Are You Ready For The Next Rally?

 

 

Are You Ready For The Next Rally?

Written by Craig Hemke, Sprott Money News & TF Metals Report

 

 

Are You Ready For The Next Rally? - Craig Hemke

 

Each of the last three years have begun with gold rallies of over 10%. The stage is set for another such move in 2018. Are you prepared?

 

Many folks have written about how the current selloff in gold and silver was predictable. Whether it was expected due to tax-loss selling, seasonality, CoT-washing or the expected FOMC rate hike, the majority of analysts were expecting price weakness in November and December and, this time, the majority was correct.

 

But if this current selloff was so easily predictable, then why can't the coming rally to begin the year be just as foreseeable and certain?

 

Below is a weekly chart of Comex gold going back to this time in 2014. Note the bottoms found in December of each of the past three years and then be sure to note the January-February rallies in 2015, 2016 and 2017:

 

 

At TFMR we have an old adage that applies here: "When trading gold and silver, you must always be prepared to sell a little when things look rosiest and buy a little when things look the darkest". I don't think that anyone would argue that December 2017 feels like the darkest period in recent memory.

 

And this "darkness of sentiment" is reflected in the Relative Strength Indices for gold, silver and the shares. If you're unfamiliar with this important technical indicator, you can read more about it here: https://www.fidelity.com/learning-center/trading-i...

 

Generally speaking, rallies exhaust and price begins to turn lower as the RSI exceeds 70. In selloffs, short-term capitulation is usually seen when the RSI drops below 30. For example, after 17 consecutive down days for Comex silver last spring, price turned and rallied 10% in under four weeks from an RSI extreme low of 18.

 

 

A look at the current charts only serves to reinforce the view that prices are oversold, near a bottom and ready for the usual late-December rebound and rally.

 

Comex Gold is near strong support of $1220 and its 200-week moving average near $1231. Also note, however, that its current RSI is 31 and near the previous 2017 lows seen at the turns in May and July.

 

 

Comex silver is in its support zone of $15.50-$16.00 and its RSI is even lower at 26!

 

 

And the mining shares, as measured by the GDX, are clearly near a low, too. The price level of $21 has previously held as support on several occasions, tax loss selling in Canada will be finished by the end of next week and the RSI is at a 2017 low of 27.

 

 

Again, successful investing in the metals requires the ability to buy a little when things look darkest. To that point though, these buying opportunities don't often clearly present themselves. The only question remaining for December of 2017 is...are you prepared to take advantage this time?

 

 

Questions or comments about this article? Leave your thoughts HERE.

 

 

 

Are You Ready For The Next Rally?

Written by Craig Hemke, Sprott Money News & TF Metals Report

 

 

Check out these other articles by our contributors:


Eric Dubin: Buying Into A Collective Economic Delusion - Rory Hall

 

Bitcoin Hyper-Deflation - Keith Weiner

 

Friday’s COT Report: A WTF Moment For the Ages? - Ed Steer

Eric Sprott Forecasts Status Quo Now, But Big Rally in 2018 (Weekly Wrap-Up, December 8, 2017)

Comments

Fahq Yuhaad Fri, 12/15/2017 - 06:17 Permalink

Technical indicators?Lulz.  A macabre joke in manipulated "markets". And in any case - RSI based on what interval? 14 days? Why not 12 or 16.35? Momentum indicators are bullshit anyway because they are derived from exactly the same data as the price chart. They are of less utility for price prediction than goat entrails. A toss-up whether "momentum indicators"  or "moving averages" are the bigger farce.

BobEore Fri, 12/15/2017 - 07:17 Permalink

Why is it that guys who rely upon charts showing golds' "performance" always draw a cut off line where it hasn't dropped yet - just as regularly as that part of the year where it rose for a while...

and then talk about the next "rally" as if the seasonal patterns in place for years now ... are suddenly going to be replaced by

A MOONSHOT instead? Could it be that they think their 'readers' are too STUPID to see through the blarney ...
for the 300th time?

Could it be that whoever IS STILL READING TFMR ... really IS too stupid to see through the blarney? What are the chances of that?

Montani Semper… Fri, 12/15/2017 - 08:24 Permalink

 I wonder why he doesn't go back one more year and mention the new years rally of 2014? After being scared off by plummeting gold prices throughout 2013, I finally made my first gold purchase on Dec-27 when it was down to $1200 an oz. By the end of Feb 2014 gold was trading at $1340 and I felt like a freakin' financial genius, but in hindsight I know it was mostly dumb luck that I hit that dip almost perfectly. But anyway, that was better than a 10% gain by math at the time and today, and should qualify as a fourh straight year. 

Pearson365 Fri, 12/15/2017 - 08:52 Permalink

If I can get 10% appreciation in the price from the December to December lows, it beats the hell out of money in the bank.  So far that's been the case since 2015.

ThrowAwayYourTV Fri, 12/15/2017 - 09:21 Permalink

And Gold is going to be worth so much soon that I'm selling it. Thats right! I'll sell you all my gold because I want YOU to make a ton, while I enjoy selling it all to you.LOL! 

Cassandra.Hermes Fri, 12/15/2017 - 09:29 Permalink

Why does ZH become so obsessed with FBI? Why does Trump is so obsessed with FBI? What is coming ? Why are they so obsessed with the institution that is investigating them?
How much money did ZH get from Russia? According to Bulgarian government around 400,000. The ZH owners are foreign born USA citizen, FBI can kick them out for what they have done?