I’m accumulating in an offensive posture on a chart, rather than a defensive one.
- Silver staged a “breakout” against gold from the red down channel, simply by trading sideways. From there, it formed a symmetrical triangle, and yesterday it staged an absolutely majestic breakout to the upside.
- The bottom line for silver is that gold’s little brother is talking. The question is, are you listening?
- Having said that, most amateur investors often let greed get the better of them. Just because one asset is probably set to outperform another doesn’t mean that you should invest so much risk capital into it that you become emotionally broken, if things don’t go your way.
- It’s a long way to Tipperary, and the road to the highest prices targeted by enthusiastic silver investors will likely feature some very ugly surprises.
- All I do in the market is ruled by the motto, “When price declines, you should be emotionally uncomfortable, not screaming in pain. Trade smaller than you know is rational. The greedy investor with grand upside price targets will never beat the professional investor, especially when it is time to go to sleep at night. Trade small enough so that you are never overwhelmed by greed and fear.”
- While I consider the August 7th-October 31st timeframe to be “crash season”, it’s highly unlikely that the Dow will crash right before the US elections.
- I don’t know anyone who isn’t nervous about the market right now, other than myself. I always sell all Dow stocks at the beginning of each crash season, but that doesn’t mean I’m bearish.
- Please click here now. You are looking at the monthly chart for the Dow Transports, and what is arguably one of the most bullish price patterns in the history of markets.
- There appears to be a truly gargantuan bull continuation reverse head & shoulders pattern in play. It has been forming for five years. I think that most stock market investors are probably underestimating the amount of quantitative easing being planned by the Fed.
- The size and shape of that pattern indicate that the Transports could rise to about 10,000. Could the Dow Industrials double in price, from here? I think the Dow can double in price, and will do so, because another round of quantitative easing would make institutional money managers begin to view the dollar as the “risk-on” trade, and the Dow as more of a currency and a “risk-off” trade.
- What does that mean for your gold stocks? It probably means they are going to rise quite dramatically. Please click here now. The highs at point B were created by GDX banging into the lows at point A.
- I plan to sell 5-7% of my position in the price area around point B, but it should be noted that an upside breakout has already occurred in a number of individual issues. GDX could quickly burst over $48.72 in decisive fashion, and then begin a sort of “runaway” move to the upside!
Aug 21, 2012
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