Well Larry, of course a vicious correction will violate moving averages and technical levels. Because if it didnt, it would be an obvious correction, and nothing is ever obvious in this business. A typical 10% STOCK correction is not relative here, as few stocks have the kind of year Silver had (80%)...So being a more crowded trade, we can take the typical healthy 10% correction and move it up to something like 15-20%..Just remember, a precious metal correction is never accompanied with a neon flashing sign that says "this is just a correction, you can buy"...Instead, the money is made by buying corrections that violate a moving average and seem to say "This is very scary. We're crashing and going much much lower." Because then, and only then, are things not obvious. And its tough to make good money when things are obvious...Just my experience, sir
Sorry, Larry, the cake has been eaten and the keg is dry because you are LATE to the party. If we rewind to the first of the year, yes, this was a great trade. The effects of the DJ-UBS commosity index rebalancing (which was a seller of metals) acted as a rathe severe catalyst for even more selling. However, trends beget trends, and a strong trend just does not cease to exist going forward. This a correction in a bull market. A violent correction, no doubt, but a correction nonetheless. Instead of being cute and timing pullbacks, the smart money is preserving and buying on the oh-so-scary dip. Bet on it...
Many more people will get hurt by piling on the downside than those who are long this month. Precious metals are in an uptrend. However, the nature of corrections in a crowded trade are not pretty. It's the typical 'large room, small exit door' mentality. While longs may be hurting now, the right move is to sit tight. For those more risk oriented, this is a great buying opportunity. Fundamentals are still unquestionably intact for this trade.
CNBC's horse faced Bob Pisani says "Oh, Im not buying the Silver argument, technically it's WAY OVERBOUGHT!" Well Bob, this is why you're a lowly reporter and not a trader. Technically speaking, Bob, this is the chart that you wanna see, this is the chart of an uptrend. I know you cant find a trend with two hands and a flashlight, so let me help you out: Higher highs and higher lows are what you want to see, and should be bought all day, every day. Well Bob, you say it's overbought and I say it's a buy..This is why I run a trading book and you just report the news. Let's stick with what we do best...
Much like you can tell the true nature of a man through the adversity in which he is faced, I like to look at Silver's adversity. This is where true strength shows. I was actually wildly bullish last week when Silver was absolutely, without a doubt flat. Flat in the face of every obstacle being thrown at it from every direction conceivable. There are two things I like in the market: Things that go up, and things that stay flat when they have every reason for going down. Last week, silver was the latter. This week, silver is the former. Using SLV as silver's proxy, todays closing price of $27.44 is a new all time closing high. The intra-day low of $26.84 is the highest all time intra-day low. And with some EOY performance chasing and rebalancing out of things that ARENT working into things that AREworking, just wait and see what December brings!...Good luck guys
Great article, Five K. That ETF is garbage. Just curious what you make of the cute little recent rally in NG? Would you attribute it to short covering, fund rebalancing, or perhaps bottom picking? I thought the tape action was quite negative, finishing convincingly off the highs even with the assistance of a bullish inventory report. Many thanks...
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You are correct sir. Let's point out that Tuesday's action was an isolated incident and doesnt reflect at all on the actual demand for Silver. Tuesdays ugly tape action was the result of increased margin requirements on futures contracts. Not one thing changed in the macro environment that has made silver a great investment. Not one. Less money is not being printed. Asian demand is not decreasing. The fundamental supply/demand for Silver didn't change one bit, it's important for everyone to know this. What you saw was a classic bear trap. Now since then, what have we seen? We've seen 2 high volume advances in Silver in the face of a rising dollar. We've seen undeniable proof for the true appetite for Silver. I've always said true strength can be shown through down days in the market; and after seeing Tuesday's decline followed up with 2 big updays and no continued selling, Im more bullish than I've ever been..
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Matt seriously, Nat gas isn't 'friendly' and it cant be measured by way of the 20 day MA. Every run-up is being aggressively sold into by funds, hence the inability to hold or sustain any type of rally. Natty is a great short going into winter. Silver is a screaming buy right here, up again in the face of a rising dollar. When will people realize that what happened to Silver on Tuesday had NOTHING to do with the macro environment that favors Silver as an investment. It didnt change the fundamentals for Silver one bit. I think you're right on with the metals..
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My question is what's changed? What possibly changed from a macro perspective from yesterday morning to yesterday's close? Absolutely nothing. It was hysteria, a complete sell now- ask questions later scenario. And in my experience, anytime you fade hysteria you will usually come out ahead. Silver gave you a great entry point yesterday. And I cannot express the bullishness of todays tape in Silver. A huge volume reversal yesterday with Silver finishing on its lows and the bears cant take it down 2 days in a row? Thats all they got? Wow, see you at $30 fellas...
Update time! With only one (1) trading day gone by since this ridiculous article, great call on the overbought thesis! I'd hate to still be in SLV and be up another 3.25% before 10am...
Look, one thing that undeniably follows these big price moves is a band of internet cowboys screaming 'overbought' and trying to be cute by timing pullbacks by stepping in front of the clearly defined trend. If you subscribe to technical analysis, this is the chart you want to see! I've never seen so many people try to deny or fade a chart thats so obvious. New 52 week highs with great volume are to be bought, all day every day. I understand its human nature to try and fade a big price move, but the Silver market is sending you a very loud, very clear message here...its up to you if you want to listen..
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Matt, perhaps I've been a bit rough on your articles in the past. I just didnt understand the strategy of fading the best performers or trying to time pullbacks. Now you are spot on. I would tell you to please tread careful with natural gas. It's just so volatile and can be affected by so many things that I wouldnt put a whole lot of weight into the moving average of it. It's been a serial underperformer this year, and I think we'll see fund managers chase performance for the remainder of the year, not underperformance. Hence my agreement with metals and agggies. Good strategy going forward...
It's finally getting that respect now, let me tell you. Now, I am the bull of bulls in Silver and even I expected a healthy pullback to follow up on yesterday's phenomenal performance. Yesterday was just incredible. Yet here we are, with spot up another .60. This is incredible, and should not be overlooked. All this in the face of a rising dollar. Make no mistake, this is a scramble to cover short positions as well as high demand from investors. Mix those together and you get a recipe for much higher prices...
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