Technically Perfect

What a week it was. My head is still spinning. With gold and silver breaking out and following through and now coming into some resistance to the US markets holding up great then looking like they wanted a little consolidation then seeing many leading stocks rush higher later Friday afternoon.

We had some stellar earnings reports this week, and some not so stellar. I try and steer clear of trying to trade over those earnings report days as the fast, very fast, leading stocks I trade in my swing trading portfolio simply move too much on earnings.

If it works out for you then it's great, but if not, then it can be disastrous when we are talking 18% gains or even gains as much as 6% or 8% can be devastating as a gap will form and often in leading stocks the gap simply will never be filled. An of course the inverse can be true if the street dislikes a companies numbers

With leaders breaking out Friday afternoon and really the markets not doing much it gives me great encouragement for our near-term swing trading future.

Leading stocks lead the market in term of timing, and especially in terms of gains.

Last week I had taken gains in all our swing trading positions for great gains. Unfortunately it appears I took them too early as we would have had a nice run this week. I did not hold any new positions into this weekend as the ones I tried quickly didn't work and it looked like a market correction was due also.

You can't win 'em all but I'll be here ready for the next buy point.

On that note, let's move into our precious metals charts who did exceptionally well this past week.

Metals review

Gold rose 4% for the week and even closed Wednesday above 2% on the day which is a rare occurrence. We broke out of the reverse head and shoulder pattern which morphed into an uptrend channel last week as I mentioned.

I did expect gold to rest a bit this week but that's why you just react to markets and stocks and try not to predict things. I do like to look for high probability patterns in fast moving stocks though and buy the exact breakout level and if it is going to work I know right away and let it ride, if not the stock reverses and I sell right away. But that's swing trading, we're talking about metals here.

Gold busted above the 50 and 100 day moving averages very very convincingly and perfectly. Notice the explosion of volume as price broke out. That is perfect and will work most of the time, especially when the next day price holds up and follows through with more awesome volume.

The GLD ETF exhibited the same superb price action and accompanying volume.

You just couldn't ask for anything better, actually, hold that thought. Let's take a gander over yonder at silver.

Silver rose 5.49% for this past week and it's chart is a thing of beauty. The break above the head and shoulders the previous Friday the 20th was great and followed through this week.

The price consolidated slightly at the downtrend line from late October then flew higher and is now residing at the $34 resistance area where we could see a few days to a week or so of consolidation.

You just don't see stocks or markets breakout quite so perfectly this often and when they do there is only one thing to do, BUY!!!

I've read and witnessed before that intellects aren't the best traders because they over-think things rather than just react. I'm no intellect but I am certainly guilty of over-thinking a trade and missing it.

The best policy is to just buy a proper breakout at the proper time and keep stops at that breakout level. If it's going to work, it will begin working right away in my experience and if not then you're already out.

You can always buy back in as well, but you can't recoup losses in a trade if you let it run. I'm guilty of that mistake the odd time as well though sadly.

After all these years you'd think I'd know better, and I do, but emotions sometimes take over.

Volume was exceptional in the silver futures market as well as the SLV ETF and we will be ready for higher prices soon once we best $34.

Platinum rose 5.88% this past week after breaking the downtrend line convincingly on Monday. Super action as the price rested slightly below the downtrend and then broke higher quickly with more spectacular volume.

Next resistance area is the 200 day moving average which happens to coincide with horizontal resistance from the highs back in early November 2011.

The technically perfect action in these precious metals as of late is attracting some major attention from the swing trading community along with the technical traders. This is great and brings more money into this hot and very small market.

Volume on the breakout was perfect and heavy in platinum in the futures market and the PPLT ETF saw the same great action.

Palladium rose 2.06% this past week after attempting to breakout from resistance around the $690 area.

We've got the significant 200 day moving average lying right above $700 and it appears we need at least as few days to build the force to power above it.

Thursday printed what's termed a naked bar whereby the price shoots higher then reverses and closes on or near the lows of the day. These are reversal bars or signs that rest is needed. Especially on heavy volume as we saw Thursday. Friday saw low volume though which means this rest stop may be short-lived.

The PALL ETF volume has been weaker and peaked out on Wednesday which gave us clues as to the coming consolidation which we are now in.

In recap, it looks like gold and platinum are set for higher prices immediately while silver and palladium may take a day or three off.

Fundamental Review

With so much hot air coming out of Davos this past week it's hard to believe there still snow there. I won't go into it as it's far over-covered in my view.

We had four banks fail this past Friday after everything closed up for the week. This is the most since October 14th 2011.

We saw the merger mania in mining companies begin this past week with a major silver company buying a smaller gold and silver producer whom we used to own, but I've been out of that stock well before the mergers was announced as the stock just wasn't moving much.

Another company we do however own, merged with a company this week and we're already profiting handsomely as the stock has doubled so far in 2012.

Rumours are swirling around about another potential large mining combination coming down the pipe.

I know long suffering mining shareholders have had a rough ride for the past decade for the most part but as long as you've had a hefty percentage weighting in physical gold an silver you should have been able to weather the storm for the most part with the exception of 2008 in many cases.

I have never been so serious when I say I think 2012 will be our best year yet in the mining sector. Although, it's just going to be a warmup for the true blowoff top.

I see that rumours of India paying Iran for their oil in gold are floating around, but they are officially being denied. I doubt this to be true, but if it were possible it would be in trade with Iran as they are under some stringent sanctions these days.

I seem to recall that Iraq was attempting to skirt the US dollar and sell oil in Euros before they were attacked by the US......

Zimbabwe is set to increase the cost of registering platinum mines from $300 to $2.5 million so speculation will be cut and actual work will be done. A wise enough move in my view as any serious company should be able to afford that price, but it is still quite steep.

Zimbabwe is also increasing their prospecting license fees from $150 to $500,000. This will definitely increasing illegal mining in the country.

I like to show the following chart once in a while and I've done it before showing the Nasdaq bubble and others next to this chart. You should compare a few bubbles to this chart and see just how uncanny it is. Looking at at least a 10 year chart is best.

When looking at the Nasdaq chart you can clearly see the major first selloff occur in 1998 after which we saw one of the wildest, most violent bull markets in history.

Where do you think we are in this gold bull market?

Personally, when I am looking at the 1990-2003 Nasdaq chart and the 200-2012 gold chart and it looks like we have had the first sell off and are nearing the end of the media attraction stage.

It won't be hard to tell if this is true as we move forward but it appears so to me. However, the length of the enthusiasm, greed, delusion and new paradigm phases may stretch much longer than that of the Nasdaq bubble as gold is money and our worldwide monetary system is being flushed down the tubes.

But I talk about that far too often so let's continue on with the comparison.

The Nasdaq rose from 2,000 to the ultimate peak of 5,000 in just about a year. That's a 150% gain in a year.

Let's say, for comparison sake, gold hit $2,000 in 2011 and that was the first sell off. That means gold should go to $5,000 if it mirrored the Nasdaq's move.

That would be a fantastic return, especially for those of us who've been in closer to the $400 level.

We are far from that type of gain in gold and if gold ultimately did top at the $5,000 level, I'd be extremely shocked and quite frankly, disappointed!

I'll likely be lightening up the position around that area, but I certainly think we will go quite a bit higher than $5,000 and ounce.

But if the signs are there that the top is in, then I will have to dump my whole holdings of physical gold and silver. That is a day I'm not looking forward to, but will readily accept when it comes.

I'm breaking every trading rule in the book by falling in love with my physical gold and silver trade. It's the easiest trade I've ever made. You buy it, hide it and forget about it.

I don't worry about countries, governments, frauds, insider trading, insider scandals, management, tsunamis wiping out factories or anything else.

I hope you're enjoying this easiest trade of your life as well, but if not I hope I've quickly convinced you that you've still got time.

I try and keep these free weekend letters as short as I can since I need a rest on the weekend after a long hard week and the last thing I want to do is impose on your weekend so I'll finish up here.

Have a great relaxing weekend