Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
Best Time / Month to Buy a Used Car From a UK Dealer - 16th Dec 17
Relief Rally in Gold Mining Stocks - 16th Dec 17
Amid Bad Fundamentals, Gold Sector Rally May Have Begun - 16th Dec 17
Gold Bullish on US Fed Interest Rate Hike - 16th Dec 17
The LORAX Explains What Happened to Sheffield's Street Trees 2017 - 16th Dec 17
Bitcoin Trading Alert: Bitcoin Pauses – Will Appreciation Follow? - 16th Dec 17
SanDisk Ultra 128gb 100mbs Micro SD Card for Smartphone's Speed Test - 15th Dec 17
Inflation is Spiking Globally… Bond Bubble Bursts in 3… 2… - 15th Dec 17
Sheffield's 'Real' LORAX Defending the Trees From the Labour City Council Patrol Units - 15th Dec 17
Stock Market Decline Signals are Near - 15th Dec 17
Santa Is Putting Christmas On The Blockchain And Saving Billions - 14th Dec 17
The Unprotected, the Protected, the Vulnerably Protected Classes—Which Are You? - 14th Dec 17
Gold’s Upside Target - 14th Dec 17
Year-end US Interest Rate Hike Again Proves To Be Launchpad For Gold Price - 14th Dec 17
2 Charts That Might Define the Fed’s Jerome Powell Era - 13th Dec 17
UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - 13th Dec 17
Stock Market Elliott Wave Forecasts - Is the World coming to the end? - 13th Dec 17
A Method Traders Can Use to Confirm an Elliott Wave Count - 13th Dec 17
Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - 13th Dec 17
A Former Wall Street Veteran: Good Traders Are Born, Not Trained - 12th Dec 17
Buy Gold, Silver Time After Speculators Reduce Longs and Banks Reduce Shorts to Continue? - 12th Dec 17
Masters of Economic and Political Illusion – in Taxes, Debt, Government, and Markets - 12th Dec 17
Approved Used Land Rover Main Dealer Real Customer Buying Guide - Hunters, Chester - 12th Dec 17
Gold Price 100% Bullish Signal - 12th Dec 17
Epic Stock Market & Fixed Income Bubble Will Not End Well - 12th Dec 17
Bitcoin can be stolen. Although Can’t be hacked - 11th Dec 17
Have Stocks Reached A Permanently Rigged Plateau? - 11th Dec 17
Trying To Beat The System Is A Fatally Flawed Investment Strategy - 11th Dec 17
Is This The Beginning Of The Next Silver Rush? - 11th Dec 17
The Dow Gold Ratio - 11th Dec 17
Evidence of a Stock Market Top Mounting - 10th Dec 17
Bitcoin Doesn’t Exist – Forks and Mad Max - 10th Dec 17

Market Oracle FREE Newsletter

Traders Workshop

Gold And Silver Sellers Remain In Control

Commodities / Gold and Silver 2015 Nov 14, 2015 - 06:42 PM GMT

By: Michael_Noonan

Commodities

This week, we are ending our commentary portion, probably until January due to a pressing time commitment for the next several weeks. Starting from next week, we will post charts and chart comments only on this site. If you are not a subscriber and still want to read the chart comments, you will have to subscribe in order to follow the updates.

This is not an effort to increase subscribers, rather, it is the only viable way because the sites to which our articles are submitted prefer some accompanying commentary, in addition to the charts. We do not use subscriber e-mails for any purpose other than submitting our commentaries directly to them. Subscriber privacy is respected. Besides, from our point of view, the charts tell the most compelling story.


Charts...

The continuing PM down trend is obvious, but sometimes adding a simple line to connect the swing highs and lows can alter what the eye sees. As a consequence, we were able to focus on reaction rallies 1, 2, and 3 for a comparison and assessment, as explained on the chart.

Typically, when a trend ends, there is often some form of dramatic price/volume activity that stands out. An example would be seen in the activity on the left portion of the chart. Price declined sharply into the June lows and had the look of a potential end to the trend. What is missing and explains why this was not an end to the down trend were two factors: lack of heavy volume at/near the lows, your typical sign of change from weak hands into strong hands, and the initial reaction rally off of the low was not that strong.

What you are seeing in gold is a steady decline with no apparent panicking to form the basis for a bottom. The very small range of last week is the antithesis of a panic. It shows that buyers were keeping sellers in check after a sharp decline. Sellers lost control, at least for the week. This opens the door for buyers to begin a reaction rally, and that remains to be seen.

Gold Weekly Chart

The strong rally bar from 3 weeks ago was a sufficient performance for us to take a small position from the long side, one that lasted less than a day. The gap lower opening proved the strong rally was a bull trap, and it was also evidence of how weak the gold market is, was at that time. The subsequent 11 day decline demonstrated gold's continuing weakness and seller control.

The small loss suffered was a no-brainer decision because there was a stop in place at the same time the buy recommendation was initiated. This removes any/all reaction surprise and/or guesswork to the reaction opening lower. Those who choose not to use stops were then confronted with holding for a reaction higher, that never developed, or not knowing how to handle the trade that unexpectedly moved sharply lower. The net effect is almost always a greater loss than if a stop were already in place. A word to the wise...

Will this potential double bottom hold? After the wide range bar decline, 6 bars ago, the last 5 bars have been overlapping, and the closes are almost clustering, both signs for a possible change in price direction. A rally can be expected, but surrounding circumstances dictate it may not last, as explained next.

The circled high volume reflects short covering at a previous low. It can lead to a "double bottom," but not one that would be of last duration due to the precipitous decline leading up to the low of Thursday. A reaction rally, yes. A sustainable rally? Not likely, for two reasons. First, the sharpness of the decline, as mentioned, and second, the trend is still down and controlling. Both weigh against the odds of a reversible rally with staying power. [EDM = Ease of Downward Movement]

Gold Daily Chart

We often mention how one move needs to be confirmed by the next, yet to happen, ensuing move. Too many traders do not exercise enough patience to wait for some evidence to confirm what already took place. The "double bottom" in silver was not confirmed by subsequent activity. In fact, the weak rally reaction and inability to exceed a 50% retracement from the last swing high were both signs that the rally was not likely to hold. As in gold, last week's small range can lead to another reaction rally. The character of the next rally will be more clearly seen on the daily chart.

Silver Weekly Chart

The bull trap was much more apparent in silver, [the failed high rally at the end of October]. Here again, if one did not use a stop in going long, an amateur's tactic, one would have more than likely suffered an unnecessary larger loss, and they add up.

The increased volume on that failed rally was a false sign of strength. It was actually an exhaustion rally destined to fail, but that could not be known until it was confirmed the next TD. Not every buy or sell position or signal will work successfully, and that is a part of doing business, and it is also acceptable and to be expected. This is why stops are so essential in trading. [TD = Trading Day]

The signs leading to what may be another temporary bottom were negative, just as in gold: very sharp drop and the trend being down. A reaction rally can be expected, even next week. What will be critical to watch is how the rally develops because the probability is that the reaction rally will be temporary, even if price rallies back to the 15.50 - 15.70 area, an optimistic target.

The decline in PMs does not appear to be over.

Silver Daily Chart

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.

© 2015 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

© 2005-2018 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