News, analysis and commentary for gold traders and investors

"Be Right - Sit Tight"

Jesse Livermore
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Gold Market Wire

News, analysis and commentary for gold traders and investors

Gold Market Update

Gold follows through to the Upside

May 7, 2021 - (Gold Market Wire) - Gold is following through on its breakout of earlier this week, with a strong gap higher. This is the stuff that the bulls' dreams are made of. It's not even a power up-trend, but, instead, a veritable gap. Gold and Silver are moving higher and will very likely continue to. The chart shows our triple bottom (always perfectly clear when far enough in the rear-view mirror!) and the gap. We are entering the sweet spot for the metals now and it is time to be on the train, luggage fully stowed, for what is likely to be a long ride.

...quite the bullish picture.

Yesterday we noted that we should be prepared to shed 1/3 of our length if the rally gets heated. In this context we would note that the type of gap we are getting today (in our opinion) is not the kind that flames out, like a parabolic move, but is instead a gateway to a new market level from which we can re-examine. Therefore, these types of gaps, as follow throughs from the breakout of the downtrend, tend not to flame out, but, instead reset prices at a new level. It is these calm, orderly, rallies that we seek in trading, because they can be sustained.

Of course, we will always need to make exceptions to that rule for Gold's psychotic little brother, Silver, who doesn't always follow rules, but does have a sharp forecasting eye. Many times we see Silver jump and Gold catch up. The older brother is wiser, no doubt, but he is also slower. That can lead to some great opportunities to get long Gold as a confirmation trade, on the back of a Silver surge. In fact, that's just what we got this week.

...as a Gold indicator, you could do worse than Silver.

Silver, being so highly keyed, can indicate nicely to those addicted to trading, and offer short-term opportunities to jump into a rally at an early stage.

Right now, things are going smoothly. We stuck to our Silver discipline and reaped the rewards. We bought small at $26.40 (downtrend break )and big when we crossed $26.50 - our main horizontal resistance, because we saw a new channel develop. Now we are content to run the position. We waited long and hard on the sidelines for this opening, taking $1 out of Silver along the way. Equally important, we sidestepped the stomach churning and tail-chasing that so many engaged in. Had we stuck it out, we'd be further in the money - but that is what the core position is for and not the trading book. If you're a hyper-disciplined insomniac, who probably has a short life span, well, go for it, as they say. Not us though. Our plan is simple: the lowest risk we can muster to get something out of the middle of a trend and then sleep nice and sound while others sweat in their dreams. As one of our great trading mentors, now in his 80s told us many decades ago, "only fools try and call tops and bottoms in markets. The rest of us take something out of the middle and go home."

We're still in the 'middle'. We're not going home yet. And we're not going to try and call tops and bottoms. It's about letting the market tell us what to do and not trying to be a mystic predictor of the future... which is always laced with uncertainty. We trade to make money - not to be "right".

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