jschulmansr's  Instablog

From a reader/ and fellow trader on late Friday afternoon 4-29-11

Jeff-  Something us up. I am closing half of my position here, and the rest if it starts coming down.  

My reply back on Monday morning 5-2-11

     Good move!- I had closed out 1/2 of my GLD and 1/3 my SLV options. Then- lucky me had stop limit orders in Gold, wasn't touched, and Silver which didnt get filled due to such a large drop and blew past my limit price... The one time I use Stop Limit instead of Stop orders ... Who would have thought they would finally get Bin Laden!?!

     Anyways, I am currently watching the Precious Metals market come back up. FYI... I am glad SLV cooling a little; current Gold/Silver ratio 34.5-1 so they (GLD, SLV), should hand step together back up and test some more new nominal highs. The downward spike in SLV stopped and did not break out of the accelerated up trend channel and did not come near actual bottom line/boundary of main up trend channel.

     So I still have half 1/2my GLD and 2/3 my SLV options. I am seriously thinking about adding more May Calls. My targets still remain unchanged $155-$160 GLD, and $50-$55 SLV; before the big downward correction. Then approx 30-35% retracement before launching on next upward leg which will eventually see $2000-$2500 Gold, and $75- $100 Silver.  I do believe in my heart that we will actually set not nominal but real time all time highs for Gold and Silver even adjusted for inflation.

Next area to worry is when S&P hits the upper level or channel line next time, then think will see reverse in US Dollar, S&P major correction (to agree with old saying sell in May and go away). And Yes- some big corrections in GLD, SLV during the UUP or US Dollar recovery/rally. Other indicators will be the failure of the Euro between $1.50 - $1.60 level. Then will be time to place big shorts in Euro, S&P, GLD, SLV, and USO; while Long US Dollar. I will let you know when about to happen and that is my current take for now on the Bull Market in Gold and Silver.

Good Luck for Both of Us and Even Better Investing!

Jeff

 

Maybe.... Depending on who you are talking to. Today's rally took me a little bit by surprise, thanks to Japan. The market totally shrugged off Moody's potential downgrade of Irish Banks and Ireland. 

     The recently released report of the causes of the "Flash Crash"  showed that derivatives actuallly was one of the major causes of the crash. Well guess what? Right before the collapse of Lehman, and the ensuing crash and crisis; banks were holding all time record levels of derivatives. Currently once again, banks are holding all time record high levels of derivatives!

     So today's rally can be totally attributed to Japan's central bank. The Japanese Central Bank while slashing interest rates to basically 0%, also announced that they would be buying Japanese assets (Bonds, Reits, Mortgages, Equities), thereby fueling speculation that the Fed would do the same thru QE2 here in the United States.

     However, I think it's about time for a correction in the GLD, SLV, FXE, SPY, UUP.
Looking at the charts this has all of the appearance of an exhaustion gap. Not that I don't think that we have a real shot a $1500 Spot Gold by the end of this year.

     So even though I was stopped out of my GLD puts this morning I am seriously thinking about jumping back in and buying more GLD and SLV puts. I will let youknow on stock talks when I do.

     That being said, I don't think the correction for GLD and SLV will be more than 5-7% before resuming their march to $1500 (Gold) and $25 (Silver). Another note: I expect Silver to perform even better than Gold. The gold/silver ratio is approximately 60/1, if we see a return to what used to be the norm of 30/1 gold/silver ratio; then Silver could potentially run as high as $35-$50/oz. 

     Finally, as they do another quantitative easing (QE2) here in the US (currently not official QE), this continues to put pressure on Europe and Japan to devalue their currencies  and keep the printing presses running. Long term this is going to create a very hyper inflationary climate long term. So being the Gold and Precious Metals PermaBull that I am, I think that you should be buying and stockpiling (bullion, rounds,  coins; as much as you can get; to lock in the value of your money now. Events are truly starting to line up and set the stage for a potential worldwide collapse and depression.


Disclosure: Long SLV $21 Oct puts, Long GLD $130 Oct puts, Long UUP $22 Calls,

Okay as you know on my stock talks I sold my GLD Oct $125 calls for $3.25 per. Bought them at $1.73 per so have net profit of $1.52 per option. Why did I sell? Several reasons actually, China PMI tonight,China and Europe tomorrow. China because of the increasing trade tensions and possibility of trade war brewing with China. Europe because sovereign debt is not over just hidden. The Euro has had a huge  up move and the US Dollar has been trashed time for a retracement on both.. Think we will now also have a small retracement in precious metals complex. Do I think these retracements will last very long ? Probably not, but long enough to take nice profits to the bank.

My price targets for GLD for the short run $126.11, $124.16 and maybe, just maybe down to the 50 day MA approximately $120.50. For SLV my price targets are $20.73, $20.02 and maybe down to 50 day MA at $18.88. This down retracement will be very short lived and traders must be prepared to turn on a dime so to speak.

I have bought SLV Oct $21.00 puts @ .35 cents per and GLD Oct $125 puts @.69 cents per. STOPs are as Follows for GLD put stop @ $128.50 and for SLV put stop @ $23.35.






Disclosure: Long GLD Oct $125 puts and Long SLV Oct $21.00 puts

Disclosure: Long GLD Oct $125 Puts and Long SLV Oct $21.00 Puts