“The good speculators always wait and have patience, waiting for the market to confirm their judgment.” -Jesse Livermore
Continuing to monitor the key developments in the precious metals sector during this six-week consolidation period, our long-term view of silver remains firm from a technical and fundamental point of view. We are watching an attempted breakout in gold that in Q3 should reach a new all-time high yet mindful of the crowded trades that are happening, i.e., long 10-year, S&P 500 puts, technology, cash, and gold. While additional lockdowns are occurring globally, government monetary stimulus continues around the world to expand, making silver an ideal asset class to hedge against inflation, piggyback on gold, and participate in the recovery trade.
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The big picture
Remember that technical analysis is an art form, and as a road map with turn by turn instructions, we can often use this map to anticipate “risk ranges” for ideal buy and sell levels. The “fire sale” in March with silver below $12 is now a thing of the past that only a handful of silver futures traders were able to react quickly enough to lock in at those levels. Those traders will most likely have their contracts converted to long term warehouse receipts.
Since the decisive breakout on May 15, a small head and shoulders pattern formed and was completed on June 15 low. This is where the 200 DMA (day moving average) has come in as the new place to add to positions on corrections. The current trading pattern now will most likely result in coiling where one would need to put their “trading caps” on in an attempt to tactically buy at key support levels while letting silver go at areas of resistance. This strategy will allow someone to size up on declines and deploy excess capital into other assets that will benefit from a falling dollar, i.e., other metals, energies, grains, and softs. Since the 50 DMA has crossed over the 200 DMA, the golden cross is now confirmed.
We have been extensively covering the technical backdrop of the precious metals markets in the Blue Line Futures Morning Express Research Reports so be sure to stay up to date on the developments by registering for a Free two-week trial by clicking on the link here: The Blue Line Express Two-Week Free Trial Sign up.
What is a golden cross?
If you are not familiar with this term, the golden cross is a technical chart pattern indicating the potential for a major rally. It appears on a chart when a 50-day moving average crosses above the 200-day moving average. The golden cross can be contrasted with a death cross, indicating a bearish price movement.
If you did not receive the new edition of our free “Gold Trends Macro Book,” it has been updated with slides on silver. This monthly updated booklet will provide you with all the quantitative analysis of the precious metals markets. You can request yours here: Free Gold Trends Macro Book.
Good luck and good trading,
Chief Market Strategist
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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.