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-- Posted Thursday, 9 March 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +3.60, SILVER +4.00
London Gold Fix $547.25 -$1.35 LME COPPER STKS 129,600 ml tns +3,875 tns
COMEX GOLD stks 7.549 ml oz +31,964 oz COMEX SILVER stks 127.8 ml oz Unchanged OVERNIGHT ACTION: Chinese central bank gold selling overnight was offset by fresh physical gold buying. GOLD: In retrospect, the slide in gold isn't surprising when one considers the recent rate hike mania, periodic strength in the Dollar, slack US economic numbers, significant weakness in oil prices and the moderately overbought status of the gold market around the February highs. In looking forward, it is possible that a final wave of selling is possible into and through the Friday morning US payroll reading as the Dollar might rise on a strong report. However, a strong payroll report is probably necessary just to begin rebuilding the bull case. While physical buying is supposedly the hallmark of the bull market, it is our opinion that physical buying is stimulated by a strong economy, the prospect of inflation off rising energy prices and a lack of a dominant currency. Therefore, traders should look to the direction of oil prices and the US numbers for a clue on the near term direction of gold prices. It would seem like the April gold has carved out some support around the $540 level and since the market bounced off that level in the February break, that level should be given some additional credence. However, because the fundamental condition in gold is still lacking, we would suggest that would-be longs utilize June call options instead of long futures. We would also suggest that traders continue to hold long puts against long Futures. Those who sold calls and bought puts against long futures, should exit the short calls and look to reset that coverage on a bounce to $555 in the April contract. For a fresh long play, consider selling April $560 gold calls for 500 and then buying a June Gold $580 call for 900. SILVER: The silver market also managed to bounce yesterday and is showing signs of a follow through rise in the action today. Near term trend channel support in the May contract is seen at $9.70 but an even more critical pivot point is seen today at the $9.85 level. Like gold, the silver market appears to have been upended by sagging industrial demand expectations for all metals, economic slowing fears and by declining inflation fears. Given the breadth of bearish fundamental factors, we doubt that the uptrend will simply turn back on without notice. However, the market might be able to respect recent support on the charts, but to truly turn the bull trend back on might require a recovery in the global economic outlook and renewed strength in energy prices. Therefore, the odds that a bottom has been forged have increased from a technical perspective, but we aren't overly excited about the external fundamental factors that influence silver. However, those unwilling to wait for fundamental confirmation of a low, might consider selling an April silver 10.00 call for 29 cents and buying a May silver $10.25 call for 36 cents. If the correction extends, the short April calls should evaporate, leaving the longer dated call in place at a much reduced in cost. METALS TECHNICAL OUTLOOK 3/9/2006 COMEX SILVER (MAY) 03/09/2006: The daily stochastics gave a bearish indicator with a crossover down. Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. A negative signal for trend short-term was given on a close under the 9-bar moving average. The gap lower price action on the day session chart is a bearish indicator for trend. The market is in a bearish position with the close below the 2nd swing support number. The next downside objective is now at 959.3. The next area of resistance is around 995.5 and 1003.3, while 1st support hits today at 973.5 and below there at 959.3. COMEX GOLD (APR) 03/09/2006: The close below the 60-day moving average is an indication the longer-term trend has turned down. Negative momentum studies in the neutral zone will tend to reinforce lower price action. A negative signal for trend short-term was given on a close under the 9-bar moving average. The gap lower price action on the day session chart is a bearish indicator for trend. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The next downside objective is now at 535.4. The next area of resistance is around 548.6 and 552.7, while 1st support hits today at 540.0 and below there at 535.4.
To those of you who have emailed or commented on the daily commentary regarding price manipulation: our daily comments are strictly to provide our customers and subscribers with news, which may influence the markets marginally on a day-to-day basis. This is not the forum to address price manipulation.
There are multitudes of ways in which one can participate in a bullish or bearish perspective in the metals complex. Mining shares as well as purchasing bullion are just a few. Another investment of choice is through futures and/ or options on futures contracts. If you have traded, then you will be able to appreciate the brokerage service that Nell Sloane and Group can offer. If you have not, and wish to learn more about it, please feel free to contact her staff so that they can forward you some educational literature for your review. Please contact Nell Sloane or a member of her team at 800 238 2610.
-- Posted Thursday, 9 March 2006 | Digg This Article
***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Hartfield Management, Inc. is strictly prohibited.
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