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 Wire

Life in the Downtrending Channel

October 29, 2020 - (Gold Market Wire) - The Precious Metals' sell off is following through from yesterday's dramatic downside action, as we resolve more than a fortnight of market indecision and vascilation, to the downside. We're back in the channel, properly, after numerous failed attempts to break out in the past few weeks.

...a double-barreled sell-off

This is no 'tree shaking' exercise, this is a test of support, for real. The market has that triple-bottom at $1850 in its sights, and it is hard to not believe it won't be challenged. The downtrending channel has proven to be a proper tractor beam, and breaking-out of it is going to take some strength...and strength is garnered from sell-offs. Be prepared for more downside a action.

For now, the sidelines are the only place to be. We had expected a second-wave of selling, as we related in our monthly report (sign up on home page), but the market gave us plenty of teases to try and get us to commit real length. Thus, the re-entry to the channel after repeated false dawns for a break-out was an indicator that served us well and demanded discipline. It did its job perfectly. First, it made us suspicious over the past few weeks that the channel was starting to develop as a magnet. And each failed breakout increased the possibility that the channel would win the battle against the uptrend. Our insistence on getting a solid end of week or even end of month close outside the channel was another discipline that served us well. We never did - and , again, our suspicions were increased. The failure to pass these tests meant that trading either ceased for us, or was cut to such small size it bordered on spec. And so we maintained the discipline and lived to fight another day. For the book there were some small losses a couple of gains and a lot of scratches. That's the bane of the trader. But we saw the freight train clearly, and were "off the tracks" when she roared through the station. Such an important part of trading. What we didn't do was start some short-term escalated buying program, because the channel flashed a warning that a market back in its grip could signal a test of the channel's bottom. So, once again, a properly drawn channel did its job. As did our identification of the $1906 horizontal and the $1910 horizontal (call it a 'band' if you wish) several times over the past two weeks+. We also noted failure at the 50-day moving average and the final breakthrough of the 100-day moving average fired the starters pistol for the sell off. And that's that. As we are always won't to say - "technicals work", and they worked again.

And so, on to the bigger picture.

We have a solid sell-off in a secular bull market surrounded by macro-economic devastation and a world political scene bordering on chaos throughout the West (and beyond). That tells us that the lurch lower means its time to scope out core position additions. We will be heading back up eventually, and by that we mean within a few months at the most (i.e. - not years), so we check in with our alpha play - Silver, to set the stage.

Silver gets whacked

Our core buying program in Silver is coming into play. On our way down from the big August 11 sell-off we committed to buying at $24 and $22, and we have been filled on these. We now hold $20 and, lastly $18 in sight as buy points (un-margined). These are scale-down buys, each one adding size as we fall. After $18 the buying program is at an end and the position will be held. With the US electoral chaos coming up, and the all too evident dawning of a proper monetary crisis that will shake the financial world to its very core, we have little doubt that the buying program is very likely to succeed, and that trading opportunities await in the near future.

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