If there has been one major theme for 2013 it is the bear
market in precious metals. Year to date, gold has fallen
over 23% and silver is down a whopping 30%. At a time of monumental
government instability, precious metals have not lived up to
their "safe haven" status.
And all the "major" gold players got it wrong and continue to
get it wrong. (See John Paulson, Peter Schiff, and James
As they were all calling for higher prices, they refused to
listen to what the markets were actually saying. In other
words, their rose colored glasses combined with their
conflicted biases have resulted in a cesspool of toxic
advice. (Read our "
Is the Worst for Gold and Silver Really Over?"
piece published 9/5.)
When it comes to the gold (NYSEARCA:GLD) and silver (NYSEARCA:
SLV) markets these blind guides were looking at the wrong things,
namely fundamentals. Instead, they should have been
following market sentiment, market history, and the
charts - all of which combined for some extremely good trade
What Really Mattered
In mid-June when silver (NYSEARCA:AGQ) and gold (NYSEARCA:NUGT)
were in the midst of their waterfall declines, bearishness toward
the metals (NYSEARCA:DBP) reached an extreme.
This was also supported by a Commitment of Traders report that
showed extremely bearish lopsided bets by the typically wrong
"speculators". That data suggested that the majority of
traders were selling or had already sold out of their precious
metals positions leaving the path of least resistance to the
When combining such sentiment extremes with the charts, we saw a
lot of great opportunities to go both long and short the
Here is a summary of how we captured the major turns of the
precious metals utilizing a combination of sentiment and technical
analysis in our twice weekly
including our most recent two week 10% profit on 9/15:
--June 30 (SLV @ $19 GLD @ $119) - Take profits on short
positions. "Gold and silver may have kicked off their relief
rally Friday. Gold and silver shorts should be on high alert
and managing stops to lock in profits should be priority #1"
--July 13 (SLV $19 @ GLD @ $124) - Long - "Big gap on SLV up at
$20.50 that will likely be filled at some point"
--September 1 (SLV @ $23 GLD @ $136, ZSL @ $68, GLL @ $81) - Short
- "At this point it is very tempting to say gold has topped and has
resumed its downtrend on extremely bullish sentiment. Very
aggressive traders look into GLL (NYSEARCA:GLL) or ZSL
--September 15 (SLV @ $21, GLD @ $128, ZSL @ $75, GLL @ $90) - Take
Profits - "Gold bears (shorters) should get a better price this
week to initiate or add to precious metals shorts. Aggressive
traders should look at taking some profits off the table"
--September 18 (SLV @ $22, GLD @ $132) - Short - "Traders that
were looking to short and waiting for a better entry certainly got
that today, and it needs to be stressed that today did nothing to
the longer term outlook, which is to stay short as long as price
stays below trendline resistance.
The above mentioned trades are shown in the chart below along
with the commentary and technicals we provided to subscribers.
Each step of the way, we were able to capitalize on the direction
What Still Really Matters
A logical trading philosophy behind gold and silver should
include the euphoria and/or negativity surrounding the precious
metals as much as it surrounds the long term fundamental
Even though the fundamentals, based on some professional
opinions, may have not changed or may have even gotten
better, reality says otherwise for owners of gold
(NYSEARCA:GDXJ) and silver (NYSEARCA:USLV). They have seen prices
drop 25% to 40% since their 2011 peak.
Timing is important when it comes to volatile markets such as
the precious metals, and a large part of that timing is based on
the public's and traders' general sentiment toward these assets
(NYSEARCA:XME) that don't offer any cash flows and are probably the
most speculative of all the major asset class.
It is no coincidence that
was one of the highest rated television shows in 2011 just as
Gold Rush - Alaska
was being kicked off and gold and silver were topping in
price. As I discussed in our April Newsletter, pop culture
warning signals such as these often coincide with peaks in their
Profit Strategy Newsletter
follows the major asset classes utilizing sentiment, technical, and
fundamental analysis. Gold and silver have offered some great
sentiment setups over the past few years. What will they
offer us next?
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