Volatility continues to grip markets, and given the concentration of stocks in the latest bull market, we would expect no less. When you have an incredible run in a market fueled by seven stocks, once one domino falls, they all fall unless another takes its place. That is why monitoring the market breadth when trading stock indices is essential. Market breadth represents the total number of stocks that are increasing in price as opposed to the number of stocks that are declining in price. But how do you monitor volatility in a commodity such as Silver?

One straightforward way is to take the average true range (ATR) and multiply it by $/points. For the 1000-ounce Silver futures contract, every penny move is $10, while the ATR is 94 cents per day, meaning on an average day, one can expect to see a $940 fluctuation on average per day per contract. On Thursday, we saw a daily range of $1.53 or $1,530 per 1000 oz contract, which was an outlier. If you have read the Metals Edge since its inception last Monday, I have been warning that  DMI – is attempting to cross above DMI +. Often, a negative crossover sets the stage for a larger correction.”

The directional movement indicator (DMI) was created in 1978 by J. Welles Wilder and is a moving average of range expansion over a given period (the default is 14 days). The positive directional movement indicator (+DMI) measures how strongly the price moves upward; the negative directional movement indicator (-DMI) measures how strongly the price moves downward. The two lines reflect the respective strength of the bulls versus the bears. When the two cross, we often see an explosive uptick in volatility.

If you enjoy reading about strategies, insights, and in-depth analysis of Gold and Silver, the Metals Edge is a new Blue Line Futures product developed for Swing and Long-Term Traders. The daily report focuses on Gold and Silver and identifies trend changes, entry and exit points, seasonal tendencies, and option strategies. To register for a free two-week trial of the Metals Edge, you can do so here: Get Metals Edge.

Daily Gold Chart
 

Technicals (August)

For Swing Traders

Bias: Neutral/Slightly Bullish
Resistance:  2400 (Psychological)**,  2434.2*** (Bull trade Trigger), 2448.4-2450.0***, 2488.4****
Pivot: 2375 (50 DMA)
Support: 2350-2345***, 2339.6*** (Bear trade Trigger)
The liquidation in Gold paused on Friday as traders digested the latest PCE inflation data. PCE is the last big data point before the Federal Reserve meets next week. I expect to see Jerome Powell pivot dovish on Wednesday and help cement a bottom on Gold.

If you get the metals edge, I mentioned several times this week that “If the bulls cannot defend 2400, futures will likely trade down to the 50 DMA at 2375,” which proved correct. Yesterday, futures closed at 2353.5, below our Trend Neutralizer level, taking Gold to a “neutral” trend. With the snapback in futures +$28, Gold must close above the 50 DMA at 2376.7 to stage another attack on 2400. A move back above 2434.2 will shift markets to a Bullish trend, while a close below 2339.6 will take the market to a Bearish trend.

Daily Silver Chart
 

Futures trading involves substantial risk of loss and may not be suitable for all investors. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Blue Line Futures is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that the NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. Therefore, carefully consider whether such trading is suitable for you considering your financial condition.
With Cyber-attacks on the rise, attacking firms in the healthcare, financial, energy and other state and global sectors, Blue Line Futures wants you to be safe! Blue Line Futures will never contact you via a third party application. Blue Line Futures employees use only firm authorized email addresses and phone numbers. If you are contacted by any person and want to confirm identity please reach out to us at info@bluelinefutures.com or call us at 312- 278-0500
Performance Disclaimer
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.