Gold and Silver Bid for A Bottom In Wake of September Jobs Report - ONE-TWENTY TWO: Trading Financial Markets

(This is an excerpt from an article I originally published on Seeking Alpha on October 8, 2016. Click here to read the entire piece.)

On October 5th, I noted how SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) both completed post-Brexit roundtrips as rumors of a eurozone tapering of QE triggered a fresh wave of selling in the precious metals. I used this event as another opportunity to examine the case for a (short-term?) topping in GLD and SLV. The trading action immediately before and after the U.S. jobs report for September, 2016 provides an opportunity to trade on a relief rally as GLD and SLV make a bid for a bottom.

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Financial markets seems to be settling in for a December rate hike from the Fed.

Source: CME Group FedWatch

Per previous history, the Fed futures is closing on near certainty for a December rate hike. Futures sat around 80% the day before the Fed’s December, 2015 rate hike and were in the high 60s a month prior. In other words, I do not think higher levels from here really communicate much more certainty in the minds and actions of traders. {snip}

The U.S. dollar's impressive breakout above its 200-day moving average (DMA) may have come to a quick end with a post jobs report fade. — The U.S. dollar’s impressive breakout above its 200-day moving average (DMA) may have come to a quick end with a post jobs report fade.

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SPDR Gold Shares (GLD) tries to hold support at its 200DMA despite two consecutive closes marginally below this critical trendline.

iShares Silver Trust (SLV) bounces off its 200DMA support in picture-perfect form two consecutive days.

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Can support at its 200DMA stave off the downward momentum from the recent 50DMA breakdown for VanEck Vectors Gold Miners ETF (GDX)?

Source for charts: FreeStockCharts.com

I am a little more comfortable trading around my core long positions in GLD and SLV because speculators have cooled off a bit from recent highs in speculative positions. {snip}

Gold speculators take net longs back to levels last seen four months ago (which in turn match the peaks from 2011 - not shown) — Gold speculators take net longs back to levels last seen four months ago (which in turn match the peaks from 2011 – not shown)

Silver speculators take net longs back to levels last seen four months ago (which are still higher than anything seen since at least 2008)

Source: Oanda’s CFTC Commitments of Traders

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Going forward I do not expect a rally in GLD or SLV to top recent highs. The most likely catalyst that could get both over the hump may, ironically enough, be an actual rate hike from the Fed. {snip}

Be careful out there!

Full disclosure: long GLD, SLV (shares and call options)

(This is an excerpt from an article I originally published on Seeking Alpha on October 8, 2016. Click here to read the entire piece.)

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