SD Midweek Update: We could have seen the end of the pullback. The case is compelling. Here’s the details…
When we ended 2017, we noticed something peculiar: Gold & silver pulled off the same end-of-year trend for the third year running.
There was something different, however, and that was that the trade was essentially “front-runned”, meaning everybody knew what was coming, and as such, everybody was already either in position, or buying their phyzz at the low.
While it is difficult to use 2016 as a guide, because silver was just coming off multi-year bottoming, looking back at the silver chart at the end of December/beginning of January 2017 shows the same type of pullback we saw this week.
See the 2017 silver daily specifically:
Now compare that pullback with the first week of January 2018, continuing though the pullback of this week:
Eerily similar right?
In fact, in January 2017, silver went from a $17.36 peak to a $16.63 trough for a pullback of 4.2%.
Just this week, silver went from a $17.32 peak to a $16.93 trough for a pullback of 2.47%.
Here’s something to think about in the latest price action in silver:
The 2017 pullback occurred over eight days, but we are only five days into this most recent pullback. This could mean we are not out of the clear yet, but, and it’s a big but, one of the patterns we have seen over the last three years is that the cartel smashings and bombings of the market with naked short paper have had less effect on price (meaning price hasn’t pulled back as much as it otherwise would have) and had less effect on duration (meaning the price recovered faster with each subsequent cartel smashing).
In other words, we could very well have seen the end of the most recent “pullback” as price has not gone down quite as much, nor did it take as long for price to recover.
Furthermore, if January 2018 follows suit like December 2017 did, then we are still out to have a decent finish for the first month.
Bottom line: We might not be done with the most recent pullback yet, but there’s a strong case that we are.
Throw in the mixed sentiment right not in the market and it could very well spell r-a-l-l-y.
Gold is also showing the case for rally with a massive bullish engulfing candle that formed overnight and into the pre-market action today, Wednesday:
The RSI, while still near “overbought” territory, even looks to be turning up once again.
Another clue to look for in trying to decipher where we are is the gold to silver ratio:
Again, we are seeing similar moves showing up on the chart. If that is the case, the spike in the GSR over the last couple of days would be a “break-out fake-out”.
And that’s what bull markets do folks. They throw people off.
Most people can grab the bull by the horns, but most won’t hang on.
Adding doubt to the bullish case and end to the pullback are the other two precious metals:
Platinum is showing overbought still:
But platinum has had a terrible run of the last couple of years anyway, so it stands to reason that the signals are not quite as strong from platinum until more time goes on.
Palladium is also signaling overbought:
But palladium is also doing its own thing over the last couple of years, and yesterday’s all-time high is just another example of that.
In fact, it looks like palladium wants to start consolidating at $1100.
Copper is giving the monetary metals a bullish argument:
Two days ago we were discussing a trip back down to the 50-day moving average as copper has done time and time again, but like gold, overnight copper has been forming a bullish engulfing candle on the chart.
Buy my oh my, check out crude oil:
Crude is certainly making the bullish case for gold & silver. Crude is going to make the price of everything go up, including the costs to mine gold & silver and get it to market, and you have to go back several years (2014) to see a crude price this high.
The dollar looks like the bounce could be coming to an end:
Where gold and copper are developing bullish engulfing candles on the daily chart, the dollar is forming a bearish engulfing candle.
The yield on the 10-year had a massive spike higher yesterday:
But the Fed’s plan is to cut interest rates (and print more money via QE) during the next recession, and the yield still is not above 52-week highs, so I’m not going to go about calling the bull market in bonds over just yet.
Besides, how is the Fed just going to gradually normalize rates? It has long been the opinion of your’s truly that the Fed cannot normalize, and once the bond market does blow up, we will be in store for huge spikes in yield, like full percentages at a time if not all out Paul Volcker style hiking.
The VIX could be getting perky right now:
But we know the Fed is selling volatility and buying the indexes, so it could just be an “allowable” range. It stands to be seen if the Fed and other central banks slowly let back on all their “emergency” monetary policies like they state the are (and will).
Bitcoin is back to a 13-handle:
And if the stock market is going to hit 26,000 by the end of the week:
It had better get moving. Granted, with two Fed speeches today, and major data releases through the end of the week, if “everything is awesome” is there narrative the manipulators chose to signal, it might just get there. And if everything is not all awesome, well, everybody believe the Fed and the manipulators have everybody’s back anyway right?
They will until it is no longer profitable or it becomes more profitable not to have it.