Last week was a relatively strong week for stocks and commodities. Although the SP500 closed slightly lower on the week the price action Friday was strong. The recent pop in commodities has everyone feeling good and bullish again and we all know how the market works… When everyone is feeling good the market has a way of shaking things up.
Below are a few charts showing heavy volume resistance levels that will most likely cause the broad market & commodities to pullback or trade sideways for a few days as buyers and sellers play tug-o-war.
SLV – Silver Bullion ETF Trading
Silver had a very nice pop last week but if you step back and look the recent price action you can see that it’s still trading below the previous major bounce from back in June. It looks as though silver is a little over extended as large percentage moves tend to give back 25-50% of the mover shortly after.
Take a look at the price by volume bar. It shows there has been heavy volume traded at that $19.00 level and the previous time it was reached sellers stepped back in pulling silver down.
GLD – Gold Bullion ETF Trading
Gold is trading deep into the resistance level and struggling to hold up. Last week we went long GLD after the bullish engulfing candle and took profits near the high two days later on Thursday’s price. Although gold is trading at resistance the intraday price action remains somewhat bullish/neutral for the time being.
USO – Oil ETF Trading
The oil ETF broke down from its large multi month bear flag and is now bouncing up to test that breakdown/resistance level. This could be a possible kiss good bye. I will keep my eye on this commodity as it could provide us with a great shorting opportunity in the coming days.
SPY – SP500 ETF Trading
The equities market has been tried to bottom all week and Friday’s price action looks strong. While the chart looks strong the market internals are telling me the opposite. Last week we saw a gap down and Friday that gap window was filled. With heavy volume resistance just above the current price the odds are pointing to lower prices.
Weekend Equities and Commodities ETF Trading Report:
In short, it looks as though everything is trading just under or at resistance levels. That means sellers will start to enter the market and cause prices to stall (trade sideways/choppy) and or reverse lower.
That being said, with Friday’s strong close for oil and the sp500 I am expecting a gap higher in the morning because traders will review those charts this weekend and enter the market Monday feeling bullish.
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Prices continue to churn as traders and investors try to figure if they want their hard earned dollar in cash or investments. The market is very jittery simply because no one wants to get caught on the wrong side of the market if it makes another 30-40% move, which is why we are seeing money rotate in and out each with very little commitment and follow through. Until a major trend looks to be in place most investors will not me holding many positions over night or through the weekend.
Here are a couple charts on what I think is most likely to happen in gold and the sp500.
GLD – Gold ETF Daily Chart
Last week we saw gold move higher by 1% but I cannot help but think a sharp sell off is only days away from being triggered. Either we get a another pop into resistance which would eventually trigger a wave of sellers and cause a sharp drop or the price of gold will drift lower to eventually break a key support level and trigger stop orders. Once the stops start to get triggered I would expect follow through selling for a couple days which will pull the price of GLD back down to the $113-116 area.
Also there is a possible head and shoulders pattern forming on this chart which is not picture perfect one but, it’s important to be aware as a neckline break could trigger massive selling and pull GLD down to the $100 area. But that would not unfold for several weeks if not months.
SPY – SP500 ETF
SP500 broke down from the support trendline two week ago and has since been trying to bounce. Last week we did see a two day pop but was given back Thursday. As you can see there is a possible mini head & shoulders pattern forming and the current price is testing the neckline. A breakdown below this should trigger a move to the $102 level.
Weekend Trading Conclusion:
In short, the market is trading at a key support level and this week should be exciting. Looking at several large cap stocks I am seeing bear flags on a large percentage of charts. Seeing these forming makes me think lower prices are just around the corner.
It looks like low risk trading setups are about to start popping up across the board and if we get a powerful trend going into the year end there will be some good money made for those on the proper side.
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Silver, Two of Seven
Richard (Rick) Mills
Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information.
In the time of the ancient Babylonians – long before the periodic table – there were seven sacred metals: gold, silver, copper, iron, tin, lead and mercury.
In Roman and Greek Mythology, the First Age was called Golden, the Second Age Silver. Apollo, the god of truth and light, and teacher of medicine, carried a silver bow.
The hieroglyph of Isis (Egyptian moon goddess) is a crescent and images of her are usually reproduced with her standing on the Crescent. This has also become the symbol for silver – on old maps a crescent shows the location of a silver mine.
Islamic alchemy gave silver an important place, alchemical procedures were defined in terms of silver – the silvering of other metals, the act of giving other metals silver like qualities.
We’ve long practiced the science (metallurgy) of separating silver from lead – the earliest known workings of any significant size were those of the pre-Hittites of Cappadocia in eastern Anatolia, the first sophisticated processing of lead-silver ore was attributed to the Chaldeans around 2500 B.C.
Silver metal was recognized as more precious than gold when bartering in ancient Egypt – this recorded as early as 930 BC. Silver’s use as money in coin form began around 2600 years ago. The Lydian (present day Turkey) Trite is considered by many experts to be one of the first coins used as money. It was made of “Electrum”, a silver and gold mixture. Egyptian silver in coin form began appearing around 300BC.
Silver and gold have stood the test of time, as a medium of exchange, a storehouse of value and a safe haven in times of turmoil.
The history of fiat money has always been one of failure (most paper money economies downfall can be linked directly to the costs of financing out of control military growth and its wars). Every fiat currency since the Romans started diluting the silver content of their denarius has ended in devaluation and eventual collapse of both the currency and of that particular economy.
For the very first time in our history, all money, all currencies, are now fiat – the US dollar use to be gold backed and it was the rock all the worlds currencies were anchored to – when the US dollar became fiat, all the worlds currencies became fiat.
The Federal Reserve first issued its debt based paper money in 1913. Since then the US dollar has lost 95% of its value.
“The major monetary metal in history is silver, not gold.” Milton Friedman, Nobel Laureate
In this author’s opinion silver has a few unique twists:
Firstly as a much cheaper precious metal silver is winning market share from gold buyers. The higher gold prices go the more consumers will step down to silver, more so if they think silver’s price will rise substantially.
Today the gold:silver ratio stands at 65.94:1
Gold $1224 oz/silver 18.56 oz = 65.94
Historically the ratio has been 15:1
Since silver made it’s nominal high in 1984 the gold:silver ratio has held fairly steady at 45:1 – with the current ratio at 65.94:1 either gold will have to fall or silver will have to rise to $27.20 in order to get the numbers back in sync with 45:1.
To get back to the historical average ratio of 15:1 silver would have to rise to $81.60 an oz.
Silver, like gold, also performs it’s function as a precious metal – acting as a storehouse of value and a safe haven in times of turmoil – although, and herein might lie the opportunity, silver seems to have been asleep on the job what with the historical gold:silver ratio being so out of whack.
Gold does seem to be performing admirably and in this authors opinion does not seem set to significantly drop in price any time soon, the Dow on gold’s terms:
• In 2000 gold made its $260 per ounce low
• January 2000 the Dow was 10,900
• 10,900 / $260 per ounce = 41.9 ounces to buy the Dow
• Today at 10,443 DJII and $1,224 gold it’s 8.53 oz to buy the Dow
Secondly silver is an industrial metal/commodity which, unlike gold, is consumed, therefore giving you a call on an economic recovery.
“Silver is a unique metal that wins whether the economy is going well or is in bad shape. In the latter, the investor buys it as a hedge against the downturn in the economy and the markets. And if the economy improves, then the industrial demand increases.” Chintan Parikh, CPM Group commodity analyst.
The bottom line? Silver gives you a nice double play with prices expected to perform well no matter what the prevailing economic or geopolitical conditions.
Third silver does not have the threat of much publicized Central Bank and IMF sales constantly overhanging it – although silver does seem to trade in lockstep with gold when this old bogey man is trotted out to the herd.
In this authors opinion, it’s not if, but rather when, the gold:silver ratio will revert to a more traditional number and share price upswings will trickle down to the very few junior silver producers, the soon to be producers, developers and explorers. It’s for these reasons that silver and silver junior precious metal company’s should be on every investor’s radar screen.
Are they on yours?
If you’re interested in learning more about specific junior silver/gold stocks and the junior resource market in general please come and visit us at www.aheadoftheherd.com
Membership is free, no credit card or personal information is asked for.
Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.
Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
Richard Mills does not own shares in any company mentioned in this report and none are sponsors on his website aheadoftheherd.com
Silver (Ag) has an atomic number of 47. This means it is the 47th element in the periodic table by atomic weight and contains 47 electrons.
Silver has a hardness rated between 2.5 and 2.7, and is therefore one of the most malleable of all metals. Silver is white and lustrous.
Up until about the 1930′s, and the discovery of antibiotics, silver compounds were used as a normal part of medicine, silver nitrate being the prevalent form. Silver Iodide was used in babies’ eyes upon birth to prevent blinding as the result of bacterial contamination.
David Banister- www.markettrendforecast.com
In my last article a few weeks ago for Kitco.com, I was concerned that the market could have a hangover after the recent rally. Apparently, my concern was not un-founded as we dropped from a rising bearish wedge near 1130, to the 1070 Fibonacci pivot earlier this week. Although my subscribers were prepared for this drop by shorting the SP 500 in advance of that move, we covered our short near 1070 on the SP this week.
Bringing things up to speed, the market rallied up from July 1st to near 1130, which was a maximum target I mentioned in my last article. This completed a 3-3-5 elliott wave pattern that I identified, and broke the rising wedge on cue. At 1130, the SP 500 had re-traced a Fibonacci 61% of the April highs to Jul 1st lows, and had completed that re-tracement over a Fibonacci 5 week window. At TMTF, we believe that markets move in extremely reliable patterns and are not at all random. At the 1221 SP 500 top in April, it landed exactly at a 61% Fibonacci upward re-tracement of the 2007 highs and the 2009 lows. At the 2009 lows, the SP 500 had corrected 61% of the 1974 lows to 2000 highs right on the nose at 666!
What I forecast now is for a re-test of the 1011 area on the SP 500 to be completed likely by the end of August, and potentially a drop to 942 by the end of September and early October. I realize this is not a popular forecast right now, but at a bare minimum we should expect the market to go back and bounce off the 1011 area where it bottomed on July 1st. What would negate this view is if the SP 500 can rally past 1105 this week and hold into next week, then we may expect the bulls to re-take control. Another interesting point is when the market did in fact bottom at 1011, it was a Fibonacci Intersection. By that I mean it re-traced 38% of the 2009 lows to 2010 highs, and also was at the exact 38% pivot of the 2007 highs to 2009 lows at the same time. This gives pretty strong support for a 2010 market bottom, with the re-test possible.
I expect Gold to complete it’s “B wave” bounce at 1225-1238 ranges, and pull back to re-test the $1,155 recent low, but possibly stopping around $1177. That recent pivot low was a 50% Fibonacci re-tracement of the February lows and June highs of this year. Again, markets actually move in reliable patterns as they are largely controlled by the crowd’s sentimental reactions to news and events, which tend to be the same over time no matter the conditions. The downside to Gold is that we have had 8 consecutive years of Gold ending the calendar year in positive territory, and somewhere along the line that trend is likely to be interrupted. The lower level projections I have for gold are a deeper re-tracement to as low as $1,040 by the end of this year, correcting a recent 21 Fibonacci month advance. The probabilities as outlined on my chart below are for $1,177, a 38% Fibonacci figure.
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I find it amazing how many traders do not use volume as a factor in their trading decisions. I believe it’s always important to track the volume no matter which time frame you are trading simply because it tell you how much interest there is for that investment at that given time and price level. If you use volume and understand how to read it when located at the bottom of the chart which is the standard way of reading it then your well ahead of many traders and just may find this little volume indicator helpful.
Price and volume are the two most important aspects of trading in my opinion. While news and geopolitical events cause daily blips and in rare occasions change the overall trend of an investment, more times than not its better to just trade the underlying trend. Most news and events cannot be predicted so focusing on the price action and volume helps tell us if investors are bullish or bearish for any given investment.
Below are a few charts showing the volume by price indicator in use. Reading this indicator is simple, the longer the blue bars the more volume had traded at that point. High volume levels become key support and resistance levels.
SPY – SP500 Exchange Traded Fund
As you can see on the chart below and I have pointed out key support and resistance levels using the volume by price indicator. The thin red resistance levels would be areas which I would be tightening my stops and or pulling some money off the table.
The SP500 is currently trading at the apex of this wedge. The market internals as of Friday were still giving a bullish bias which should bring the index up to resistance once more on Monday or Tuesday. From there we will have to see if we get another wave of heavy selling or a breakout to the upside.
GLD – Gold Exchange Traded Fund
Gold has the opposite volume to price action as the SP500. We are seeing a lot more over head resistance and that’s going to make it tough for gold to make a new high any time soon.
USO – Crude Oil Trading Fund
Crude oil broke out of is rising wedge last week and has started to drift back down as traders take profits. Many times after a breakout we will see prices dip down and test that breakout level before continuing in the trend of the breakout. I should point out that there is a large gap to be filled from last Monday’s pop in price and we all know most gaps tend to get filled.
UUP – US Dollar Exchange Traded Fund
The dollar has been sliding the past 2 months and it’s now trading at the bottom of a major support level. If the dollar starts to bounce it will put some downward pressure on stocks and commodities.
In short, I feel the market has a little more life left in it. I’m expecting 1-2 more days of bullish/sideways price action, after that we could see the market roll over hard. It’s very likely the US dollar starts a significant rally which will pull stocks and commodities down.
With the major indices and gold trading at key resistance levels, traders/investors ready to hit the sell button, and the dollar at a key support level I think its only a matter of time before we see a sharp snapback. That being said there is one scenario which is bullish and could still play out. That would be if the US dollar starts to flag and drift sideways for a week or so, and for stocks and commodities to also move sideways before taking another run higher. Watching the intraday price and volume action will help us figure out if buyers are sellers are in control this week. Anyways that’s it for now.
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Judging by some analysts comments, the bullish heads on CNBC, and fearless Bulls, we have to continue to question whether this is a “corrective” rally up in the markets working off oversold indicators and sentiment in late June…. or…. the start of a major 3rd Elliott wave structure off the 2009 bottoms which takes the markets to new all time highs.
In the interim, evidence mounts that the Bull Trade is getting pretty crowded now just 30 odd days since there were nothing but Bears on CNBC and headlines were pretty negative. I scan CNBC here and there mostly to see how many talking heads and pundits are bearish vs. bullish. Near the July 1st lows there were all kinds of calls to raise cash and for markets to move much lower, indicating a bottom was probably nigh. Now nobody is willing to be bearish after this rally, indicating a near term top is nigh as well.
The Elliott Wave patterns still appear to be an intermediate upward correction or a Wave 2 or Wave B up in sentiment off the Jul 1st 1011 SP 500 index lows. Often bottoms come out of nowhere, as do tops. They don’t tend to ring bells at either bottoms or tops do they? I don’t remember getting a phone call on July 1st, but I did indicate a pivot low around 1008 on the SP 500 would be normal. What I didn’t fathom was the extent of the rise since that low, and this has forced be to go back and re-draw charts and find my old Fibonacci calculator.
Right now the area between 1131 and 1140 on the SP 500 fits several Fibonacci upward targets over various time zones. In addition, the current pattern looks and walks not like a duck, but like an “Ending Diagonal” triangle. These are terminal patterns and serve to stop sentiment in it’s tracks when read right.
Will we have a terminal top or throwover top in the next few days on this rally, then followed by a substantial correction? The probabilities say it’s likely, and below is a chart showing a sample of an “Ending Diagonal” pattern, and then the actual SP 500 pattern right now. They look nearly the same. We will soon see if this “3-3-5″ corrective pattern was the right read I made, or if we are off to the races. Evidence suggests a lot of racing from here will be difficult for the Bulls to pull off, but we shall see. The lows at 1011 in terms of the pattern itself, just don’t seem that they completed to me, hence my stubborn views that we need a re-test of those lows… time will tell. Sometimes forecasting is like predicting the weather 3 days in advance, we will have to see how the radar is tuned in shortly.
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Individual Retirement Accounts (IRAs) can be funded with physical gold and silver, yet very few investors are aware of this fact. They are exempt from all capital gains taxes, so if your investments perform well over a long period of time, it can result in huge savings.
Diversifying your retirement portfolio with precious metals is fundamentally required if you properly understand asset allocation (see the Ibbotson study). Additionally precious metals normally rise during periods of unsettling events such as wars, terrorism, inflation, deflation, downturns in the stock market and the US dollar. Precious metals usually yield large profits in these circumstances.
What is unique about this plan is that you can take physical possession of the actual gold or silver when you make your withdrawals. That’s correct! You can cash out in real honest-to-goodness gold and silver instead of fiat dollars. This is the most important feature of all. Down the road, in this generational bull market in gold and silver, the odds are in your favor that you will want and need the physicals when it’s time to access your investment.
Once you decide that you want to include precious metals in your retirement planning, you need to determine how much you want to invest. How much depends on your annual contribution, your personal goals and your individual investment philosophy. Factors to consider are your age, total assets and risk tolerance.
Very few institutions are set up to handle the precious metals component of retirement plans. But they do exist.
Establishing an IRA with a Trust Company
Setting up a self-directed IRA with a Trust Company involves three steps.
1. Submit the paperwork.
2. Fund the account.
3. Direct your broker which precious metals to buy.
The metals are stored at an approved precious metals depository, which is used by COMEX and other major commodities exchanges. Annual storage fees are charged on an annual basis.
Steps #1 and #2 involves completing the proper forms to transfer the funds to one of the three trust companies that are authorized to perform this function. Normally, the funds are transferred directly from an existing IRA or Qualified Retirement Plan.
In Step #3, the IRA investor directs a dealer which precious metals to buy.
Mr. Morgan has followed the silver and gold market daily for over thirty years. Much of this Web site, www.silver-investor.com, is devoted to education about the precious metals.
You can get his Ten Rules of Silver Investing — click here
This August issue of The Morgan Report was primarily done by Webinar which you can access as a member of the Silver-Investor.com website.
I did make some notes regarding the position limit changes that will take place in the Futures Market for silver. Also we made crystal clear exactly what the new “health bill” truly means for reporting requirements on precious metals transactions above $600.00 staring in 2012. This one topic generated tons of emails — but we have the complete facts for you so there is no mistake exactly what this means to you as a precious metals investor.
Additionally, there has been a huge shift in the Rare Earth Elements space and we report on this as well. During my research after Clint Cox sent us his update on REEs, I actually found an REE investment that is selling at a discount and makes total sense to my conservative nature. It takes out much of the risk of investing or speculation in a REE mining company. I will be buying on Monday, but did not buy ahead of the letter being posted. There will most likely be another financing so the stock may take a hit, but I doubt it because as stated above this company is selling for LESS than net asset value.
Mike Maloney did much of the presentation for the August Webinar and he is rather famous since his book is the best selling in the precious metals space and has the Rich Dad label as well. Mike and I spoke together at the first Sliver Summit Asia in March of this year.
Mike Maloney is the founder of GoldSilver.com and is one of my trusted metals dealers, for those that want a fair deal on Silver Eagles especially, or any common gold or silver, use this link: http://goldsilver.com/index.php?ref=2
Also, we will provide an update to our speculative stocks in approximately
That concludes this brief summary of the August edition of The Morgan Report
Wishing you health above wealth and wisdom beyond knowledge,