Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Fuzzy Silver, What's Next for SLV ETF?

Commodities / Gold and Silver 2010 Oct 28, 2010 - 04:41 AM GMT

By: Bob_Clark

Commodities Best Financial Markets Analysis ArticleSometimes the picture is not clear. This type of trading environment is what separates the men from the boys.
Risk management is not well understood, but it is vital to successful investing and trading.
 
The precious metals markets are correcting as expected.  Commodities in general and the metals in particular have seen a "love in" that would make Woodstock blush. So now what?


In the following chart I have overlaid the Baltic dry index which shows what it costs to ship non liquid commodities.  Notice that this is the first time that it has not confirmed the up moves in the price of silver.  Does it mean anything?  It seems to be saying that currently many of the world's commodities are not been used, consumed or shipped and that suggests that they are being hoarded.  Hoarding usually doesn't end well for the speculator.  Does this have implications for the metals? Is this chart screaming sell silver and gold?
 
We have to consider that when we made previous highs in the Baltic index there were not as many ships available to lease.  They have been building ships as fast as they were building condos in Florida during the housing bubble. We will not see those rates again for a long time, but the lack of any kind of move in the index is a caution flag.  Another thing that it could point to is a crummy Christmas sales season.

All that can change however, as it did last year around this time.  Notice we had the same dynamic but the index did ultimately confirm the move in silver, so we will watch it carefully for strength during November.
 

 
Let's take a look at the silver chart itself and see if the cycles can help us look into the future.
 
The low we made in the July-August time frame was most likely a 1 year cycle low.  That is when we often see the metals make a seasonal bottom for the year. There is a problem however, because we compressed into August there is not a clearly defined point that we can definitively call the low.  Compressions are not unusual but they make for fuzzy entry points later.  Like now.

Before we look at the cyclical dynamic, I want to correlate the two charts.  We have seen a lot of volume in these highs after a very strong move to relatively high prices. We have seen the same thing in most commodities and these high prices have been met by the big commercial producers and users with lots of selling. In the past when we have seen high volume situations like this, once the market has run out of steam we have moved sideways for a time.   I highlighted one such area on the chart and if you look at longer term chart you will see more examples. I am not saying that is what is going to happen but it quite possible. I think at the very least we can say that things got a little frothy and there is the risk of disappointment next week.
 
Cyclically there is no easy answer either. 
The metals tend to have a 3 month trading cycle. Plus a 1 month cycle that is also identifiable. We have just made a 1 month low which I have marked with a red triangle. We may have also made a 3 month trading cycle low.
 
As the chart shows there are two possible scenarios to consider.

The first is, we go up now.
If we have made a 3 month trading cycle low we should start to trend again and go straight up until the end of November. 
  
The second is, we churn in a range for another few weeks and quite possibly go lower in November. The end result should still be higher prices near year end, the trading cycle low will come in and it will be  higher than the last one and we will rally from it.  It is what happens in between now and when the trading low is made that becomes a matter of risk management. 

That is especially true if you are adding, or entering a new position for the first time. We want to be in, but we also want to be in low.
  

To sum up
We will either make the trading cycle low now, if that is the case, we will bolt straight up for a month and hit 26.00. 

However, if we are starting an ABC type of correction, we will be choppy maybe for a full month and then bolt up to 26.00 but it will make managing risk much more difficult. The high volume and the over extended nature of the other markets, points to a more complicated correction and lots  of confusion.  Remember the Fat Boys love to muddy the waters. 
 
I am using a simple strategy that lets me enter at high, over bought levels and participate in the next run up if it comes now. It also keeps me from getting killed if it turns into a choppy mess.

I enter at a low point and when we bounce I take profits on half the position and place a stop loss order on the remaining half position near or at break even.  I then have a risk free trade that should actually yield a profit.
 
I have posted a link to my E-visory on my blog, to show how I just did it in slv, in real time. 
 
Everyone wants to profit from the runs like we just had.  The thing is, they are rare, 80% of the time markets go nowhere.  As investors and traders we need the skills to trade those less directional times.  

Bob Clark is a professional trader with over twenty years experience, he also provides real time online trading instruction, publishes a daily email trading advisory and maintains a web blog at www.winningtradingtactics.blogspot.com  his email is linesbot@gmail.com.

© 2010 Copyright Bob Clark - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules