When will gold and silver rally? …We would say the best answer comes from a reading of the charts…Has a bottom been confirmed? Not by our standard of confirmation. [Let me explain.]
By Michael Noonan (edgetraderplus.com). The article* was originally published under the title Gold And Silver – Timing Is Most Important Element.
The charts define the trend and place the current market activity into a context…[providing] a pretty good read of reality. Do charts pick market tops and bottoms? Absolutely! The qualifier is that neither the top nor bottom can be recognized until some time after the fact, as in several weeks or months, in most cases. That happens to be reality… An accurate reading of chart/trend development is superior to almost every other form of market prognostication.
Consider this: The 2007-2008 stock market top was not confirmed until a few months after a top was established. What happened afterwards, and there may be many among you who can attest to this, is that the world of fundamental and so-called value analysis was turned upside down when the stock market cratered to the utter shock of those who ignored an after-the fact-confirmation of an established top. There was still ample time to have exited from the stock market relatively intact. The same is true for the gold and silver market.
Has a bottom been confirmed? Not by our standard of confirmation, although January has made an impact in viewing the lows of November 2014 as a potential bottom. There has been a decided change in market behavior not seen since the decline off the 2011 highs. There will be some who may “predict” or pinpoint the market bottom when it occurs, but most of those who make such a call will be the same ones who have previously already (and incorrectly) made a market bottom call in the past several months. They rely on forgiving short memories of the public for past errors.[Given the above,]…here is our current view of the ongoing developing market activity.
Silver: Weekly Chart
It is always good to keep a perspective on the market and not get caught up in the smaller time frame activity. The weekly silver chart below accomplishes just that as it shows how much work needs to be done to alter the current down trend.
Comments within the chart are directed to the small range of last week as a red flag warning that the rally could undergo a correction, starting as early as next week [i.e. week beginning January 26th]. The read does not require “predicting” what the market may or may not do, but rather just pay attention to the how a market develops for clues of what may develop. It then puts us in a position to be prepared for what may follow that could lead to an opportunity.
If price were to retrace lower, sometime next week, a logical are of support appears to be the 17.25 area. This is where price accelerated down at the end of last October, and it is also the last failed rally high in mid-December. Putting developing market activity into a context like this enables us to be prepared for a trading opportunity with a defined risk, Of course, the weekly chart is not used for timing. For that, we look at the daily chart below.
Silver: Daily Chart
The comments within the daily chart below cover what can be said. Last week’s small range provides the same red flag warning that sellers showed up and stopped buyers from extending the rally higher.
The small weekly range in the weekly chart for gold shown below is comprised of bars that are overlapping. Compare those 4 TDs to the bars that comprise the rally up to that point, and you will see less overlapping as price rallied.
When sellers are able to match the effort of buyers, the rally stalls, as it did the last 4 days. This action typifies what can lead to a corrective reaction lower. The possibility exists that the overlapping bars could also be a pause before the current rally resumes and goes yet higher without correcting.
There is now a higher swing low and a higher swing high. If the next correction creates a 2nd higher swing low, it will confirm a trend change to the up side on the daily time frame. This can also set up a buy opportunity in the paper market.
[The above article is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here) 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. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
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