Metals May Have Topped Short Term

Looks like the other day we might have hit the nail on the head when we closed out all shorts and saw both gold and silver have spectacular runs. However, indicators suggest that the buying has run out of gas and we are set for a correction now. (I Personally went short the SLV using the Oct. 20, $32.50 strike puts). Strictly my opinion and certainly not a recommendation.

This has nothing to do with long term outlook but keep in mind that indicators are suggesting that the world is slipping back into recession (if you ever bought the notion that they were ever out of the recession) which in part should contributed to a lessoned demand for industrial metals. As a reader pointed out in a comment to my post about closing out shorts from the other day, this shot upwards may have been “it” and I tend to agree. I also feel that any Chinese stimulus or Spanish bailout is priced into the market.

An inability for silver to hold a key level $35.20 according to my charts was the indicator I needed.

I will try to chart it out later but if we surpass that aforementioned level then in my view, the shorts come off again and we could see a rapid rise to $38.00. HOWEVER, the daily sentiment index is at extremes not seen since May of 2011 and we all know what happened then don’t we? The Daily Sentiment Index was at 92% bullish to end September. Those extremes usually indicate it might be time to go the other way.

Elliot Wave International showed last Friday that Daily Sentiment Index was more bullish to end September than it was to start the year and we all know the correction that ensued. Keep your heads up and your eyes open. The Daily Sentiment Index peaked at 92% to end September. I’ll get that daily sentiment index chart from EWI up for readers as soon as I get permission to post it so you can see what I mean.