I came across a couple of “monthly” charts last week and my face just lit up! The 2 charts above (courtesy of Trader Dan Norcini) are exactly why you can no longer wait to enter the metals in either “form.” When I say either form I mean either through the mining shares (which are already 30%+ off of their lows) or the physical metal itself. When you look at these charts, please make very close note of the “MACD’s.” These are “the moving average convergence/divergence.” Without getting too highly technical they are a “trading tool,” let me explain.
Charts can be ultra-short term as in minutes or even seconds, or they can be very long term as in months or years. Obviously the very short term charts are used for trading while the long term charts will help you time your “big bets” for core capital. I have cautioned all along about not trying to “time” your purchases because the fundamentals are such that on any given day the entire system can simply “break” in which case “waiting” to purchase would be a disaster because you won’t ever have the chance. That said, I wrote a similar piece to this one back on Feb. 28th 2012 and showed how the “weekly” charts were about to break out, this was followed the next day by a massive sale of paper contracts in the “leap day massacre” and the breakouts were negated. Please understand that the bullion banks and the central banks can and do read charts which is why the “breakouts” back then needed to be suppressed and they were.
Before going any further, also please understand that gold, silver and the shares were not “depressed” and oversold as they are now, in other words “suppression” could be done. From current levels I do not believe there to be a snowball’s chance in hell for any type of “washout” event, simply because from a chart standpoint, a “strong hands versus weak hands” standpoint…and the fact that the metals are at or below the cost of production (which has served to dramatically increase demand and restrict supply), the conditions do not exist to create any panic selling event. This trick has already been used and there is no more “yardage” left in my opinion. In fact, any more naked short sales to push price down would only increase demand, probably in frantic fashion.
I mention the above paragraph because there will be those who will say, “Well Holter, this is what you said in Feb. 2012 and look what happened.” Yes, I wrote that piece more or less from a trading standpoint and it was based on weekly charts, these 2 charts are VERY long term in nature (monthly as opposed to weekly), much more difficult to paint and almost impossible to paint either up or down when they are already at extremes…”extremes” as in we are much more oversold right now than at any point in the last 20 years, you can see this on both charts.
If you look at the first chart above you will see near the bottom where the HUI (mining shares) have the MACD’s “touching” each other and will soon (probably the last trading day of this month) “cross” to the upside. In the second chart, gold itself is a little bit behind but quite similar, this looks like it could cross in 1-3 months. This is exactly as it should be! No, not because I am bullish, long and have my net worth tied up here, because the shares “should” (almost always do) lead the bullion both up and down. Not only do they lead but they are “steroidal” so to speak because they go down faster and up faster. Put simply, they have broken several downtrend lines and barring anything crazy to the downside in the next 2 weeks they will have every technician and their brother flipping to the buy side…because the charts are telling them so.
So what does this mean to you? It means that if you are “waiting” to purchase…DON’T! “Don’t” because I believe the odds are very high that you will not get any better prices than the low day of last week AND you are at risk. I say “risk” because from a fundamental standpoint if gold is rising rapidly or in panic fashion it means that something has gone really wrong…which in today’s ridiculously leveraged world could mean “game over,” reset and you are “shut out” from fixing any mistakes. Say what you will, tell me that I am being overly dramatic or whatever. These very long term monthly charts have never been this “compressed” or oversold in the last 20 years. This by the way from a fundamental standpoint is the same thing as saying you have NEVER had a better buying opportunity than you do now!
Let’s watch and see what happens. Whether “this is it” here and now or it takes another couple of months to really heat up…it doesn’t matter. Once this move takes place, I feel comfortable saying that the 1978-1980 move in gold and the shares will pale in comparison to what will happen over the next 2-3 years (or overnight in the case of a reset). We seem to be breaking out to the upside now…from THE most coiled and energy packed position of the last 20 years! This boat cannot be missed as I believe it is the last one of this generation before the upcoming reset! Please, now is not the time to be cute or hold out for better prices. Now is the time to create positions or finish purchases because we will be looking back at current levels thinking “Oh my god, look what I could have bought at.” This is about your financial life, “coulda, shoulda, woulda’s” will have no place at an empty table!