Tuesday the markets greeted the 40-year high CPI number with a big rally early followed by a hard sell off. Gold and silver charged higher closing above the key resistance in gold and slightly below in silver. The action was predictable leaving gold and silver on the cusp of reversing.
Gold and silver are higher this morning along with platinum. A higher close in gold and silver would trigger a reversal, this looks to be the case. Although we remain short gold and silver, we are not aggressive sellers understanding the pattern is changing.
Looking at the big picture of markets, equities look like they are ready to fall apart. Observing price action, it appears that the institutions and commercial traders are holding up markets allowing retail traders to buy the dip. Gold and silver look the opposite and appear ready to run. Today will tell us a lot about what happens next.
Precious metals should be owned on a physical basis with capital that is not needed tomorrow or anytime soon. Trading should be done with paper knowing that we can trade either side without emotions.
In all markets price action determines what will happen in the next day, week, or months. Keep the two strategies separate, the worst trade anyone can make is turning a trade into an investment hoping for a way out. Traders must learn to take their losses and move on to the next trade.
Patience, discipline, and money management always win the day. Let the map of the markets show you the way.
Todd Horwitz Chief Strategist BubbaTrading.com
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