Another Buying Opportunity is looming around the corner
Thursday, August 28, 2008
by Ira Epstein of Ira Epstein & Company
|
|
8-28-2008 Jake Bernstein is now a regular Tuesday show located in the Video Section of the Ira Epstein & Company Website. More shows of this type are coming this fall. This past Wednesday night I shifted the streaming of my Nightly Video to our new server service which hosts and plays "all" of our videos from servers located all over the world. In theory, this produces a quicker stream to you and that should prevent buffering and provide a true TV experience. Let me know if it doesn't. Obviously the user's method of obtaining access plays a large role. Dial-up services are not what we have geared out transmissions through. http://www.iepstein.com/videos_start.aspx
Hurricane Gustav Gold and silver for the first time in a very long time have a series of events going for them. - GDP growth in the US is stronger than many thought
- Due to the relative value of the Dollar to the Euro, US exports continue strong
- New geopolitical tensions between the EU and Russia, with the EU now threatening economic sanctions against Russia
- The idea now surfacing that Russia will invade the Ukraine
- Chinese factories beginning to open due to the close of the Olympics
- Iran notifying the world that it is beginning construction of a Nuclear Reactor
And... the approach of Gustav. Hurricane Gustav will hopefully turn out to be a non-event, meaning it will miss the oil and natural gas platforms in the Gulf of Mexico. At risk are refineries and other energy structures all along the coast of Texas through Mississippi. Should a direct hit of sorts take place and infrastructure be taken out, energy markets most likely rally, possibly dramatically so. Destruction to energy infrastructure is not a smart gamble in my opinion as these things typically don't happen. Playing that it will is very risky. As such you should almost be playing what to do if Gustav is not as destructive as many think it will be. In the aftermath of Gustav not being overly destructive, the premium that has been built into energy prices, which in turn dragged up gold and silver prices, will come out. If Gustav makes a direct hit, you know the impact will be sharply higher energy prices, which will pull gold and silver prices higher. Next week's trading will respond quickly and directly to either of these two events. After that the fundamentals mentioned above will take center stage. What Now for Gold and Silver The big question now is what propels the markets going forward after Gustav. I think you prepare for Gustav not being a devastating storm, which if I am correct on will create a price break in Gold and Silver and from that break, I look for a sustained year end rally to develop off of demand, not hurricane fundamentals. Gold's Seasonal Story A final pull back in prices into the very end of August is what should be expected. Look at the Seasonal Chart below provided to us by the good folks at Moore Research Center, Inc. 
December Gold Lets start out by looking at a Daily Chart of December Gold Futures 
As mentioned in last week's letter, once the Stochastic Study lost its embedded status the upside price target was the 18-Day Moving Average of Closes, which has been hit. Now I expect market momentum to stall out a while, depending on what Gustav does or doesn't do. Given the holiday and market mentality of making all of us become "weathermen" makes no sense to me. As such I have taken protective action. 
As readers of my Weekly Metal Report know, last week we recommended purchasing December Gold $850 Calls and also took full profit on them. This was a very profitable trade for those who followed it. What I did was recommend you take the profits in Gold and buy Silver Calls. Those as of this writing are doing well. I expect to cut the silver position down today, since I don't want to play Gustav with much of a position since it's the rare occasion where an event like the one being spoken about actually occurs. This leaves in place the December Bull Call $1000-$1025 Spread that you own at 6.30. Those who own this spread are behind on it. However, those who followed my Twice Daily Trade Recommendations both entered into and took full profit on the Gold Calls mentioned in last week's Metal Report, banking more profit than the cost of this spread. Therefore, I want you to hold onto this spread. This spread has until the end of November. If the seasonals in Gold and Silver take hold, or if Crude simply holds steady after Gustav's impact, the seasonal gains ahead could be very substantial. If I am wrong, your risk is limited to the cost of the spread plus fees. Don't forget that this strategy is not a do or die situation. You have the flexibility to get out at any time prior to expiration for whatever the spread is worth. Expiration is in late November, so you have a lot of time to see trends develop. My recommendation at this time is to hold tight.
I receive a lot of questions on how I use Stochastics in my price analysis. I teach how I use them in my trading course called The Futures Academy. I've created a short video that explains my teaching style. In the video I speak about The Futures Academy and the indicators I use in my trade analysis. You can click on the image below if you are online or simply type the link address below the video image into your web browser. 
Video Link: http://www.iepstein.com/videoAds/fa_video_1/fa_video_1.html Getting started is easy. Simply click here to learn more or to subscribe.... If you haven't had a FREE 4-Week Trial to our Twice Daily Market Recommendations and access to our nightly videos where we review charts nightly, go to http://www.iepstein.com/ and fill out the New Investor Kit Form. We will send the kit and access to our research to you. As long as you haven't had access in the past year, you can obtain a Free Subscription to receive access to all of our research, including Nightly Audio/Video Recordings where we cover in detail all the metal markets, when you fill out the New Investor Kit Form on our website.
Let's look at the Seasonal Silver Chart to see what it offers. 
Historically speaking its possible that today may represent the near term high in silver in terms of seasonality as prices had an "Outside Day Down", a chart pattern often associated with turn in market trend. If this proves to be the case, a move down is likely.
I personally think silver has a bit more going for it than Gold does as GDP and exports continue to grow and grow sharply. In addition, from a technical perspective, silver looks to "owe" a rally up to its 18-Day Moving Average of Closes. Let's start off by looking at a Seasonal Chart of Silver as provide to us by The Moore Research Center...http://www.mrci.com/.
Let's assume Gustav proves to be a non-event. Silver should drop along with energy and Gold prices. Look at the spike low on the seasonal chart above. Boy, does that fit in if Gustav doesn't do the damage it could. The silver lining, how's that for a pun on words, is this. From a seasonal perspective, this next price break is the washout that should produce a sustainable move up. December Silver Let's look at a chart of December Silver. 
Stochastics came out of their embedded status on August 21st. Technically speaking, price and the 18-Day Moving Average of Closes, should hit each other after this type of event. Each day they do not, takes away some profit potential as the lower the 18-Day Moving Average of Closes moves down, the less available initial profit. That is what is taking place today. 
As mentioned last week, I recommended and fills were made in the $15.00 December Silver Call at .600. A move up to the 18-Day Moving Average of Closes, where ever it comes in is the initial objective. Today I recommended that partial profit, near .670 cents be taken. Via my Twice Daily Update, which I e-mail out, I will track this trade. I remain bullish and think the influence of energy prices is but "noise" that is affecting the overall bullish trend in Silver. My goal is to NOT have trades remain exposed on this trade over the coming holiday. Rather, I will have them liquidate and hold the longer-term Silver Call Option Spread that I make mention of in my Daily Report. See how to obtain access to that report above.
As Exchanges and Vendors raise and/or lower rates, those changes are passed on. The Fees and Commission being quoted are on a per-side basis and are all inclusive! Volatility is here. That's what traders thrive on. Take advantage of trading conditions by using our super low commissions and great trading software which make it feasible to enter trades where commissions aren't much of a decision factor, placing the burden where it belongs. On being right the market! It's really that elementary. To learn more about us or to get started trading through us simply go to our website at http://www.iepstein.com/ and fill out the New Investor Kit Form. A CD-Rom will be sent to you. At the same time you will instantly begin receiving access to and instructions on how to access our daily market research, trading recommendations, charts and much more. If phoning us is easier for you our phone number is 1 800 284 3010. We handle trading accounts from individuals in a number of foreign countries as well.
Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from Ira Epstein & Company or Shatkin Arbor, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future
Recent articles from this author
- Gold can go either way - Thursday, December 04, 2008
- Gold ...could the current price break be setting tGold up for a year end rally? - Thursday, November 06, 2008
- Gold and Silver Break Down - Thursday, October 16, 2008
- Metdown in Stocks offer Bid to Gold and Silver - Thursday, October 09, 2008
- Washout Does Not Provide Gold or Silver Safe Haven Status - Monday, September 15, 2008
About the author
In 1984 Ira Epstein & Company was founded by Ira Epstein. Ira was a highly successful retail futures broker, having mastered TV to showcase his talents, which in turned helped Ira develop and create a very large customer following. Many of you may remember his TV show "Stocks, Options and Futures", which was one of the most popular Finance Television shows on what was then called The Financial News Network, which is now known as CNBC. Ira showcased his talents in many other TV markets as well, including Los Angeles where he was a regular guest on KWHY-TV as well as WCIU-TV in Chicago, where he was on the air for nearly 20 years. Ira Epstein...the man behind Ira Epstein & Company Ira's background...written by Ira I was born in Chicago in the mid-forties. A War Baby. Graduated High School in Park Ridge, Ill and went on to college. I obtained my Bachelor of Science Degree from Arizona State University, majoring in Marketing and Economics. I completed courses toward a Masters Degree and attended John Marshall Law School in Chicago. When in Law School, I needed a part-time job. While my family helped with my schooling costs, they simply could not carry the continuing financial burden of Law School. I needed a job. Ira discovers the Futures Market One day I found myself looking for a job on the Law School's Bulletin Board. I noticed a job offer for a "Runner". I had no idea what that meant, but I was thin and in good shape. Ready to run. Few people outside of Chicago knew at that time, 1969, knew much about the Futures Markets, including me. I applied for the job and was hired at G.H. Miller & Company. They were a clearing firm at the Chicago Mercantile Exchange(CME), specializing in the trading of Eggs and Broilers...chickens. Turns out they were pretty good at what they did. So I began running. Orders were phoned in by brokers to Miller's trade desk on the exchange floor. My first job was to "run" the order into the appropriate filling broker. I had a knack for it, but have to tell you that running wasn't really allowed. Just fast walking. Very fast walking. I also became the designated employee to take Polaroid Pictures of the chalk boards. No computer boards on the exchange back then. Rather, the exchange had employees who used chalk to write on blackboards the price a trade took place at in the order they were called up to the chalkboard writer. It looked very very chaotic, but it worked. As the blackboard filled with prices, those boards were handed down to ground staff who took Polaroid photo's of them to both track official pricing and provide member firms with trade records. The boards were than washed and put back up. My job was to take pictures of the boards or photo's of the pictures themselves. Fun times. All the while I was still in Law School. School began late in the afternoon and the markets back than ended at 1:00 P.M. I was burning the candle from both ends, studying hard, writing legal brief and whatever. Who cared. I was young and eager. I found myself liking the market. Really liking it. I was fortunate to find that making contacts with "important people' in the business was easy on the exchange floor. In fact, many of the owners of trading companies you know of quickly became influential in my life. Keep in mind that basically I had "nothing", and here I was talking and soon socializing daily with multimillionaires. I remember making $35 a week gross, owning 6 shirts and 3 pair of pants. all specific to work. My boss, Gil Miller continually told me I was being overpaid given the education I was getting. It was mind boggling, but true. Promotion and more... In a very short time promotions began. First to Order Taker and than to running part of the trade desk. I became very good at it and was assigned to one of Gil Miller's largest clients. His name was Ray E.Friedman. I worked as his personal trade deskman. Ray later sent his son to Chicago to learn the business. I shared a small office with his son, Tom Dittmer for quite a while. Today you know that company as Refco. I found Law School less and less appealing. I'd made a lot of friends and acquaintances early on at the exchange. I was never bashful and constantly asked about the markets. I needed to learn and who better from than the pro's. I was surprised at how helpful some were. Leo Melamed, the founder of the IMM division of the Chicago Mercantile Exchange and Barry Lind of Lind-Waldock offered solid advice early in my career. They were always there, answering all my questions. I watched these men, what they did, how they did it and followed my closest mentor, Gil Miller into the unknown. My parents at that time were convinced Futures Brokers were professional gamblers. The big event... O.K. Here I am watching everyone getting rich but me. It looked so simple. I had to try it. After all, I was on the trading floor, in the thick of things and couldn't miss. I had a few months of learning under my belt and "knew" how to do it. I won't bore you with all the details. You already know how it turned out. My family gave me some funds they really couldn't afford to lose. Market went against me, I had no stop, the market was of course "wrong", but I had lost more than I had in the trading account. All in but a few hours. Quite a feat. Had no way to pay it back. In panic I even resorted to calling my college roommate, pleading for help. His dad said he'd come to my aid...partially, but couldn't cover the whole loss. After exhausting all my resources, which didn't take very long, I came to the dreaded realization that by the morning my goose was cooked. I could not cover the debit and was in deep trouble. I couldn't let that happen. Late in the day, that tragic day, I walked into Mr. Miller's office and asked to speak with him. We sat down and he began talking about my progress. I didn't know if he knew about my debit or not. I then, practically choking to death, broke the news to him about the debit, hoping for some mercy. His reaction surprised me. He got up and asked me to follow him. I did. He showed me his personal shower, his sofa, stereo equipment and asked how I liked his office. I of course told him I "loved it" and was so thankful for the opportunity he had given me. He smiled, went to either his drawer or a closet, I forget which, brought out an old hotplate and handed it to me. I must've thought he was giving it all to me. Well, he said something like, "I'm glad you love it. You now live here. You can use the shower and sleep on the sofa. Be out when I get to work. Now go to work and pay me back". I ended up living in that office for a bit of time. I do mean living...not just working. One of the best times of my life. By the way, looking back on it, I know he knew before I ever walked into his office, about the debit. Did I say I also got a raise? Maybe he liked how I handled myself in terms of being honest and addressing the situation head on... or maybe he knew I couldn't afford food after my trading fiasco. I quit Law School. Had to. Didn't have the funds to continue, owed too many people money and frankly found something I had really had a passion for. I turned my attention full time to the markets. I registered and became a licensed broker. Back then there were no exams to become a broker. No studying. You simply signed up at the front desk of the exchange, listing your name, social security number and an address on a white legal pad. You were a broker. How things have changed. The rest of the story... I worked for several years both on the trading floor and up in the office as a registered broker. I discovered I had a knack for marketing, but wasn't the best trader. I knew enough to go looking for help. I learned a lot from the "old-timers" in the building, and there were plenty of them. They never seemed to go home. I remember spending literally hundreds of hours in Barry Lind's offices. I found traders everywhere. They saw I was interested and many took the time out to teach me trading disciplines. I wish there were space to name them all. In any case, I think of them often. Eventually my turn came. I had a membership at the Chicago Mercantile Exchange. My dream had come true. Or had it? The rest of the story... I vividly recollect my early dreams. I, probably like many others before me envisioned my life in the trading pits as something very different than it turned out to be. Being a runner, phone clerk and customer's broker was one thing. Trading in the pits another. It didn't take long for me to discover I liked trading outside of the pit way better than in it. The screaming and intimidation when I was trying to buy or sell a few contracts, while watching the multimillionaire trader next to me offering hundreds of contracts on the other side of the trade can shake the strongest of wills. Needless to say, I didn't stay long in the pits. As it turned out, that was a smart move for me. Skipping forward.... For 15-years I honed my talents at G.H. Miller & Company. I developed strong marketing and trading talents, which enabled me to develop and build a large retail client base. My business eventually grew too large for G.H. Miller & Company to handle. When that happened it was Gil Miller who setup my move to Shatkin Trading, with partners Hank Shatkin and Pat Arbor. Pat was recently past Chairman of the Chicago Board of Trade and Hank is one of the most well known and liked traders at the CBOT, running a large floor trader operation. The rest is simply history and my other accomplishments...well there's been a lot. Ira Epstein & Company continues to flourish and grow. What makes us unique is how quickly we adapt to change and embrace technology in the market place. I can't emphasize enough the word "we". The staff at Ira Epstein & Company is dedicated to our clients. Our staff realized that to survive, one has to evolve. We do just that. However, along this ever changing trip, we stay fixed on who we are and who we service. The Futures Academy Life has changed a lot since I began in this business. One of the things I notice is that because of technology, specifically the Internet, personal contact is lost. When I was trying to learn trading, I could knock on doors and speak with seasoned traders. That can't be done today. Most traders now have computers at home, making long hours at the office a thing of the past. There's a void that needs to be filled. Win or lose, you the client pay commissions to trade. I'd rather take the commission out of winning trades than add them to losing trades. I have no "Holy Grail". No get rich quick system. What I do have is a trading discipline that I believe in and that can be easily taught. Years ago I learned that most good traders are disciplined. They work off a checklist. That list can be written or innate. A few years back I co-authored a book called, "The Psychology of Smart Money". The premise was a comparison of professional traders versus amatures. We looked for differences in each group. What we found was profound... and obvious. The pro's had discipline. They worked at maintaining their discipline. The average trading client, the amature, had little or no discipline. Rather, they often just took "shots" in marketplace, to often because "someone told them something". Not the best laid plan. Many amatures just wanted some market "action". The list goes on and on. I hope this doesn't hit home. If it does, it's simple to change and yes, you can still have the "action". The Futures Academy teaches a simple 5 step approach to trading. You must have a computer and Internet connection. We teach over the Internet, using a "live virtual classroom" where you and your mentor work privately together. No need to worry if you miss a classroom. We work around your schedule. No matter what your profession in life is, the odds are someone was looking over your shoulder when you first began. It's rare that one becomes a plumber, hair stylist or whatever without first becoming a "Journey Man". As a Journey Man you had a supervisor. That supervisor looked over what you were doing, to be sure you were doing it properly. That's how you learned in school. Your teacher did not pass out books at the beginning of a semester and say I'll see you at "final exams". Rather, they went through the books with you. The books had chapters. An order to each chapter. That's how The Futures Academy teaches trading. Each step builds on the next. You should take a look into it if you want to learn a disciplined trading skill. In any case, you now know something about Ira Epstein & Company. You'll find that some things don't change. We'll work hard for your business. Good luck and good trading to you. Ira Epstein
|
