Look for me on CNBC Worldwide Exchange at 4:30 and 4:50am CST on Friday the 16th!
ECONOMIC OVERVIEW
The Swiss National Bank announced its intention to set a minimum exchange rate for the Swiss franc against the Euro at 1.20. This was the most powerful intervention since 1993 when the Bundesbank intervened in the currency markets. What does this mean for Gold? Initially the market sold off, but within a day the market bounced back in true glittery fashion. Gold’s luster is not dulled by all of this maneuvering because it is believed now more than ever that a currency crisis is underway. Like all intervention, the SNB is not bigger than the marketplace itself, so it cannot control what happens to the rest of the economy. The metals have in general kept up their shine. Although both Silver and Gold have suffered some setbacks and extreme volatility, their up-trends are still intact. Sooner or later all the capital will end up in gold as one by one the escape hatches are closed! A word to the wise should be sufficient. Be prepared, its coming! On the technical side, support for Gold comes in at 1775 on the daily chart and 1700 on a weekly basis. Support for Silver comes in at 40.00 on a daily level and 38.37 on a weekly basis.
The sell-off’s will provide opportunities for entering new or adding to already existing positions in these markets. As I have said before, these are trending bull markets and as such, I looked to buy on pullbacks and sell on overbought strength. Looking at our technical work, we are a stone’s throw from $2000 in gold. Silver has been and still continues to be the laggard, but don’t under estimate the potential for silver too. Some analysts have targets at $100, but I prefer to keep my target conservative and would be happy to re-visit the highs around $50.00. Target levels and risk management are an important part of our trading model. This will allow for traders to manage positions accordingly with their level of risk exposure. We also participate in option based trades and they can be a viable substitute for the futures contract. Lower equity traders should consider options to help manage overnight risk. For more information on trading models and strategies, please feel free to contact my office at 312-264-4364 or email me at afranklin@pricegroup.com.
Gold ~ Weekly
Silver ~ Daily
Ever hear of the saying “throwing good money after bad”? I don’t think the president has or he is just willing to ignore the fact that the US debt ceiling is now at $15.194 trillion or 101% of GDP. Ahh, yes remember the chaos in the markets right before the deadline to raise the debt ceiling??? It seems that has been put in the closet for now until the next time. The Super Committee that has been appointed this task must submit a plan by November 23rd. The equities closed near their lows on Friday and over the weekend more fear continued to pour out of Euro land. German, Dutch and Finnish bonds jumped while Italian, Spanish and Greek securities fell. European liquidity is the lowest in years. The possibility of a Greek default is growing and the German banks and government are preparing for it. How long can the US economy continue on the path of negative real interest rates? Fed official, John Williams stated, “The global financial system is experiencing great stress”. Hmmm, do ya think?
“If the world economy gets better I’m going to make money in commodities because of shortages that are developing, especially in agriculture and precious metals. If the world economy doesn’t get better, you’re not going to make any money in Toyota or IBM but you might make money in commodities because they’re going to print more money. It’s the wrong thing to do but they will print money. Bernanke is already printing money again. You have to protect yourself. I’m short stocks, but I don’t expect the world economy to get better. Not much better anyway; if it does and I am long commodities as a protection.” – Jim Rogers on CNBC 09-09-11.
The Euro on a weekly chart has broken through the trend line and reached the first level of retrace at 1.3766 from the highs to lows. Next stop is 1.3399 and potentially 1.3033. Keep in mind, that this market has fallen a great deal already, so if you are not short this market already, it would be prudent to wait for a correction. Back on Aug 29th we talked about the range that the Euro had been trading in for a quite a while and that if broke in either direction it would see some follow through. Of course, traders could get involved for a daily move. These markets move enough in one day to make it worth the while. We suggest using parameters and levels. If you are unfamiliar with these concepts, please call our office 312-264-4364 and we can guide you through entry levels techniques and risk management.
Euro FX ~ Weekly
The S&P 500 briefly broke below the shorter-term trend line on our daily chart and then proceeded to close almost at the high of the day. If the market closes below the trend line, it’s very possible that it will re-visit the 1077 lows. Many analysts continue to pedal the idea that stocks are cheap, but that doesn’t mean they cannot get cheaper. The outlook for growth continues to look grim. There is still a pervasive fear among investors who were burned the first time around. As the see-saw of news keeps coming, we must rely on the technical aspects of the market that help keep our risk management in check. Traders who wish to look at trading the markets intra-day for a better risk management with no overnight exposure can call our office at 312-264-4364 for additional information. We have seminar coming up in October. The details will follow in our next newsletter.
S&P Index ~ Daily
CURRENT TRADES
Upon Request – afranklin@pricegroup.com
Once a trade is closed out, it will no longer appear under the weekly “New Trades”. It will be added to a summary of all open and closed positions, which is sent as a timely email update to subscribers. To subscribe, please email afranklin@pricegroup.com or call 312-264-4364.
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