Thursday, September 17, 2009

The Long Side Of The Boat Looks Full

Gold AND Silver are ripe for a reaction lower here. The charts, COT numbers, and multiple market commentary suggests so. Why hasn't the price of the Precious Metals dropped then? Because so many sources suggest it should...

Huh? What? Yep. As traders enter the market on the short side, they go to battle with traders looking to buy any little dip in the market now that Gold is above $1000. If there are more buyers than sellers, weak shorts must cover their bets, and in effect, aid the Bull camp in moving prices higher. This is precisely why prices have crept higher all week even though "we all know" prices should be reacting lower. This is a trap the Bulls must fight to resist being snared in. How many times have you bought that "last dip" expecting prices to continue higher, only to see them crash?

Why do they suddenly crash? Because you finally bought in long. No, not really. Prices "crash" because they never should have gotten this high, and because the markets run out of dip buyers at such a high level. This is where the smart money is selling to the dumb money. The dumb money being those "late to the party".

Don't get me wrong. Gold AND Silver are going HIGHER...much, much higher. But to really move higher, they need to move lower first.

The Silver chart posted above speaks for itself. Key support for Gold is at 1007. Should Gold fall below 1007, a move to retest of the breakout from the 18 month consolidation triangle would seem likely. A reaction back to 970 would be in play should this happen with support at 988 in between.

The chart of the DOW posted above suggests that the six month [bear market] rally may be mercifully near it's end. Should this be true, it may complicate things in the Precious Metals camp. A severe reaction in equities has the potential to drag the Precious Metals down in the beginning. If this occurs, the support areas mentioned above may prove inadequate and the metals could get beat up pretty good before they right themselves with a safe haven bid in the ensuing panic that the recent recovery hopes promoted by western governments are just that...hopes. Should this scenario in equities play out, look for support in the Precious Metals first at their respective 200 day moving averages.

In conclusion, this is a good time to keep some powder dry for a fantastic buying opportunity in the days, and possibly weeks, ahead.

Silver Update
By: Roland Watson, The Silver Analyst
Silver has put in a real price push in the last few months having run from a low of $12.45 on the 13th July to a current best high of $17.66. Now the talk is of $25 or higher silver and $1500 gold. Buyers are coming out in force afraid to miss out on a big move and are piling into bullion, stocks and ETFs. Meanwhile the smart money is ready to take their profits and move on. Not because silver must be suppressed at all costs but rather because profits are the lifeblood of any business be it the sole trader riding the short term moves or the investment bank whose share price depends on consistently profitable buying and selling.

The chart below helps sum up the situation. assured this is not a time to buy in bulk unless you are disciplined with your stops and do not allow them to be unactionable at any time. Am I saying the silver bull is now dead and buried? Not at all! ... Prepare for greater heights but don’t get carried away at these critical junctures.

Warning: Gold Breakout...Next Week
By Warren Bevan
The message I want to portray today is the fact that tomorrow is quadruple witching day where contracts for stock index futures, stock index options, stock options and single stock futures expire.

Too many times in the past bullish investors have been sucked in at the last minute and bought bullish contracts only to lose their shirt over the next few days as the price reverses quickly and takes their contracts out of the money allowing the contract sellers to pocket the full premium.

Yesterday, options on GLD were bought heavily, many of which are already out of the money. Do not get fooled into buying a short term options this week. From the open interest on GLD options I am guessing that we will see a quick move below $980 where 21,043 positions are open, and possibly even to $960 where 26,819 contracts are open in order for the option sellers to maximize their profit. Possibly even just below $950 where 25,764 contracts are open. The simple message is tread carefully until the witching ends.

Don’t get me wrong gold has broken out, but a quick setback is in the cards in my view. Even as I type this quickly, gold is under pressure and looks to be ready to move below $1,010.

Treasury To Sell $112 Billion In Notes Next Week
NEW YORK -- The Treasury Department said Thursday it will issue $112 billion in notes next week. A record $43 billion in 2-year notes will be sold on Tuesday, followed by $40 billion in 5-year debt on Wednesday. The final offering will be $49 billion in 7-year notes on Thursday. The amounts are each $1 billion more than last month -- the most ever for each security -- and in line with estimates of some of Wall Street's biggest bond dealers. The government will also sell $85 billion in shorter-term bills. After the announcement, 2-year note yields, which move inversely to prices, remained up 1 basis point on the day, at 1%, the highest this month.

U.S. credit card defaults up, signal consumer stress
NEW YORK (Reuters) - Bank of America Corp and Citigroup Inc customers defaulted on their credit card debts in August at the highest rates since the onset of the recession, a sign that the banks' consumer lending woes are far from over.

The trend was echoed among most other major credit card issuers, dashing optimism sparked when many banks and specialty finance companies reported lower default rates for July.

"People have gotten very bullish with the July data, and (the August data) raises the question about how fast the consumer will get better," said Scott Valentin, an analyst at FBR Capital Markets. "People were assuming the pace would be pretty rapid, and this maybe slows the pace down."

The worse-than-expected August numbers bolstered the contention of some analysts that the July decline in defaults was due more to seasonal effects, like tax refunds, then an improvement in consumers' financial health.

Many analysts expect bad-loan levels will keep rising until later this year or early 2010.

"The defaults are a wake-up call for those expecting a V-shaped recovery," said Elliot Spar, options market strategist at Stifel Nicolaus & Co.

Hyperinflation Nation [Video] [MUST SEE!!!]

PLEASE watch this video documentary about inflation...the TRUTH about America's Future IS NOT VERY PRETTY. After you view it please pass the link on to friends and family. EVERY
American should know of the perils our country faces. EVERY AMERICAN SHOULD KNOW THE TRUTH.

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