-- Posted Friday, 20 July 2007 | Digg This Article
7-19-2007
This week’s Weekly Metals Report is going to be different as I want to diverge from our normal format as something big and important is taking place.
It is now time for you to get yourself ready on price breaks to get long. Some may want to play using December Call Options while others may prefer to use futures. In either case, the time is now to fund your trading account to take advantage of what I think is going to be one heck of ride in gold and silver.
The reasons for this center around the US Dollar, which is now on the ropes. Those who receive my Twice Daily Market Recommendations are more than aware of this as they were told by me to go long the September British Pound, nearly 400-points ago by me.
I think it wise to spend time this week on what has been going on and what insight history offers in terms of chart action. Keep in mind that what occurred before does not always occur again. However, I believe that past performance can be and is a very useful tool and I do use it in my chart analysis.
The charts below come from the Moore Research Center and are reproduced with their permission. Steve Moore and I have a relationship that goes back over 20-years. You are invited to access their website by going to www.mrci.com.
Let’s start off with a Gold Chart. Both the 33-Year and 15-Year Seasonal Studies are plotted on it. The 33-year pattern in “blue” and the 15-year pattern in “red”. I like to use both longer and shorter term chart patterns together, as the shorter term one takes into account events and more current pricing while the longer term one takes into account a lot more data and history.
In August some divergence begins. Typically after a mid to late July rally prices churn a bit. The ride as I like to call it, begins in late August. Where we are right now, mid-July is transition month on both the 33-year and 15-year charts. Prices have already in my opinion transitioned out of a downtrend and have begun a longer term Uptrend. Once into September is where and when historically speaking the party begins.
By design this chart does not show price in and of itself. Rather it shows price “momentum”. In other words, on a historical basis the above chart shows what past performance has done in terms of prices moving up or down over set period of time.
Those that subscribe to and view my Daily Audio/Video Recordings know that in June I took a bearish stance on gold and silver in terms of both market momentum and price action. As it turned out I was correct on both.
This past Tuesday night I offered up in writing to subscribers of my written recommendations what I thought were break out upside breakout points in both gold and silver. As it turned out both numbers where hit on Wednesday, a strong rally began and is following through today.
The reasons behind my thoughts centers on the falling US Dollar and increasing inflation. Fed Chairman Bernanke pointed out both today and yesterday that he is concerned about inflation. Food and energy prices don’t get enough attention in my opinion. They have to be looked at. Milk prices have doubled in the past year. Eggs the same. Crude oil is approaching a historic high which should if it stays here create higher highs in crude oil byproducts. Even Chairman Bernanke is resigned to higher crude oil prices going forward. At best he is hoping for a leveling off, according to the testimony I heard.
For those that want to play metals, it is time to get your trading account ready to do so. On pullbacks I will soon be recommending how to accumulate December Call Options and am already making recommendation in August Gold in my Twice Daily Market Reports.
I expect gold to become very exciting to trade….very soon.
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Let’s keep looking at seasonal charts and focus on Silver. In this chart we have 40 year data overlaid on 15-year data.
My comments on the above chart are meant to point out that silver has a very different historic seasonal tendency pattern that that of gold when looking at the 40 year pattern. The 15-year pattern is a little close to gold’s pattern, but still shows substantial differences. The 40-year is plotted in ‘blue’ and the 15-year pattern is plotted in “red”.
I prefer to use the 15-year line, as this is deals with more recent price movement. While it’s nice to see where the two depart, given the reasons I laid out in the gold section as to why I expect a gold rally, I think it best to focus on silver’s 15-year tendency. It ties in closer with that of gold’s and the 40-year line above.
Notice that silver often has mid July price break followed by rally back up through the end of July. That’s’ where we are now. From there prices historically tend to break down again, sometimes very hard and through the July low. This is a different than the gold picture above, which historically makes its price low now.
What this means to me is that gold, not silver should be where you turn your focus until near mid-August. This does not mean silvers history will come to pass. Things are never this simple. While my analysis for this report is based on historical chart action going back 40-years, it not and does not guarantee results. Rather it offers a scenario and I like scenarios as from the information is provided to setup a game plan to trade from.
It will be very important to keep looking at both the daily and weekly chart action in silver to see if the longer term seasonal chart action, as shown above, comes into play. We will continue to do that in coming weeks Weekly Metal Reports.
To some degree, silver will follow the action in both gold and copper. As silver is primarily an industrial metal in terms of usage, it gets pulled along by both. Copper prices rallied nearly 10-cents today. Gold was up nearly $5. Silver will look to both for guidance, but will most likely take on the role of a metals complex leader. That will be left to gold in precious metals and most likely copper in the industrial metals.
The timing of a seasonal bottom differs considerably in gold and silver. Gold according to the chart above has most likely seen its summer low. Silver according to the chart above often sees even lower pricing, after a July bounce, into late August.
On my Twice Daily Market Reports I will continue to address these differences from time to time. Be sure you subscribe to them in order to keep up with our trade recommendations.
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Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from Ira Epstein & Company or Shatkin Arbor, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
-- Posted Friday, 20 July 2007 | Digg This Article
