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January 14, 2010

Watch Palladium

Just a quickie here as I'm on the run. We had a very interesting development in the precious metals markets today, and it had nothing to do with gold or silver. Palladium was up a whopping $20. I've previously discussed how palladium (and platinum) have been the leaders in this precious metals bull market, meaning they tend to break to new highs ahead of gold and silver. Both Pa and Pt have been setting new rally highs, and I believe we are only days away from seeing gold and silver break out, as well. In fact, the last time palladium broke sharply higher was exactly two weeks ago, on the last trading day of 2009. The following week saw the precious metals sector rally fervently. Therefore, if palladium remains a faithful guide, next week could be quite exciting for PM bulls.

There is also a lot of buzz in the comments section about Silver Wheaton these days. It seems to be a favorite among locals for playing the silver move. Indeed, my collection of stock, calls, and warrants on SLW constitutes my second largest position... second to silver itself. When a trader has a sizable position in one stock, it is easy to fret about bearish candlesticks, but let me show you what bearish candlesticks at or near rally highs have meant to Silver Wheaton shares since July's intermediate bottom:

silver wheaton chart

I dunno about you, but it looks to me like bearish "reversal" candlesticks have done quite a good job of gettting traders out of solid positions prematurely. We would likely do best to base all our precious metals-related trades on the charts of the underlying assets.

Okay, for those of you who haven't been paying attention in class, I'm getting married Saturday, so don't expect a weekend post! We are not leaving immediately for a honeymoon, so I'll see y'all next week.


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