Gold and Silver Current Thoughts 1-21-2015

Today the price of gold and silver gapped up to over $1,300 and $18 the prior resistance and almost immediately after the U.S. markets opened, began to drift lower.  In yesterday’s Current Thoughts I said this; “JDST moving above $7.48 would be the conservative trade.” In fact, I said “or if we gap down a higher high is playable.” We did just that, but closed at $7.20 so you may be sitting with a little bit of a loss if you went the conservative route. I do expect some lower lows in gold to be hit and think the risk vs. reward is on your side with JDST at this point. I will say this is pure speculation on my behalf, mostly because I think we get the “sell the news” report from the ECB tomorrow regarding QE.

Today’s move down in gold and silver off their highs might have already been an early start to sell the news as the Euro rebounded and dollar fell, but the Euro rebound was somewhat short lived. Maybe it was a test drive for tomorrow’s price action as gold fell sharply then meandered a little higher from that bottom the rest of the day.

Tomorrow should be telling as to the power of market makers and their ability to move the price of gold. From a standpoint of what I think a market maker would do, I can say that under $1,150 is without a doubt a price they would like to “squeeze” the longs out of their positions, and from there a further 15% drop under $1,000 is not out of the question. So while we are presently debating whether gold will move higher over the $1,300 mark, I am questioning where market makers will want to take gold next. It is possible we get a quick move up to higher highs from today once again over the $1,300 mark, squeezing out recent shorts, but then dropping gold hard, Silver would be the same situation but possibly worse on the downturn as it is still acting like an industrial metal like copper overall.

One way or another I expect volatility tomorrow. If the stock market takes off higher, which I think it will, and come Sunday there is no real change with Greece exiting the Euro, then a calm should come over the markets sending gold back into its down channel and on its way to the lower lows.

Mining stocks and ETFs opened with a nice gap up along with the higher prices in gold and silver and dropped sharply. It would have been impossible to go long so the trade to look at was the higher high in JDST after the dip in the morning that I discussed above. With the volatility tomorrow, I would wait for the announcement from the ECB and try to trade that trend with stops, just in case market makers reverse the trend on you. For some this would mean take the day off and wait for the trend to develop. It’s always difficult to trade what I perceive to be the top of a trend and its reversal.

UGAZ and UWTI traded a bit higher today. Tomorrow’s natural gas report may finally give UGAZ the bump up it’s been waiting for. I would only try to scalp it, not marry it and be flat by end of day or end of day Friday. You can always jump in the trend on any given day and profit. DGAZ may get the nod once again though so be ready to play both sides. I just still lean the UGAZ way as today’s price action wasn’t that bad. Again, catching the trend reversal isn’t easy and you have to be able to readjust your thinking if the trade goes against you. I’d rather lose $200 on a 1000 share trade and admit I am wrong versus losing more thinking I am right and the market is wrong. On the other side I would prefer to catch the trend and take profit if I make $1,000 or more on a one or two day trade.

TNA had a down then up then down day but I still lean bullish with an expectation of 80 being seen. After that I reserve the right to adjust my thinking based on what I see. Buying the dip hasn’t been a bad daily trade for it though, selling higher each time it dips.

RUSL took off and is off my radar for now.

Tomorrow should be an interesting day. None of the arrows below changed from yesterday’s report.

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