Last week we mentioned the buy signals for both GLD and SLV, however we were issuing these buy signals with much caution even though it's been many months.

On Friday SLV signal a possible bearish reversal after only one week...




This is a highly reliable signal and therefore we should take into serious consideration that the last SLV buy signal was false. According to Elliot wave theory, we should see a 3rd wave decline beneath the October 2008 low of 8.39 unless we are able to push above 13.94. Faces with this information we highly suggest putting in protective stops as silver seems vulnerable to a sell-off.

GLD has isssued a sell warning as well, although it's not as reliable. However, prudence maintains that you put in protective stops in case we do get a substaintial pullback. In light of this GDX has posted a buy alert, but we will not be convinced until we see a confirmation, which seems increasingly unlikely in the short term. Our previous sell signal was 31.95 on 1/09/09 and thus far GDX has not made any impressive gains, none that would convince us a new upleg in the market is underway.

DBE and energy  ETF has issued a BUY alert as well - but we need to see confirmation. Oil has stabilized and the only thing dragging DBE down is the poor performance of natural gas.





Notice DBE was not able to go beneath it's Feb low. Coupled with this reversal we might see an imminent trend turnaround. There is a massive wall of resistance headed our way, but in the long run this cloud will begin to thin out as prices stabilize. We still wont see the supply issues impact us until later this year, and we have a long long way on the upside so there is little chance of missing the boat. Patience is key here and we will most certainly be watching for an official buy confirmation. DXO is another speculative play here as oil looks like it may have some more room for gains.

The PXE energy index issued a sell alert, but this is low reliability. However any broad market pullback will most likely affect this and therefore close watch is recommended.

The overall market rally is suspect, but given the positive spin on news, the market may continue to grind higher. While we may see an intermediate term pullback, Elliotwave analysis suggests an S&P move close to 1000 and the Dow near 9,000-10,000. We may offer some short position suggestions as we approach this point.

Once this move is finished agriculture is something we will be very interested in looking at. DBA is looking more favorable but has not issued any buy alert yet, however we see this as something coming soon.

So in summary - nothing to buy or sell this week. We'll post if there is anything official on any of the new signals given.

Here are the latest Blees COT ratings released on 4/24/09 for some key markets. Remember “100″ is the most extreme bullish position on the part of commercial traders (aka the “smart money”) for the last eighteen months. “0″ is the most extreme bearish position:

S&P 500 Index: 12
S&P E-mini: 64
Dow Industrials: 34
Nasdaq 100: 19
Nasdaq 100 Mini: 21
Gold: 56
Silver: 94
Crude Oil: 70
Copper: 69
Corn: 86
Soybeans: 40
Sugar: 72
Wheat: 97
Cattle: 58
Hogs: 66
U.S. Dollar: 41
Cocoa: 69
Natural Gas: 56

 

Our energy update is as follows. The actual commodities are still in a sell state. Lets take a look at DBE (Oil, Heating Oil, Natural Gas, Gasoline)

 

 

And USO (proxy for WTI Crude)

 

Look remarkably the same don't they? Both these energy indexes are working off a very strong collapse from last year, with action well beneath the clouds with a very thick base approaching. What we do see is consolidation, and while we do not have any key reversal patterns in place yet we do anticipate something to occur soon, and quickly approach the clouds. A speculative play idea would be to place a small position in DXO (leveraged oil).

PXE which is our energy shares ETF has had a bounce since out signal was given at the end of march. However we are showing a non-confirmed SELL alert and will be watching closely.

The energy picture from a fundemental standpoint still looks strong in the future. So much production has been shattered due to the low oil prices that any global sustained uptick in demand will really put a crunch on the supply side.

We are monitoring our intelligence sources carefully, but we must tread very lightly over the next few months as this market rally will eventually peter out. The market news and trends, despite being gloomy have not been able to create a sizable correction. The swine flu, bankruptsy of Chrysler all have not created massive sell offs (yet).  Therefore in the short term we still have upward momentum in the markets, however an increase in flu activity may cause a kneejerk reaction. The ultimate blow off phase still lurks.

Gold and Silver, despite being in a buy signal currently need to be closely watched. Our friends at Elliotwave still see a downward leg near the $700 area before the true upleg begins. Silver also has a downside target near the $9 level. It is possible that we may further rally before an even larger correction, so we'll keep a close eye on it.

GDX is still not a confirmed buy, and will most likely end the week without anything meaningfull. 

More updates on the AG's this weekend along with any other new developments.

 

This update will be completed over the course of several days as we get more data. But lets focus on the important and probably the most confusing sector we cover - the precious metals.

Today we just look at some charts and also discuss the reversal indicators that ended this week. As we reported last week, we got buy signals for both gold and silver. This past week a BUY signal for GLD was confirmed (our gold proxy). The significance of this is that the previous sell signal was way back in October - and up until this week none of the action in gold was convincing or had the follow through to issue a buy signal. This was the first week where we got a reversal buy signal and one that held. So this in itself is a significant signal.



Looking at the cloud chart we see that the formidable cloud resistance was broken in February and after a retreat has managed to bounce right at the cloud resistance near 850. So a bullish candlestick reversal that was confirmed, and a bullish weekly chart pattern indicated we may have a shot to the upside ahead of us.



Silver is a little less convincing, and our reversal indicators have failed the past few trades (other than the big run up from 9.71 to 14). In this case silver has experienced more volatility and is still in a bearish pattern (i.e. underneath the clouds) with formidable resistance. Notice how silver has not been above the clouds since august of last year and is now approaching a formidable resistance with a thick cloud layer. Nonetheless a fully confirmed reversal must be taken for what it's worth - and a phased in approach may be prudent until we can see continued favorable price action.



GDX has flashed a buy alert signal based on our candestick analyzer, but the reliability is low so we definitly would like to see a confirmation before we march ahead. However the postivie development is that GDX has entered the cloud so therefore we are in neutral territory now, something that has taken quite a while to accomplish. If we get a intraweek confirmation we may recommend a partial entry in GDX.

We'll post some COT numbers in the next day or so along with excerpts from other technicians and market analysts. The problem we see here is that there is a possibility of a major leg downward in the market that may drag everything else with it. On the other hand events may turn out to propel gold and silver much higher. In any case, it's prudent to be cautious and not to load up too quickly, too soon. But at the very least - use the stop losses we post, or wait for another reversal signal to get out until we can reposition ourselves for a more favorable entry.

We'll cover energy later this week, along with posting some additional data from other services that will help us put everything together.

GLD has been in a sell state since early October 2008 and has basically gone nowhere since then. Today a buy alert was issued, and is temporarily confirmed. However we will be patient and wait until a weekly confirmation signal is confirmed. With GLD and SLV we want to make sure this confirmation is for real, which is why so many previous buy alerts have failed. Interestingly Martin Arm Strong called for a bottom in Gold on 4/19.



The current pattern that is evolving is the white spinning top - which is of low reliability and shows a complete indecision between bulls and bears. Because of it's low reliability we want to watch what happens before making any moves. A simular pattern is evolving for SLV, and the buy signal has been rejected.

Based on other technical studies, there are two scenarios that can evolve - one we have reached the low and will be climbing higher, or two - we have one more big leg down in the metals markets, or multiple stairs down to the low. The positives as posted by sunshineprofits is that the volume in the ETF's is declining with this correction.

ADRE and PHO are currently in a confirmed SELL state. The confirmation may get rejected over the next few days if there is a strong recovery, but after 6 weeks of rallying the market is due for a pause so we will treat the signals as real.