All known information is contained in the charts, and being able to read them is a distinct advantage. The best way to achieve that advantage is to learn to make distinctions contained in the charts from one day/week/month to the next and this article does just that for both gold and silver. [Take a look.] Words: 1375; Charts: 6
So writes Michael Noonan (http://edgetraderplus.com) in edited excerpts from his original article* entitled Gold And Silver – Ayn Rand, Sir Walter Scott, And Nearing “Crunch Time”.
This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) 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. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Noonan goes on to say in further edited excerpts: [For a prologue to this post read: Gold & Silver Are the Achilles Heel of the Largest Ponzi Scheme – Ever! Here’s Why]
The Monthly Chart for Gold
[In the chart below] you can see how price moves farther along the Right Hand Side (RHS) of the now 16 month trading range (TR) [and,] whenever you see price locked in a TR, the farther it moves toward the RHS of the chart the closer it is to reaching a resolve. A resolve is not apparent at this point in time, given the location of current price, not near the upper or lower breakout area on the chart. Still, it is important to observe what is going on, looking for clues of change.
One important change evident is how price is laboring as it moves lower, relative to the rally, and this will be better seen on the weekly chart. It is too early to draw a conclusion on a monthly chart, with almost two more weeks to go before month end, but we can make observations and see if/how they play out on the lower time frames.
The month opened at 1676 and moved lower. The net low under the December low is not very great. This tells us the effort of sellers has been limited. After moving lower, price has rallied to the current high area of 1687. With the large degree of bullish spacing, we can reasonably expect to see more bullish behavior over bearish signs. The inability of sellers to move the corrective TR lower is one such indication.
The Weekly Chart for Gold
The more detailed weekly [chart below] allows for even more distinctions. The importance of making quality distinctions is a better read of what the developing market activity has to impart to any discriminating observer. The ones we see as pertinent start with the May through August smaller TR at support lows. For four months, sellers were simply unable to break the bottom barrier. When compared to the spike lows of September and December 2011, the smaller TR is a change of behavior worth noting.
The breakout from the smaller range is a wide range bar up, strong close, and at the time, increased volume, all classic signs of strength, whatever the direction. Seven weeks later, price stops at resistance, to be expected in a TR. What next stands out is the relatively labored decline, mentioned on the monthly chart, 13 weeks, almost twice as long, in time, as the rally, and the correction did not come close to reaching the lower support TR.
The clustering of closes for four weeks can mean a resting area, prior to resuming the preceding direction, or it can lead to a turnaround. It turned out to be the latter, at least for now. The clustering also stopped at/near the breakout bar of last August. Markets are continually testing and retesting previous support/resistance areas. As in life, there are no accidents in the markets.
The Daily Chart for Gold
Ratcheting the focus more so, using the daily chart below, we see the high/low of the mid-August 2011 breakout bar, and we extended horizontal bars to the right as potential future support if price were to retest it. That retest evolved from December into January, and we are now able to see even more distinctions. We start with volume at A and B.
The volume and price bar at “A” relate directly to the established low from late December. It says quite a lot. First, note the decline from the last swing high, two days earlier. It is a quick and sharp drop, telling us sellers have buyers on the defensive. Note the location of the close, however. It is just above mid-range the bar. For all the evidence that sellers were in control, the close says otherwise.
What makes the message of the close critical in content is the sharp increase in the level of volume. Large volume increases tell us there is a lot of activity going on, many times denoting a possible change of risk, from weak hands into strong hands. Price broke hard and fast, but held, and held strongly. Relating this activity back to December, it was a price probe under that low, and we learn important pieces of market information from it.
The January 4th failed probe lower tells us that any sell stops under the December support low were wiped out, and more importantly, there was no appetite for sellers to press price lower. Their energy was spent. What followed was a controlled rally leading us to last week, and volume/price bar “B.”
Last Thursday’s rally was a wide range, high-end close bar and on very strong volume. Volume is the driving energy behind any market move. The two highest recent volume bars carried price upside, a sign of market intent. We see remaining layers of overhead resistance, and how price reacts/responds to them will give yet more market insight.
Looking at the location, still at the lower register of the TR, gold needs to show continued positive market activity to sustain the current rally.
For now, central bankers and talk show lackeys may say that one cannot eat gold. At some point, they will eat those words.
We took a probe to the long side of gold on Thursday’s strong bar.
The Monthly Chart for Silver
Silver, step-child to gold, has enormous upside potential. The bullish spacing is not as great as gold’s, and gold remains relatively stronger. We treat it separately but view it as an equal alternative.
[As can be seen in the chart below] there is the same, more labored, decline relative to the previous rally [which is] a positive sign, especially…[given that the] current price is, for now, showing a degree of strength after a four week drop.
The Weekly Chart for Silver
[The chart below is ] so similar to the gold analysis, it would belabor the point to repeat what has been [already] stated [pertaining to gold].
The good thing about the gold analysis is that it allows a short-hand version for silver, due to the close similarities.
The Daily Chart on Silver
One slight difference is the stopping activity in silver on 20 December. Volume increased sharply. [The chart below] is another look at how high volume is a likely sign of risk transfer from weak hands into strong. While the range down was large and the close weak, indicating sellers in total control, it was volume that warned of a potential red flag. Price stopped dead, and so did the effort of the sellers. The stopping point was also from a previous support area, noted. This is how the market “speaks” to everyone who wants to take note.
We see a similar failed probe lower with a higher end close on a sharp volume increase, another market message. These are the distinctions of which we spoke, earlier, for they lead to likely conclusions for understanding market direction. What they do is decrease risk exposure, removing “guesswork,” “gut-feel” decisions. It is much better to base any market decision(s) on facts over guesses/gut-feels, both [of which have] proven to not work, over time.
While gold has been relatively stronger than silver, silver’s rally over the 3 January swing high was much strong than gold’s performance. We also took a long position in silver, based upon the strong market indicators of that day.
We remain very bullish on gold and silver as both remain in respective trading ranges. Continue buying the physical for both metals as a “wealth accumulation” move.
To anyone questioning the decision to buy, or not, which would you rather own, given a proven history that ALL fiats fail? Rock breaks scissors, and paper covers rock, but the cover is merely packaging for the shiny stuff contained within, and the paper gets thrown away.
Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. 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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