Are Gold and Silver Setting up for a Slingshot Move?

Gold and silver have been stuck in their respective trading range for three months.

How long the yawning continues remains to be seen, but a slingshot move would be a welcome change of pace. What is a slingshot move? It’s a powerful directional move preceded by a fakeout step.

The review below explains the potential slingshot setup:

The July 4 and July 7 Profit Radar Reports highlighted various conflicting indicators and decided that: “With both metals approaching our up side targets, we don’t want to chase trade.”

The chart below, published via the July 7 Profit Radar Report, shows two of the conflicting indicators for gold:

  • Investor Sentiment (commercial hedgers’ exposure – light blue graph): Bearish for gold
  • Seasonality (dark blue graph): Bullish for gold

Silver essentially suffered the same conflict and was nearing a resistance clusters.

The July 4 Profit Radar Report showed the chart below along with the following commentary:

Silver is overbought. In general, large spikes are followed by sideways trading or sizeable drops. Aggressive traders may find success shorting silver (corresponding ETF: ZSL).”

In hindsight it becomes obvious that bullish seasonality and bearish sentiment cancelled each other out, resulting in the three-month stalemate.

Some sort of a trading range is usually the result when our indicators are in conflict, that’s why we generally don’t trade during such periods (the Profit Radar Report’s last precious metals recommendation was to buy gold at 1,088 in November 2015).

The Slingshot Move

As the above charts show, gold and silver reached the low end of our up side targets. Gold and silver have been stair-stepping lower ever since (see updated charts below).

Our intention was to short gold and silver in their respective resistance areas. Unfortunately they never fully got there.

New Bear Market Lows?

The question now is whether the top is in or not?

The best-case scenario would be a swift rally into the red resistance zone (above 1,380 for gold, above 21.2 for silver). We’d consider this rally the slingshot move (fakeout rally before sizeable decline).

The rally to new recovery highs would get bulls excited just before a considerable down side reversal (and quite possibly a drop below $1,000/oz for gold).

However, the best-case scenario may not happen. Gold and silver as good as touched the bottom of our up side targets, which may be enough. A sizeable top may already be in place (watch green support areas).

The strategy for precious metals is to sell the bounces. Now we just need to figure out how big the bounces will be.

Continuous updates for gold and silver are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

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Risk/Reward for Gold and Silver is Getting More Attractive, But …

On May 5, I received the following e-mail:

“Hi Simon, With all this volatility, why don’t you want to initiate any trades? For example a low risk trade as shorting XLU and QQQ? Gold, Silver, Platinum, Natural Gas, Oil look to me as a great long candidates. I don’t understand why you are staying on sidelines at the best time you can trade.”

Here is my reply:

“True, purely based on technicals, there are trades out there, but we lack confirmation of our other indicators to confirm such a trade. I have learned that no trade is better than a bad trade, and that a bad trade is more likely when data is conflicting. We didn’t short QQQ, because of the open chart gap. Feel free to go long gold or silver, and we’ll revisit how that trade is going in a few weeks (please see recent PRRs for more details on why we are not buying silver and gold at these prices). Seasonality for XLU is pretty strong the next several weeks, so shorting it is not ideal.

I’m itching to recommend a trade … once the risk profile improves. Hope this helps a bit. Best, Simon”

I haven’t yet sent an e-mail to revisit the gold and silver trade (I don’t like to rub things in, so I won’t), but lets take a moment to revisit gold and silver.

The April 20 Profit Radar Report looked at technicals, gold sentiment and gold seasonality and concluded the following:

Gold Update

Out of the three driving forces we monitor for gold (technicals, sentiment, seasonality), technicals look the most bullish. Sentiment says risk is elevated. Immediate up side potential is limited based on seasonality.

Important chart support is around 1,200 and 1,160 – 1,130. We are looking to buy gold at a price tag of 1,200 or below. We will reassess our buy limit once (and if) we get closer to 1,200.”

Barron’s rates the iSPYETF as a “trader with a good track record.” Click here for Barron’s assessment of the Profit Radar Report.

The same analysis along with long-term gold and silver charts and sentiment data were also published here on May 5: Gold and Silver Bulls Risk Painful Whipsaw

On Monday, gold fell as low as 1,202, which makes buying much more attractive than it was near 1,300. It now becomes an exercise of patience and fine-tuning to peg the right buy limit.

We may see another up/down sequence before a more ideal low (see chart for potential support levels). The biggest knock against buying right now remains gold sentiment.

Silver

The April 13 Profit Radar Report stated that: “A move above 16.40 could result in a move towards 17.8.”

Silver peaked at 18.075, and the April 24 Profit Radar Report warned that: “Seasonality and sentiment suggest danger ahead. We eventually would like to own silver, but the risk/reward ratio doesn’t become attractive until price drops towards 16 and below.”

Silver fell as low as 15.84 and retraced 50% of the prior gains. There are some oversold readings and silver may bounce, but more bullish sentiment will likely have to be worked off before a more lasting low is reached (see chart for potential support levels).

The corresponding ETF charts for gold and silver – SPDR Gold Shares (NYSEArca: GLD) and iShares Silver Trust (NYSEArca: SLV) – paint the same picture.

Continued gold and silver analysis is available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

Gold and Silver Bulls Risk Painful Whipsaw

Gold and silver have been on a tear, but there’s reason to be cautious. Here are some facts to consider before following the crowded trade:

Gold Update

Since late December 2015, when we anticipated a tradable low, gold has rallied as much as 25%. Commercial hedgers (considered the ‘smart money’) are now heavily selling into this rally.

The chart below was published as part of the April 24 Profit Radar Report update.

Barron’s rates the iSPYETF as a “trader with a good track record.” Click here for Barron’s assessment of the Profit Radar Report.

Shown is the price of gold along with the net exposure of commercial gold hedgers. Hedgers have racked up the largest short position since 2012.

The April 24 Profit Radar Report stated that: “Out of the three driving forces we monitor for gold (technicals, sentiment, seasonality), technicals look the most bullish. Sentiment says risk is elevated. Immediate up side potential is limited based on seasonality.”

The May 1 Profit Radar Report included the following update: “Gold moved above resistance at 1,272 and above this year’s high at 1,290. It is next to impossible to peg the termination point of strong momentum moves, such as in February and currently. 2-day RSI is overbought and sentiment remains bearish, so the next resistance zone at 1,310 – 1,320 is a candidate for a pause/reversal. More up side is possible, but when the tide turns, it is likely to turn quickly and burn latecomers.”

As the updated gold chart shows, gold reversed just below the 1,310 – 1,320 zone, but remains above support. What this means is discussed in the latest Profit Radar Report update.

Silver Update

The chart below (published via the April 20 Profit Radar Report) shows that commercial hedgers are even more bearish on silver.

The May 1 Profit Radar Report included the following update: “Commercial traders ramped up their silver short positions to the highest level in decades, 2-day RSI is overbought and seasonality is getting close to the most bearish period of the year. Next resistance is around 18.5. A move to around 18.5 along with some bearish divergences would create the potential for a nice short trade (ZSL is one ETF option).”

The updated chart below shows silver reacting to its overbought condition and rising red trend line, but reversing before reaching resistance at 18.5.

The extreme short positions of commercial hedgers and the most bearish seasonal pocket of the year should be a worry for silver bulls, but may set up a nice trade for trading opportunists.

Continued gold and silver analysis is available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

Gold and Silver Rally Stalled – What’s Next?

2016 has seen a renaissance for gold and silver. But just as the luster started to return (and investors piled back into the GLD ETF), the rally stalled.

What’s next?

Gold

The March 2 Profit Radar Report identified a triangle and stated:

Upon completion, triangles often lead to strong, but temporary breakouts. A quick spike to 1,300 +/- could mark the end of the initial up leg from the December low. Such a quickly reversed spike higher followed by a multi-week/months correction would harmonize to a satisfactory degree with seasonality and sentiment. A break above 1,255 would be the first steps towards a post-triangle spike.”

The chart below shows the triangle (purple lines) and other resistance levels followed by the Profit Radar Report. There is also a bearish RSI divergence at the latest high.

This explains why gold has fallen since its 1,290 spike high.

A deeper correction, likely followed by another rally leg is likely. Correction low and rally high targets are available via the Profit Radar Report.

Silver

The long-term silver chart (initially published in the February 21 Profit Radar Report) explains why silver is struggling to move higher.

  1. Various technical resistance levels converge around 15.7 – 16.
  2. Commercial hedgers are record bearish.

Commercial hedgers (the smart money) have the highest short exposure since 2008. History (in particular recent history) says this is bad news for silver. The only time commercial hedgers were wrong was late 2010 when silver entered its blow-off stage.

While we anticipate more gains for silver later in 2016, sentiment and seasonality will make it very difficult for silver to rack up further gains in the near future.

It would take a strong catalyst to drive gold/silver prices higher and void bearish sentiment and seasonality. The risk is to the down side for now.

Continuous gold and silver analysis is available via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

Oil and Gold Update

Oil Update

The February 21 Profit Radar Report said the following about crude oil:

Crude oil filled the massive gap left by Wednesday spike and is sitting right atop trend line support. Seasonality is strongly bullish until late April. For anyone interested in trading oil, this is a tempting setup to go long.

The problem with this trade is that oil has had massive daily swings, which makes identifying an effective stop-loss level nearly impossible. One of the goals of the Profit Radar Report is to keep risk at a minimum.

There is much up side to oil. Investors who don’t mind short-term drawdowns in exchange for potentially sizeable profits, this is a trade worth taking. However, since we cannot effectively limit risk, this won’t be an official trade.”

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The updated chart below shows that oil soared higher until it hit resistance near 38.

This resistance paused the rally and generated a bearish RSI divergence. More weakness is possibly, but ultimately higher prices are likely.

Gold Update

The March 2, Profit Radar Report pointed out a potential triangle formation for gold, and stated:

Gold appears to be carving out a triangle. Upon completion, triangles often lead to strong, but temporary breakouts. A quick spike to 1,300 +/- could mark the end of the initial up leg from the December low. Such a quickly reversed spike higher followed by a multi-week/months correction (see yellow projection) would harmonize to a satisfactory degree with seasonality and sentiment. A break above 1,255 would be the first steps towards a post-triangle spike.”

The chart below was published via the same update.

The second chart provides more long-term context. The purple lines outline the triangle formation. The initial post triangle thrust stopped at trend line resistance (ascending red line), and created a bearish RSI divergence. Gold found support today, and rallied higher. This keeps the potential of a move to 1,300+/- alive, but chasing this move would take impeccable timing.

Continuous updates for oil, gold, silver, S&P 500 and other assets classes are available via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Can this Gold Rally Stick?

Gold is the best performing asset of 2016, up 15% since December 3, 2015.

For many this must come as surprise, at least that’s what we can surmise based on various sentiment gauges and headlines at the December low. Here are a few:

  • Bloomberg: “Hedge funds boost bearish gold bets to record as rate rise nears” – Dec 1, 2015
  • Kitco: “No reason to hold gold in 2016” – Dec 3, 2015
  • CNBC: “It’s going to get much worse for gold: Technician” – Dec 4, 2015

This wasn’t the first time the financial media (or hedge funds) got it wrong. The chart below captures CNBC’s top 3 most ‘brilliant’ gold calls.

Leading up to the December low, the Profit Radar Report had been carefully watching investor sentiment developments and published the chart below in the November 30, 2015 update.

Commercial hedgers’ net short exposure dropped to the lowest level in over a decade (since hedgers are by nature net short, it looks like a ‘high’ on the chart).

Unlike the media and hedge funds, commercial hedgers are the ‘smart money.’ It rarely pays to bet against the smart money, and the smart money was looking for higher gold prices a couple months ago.

That’s why the December 2, Profit Radar Report stated that: “There are three different bullish RSI divergences. The odds of a bounce increase with every tic lower. Hedgers decreased their short exposure further, which should bode well for prices.”

Despite being overbought, gold busted already through two resistance levels. This is long-term bullish.

Short-term, gold is near the next resistance level and is trying to take a stand against a pocket of bearish seasonality.

This gold rally has much more up side potential than the prior ones (which failed after 10 – 15% gains), but buying the dips appears more promising than chasing trade right now. Continuous gold analysis is available via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

Gold Overcomes 3-year Old Price Barrier

After a number of failed attempts, gold surpassed red trend line resistance going back to October 2011.

The weekly bar chart below highlights this fledgling technical breakout.

It also shows that gold bounced from just above triple support (green trend line, green bar, black trend channel) on July 24, 2015. This is right about where we anticipated to see a solid buying opportunity.

The July 26 Profit Radar Report observed that: “The daily bar chart shows a bullish reversal candle at Friday’s low. Although trade didn’t quite dip to the 1,070 level we set as buy trigger, Friday’s intraday reversal satisfies the basic requirements for a tradeable low. Odds favor higher prices with a target above 1,300.”

Although gold missed our buy limit at 1,070 (by less than 6 points), we ended up buying gold futures (or GLD) at 1,100 (GLD: 105.50) on July 27.

Gold’s move above trend line resistance is another step towards our up side target. Next big resistance will be around 1,230 (I suppose we’ll get there before 2015 is over).

Seasonality allows for weakness in October. Sentiment is not nearly as bearish (bullish for gold) as it was in July, but it allows for further gains.

With trade above the 3-year trend line, it now turns from resistance to support. Further gains are likely as long as gold remains above support.

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.