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Swinging For The Fences

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Published : October 11th, 2011
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Category : Market Analysis





It was a wild week to be sure and we’ve hit a tentative bottom in US equity markets with the S&P printing a double bottom pattern as I’d hoped would occur.

We’ve been avoiding trading in the markets since the early part of August when we took some large short positions and made a killing in only a few days.  Then we were market watchers as there were no great chances to trade in my opinion.

We saw another great chance last week, Thursday to be exact and we went heavily short once again.  We took profits as markets and our stocks positions tanked and then we covered all late on Tuesday as markets appeared to have bottomed and so far they have.

We all but doubled the swing trading account in those 4 trading days which is great, but as many of you well know, mining stocks have taken some huge hits and we were not immune to it.

In hindsight perhaps we should have sold them all early in August when we saw a larger move lower on the horizon for the markets but alas, we didn’t.  Many of the stocks are smaller anyhow and the last thing I wanted to do was amplify the moves lower.

It’s not easy owning junior mining companies and even harder owning the odd exploration company.  When you decide they are a company you believe in you have to take the long haul approach.

The mania is coming for mining stocks someday, I think.

It's been a long wait but until the mining stocks mania we’re having fun swing trading when the opportunities appear and making some good coin while we’re at it!
Let’s get right to the charts.

Metals review

Gold stabilized somewhat this past week and rose 0.98% but the moves were still sharp and relatively large for gold.  Last week I said I thought the low was in but after this weeks action that thought is now highly contentious as it’s building a sloppy bear flag pattern here which often turns the price lower.

That being said the pattern could also be the makings of a slight U pattern which would be bullish.

I really have no idea at this time other than some type of base is being built and once gold moves one way out of it then that should be the new trend for a week at least.
What I do know is that gold is much cheaper today than a few weeks ago.  It’s on sale!

The good news is that gold has done nothing than trade the opposite way than it should during this bull market.  We’ve seen a variety of patterns, from this bear flag to head and shoulders patterns, show a breakout in the right direction only to quickly reverse the other way catching traders off guard.

That’s been the major reason that I’ve avoided trading gold and silver.  They just don’t do what they are suppose to.  And in gold’s case, it just moves too slowly to trade in my opinion.

Silver rose a solid 4.17% for the week and looks much better than gold as this base that is slanting lower is termed a bull flag pattern and often leads to higher prices. 
While we all know how silver trades wrongly to how it is supposed to I’m hoping that is not the case this go round.  Actually, I’d really like to be able to buy silver at $20 an ounce, if only for a couple hours.

The SLV ETF is showing slower volume as this base forms.  From all I’m hearing and seeing the real accumulation is taking place in the physical market as sales records are falling almost daily at brokers and mints.

With such accumulation you’d think the price would be moving higher but it’s not.  Its a paper price, not a physical price as prices are determined to a large degree in the futures pits and no physical silver ever actually changes hands.  It’s not what the news says the price is that is important, it’s the actual price you can get or sell your ounces for.

The premiums will be huge as we move forward and that is the best reason for owning the actual physical metals.

Platinum dropped only 1.13% for the week but it was a volatile week with a $100 range or so.  The volume here has absolutely dried up but the PPLT ETF saw pretty good volume on the low which is more indicative of a bottom.

I wouldn’t be betting either way with platinum right now, but if you twist my arm I’d have to think a low is now in.

Palladium fell 3.89% on the week and it’s lucky to only have fallen that much as the low of the week was much lower.  As with platinum, palladium is probing for a low here but still far too volatile to consider for anything other than a quick trade or perhaps some accumulation of the physical bullion.

The PALL ETF saw great high volume on the mid week lows which indicates the low is now in.  We shall see.

Fundamental Review         

We saw some downgrades of countries debt ratings this past week again with Italy and Spain feeling the wrath.  Several banks have also been downgraded and many large banks are seeing their stocks under sever pressure which really tells the tale.

The real problem is the banks though as they have the most exposure to these countries through their bonds or treasuries.  I’ve said it many times before and I’ll say it again.  Any bailout of a country is actually a bailout of the banking system and large banks as they won’t be allowed to fail en mass as they should be.

Sure there will always be some banks who will be allowed to go under to be made an example of but those will be relatively small banks and most with any clout will always be bailed out as we’re seeing now.

Speaking of banks failing we continue to see them trickle in.  We saw only two failed banks in the U.S. this past week.

Silver eagle sales are headed for another record year and the sale on now is doing nothing to subside demand, in fact it’s increased it dramatically as September saw the second highest sales numbers for silver eagles ever!

The best month ever was January of this year and five of the top ten sales months ever also came in 2011.  It seems the word is getting out that silver represents an easy, safe and sure winner of an investment.

China’s insatiable appetite for precious metals will somewhat be quenched as up to 2,000 gold ATM’s are to be installed in the country.  As the late J.P. Morgan said, “gold is money and nothing else”.  It seems the Chinese understand this.

Venezuela is moving forward with their plans to repatriate their gold and they expect the first shipment in mid-November.  They’re planning to bring back $11 billion in gold bullion.  I’m very curious to see how this plays out.

I get lots of questions on how to store your precious metals and my answer is usually in a few different spots.  Here is an article that goes into a little more depth on the subject.  Burying it safely is definitely one route that should be considered and as always, but especially in that route, keep it secret and only tell perhaps one other person whom you trust implicitly where the metals are stored.

If you’re in Canada please to enjoy this long Thanksgiving weekend and stuff your face with turkey.  If you’re in the U.S., happy Columbus Day.  And if you’re elsewhere I still wish you a great week ahead.

Until next week take care and thank you for reading. 

Warren Bevan


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Data and Statistics for these countries : Turkey | Venezuela | All
Gold and Silver Prices for these countries : Turkey | Venezuela | All
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