Negative Outside Reversal Day: Beware The Ides Of March

Precious metals expert Michael Ballanger believes we are in the very early stages of an absolutely breathtaking bull market in mining stocks and the precious metals, but like the famous Aesopian fable, sometimes it’s the tortoise that wins the race by simply plodding along and exercising patience and a tad of caution.

Over the weekend, I wrote an essay entitled “Patiently Climbing Aboard the New Golden Bull,” in which I stated that not only are we in a new bull market in precious metals, but also I pegged my long-term target price for gold at US$7,189/oz, which, at a gold-to-silver ration (GTSR) of 50, implies a longer-term silver price of $143/oz.

Over the intermediate term, I see a move up to the $1,450/oz range, albeit not without a great deal of backing and filling and accelerated volatility. That sounds wonderful, doesn’t it? You can just back up your Ford 150 and load it to the brim with gold coins and wafers and senior mining shares and why not buy a few million shares of a 5-cent penny dreadful because, after all, don’t we all agree that “there’s no fever like gold fever,” and fifty-baggers are a walk in the park. Right?

Wrong.

The Friday afternoon numbers for the COT, coupled with the most rapid advance in bullish sentiment since 2009, has set us up for disappointment and if we are not careful, severe short-term draw downs.

Before I proceed, it must be stated and stated clearly that I have two main accounts that I use for the precious metals, with one dedicated to long and intermediate-term positions and the other to short-term trading. I own large positions in a number of junior TSX.V explorer/developers and some of these have been held since 2010, which means that I have exposure to gold (and silver) literally 100% of the time. I never trade my physical; I seldom trade the high-quality miners; and I often hedge both by using ETFs or options. So when I tell the world that I am looking for a “better entry point” for my trading positions, I don’t want to read a post in some chatroom that “Ballanger’s bearish!” because, as you have read earlier in this missive, I am NOT a “bear.” But make no mistake: I look for a bone-jarring correction in March-April that will singe the eyebrows.