Last week Gold, Silver and Platinum were rolling along without a care in the world. Gold was in the middle of making a move through 2000, suddenly the buyers were gone and panic set in. It was like a switch was flipped and sellers took total control.
Markets are interesting and there are never any guarantees, however last week’s action was epic. Looking at all markets in general, Thursday saw equites plunging, with Gold, Silver, Platinum, Crude, Grains, and others charging higher.
Although we call the moves at the end of the week epic, it really shouldn’t have been a surprise except for the size of the move. If you recall a couple of weeks ago, we wrote about the fear based short covering that turned the trends in precious metals. This was almost identical except we were already long.
One market fact that must always be remembered, no market can sustain the speed and parabolic nature we were watching last week to the downside in equities and the rise in metals. At some point there will always be some mean reversion. Bottom line, we are still long, and the early action will determine the next move.
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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