Getting Real

With earnings coming out from some heavy hitters this past week and revenues coming in less than stellar we saw some major weakness late in the week.

What really sparked the move was a a pre-announcement or leak from the major search engine we all know and love so well. It came in the middle of the day on Thursday rather than the normal time, after the bell.

It seemed everything began to roll over along with it and Friday ended up being a bloodbath seeing some of the few green tickers being inverse ETF's!

We will have to see how this coming week shapes up but the S&P moved quickly off resistance Thursday and all the way back down to support on Friday.

It took about 5 days for the S&P to move from support to resistance but only a day and a half for it to move from resistance all the way back down to support.

You can make fantastic quick money shorting equities and I don't understand why more people don't do it more often, I know I do.

I know some made close to 800% on Friday alone on their short position I recommended only a day before on the S&P 500, but that was an anomaly. Those moves certainly don't come everyday, or I'd be on a beach in Fiji sipping on a Mai Tai!

All in all this earnings season is shaping up to be bad news so far as the election cycle really heats up. Often markets rise during election cycles so we have to see how the next little while plays out.

I doubt the markets will be allowed to fall too far for too long. Ben Bernanke will be set to the task of keeping them in check I'm sure by the current administration.

Let's take a look at the precious metals charts. Last week I said they didn't look good and were set for a fall and that is what took place.

I get a lot of flack for saying the metals look to be headed lower as the manipulation theory is stated and drilled into my head.

I'm well aware of the fact that many markets are manipulated to some degree or another and that includes gold and silver but they remain in a secular bull market so I can handle corrections.

Just because I know that a market is being held in check or moved lower doesn't mean I can keep my blinders on and fight the trend because it's the "right thing to do".

Every market has corrections and they are healthy. We have to accept and embrace consolidation moves and correction moves. It's a normal part of a healthy market.

I know I'll get a lot of heat for this next statement, but it's true.

The charts really do tell all. They tell where support and resistance can be found and they tell me the current state of a market with it's price action and volume.

It doesn't matter if something is manipulated, the charts still tell a tale to those who can interpret it, and those who can are able to use moves to their advantage.

I prefer to keep the blinders off and be a realist and accept the markets and the moves they make for what they are. I just don't see the point in saying every single week that gold and silver must go higher for whatever reason it may be on that day.

Get real and accept reality!

Metals Review

Gold only fell 1.88% for the whole week and this may anger some. If you're one of them, give your head a shake!

One leading stock was off some 15% on Friday alone after a less than stellar earnings report.

Now that is a scary move!

If gold were to drop that much in a single day, it would be something to get nervous or even upset about, but a drop of less than 2% over the period of a whole week is no big deal at all in my view.

Gold held it's 50 day moving average Friday and that is likely the low for the time being. We will probably see a consolidation here for a few days to a week and then if we are to head lower again, that will be the time.

I need to see how the action and bounce is off this level before I can really say if gold will continue further but I do suspect it will move down to test at least $1,700 and more likely the 200 and 100 day moving averages around $1,660.

It may take two or three weeks to test that level but I do suspect it's coming.

Don't shoot the messenger, I'm just reading the chart.

Don't be scared or upset at corrections, embrace them as they are a sign of a healthy market.

I've said many times in the past that once gold is rising nearly everyday for a period of time, then I'll be really getting worried and likely begin to take profits.

Until then though, the trend remains up, but not straight up.

Silver fell a much harder $4.10 this past week. It remains gold's more volatile cousin.

Notice any repeating patterns on the chart I've drawn?

Two bear flags formed perfectly and broke right on cue. Those patterns are some of the most reliable to trade off of.

It doesn't matter if it's gold, an index or a stock. Bear flags are great for quick trading, especially when you use a type of leverage like options or a leveraged ETF.

Last week I stated the importance of the $32 level and that is where silver stopped this week.

Now I can only guess that we will see another bear flag type of pattern form here before we head lower once again.

I expect a test of the 200-day moving average at $31 is in the cards. But if we get a real washout move here, then we could easily test the very significant $28 level in time.

The chart is telling me we aren't done with this correction yet, but that doesn't mean we head straight lower right now.

As with gold, I am looking for a consolidation this week before we see a real move one way or another and so far that appears to be a move lower once again.

Platinum fell 2.04% this past week. In reviewing what I said last week I said we are all but guaranteed to hit the 100 day moving average when I should have said the 50 day moving average. We are almost there now.

A double top pattern formed here and now we're correcting pretty hard and it's very likely we will see the 200 day moving average hit as there is strong horizontal support also at that level near $1,550.

It may take two or three weeks or more but I do think we are still heading lower before we resume moving higher.

Palladium fell only 0.94% this past week with really all of that coming in on Friday.

It looks like we are now ready to break this head and shoulders pattern as volume and price action is quite bearish here.

The measured move of this head and shoulders pattern would either be a$70 or $80 move lower depending on which neckline you choose. Either way, lower seem to be palladium's direction of choice for the near future.

Either way, we can make money. Being an active trader is a must in this type of market as the buy and hold strategy is all but dead with the exception of our dividend paying stocks who underwent a major quick correction early this past week.

The highest paying stock pays near 18% a year and had a flash sale along with a few others. These swift moves lower rarely occur, but when they have they have only lasted a very short time but offered great opportunity to those who've been waiting.

We were lucky enough to have timed our buy points perfectly early in the week but the window was a very short one. I added heavily to these stable stocks and they give me a great income alone.

I have less and less allocated now to mining stocks as they are just not doing much for us, and haven't for a long time.

I've still got the heaviest weighting in physical gold and silver, followed now by our dividend stocks then an active trading account and the smallest portion is now allocated to mining shares.

I'd love to increase the weightings in them but I don't see the point at the moment.

This may anger some but it's just my honest opinion.