What Did You Expect?

Well, we retraced about half of the drop with one more trading hour to go. So, was Mole right to warn about a snap back? Well, that’s really not the right question to ask – if you look at how far we dropped yesterday then it’s clear that we have not retraced much of that at all. Today’s glory all belongs to the Zero which warned us about an impending (POMO induced) ramp up – brilliant divergence and if you’re a sub you’re laughing all the way to the bank right now.

Alright, we’re evil – but not that evil, seriously. Anyway, despite the fact that the tape is looking bullish again all is not well at Ben’s POMO Cattle Ranch. Paranoid as I am it’s my duty to always look for evidence that someone’s swinging a rope – and if we don’t watch out we may find ourselves tied up and brand marked.
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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The thorn in my eye today is the VIX chart which I was pointing to yesterday as bullish evidence. Not so fast, grasshopper! This morning we pushed outside the 2.0 BB and then instantly snapped back. Most likely we’ll close around 17.6 and that’s BAD for the bulls.

WHY of WHY in your infinite wisdom is that bad for the bulls, oh mighty Mole?

Look, a close outside the Bollinger band would have been medium term bullish. But a snap back in only serves to extend the upper band higher and that produces an expansion and thus more downside potential. So, although today’s tape is quite bullish (thus far – it ain’t done yet as I’m writing this) it is possible that there will be a price to be paid. So remain vigilant, the bears may just get their big day yet.

You know my attitude about precious metals by now – I think the big drop will have to wait a bit more – most likely until early February. Which is why I am looking for long opportunities right now – but of course not without evidence. We want to see a bottoming pattern first, and thus far I’m not seeing it yet. I have pointed at two support clusters – one being around today’s lows and the other around the 26.5 mark.

As the gold silver ratio has been dropping like a 1920s mobster wearing concrete boots the thinking has been that once the big day comes gold – not silver – will be the proper short victim to throw down in the river.

Well, I’m not so sure – I have pulled up a left chart of COMEX gold vs. silver and although silver did a lot of catching up in the last year (thus dropping the ratio) it’s currently falling faster than gold. So the jury is out on that school of thought – it’s probably best to diversify here and load up on equal amounts once the big day is upon us.

Cheers,

Mole