Technicals: $1380 and $20.36 for Starters

Gold

Why Precious Metals Are in a Bull Market

Chutes and Ladders

Remember when Gold and Silver used to take the stairs up, only to free-fall in the elevator down? They would work higher over a 5 day period and give it all back in a day? Well look at the charts now. Precious Metals don't work that way anymore. There are still washouts to be sure. But there are just as many, if not more wash-ups.That is because the market is fundamentally telling you something is different. The shorts are the ones playing Chutes and Ladders now.

Pricing Demand

When a market is prone to work higher and swoon lower, we observe and say it is "pricing supply". The market creeps higher, cautiously getting optimistic about itself. But supply looms above. And when it hits that wall of selling, it runs away. Sellers could be producers, Bullion Banks with volume on their books to go, or Central Banks puking their souls for paper money (I'm talking to you Great Britain). It just mattered that they were big and immovable. The sellers can just be limit orders, but the longs trip over themselves panicking for the exits. Smart ( AKA- spoofing, manipulative, front-running, flow-trading, unethical, customer last) Banks then start smacking bids because they had a wall of selling behind them That is when a market is pricing supply

But now all you have to do is look at the charts to see that the market is pricing demand. Put another way; There is demand lurking below the market patiently waiting for a selloff to get filled. It could be China, Russia, the US, Funds. It doesn't matter. But patient large buyers are underpinning the market now.

Event Driven Spikes

When a bullish event happens, some of those lurking buyers go to market and some raise their bids.This forces other less patient players to act now. The shorts don't have the luxury they used to have. Remember when bullish news would come out and Gold used to yawn? Now it reacts. Lurking bidders raise their bids, funds buy, and shorts must cover.

The Best Part of Yesterday's Rally

Look at the open interest. What fund was long? And we love that. Keep the hot-money traders away. We need no froth. That tells us this is more likely the beginning of a bigger rally. In fact we believe from a cursory look that shorts were covering. And we have made it no secret we were buying repeatedly and getting stopped out playing the Tudor game. So we missed this. I guess that makes US the hot money we hate! But we bought some physical silver in coins which we prefer now in light of our own opinion on JPM's long term play.

One More Thing

Note Silver has pierced its descending trend line of resistance, but gold has a ways to go yet. That is a gift in our opinion. Silver has more volatility, and therefore will respect technical numbers faster than Gold. Silver's faster behavior is a tool for assessing Gold's. Play it any way you like:

Silver as Gold Buy Indicator Gold target is the descending trendline as long as Silver stays above its line
Gold as Silver Sell Indicator Silver is a sale if Gold reachesits trendline and starts to slide

Silver

DEC SILVER Resist: 2011, 20365, 2100+/- ST Trend: Sdwys/Up(19915) Supprt: 1952-1949, 19405* Obj: 20365 TRP: 1940.5Comment: Yesterday’s outside bull reversal marks a short term turnaround out of the recent selloff andalerts for a larger emerging bull climb, initially to 20365 and potential to drive near 2100. Be prepared forminor consolidation inside the upper half of yesterday’s rally. Only a close under 19405* voids the upturn

Gold

DEC GOLD Resist: 134340, 1350-1352 ST Trend: Sdwys/Up(133900) Supprt: 133060, 132800, 132250* Obj: 135050 TRP: 1322.50Comment: Yesterday’s outside bull reversal marks a short term turnaround out of the recent selloff andalerts for a larger emerging bull climb, initially to 135050 and potential to drive to 1370-1380. Be preparedfor minor consolidation inside the upper half of yesterday’s rally. Only a close under 132250* voids theupturn

comments and questions welcome

-vbl

TWITTER: @VlanciPictures