- The metals markets are into the completion of a seasonal cycle low which will put the yearly lows in place.
- Fundamentals do not appear to be affecting gold or silver, which are trading purely on technicals.
- The markets are beginning to feel that we may be running into a supply squeeze as we move into the holiday period.
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Silver is up about 32 cents, while gold is down about $2.50. We appear to be getting an adjustment on the gold/silver ratio. It was trading at around 80, so we have seen silver appreciate about $35 cents against gold, which is down. The metals markets are into the completion of a seasonal cycle low which will put the yearly lows in place. Fundamentals do not appear to be affecting gold or silver, which are trading purely on technical. We have a debt ceiling looming again in about December. Consumer spending is running at very high levels, Inflation is running at a higher level. The supply chain is being affected by a delay of cargo ships delivering goods. The markets are beginning to feel that we may be running into a supply squeeze as we move into the holiday period.
Consumers have a lot of cash and it is looking to buy things, but supply chains are constrained. It is a kind of stagflation and it remains to be seen how long it will take for this situation to be resolved. Tapering is also on the table, off the table and then back on. It is frustrating when you try to use fundamentals to develop a trading strategy. So we focus on technicals; one of the ways we do that is by looking at longer-term trends, such as the gold 360-day cycle.
The Variable Changing Price Momentum Indicator (VC PMI) annual gold report published on September 28, 2021, states that the annual trend momentum for the next 360-day cycle is bearish at $1794. The VC PMI of $1840 indicates a bearish price momentum. A close above $1840 stop will negate this bearishness to neutral. If you’re short, take profits at the Buy 1 level of $1572 and the Buy 2 level of $1409.
If you are long, take profits at the Sell level of $2003 and the Sell 2 level of $2271. The Buy levels are also where to enter the market to go long, and the sell levels are where you could enter the market to go short. The average price is $1840 and the moving average is $1794. Since gold is below that level, it is entering this period with a bearish trend momentum. If gold closes below that price, it is a bearish trend momentum.
The price momentum indicates the velocity of price in relation to the bigger trend. The 9-month moving average is bearish and the price momentum is bearish, so the market has activated the targets below of $1572 to $1409. If we get through $1840, then it will shift the price momentum bullish. It would then activate the targets of $2003 to $2271 for the next 360 days. The VC PMI provides you with pivot points based on the artificial intelligence algorithm and also provides probabilities for each entry point.
We also use the VC PMI based on shorter-term daily, weekly and monthly data to analyze the shorter-term actions of the market. When you trade, you want to know whether it is for the short, medium or long term. You don’t want to go into a position for the long term, it goes down, and then you have to sell. You want to commit the amount of money that you can lose and hold for the long term, even if it goes down. Sometimes you have to take the drawdowns in the market until the market does what it’s going to do over the long term. We continue to buy gold and silver for the long term.
To learn more about how the VC PMI works and receive weekly reports on the E-mini, gold and silver, check out our Marketplace service, Mean Reversion Trading.
This article was written by
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