Monday saw a hard sell in gold, silver and platinum which was expected. The extent of the sell off was big enough to produce a rally in the next day or two but the sellers are in control and will use the rally to sell. The pattern we see in the precious metals suggests the selling of every rally that reaches a resistance level.

We remain long term bulls but currently the metals are in a downtrend and reaching major support levels. The real key for metals will be the action created from support. This morning’s rally is a big nothing for now but could turn into something bigger. Probability favors a test of 1890 gold, 23.5 silver and 900 platinum.

If the precious metals break through support the metals could get very ugly. The pressure to sell for the weak hands will become immense. However, if support holds, we could see a reversal to the long side later. All markets are starting to pick up which should create more action, we are short all precious metals until the trend changes.

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
Stop being a prophet and make profits