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Robert Edwards
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Contrarian daytrading technician who specializes in locating high probability short term trades while predicting price movement directions with over 85% accuracy. Most of my trading involves either extremely short term micro scalping of stocks or commodities (using 1 minute bar charts), or swing... More
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  • The Bears Run Stops In June Gold Futures Under $1174.10 To Regain Momentum

    (click to enlarge)

    The above daily chart of June Gold Futures confirms that although gold has suffered a nasty selloff the last couple days, it remains in a tight trading range, between $1140 on the downside and $1224 on the upside. Last week June Gold futures hit a low of $1174.10 and then bounced nicely to trade towards $1215. Well, today that support level of $1174.10 was obliterated, thanks to a 5000 contract sell program that hit between 8 a.m. and 9 a.m. EST. The low so far today is $1168.40 which may or may not hold. However, being down for the third day in a row, I am hopeful that beginning Monday we see a nice short-covering rally begin. The bounce off the lows, should be in the neighborhood of $20 to $30. Based on the current low of $1168.40, that would project a swing high of $1188 to $1198.

    There is no explanation for the severe drop in gold prices on Thursday, April 30, 2015. Regardless of what some pundits are saying, there was nothing hawkish about Wednesday's Fed statement. If anything, the statement was dovish, meaning the Fed is more inclined to hold off on raising of interest rates. If we do actually get an interest rate hike in 2015, it will surely occur in September or later, and should not be more than a quarter point. The only reason the Fed will raise rates is to save "face" and to give the appearance of possessing a small bit of credibility. All that would be accomplished with a small rate increase, is a move from extremely negative interest rates, to just marginally negative interest rates. There is no reason for anyone to panic, including stock investors, at this time. Everyone knows that the moment we get as much as a 10% correction in the stock market, the Fed will be running back in to stimulate the economy with more easy money.

    Anyway, there was no reason for gold to make a new 6-week low today. The US Dollar is off its highs. The stock market has a few jitters. Crude Oil is rallying. The Fed remains extremely accommodative. The only explanation for gold's weakness is that large players who can control the market, decided to band together and bring it down. Whether June Gold futures stops dropping at $1168, $1160, $1150, $1140, $1120, $1100 or $1065, I cannot say. I do know that over the past year, all dips under $1180 and especially $1160, have been short lived. We are at the end stages of a bear market in gold and gold stocks, that will soon hit the 4 year mark in duration. We are at the extremes in both time, and in price. The only safe way to play gold and gold stocks at this late stage, is from the long side. The risk to the downside is limited, while the potential gain to the upside is infinitely great.

    Unfortunately we don't yet have a solid buy signal in gold, as the best one can say is that we are just moving sideways in a large trading range. We are now approaching the lower end of that range and should soon see a bounce, either from support in the $1140 to $1160 area, or from marginally new lows. Anything below $1180 is a buy longer term, IMHO. We are just waiting for a catalyst to get the ball rolling to the upside. If Asian or Indian buying does not show up soon, or if Greece stays with the Euro, etc., we could drift around for a bit longer. Without a fundamental reason to buy, eventually we will have a good technical reason to buy. When the bears drive the price down to a low enough level, they will exhaust themselves and will have driven out virtually every last bull. Then there will be no other direction to move but up, and we should see the mother of all short-covering rallies.

    Anyway, as I type it is 10:00 a.m. on Friday, and gold just jumped from $1172.90 to $1179.70. That buy program is very helpful for the bulls. Maybe we won't have to make new lows today and can begin a 1-2 day rally back to the $1188 to $1198 resitance area beginning late today or Monday. It is the weekend and maybe the bears will want to cash in and maybe we get a late rally today in the $10 range. I think I will play for that.

    Disclaimer:

    The thoughts and opinions in this article, along with all Stocktalk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

    May 01 10:08 AM | Link | 4 Comments
  • Negative Interest Rates Are Long-Term Bullish For Gold

    Taki Tsaklanos of Secular/Investor.com, click here, wrote an excellent article that warns investors to not embrace the current low interest rate environment as it will surely end badly. His answer to the current dilemma is to own gold. I wholeheartedly agree.

    Right now, the U.S. (along with most countries in the world), is embracing a negative real interest rate environment to combat deflation and to try to spur growth. The Fed has announced that small measured increases in interest rates are coming, but has delayed the start of the rate increases over fears of upsetting market participants. It is apparent that once rate increases begin, either in June 2015, September 2015 or later, we will probably not get more than 2-3 rate increases the first year. Thus, for the foreseeable future we will only go from extremely negative interest rates, to slightly negative interest rates. The fear of an increase in interest rates has supposedly been a negative influence on gold. I say it has been the opposite. Once they actually increase rates by a quarter point, gold should rally and not fall. The uncertainty of the Fed dragging its feet is not doing gold bulls any favors. Get on with it already! We have more to fear from the Fed dragging their feet on raising rates, than from raising them! Better to be early than to be late!

    Another person who appears to share these same sentiments is Stan Druckenmiller, a billionaire investor with great knowledge and insight. He was recently interviewed on Bloomberg.com, click here, where he mentions how the current environment is similar to the markets in 2004. It is a long interview but well worth the time listening. Rarely will you find anyone who can spit out numbers like Stan does without looking at any notes. He is really brilliant and when such an intelligent market participant speaks, it is worth listening to. All that I am going to say for now, is that if 2015 is similar to 2004, then we need to be investing in gold right now, just like one should have been investing in gold in 2004! Take a look at the monthly chart of gold, as follows:

    (click to enlarge)

    If you look at where gold was trading in 2004, it was going sideways. But in 2005, it started to pick up some steam. Then in 2006 gold exploded higher and after 5 more years, hit an all-time high in 2011. I hope Stan Druckenmiller is right about this being like 2004! The bullish implications for gold are astounding!

    I will end this article with a reference to Chris Vermeulen at www.TheGoldAndOilGuy.com. Friday he wrote a great article on kitco.com, click here, where he projected a future gold price of $5,000+ in the next 3 to 5 years. Chris might be a bit aggressive on his targets as we may stop at $3,600 and may take a bit longer to reach $5,000+, but I believe he does have the direction gold will be moving, correct. Should be fun!

    Disclaimer:

    The thoughts and opinions in this article, along with all Stocktalk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

    Apr 26 7:39 PM | Link | 5 Comments
  • Natural Gas Is Cheap While Crude Oil Is Booming

    Natural Gas Is Cheap

    If you check out the forecasted price of natural gas at www.forecasts.org, you will see that they are now predicting an increase in prices going forward over the next six months, click here. That should not come as a surprise since natural gas is trading at historical low prices. Here is a weekly chart of June Natural Gas futures:

    Over the last 10 weeks, June Natural Gas has alternated closing up/down/up/down/up/down/up/down/up/down. That would make next week an up week, right? Maybe. In any case we are not making any real progress to the downside, even though many have been predicting a major washout. So far, so good. If you look at where we traded in natural gas, in May 2014 and in May 2013, prices remained bouncy and going long in April paid off. However, during both of the last two years, after showing some strength into the middle of June, there was still a selloff going into July. I would expect that scalping long in natural gas futures should work well until the middle of June 2015, similar to what happened the last couple years. I am long June Natural Gas futures from 3.570.

    For those trading in the triple leveraged natural gas ETN (NYSEARCA:UGAZ), here is the daily chart:

    (click to enlarge)

    Even though UGAZ is continuing to work sideways to lower, scale buying down to $1.80 should work out, as it should be followed by a bounce back of 20 to 40 cents. If we then fall back to $1.80, one can buy with confidence and buy even more on a dip to $1.60, and then play for a move back to $2.00. Buying dips under $2.00 should work well if one scale in buys and takes profits on rallies back towards $2.00+, between now and the middle of June.

    (click to enlarge)

    This is the natural gas producers ETF (NYSEARCA:FCG) that I recommended from $10 to $11. When we rallied recently above $12, I recommended a week ago to take profits and buy again on dips. So far we have fallen back towards the $11.50s. I would pick some up in here and add more on a dip close to $11 again. Scale in buying in FCG should also work out well as we should work sideways to higher in the next couple months. The recent low was $9.70 and high was $12.43. A 38% Fibonacci retracement would be $11.39, while a 50% Fib retracement would be $11.06. Buying on dips towards $11 should work out well.

    Crude Oil Is Booming

    Over the past five weeks June Crude Oil has been in an uptrend. However, the high for the move was scored 7 trading days back, at $58.82. It appears we are hitting into resistance just under $60. For now, it is unlikely that June Crude Oil can move higher than the $60 to $65 level without correcting first. But even though we may see a pullback next week. I still prefer playing the long side of the triple leveraged crude oil ETN (NYSEARCA:UWTI) rather than dabbling with DWTI. There is a very good chance that the bottom is in already in crude oil, and the lowest we will probably trade for the remainder of 2015, is the $40 to $45 level. Don't be surprised if we never trade below $50 for the remainder of the year. Low prices are bringing in demand that over time should more than sap up the excess supply.

    The recent low in June Crude Oil was $45.93 and the high that followed was $58.82. That was a $12.89 rally and 28% move off the low. Now that we are hitting resistance, we could easily slip back to a 38% Fibonacci retracement level of $53.92. A 50% retracement in crude oil would be $52.37.

    (click to enlarge)

    The recent low of UWTI (chart shown above) is $1.79 and high is $3.59, so UWTI doubled in value off the low. A 38% Fib correction would be $2.91 and a 50% Fib correction would be $2.69. I like buying all dips in UWTI, especially if I can buy in the $2.91 to $3.05 support area.

    Disclaimer:

    The thoughts and opinions in this article, along with all Stocktalk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

    Apr 26 3:28 PM | Link | 4 Comments
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