Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Could A Big Move In The Global Stock Markets Be Setting Up? - 25th Jun 18
Soybean Price Hits 9 Year Low Due to Trade War - 24th Jun 18
Small Cap Stocks, Technology and Pharma To Drive A Renewed Market Rally - 24th Jun 18
Gerald Celente: Why You Still Need Guns, Gold, and a Getaway Plan... - 23rd Jun 18
Cheap Gold Stocks Bottom Basing - 23rd Jun 18
A Trade War Won’t Be Good for the US Dollar - 23rd Jun 18
SPX/Gold, Long-term Yields & Yield Curve 3 Amigos Update - 22nd Jun 18
Gold - How Long Can This Last? - 22nd Jun 18
Dow Has Fallen 8 days in a Row. Medium-long Term Bullish for Stocks - 22nd Jun 18
Trouble Spotting Market Trends? This Can Help - 22nd Jun 18
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Gold And Silver - Chart Facts Are Market's Message

Commodities / Gold and Silver 2016 Jan 23, 2016 - 05:30 PM GMT

By: Michael_Noonan

Commodities

We keep reiterating that one need not be expert, nor even conversant, in reading a chart to be able to read and appreciate how charts "talk" and reveal very clear information. Opinions are of no consequence, regardless of how strong or otherwise "informed" one is about a market.

A fact is something upon which people of diverging opinions can agree, at least within reason. Each of the following charts contains facts, and it has always been our position that the market has its own message[s] contained in price volume behavior that has a convincing element of reason, no matter what the skill level of one's ability, or lack of, to read a chart.


See if you agree.

We continue to favor silver purchases over gold solely on the basis of the gold:silver ratio having extended to the 78:1 area, where a single ounce of gold can buy 78 oz of silver, in theory. In theory because there are transaction costs from a dealer. This week, we took advantage of the ratio and exchanged some gold for silver, on a personal level, getting 75:1 for each oz of gold.

For simplicity's sake, we use 10 oz of gold as our measure, and that translated into 750 oz of silver. The intent over a period of time, usually years, is to switch back from silver into gold. For sake of argument, assume the ratio goes to 40:1. That means it takes 40 oz of silver to buy a single oz of gold. Allowing for transaction costs, assume it takes 44 oz to buy an oz of gold. We had 750 oz, divided by 44, yields 17 oz of gold to switch. Our original 10 oz has now become 17 oz, just from patiently waiting for changes in the ratio to occur.

We expect the ratio can continue to 80:1, perhaps higher, we do not know for the chart on the higher weekly time frame does not show any sign of an end to the down trend. The reasoning, based on factual observations from reading developing market activity depicted in the chart, combined with logic, leads to that inescapable conclusion: price is likely to go lower.

Silver Weekly Chart

The daily chart supports the weak read for this market. As indicated in the chart comments, the message from the market is weakness, followed by more weakness with each passing week and month.

When will a turnaround occur? As we keep saying, no one knows, and for sure we do not. What we know for certain is that the market will give clear signs when and as a turnaround is developing. For as long as the message remains constant, one must exercise patience. Actually, there is no choice, and those who have been impatient and tried to pick a bottom have paid a price, depending upon how hard-headed one is, or the size of one's margin call.

Silver Daily Chart

What is also true is that smart money buys low and sells high, for the most part. It is less important to buy the exact bottom or sell the exact top, for it takes time to accumulate a position during lows, or distribute a position near highs. However, whenever you see large spikes in volume, you can be sure that smart money is on the other side of the trade.

Who is on the other side? Weak handed traders with insufficient staying power.

If smart money were buying silver, below, [even though it is only a 20 minute intra day chart, the principle is what matters], their activity, and it shows up in increased volume, would be nearer the lows, and certainly not at the highs. The largest volume spike that sticks out like a sore thumb, occurred at the highs. This is not where smart money would be buying. If not buying, then they must be selling, and weak-handed buyers are buying into the late stages of a rally.

Confirmation occurs a few bars later when an even larger range bar appears to the down side and erasing all the buying effort from the rally to the high. We mentioned weak closes on the weekly chart as an indication that sellers are still in control and buyers cannot hold a rally. This 20 minute chart is an abbreviated time frame that demonstrates this principle over every time frame. It is a message from the market that bears heeding every time.

Silver 20-Minute Chart

This chart is an update from one posted a few weeks ago. There was no sign of change then, and that fact has not changed to date. Keep in mind, all of the fundamental information on gold, and silver, is known. The whole world is aware of how bullish the news is, how bullish demand is relative to supply. Yet, despite that information, the market is telling everyone who cares to pay attention that those fundamental factors are not what is moving these markets.

Even if one does not understand the underlying reasons, fundamental or otherwise, it pays to heed what the market is showing and react accordingly. This is still a bear market, all other news notwithstanding. Price is the final arbiter, not one's opinion.

Gold Weekly Chart

If there were something positive we could say about this chart, we would, but we cannot, and that is enough said.

Gold 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

6 Critical Money Making Rules