People are focusing on the price of PMs, treating gold and silver as vehicles for increasing in price relative to their cost of purchase and not on the reality of what the artificially suppressed market is showing. It is the reason for buying and holding gold and silver that matters. Know this: It does not matter what you pay/paid for owning physical gold and silver. Price is temporary; physical is permanent. [That being said, however,] a red flag is in currently in effect for both gold & silver. Below I explain why.
So says Michael Noonan (edgetraderplus.com) in edited excerpts from his original article* entitled Gold And Silver – All Eyes On Gold And China When Silver Could Be The Tipping Point.
[The following is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Noonan goes on to say in further edited excerpts:
The price of gold is where it is today because it has been purposefully suppressed by Western central bankers to keep the “dollar” alive as the world’s reserve currency. Destroy that, (and gold and silver do, which is why PM are so despised by central banks, competing against their paper enslavement scheme,) and the Western banking system collapses. The central bankers will not allow that to happen until they have destroyed every fiat currency, first, and along with that destruction, the “value” of whatever people hold in paper form: cash, stocks, bonds, pensions, etc. It is in process of happening and has been for decades. Right now, events are leading up to the final phase of the dollar to undergo severe devaluation.
People are focusing on the price of PMs, treating gold and silver as vehicles for increasing in price relative to their cost of purchase. but it is the reason for buying and holding gold and silver that matters. As a consequence, attention is paid to what people think should happen to the price of gold and silver, and not on the reality of what the artificially suppressed market is showing. For that reality, we turn to the charts because the very legitimate fundamentals that will ultimately drive the price of gold and silver are not a barometer for the timing of any future price increases. Plain and simple, gold and silver will not increase in price until the socialist/fascist central planners and their puppet governments have confiscated as much wealth as possible from the masses, leaving many destitute.
No matter what phase a market is in, there will always be set-up opportunities that offer limited risk and a higher probability for a successful outcome, and that will also happen for gold and silver. It is critical to…always make decisions about the reality of a current market and not what one may think will happen in any given market [- and below is what the charts have to say].
Gold: Weekly Chart
The weekly gold chart is a simple one. A red flag is in effect based on the increased volume and the very small weekly range that resulted. The message from the market for this specific situation is that the increased effort on the part of buyers was met, even overcome, by sellers who prevented buyers from extending the range more to the upside.
Gold: Daily Chart
The daily shows more detail.
Charts are replete with information about past activity and how it can possibly influence present activity. The rectangular box on the left shows where price declined quickly from the 1360 level down to the 1320 area. (Resistance should always be considered as an area and not just a specific price.) The current rally in gold stopped, so far, at the 1330 area.
There are two important considerations to keep in mind:
- The upper channel line is a supply line that indicates when a market is in an overbought situation. What many fail to appreciate is that overbought can become more overbought, so it is not a reason, by itself, for making a trade decision.
- The other aspect is the sharp increase in volume, which happened to occur at the overbought supply line at the same time. Whenever there is a sharp increase in volume, pay attention. It is the earmark of “smart money” stepping up activity. Smart money buys low, sells high. That is axiomatic.
Up until last Tuesday, the high volume day, gold made 12 successive higher lows. The increase in volume came at the high. Would you surmise smart money was buying or selling at that high day? The logic, to which we referenced earlier for those not too familiar with charts as we use them, would say smart money was selling.
Consider the facts taken directly from the chart.
- Price was in an area where it declined previously (last October, early November 2013).
- Price was also at an overbought condition, converging with these other two factual observations, as volume had a sharp increase.
A logical conclusion can be drawn from those facts, (vs. opinions which can be different from one person to another).
Will a correction develop soon, next week, based upon this information? We do not know, nor is it important to know what may happen, in advance. We have formulated an idea on what the market may do, but we have to wait and see if the market confirms the idea.
- If it does confirm a correction is imminent, the next step is to prepare for an opportunity to possibly be a buyer. This approach to the market eliminates guesswork or having to make a prediction. Time will tell, starting next week.
- If the market rallies more, instead, we wait again for another opportunity that will develop. Markets do not disappoint.
Silver: Weekly Chart
There is a growing sense that silver, so often overshadowed by gold, may be the key for when the PM begin to rally in earnest. For all the severe shortage of physical silver and mining issues for more supply, etc., the chart below does not reflect any sense of urgency that silver is about to launch a major rally.
Like gold, the chart above shows the same sharp volume increase and very small weekly range, relative to the effort expended, which is also a red flag alert. The issue of bearish spacing still exists, and the current rally is at the 50% area from the last swing high to low. Whenever a market does not rally past a half-way point, it is a general indication of overall weakness, emphasis on general.
Silver: Daily Chart
It is the daily that shows how charts show the way in which a market provides all the information one needs to make an informed trading decision.
The weekly chart already indicated a red flag alert from the high volume and small range bar. We will start with that bar, “B” on the chart, but we see that specific day as a point of culmination, based upon past market activity. Just as with gold, silver had a failed rally at “A,” see arrow.
We can see the market declined from that high, but what makes that high of greater importance is seeing how the market closed on 30 October. There was a wide range rally and strong close near the high. Logically, one would expect upside follow through, next day. What happened instead? Price gapped down, opening under the low of that rally bar, the exact opposite of expectations.
Whenever the market does something opposite to obvious expectation, that is an important message from the market itself! Pay close attention when that happens. The market failed to confirm the expectation. This gives greater credence to that area being resistance into the future. When we noted that “B” related directly to “A,” you would not have likely made that pertinent observation.
Further, “A” relates back to “C,” which we just realized was not marked on the chart. “C” is the last failed rally in the middle of September, where there was a very wide range bar, followed by a small bar, stopping the rally, and price sold off sharply, next trading day.
When you see how “C” acted, it puts “A” into a context that is less surprising. It is the combination of “C,” “A,” and the volume spike that strongly suggests “B” may also turn into a decline. By itself, “B” is not as strong a case for a potential reaction as when a “story” is developed from previous developed market activity.
While all of the focus is primarily on gold, silver is not in as relatively as strong a position as gold, and it may be a truer roadmap for when the eventual bull market emerges at some, as yet unknown, point in the future. Whenever that rally starts, it is almost certain that the first signs will come from the charts, as described.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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