We are starting to see some subtle changes in market behavior but the trend currently remains down for both gold and silver. For those who want to grow their capital, the best time to make a market commitment is with the trend and given how no one knows how the market will correct, it is best to wait and see first what the market reveals. Below are some daily and weekly charts on gold & silver charts to show you how things are developing.
So says Michael Noonan (edgetraderplus.com) in edited excerpts from his original article* entitled Gold And Silver – Chart Reading More Accurately Depicts Fundamentals/Technicals.
[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:
It is absurd to “predict” any future market action. The future has not yet happened. The only aspects about the market of which we are certain is that anything can happen, at any time. Every trade potential is a unique event. Markets may appear similar, but the players in the current market are very different than the ones from a similar past situation. How price will develop into the future is unknown and cannot be known in advance.
The market is based on probabilities, outcomes that are likely to occur, and however likely they are to occur, no one can know how they will unfold. You have a history from the past two years of endless predictions on where the prices of gold and silver would be.
We have not kept a scorecard on the silliness of how wrong so much respected talent, and lesser, varying degrees of not so much talent that have totally missed the mark.
Our Approach to Understanding the Markets
There are 2 different approaches to supposedly understanding the market, fundamental analysis & technical analysis and variations thereof, What are we?
1. We are not fundamentalists, at all, with emphasis on at all. Fundamentals are an attempt to discover and measure the factors of supply and demand. The biggest problem with any such analysis is one of timing. There is none. The other issue is the degree of awareness of which fundamentals are the biggest drivers; some may not be known or even recognized, leaving any such analysis incomplete.
Admittedly, we know nothing about fundamentals, by choice. What we know of them is that they are fully incorporated into the charts by those who know what they know and ultimately make a decision to act upon that knowledge. That action gets translated into price and volume. It matters not if it is widely known information, insider information, market manipulation, what have you. It has to show up in executed price and be a part of total volume. Once information enters the market in price and volume, it is a “got ya” moment.
2. Nor are we technicians, as most technical analysts, (TA), are. TA rely upon a few or several technical tools as a means of interpreting the markets, such as RSI, Bollinger Bands, MACD, moving averages, (even used by fundamentalists, to a degree), trend lines, overbought/oversold indicators, etc, etc. With commonly recognized technical analysis, every tool is a derivative of price and volume. Derived technical tools are all attempts to impose past tense market information onto the present tense in an effort to “predict” the future tense.
3. In our analyses of gold and silver we simply choose to focus on the purity of the information in its original format. We use, exclusively, a combination of price and volume and read within the context of the prevailing trend, for whatever time frame, be it monthly, weekly, daily or intra-day. The range of a bar tells the ease, or lack of market movement. The location of the close says who won the battle between buyers and sellers. When volume is added into the mix, the market begins to take on life, of sorts, that fleshes out the actual ebb and flow of the tug-o-war between the opposing forces of supply and demand.
The Current Situation
We are starting to see some subtle changes in market behavior. The trend remains down, and we are not making a prediction that the trend will change next week, next month, or whenever. It does not matter. (Now we are referring to the paper futures market.)
The sole purpose for trading futures is to increase one’s capital of fiat-based assets. There is always risk of loss, as many know. For us, and for those who want to grow their capital, the best time to make a market commitment is with the trend. There is no reason to be long in a declining market, and the number of profitable longs in either gold or silver has been very small over the past few years…When the trend turns up, there will be ample opportunity to be positioned from the long side with a lower risk and a higher probability of a profitable outcome, but never guaranteed. There is no need to guess. There is no need to predict. Let the market take its course, and then follow its confirmed direction…
Price is knocking on the down trend door in gold, but that does not mean it is knocking that door down. It takes time to turn a trend. We show gold testing a small 50% range. There are two higher half-way points that price has yet to approach, so despite a decent rally, last week, the trend has not turned. How gold corrects lower over the next week or two may well provide some important trend information. Given how no one knows how the market will correct, it is best to wait and see what the market reveals, first.
Let the market declare itself and the following charts show you where we are at:
Gold – Weekly Chart
Gold – Daily Chart
The daily shows in detail why gold was expected, (not predicted), to run into resistance at the 1260 – 1270 area. Always think of support or resistance as a price area and not just an absolute number. Thursday’s wide range, high volume bar was likely a combination of short covering and maybe some new buying. What will be key to watch is how price retraces this last rally effort.
If the market intends to go higher, the next correction will have smaller ranges and lighter volume, indicating less selling pressure. If price corrects on increased volume and wider ranges with weak closes lower, then the down trend will remain intact.
Silver – Weekly Chart
Silver acts differently than gold. It is clear that the trend remains lower with no sign of buyers taking control. A picture of 1,000 words to which we need not add.
(As an aside, how does one reconcile the chart with the fundamentals? Everyone claims the fundamentals for silver are ultra-bullish.)
Silver – Daily Chart
Silver has work to do to turn the trend around. Looking at the daily chart, in some ways it would not take much effort to end the down trend.
There are no guarantees that physical silver and gold will continue to be available at current prices, maybe not even at any price until it adjusts to a higher level. That is the risk everyone who want to buy coins and bars takes, while waiting or trying to get a better price or simply trying to outguess the market. Will you catch the bottom? No, (care to guess how may have tried and succeeded in the past few years?0 but if you can consistently catch profitable trades, with the trend as it develops for at least many months and more, does that not make plain common sense?
[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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