Monday, November 15, 2010

Bought BULM $1.04 and SIL $23.05. $Gold/$Silver Oversold

I made a couple of purchases today.  One had an excellent technical setup, and the other I was just playing an optimistic hunch.
Here is Bullion Monarch Mining Inc (BULM) which I bought because it had all the ingredients of a successful trade.  True Strength Index (TSI) and Money Flow Index (MFI) trend line breaks, a positive divergence between a flat price and a rising TSI and a ZERO crossover.  
Click on any chart to ENLARGE

My hunch is that Gold and Silver are getting so oversold that the current meltdown cannot continue much longer without at least a bounce.  With that in mind, I bought some Global X Silver Miners ETF (SIL), not because there was a buy signal, but because I think a position now has good odds of becoming profitable relatively soon.  
Here is a chart of $GOLD, and another of $SILVER.  The RSI (3), which measures on a very short term basis how relatively oversold something is, reveals this sell-off has pushed things about as far as is likely without some kind of a bounce.  Fingers crossed.



  1. Hi John,

    In purpose of Gold and Silver, do you maintain your global strategy of the C- Wave ?

    What are the odds now that this C- Wave really unfold in the near therm frame ?

    What is your view about that ? Do you see more meltdown Gold and Silver even after the bounce you talk above ?


  2. Carlos - I think this pause in the C wave is serving the purpose of taking excessive bullish sentiment down a few notches. No, I don't see more meltdown.

  3. Gold (spot) has now issued 2 sell signals, below the zero line and also a trendline break to the downside. It might pause here for a few days but selling retraces into the $1300 region should be about the appropriate region given the recent margin increases in commodities.

  4. J - thanks for sharing your thoughts. I want to always honor others thoughts and contributions to my blog, even when I strongly disagree with them.

    I would like to understand these 2 sell signals you are referring to, as it sounds as though you are using TSI and that is a passion of mine.

    Please add some details, if interested. Or send me a couple charts so we can get on the same page and hopefully share your insight with the readers.

    Thanks for your post!

  5. No problem - happy to discuss - here is a link:
    TSI is set to 7,4. I have put the trendlines and the zero line on.

  6. J -- thanks for the link to your chart. OK, now I see what you are talking about.

    Your chart is a daily chart of GLD, I presume, made two days after the recent top was achieved. And you have noted a longer term TSI trend line that was definitely violated to the downside coinciding with the time frame of the absolute top of the recent peak in price (good TSI work!).

    And you have also noted that the daily TSI is diving steeply below the ZERO crossover (also good TSI work!)

    I agree that both are SELL signals. Absolutely agree.

    The question that matters now is, what is going to happen next, of course. Is gold now going to to continue to fall after a breather - to the $1300 area, I believe is your question.

    For starters, I would be amiss to not recognize that absolutely anything is possible and no one - especially myself - can see the future.

    That said, I don't think gold will head for $1300 and I do think this current $1330 area is close to the final bottom. In my mind, I think today, in fact, was the bottom, but we won't know that until tomorrow.

    Without taking paragraphs of explanation, I will simply say that I believe the current rally in the US Dollar is over or about over. Today may well have been as high as it will get for a long long time. If I am correct, the US Dollar will now roll over and its daily cycle will become left translated which is bearish and means that price during the daily cycle peaked left of center.

    Meanwhile, the gold cycle, normally 20-28 days, is today on day 19 and due to bottom and begin a new daily cycle - meaning price will soon be rising over many days - over two weeks for sure and possibly much longer.

    J -- aside from my cycle observations, gold is deeply oversold on a measure such as the RSI (5), and due at least a counter bounce of some magnitude. And, the steepness of the sell off along with my understanding of the TSI, suggest that a breakout in price will occur sooner than later (the subject of my posts this week).

    And finally, on a sentiment basis, gold had a threat from the Chinese to raise interest rates, big "new" problems in Euro land, and, as you mentioned, the raising of margin requirements on gold and silver futures traders. Each one of these "news" events led to the hysteria and emotional and brutal sell off. The bull kicked a whole bunch of people off his back with that move. But what is the likelihood that we will come up with 3 more blockbuster scary stories in the next 5 days? I say nil.

    Sorry if I rambled on too much. Any comments will be appreciated!