Silver has reversed and broken out to the upside. After a week of consolidation, the buyers have showed up and pushed silver through the top. Gold has been in a similar pattern just a little weaker than silver, but an up day today should be enough to trigger a reversal.

The recent trade in metals had been ugly; but like all markets, patterns and trends change. There is no way to know how long or how big the rally will be. 2200 would appear the next roadblock for silver while gold would be 1820.

This could be a short-lived rally or one that lasts for an extended period. We would suspect the latter, the hold of the lows when there was every chance to go much lower indicates some buying power behind the rally. Of course, there are no guarantees just pattern recognition.

We are now long silver, still short gold. That position will not change until tomorrow at the earliest. Although gold looks better and will probably change directions we will wait for confirmation that the trend has changed.

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