The evidence continues to mount that gold and silver markets and investors are in for a shakedown … and probably sooner rather than later.

Don’t get me wrong. I’m bullish on gold and silver markets. I’ve established my initial position. I am not, however, going to chase a runaway train. In fact, as an investor in precious metals myself, I’m looking forward to the coming shakedown.

The strongest indication that the current rally in gold and silver is due for a breather continues to come from the actions of the commercial players in the futures markets. I’ve shown the below chart before. The situation has only gotten more extreme as the rally has continued.

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Commercial interests in the gold markets are selling into this rally like nobody’s business. Every time these market participants have reached a negative sentiment extreme (when the black CCoT line crosses the bottom red line) in the past 4 years, prices have declined significantly.

We’re seeing the exact same pattern in the silver futures markets as well.

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Just like in the gold markets, the institutions who actually deal with physical silver as part of their businesses are VERY happy to be selling silver at these prices. They are happier to sell at this price than they have been at any time in the past 4 years.

It’s helpful, on occasion, to think about who is on the other side of our trades. In the gold and silver markets right now, the folks who are selling their gold and silver are the same folks that live and breathe the business of gold and silver every day.

Do we think we have an edge on them? Do we think that we know something they don’t? Maybe they are in a tight spot and they are being forced to sell at these prices because they need to raise cash to pay off debt just to stay alive?

Frankly, I don’t know why they are selling so aggressively. What I do know is that when they have sold this aggressively in the past, gold and silver prices have declined. What I also know is that the investing public is highly vulnerable to being worked into a frenzy of buying … and the insiders are more than happy to take the other side of that trade.

Where do our TradeStops indicators stand at the moment? Using the popular ETFs for physical gold (GLD) and silver (SLV):

  • Gold (GLD): The current VQ on GLD is 13.7%. GLD triggered a Re-Entry Rule back on February 22, 2016. The top of the Low-Risk Zone on GLD currently sits at $111.77. (That’s the level I’m looking for personally.) GLD would be stopped out if it falls below $105.28.
  • Silver (SLV): The current VQ on SLV is 20.2%. We’re still waiting for a Re-Entry Rule to trigger on SLV. We’ll likely need to see SLV rise another 10% from its current levels before it triggers a Re-Entry Rule.

One final thing for today, I wanted to update you on the trade in US Ten Year Treasury Notes that I mentioned a few weeks ago. We certainly nailed the bottom of that trade and have enjoyed a nice rally for the last several weeks. Take a look:

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In the past few days, however, the rally in T-Notes has failed to break through overhead volume-at-price resistance:

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And our favorite short-term cycle in T-Notes is nearing a top:

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We’re on the sidelines in T-Notes for now.

Have a great weekend,

Richard_Signature
Richard M. Smith, PhD
CEO, TradeSmith
Founder, TradeStops.com

P.S. I had the privilege of meeting some of our subscribers last night at a meet-up in St. Petersburg, Florida. It was inspiring to hear from so many subscribers what a difference TradeStops is making in their lives – both in terms of financial freedom and, even more importantly, free time. TradeStops has become a trusted investing auto-pilot for so many subscribers.