SD Friday Wrap: The gold & silver Christmas rally is the gift that keeps on giving…
On Wednesday we could see the charts forming to make a run at $1300 for gold and $17 for silver.
We were not let down.
The charts are looking good for so many reasons.
Let’s start with silver.
First, things are shaping up quite nicely on the daily:
Not only did we punch through the 50-day with authority, but we have also punched through the 200-day moving average to the upside, which is bullish for silver.
The moving averages convergence/divergence (MACD) is bullish, and the Relative Strength Index, at a level of 64, is showing that silver still has room to run before becoming “overbought”.
I get it: Silver is up only 6.4ish% on the year. Yes silver is, and that is in spite of the heavy handedness of the cartel all year long.
So yes, I consider this year strong for a very important reason: Putting things into perspective, silver just kicked the bully’s butt after being pushed down on the playground, shoved against the lockers, and wedgied all year long.
It may not have been pretty, but silver fought back.
So before jumping to the conclusion that 6.4ish% is weak, think about the bigger picture: The bully has been defeated, and after hitting rock bottom three Decembers ago, it is now apparent that silver will stand its ground and fight, and us stackers have silver’s back!
On the weekly, we see a nice set-up on the charts too:
Those are the same moving averages, but proportionate to the time-frame. In other words, we are set up for a “golden cross”, but instead of it being the 50-day crossing the 200-day to the upside, it would be the 50-week moving average crossing the 200-week moving average to the upside. In addition, the MACD is shaping up on the weekly chart as well, and the RSI is very bullish right now sitting at a level barely above neutral.
On the silver monthly, we can see how the white metal has been panning out over the long term:
We can see the three consecutive higher-lows played out over the last three Decembers, and all indicators point towards strength, not weakness.
No matter how ya slice it, those Christmas silver bells are turning into silver bulls.
So let’s just get this out of the way now: While we are bullish indeed, we are not putting it past the cartel to try and crush some sentiment.
What’s that cliche about taking a long time to build up, but being lost in short order? I think the saying pertains to trust but it is equally useful when talking about sentiment in the gold & silver markets.
Looking at the three silver charts above, we can get a better understanding of why the GSR may have finally started it’s descent:
After a few weeks of “managed retreat”, the GSR is starting to break-out to the downside, which means it takes less ounces of silver to buy one single ounce of gold. Recently, it took over 80 ounces of silver to buy one ounce of gold, but now it takes 76. As as reminder, the historical ratio is 15 – 20 to 1, and currently, silver is taken out of the earth at a rate of 9 to 1.
The gold daily chart looks good:
A sign of concern would be the RSI reaching “overbought” territory sooner than later, which could cause a pullback in the price sooner than later, but that would be fine.
Because we want to see silver moving harder and faster to the upside than gold. Silver is gold on steroids, so silver exaggerates golds’ moves to the upside (and downside for that matter).
Here’s what silver catching up to gold is starting to look like on the daily:
But there is no mistaking it: Gold has been on a nice rally lately, and at the $1300 level, which has been staunch resistance all year, gold is slowly but surely finding support at there, and once decisively though $1300, that support will help raise the floor on the yellow metal.
Zooming out over the long-term, we see that gold looks good on the monthly chart as well:
Like silver, we can see gold’s previous three December lows, but there is also something bullish on the chart. This month, the gold price was smashed down in an effort break-down through the 50-month moving average. Gold came close, but the gold price never pierced through the average to the downside. Very bullish as it “tested” the support of the 50-month and bounced off of it nicely.
Recall that when gold closes below those moving averages, it generally equates to several candlesticks of pain.
We have followed this mostly on the daily chart this year, but either way, staying above the technical moving average is bullish.
Even platinum is springing to life:
Platinum tagged it’s 200-day moving average today, setting up to break-out above the resistance level soon, possibly in the first week of January if this rally in the precious metals continues, which most analysts do.
And if palladium has anything to say about it, it’s still rally on:
Palladium has seen a percentage increase of nearly sixty percent from the low at the start of the year until just yesterday when palladium put in its most recent high (not all-time high mind you).
Speaking of big moves, check out copper:
That is a big percentage move in the course of the year.
And check out crude:
The massive move in crude is just in the last six months.
So here we sit ready to start 2018 at $60 oil.
Translation: Get ready for even faster price inflation on everything.
The US Dollar was a trade all the “pros” got wrong this year (as the most crowded trade was ‘long dollar’):
Everybody was so sure about the U.S. dollar at the start of the year, but anybody who has been around SD for a while knows that we see serious problems with the U.S. dollar.
Since we’re on the topic of big percentage moves, well, this:
Yes, Bitcoin has been on a tear all year. I get it.
But be careful. Just like everybody was so sure about the U.S. dollar at the end of last year and at the start of this year, I will be the first to say it: Be careful when everybody is so sure of something.
I hate to break it to you, but everybody is usually wrong most of the time. Bitcoin is no exception, and no, it’s not different this time.
Here’s the farce of the year:
However, the stock market technicals look downright terrible.
I’m not gonna go callin’ a top on this market, but I wouldn’t be buying stocks here either.
Here’s the S&P 500 just to see how ridiculous this year was compared to past:
That’s what a printing press will buy I suppose.
The wild card for the stock market is the financial engineering that may be about to be unleashed if all these “overseas” corporate profits come back to the U.S., not for the purposes of hiring more employees or making actual capital investments as Washington would have us all believe, but for the purposes of share buybacks.
Remember: The corporation is not loyal to employee, much less to the country, but rather, corporations are loyal to shareholders, and the CEOs will behave accordingly.
Besides, it helps the executive’s bottom line to behave in such a manner.
Here’s something to think about as we wind down 2017:
- Russian collusion
- Impeach or remove the President anyway they can
- Sex scandals, sex scandals and sex scandals, all working their way up the societal ladder
- Russian provocateurs and spies
- Chinese sanction evading black market trading
- Identity politics
- Mass shootings
- Thermo-nuclear war at any moment
- Rogue North Korea
- Rogue Iran
- Rogue Venezuela
- United Nations patrolling the streets of Chicago
- Drug wars heating up again south of the border as gang wars heat up in the inner-cities of America
- A weakening dollar
- Several things I have forgotten to mention
- Several more for good measure
Now put all those bullet points together and what do we get:
The most calm, complacent, “everything is awesome”, not a worry in the world VIX moving from the already low 14 to 10, with how many closes with a 9-handle?
Amazing. So go ahead and forget all of those bullet points above. Here’s not a shred of uncertainty as far as the eye can see.
Yet when uncertainty comes back into the market, it’s going to hurt.
Finally, this seems to sum up 2017:
In the big picture, nothing has changed with regards to monetary policy or fiscal policy.
This “all talk and no action” can only go on for so long before the market either loses patience, inflation gets out of control, or the Fed shows their true
money US debt-based fiat currency printing cards for what they are.
So enjoy the Christmas gift that keeps on giving.
Happy New Year!
– Half Dollar