Some hopefully final comments on Silver bulls

 

If you have not formally considered me a Silver bear since late April 2011 (with a couple of small head fakes along the way) and a Gold bear since late 2012, then you live on a different planet.

Perhaps there have been other traders as adamantly bearish on Silver, but if so I am not aware of them. I have been unapologetic in my opinion and openly in the face of Silver bulls.

Then, late last week I Tweeted that “We are in the final portion of this phase of the bear market [in Silver and Gold]. At the time Silver was trading at 18.63. On Friday I Tweeted that if I were a bottom picker I would buy Gold with a tight stop. Gold was at 1213 at the time. It has not traded below 1209 since.  Also on Friday I announced I had bought some bullion for my safety deposit box.

I want to spend the rest of this post discussing my present opinion on precious metals and why I have been so harsh on Silver bulls.

My present opinion

I think the vast majority of the bear market in metals is over. I have no desire to be short — at least at present levels and at this time. Should metals put in a good rally, then I would likely be looking for a short trade. But I am in no hurry. The metals have dropped a very long way. Now is not the right time to become a metals’ bear. What kind of a rally might interest me in shorting — a big enough rally to blow all the late shorts out of their losing positions. I have no idea what the price levels would be. I have not turned constructive on metals. In fact, I am 50% sure the low prices are not in place. But, I have no desire to be short.

I bought bullion because I do believe in holding some insurance against fiat currencies. But, I will not campaign for or be married to this idea. I put a small amount of cash into the bullion purchase. If I do not need the Gold as insurance in my lifetime I will pass it along to my grand kids. Perhaps they can make some jewlery out of it.

Bottom line: I have no desire to be short metals. I am not a bear. I am not a bull. I am nothing. I have no interest in the metal markets. I may not trade Gold or Silver again for months. I have no price targets or time targets.

My cruelty to Silver bulls

I have taken a lot of criticism for my treatment of the Silver bugs. But, they deserve every last word of mocking I have placed upon them. Silver bulls are idiots. Why? Because they do not think critically or independently, they travel in over-crowded herds and refuse to acknowledge price as the ultimate arbiter of value. Silver is a commodity. Nothing more, nothing less. Silver has no intrinsic value other than what the market says is is worth. Silver bulls, more than traders of any other commodity, are obsessed with the narative of fiat currency destruction, manipulation by the exchanges, “paper” Silver vs. “physical” Silver, supply shortages, cost of production, etc., etc., etc. Silver bulls — you are fools.

Let me make something very clear to you — and this applies to traders of any and all physical items. Unless you plan to take deliver and actually consume Silver, then you are simply a speculator and gambler on the price of Silver. Nothing more. Nothing less.

And speculators trade price and nothing more. No, in fact, speculators trade price change and nothing more. If you really think you are trading or investing in Silver (or Soybeans, or Gold, or Platinum, or Sugar, or S&Ps, etc.), then you are completely self deceived. No group is more self deceived than Silver bugs.

Speculators trade price change. We profit if we can sell at a higher price than at which we bought. Who cares what name is at the top of a price chart. The only thing that matters is the price scale at the right and left side of a price chart. Until Silver bugs figure this out they deserve their lot in life.

I have not always been a Slver bear. Only since late April 2011. Some of my best traders since 1980 have been on the long side of Silver — and they have been trades based on trading price and price alone, not on trading Silver.

I was a super bull in Silver in late 2005/early 2006 when the weekly chart completed a textbook ascending triangle coincidental with the completion of a massive multi-decade base on the quarterly graph, as shown below.

6.30_SI_monthly6.30_SI_weekly

And, when Silver made new highs on expanded volume in October 2010 there was no way to be other than bullish.

 6.30_SI_weekly_2010

So, I have not really campaigned against Silver — I have campaigned against Silver bugs. I have nothing against Silver. It is the irrationality and arrogance of Silver bulls without confirming price behavior that have driven me crazy.

There is an approach to prediction (of markets, weather, earthquakes, sporting events, etc.) known as Bayesianism. Silver bulls should become familiar with Bayesianism. All traders should learn to think like Bayesians. In a very simplistic approach to the Silver market, a Bayesian would make certain statements, such as:

  • The reason to be bullish on a market is that prices are advancing.
  • A characteristic of a bull market is advancing prices.
  • When prices are not advancing, the bull market is not a logical conclusion.

Of course, Bayesianism is much more complicated than this, but you get the idea.

$PSLV, $SLV, $SIF

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Why I am a $65 bear in Crude Oil

 

The charts could be an accident waiting to happen

The monthly and weekly Crude Oil charts have been forming a 9-month triangle within a 3+ year triangle. This price behavior represents a tremendous amount of compression that will at some point be released.

Of great significance, in my opinion, was the upward price thrust in mid-June that completeed an inverted H&S and the smaller symmetrical triangle. This upward breakout has now proven to be a classic bull trap.

Targets are the lower boundary of the smaller triangle at 86.70, the lower boundary of the bigger triangle at 81.72, the target of the smaller triangle at 72.89 (assumed the completion of the smaller triangle) and the target of the larger triangle at 59.50 (let’s call it 65.00).

But, you might say, this kind of drop is impossible because producers must make money. Who says?? Markets in supply surplus (such as energy at the present time) tend to go the production price of the most efficient producers. Plus, which one of you macro economic fundamental experts predicted Crude could drop from $148 in mid 2008 to below $40 in just six months.  Don’t you all raise your hands at once! So take your pet macro economic/fundamental scenario and burn it with the trash!

6.22_CL_monthly

6.22_CL_weekly6.22_CL_daily

Disclaimers and caveats: I am short Crude Oil futures and will be stopped out if the market makes a new high. I am looking to add. Decisive closes below 85.90 and then below 77.25 are required to confirm a target of $65.

 

$CL_F, $USO

 

 

I am predicting $65 Crude Oil

 

 

Energy charts are a disaster waiting to happen

I have a crazy busy week ahead and am not sure I will have time for blogging. I am or may not be able to post more charts — I have many Icould show, Crude Oil, Brent, Gas, Heat. But I will show UGA charts (the ETF) for you stock folks. I have no time to elaborate, but do NOT be long energy — unless, of course, some silver bull gives you trading power of attorney.

6.22_UGA_daily

 

6.22_USG_weekly

$UGA

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Is the Canadian Dollar about to get cross checked?

 

The C-Dollar is attempting to complete a major chart top pattern

The quarterly, monthly and weekly charts all display a possible 42-month H&S top in the Canadian Dollar (futures). It is often difficult to precisely draw the key boundary lines on such a long-duration and complex pattern. I have noted the orthodox neckline (using the bar lows) and the neckline from the Friday closes (dashed line).

I believe a close today below 9550 will complete this pattern, although technically the right shoulder low at 9367 must give way for the pattern to be confirmed. The target of the pattern is 8470.

6.21_CAD_quartlery

6.21_CAD_monthly

6.21_CAD_weekly

 

$USDCAD #CANADIANDOLLAR

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A chart update on the metals, other markets

 

Markets are fast approaching chart targets

 

The weekly Gold chart is well on its way to the target of 1266 establsihed by the April completion of a 19-month rectangle. The daily chart has now completed a continuation 9-week triangle. This triangle has a further target of 1221.

6.20_Gold_weekly

6.20_GC57_daily

The weekly Silver chart has a target of 1615 established by the April completion of an 18-month rectangle. The daily chart is forming a possible wedge pattern. My guess is that this wedge pattern will serve as a launch to the final low in this bear market.

6.20_SI_weekly

6.20_SIN3_daily

The montly Platinum chart displays an 18-month rectangle. Should this rectangle be decisively resolved by a downside breakout the target would become 1024.

6.20_PL_monthly

 

The dominant pattern in Copper is the completion on the weekly chart of an 18-month symmetrical triangle in March. This pattern has a target of 273. My guess (or perhaps my hope) is that the daily chart will hold at the April low and a rally back toward 320 to 325 will occur. This would set up the possibility of a continuation H&S pattern. However, we would need a right shoulder rally for this to occur.

6.20_HG_weekly

6.20_HG57_daily

The target of the weekly and daily H&S top in the Dec. 2017 Eurodollars has been met. Meeting a downside target is not a reason to become a bull. A major trend change has taken place in the interest rate markets. Further downside targets exist at 96.51 and 94.40. The 94.40 target (representing an interest rate of 5.6%) is probably a year or so away.

6.20_GEZ7_weekly

The bearish implications of the completion of the 2-year symmetrical triangle on the weekly Australian Dollar chart cominue to play out. The target in this market is .8342. Do not rule out a period of congestion and short-covering strength along the way.

6.20_AD_weekly

I am quite certain that the brief completion in recent days of the 10-month “triangle within the triangle” on the weekly Crude Oil chart will prove to be a giant bull trap (yes, for the record, I got nipped for 65 points). Yet, the bear trap is not yet official. A full bar close below the upper boundary of the triangle is required to spring the trap.

6.20_CL_weekly

Allow me to whet your appitite with a weekly chart of the Canadian Dollar futures. The market is forming a massive 3-year H&S top pattern. The key price is 9568. A decisive close below this level would complete the pattern and establish a target of .8470.

6.20_CAD_weekly

 

One final chart – $AAPL. A decisive close below 415 or so would complete a 4-month H&S failure pattern with a target of 358.

6.20_AAPL

 

Markets: $GC_F, $SI_F, $GLD, $SLV, $PL_F, $GE_F, $CL_F, $USDCAD, $AUDUSD, $HG_F

 

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Will Silver continue its cycle of one-day wash outs, brief rallies, then big puke outs

 

If the cyclic pattern continues, the next down wave in Silver is just around the corner

The entire basis for technical analysis is that price behavior tends to repeat itself in an analog manner. This is exactly what has happened in Silver since November 2012.

The pattern takes the form of three simple stages:

  1. A one-day spike decline (three days in the case of April) that lacks follow through
  2. A brief three to four week rally
  3. Another sharp decline

Interestingly, in each of the four previous recent cases, Stage 3 begins almost immediately after Stage 2 rolls over. The present Stage 2 rally in Silver is anemic at best. The market is unable mount a rally. A decline and close below 21.80 (July “paper” Silver) would likely mean that the Stage 3 puke out is at hand.

64_SIN

The present Gold/Silver ratio is about where is should be. Gold is about 25% over valued relative to its historic relationship to fiat currency. A 25% decline in Silver would be to 16.85, well below my long-standing chart target of 18.75.

The harsh reality for Silver bulls is that Silver is a commodity and subject to booms and busts. There is nothing special about Silver — it is simply a rock mined form the earth. Contrary to what the Silver bulls claim, industrial Silver use is not sky rocketing., but has been flat for years. The biggest growth in consumption has come from investors. But, what would happen if the market went through a period of disinvestment? This has happened in the past.

Silver needs to rally and close above 23.40 in order offset the present negative technical bias.

$SI_F, $SLV

 

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