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Even if Gold and Silver are driving to the final low, so what? It still is no reason to be long.

 

It could take many months — or even years — for the precious metals to form a bottom

I am on record as stating my opinion that the current down thrust in Gold, Silver and Platinum is likely to be the final leg down in their respective bear trends. If you inappropriately still own precious metals from higher prices, please do not take comfort from my belief we are headed for a low.

There is a huge difference between the end of a bear market and a bottom. Even if the precious metals find a final low, you could grow old and die before the next bull trend bails you out.

Let’s look at history.

The bottom in Gold following the 1974-1976 bear trend required 14 months to bottom. There was no reason to be a bottom picker during this bear trend.

7.20.Gold_W_1976 bottom

The bottom in Gold following the 1980-1999 bear trend required more than five years to bottom. There was no urgency to pick the bottom of this 19-year bear trend.

7.20.Gold_W_1999 bottom

Bottoms require time, especially in raw material commodities. SELDOM do raw materials create “V”-extended lows. Take a look at the current Gold chart. What possible reason is there to become a Gold bull even if a low might be near? Answer — ABSOLUTELY NO REASON!

7.20.Gold_M

Based on history, there is even less urgency to be an owner of Silver. It required 20 years for Silver to bottom after the 1979/1980 bull market, finally completing its bottom in 2005. I remember this well — I became a major bull in Silver in late 2005 based on classical charting principles.

7.20.SI_Q

When I think about Gold and Silver entering the final stages of their bear trends, my frame of reference is short covering, not trying to pick a bottom as a buyer. Even if the precious metal markets are in their final down thrust, it could be many months or even years before it is time to seriously become a bull again.

$GLD, $GC_F, $SI_F, $SLV, $PL_F

 

 

Have Gold and Crude Oil bottomed — What do the long-term charts have to say?

 

History repeats itself — although most often with slightly different twists

 

Price graphs have provided strong clues to the direction of Gold and Crude Oil in recent years. So the question is — what’s next?

 

Crude Oil summary

In August 2014 — with Crude Oil prices near $100 — this blog and the Factor email service began predicting a collapse in energy prices. This prediction was based on the formation of a symmetrical triangle pattern. We had been monitoring this triangle for more than a year.  Read our August 2014 analysis here.  The Factor initially projected a decline in Crude Oil to $65 — this target was then lowered to $45. Crude Oil producers scoffed at these forecasts. Crude Oil futures reached $44.20 on Jan 12, 2015.

2.19_Crude_M

The talking heads on CNBC and Bloomberg have now declared an end to the Crude Oil bear market. But, has Crude Oil bottomed? Should traders rush out and buy Crude Oil futures or related ETFs. I think not!

Let history be your guide.

After the decline from $147 to $32.48 in 2008 (that’s right — a $114 decline), Crude Oil spent six months building a bottom on the nearby futures contract chart, as shown below. SIX MONTHS! The absolute low-to-date in this current Crude Oil bear trend occurred on Jan 29, only three weeks ago.

2.19_Crude_2009

There is more to the story on why it is too early to become a Crude Oil bull. After the $114 decline in 2008, Crude Oil futures (nearby contract) advanced 168% from the Dec 19, 2008 low to the May 9, 2010 high, as shown below.

2.19_Crude_2009_2010 advance

Yet, enormous carrying charges developed during the 2008 decline. From Dec 19, 2008 (low for nearby Crude futures) through May 2010, the June 2010 Crude Oil futures advanced only 17% as shown below.

2.19_Crude_June2010

 

Crude Oil ETFs did not do any better. If a trader bought the ETF OIL on Dec 19, 2008, the day Crude Oil bottomed, and exited at the April 2010 high, the gain was the same 17%. Not exactly a trade to write home about.

2.19_OIL

 

The current spread structure in Crude Oil futures has adopted the same profile as was the case at the 2008 low. The Dec 2016 futures closed today at 63.26, representing a 43% advance from the low made by the Feb 2015 contract. The frosting is off the cake. Worst case — Dec 2016 Crude Oil could decline to the mid $40’s as the market endures two to three years of depressed prices. Best shorter-term case — a rally by Dec 2016 Crude toward $70 could be a short sellers delight. Crude Oil prices fell a very long way in 2014, so a sharp snap-back rally is possible. As a classical chartist, I do note a possible H&S bottom in the Dec 2016 contract — so a rally toward $75 cannot be ruled out. But such a rally should be gobbled up by hedgers.

2.19_CL3_Dec16

Bottom line — spot Crude Oil may have bottomed, but making money on the long side will be for the quick and nimble. The deferred Crude Oil contracts have not yet seen their lows, although a dead-cat bounce could occur.

 

Gold summary

My perspective on Gold is unchanged. Gold is the ultimate charting market. The Gold market has always announced its intentions with the formation of a recognizable chart pattern. For background, please read the “Chart History of the Gold Market.”

The last major pattern in Gold was the 20-month descending triangle top completed in Apr 2013. The target of 1165 from this pattern has been met.

2.19_GC_W

 

Yet, Gold has not developed a daily chart bottom — and I believe this is a necessary condition for any future bull market in the metal. I thought Gold had formed a H&S bottom in Jan 2015, but the recent decline has been too severe, so we are back to the drawing board. I see no trade in Gold at the present time.

2.19_GC_D

 

Markets: $OIL, $CL_F, $GC_F

Note: This post represents the type of technical analysis provided on a regular basis to members of the Factor service. Within the next few months the Factor service will impose a limit on the number of members — and an application process and waiting list will implemented. For more information on the Factor service, see the menu bar above.

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Charts of the Day for November 13, 2014 — Some excitement ahead

 

Gold, Palladium, Platinum, CATO, Crude Oil

Keep your eyes on the precious metals. Gold and Palladium could be bottoming. A decisive close by Gold above 1180 and then above 1202 would be strong indications that the 3+ year bear market has run its course.

11.13_GC_D

Palladium is forming a 9-week H&S bottom pattern.  The key levels to watch for the next direction are the Nov high at 809 and the Nov low at 746.25. More bearish is the Platinum chart. A new low under 1186 would not be constructive.

11.13_PA_D

11.13_PL_D

The weekly Crude Oil chart explains the current weakness. The 3-1/2 symmetrical triangle on the weekly chart has a target of $50. Look for real estate deals in North Dakota.

11.13_CL_W

Kuddos to Factor member Paul S. for alerting me to CATO. On Tuesday he correctly interpreted the continuation H&S pattern in this stock and is profiting accordingly. Way to go, Paul.

11.13_CATO_D

 

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The Chart History of the Gold Market — an Updated Edition

 

Gold is the ultimate charting market. Gold rarely begins a major trend without first ringing a bell and waiving a flag announcing its intentions.

 A must read for all Gold bugs, merchants, producers and traders

 

For the Updated Edition, click here or on the page below.

 

10.14_History of Gold Charts

 

 

[scribd id=244253053 key=key-HHcGq4HDD7hrMvQoEXyY mode=scroll]

 

$GC_F, $GLD, #GOLD

Putting the current bear markets in Gold and Silver into a longer-term perspective

 

 

Silver bulls may eventually be right, but they are still idiots.

 

By contrast, Gold bulls represent — by and large — a thoughtful group of folks.

As a trader and blogger, I love to have fun at the expense of Silver bulls. No other market I trade has a larger and more obsessed cult following of non-thinking and emotional “investors.”

I tend to be a Bayesian thinker. In my career as a trader dating back to 1976 I have found that most really good traders are Bayesian, whether they even know the term. No way could a logical Bayesian buy into the nonsense believed by Silver bulls. In mean, these are people who believe the Gold/Silver ratio should be 15 to 1 because it was so proclaimed by some Spanish king 500 years ago!

The daily and weekly graphs of Gold and Silver indicate that lower prices are most likely. Key chart levels are giving way, calling for a possible sharp drop from current prices. Let’s review these charts.

The weekly Gold chart is attempting to complete a 15+ month H&S failure pattern. A decisive close below 1240 will complete this chart configuration and indicate a possible target at low as 1040. HERESY! … the Gold bulls proclaim. It must be market manipulation — after all, the destiny for Gold is $5,000 per oz.

9.12_GC_W

The weekly Silver chart is challenging the lower boundary of a descending triangle. A decisive completion of this pattern would indicate a target of 12.85. ABSOLUTE HERESY OF THE FIRST ORDER! THE GLOBE IS OFF ITS AXIS!!! This cannot happen. Impossible. After all, the cost of mining is $15 or $25 or whatever per oz. Let me say this once clearly for you Silver suckers — the cost of production means nothing. Who cares if small marginal cost-of-production miners shut down. It means nothing. It would take years and years of low prices for the big miners to shut down.

9.12_SI_F

While the weekly and monthly charts are negative, Gold and Silver can be viewed from an ever larger historical perspective. Keep in mind, many a trader has gone broke with the correct longest-term historical perspectives. Historical perspectives are good for understanding, but not for timing investing and trading.

It can be argued that the longest-term trend is arguably up in Silver on the basis of this 100+ year chart.

SI_since 1861_semi log

 

Silver could drop all the way back to $6 to $8 and remain in a long-term bull trend. There is one other chart of Silver worthy of display — the price of Silver adjusted for inflation (i.e., purchasing power as a function of “fiat” money). On this chart we see that Silver is right in the middle of a 100-year trading range — and in fact, has spent many more years in the past century below the current price than above the current price.

SI_semi log_inflation adjusted

 

The 200-year chart of Gold shows a different picture than that of Silver. Gold is in a genuine “for real” historic bull market.

GC_semi log_200 yrs

 

There is a reason for the different “look” of the longest-term Silver and Gold charts — and you Silver bugs are not going to like what I say. Gold is a precious metal and store of value. Gold is actually a real investment medium. Silver is primarily an industrial metal (75% of annual Silver supply is off-taken for industrial uses). You can go ahead and argue with my statistic based on data provided to you in the latest report titled, “Why Silver Will Triple in Price in the Next Five Years,” published by some company that wants to charge you an arm and leg premium over spot prices to sell you coins from some “limited supply, one-time-only” Donald Duck release. But, my figure is right and their figure is wrong.

I actually believe in the long-term prospects for Gold. I think prudent people should be accumulating physical Gold during this bear market and sticking it in their safety-deposit boxes. As for Silver … no interest.

Please click here to read a copy of “The History of Gold Prices” updated late in 2013.

Markets: $GC_F, $GLD, $SI_F, $SLV, $GDX

Note: This perspective represents the type of analysis and thinking delivered on a regular and timely basis to members of the Factor email service. For information on this service, click the “Subscription” tab in the upper menu bar.

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Chart patterns I am watching this week

 

The following is the weekly Factor Update sent to members of the Factor service for the week of September 7, 2014. To become a member of the Factor service, click here for “Subscription Membership.”  If the pdf is not visible below, click here.

 

http://www.scribd.com/doc/239067009/Factor-Update-September-7-2014

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A bearish technical case for precious metals

 

Silver at 1304, Gold at 1075.

I know it is hard to believe. Personally, I am generally a Gold bull. I want the H&S bottom in Gold to complete, followed by a run to $2,000. But, a very bearish case can be made for the precious metals. First, the H&S bottom bullish case. The H&S pattern is a most reliable chart configuration — in fact, the most reliable of all classical chart patterns. A decisive close above 1,400 in Gold would be extremely constructive.

8.21_GC_Wc

Yet, whenever a clear H&S pattern develops there is a possibility for a H&S failure. A close below the 1240 right shoulder low in Gold would be an indication that the H&S bottom is failing. The target would be 1074. A close below the late Jul low of 1281 would not be constructive — and, in fact, would suggests that the bears have control of the market. The market appears to be rolling over today. I will read a close below 1280 as a sell signal.

8.21_GC_D   8.21_GC_Dv2

The same chart construction can be seen in $GDX, the gold miners ETF. A decisive close above 28.05 would complete the H&S bottom. A decisive close below 21.93 would complete the H&S failure.

8.21_GDX

Then there is Silver — which, in my opinion is not even a precious metal in the true sense. I am constantly amazed by the number of people who think t he world is running out of Silver. Might they have believed the world was running out of carbon-based energy 10 or 15 years ago? These people also believe that the Gold/Silver ratio should be 20 to 1 just because some king of Spain declared it to be so some 500 years ago. I have commented numerous times during 2014 that Silver could be forming a descending triangle formation. This pattern generally has bearish implications. The top completed in Silver in Apr 2013 established an yet unmet target of 16.70. A decisive close below 18.00 would extend the downward target to 1300.

8.21_SI_W

$SLV, $SI_F, $GLD, $GC_F, $GDX

 

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Have precious metals begun a new bull market?

 

Gold is forming a possible massive H&S bottom

On Sunday, June 15, I issued a Tweet that Gold was forming a possible H&S bottom pattern. See here for chart posted.

Additional evidence exists that the precious metals are forming major chart bottoms that could propel the next bull market phase. To gain a fuller understanding of the importance of price charts in Gold, please read the “Chart History of the Gold Market,” last updated in November 2013.

The H&S bottom in Gold is now clearly defined on the daily and weekly charts (weekly chart shown). The rally today is strong indication that the right shoulder low is in place. A close above 1400 is required to complete this bottom.

6.19_GC_W_v1

In the event of such a close, the swing target in Gold would become 2,400 as shown on the monthly graph. This swing target assumes that the advance from the Dec 2013 low will equal the advance from late 2008 through Sept 2011. Remember, a H&S bottom is not a H&S bottom until it is completed.

6.19_GC_M

Silver also presents an interesting technical study. The decline into the May low had all the earmarks of a bearish descending triangle. Yet, the market was on the ropes but could not be put down. While failed descending triangles are not typical bottom patterns, they do occur.

6.19_SI_W

Also, it is possible to argue that the entire period since the Apr 2011 high has formed a channel on the semi-long monthly graph. On an arithmetic scale, the period since the Apr 2011 high has formed a bullish wedge.

6.19_SI_M_semi

6.19_SI_M

The long-term chart of Platinum exhibits a possible 6-year triangulation as part of a bull trend that began in the last 1990’s. If this labeling is correct, Platinum’s target could extend toward 2,750. Obviously, this will not happen overnight.

6.19_PL_Q

Traders should be alert for buying opportunities consistent with their approach to trading.

 

Markets: $SLV, $GLD, $GC_F, $PL_F, $SI_F

 

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Charts that have my attention

 

Some charts that have my attention

$AUDUSD — on a closing price basis the advance yesterday re-completed the H&S bottom (black neckline) and there is follow through so far today. I will always try good pattern twice — and this one qualifies. I bought the June futures overnight at .9011.
Inline image 1
$GBPAUD — the cross is attempting to punch through the neckline of a 3-month H&S top. The 1.8118 level is key — although a close below 1.8196 would close below the lowest close of the right shoulder of the pattern. The right shoulder of the 3-month H&S is a smaller H&S top.  — and a weak close today would complete this smaller launching pattern. In fact, I would consider a decisive close below 1.8180 as commencing a Factor Move.
Inline image 2
Canadian Dollar — the weekly chart remains a disaster waiting to happen. The current 8-week congestion has been a trying period for the shorts (including me). I believe this 8-week triangle will be completed by a decisive close below .8940.
Inline image 4
Inline image 3
Soybeans — The life-of-contract H&S bottom pattern in May Soybeans met its initial objective, but I believe the party may be just starting. Make no doubt about it, the weather, not the charts, will dictate Soybean prices. But if planting or growing problems develop, Soybean prices could easily trade at $16.
Inline image 5
Corn — Corn is at an all-time historical value to Soybeans. Thus, if Soybean prices advance, Corn prices could explode. I think the bottom is in place for at least the next few months. The daily chart is forming a small pennant. Another thrust up is possible.
Inline image 6
Palladium — I believe this market has entered a bull phase. I am hoping to get a dip toward 753 to establish a long position with more manageable risk. The 753 level would retest the January high and the upper boundary line. This market is thin and I have not wanted to chase the advance.
Inline image 7
Dec. 2017 Eurodollars (the interest rate, not the currency) — This could become the mother of all H&S patterns — this one dating back to mid 2012. The right shoulder, currently under construction, could become a double-type top (different than a real double top).
Inline image 8
Copper — the weekly chart has completed a massive descending triangle on the continuation chart with the first-notice-date roll-over (shown), but not on the continuation chart with the last-trading-date roll-over. I am looking for a low risk short trade. If the March contract expires with the May contract trading under $3, then both continuation charts will have completed the triangle.
Inline image 9
Silver — While my instincts (not to be trusted, by the way) tell me that precious metal prices have bottomed, I cannot rule out a possible bearish descending triangle in Silver.
Inline image 10
plb
$SI_F, $HG_F, $GBPAUD, $USDCAD, $ZC_F, $ZS_F, $PA_F, $GE_F
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The charts I am watching this week

 

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If the PDF below does not appear, click here

[scribd id=207416514 key=key-wg86sti669zm4hh6g3a mode=scroll]

 

Markets: $SI_F, $GC_F, $SLV, $GLD, $USDMXN, $USDCAD, $GBPUSD, $AUDUSD, $CPST, $LIVE