Time to Buy More Silver, Says Precious Metal Expert
The market dropped again and commodities swooned for the second straight session. Metals were the noticeable loser, with gold down 3.5% (7.5% for the week) and silver down 5.8% (10.2% for the week). The fall in commodities is in no small part due to the strength in the dollar.
The euro has fallen sharply lower by 3% this week, which has corresponded to a similar rise in the dollar. The rise from the dollar brought havoc to the commodities and stock market alike.
On Monday I mentioned how gold was slowly moving lower while the market pushed higher, and that gold likely had another 10% fall ahead. While I didn't think it would happen in 48 hours, that decline is here and it's likely not over.
I asked our commodities expert at Wyatt Research, Kevin McElroy for his thoughts,
"You see, the whole reason silver is dropping right now is because of the dollar.
It has nothing to do with the silver market, or the end of the commodity bull market or anything like that.
This silver selloff lines up exactly with the dollar's current rally."
I recommend that any silver owner take a look at Kevin's great commentary for some direction. Kevin goes into further detail on how to profit from the dollar and silver relationship.
This market has been intolerably volatile over the past two months, making for difficult trading conditions.
I reviewed our profit and loss statement last night and was stunned to see that TradeMaster Daily Stock Alerts hadn't recorded a trade over 10% in a month until we captured 10.3% on NFLX. I had to go back to last September to find another month when that happened. Before September 2010, I'm not sure that it ever happened.
When the market is trendless, which it's essentially been for well over a month, swing trading is rough. Rallies are short lived, and bearish reversals happen in the blink of an eye, usually overnight. But the bright side is that eventually the market will begin a new trend again.
Technically, it's in a bullish trend until the November 25 low is taken out - despite the head fakes, intense selling and European debt issues. That said, even I am starting to doubt the potential for an end-of-the-year rally.
The decline this week strikes me as similar to the pullback the market experienced about a month ago. For nearly four weeks SPX consolidated at 1250 and rarely moved more than 2% in either direction. At the time, I was looking for 1197 to provide impenetrable support, but if SPX did break it 1155 was the next target.
The index did break 1197 and three days later it sunk to 1158 before it bottomed on November 25. While SPX has only consolidated at 1250 for eight sessions, the setup is the same - 1197 should be potent support, and if it isn't, 1155 is the target. Conversely, any near-term support should take SPX for a quick ride to 1250 where with any luck it will set up a move to 1301.
The indices were pushed into near-term very oversold condition yesterday. Additionally, big banks like Wells Fargo (NYSE: WFC) and JP Morgan (NYSE: JPM) closed higher. The worst of the decline for the week is probably over, but if SPX stays below 1220 next week could spell trouble for the bulls.
Where do you think big bank stocks like Goldman Sachs (NYSE: GS) and Bank of America (NYSE: BAC) are headed next year? Please drop me a line sometime today at marketforecast@wyattresearch.com.
