SD Midweek Update: Assets correct over price or over time. Gold & silver look nearly done with the latter. Here’s the details…
We’ve been talking about corrections.
Corrections can happen over price, but they can also happen over time.
Gold & silver have been correcting over time.
It has been particularly painful because this correction has been slow and agonizing, especially for silver. On Monday I showed two trading ranges in silver. One of the ranges was $16.20 to $16.80, but the other range was tighter – $16.40 to $16.60.
Often the analogy is used of a coiled spring, and we can see that clearly with silver:
Right now we’re at the top of the range of $16.40 to $16.60. Does that mean a trip back down to $16.40?
The point is moot.
We’re talking about a very tight range here. Less than a quarter.
Although we do need to look at some of the underlying factors to determine how much longer we have to wallow in this sideways misery.
The single most determining reason the cartel is heck-bent on keeping silver in such a tight range is because of the inevitable “golden cross”. The golden cross takes place when the 50-day moving average crosses up and through the 200-day moving average. This shows that price is moving up and a break-out is taking place. A golden cross is Trading 101, so the cartel is only delaying the inevitable for as long as they can.
We also have the still uber-bullish Large Spec Net Short silver position on the COMEX. Remember, the cartel has infinite currency (but not infinite phyzz) to simply wait out and flush out the speculators, who do not have infinite currency, they do not have the blessings of the ESF and the Fed, nor do they have infinite time to wait it out, so the speculators are always wrong.
Finally, silver is literally one of, the if not the, single most undervalued assets on the planet. In my opinion silver is, so to both contrarians and value investors looking for something solid to invest in, pun and no pun intended, silver is a “no-brainer”.
Those are just a few reasons, technical and fundamental in nature, which support the case that silver is in the midst of a protracted and prolonged correction over time.
As a secondary theme for today’s update, it is also noteworthy that right now nearly all financial assets are in sideways channels – call ’em holding patterns if you like.
Holding for what?
Next Wednesday’s FOMC Meeting, which is also Powell’s First MSM Presser Love-Fest, and, presumably, a 25 basis point rate “hike”. More on that later.
For now, we can see that gold’s trading range has also tightened:
Whereas silver is near the top of its range, bold is near the bottom of the range. Does this mean we’re about to undergo a trip back up to $1240?
Well, if channels and ranges mean anything, then all indications are that it does.
The gold-to-silver ratio is even range-bound:
Call it a range of 70 to 81, with most of the range above 80 over the last several weeks.
It has been a painful start to the year for the metals indeed.
Palladium is not so much range-bound as it is putting in a double-bottom:
Since palladium was the MVM (most valuable metal, kind of like the MVP) of 2017, suffice to say palladium is correcting over both price and time.
Notice the little blue arrow, however. The Moving Averages Convergence-Divergence (MACD) is signaling the turn is close and that the next move is up. We also see the double bottom clearly on the MACD.
Platinum, as has been the case for some time, is downright ugly:
Although we are seeing the same indicator with platinum on the MACD signaling the crossover is near. For now, the single most important thing for platinum to do is get above its 50-day moving average.
Speaking of ranges, it’s not just gold & silver, but the commodities in general.
Crude has been consolidating and correcting over both price and time, and now the range is beginning to tighten:
Call it a range of $60 – $62.50. As the dollar weakens and breaks-down we would expect crude to start moving higher, but for now, crude is right in line with our theme of the day: Stuck in a tight trading range.
Copper is still banging around its 50-day:
Over the night and into the morning copper has tagged the moving average.
Since copper has been trading below that average, it is resistance.
Remember: What was resistance becomes support, and what was support becomes resistance.
Although the same is true for copper as it is for crude and the commodities in general: A weakening dollar will get copper moving again.
Speaking of the dollar:
Last week the dollar tagged its 50-day moving average and has since faded. Regardless, notice the range. See the theme here, it’s literally like suspended animation.
For now, yes, the cartel, mainly being the ESF and the Fed, literally do have that much control.
They will until they don’t, and then they will lose it.
Speaking of losing it:
Is it possible we have actually put in the top in the stock market and are now beginning to rollover?
Time will tell. The stock market has gone on much higher and longer than anybody could have imagined, but the action on the chart is not screaming “buy the dip”.
This isn’t screaming “buy the dip” either:
But then again, Bitcoin is a speculative risk asset, much like the stock market. It stands to reason that if the stock market is rolling over, so is Bitcoin and the flight to safety, risk aversion, hedge against uncertainty, or whatever you want to call it trade works itself in to the collective psyche of the markets.
Speaking of uncertainty:
Dead cat bounce or the start of another spike?
If the stock market is coming down, then the VIX is going up, so we’ll see.
Today let’s end with what many call the most important market of all:
That’s the yield (interest rate) on the 10-Year U.S. Treasury Note.
Notice what happened before, during and after the last rate hike.
Now first, I get it: “That doesn’t mean it’s going to happen like that again Half Dollar”.
Just humor me for a moment.
Remember the range of the longest time from September through mid-December? Yield was in a sideways channel for 2.3% – 2.4% for months. The Fed hiked rates on December 13th, 2017, and the very next day until the beginning of February the yield increased a whopping 500 basis points!
That’s a massive move.
If we’re at 2.9% now, even if we only get a 100 basis point move in rates, that will still put us at and above the dreaded 3.0% threshold.
And that is why everything is range-bound and basically in this holding pattern.
I would argue, however, that the markets have been pricing in the March 21st rate hike for the last several weeks now. For example, the markets have mistakenly been “selling” gold in anticipation of higher rates, although rate hikes are, and have been shown since the bottom in December of 2015, to be “good for gold”.
But for now, I get it. We’ve still got potentially another week of this agonizing sideways channel.
However, recall that gold & silver put in short-term bottoms on Tuesday, December 12th. That’s was the first day of the two day Fed meeting. And the metals took off the day of the rate hike and began to rally through most of January.
So there is much reason to be optimistic and every reason to expect a rally!
Will that be today, tomorrow, or next Wednesday?
Remember, there are data dumps at 8:30 a.m. EST every day for the rest of this week, and the cartel is trying to put off the rally for as long as possible, so I’m still expecting them to smash with the cover of an “everything is awesome for the stock market and bad for gold” excuse.
More importantly, the next rally in silver is going to show us that oh-so bullish “golden cross”, and if it comes mid-to-late next week, the very next week after that the fireworks display may begin in China with the launch of the petro-yuan (March 26th).
For now, however, let’s take it one day at a time because that’s how everyday has been pretty much all year, especially in silver.
– Half Dollar