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-- Posted Wednesday, 9 April 2003 | Digg This Article
Why is “good news regarding the war in Iraq being absorbed with a negative tone by the US dollar, equities and financials? Perhaps we’re experiencing another classic case of “buy the rumor and sell the fact?” Markets will usually do a terrific job of discounting information and leading the news. There was some legitimate rationale behind the recent buoyancy in stocks and the dollar, after all, the markets were anticipating a favorable outcome. However, many issues in Iraq still need to be addressed, as do other hotbeds of potential turmoil, and of course economic data isn’t doing much to impress anyone. Therefore, looking at the forest through the trees, stocks remain tepid at best, the dollar is struggling and energies bulls are charging, so perhaps gold will shine once again. It's not possible to predict the daily change of tide on the geopolitical landscape, just as one can't always correctly forecast market direction on a short-term basis. Do your best to follow the longer-term trends, initiate positions with a favorable risk/reward ratio and try to filter out the static. Monthly gold charts show gold still remains in a longer-term uptrend. With prices having fallen somewhat consistently over the last couple of months, one has to wonder if the correction is over. Prices are not yet above the 5, 10 and 20 period moving averages, but when gold closes consecutively above those averages look for continued strength. Meanwhile, aggressive bulls that bought in the low 320’s are doing just fine, but should move stops to at least breakeven levels. Be sure to watch TradeScope daily. Remember, with futures and options one can be short or long, feel free to contact me to discuss trading strategies. Each contract/option = 100 ounces, a $1 move in a futures contract $100.
To open an account and receive trading recommendations on gold futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com. Visit www.altavest.com to request a Free Starter Kit. Keep in mind that there is risk of loss in all trading.
May Silver: Close = 448.3, +.50-cents
This week we hit levels not seen in over three weeks as the market has slowly edged higher. Silver hasn’t been quite as volatile as gold, but instead it has possibly built a bit of a base in the 435 to 450 area. An article in the Wall Street Journal by Gavin Maguire also references thin trading conditions and the COT report as factors to consider:
”On one hand, the emergence of continued buying by speculators despite rising prices indicates that they expect heightened demand for silver at some point in the future.
Such an assumption is based on the fact that prices have recently built a fairly solid base in the $4.35 to $4.40 region despite the accumulation of a rare speculative net "short" position that had applied downward pressure on prices in recent days. Market participants will sell futures, or become "short," when they expect prices to fall. They then buy futures to reverse those sales to close the position.
The latest Commitments of Traders report…indicated that speculators built a 3,680-contract net short position in the week to April 1 -- the largest such position since November 2000.
Tim Evans, commodities analyst at Pegasus Econometrics, argued that as large speculators have traditionally abstained from hosting hefty short positions in the silver market for long, little further downside pressure was expected over the near to medium term -- rendering the upside as the path of least resistance.
On the other hand, the fact that prices encountered some commercial and speculative fund selling late in the session Tuesday and subsequently failed to secure a settlement above the psychologically significant $4.50 level demonstrates that many other market observers harbor doubts about silver's recuperative powers.”
The chart remains awfully messy, with technical indicators oversold, then turning higher, and now they are indifferent. If long, exit on a close below 444, the next resistance area is now 451 or so. Certainly there is room to rally but only on the shoulders of a willing gold market, which means silver bulls will need the dollar to drop. Each contract/option = 5,000 ounces, a 1-cent move in a futures contract = $50. Contact me anytime to discuss strategies to fit your needs.
To open an account and receive trading recommendations on silver futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com. Visit www.altavest.com to request a Free Starter Kit. Keep in mind that there is risk of loss in all trading.
-- Posted Wednesday, 9 April 2003 | Digg This Article
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