Wednesday, October 27, 2010

Silver bulls caution warranted ahead of Fed QE2 announcement

Until the Fed has announced its QE2 program scope next week (there is an interest rate meeting Wednesday November 3, 2010) precious metals are likely to keep consolidating.  Will the asset purchases be on the order of a few hundreds of billions of dollars or a few trillion?  What will be the asset mix?  Most importantly, how will traders react?  For example, Bill Gross of PIMCO (who may very well have an inside scoop on the Fed's activities) feels that bonds will sell off rather than be bolstered (the more intuitive reaction). [1, 2]  In any case, there might be some sort of unanticipated surprise or disappointment (at least for those of us who are not psychic or Bill Gross).

Weekly Chart:  Best guess we are in minor 4, of intermediate 5, of primary 3

4 Hour Chart: Zooming in, possible zigzag developing as a fractal within minor 4
1. Bill Gross Telegraphs QE2 Green Light: Buys MBS On Margin Tyler Durden ZeroHedge

2. Bill Gross: QE2 Signals End of Bond Rally, Shanthi Venkataraman