Saturday, February 13, 2010

Will Silver Outperform Gold In 2010 By Clif Droke?

From a technical standpoint one of the things we can notice about silver’s price is that when the dominant long-term 30/60/90-week moving averages are in synch on the upside, corrections within the secular uptrend have always been reversed upon coming into contact with one or more of these three trend lines. For instance, there were three corrections for the silver price in 2005. The first two of these found support above the rising 60-week MA, the third one found support above the 90-week MA. The only time the key long-term moving averages are of no benefit as benchmark support levels is during times of serious market panic when support means little and even long-term supports are sliced through like a hot knife through butter. This was assuredly the case during the credit crisis panic of August-October 2008. Institutional fund managers look at these benchmark moving averages as important levels of potential support and use these as buying opportunities after significant corrections in the silver price. As long as internal market conditions are supportive of a market recovery, tests of the long-term trend lines are apt to elicit buying interest from the institutional and professional element, which is why it’s important to always keep an eye on these moving averages following a sharp decline in the silver price. An important intermediate-term cycle is currently in the process of bottoming and now is the time to look closely at silver. If silver confirms a bottom above the point where the 60-week and 90-week moving averages converge in the daily chart as shown above, we should have a good base from which a recovery can begin. The internal momentum indicators will confirm the shift of trend once the cycle has bottomed and will tell us what to expect in terms of upside potential in the next recovery phase. With the precious metals long-term bull market well underway, many independent traders and investors are looking for ways to capitalize on short-term and interim moves in the metals. Realizing that the long-term “buy and hold” approach isn’t always the best, many are seeking a more disciplined, technical approach for realizing gains in the market for metals and the PM mining shares. It’s for that reason that I wrote “Silver Trading Techniques” back in 2005. My goal in writing this book was to provide traders with some reliable trading indicators for anticipating and capturing meaningful moves in the price for silver and the silver mining shares. Included in this guide are rules for using the best moving averages when trading silver stocks, how to spot a turnaround in the silver stocks before it happens (best-kept secret!), how to tell when a silver stock has topped and which moving average crossovers work and which don't . Also explained are the best technical indicators for capturing profitable swings in silver and silver stocks and how to apply them. You won't find these techniques in a copy of Edward's & Magee's book on technical analysis or anywhere else. These reliable "tricks of the trade" are available to you in Silver Trading Techniques. Click here to order:http://www.clifdroke.com/books/silvertrading.mgi

http://news.silverseek.com/SilverSeek/1265996412.php

31 comments:

  1. He works off the premise that "the precious metals long-term bull market [is] well underway" and that may be a false premise.

    Here's a monthly chart of the US$.
    http://stockcharts.com/c-sc/sc?s=$USD&p=M&b=5&g=0&i=p14313159020&a=191360715&r=944

    I'm seeing a clear longer-term uptrend in the US$ with a 93-93.5 target before the end of 2010. Two other things to note on this chart -
    -- Note the negative divergence between MACD and price between late 2004 and early 2008.
    -- Note how RSI bounced off of 40 in late 2009. In a bear environment, RSI oversold/overbought levels runs 20/60 and in a bull environment, RSI runs 40/80. That bounce off of 40 is a pretty strong confirmation of the reversal within the price channel.

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  2. ecbot.......then its P3 and the ponzi is over this year....if you believe that and it certainly is possible then your silver buy point will be late summer or fall....but I do not agree. This is a ponzi and they will fight till their dying breath to maintain the political structure....The presses will run.

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  3. Ecbot, a bounce off RSI 40 does not confirm a bullish trend, it sets up the possibility of one beginning, but that is not confirmation. You could claim the same off a weekly chart for USD on 5/4/2009 if that were the case. The ADX indicator on your same chart does not have a +DMI cross yet, you would need your target attained before you could have confirmation on the trend change. The weekly chart for USD is showing a possible loss of momentum as well, so too early to claim this premise yet. Not to say it cannot carry through to occur, just too early to tell. A lot will depend on current politics and Euro. - Analyze.

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  4. If we get to that point, there is something that will be much more valuable than gold/silver -- food.

    We (in the US) tend to take the idea of deficits, current debt, unfunded liabilities and lump those into a nebula and project them forward to the current month or year creating the impression that we're on the brink. IMO, PIIGS are the canaries in the coal mine and what you'll see is the EZ (+ UK) fail first followed by Japan. Despite our problems, there will be a clamor for Dollars, not PMs.

    The above, in and of itself will probably create a firestorm so I'd better not fan the flames any more, lol.

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  5. The well-timed interview with Evelyn de Rothschild last night on CNBC where he said "I am sure something good will end up coming from it" related to the current problem in Greece would make me bet that the situation is "contained". - Analyze.

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  6. Analyze - just to clarify my language - in saying "pretty strong confirmation", I'd assign an 80% probability to it. Since we're asking the charts to be predictive, there obviously are no absolutes until well after the fact. The DMI cross for the overall uptrend occurred in mid-2008. We're simply looking for for a cross now as a further possible confirmation of the current leg.

    Go back to RSI for a moment. Something I have been doing is overlaying a 45EMA and using Sto as a confirmation. IMO, this signaled the uptrend in mid 2008. The slight dip below RSI in late 2009 was not confirmed by Sto.

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  7. Got it, you are referring to leg and uptrend not as a trend reversal on the monthly but for this current trend change, which is a flag until proven through further confirmation to be a reversal and not a flag, and watching for failure/pass at RSI 60 along with the DMI cross and ADX signal for confirmation. - Analyze.

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  8. Has anyone noticed the drastic reduction in the commercial short positions in Gold and Silver the past few weeks? There seems to be a trend developing.

    http://news.goldseek.com/COT/1266006723.php

    -C

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  9. interesting C....back to the dollar...IMO The collapse of the market in 2008 removed the hedge money and retail long money out of the market period. The movement in 2009 is ONLY an I repeat ONLY Fed/GS/JPM essentially a monolith. It is coordinated politically also. All of this represents a monumental effort to reinflate the economy through the same efforts that inflated it after the 2000 crash....If you believe that the Fed will now rollover and allow its arms GS/JPM to short the market to hell and permanently extinguish the ponzi in a fast ride to hell then fine. It seems the logical conclusion that a medium term dollar strengthening with continued market manipulation....and then of course the presses will use the dollars status as the world reserve currency to aim once again at the deflationary spiral that we are in. Yes they will print and print and print. So you will see 93 possibly but only after the capitulation of this effort fails probably 2012-2014....the Kress 120 cycle..

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  10. Absolutely. The reason the markets recovered to 2006 levels while the economy is stuck at 90's levels is all the liquidity pumped in. You don't have to look further than copper. In June 08 when copper broke $4/lb, LME inventories were down around 100k tons - classic supply/demand. A month ago, with LME inventories standing at over 540k tons, price was north of $3.40/lb. - classic excess speculative liquidity.

    If my end of year Dollar prediction comes true, it will represent an even larger crash in the markets, the "big banks" will be out of business early next yar with no bailout empathy coming from the US taxpayer. At that time, several EZ countries will be putting up signs at their borders... "Closed for repairs". All the focus is on Greece but... http://www.haver.com/comment/100209i.jpg

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  11. This comment has been removed by the author.

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  12. ecbot....big banks/Fed ARE the dollar....once the market was destroyed in 08...there is only a one way trade controlled by them. Without literally a presidential policy reversal they will maintain control of the market through currency manipulation/QE liquidity manipulation. There is virtually NO scenario short of a black swan that will derail this. It is an attempt to buy time until the magic bullet is found for growing world GDP. Bankers are in the proverbial rock and hard place...thanks to years of ponzi leveraging. The creation of 1.25 quadrillion of derivatives obviously was the driving force. Now the piper has to be paid and you are correct. The problem is timing. A strong conviction that the Fed cannot kick this can further down the road .....ie 2012 could get you killed if you lever yourself too far to one side of the boat. Prechter will be right eventually.....meanwhile making calls to be 200% short is absurd.

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  13. I found a Pretcher related music video.

    http://www.youtube.com/watch?v=SatL8-ohp6g

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  14. ecbot,

    If you believe Dollar will get to 93 by yr end then buy and hold EUO ( short euro), and DTO ( short oil) heavy and let it ride, you will be a rich man. On top of that short all the miners and hold as well.

    palmer

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  15. kli,

    It's time for those of you who really believe market is going mainly in one direction this yr and especially those who believe P3 is coming soon to ACT on it. Talk is cheap, let's see some real action, it's time to put up or shut up for those who are EITHER BULL or BEAR to act and put their money where their mouth is. Buy and hold equities for those who are bullish and short and hold for those who are bearish.

    palmer

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  16. kli,

    Are you nuts? What do you mean by timing of 2012, by that time it's too late to short. Economy is in turmoil, print money going no where. I strongly agree with prechter crowd who believe market is going to crash this yr and dollar going to 95. Short and hold the market now with both hands. I can not do it since I am broke, and therfore I will be watching from sidelines and cheering you guys on. No guts, no glory.

    palmer

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  17. palmer - not sure what the challenge is all about but I'm positioned as per my talk. Short silver in varying amounts, a currently lightened short on the Naz and S&P, in and out but short only on the EURUSD, GPDUSD and bi-directional on the AUDUSD. Note that the Euro, Cable and the Aussie are on 1% margin.

    http://farm5.static.flickr.com/4021/4347095605_6195aa0eac_b.jpg

    http://farm5.static.flickr.com/4032/4347843348_8650f1dcd6_o.jpg

    http://farm5.static.flickr.com/4011/4347843310_c9d6470392_o.jpg

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  18. ecbot,

    I am not challenging you at all, I was serious when i said people should act on what they believe. There is a 50/50 chance dollar can get to over 90 this yr. If this was a free market, S&P would have botomed by the end of 2009 around 250/300, how ever FED did not allow it. I welcome a real collapse this yr, it's in line with economic reality. The only question left is whether FED who controls the market allow it this yr or not? Also I do not know whether you have thought about the possibility of chinese dumping their dollar holdings which is almost 2T? Personally I like to see the scenario you discussed in your first post, how ever after 35 yrs investing/trading in the market, I also understand who currently controls the market , and what they are capable of doing, that's all.

    palmer

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  19. Deadly dance that we are playing and as most retail investors that are trying to salvage their accounts will find only the most "aware" players will survive. This game is for only the most savvy traders left. Miners give you a chance ONLY because they will survive virtually every scenario with the exception of a growing prospering low inflation economic environment.....and that aint gonna happen.

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  20. Sorry, I misread a "tone" in message.

    That's one of my main complaints. The liquidity pump has created a fake market. We also had a brand new administration that did not want to come into office and have a depression occur on their watch. So they both threw money around trying to prop up the economy as if it was a run-of-the-mill recession. IMO, they have only delayed the inevitable and round 2 will be worse. Companies that over-leveraged or were inefficient should have been allowed to fail, then let entrepreneurs pick up the pieces and start fresh. I have a lot of friends that took a 50% haircut in their 401(k), currently feel relieved that they got a bunch back and have no idea that they will probably lose another 50% from here. There will be a lot of destroyed dreams.

    I think the best thing China could do is to raise wages to spur domestic consumption. If they were to dump their $ holdings, it would result in a worldwide economic Armageddon and with their over-reliance on exports, they would not escape the pain.

    All IMO.

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  21. Hey guys... nice exchange of thoughts today. Enjoyed/appreciated it.

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  22. ecbot,

    The economic war chess between us and chinese has already started, they are not going to dump all 2T this yr, but as dollar gets stronger, they will dump and buy more hard assets which is what's needed, that I can assure you and it's not a guess. The current cycle we are in overall is deflationary cycle which should bottom around end of 2014/2015. By the way EUO, shorting miners this yr, along with DTO have been good to me. I am glad kli listened to me and bought EUO while back.
    palmer

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  23. ecbot,

    Check out the essay I wrote couple of days ago here, " Gold during Deflationary Cycle".

    palmer

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  24. MMs used to game retail investor emotion, before technical analysis, blogs etc. became the accessible norm for average people. Now that the playing field is leveled somewhat in that arena, the game has been stepped up, so that traditional T/A is what the real people in power game in this market, especially anything using the classic methods that is projected over longer timeframes. The typical indicators and chart patterns that average retail investors use has really become the mechanism to guage actions of the masses, dumb money, or the "great unwashed" so to speak. All the systems including EW have exploitable flaws, and the ponzi is just simply crushing people with this. There are two methods to contend with this, one is what Kli and Palmer have described numerous times on this site related to trading tactics aligned with understanding global market and fed monetary policy. The second is to contend with the T/A tactics of the GS quants. You would be hard pressed to find anyone who would be willing to explain it online to hand it out to people, so the trading tactics is the high probability survival play to follow for people in general. Like in "the Matrix", welcome to the real world. - Analyze.

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  25. Hey Ecbot, you already know where I stand...thanks for joining the group..interesting insights you guys are posting. Texasblondie...Thanks!

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  26. If you cannot bear the risks, stay out. Fed and other Central Bankers will do whatever it takes to keep keep the great unwashed masses from becoming great unemployed and hungry unwashed masses, and honestly can you blame them, to protect their necks and interest, that's reality. Hoping for a washout to a Prechter's crowd benefit is worse than playing the weekly lottery in hopes of striking it rich. Most people are better off to get out and stay out of any paper assets until 2015, take the scraps and secure basics like decent food and shelter, and some precious metals along with the means to protect it.

    However Palmer has pointed out, correctly, people would not visit this site for the big picture of what's coming up in line with the Kress Cycle and Kondratiev winter, they want to play the ponies in the Ponzi casino and know how to strike it rich on some sort of mechanical system like EW. Not going to happen without some serious risks of being wiped out, especially for those without a clue on the basics of TA and an appreciable understanding of the power of Central Banks, both national and privately owned.

    The approach currently being relayed is more of a Guerilla Trading tactic to pick up the scraps as the GS/JPM quant programs herd the TA and Prechter crowd to one slaughter after the next in the name of economic national security and apple pie, the year end bonuses are just icing. The quant programs are geared towards other large similar trading programs that try to squeeze the last smallest penny out of a technical trade based on the lowest beta risks but being so big can only trade so many shares without directly impacting the market severely. For example Gap Trades are extremely high risk, high beta trades that are only profitable on small amounts, once the trend changes and is caught on along with the lower risks it's a false signal the returns diminish, and the sheep late to the party are once again fleeced by the quant programs.

    Don't confuse the dollar with treasuries, debt. Or the interest of Western debtor Central Banks and Eastern creditor Central Banks. Western Central Banks need cheap credit to try and increase the velocity of money, the Eastern Central Banks don't need anymore of this hot money and actually have too much of it. West wants to continuing debasing their currencies and debt in a competitive devaluation, beggar thy neighbor. East wants to maintain or inflate the US dollar at least long enough to swap it for hard assets. Dumping Treasuries for cash is only 1 tool in strengthening the dollar, the other is currency controls like raising reserve requirements in China while at the same time maintaining the US/Yuan peg. Prices for real estate in the East has doubled in some areas causing further inflation.

    This is the tug of war trading environment you are facing, and to believe any player will let it tank sooner rather than later when they (East and West central bankers) get what they want economic/political/military, is a very quick trip to the dumpster diving for left over Alpo cans.

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  27. Oh my red.....you pounded that one...I hope you all notice the comment on the east attitude towards the dollar...

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  28. Red,

    Current trading environment is guerilla warfare, hit and run, heheeeeeee!

    palmer

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  29. That was a capitulation top post Red, I saved it off into a word doc on my desktop. - Analyze.

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  30. Several newsfeed items ...

    [IMM CFTC DATA] showed currency speculators continuing to raise their net long positions in the USD to Usd 9.412 bln in the week ended Feb 9th versus Usd 5.84 bln in the week prior - the highest level since Sept 23 2008. At the same time, specs also tripled their net long positions in the Yen to 22,396 contracts vs 7,135 prior; the most since Dec 8th. On the other side of the fence, bets made against the Euro were raised even further on doubts over a Greek bail out accord; and rose to a record high position of -57,152 from -46,731 prior, whilst Euro open interest surged by 10,579 contracts to 197,457 contracts. Specs also raised sharply their short bets agst the Sterling to -52,765 from -33,968 prior and in the Swiss franc to -6,896 from -1,775; whilst net long positions in the Aussie continued to be lowered to 27,606 from 33,271 prior, in the Kiwi dollar to 4,723 from 5,383, in the Canadian Dollar to 8,863 from 15,355 and in the Mexican Peso to 32,274 from 42,653 prior.

    [CHINESE WHISPERS] PBOC signalled it was acting more quickly to rein in its booming economy after it unexpectedly raised the reserve requirement ratio for banks by 50bps from Feb 25th, the second increase this yr. Another rise was expected but not so soon, with high ylders and commodities immediately hit by the announcement which came after the Shanghai stock mkt closed; seemingly to minimize the impact on Chinese shares given local markets will be closed all this week for CNY. However key focus continues to be on a Yuan revaluation; with Goldman Sach's chief economist John O Neil, keeping mkts on edge in his subsequent comment that something is brewing in China on the ccy front, which could happen anytime soon. Commenting in Bloomberg, O'Neil said that China may allow the Yuan to rise as much as 5% in a one off reval, and to then trade within a bigger band or agst a larger basket of currencies in a bid to stem rising inflation.

    [DUBAI DEBT] concerns re-emerged from Frid as CDS on Dubai govt debt jumped to 631bps, the highest level since Nov 27. Dubai stocks also plunged 3.5% on Sunday, the most in almost 3wks on a wire rpt saying Dubai World may offer creditors a sizeable and prolonged hair cut of 60c on the dollar after 7yrs. The Dubai Govt subsequently denied the rpt, and said no plans were formalised & will only be announced in March/April; however DW's situation still remains murky on how it actually intends to pay some $22bln of outstanding debt as informal banker negotiations continue.

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  31. bet those dubai creditors will like that haircut ......china moves should allow further dollar strengthening....."should"

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