It has been one hell of a Bearish reversal since mid March and the dipbuyers (Bernanke sheep) have been rewarded well thus far. There is no question this past week was extremely interesting on the market. We saw strong breakout moves by Gold, Silver, and Crude Oil. There is really no telling when these runs are going to end. Below I will address the commodities, reflect on the US situation, and follow this post with some setups I will be watching albeit hinging on movement upwards by the S&P and mainly Crude.
Gold consolidated in late march at the 1430-1450 level, testing the 1450 level and 1410 supports multiple times. We saw a lot of manipulation with large sellers taking profits, but the bottoms were quickly bid back up. This week we saw a bust through the 1450 level touching new highs Tuesday and Wednesday, closing at highs on Friday (1476). I rode the train via $EGO and $ABX calls, and I am still holding $ABX through the weekend.
The question here is what does next week bring for gold? We’re seeing not only seeing a bunch of bible pushers trying to shut down the American budget, but the EU extending a bailout to Portugal and forcing Greece to concede they need one as well. This should in theory lead to more appreciation of gold considering the handouts that will ensue.
I’m still a silver bear, not that I am trading it that way right now. I’m spiteful from missing the parabolic growth from last November. Bulls present evidence to me relating to the gold/silver ratio or the lack of natural inflationary appreciation that some traders stretch back to the 1920s. That’s fine, I still don’t believe silver is a $40-$50 commodity long term (long term: resilient through a recession/depression); however, I will be riding the bandwagon as high as it goes. I closed my $SLW position Friday on strength, not wanting to be so exposed to PMs heading into Monday. Silver is also very extended and small cap companies such as $EXK have breached highs and it would be wise to trim and lock in some profits. If there was some healthy consolidation at the $40 levels I will definitely be a buyer again searching for $50.
This is my favorite commodity to watch right now. Indisputably, we have breached the $108.50 resistance level and there is no recorded overhead resistance between here and $145 a barrel. I capitalized on $SU testing its SMA(50) last week and had a nice quick options flip. I will be watching oil the most moving forward. There is no telling where oil is going to end. The USA is currently in Afghanistan, Iraq, Libya, and observing volatile situations in North Korea and the Ivory Coast. Of course this is neglecting the violence in Egypt (No Oil), Bahrain (close to Saudi’s Oil), and hearing pleas from Iran (Oil). Furthermore, we have Israel just shitting on Palestine although that’s not even really news anymore, but when will someone either address that mess or see escalation. We had another earthquake in Japan (7.1-7.4), we could see some more reports of nuclear problems or cover ups and optimistically (I like refiners) a further hindrance to refining capacity. Bears will argue this has been a news driven surge and I will concur. I still think there is a higher propensity for bad news and more US military deployments/Freedom Bombings in the weeks/months ahead.
We saw crude consolidate nicely at the $108-$110 level before it ripped the t-shirts off the back of crude bears, those especially who are inclined to only read into the WTI and Brent divergence (Libya’s oil goes mostly to Europe? No Shit). $113 and counting some healthy consolidation and I will likely leverage long next week.
All of the above futures charts and expectations are optimistic and it was nice to lock profit off of all of the moves. But, they’re really just a byproduct of USA foreign, monetary, and government policy. This week we will see some serious indicators of where we will be going next week, month, and heading into the summer. The Bernanke-ism for this quarter is “Buy Buy Buy till July”, but my gut isn’t nearly that confident.
This will be the largest influence on the path precious metals and commodities alike take moving forward. The USD has been dying courtesy of the printing press since the beginning of QE and subsequently kicked while down at the hands of QE2. First of all we’re approaching massive resistance at the $75 level – the question then is it going to test the resistance or be anticipated. Shit, will it be broken? There are rumblings about QE3, raising interest rates, and of course shutting the government down over a woman’s freedom of choice to tell Jesus to fuck off. You must monitor the USD closely next week it will largely determine where commodities and the economy go from here. Below is a weekly chart of the USD to show you the significance of this level. Maybe this is the transitionary inflation level the Bernanke has been reinforcing all along.
Last week had every North American trader viewing the jumping point. It was probably the longest 5 days of chop I have experienced in a long time. We saw day after day of gap up or down on open, and trade sideways accordingly culminating in a quick Japan earthquake sell off and V shaped recovery and a huge selloff into Friday afternoon. There is no question consolidation around the 1332 level is healthy after the bearish reversal that we had from mid March, but our direction will hopefully be resolved this week. I marked the 1344, 1332, and 1300(ish) lines on the chart as important levels of support and resistance.
Heading into next week. We have a ton of entry points presenting themselves after the week of consolidation. There will be emerging setups that can be confirmed by volume and price action. The trannies, emerging markets, steels, and solars are looking at highs and could be areas to monitor. News has been swaying the market in various directions since the middle of February, but we have reached a point where either the bulls are going to run for another leg or the bears are going to come out of the closet again. The only certain advice I can give you is keep your money out of the Chinese reverse merger stocks trading on the NYSE. They are toxic and prone to fraud allegations/confirmation.