“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


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Monday, August 12, 2013

Mining Shares Leading the Metals - Silver Strong

Silver is pulling gold higher today in a continuation of what the grey metal was doing late last week. It appears that the market is still keying in on the stronger-than-expected Chinese trade data from last week.

I should also note that the Goldman Sachs Commodity Index or GSCI has been higher the last two trading sessions with some short covering in the soybean market helping pull the grain complex a bit higher as traders attempt to balance today's USDA crop numbers with previous market expectations. It never hurts silver to see the broader commodity complex ( as a whole ) moving higher.

However, in the precious metals sector, what has my attention is the fact that the mining shares continue to lead the bullion higher. This is important as far as I am concerned because whether or not we like it or agree with it, the shares have been pretty accurate over the last two years in leading the metals lower. Now, if they are indeed reversing course and putting in some long term bottoms, then they should once more take the lead in the precious metals sector but this time to the upside.

Take a look at the following chart of the HUI. I am always fascinated by the price action of various markets that I track/trade but this HUI chart, especially that GAP REGION is incredibly interesting to me. So much of the price action over the last two months has revolved around this gap on the charts. It acted as a ceiling for the better part of a month beginning in late June until it was broken in the second half of July. Then it was giving a hint of something greater for the bulls but the miners promptly surrendered their gains leaving the index to plunge back through it to start this month.



Back up the index went into the gap last week on the Chinese news but it was unable to hold its gains into the bell Friday so that it closed within the gap. Today, it GAPPED ABOVE THE GAP - same exact thing it did back late last month.

Now the question is, will the bulls be able to finally drive the bears out of the shares cementing a solid, long-lasting bottom and the beginning of a sustained uptrend or will it run to the TOP of THE RANGE near the 260 level and sell off again signaling that the RANGE TRADE is alive and well? Who knows for certain but one has to be impressed thus far with the price action in that the last setback in price the first week of August uncovered willing buyers above the recent panic selling low down under 210. That tells us that buyers were more eager to get in than they previously had been...

21 comments:

  1. Let me show my view on the miners with GCM (Gran Colombia Gold) as an extreme example:
    Bad managed they had cash costs of 1500 $/oz. On the brink of going bancrupt they threw out the incompetent staff, optimized everything and are now down to 1200 $/oz. But not only cash costs, but all-in sustaining cashcosts. And with further optimizations from October on they will be down to 1150.

    This shows me the enourmous potential in the mining industry. It seems the miners were living like a bee in clover because of the eleven year bull market. No reason to look at costs, because the rising price of gold was coming to rescure bad and lazy management.

    But this is only one aspect shwoing the potential of the miners.

    The other is, that miners expanded their resources at the cost of lower grades. Extending the mine of life, or showing an impressive resource growth, by operating low grade deposits which additionally raised costs.

    Now these deposits have become not economical. This means we can expect huge writedowns on their resources. They will write off the low grades.
    Which means that the worldwide reserve situation of gold is becoming even worse! Very bullish for gold.

    And last but not least, they are cutting exploration expenses tremendously. This means even less new discoveries.
    And this in a situation, where no big new gold deposits couldn't be found in the last years anyway.

    IMO this ingerients have the potential of a perfect storm for the miners, pushing gold higher, while the higher goldprices will have a much bigger impact on the earnings than in the past.

    ReplyDelete
    Replies
    1. badly managed
      ingredients
      ...

      Sorry for the errors. But I hope it can be understood anyway. :D

      Delete
  2. dear Dan,

    "will the bulls be able to finally drive the bears out of the shares cementing a solid, long-lasting bottom and the beginning of a sustained uptrend or will it run to the TOP of THE RANGE near the 260 level and sell off again signaling that the RANGE TRADE is alive and well?",..."who knows for certain.."


    Given this uncertainty, would you mind sharing how you'd position your trades in this environment for let's say, silver? Do you play the range or do you stay out until it breaks out up or down before you take a position, or both?

    (just curious about how the professionals like you do it, and make money here...) thanks!

    ReplyDelete
  3. Jim Silver;

    There are several different things that determine whether or not I will trade the range or play for the breakout.

    Some of it is just intuition based on watching the price action every day as you get a sort of "feel" for how things are likely to go. some of it is also the volume and the way it behaves around the resistance level at the top of the range. If the market sets back from the resistance upon its first approach (which is normal) but does not retreat very far and the volume on the pullback is low, that tends to increase the odds that the funds are coming in on the buy side and the market will break out to the upside.

    If the setback is shallow but the market seems to lose intensity when it tries the top of the range on the next time up, odds are that guys are nervous and lack conviction. In that case, it will more than likely confirm the range trade instead of breaking out.

    The speed at which the computers can send orders into the pit these days means you really have to watch the price action like a hawk and cannot leave your chair for long, if at all, until you get the direction.

    Even at that, there is no guarantee so you have to be able to cut and run quickly and take the small loss and try again the next time.

    Dan

    ReplyDelete
    Replies
    1. Dan,
      Thank you for the insight indeed! :-)

      Delete
    2. Hi Dan

      I seldom look at the screen nowsdays., sometime once a weeks.. cause daily trade is confusing and it will cloud your jugdement. I do better then daily trade and i do not have stop lose.

      I stop jumping around 4 years go. I trade with directive and focus..do homework play with fundamental.

      Trading nowsaday is the survive of fitness. If planning to enter areana with stop loss ... then you will lose more then you gain.

      Cheer guy and as always thank you dan for your sharing.

      Delete
    3. Preditor,
      If what you wrote was true, Dan would not be a trader anymore, would he?
      I have another friend trader (successful as well) who tells me that some days are indeed unnerving, because you get stopped, and stopped, and stopped...but you gotta find the strength to keep entering the market because next time is the time the resistance could break. And that's how he makes a profit on the long run. Keeping his losses small at every failed attempt, but letting his positions run when he is right.
      So that tends to contradict your point of view.
      Doesn't mean you are wrong, if you manage to make money as well.
      But from a trader's point of view, I never heard a successful trader (trader = intra-day, scalp, spiel, etc...) trade without a stop loss (except very specific conditions of crazy volatility).

      Delete
    4. Hi Hubert,

      It depend how and when you used it but not everyday .. what i have being trying to said is well equip investor or trader do not even need stop loss..

      Now this is my early experience in trading .Using technical and stop loss ... especially if you are new to the market ...

      (Please note that my highest decree of education is just high school)

      When i start follow a pro technical investor cause i was losing money big time, then i came a cross technical chart and stop loss.

      This does not mean that it is not good..but you have to execute with understanding (it work from time to time but not always) and i always emphasis that you need to do more then chart reading to make money from the market I mean real money not just 10 or 20% from your investment.

      If you don't have experience of turning 2 million to 20 million in 1 years time, then you will never understand what i am talking.

      Back then when i start using technical for example my open position is long then the market start drift lower until it breach technical support zone, base on my learning at that time is you need to close your long position which i do as the book and i stop out ... the market continue lower base on the chart it is bearish, then i think to myself luckily i close out early as the market still drift lower ( i was happy as i did not lose more)Now I thought I learn something which will make me rich and i will like to regain some of my lose and i am in revenge mood at that time , I close my position in long out of fear .. and then I short the market with my greediness at the end of the market, the market rebound into the close and the next session is rally back, I can tell it is no fun as your proflio is bleeding cash, your hand will shake (this depend how much you lose for me i go broke).. your eye will filled with tear ... I look at my wife and my little baby with tear and fear ...you have no strength to walk . you can't sleep well in the night and you do not have the will to do anything for the next 2 -3 month,

      That is how i learn my lesson.

      Do homework, go out to the supermarket, go to the bar, talk to people .


      Any way cheer..

      Delete
    5. And hubert

      "If what you wrote was true, Dan would not be a trader anymore, would he?"

      Do you have what it take to make profit from Dan's way , I bet he has lot of thing behind his trading strategy.

      Dan , he is quite alert ... he see graph not just in US dollar but in difference country .... for me I like picking small country..

      Cheer

      Delete
    6. Preditor,
      It is sad but true that the manipulation, Bullion Banks, Hedge funds with their Algo HFT platforms dominate these trades. It is like the Matrix and to survive we have to BE ON THEIR RIGHT SIDE OF THE TRADE, unless of course they are exposed and the market changes. Very limited right now until that 1350-1360 channel is smashed. I am routing for it of course.

      Delete
    7. Hi white wolf ,

      The trade Algo HFT is evolve with the market.. Something like real steel movie where the "Zeus " the greatest Robot fighter... Tak Mashido: Zeus is autonomous and constantly evolving during the fights. With his adaptive operating system he recognizes patterns and rewrites his fight code instantaneously."

      Starblaze Area Reporter #2: It's your six pack out there, are you saying that Zeus...
      Tak Mashido: I'm saying that, no matter what happens in that ring, the results of any fight is inevitable. What Zeus sees, he kills.

      Cheer

      Delete
  4. Maybe 30 days to play this up move in the miners with the occasional correction along the way. Some kind of stair stepping patterns taking place which makes for a stronger move. After a month the gaps can fill into December.

    Really no rhyme or reason for this large percentage move just computer programs moving over to the other side of the boat, with most human investors still on the sidelines. World economies in the tank, who needs silver or copper for that matter?

    Feels more like a bounce with some panic thrown in. Need some real overhead resistance taken out. Watch for any spikes up as a warning of profit taking. Even if you caught 50% of a move up, that would be a good thing just don't forget to sell even if early.

    ReplyDelete
  5. Dear all,

    imho, as long as 1350 is not broken, no need to hurry up to buy more gold.
    Chart on 2-days candles :
    http://s16.postimg.org/6kfxi68z9/gld_2d.jpg

    Silver is giving encouraging signs (ratio gold/silver down) BUT :
    - the 22 $ short-term target has been reached.
    - we broke up from a significant downwards channel, which may explain this fast bounce...doesn't mean the rocket has a lot of fuel left, after stop losses have been reached.
    - it looked like silver was in a downwards channel that we may call "tendance en ligne" in French (bloody French, but what does it mean?), bah, anyway, a channel going down, and we broke it on the way up. Usually, when you are in a "tendance en ligne" going down, and you break it down, it looks like capitulation and there is a good chance that the bottom is in. On the other hand, if it is broken UP, even if the trend may change later on, it is still likely that you will have a new and last low. Said simply, it is still possibile imho that we can face an unpleasant last krach on the metals, probably the final one, which may send silver under its latest lows. My long positions are still short-term, get-in / get-out quickly until 1350 is convincingly broken by gold.

    Have a nice day ;)

    ReplyDelete
    Replies
    1. Hi Hubert Du Haut,

      Im not suggesting that the way I drew it is correct per se, but silver seems to be still within the channel as oppose to, "we broke up from a significant downwards channel.

      see below;

      http://4.bp.blogspot.com/-eZPP_kpCvCY/Ugjaf7v6FsI/AAAAAAAAARk/D6x7YCDcNeM/s1600/silver+chart_daily.jpg

      Cheers!

      Delete
    2. Hi Jim,
      Seems as correct as mine to me :)
      Many ways to draw a chart.
      On mine, I just had a few impact points on the top of the channel, but yours seems perfectly valid as well.
      Let's see ;)

      Delete
    3. "tendance en ligne" is trendline. It can be up or down. When you have 2 lines (resistance et support) it is called "un canal" or a channel in English. Again the channel can be upward (haussier) or downward (baissier).

      Hubert du Haut, hope this will help you understand "Bloody French"

      Delete
    4. Merci Hubert :)
      Anyhow, it's very "tendance" to mix a few french words in an english sentence, non? (I'm trying to find an excuse for my lack of vocabulary...)

      Delete
  6. A note..

    The bull is gaining traction ... I will be ready to close all my long if there extreme bullish indicator a cross the market.

    Cheer.

    ReplyDelete
  7. This comment has been removed by the author.

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  8. maybe I am doing something wrong in trying to send messages; anyway, has it not occurred to anyone that it is quite interesting that Germany and France are now pulling the periphery out of the dumper? And now that the average Joe now knows that the bull mkt in China is over, that now, the news out of China suddenly is bullish? lol, lol, especially how all the Chinese are buying gold hand over fist, but wait, what are they gonna do when they have to start making payments on their empty condos? oh, I never thought about that; this rally is made in heaven and I sell it, just like the beans and yen; steve in sparks

    ReplyDelete

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