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Welcome to the other side of the Catherine Wheel that is this current Precious Metal Bull Market. This is the side that crushes your limbs and threads your guts around a spindle-rod of molten steel. This is the side that dares you to jump to end the pain.
Seems a long way from last week, doesn’t it — when airy elation suffused your soul as a result of of daily 6-10% moves northward in your positions. You felt inner calm, you felt invincible peace. You priced Gulfstreams 650’s from your cubicle. You went out and were fitted for a new flowing robe of purest white ermine, with matching albino alligator sandals. ‘Fess up!
Well, get used to this queasy sea-change, ladies and gents, this is The Life of the PM Investor. Not everyone is cut out for it, as it takes a modicum of steeliness and cement-headed self-assurity. We are dealing with extremely volatile chemicals here, and it is only our good fortune that in this particular cycle they so often explode upward, instead of directly into our face.
The main tenet I’ve learned from this almost decade long period is that these things are almost impossible to trade, save at very extreme cycle beginnings and endings, which we will attempt to identify. Therefore, if you want to attempt to trade, I would advise keeping a “happy pile” of perhaps 15-20% of your stash, and using it to try to add to your more significant long term investment pile — your “treasure pile” for want of a better term.
Today’s move was unnerving, and unsettling. The good news is, we are quickly advancing to oversold on the major index — the Amex Gold Bugs Index, or $HUI, which I use as a guide for entry purposes. As you can see from this daily, we are perhaps a day or two away from a bottoming indication, as illustrated by the RSI stochastic:
We are also approaching support at the $535 level, which you may remember offered considerable resistance some weeks back. Now it should serve as a brake on our descent, just as it acted as an intransigent lid in the past.
Another indicator I watch closely in exigent periods like this is the U.S. dollar. It too is approaching a critical point in the RSI reading, this time on the overbought side. It looks like it will be very difficult for the dollar to break through $78, at least in the near term. You will note that that level also coincides with the dollar’s 50-day EMA, which has served as a resistance level in the past.
Dollars will print, my friends, until the Bernank thinks we are out of the deflationary woods. There are already too many out there, but no matter. Hang on, my various Sloopies.
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Check PPT stats on ZSL. Bottom in silver pending.
Agreud!
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I thought we may have bottomed at $536 and looked for a reversal … I have my RSI set at 5 too and it looked like we touched 20 at today’s nadir … you looking for 15 or lower?
Speaking of the $HUI of course … so we need a coordinated event with the $ topping …. Ok, so I’ll wait another day or two before loading up.
Low of the day on the $HUI (thus far) $533.31.
Amazing, isn’t it?
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Silver made a beautiful bounce off of the lower channel line today and it is up after hours and the dollar is down. If not Friday then I expect by Monday we’ll see silver back to rally mode.
Jake, when you say, “The main tenet I’ve learned from this almost decade long period is that these things are almost impossible to trade”…does that mean not to touch my long term investment pile even after there were huge runs like last week?
Q,thats what i’m doing.i even added last week and holding through this, i would love another one of todays tape to go in for the kill and add tomorrow lower. exk…all the way.perfect storm if you aks me
That means you can hedge a bit, sell some calls, take 10-15% off, but yes, do not touch the main bulk of it.
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Jake
Plenty of bids got hit today ova heah especially in EXK, ANV, SLW, IAG, MVG and …… ANDE!!!!!!
Question: Why do you prefer the EMA to the more popular SMA? Do you use both, and if so, when do you go for sma over ema?
EMA is just a more real number, as it incorporates change over time.
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Put that usd chrart on weekly. Bullish engulfing.
is the life of a PM investor really more volatile than the life of someone generally long any other category of equity …?
Yes. Because all PM investors fall into one of two groups: Smart-money billionaires like Paulson and Soros, or crackpot tinfoil-hat “goldline” shoppers. There is no middle ground.
Might I mention that our mentor here, the good Senator Gint, falls into the “smart money” category, whatever his account value may be. And might I also add that you could, too, should you follow his advice.
in all honesty i think that PM investors right now span a remarkably broad category consisting of “most investors”.
Its on Mad Money every day, its on at least half the blogs around, numerous (MANY) blogger and commentators are PM only people, its all the rage.
Disagree. When we see the $100 dollar tomato (more like $20), people will all be looking for a more stable storage of money than fiat.
Disagree, but on different grounds than go2mars. I don’t think we’ll ever see a $100 tomato.
Less than 1% of all assets globally are allocated gold and silver. The middle class still has no interest in gold. Ask yourself how many people you know who actually own gold as an investment.
A guy on YouTube went onthe street here in SoCal and offered to give a gold coin to anyone who could tell him the value of an ounce of gold within $100. No one even came close. Most people thought that gold was $25 per ounce.
Finally he tried to give the coin away. No one would take it.
We are still a long way from the top.
Well yes, if compared against most other equity “categories” or the S&P as a whole, as its just a lot more volatile segment.
Try this exercise: plot a chart of SLW, or even GDX, which is a diversified holding gold ETF, against that of the S&P. Note the larger volatility swings? That’s the PM markets higher volatility showing up. Its a result of smaller market caps, lesser liquidity, more narrow investor interest and a volatile underlying commodity input price.
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hmmm, I grant a good point has been made here. I ‘spect that a reasonable debate could be made with a fair bit of number crunching, but I’ll forgo it out of sheer laziness.
Jake:
GDX and GDXJ are both approaching their 200ema’s. Both only a few hundred bp’s away. I know you love this moving average. I will have bids there.
There’s been no better place to accumulate during this bull. I might grab some calls there.
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In a shocking move, the dollar is down, and the $HUI has bounced off the above support line.
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Only shocking to those who don’t read your blog (or those who read and haven’t learned yet).
😉
Thinking about GG here and NGD for a longer hold. KGC keeps staring at me at 15 and change, but if that does not hold is zero out of the question?
I have held GG since they bought out the former Wheaton Gold, which I had a tonne of.
I’ve never even touched it. It is the core of my “core.”
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Jake; how will the Japanese problem affect metal’s, or is it wait and see…?
Maybe a liquidity squeeze in the short term, but no change in the longer term.
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I sold even some of my precious silver stocks to take advantage of discounts in Uranium (which are hugely down thanks to reactor troubles in Japan). I bought DML Dennison Mines, Forum Uranium (FDC) and Hathor Resources (HAT). They are all down 25 to 35% today. It feels like stealing.
Don’t forget about Charlie Don’t QSURF.
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They changed their name from Uranium to Rare Earth so they seem to not have dropped in price quite as dramatically. What’s the story with them? You rikey?
Thanks Jake; do you see any good entry points here? (I picked up $AGQ for 189 Friday). Also, are you considering a subscription service ?
Nice pick up and no, that’s Fly’s department.
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