We’re going to look at a few items this week. With spring upon us, it seems appropriate to survey the scenery before the heat of summer and that sweaty July madness arrive and make it hard for us to think.
We’ll begin with what could only be considered a schizophrenic trade in silver.
A quick look at the iShares Silver Trust (NYSE:SLV), the most popular equity ETF for the grey metal reveals the following –
And we ask you, as fellow men and women of reason, educated people with a disdain for all things coarse and corrupt – just what the hell is going on here!?
Is it some kind of joke? Is this what they refer to when they say ‘silver’s merely working itself out’?
Or is it a bolt-tight indication that the metal has lost it’s mind?
Look’s whacked from our standpoint.
But before we grind into the nitty gritty, a few general technical observations on the chart above –
- First, all SLV’s major moving averages are trending lower and price is below them all – bad news for the bulls.
- RSI and MACD are confirming the bearish read with their sub-waterline activity over the last two weeks (in black), and
- We’re but five percent from a major support line at $19.25.
All told, not an optimistic picture.
But it’s more the erratic trading in the blue square that’s captured our attention.
Have a look now at a 15 minute chart of that same (blue square) period –
The manic bouncy-bounce that’s been going on for the last ten days – the gapping action higher and lower on an almost daily basis – is a response to… what? Questionable industrial demand figures? Strike negotiations with the Mexican mining union?
No and no.
As we stated above, silver is hopscotching about because investors are schizophrenic regarding which way the precious metals are next headed. It’s a market that’s still dominated by investment money, and at the moment that money is sh@t scared of what’s about to happen.
So, one day they buy. The next they sell.
And it won’t end well.
We already have an open bearish trade on gold, so we won’t be adding any precious metals positions at present. But we do urge caution for those who are still long gold and silver. And we also recommend you keep your eye on silver, the LEADING INDICATOR in the PM realm.
Next up on the Docket
We turn our scorn now from things metallic to those electric. The object of our enmity is once again Tesla Motors (NASDAQ:TSLA), on whom we also have an open trade, initiated two weeks ago in a letter called The End of the Road for Tesla.
There, we anticipated a continued drop for the stock, writing,
TSLA lost nearly a quarter of its value in the last thirty days, and we say it will continue to fall until it hits the 137 day moving average, currently rising in the vicinity of $180. That’s another 15% loss [from here].
We haven’t seen the full 15% blood-letting yet, but last week’s action did confirm our bearish hypothesis, as the company’s shares cut below existing support at roughly $203 and now appear to be teetering on the precipice of a major Californian fault.
Here’s the chart –
The most important features of the chart are 1) as mentioned above, the break below recent support (in blue), a clearly bearish development, 2) the rollover of the short term moving average (black arrow, at top), a signal that would prove outright dangerous were it to drop below previous support at $203 and 3) MACD’s submerging below its midway ‘waterline’ just three trading sessions ago (red box). With that last development, we have a confirmation of RSI’s break below her waterline some three weeks back, a move that seals the bearish fate of the stock for the near- to mid-term, as technical traders will likely find enough reason to sell the stock here.
As far as acting on these latest developments, we’re going to leave our current speculative PUT in place, because we believe there’s more to be squeezed from the trade. And we would encourage anyone who hesitated to join us initially to hop aboard now. There’s still plenty to be made, and details can be found on our website, here.
And Now, the Moment You’ve all Been Waiting for…
Tesla and silver are now entering the corridors of pain, but what of the rest of the market? Is it just a few high fliers that are getting punished? Will the rest of the techs follow? And maybe silver’s just an exception. Maybe gold will buck the trend and hit $3,000 in a fortnight?
Our take is like this –
This is the ‘Facebook Market’. It’s a market that’s rising on a whole lot of liquidity and the merry belief that so long as we’re having fun, there’s no harm done – everything will work out fine. Facebook, too, is premised on the same insidious vacuousness – just log on and waste time because everyone else is doing it, and we want to be considered part of the crowd, liked, befriended, etc.
So what if underlying the whole project there’s a vast slave trade of personal information that’s being bought and sold, a soul-harvest that’s used to monitor your every move and thought – lest you become a menace to the authorities and have to be dealt with for the potential danger you represent.
As goes Facebook…so goes the market.
That’s what we believe.
So let’s have a look at her chart –
Facebook still has a few dollars to fall before she fills her January gap and resumes her uptrend. Until then, she’s adrift.
And yet it’s not Facebook that we’re going to be trading today, but another company, whose chart’s resemblance to FB is uncanny.
It’s Keurig Green Mountain Inc. (NASDAQ:GMCR), whose stock looks like this –
GMCR is an exaggerated Facebook, and should also be headed toward her 137 day moving average.
That’s a big move.
[mepr-rule id=”203″ ifallowed=”hide”]
[mepr-rule id=”203″ ifallowed=”show”]
So we’re buying a speculative PUT at the 137 DMA.
Wall Street Elite recommends the following trade for your consideration – buy the GMCR June 80 PUT for $2.72.
With kind regards,
Hugh L. O’Haynew