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Posts Tagged ‘silver buy signal’

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Investors Rush Into Gold and Silver as U.S. Treasuries Show Signs Of Weakness

In Market Analysis on September 20, 2010 at 5:47 pm

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Since the emergence of the European Debt crisis in April 2010, treasuries have been in a strong uptrend as investors have been seeking protection from risky assets.April to August 2010 was a deflationary period, similar to the fourth quarter of 2008 when treasuries soared higher before the massive government stimulus.  Stocks have been in a five month correction.  Now, in September 2010, long term treasuries are suffering a correction and break of long term trend support.

Long term treasuries are unable to find support at the 50 day moving average.  I highlighted a few weeks ago that treasuries appear to be making a top as the Chinese cut back on U.S. debt. The massive efforts from Washington to prevent a double dip appear to be putting a respite in the decline in equity markets.  It also appears that  The Fed will continue to easy monetarily during this crisis as they meet tomorrow and is expected to accommodate further.  The Fed has already stated that they will keep interest rates low well into 2011.  This is very bullish for silver and gold.

Efforts to deflate the currency have succeeded and now the dollar is challenging new lows and breaking through support.  Treasuries have corrected considerably along with the dollar.  Although the policy makers in Washington have revived the equity markets, the long term effect on the dollar and long term debt will be detrimental.  The markets are at resistance now and are very overbought.  I would consider being careful on this rally as a deteriorating currency and high unemployment will put pressure on the consumer.

The precious metals long term uptrend is in fact the best place to be during this ongoing debt crisis.  Now there is a massive flow to silver and gold.  I would not go chasing it now with the masses.  There will always be corrections and sales on gold and silver in a bull market as I highlighted to my readers four weeks ago right before the rally. Silver is especially overextended and could have a  healthy pullback.  There will be sales in the future as profit taking is imminent as it is overextended over its 50 and 200 day moving averages.  Subscribe to my free newsletter for trading signals and strategies at http://goldstocktrades.com.

It appears that the strategies from the central bank are now reflating the economy as gold, silver and base metals have reached new highs, while the dollar and U.S. treasuries are correcting considerably.   I believe the trend of sovereign debt defaults will continue and central banks raising their positions in precious metals.  This is the beginning of a major rush into gold and silver

We are currently seeing a huge transfer of capital into gold, silver and mining stocks.    I believe the best way to invest in emerging markets is to buy gold, silver and base metals that these countries are now importing rather than exporting.  I also see the possibility of the equity market, dollar and treasuries decoupling from silver and gold as they have made extremely upside breakouts since our bullish call on precious metals at the end of July. It has made an explosive move and is extended way above support and moving averages so a pullback is inevitable.  I am a long term silver bull but at this point would wait for a healthy pullback and secondary buypoints will be alerted to my readers first at http://goldstocktrades.com.

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This Trading Method Is About to Signal Another Buy On Gold and Silver

In Market Analysis on July 21, 2010 at 3:59 am

Trading against the market herd, also known as going contrary can be quite profitable, but timing is another challenge entirely .  Many contrarians make calls too early as irrational markets tend to stay irrational too long for most investors to stay in them.   Nevertheless, when used in conjunction with other technical tools it can provide excellent market entry points that are high reward and low risk when structured correctly.

In these past few weeks since my article on the death cross and why specifically this cross is quite bearish due to other technical signs, I have been bombarded with emails and links to Barron’s and Marketwatch which claim the death cross when back-tested is a contrary indicator with no statistical advantage.  Word to the wise, be careful of what you read in the widely published media reports.  A technician worth his salt knows if a death cross is real and if you need to be wary of a market downturn, similar to the market decline of 2008.

Remember that Barrons, CNBC and MarketWatch are in the business of advertising, which depends on their circulation.  Many of their ads are supported by major corporations who want their readers to be bullish rather than bearish.

What has concerned me lately in gold was the amount of media promoting the possibility of gold skyrocketing during the recent Sovereign Debt Crisis, where many fled the Euro to buy treasuries, the dollar and gold.  Today there was speculation that may threaten banks who are not lending.  This is becoming a deflationary crisis and investors are now concentrating on treasuries.  Mortgage rates are at all time lows, lending is drying up and housing starts are plummeting.  There are worries about U.S. Debt, higher taxes and increased government intervention in the private sector.  This shakeout in precious metals is giving investors another opportunity to jump into this bull market without being caught up in the hysteria.  To enter the trend with additional capital, it would be wise to buy when the conditions are oversold.

I have written about the use of oscillators to show short term buypoints in an uptrend.  I am seeing this happening again with gold.  Gold is about to hit an 18 month trend line, which has been successfully tested 6 times.  This is a valid and significant trend line that needs to be monitored closely.  Oversold conditions coupled with long term trend support leads to highly profitable times, as indicated in the chart below.

While learning to trade, I was taught to be a patient lion waiting for the best possible opportunity to pounce.  Lions wait intently until they are sure of optimal results: a  profitable trade.  Now as a trader of gold and silver, I see opportunity approaching.  The best way to play this market is by buying gold and silver when it hits the lower support trend line and is oversold, and selling as it approaches the rising resistance line.  This rule forces you to enter when the conditions are oversold but still in an up market, giving you very minimal downside risk.  Each time gold has rallied into new highs, the first correction to that trend line has been the counter trend bottom in the next major move.

Investors should be concerned if there is a break in that trendline as it has proven to be valid over the past 18 months.  There are many similarities with silver.

I believe silver is a great buy here at $17, especially as this is a true deflationary hedge.  Eventually the public will want real money, which is gold and silver.  Silver has the possibility of making a major run as it is way below all time highs.  During this time when it is oversold and coming in play with long term support, I would position myself for a move higher from the $17 area to $21 by the end of 2010.