1. Market Update
It´s been a couple of tough days when silver experienced a flash crash and gold moved below its 200MA at 1,235 USD. But the incredible pessimism among basically all precious metals investors and analysts was a great contrarian signal.
Now gold and silver already do look better and I believe we might be right at the beginning of a multi-month bull run that could take gold towards 1,500 USD and silver towards 26,00 USD.
While the precious metals sector gets me excited these days the cryptocurrencies are to be handled with great care and skepticism. Obviously the wash out over the last couple of weeks is not over yet although some interesting opportunities do appear already. This recent bull run has been so massive that we have to expect a long and frustrating consolidation for the rest of 2017. But the crypto bull market is not over - it´s just taking a breather and some rest.
2. The Midas Touch Gold Model neutral since 24th of April 2017
Now we have new buy signals on the daily chart for gold in US-Dollar, in Indian Rupee and in Chinese Yuan. As well the goldminers (GDX) flashed a buy signal five days ago.
The only real concern comes from the CoT-Report for the US-Dollar. Here the commercials have once again reduced their short position which brings this signal close to a sell signal for gold.
Overall the model still calls for patience although it certainly has improved over the last couple of days. Be aware that it currently takes a move above 1,288 USD to flip the weekly gold chart to a buy signal!
3. Gold - The summer lows are very likely in
Rarely we can experience such a high level of pessimism like last week. Basically everybody was bearish - even the analysts that I like to follow. Everybody was calling for gold to move below 1,200 USD and even to crash towards 1,100 USD and lower. Although this extrem sentiment has not been reflected by the daily optix data from www.sentimentrader.com it was very obvious if you skipped through most of the precious metals sites and forums.
I think this is really great news as it is exactly what I was waiting for in this summer. Yes, I thought gold could hold around 1,235 USD and the lows came in at 1,205 USD but now we have this very oversold set up on the daily and weekly chart in combination with a bullish CoT-Report and a strong seasonal cycle.
On top Gold is sitting just 30 USD below its six year downtrend line at around 1,265 USD. It did not loose eye contact and could now finally clear this level in just one or two trading sessions...
Especially the weekly oversoldness gives a lot of room for a multi-month rally. Once gold can break out above the 1,260/1,265 USD resistance it should quickly run towards the next resistance around 1,295/1,300 USD. After that the next target is 1,375 USD. And as I have been writing for many months if gold breaks through this depressing six year downtrend line a multi-month bullish liberation rally towards around 1,500 USD until next spring is very likely.
Of course I am just cooking with water like everyone else and of course I can not see into the future. Therefore we have to prepare a worst case scenario as well. I think if gold now moves below 1,205 USD it is clear that the correction is not yet over and I´d advise to use 1,200 USD as the ultimate stop loss for any speculative trading positions.
Physical investor should relax and not worry too much about any possible downside action. Gold will always make a comeback and is currently pretty cheap - especially in Euro! So this is a clear buy recommendation for physical gold and silver at current levels!
4. Silver - Flash crash, capitulation and a huge opportunity
Yet on Friday 7th of July the tight silver-market experienced a flash crash seeing the September contract dropping 11% within a couple of seconds from 16.14 USD down to 14.34 USD. Certainly another case of high frequency trading, technical glitches, blind algorithmic robots and a very questionable form of manipulation. Fortunately prices quickly recovered and are now back above 16.00 USD.
But as worrisome as it may have seem on this Friday I think the silver-market now is cleared from all the weak hands and any stops below the technical important levels around and below 15.80 USD. You would need extremely deep pockets to sit through such a drawdown. So I guess any speculative money has been shaken out...!! And that´s very positive!
Of course technically the chart is currently broken but I believe the 12 months correction has ended with a final capitulation that now opens up the door for a new multi-months rally. We are just at the beginning!
With the recent flash crash experience in mind it is very clear again that trading silver doesn't make too much sense at all. Instead you should focus on the physical metal and on the silver mining stocks! If gold can indeed move towards 1,500 USD by next spring silver should run towards 26,00 USD. Some of the top silver mining stocks can easily triple or even quintuple during such a move. Therefore I will come up with two new buy recommendations ....
5. Buy First Majestic Silver up to 8.20 USD (NYSE: AG)
It´s been the right thing to wait with any recommendation in the mining sector. But now I feel the time is right. As explained I believe silver has a great potential over the next 8-12 months. The most promising way to play a multi-month rally in silver are some of the best but currently beaten down silver mining stocks.
First Majestic Silver without a doubt is one of the best companies in this sector. Focused on silver production in Mexico the company is run by mining legend Keith Neumeyer. Here is a very interesting interview with him.
Although First Majestic has been consolidating sideways since October last year I think the stock is at a very interesting juncture.
We might be a bit early to the party but the risk/reward is just phenomenal! With a stop loss at 6.50 USD and a 1st profit target at 19.00 USD the idea has an initial 1:7 risk/reward-ratio. But First Majestic could easily take out 19.00 USD and we might scale in a couple more times once the stock has cleared the downtrend-line at 8.20 USD.
Buy First Majestic Silver up to 8.20 USD (NYSE: AG)
Place a stopp loss at 6.50 USD
First profit target 19.00 USD
Timeframe 6-12 months
6. Buy Endeavour Silver Corp. up to 3.20 USD (NYSE: EXK)
Another silver stock that I really like and that I have already recommended in the past is Endeavour Silver Corp.. Although Endeavour had some issues in the last couple of months I continue to believe in Bradford Cooke and his team. Endeavour was one of the best performing silver stocks in the first half 2016 and should offer massive leverage in a new silver bull market.
Technically the stock as corrected back to the 61.8%-retracement around 2.80 USD and is running into a bullish wedge. With a stop loss at 2.60 USD and a 1st profit target at 5.90 USD this idea has an initial risk/reward ratio of 1:7.
Buy Endeavour Silver Corp. up to 3.20 USD (NSYE: EXK)
Place a stop loss at 2.60 USD
First profit target 5.90 USD
Timeframe 6-12 months
8. Cryptocurrencies have entered a multi-month correction
The Cryptocurrencies had a spectacular run in the last couple of months. But since mid of June they all moved into a rather nasty correction. Bitcoin went below 2,000 USD already while Ethereum lost more than 65% in six weeks. Yet they are oversold and getting interesting again.
I have been buying IOTA over the last couple of days. It´s up 52% today :-) ! As well I continue to like DASH and STEEM and I have been buying into recent weakness. However it is rather difficult to come up with a decent risk/reward-ratio at the moment. There is no need to rush.
Overall the cryptocurrencies have very likely moved into a multi-month correction. So you will need to have a lot of patience and must be very careful with your buying orders. I don't think that the bubble has burst instead this is just another healthy and necessary correction within this great crypto bull market. But it will take time. Most of the weekly charts are not yet oversold. So there is more downside or at least sideways action to expect.
Buy BITCOIN below 1.800 USD, Stop loss 950 USD
Buy DASH below 120.00 USD, no stop
Buy STEEM below 1.00 USD, no stop
Timeframe 6-12 months
Don´t put more than a maximum of 5% of your networth into cryptocurrencies and only use money you can afford to loose.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AG, EXK over the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am long physical Gold & Silver, Bitcoin, Ethereum, Dash, Steem, Iota
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.