Issue #36
Dear Member,
Gold and silver are still on track for a cyclical low later this month. You can see the cyclical forces in this gold chart here. This is a synthesis of 24 valid short-term trading cycles in gold. Notice how it points lower into September 26/27 to October 3.
This upcoming decline is what we are trading and positioned for right now, with the long positions in ProShares UltraShort Silver (ZSL) and PowerShares DB Gold Double Short ETN (DZZ), recommended in my last issue.
Interestingly, Friday’s action in gold and silver immediately after the release of the August unemployment numbers was chaotic, to say the least, for the precious metals. Both gold and silver rallied sharply, then sold off quite dramatically.
The actual August unemployment figure came in a tad better than expected, which would prompt one to think, on the one hand, that the improved employment picture would give the Federal Reserve even more reason to begin tapering its bond purchases at its September 17 FOMC meeting. That in turn would be, one might gather, bearish for the metals.
Yet gold and silver rallied. Why? Perhaps most participants felt unemployment did not fall enough. Or perhaps they felt it fell enough that the economy is improving and inflation should come roaring back.
Or that the figure was good enough to give President Obama more reason to bomb Syria. After all, a stronger economy should be able to withstand a negative event like bombing another country, right?
I mention all this to point out to you again the folly of trading based on fundamental events and news. Only rookie investors, traders and analysts take a single number like one month’s employment data and make trading decisions based on it.
Experienced pros know better. The trends are always set by the markets themselves, and not by news. To be more accurate, the markets make the news. News never makes the markets.
Give me a market that’s going up, and I can tell you with near 100% certainty that the fundamental forces and data that will come out down the road will be supportive, and positive.
Give me a market that is falling, on the other hand, and I can tell you with near 100% certainty that the fundamental forces and data that will come out down the road will also be supportive, but negative in nature.
That said, hold your positions in the above inverse ETFs, along with my recommended protective sell stops on a good-till-cancelled basis.
And stay alert: I may add to the above positions. If gold can break the $1,354 level, we should see a sharp collapse begin, with gold dropping to the next level of support at the $1,280 level.
In silver, all we need to see is an hourly close below the $23.64 level (currently trading at $23.69 at 6:35 am EST) and silver should begin a plunge to the $21 level, the next major support area.
We may have to wait for a few more days of choppy action before the real downtrend begins, so be patient. And as I just said, stay tuned; I may add more positions at any time.
Best wishes,
Larry
Position Tracker
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