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Trading Lessons

Gold And Silver – Swiss National Bank Rally. Enough For A Change?

Commodities / Gold and Silver 2015 Jan 17, 2015 - 07:04 PM GMT

By: Michael_Noonan

Commodities

It would seem that last week’s rally in gold was Swiss National Bank-driven, plain and simple. It is difficult to get a handle on the ramifications of what just happened with the Swiss “unpegging” from the Euro. It was becoming prohibitively expensive for the SNB to keep buying Euros and trashing their own economy in the process. Ostensibly, this is a tale of a central bank telling the US and the rest of the EU, enough! We have had it, and we are now going to be more fiscally responsible.

Right. Just after opting not to have the Swiss franc backed proportionately by gold, a move that would have been an act of fiscal responsibility. If there is one constant about world-wide central bankers, it is that they lie on an ongoing basis. The truth, if it ever comes out, may not become apparent for the next several months. It makes no sense for one part of the central banking cabal to pull a “surprise attack” on the rest of the group.


If there is one thing certain about this insidious group is that they always act in their own best interests, which means always against the public’s interest. The SNB telling others they have had enough should be viewed as more kabuki theater. The least surprising aspect of the SNB move toward “independence” is that there was probably a fantastic fortune made, in the process. That would be more in keeping with what to expect.

The pulling away from a 1.20 peg to the Euro is as much an independent move as is the unmitigated destruction of the crude oil market, equally as “accidental” as the suppression of gold and silver over the past few years, [actually decades], or the freak events of Ukraine, where an elected government just happened to undergo a CIA-led coup, the whole sorry event a tragic mess.

The world is changing, and the sequence of events become shorter and shorter from one to another. While the Swiss have center stage, all other events are still taking place, and foremost among them is the destructive US starting wars wherever possible, threatening and enforcing economic warfare. Is it an accident that two days prior to the slaying of a dozen people in Paris that French President Hollande was calling for recognition of Palestine and an end to Russian sanctions? The US has an uncontrollable fixation with Russia and the rest of Europe suffers for agreeing to be the US sanction lap dog. Woe be to any country, including France, that gets in the way. [Including the SNB, as well.]

Enjoy the winter, Europe. You have sown the seeds of self-implosion, blaming Russia for everything, almost all of which is fabricated. In response to such ongoing provocations, is it any wonder Russia has turned East, now having Turkey be the transit country for the natural gas on its way to other destinations? Europeans have always viewed themselves as being smarter and more sophisticated than Americans. Time to have another look in the mirror. Sad course of events everywhere, yet all purposefully brought on by those in charge, or seemingly in charge.

It makes no sense to speculate from the sidelines while the backroom deals are kept far away from scrutiny, so a look at the charts, and if there is one constant about them, they never lie. They may not always be clear until after the fact, but they relate reality as it is.

We are seeing a positive change of behavior as both PMs have rallied with strong closes and increased volume, both attributes of buyers in more control than sellers. The weekly trend remains down. It is always good to keep the weekly chart in mind to temper the enthusiasm of the more myopic daily and intra day moves.

Regardless of any of the charts, there is nothing that dampens the message to keep on accumulating physical gold and silver. The world events are circling the drain like an unstoppable eddy. If the wealthiest of countries are accumulating gold and silver as much as possible, following their lead is a worthy mantra. The current price of gold and silver is not that important. Having and holding those proven forms of real money can only be a very wise undertaking.

Last week, there was little reason to view the markets in a more positive vein, after so many weeks and months of disappointment. The market needs to prove itself and we now see some steps in the right direction, finally with a higher swing high. The D/S bar is where Demand easily overcame Supply, rallying on very strong volume and closing just as strongly.

What needs to happen next is forming a higher swing low after the next reaction. Ideally, the correction bars should be smaller and on decreased volume, telling us that selling is drying up. When that happens, demand takes over, once again, and price should move higher.

If the next reaction down can stay above a 50% retracement, and that level is just about where the D/S bar low is located, around the 1225 area, it will be a positive sign. These are just guidelines, to be prepared as the market unfolds in case a buying opportunity develops.

This caught our eye, unfortunately about a week after the rally got underway, starting from 5 January. Note how volume has increased so sharply as price has been in a bottoming-like TR [Trading Range]. Any time you see volume increasing at important highs or lows, always pay attention. Smart money creates volume, not the public. If volume picks up at a low area, smart money are covering shorts and accumulating long positions , while weak holders are buckling under the pressure of lower prices over a protracted time span.

The one caveat is the highest volume spike on Friday, most likely some profit-taking as the accumulation process continues to unfold. How much longer it may take and how will the market develop is anyone’s guess.

Silver’s weekly chart is not to be ignored, regardless of sentiment. It should not be an impediment for the ongoing stacking of physical silver, for this is a great price level in which to be adding. If you were willing to buy at 25 or 30, or higher, buying at 16 and 17 has to be a gift.

Jettison the notion that your silver only has financial value relative to acquisition costs. The value of silver has been recognized for centuries as a store of value. Anyone who is disappointed that the current price of silver is lower than their purchase price has there own sense of “value” misplaced.

You see what has just been done to the crude oil market when the manipulators want to take total control. That is what central bankers have done to the gold and silver markets. No one should flog themselves for being a victim of a rigged market. It happened, and in time, there will be pay back. History is on our side for this one.

Friday’s strong rally ended the week near resistance. There has been little in the way of any meaningful correction, so expecting one this week would be good for the market. What is important, at this juncture is to assess the character of the next reaction lower. If it unfolds in a positive manner, as we have been describing, it may present a reasonable buying opportunity.

The opportunity to keep buying physical metal never stops and accumulation, to the extent of one’s ability remains our mantra.

The volume pick up for ABX does not seem as large as it was for gold, but it was noticeable and constant, and that counts. What remains most apparent for silver is the work it must do to turn this trend around. This is why we advocate patience and not be taken in in what may not prove sustainable. Once it is proven, there will be ample opportunities to participate in the paper market, if it will be still viable to do so.

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.

© 2014 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

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