Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
Statistics for Funeral Planning in UK Grave - 26th May 16
Think Beyond Oil And Gold: Interview With Mike 'Mish' Shedlock - 26th May 16
Hard Times and False Mainstream Media Narratives - 26th May 16
Will The Swiss Guarantee 75,000 CHF For Every Family? - 26th May 16
Is There A Stocks Bear Market in Progress? - 26th May 16
Billionaires Are Wrong on Gold - 26th May 16
How NOT to Invest in the Gold Market - 26th May 16
The Black Swan Spotter...Which Saw the Oil-Crash coming; now says the “Invisible Hand” will push Brent to $85 by Christmas - 26th May 16
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Gold And Silver – Market Says Wait

Commodities / Gold and Silver 2012 Nov 18, 2012 - 12:53 PM GMT

By: Michael_Noonan

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleThere is a reason why it has not been easy to trade gold or silver, of late. One area where information is least reliable is in the middle of a trading range. That is precisely where the price of gold is currently, on the larger monthly time frame. However, while waiting idly until clarity re-enters the picture, we can do some stage-setting in preparation for what is to come, in either direction.


Gathering facts is the best way to avoid guessing what to do. We are of the mind that it is best to follow the market’s lead, rather than lead the market in the hopes that it will see the [often questionable] wisdom of divining the future. Most people prefer a “story” that seems to make sense in order to draw an easier conclusion on what to do. Letter writers work that way, markets do not. Consequently, we adhere strictly to the message of the market, for it is never wrong, it just is.

In deference to those who like a good story, there is a battle going on between the evil forces of central banks, hell-bent on destroying currencies, nations, markets and private wealth through the now unreigned creation of infinite fiat, and the other evil forces of central banks, [a duel evil role], hell-bent on refusing to admit gold and silver have a value far greater than any paper counterparts, and doing everything possible to suppress the prices of both metals.

The problem for central banks in running their massive Ponzi scheme is that it becomes more and more difficult to cover-up the fact that [most] all the gold within their control has been given up, in the form of margin, to back up their failed fiat monetary system. The moneychangers are getting caught with their hand in the [mostly empty] till. That is the short-hand version of what is going on.

We see evidence of it in the charts. After a precipitous drop from September 2011 highs to September 2011 lows, all in one month, there has been no further downside follow-through. Instead, what we see is 14 months of sideways movement. The world banking cartel are successfully suppressing price from rising above 1800, but in recognition of the destructive forces of the cartel, the other factions that refuse to drink the fiat kool-aid are supporting gold, around 1500+. Go East, young man, go East!

One thing we know for sure is that the artificial suppression of any market exacerbates the inevitable rise, once that pressure is released. This is our “story” behind the monthly chart. The inability to drive price lower, after 14 months of trying, makes that corrective effort a weak one. It is a market fact that weak corrections lead to higher prices, so the clock it ticking, but it has more time to run. We have no idea how much more? All one can do is see the signs and prepare.

Neither the monthly nor the weekly are timing tools; rather, they form the backdrop for using smaller time frames for entry. Within the confines of a trading range, how it is unfolding has a more positive look about it. Support at the 1500 level has been solid, while the resistance appears to be under more of an assault. Instead of reacting immediately away from the 1800 area, two weeks ago, as gold did on the two previous failed rally attempts, price lingered just under that area. We know from the narrowing of ranges that demand was not strong, and a correction could occur, which one has, as of last week. The character of the correction been unimpressive.

The sell-off of three weeks ago stopped on a dime, and an Outside Key Reversal, OKR, immediately followed. [OKR = an abrupt turnaround in price behavior. In this instance, a lower low, higher high, and a higher close than the previous bar, and the strength of the OKR is seen by the FACT that the close on that bar was above the high of the previous bar.] From this observation, we can conclude that buyers overwhelmed sellers and drove price higher with relative ease.

One added point: the correction stopped at a half-way retracement of the previous swing from low to high. In general, when price holds above a 50% level, it is an indication of strength, otherwise, price would have gone lower. To have these two indicators be positive within the middle of a trading range needs to be heeded.

As an aside, we drew a slanting trendline from the high to the second failed high, and one
can say the trendline was broken, that must be good. Well, one could have drawn a trendline at the previous failed top. It, too, was broken, but to no lasting effect. What is more important is where price fails, in a rally, for it tells us precisely where the last point of resistance was. You can see the lasting effect of the first failed rally from a year ago, November, depicted by the horizontal line that has had a lasting impact. Be wary of trendlines as support/resistance.

It goes without saying that both gold and silver, and maybe silver more than gold, should be accumulated at any price, for the physical, to be held within one’s own control, and NOT within any institution, and NOT in the form of paper certificates. If you do not hold it yourself, you may never get an opportunity to hold it in the future.

As to the futures market, we still see no reason to buy, based on price location in the two higher time frames, just covered. The daily chart is more illustrative of why not. There are mixed messages, currently. Looking at the recent high: there is no specific ending activity that precludes price from going higher. The subsequent move lower has been gradual, and when there was one burst of downside selling activity, it was quickly erased in two days.

Still, you can see the band of resistance that must be overcome. We did not express the chart comment very clearly in stating the weak rally was holding 50%. It is holding under a 50% retracement to the upside, and that would be a general sign of weakness. One should not be buying weakness, at least until it has been proven to have stopped.

Sometimes, a look at intra day time frames can help bring a clearer picture to developing market activity, but even the 60 minute chart shows no strong selling in the gradual drift lower. We see this as an absence of demand, [buyers] for now, with supply, [sellers] not being able to take advantage of the weak demand.

Keep buying the physical; keep holding off on the futures.

Mention has been made that silver is weaker, relative to gold, and a comparison of the charts shows it to be true. When in a trading range, the level of knowledge remains low because price can rally or decline within those bounds and there is no edge to be had.
Once price breaks out, then there is reason to make a commitment. We have a slight bias to an upside breakout, eventually, but in a trading environment where anything can happen, and often does, it is nothing more than an observation, without acting on it.

Let us then deal with the known facts. Within its trading range, price remains under the 50% area, a general indication of weakness, [reference to the upper 50% noted]. While Bernard Baruch can advise to “buy straw hats in January,” buying too early in futures can prove financially fatal. Just ask Richard Dennis about buying sugar under 5 cents. How much can you lose? Turns out, he lost a fortune. The point? Weakness is mostly a siren call, filled with potential peril.

Right above the 50% resistance area is a potentially stronger resistance, from where the large, wide-range sell-off began in September, 2011. Sellers very often defend the area where they went short, in a big way, so keep an eye on that level.

The lower 50% reference is to the smaller rally from the last low to current swing high. On the correction, price held above the half-way retracement, so it is just a general observation for potential relative strength.

We noted that band of support, two weeks ago when price closed on that wide range bar. It is also at the 50% area just mentioned, above, and it adds to our admitted bias of favoring an eventual upside breakout. However, until there is demonstrated market activity to confirm strength, silver remains in a relatively weak position. That can change in a day, next week, or next month, but until it does, there is no edge in taking a long position, given what is known, at this point.

Buy and hold physical silver with impunity. There is a legitimate shortage, among even stronger reasons for buying and holding. For the futures, it can be just as important to know when NOT to buy as to know when to buy. Based on the charts, now aint’t the time.

By Michael Noonan

http://edgetraderplus.com

Michael Noonan, mn@edgetraderplus.com, is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

© 2012 Copyright Michael Noonan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife