Gold: A Traders’s Warning

Posted by Mark Leibovit & Michael Campbell

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Mark Leibovit: The gold market was giving us little warnings the few weeks when it couldn’t break out above the December 7th high so the writing was on the wall. Some of the shares were underperforming too, so  I did advise we were heading down in the VR Gold Letter.  But I’m not running for the hills. This is the volatility of the markets and we just have to get used to it. Taking a bigger picture view…..

Gold: A Traders’s Warning


Michael Campbell: Mark Leibovit of VRTrader has been a Timer’s Digest long time Timer of the Decade, Timer Digest’s Timer of the year but also gold market timer of the Year. Mark is going to be at the World Outlook Conference February 11th and February 12th in Vancouver and of course you’ll be able to get access to that on the internet.

Mark, I want to start with gold today because we’ve got some level of correction going on. What is going to happen next?

Mark Leibovit: The gold market was giving us little warnings the few weeks when it couldn’t break out above the December 7th high so the writing was on the wall. Some of the shares were underperforming too, so  I did advise we were heading down in the VR Gold Letter.  But I’m not running for the hills. This is the volatility of the markets and we just have to get used to it. Taking a bigger picture view, gold is cheap. when it crossed $1,000 an ounce. I’ve been saying this for the last couple of years, that was like when the Dow crossed above 1,000 back in 1982. $1,000 is the floor in Gold and the move is still early on.

All this talk about a bubble is nonsense. Rhis is just the beginning. It’s a big 20 year up cycle with another five-ten years ahead of us and I look at it like a $14 stock that might go back to $12 or $13. This correction s a minor event. We had a bit of a trading top, the volume is a little negative here. There is some positive seasonality still in effect into February so this market could easily turn around and surprise the bears. You’ve got to be a buyer in dips.

Michael: Mark you’ve made it very clear in your VR Gold Letter that long term you are still very bullish.  On the short term, apart from the Credit Crunch in the Fall of 2008, gold has had trouble making any kind of significant correction on the way up. How do you trade the Gold Market Short Term?

Mark: I have in putting out these sell signals which are trading signals for those who are fine tuning the market. Still, there is the fear that people are going to unload something that could be worth $2,000-$3,000 an ounce and patience is the best formula.

It depends what your perspective is. If you keep coins in the vault, keep your core positions and I have a little sell signal, I suggest to wait a little bit until we get a bit more confirmation of a bottom before buying a new position. That’s the value of my trading signals for investors. Maybe there’ll be a bigger shake out this time than we’ve seen, I don’t know. Or it could just stop here. When I see the volume flip flop to the positive then I know that the selling is over and the correction is behind us.

It you pull up a weekly chart of one of the big ETF’s there’s no sign of a downtrend. Once a downtrend starts it’s going to be clear and you will have plenty of time to get out of the market. Gold is going back to $700-800 or some ridiculously low level,  I don’t see it at all. I think we correct a little bit here in the next month or so and then we take off again big. Quite frankly, urprises are going to be to the upside and you’ve got to be ready for the upside reversal when it comes.

Michael: So a bull market until proven otherwise and a very powerful bull market at that. Are you ooking for buying opportunities in the Senior Gold Stocks?

Mark: Well some of those shares have been giving us some warnings. One of the biggest on of the biggest leaders in the blue-chip and the gold market is Rand Gold, and it  has been underperforming for three months. I’ve be writing in the letters it’s providing some type of negative divergence or warning, and it did but gold still moved higher anyway. Now Rand Gold has come down quite a bit and I’m not quite sure it’s done yet to the downside.

So I’m watching leaders like that, big names in the blue-chip sector to give us a sense. If I see those names start to generate some strong upside volume that might be a good leading indicator for the metal itself. But my experience over the years Michael,  is to evaluate each item separately.  There could be some special situation affecting that stock perhaps, and then you start reading into too much into the markets because one or two stocks are underperforming.\\

Michael: What are your parameters for gold on the correction?

Mark: $1,325 is the next big support number, looking at the Spot price we got down to $1,352, we touched $1,354 on Friday on the Spot so I guess we could possibly go through $1,352.  Your next big number is $1,275 and then down to $1,225-$1,250 area. Now keep in mind I don’t have a projection down there, I just have some negative reversals here off little trading tops telling us that they’re still selling here and the buyers haven’t stepped to the plate yet. So it’s an estimate as to what target we’re really going to achieve on the downside or whether we’re going to stop here and suddenly reverse back higher.

So I’m cautious short and I’m not getting the upside volume, and we’ll just have to watch the support levels and if we get a clear sign of a reversal I’ll put out a bulletin and then I guess we’ll jump back in for the traders.

Michael: And let me just quickly throw silver at you.

Mark: Silver, the $26 area is what I was hoping for as a pull back considering the negative volume patterns we’re having. If that takes out$26 you’re probably looking at the $22-$23 range as your next big number. I can’t imagine it going any much further than that in the worst case scenario.

Part of my comments are related to that big correction we saw in 2008 where we dropped from $20 down to $9,  a $10-$11 correction. So for silver to go from $31 back to $21-$22 is within the parameters I would think of a pretty significant and important correction. And outside of that I just don’t see it going beyond that. But famous last words: you go with the market and the market tells you, if it ever gets down there and the volume remains negative then of course I’d have to stay cautious. $26, maybe $22-$23, that’s about it as far as I see it.

Michael: But what you’ve just said is a real key and people have to understand this about the investment markets and methodology: good analysts follow their methodology you have an opinion, but you let the market tell you what’s going on. You do that by your own proprietary measures, and you have a brand new book coming out talking about some of those measures.

Mark: Absolutely. Volume supersedes price. All I want to know is we’re the buyers and sellers are. We get technical patterns and then we figure out the reasons for it. So when I get positive volume reversals coming back to the upside, and there’s a clear sign of a bottom here in the silver and the gold. we’ll act accordingly.

But it’s a little frustrating too in a sense because you’re seeing other metals act well, I guess you noticed that palladium hit a new bull market high on Thursday at $828, and platinum hit a new mini bull market high on Thursday of $1,835. So you’re watching other markets of metals doing well and you’re scratching your head a little bit that silver and gold are diverging. Copper except for a week ago was really strong, uranium keeps moving up to new higher highs in the cash market. So the wind is still at the back of the commodities in my opinion even if we’re getting this correction there’s still a lot of interest in the basic commodities. This is very encouraging from alonger term view to see that kind of action.

Michael: Well as they say it’s going to be, the next three of four weeks are going to be fascinating. I think this couldn’t happen at a better time. We’re doing the World Outlook Conference February 11th and 12th, Mark Leibovit will be there. Mark I look forward to seeing you up there, it’s going to be terrific.

Mark: I’m looking forward to it. I love coming to Vancouver you know that Michael. Thank you for having me.