Another try at shorting precious metals

Gold & silver are in a clear short term uptrend. Let us add a caveat beforehand, our record at timing gold, silver is about 2/3 (right). So take it FWIW as everything.

Now, lets look at long term monthly charts on gold miners.

We choose the miners to plot because these are so much more volatile and a chart with greater volatility shows clearer herding behavior of greed and fear.

Above is a chart of a gold miner ABX and a silver producer SSRI. The ew labelling is shown above. The takeaway is we had a huge run up until Mar 2008 (it became a crowded trade). We can chart 3 waves down, signalling we had a correction until Oct-Nov 2008. So, we had a bull market of ~ 88 months (since 2000). We had a bear of 8 months, and then a rebound. This doesn't seem sufficient timewise. We would atleast like a 25%-50% time correction. Gold has not had one down year in the last 8 years.

As for ABX and SSRI, key monthly averages and the triangle apex are acting as magnets. The charts can penetrate those averages slightly but expect strong resistance. And we would look for any signs of divergences to pile on the short side. (Disclosure: we have a small 50% SSRI short position on from friday).

The alternate labelling is that we are done with the correction and we are onto the next leg of the bull market. We will label this secondary for another reason we elucidate after the silver chart.

The ew labels are similar to the chart above. What we point out is silver & gold have a ~8 month intermediate cycle. We had a 3 move downleg from March 08 to Oct-Nov 08. Then a 3 move upleg from Nov 08. The 8 month cycle ends around Jun11th (+/- 1 week). Silver has strong resistance around 16. Also it dropped a fibonacci $12 in the 8 months, it seems to have come up a fibonacci $8 in 8 months => the rate of descent has been greater than the ascent. Ofcourse, this doesn't preclude a bull market. But thus far the evidence is not convincing. We believe silver will top out in the 16 region. Small weekly divergences are occurring. Another nice property to note is that silver moves violently just prior to a termination. We are seeing a violent move now. So all evidence points to silver peaking.

Another key piece of evidence is the commercials COT report. Commercials have a huge short position. Such a COT report usually doesn't preclude a bull run. It happens at the very end of a bull run.