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Posts Tagged ‘silver newsletter timing’

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Look For Pullback In Gold and Silver As A Buy Point

In Market Analysis on October 13, 2010 at 7:59 pm

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These past few weeks, as the equity markets rallied based on the belief of further quantitative easing by the Fed in November’s meeting, the dollar has collapsed, which I warned readers about a couple of weeks ago. Since that time, gold and silver have had a historic and parabolic rise as investors feel the Fed will continue to ease through the end of the year. Investor sentiment has reversed completely over the last eight to 12 weeks, since I signaled a buy on gold. There are no concerns as bullish sentiment on equities and precious metals reaches record levels. Investors feel the Fed will solve everyone’s problem by devaluing the US dollar. The temporary Band-Aid isn’t fixing any of the core problems. Unemployment is still high and housing is weak. Neither the financials nor the homebuilders are participating in this rally, which leads me to suspect this entire rise in the markets isn’t sustainable as it’s been on low volume and key sectors haven’t yet participated.

In countries where there’s a huge deficit, the only solution to pay back debts is through a devalued currency. Japan has recently intervened to try to devalue the strengthening yen. A strengthening currency to countries with huge obligations can heighten the risk of default, which many countries are facing. Also, a strong currency puts pressure on international corporations that export products abroad. A weak dollar will cause the products to be more expensive to American consumers, hurting demand and growth. More sovereign debt defaults in emerging markets are expected. It appears that many investors ran to the dollar from the euro after the European Debt Crisis. I expect something similar to occur now. The euro is reaching a key resistance level and is overbought. This means a pullback should occur. The US Dollar is extremely oversold and at long-term support. The bearish sentiment on the US dollar is extremely bearish, which indicates a reversal should occur.

As global economies feel the consequences of the United States’ actions, I expect further fallout from weak economic growth and the sovereign debt burdens in Europe. Many investors are pricing in a major move from the Fed. I’m not so convinced, as equity markets are higher and the dollar has moved significantly lower. Investors should realize that unless we see another sovereign debt issue or another bank failure, another major round of easing is unlikely at this point. I believe the investment community is expecting too much from the Fed and it appears the Fed is doing an excellent job stimulating the markets just through speculation of a move rather than the actual move itself.

This last easing from the Fed has met with some more critics and it has definitely increased international tensions. The US dollar has collapsed and is now testing long-term support. I don’t know at this point if the Fed will be so quick to act the next time around unless there’s another deflationary crisis.


Technically the dollar is due for a bounce and investors should look for any pullbacks in gold and silver as a buy point. Instead of the risk associated with buying bullion at these extended prices, many juniors that would be extremely profitable at lower gold and silver prices haven’t broken out yet.

I believe these junior mining companies are presenting a great buying opportunity. Remember on these recent parabolic moves, the faster it goes up, the faster and harder the correction. Last Thursday showed a huge volume reversal day. This indicates to me that some of the smart money are hedging their long gold and silver bullion positions for a correction. Although we may see further upside, the move is about to get exhausted as it has taken out many technical targets and measured moves. Be careful of getting caught up in the hysteria.

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Silver Making Triple Top Breakout

In Market Analysis on September 3, 2010 at 6:37 pm

Point and figure charts are one of the oldest and purest charting methods in the field of technical analysis.  Point and figure charts are not commonly studied and practiced by technicians today as in the past.  However, I use it as a simple indicator of areas of supply and demand and to indicate new trends.  Warren Buffett said, “There seems to be some perverse human characteristic that likes to make easy things difficult.”  Especially in the field of technical analysis, analysts seem to love making complex formulas when in reality it is completely unnecessary.

Point and figure charting is a simple method of plotting price alone.  It helps the chartist understand support, resistance and specific congestion areas.  Congestion areas are areas of price where there was a previous battle of supply and demand.  Often times when the price reaches this area it is difficult to break through. However, when the breakout does occur a major move begins.   These charts are excellent at identifying specific price and relative strength breakouts.

Silver has just made a triple top breakout which signifies a possible major trend higher.  Triple top buy signals are very powerful and hint at a move higher.  Unlike bar charts projections are based on a horizontal count rather than vertical.  This silver triple top breakout which may occur shortly could initiate a rise to $27.  This target is also confirmed by the bar chart analysis which I showed on Sunday’s update. On the point and figure relative strength chart a breakout has already occurred.

Usually relative strength breakouts precede price breakouts and confirm the move higher.

Never in history has the gold to silver ratio been so high and a reversion to the mean could mean a significant move in silver.

Disclosure: Own silver and silver mining shares.

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Silver Ascending Triangle Breakout. Major Move Expected

In Market Analysis on August 25, 2010 at 6:14 pm

Silver had very powerful break out today as investors are seeking assets that are safe and will retain value during a debt crisis.  Silver is  seeing demand at these price levels as it is historically cheap relative to gold.  If the ratio came down to the levels it was in 2006 it would be close to $27 an ounce.  Silver is soaring because investors are realizing this is a hard asset, it is money and it is historically cheap compared to gold.

Gold has reached overbought conditions from my July 28th buy signal.  Right now gold is a bit overbought while silver is at an interesting buy point, having found support for the fourth time at its long term 200 day moving average.  Today’s breakout of the symmetrical triangle, a very bullish chart pattern, is a sign that silver has built up a lot of internal strength and could break out into new three year highs. Remember, silver is significantly below all time highs while gold has already broken into new highs.

While I am bullish on gold, I believe investors could see a higher percentage move in silver.  I have also alerted my readers to a specific  mining company which has recently found a major discovery in Mexico.  Pure silver discoveries are very rare.  Silver supply is mostly produced as a byproduct which makes supply very inelastic.  A new pure silver discovery in a silver bull market could receive a nice premium.

I believe silver will make a major move on this break out. Investors are looking for a safe haven, protection and value in silver.  Gold has already made a significant move and is quite overbought, while silver has not participated to the same extent.  The gold silver ratio should move to historical norms which could mean a major move for silver.

If you do a study of the point and figure chart of the relative strength of silver versus the S&P500 since 2001, its strong uptrend is apparent. Each time silver falls back into support, it breaks out and makes significant rallies.

The break above the red bearish resistance line and a double top breakout coupled with the daily chart symmetrical wedge pattern demonstrates that silver has reached a critical juncture and could make a nice move.