Gigem77

Leveraging Up on Precious Metals Ahead of Fed Meeting

What are the differences between now and the week after the last fed statement? For one thing there is the slide into the seasonally weakest month for gold and silver. But there is another larger difference. What was happening to the price of oil and the CRB then and what is happening now? What was happening to tech stocks and financials then and what is happening now? It isn't the same.

Have you heard of catching a falling knife? The fed spoke and stocks rallied. The miners did not. CSCO beat estimates and took off after hours. Why will anybody buy miners this week? Financials, tech, pharma, even refiners are drawing the attention of buyers, but miners are drawing shorts along with the oil and gas companies. Every bounce has been shorted and as you point out, there is no uptick rule anymore.

SLW missed their earnings estimate. They have a bad habit of doing that and silver and gold are still breaking down. Take a look at this gold chart by Dan Norcini. www.jsmineset.com/cwsi...

This is a classic head and shoulders topping pattern that may target another 20 dollar drop in gold. Gold is following oil, as are the rest of the CRB components. Oil broke below another support level today. It might stop falling tomorrow. But why not wait and see?

Why buy something that is falling? Why not wait for a tradeable bounce? I'm waiting for the selling to be exhausted. When SLW and the E&P companies begin to move up again, they will be easy to buy. They fell so hard and so fast that there are millions of shares held by stranded longs who will sell as the prices rise just to get out even.

There is one chance for a long trade. Watch the EIA weekly petroleum report tomorrow at 9:30 ET. If it moves oil higher, gold and silver will bounce. We need to see some big draws in crude and gasoline. They need to be larger than expected. Also, it will help if the demand numbers show some recovery. Then we can snap off a daytrade on some of these miners and oil companies. But it will take time to repair the technical damage done to these stock prices, so for the next week or two, they are more likely to consolidate than take off higher. And if we get greater than expected builds in oil and gasoline, look out below.