Precious Metals – Swoosh
This morning’s update was going to be a normal, pre-market notes type of thing. Then I saw gold and silver down more than $50 and $1 respectively and that became the priority.
From a public post yesterday: “More and more it looks like the end of the bear phase is going to be a swoosh.”
I have tried to make the point in the letter and in updates that these grinding would-be bottoming patterns just have not been cutting it. They have done nothing other than to relieve short-term over sold conditions in the precious metals sector to fuel further plunges. This has been wearing on peoples’ nerves; first and foremost trapped gold stock players but also I would imagine, other would-be buyers like myself.
In 2008 decisiveness was the key. You just knew it was time to put up and shut up and it all happened so quickly. This go round it has been an exhausting grind over many months (and really, 2 years) demanding constant perspective in one’s orientation and balance in functional application of that perspective.
Per the last update, I bought Pretium (PVG), which I am about to get hammered on this morning and I am relieved, not unhappy. That is because finally we have a crack, a swoosh. Finally we have something like 2008 where panic is in the air at the same time that gold and silver are approaching support (with gold not too far above 1150 and silver not too far above 17). We have potential ending action coming up.
Finally I feel that I can start to be more definitive going forward as opposed to the ‘have cash, have balance, have strict risk management if trying to go long’ robot I have been for a half a year. Early on personal risk management involved hedging by shorting silver, miners and even gold. Lately it has involved poking the sector and running to cash when parameters were violated.
All through this process I have personally wished for something dynamic. Just end the thing already. That is what this morning looks like. I am not saying today will be the end. Please understand that. Only that ending dynamics appear to be in play. People who are fundamental precious metals bulls should be cashed up against this opportunity. Also, in my opinion people should be cashed up against the likelihood of a resumed broad market correction.
Conversely, global markets continue on the relief bid. Apparently everybody is happy that America is making more weapons and aircraft, and paying more for housing.
Roughly speaking, the 50 day moving averages on the S&P 500 look like the line in the sand for a) resumed correction or b) negation of the bearish stuff.
We got a good dose of bearishness, led by some serious damage in the credit markets. Straight technicals do not paint the US stock market as being in much more than a routine correction within an uptrend. But the 50 day averages were violated for the first time since the current leg of the rally began in November and this combined with broken global markets and credit markets is notable and a bearish indicator. We’ll stick with that until the bulls prove their case by getting above resistance.
The stock market, like the precious metals, is pretty cut and dry. Break up through resistance, and it’s move along nothing to see here. Fail and we’ll look forward to a resumed summer correction.
The precious metals are entering ending action and a capitulation of potentially historic proportions. This is what we do this for folks. Anybody can navigate along in a trend. Either the precious metals are going away and people who cling to them are going to be turned into fossils or the upcoming opportunity is going to rival 2008 – or better.
We must think about value and not think like casino patrons. Gold, the metal, is a holder of value (the price assigned to this value is being adjusted). But there is a case for deflation in play. In the event that real deflation is what the precious metals are indicating, things could be very different from 2008. So another point of this update is that gold bugs – even the ones prepared for the destruction – should go about their business with humility and open minds as opposed to the hubris that many have experienced up until 2013.
In short, this could be a massive opportunity (which is currently favored), but it could also be a profound change in the macro backdrop. We are smaller than the market; much smaller. We’ll track events on all fronts with great interest going forward.