Summary
- Silver has made a new low.
- Gold will still likely see a lower low as well.
- Upcoming week's expectations.
So, how many traders and investors in the metals world are surprised about where we now find ourselves? How many calls for much higher levels have we had to endure before many started to believe that just the opposite was in store?
But, I now hear the "hopeful" amongst you saying to yourself: "but we did not get a lower low in gold yet." Well, the operative word is "yet." And, it will be coming in one of two ways.I cannot tell you how many people told me how foolish I was for expecting lower lows in the metals. I cannot count the number of people who told me that I would lose in a big way on my short positions. The bottom, according to these folks, was supposed to be in last year. We were not supposed to have broken to new lows. Yet, here we are. Silver has now made a lower low, just as expected.
So, over the last few weeks, we have seen raging bulls become "brokenhearted." Yet, some of the same bullish voices calling for higher at the highs in 2011 are still calling for higher, despite making those calls all the way down for the last 3+ years. And, surprisingly, people are still listening because they simply need hope. In fact, too many have been caught buying all the way down, despite the market telling us we should be doing otherwise. There is much pain being felt by investors in this market who have been led astray, and they are now only holding on to hope.
When you invest or trade in metals, you cannot invest or trade based upon "hope." As Franklin once said, "he that lives on hope will die fasting." I wonder if he traded metals?
But, as I have been warning for weeks, while GLD has left me with some questions, silver has been clearly set up quite bearishly. And, this past week, we broke a very important support. We dropped below the 2013 low in silver, which is something I was told over and over would simply not happen. Yet, silver has now confirmed what I have been saying for quite some time: new lows in the metals will be seen.
For now, we have a lower low in silver, and I think levels below this week's lows will still be seen. In fact, don't be surprised by a 15-16 dollar target in silver. But, more interestingly, gold has still not made a lower low, and has held up much better, thus far. Yet, the same issue that I had with silver still bothers me about gold. And, that is that I have no clear evidence of a bottom having been put in for that metal. So, I will still maintain the belief that gold will still likely see lower lows just as silver has.
And, believe it or not, even with that lower low, silver has still not invalidated the potential to head back up to the 22/23 region before the final lows are set in. This same perspective applies to GLD as well, as the lack of a strong break down below 119 has amazingly still left the door open for the move up to the 130-133 region before a run to the final lows is seen.
But, in the most immediate sense, neither metal has shown us any reason to believe yet that those higher levels will be struck before a final low is struck. Rather, as long as silver maintains below 19.33 and GLD maintains below 123, pressure will remain down. It would take a break out over those levels to confirm that GLD is likely heading to the 130-133 region, and silver is heading to the 22/23 region in order to set up the final run to lower lows. Unless we see such a break out, I still expect silver to head down to at least a 16 handle, and GLD to at least the 105 region within the next three months.
So, while I am following this current move down and expecting it to take us to lower lows, as amazing as it may sound to many of you, I still have to keep one eye open to the potential for another fake out rally back to 133GLD and 22/23 in silver, and there are many reasons I have to still entertain this potential. (But, I do want to note that should silver decline below 18.20, it makes the potential for another "fake-out" rally significantly lowered).
A significant portion of the market sees a triangle pattern as completed, and us being on our way to lower lows. Most of the technicians are touting how bad the market looks. Even the fundamentalists are now losing "hope," and some have admittedly become "brokenhearted." Sentiment is at multi-year lows according to some that track it. And, hedge funds have huge short positions in place. This is not usually a recipe for a continued strong decline. So, I am going to be very careful with my short positions, and watch the cited resistance carefully. Should they break, I would not hesitate to bank profits from my short positions (yes, the ones many of you suggested would lose money), and ride long positions to the higher target regions, where I would set up short positions yet again.
My final point is the same point I have been making for quite some time: We have not yet seen the ultimate lows in the metals for this 3+ year correction. The only questions are how and when we get there. And, if we stay below cited resistance, that low should be seen before the end of this calendar year. However, should we break up over resistance one last time, then that lower low will not likely be seen until early in 2015.
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