AGQ, GDX, Silver & Gold, Pump & Dump Charts (NORX, FNM)

Revisiting our AGQ position, here's an updated chart:

We are closer to a bullish bounce, but not there yet. It's still 50/50 whether a base has formed before a rally, or whether another drop will occur first. The safest positioning remains to be out of precious metals or slightly short.

We maintain our AGQ call options, and may go long the shares again for another swing trade on closes above $22.50 (or $21.75 by week's end, per the declining green line). Waiting for closes above $24 is safer (blue line).

Those more aggressive may wish to be long with tight stops below recent lows, or perhaps even consider cheap July call options on AGQ (levered silver) or GDX (gold miners) in case of a near-term material bounce.

July $28 AGQ calls last traded at $0.15 while July $33 GDX calls last traded at $0.17  Be warned - odds are that both will expire worthless though they may rise considerably before expiry, so if you hold these be sure to sell at least half should they double thus making the remaining half effectively cost-free.


Those who still harbor fantasies about a dying U.S. dollar and the supposed correlation of gold rising while the dollar drops, note that the dollar has plunged almost 5% the past month while gold has been flat and silver is way down. 

The yen is down 18% since October while gold is down 23% and silver is down 38% in that time, so gold wouldn't have done Japanese savers any good in that time frame either. The U.S. dollar is up only up 2% over that same period, showing that the expected correlation can be inverted longer than those who ignore history can probably remain solvent.

Margin Clerk on line 1, Reality on line 2. 

Worse, there have been no fundamental arguments in favor of gold for a very long time now while all those that did exist have arguably been proven bogus. Gold is down 27% the past two years (silver down 60%) despite massive continuing worldwide "QE" efforts by central banks, bank panics and deposit confiscations (Cyprus), ongoing fiscal issues and gov't scandals worldwide, continuing tensions in the Middle East and Korea, and the many fiscal and political problems in the Eurozone. 


It's interesting to note that for months now gold/silver haven't had the usual past correlation to stocks. For years the metals went up with, while severely lagging, stocks however lately there's been no reliable correlation. 

Same with Treasury rates. TBT used to only go up when the market went up (conversely, TLT down), but lately TBT has often moved opposite stocks. More on that in an upcoming posting, to update this posting on TBT.

The flight to *REAL* safety and quality - cash - continues, and that's still invisible to sheep following the herd, with wool willingly pulled over their eyes.


One of the most important things this blog can do is to remind people that skyrocketing issues are common. Refraining from making the mistake of buying, or buying more, at the top then losing most or all of your money while refusing to sell - or even buying more - on the way down is the tough part. 

What goes up comes down. Below are a couple of amusing recent charts that illustrate this fact well.  Both were promoted by "momentum trading" sites and via very expensive ad campaigns masking as unbiased newsletter or analyst recommendations. Usually the pump is hardest at the top, as the volume levels attest.
 
Pump & dump:

No surprise, the silver chart looks quite similar as does gold's. Here's SLV, the silver ETF:

Interesting Articles:

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