There will be an increasing number of articles declaring silver is on its way, probably from the same writers that said the same thing over the past several months, but it can take some time for a trend to change course so being first in is not always the best situation. [Let me explain further with the use of some enlightening charts.]
The above introductory comments are edited excerpts from an article* by Michael Noonan (edgetraderplus.com) entitled Gold And Silver – A Change In Suppressed Down Trend?.
Noonan goes on to say in further edited excerpts:
Silver: Weekly Chart
A glance back at the low for silver in 2010 in the chart below and you can see how, after an initial rally, price moved sideways for about five months. It does not mean a similar pattern develops this time round…[but] waiting for an upside breakout of the 5 month pattern [last time] brought more immediate results, so it pays to be more select in one’s timing, at least for futures.
Gold: Weekly Chart
Gold’s pattern is more stable than silver’s, even though silver outperformed gold last week on a relative price relationship basis. [As shown in the chart below] the previous two swing bottoms in 2013 and almost 2014 did not lead to sustained rallies, and there is zero available evidence that says a new bull move will commence, presuming the recent low holds as a swing low. Let the market prove itself first.
Gold: Daily Chart
You can see [in the chart below] how the general level of volume has picked up in the month of November. The fact that the volume increase is occurring at the lows, if they hold, usually indicates a change from weak hands into strong. Keep in mind, it takes time to turn around a trend, and the down trend can change into a sideways move before an up trend occurs, so patience has merit for not “jumping the gun,” which often means a false start.
Note the combined volume of the last 10 TDs [Trading Days]. In total, it still has not led a price move over the single down day and its volume from 31 October. It shows the difficulty of effort required of buyers to overcome sellers in a down trend. It also suggests the volume and price behavior is more in the form of short-covering as opposed to new longs being established.
Gold has dropped 770 dollars from its highs. A rally of 55 dollars should not be viewed as game-changing.
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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Earlier this year we said that 2014 could well be a repeat of 2013 in terms of unrealized expectations for much higher gold & silver price levels and over the ensuing months have continued to advise everyone to stay out of the long side of the paper futures market for as long as the trend continued down. That came from an obvious read of the charts. This article looks at what the gold and silver charts are saying today. Read More »