Here is a technical picture of gold and silver. I am utilizing our “scale-in” strategy to approach these markets, to exploit the volatility. Call for details.
APR GOLD
Overnight’s break above 04-Mar’s 1280.7 high reaffirms the past quarter’s uptrend and leaves yesterday’s 1237.5 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter this market needs to sustain gains above to avoid confirming a bearish divergence in short-term momentum. And while such an admittedly short-term mo failure would be of a scale INsufficient to conclude the end of the broader recovery from 03Dec15’s 1045 low, traders would nonetheless be advised to take at least some defensive steps on such a failure below 1237.5 in order to reduce or circumvent the risks associated with a larger-degree correction lower.
The RSI measure of momentum in the daily log active-continuation chart below shows the nicely developing POTENTIAL for a bearish divergence. However, PROOF of weakness below at least 1237.5 is required to raise the odds of this signal being CONFIRMED to the point of at least some defensive measures. Given the magnitude of the 3-MONTH rally a failure below our larger-degree corrective low and key risk parameter defined by 16-Feb’s 1191.5 corrective low is really required to break the 3-month uptrend and expose a larger-degree correction or reversal lower.
Finally and while we believe the rally from 27-Nov’s 1056 low on a weekly log close-only basis below is the initial A- or 1st-Wave of a MAJOR REVERSAL of the 4-year bear market from Sep’11’s 1877 high, such reversal PROCESSES typically include sometimes extensive corrective retests of the extreme low (in the case of a bottom) before the more significant stages of the reversal take hold. The fact that out RJO Bullish Sentiment Index has reached a historically frothy sentiment level at 84% would contribute to an interim peak and relapse IF and when the market stems the clear and present uptrend with a confirmed bearish divergence in momentum discussed above.
These issues considered, a bullish policy and exposure remain advised with a failure below 1237.5 required for shorter-term traders to move to the sidelines and longer-term players to pare bullish exposure to more conservative levels. Subsequent weakness below 1191.5 would require longer-term players to neutralize bullish exposure altogether ahead of what would then be expected to be a larger-degree correction of the rally from 03-Dec’s intra-day low that could ultimately result in a setback to the 1130-area or below. In lieu of at elast such sub-1237.5 weakness further and possibly accelerated gains remain expected.
MAY SILVER
Unlike the gold market the 240-min chart of May silver below shows the market still trapped within the past month’s range capped by resistance from the 15.84-to-15.99-range. Especially while this resistance remains intact, a failure below a recent low like yesterday’s 15.165 low would AT LEAST contribute to further lateral-to-lower corrective behavior, the depths of which would be questionable to say the least. Per such, we are considering this 15.165 low as our new short-term risk parameter around which shorter-term traders with tighter risk profiles can effectively rebase and manage the risk of a still-advised bullish policy.
The extent of the broader recovery from 14Dec15’s 13.62 low is not unimpressive and cannot be ignored as just the initial A- or 1st-Wave of a major correction or reversal of the nearly-5-year bear market from Apr’11’s 49.82 all-time high. To maintain a more immediate bullish count however the market is required to sustain gains above 29-Feb’s 14.61 next larger-degree corrective low and key long-term risk parameter. A failure below 14.61 will not necessarily negate a major base/reversal environment, but it would defer or threaten it enough to warrant a neutralizing bullish exposure by longer-term players.
In addition to the extent of Jan-Feb’s portion of the recent recovery that certainly stems the long-term bearish tide, recent historically bearish market sentiment and waning downside momentum on a QUARTERLY log scale basis below contribute to a base/reversal-threat argument that could be major in scope. But as discussed in our gold update above, sometimes extensive corrective relapses are common WITHIN a major base/reversal PROCESS. And the quick return to a frothy 83% reading in our RJO Bullish Sentiment Index would arguably contribute to an interim PEAK/reversal condition if the market failed below 14.61.
These issues considered, a bullish policy remains advised with a failure below 15.165 required for shorter-term traders to step aside and subsequent weakness below 14.61 required for longer-term players to take similar defensive action. In lieu of such weakness further gains remain expected with the 15.84-to-15.99-range resistance the next key upside threshold the bull needs to break to reaffirm its case.
