Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Bullish Silver Stealth Buying - 24th Oct 14
Blood in the Streets to Create the Gold Stocks Investor Opportunity of the Decade - 24th Oct 14
Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern - 24th Oct 14
War And The Law Of Unintended Consequences - 24th Oct 14
Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - 24th Oct 14
Saudi Move to Cut Oil Prices Is Now Russia's Biggest Economic Threat - 24th Oct 14
US Stock Market Top Is Now In Sight - 24th Oct 14
New Profit Points in the Shifting Balance of Power, Welcome to Saudi America - 24th Oct 14
QE Failure & Folly Of Paper Mache, Treasury Bond Integrated Lifeline Patches - 24th Oct 14
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Gold And Silver Current Decline Not Over

Commodities / Gold and Silver 2013 Feb 16, 2013 - 06:02 PM GMT

By: Michael_Noonan

Commodities

We often make a distinction between buyers of physical precious metals, [PMs] and buyers of futures, exhorting the former to buy with impunity, and some may see that as cavalier, given how the price for both gold and silver have been in recent decline.

The point for buyers of PMs is for both protection and creation of wealth. Protection against insidious central bankers destroying currency-purchasing power, over time, and wealth creation as evidenced by those buying PMs over the past decade and seeing the intrinsic value grow dramatically.


Buyers of the physical as less price sensitive and view current declines as opportunity to add more. As an example, we still hold physical silver purchased when price was in the mid-40s. Has the relative value declined? Absolutely. Concerned? Absolutely not. It remains a matter of time when the price of PMs will go dramatically higher, and the concern will not be how much one paid, $1800 or $1600 the ounce for gold, or $45 or $30 the ounce for silver. The concern will be over having any at all.

If gold is to go to $3,000, $4,000 $5,000, or wherever, and silver go to $100, $150, or $250, there will be many who will be glad to have paid $2,500 the ounce for gold, and $75 the ounce for silver. How does that compare to $1,800 and /or $45 purchases for physical PMs, at this point? One cannot always time the market, which is why consistent buying over time is strongly recommended, but one can determine whether to be an owner of PMs, or not.

The problem moving forward is fear of central bankers changing the rules and precluding the purchase of any PMs by the public, at any price. Death and taxes are touted as the two things one cannot escape, [not always true for the latter], but the certainty of lies and deception by central bankers/planners runs an immediate third place.

The handwriting is on the wall, as most in PMs know only too well. We mention this for those on the fence, those waiting for "bargains," [misplaced values, there], and those who have not yet purchased any PMs. Do not wait, do not wait, do not wait!

For futures, while most everyone is of the mind that manipulation is showing a steady hand in PMs markets, that "hand" is losing its grip. It is the charts that show what the market has to say about what those who are participating are saying about their decisions. A not so simple statement, but one that says, watch developing market activity to know what is going on.

That is always our purpose.

While ongoing efforts are being made to suppress the price of PMs and discourage their purchase, mostly in futures markets, the "Discouragees," [central bankers,] have been net buyers of gold for a few years now, after having been sellers for so long, so do not go by what central bankers say, [often voiced through the puppetmeisters on daily financial "news" programs], go by what they do, only in this area. Ignore them, otherwise.

The larger picture for gold is as bullish as ever. We provide two strong facts to confirm why, on the monthly chart. Bullish spacing is referenced as such because it shows the degree of eagerness of buyers in a market. It is measured by noting the last swing high and the last swing low. Typically, markets retest previous swing highs. When buyers are so intent on being long in a market, they do not wait to see if a retest of the last swing high will be successful. Instead, they, [and by "they" we mean smart money participants, or controlling forces], just keep buying breaks, creating a space that is bullish.

Another and related measure is the extent of a break, or market "give-back," in a reaction after a rally. Monthly charts are more controlling than the lower time frames, so the information you can glean from them is more reliable and more pertinent. You can see how the current break since the September 2011 high has been relatively shallow when compared to from where the rally began.

Despite the "daily grind lower," recently, the larger focus is very strong. Very strong.


A trading range is where smart money operates to accumulate or distribute their positions. Controlling market forces require time to acquire positions so as not to disrupt their attempted "sleight of hand" buys/sells during the process, and the TRs are also used to discourage participants from following them.

We said last week that $1600 was a possible target, and it was reached on Friday. Will that area hold? "NMT." Need More Time to know that answer.

Points 1 and 2 form an upper supply channel line, and a further line down is marked by dashes to show how it extends into the future, well ahead of price activity. Point 3 is the low is between points 1 and 2, and it is from there that a horizontal line, a demand line, is extended lower. It is also dashed to show that it extends into the future well ahead of developing price activity, to be used as a guide to gauge potential support when touched by yet to develop market declines.

You can see how the dashed line held the December lows, and now February is retesting it, again. There is no evidence yet of a turnaround, and it does take time for a market to turn.

The most interesting aspect of the daily chart happens to be the last bar, Friday's activity. It is a wide range bar lower, a sign of EDM, [Ease of Downward Movement], indicating sellers are in control. The sharply higher volume is a red flag, a point in time for which one needs to pay close attention, moving forward.

Remember, sharp volume increases are usually smart money either pushing a market even more, or starting to take the other side in a transfer of risk. Subsequent developing market activity usually indicates which. This volume day prompted a look at intra day behavior to see if any clues can be gleaned.


We say smart money always tries to hide their intent, but volume is something they need in order to move or accumulate positions, and they cannot hide that. If smart money sells highs and buys lows, where is the highest volume in this chart? We ask, the chart answers.

The position of the close tells us buyers are more than matching the effort of sellers to cause a rally off the low under such heavy selling pressure. The two preceding bars of increased volume may "look" like selling, but it is quite possible that smart money has been buying on the way down, taking everything offered by weak-handed longs selling out and new shorts getting in.

If Benjamin Franklin had been a trader, he would surely have said, "Never a bottom- picker be."


Bullish spacing exists in silver, just not as strongly. We do point out how the past five months of selling effort has not been impressive, relative to the two month rally prior. It is like an Ali "Rope-A-Dope," taking all the punches from his opponent, but protecting himself so not much damage is inflicted, despite the effort against him. Eventually, he comes out stronger to defeat his now-weakened opposition.


We show the same intra-TR channel down, just like in gold. Unlike gold, however, silver's low has held the lows of last December, a small show of relative strength within a negative trading environment. Still, no apparent end is at hand in the decline of futures.

The best way to trade a TR? Not to trade it at all, instead, wait for a price breakout and go with it. Why does that work? As mentioned, TRs are how smart money accumulates positions. Once they are done, they then begin the mark-up or mark-down phase, and it will last for some time, once it gets underway.


Just as a dashed line in a channel projects into the future for support/resistance, you can see where the failed probe lower, at the end of December/beginning of January acted as support. From there, a horizontal line is drawn. We made it dashed to show that is was extended into the future much earlier than when current price activity has returned to it.

Will price hold current lows? No one knows, and anyone who says otherwise is showing an unwise ego trying to be "right," as opposed to being in harmony with the market. Any bottom requires time in order to turn around, and any potential turnaround always needs to be confirmed by price behavior.

The increased volume on Friday is a red flag, as it was for gold, but a red flag means a sign or caution, to take note and see how price responds to it. That takes time. Futures players have time, or at least the smart ones are exercising it.

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.

© 2013 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.

Michael Noonan Archive

© 2005-2014 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

Free Report - Financial Markets 2014