Originally published by Chamber of Merchants
Good morning everyone.
Possible tumultuous day ahead.
I would urge every market participant to think better by considering support and resistance zones for your commodity, sector or industry.
Often when we become emotional, we seek relief by making a trade under duress. Sometimes the best trade is no trade at all.
In terms of the stock market, I am wary of the recent rallies from Thursday that seemed to falter Friday. It is possible that the ramp was engineered to get most traders on the wrong side as money starts to exit their positions. Proceed with caution.
Metals: with a rallying US dollar in the short term, metals may experience some pressure. Of course , depending on the time frame, commodities and the dollar may rise together.
The bond market has shown signs of weakness. This does not mean it is crashing today. It could take weeks , months or even years. What is rather worth considering is that as the bond market does weaken, that money will need to pour into other areas. This means that money could flow into the dollar, stocks, commodities and precious metals.
That brings me to gold and silver. Gold may rebound at this point, however it is a high probability outcome that gold will test the $1200 mark. When I say $1200 I mean a range $1180-$1227.
I believe gold is in a bull market, that means that the support zone around $1200 would be an excellent entry point for me to enter if I were not in already.
From the traders in my network the consensus is that
- This dip will be aggressively rebounded after causing much pain to majority of traders lasting another 3-5 days.
- This roughly coincides with another view that end of November early December would be the ideal entry point for Gold and Silver.
- This coincides with the upcoming FOMC rate hike decision on December 14th.
Does consensus mean that it will happen.
No.
But it is important to remember that the market does not care about the level at which a trader entered a trade. The market will do as it will. Some traders will set a stop loss around $1200 for Gold. As I mentioned this is the area where patient big and smart money have been waiting to accumulate.
Therefore realise that there are always two sides to the trade. Sometimes when exiting a trade one would be selling to the next trader that has been suckered in by their inability to recognise a trend reversal.
On the other hand, sometimes we sell to strong hands that have been waiting for suckers like us to capitulate and cough up our positions that are imminent for reversal.
A Merchant always asks the question before entertaining the the idea of selling :
If I were cash right now, would I be entering this trade or running from it? My answer to the precious metals sector would be to wait for the $1200 mark before entering. A note of caution to myself would be that if I am thinking that then so will a gazillion other traders. Hence, we may not actually reach $1200 before the rebound.
I would recommend studying the gold price from December 2015 and January 2016. The case for gold is now stronger in my opinion and once again we anticipate a rate hike.
I’m sure many marketwatch articles will fail to recognise that the last rate hike reversed the bear market in gold.
The next few days are designed to be painful. This will be alleviated or exacerbated by the slew of economic indicators from Europe and the US.
An encouraging development in many of the precious metal holding I have is an increasing notice of Becoming a Substantial Shareholder.
As we reach this support level in gold and silver (silver could touch under $17) the interest from larger players is renewed which fuels the next leg up when the time is right.
Most traders are usually right about what will happen. Most traders are usually wrong about when it will happen.