Noonan on Gold & Silver: Jettison Your Beliefs & Read Developing Market Activity Instead (+2K Views)

Because we know the trend is down, there is no guesswork about trading from the long side in paper gold.  There is no need to “predict” the price direction.  Just wait for more information that buyers are beginning to increase (which they are not, so far), and then have a strategy for buying in a changing up trend.  Presently, there is no evidence of a change to an up trend, so wait for confirmation and keep one’s powder dry.

By Michael Noonan (edgetraderplus.com)

…All fiats fail, and the only difference this time around is the grossly exaggerated extent to which fiat has managed to survive.  It also indicates that once the fiat “dollar” fails, and there are more and more cracks showing up in its ability to maintain its world reserve currency status, the move for physical gold and silver will also be favorably exaggerated to the upside.

Weekly U.S. Dollar Index Chart

[As the chart shows below,] The fiat “dollar” chart does not show any ending action to the upside…

Weekly Copper Chart

…[I include] the weekly copper chart to show how, once a trend is established, it carries the prevalent momentum until the opposing force(s) become strong enough to effect a change.  If that does not happen…price will keep falling, more than most expect, and will continue to fall until it uncovers demand…

Weekly Gold Chart

Gold’s decline is more controlled…as the lower lows do not go as deep as prior swing lows, which means the downside is just slowly giving way, but still going lower. This remains a function of price seeking demand, and until it shows up, just like in copper,  price will continue to make lower lows.

The first two of the last four TDs were sharp declines, the last two on much smaller bars but volume increased.  This would be an indication that buyers were more than able to match the increased selling effort sufficiently to prevent price from extending lower.  More than likely the buying is short-covering and not new buyers.  If true and the next rally is weak, without new buying for support, price will decline still more.

Because we know the trend is down, there is no guesswork about trading from the long side in paper gold.  There is no need to “predict” the price direction.  Just wait for more information that buyers are beginning to increase (which they are not, so far), and then have a strategy for buying in a changing up trend.  Presently, there is no evidence of a change to an up trend, so wait for confirmation and keep one’s powder dry.

The EDM reflects how buyers cannot control selling.  While price started to trade almost sideways, near the current lows, you can see, relative to the $120 decline from the last swing high, there has been no ability to mount a counter-rally, and that is a sign of weakness.

Daily Gold Chart

Any change always shows up first on the smaller time frames yet even the intra day 60 minute chart shows no sign of ending the current decline.  Read all you want about the bullish fundamental climate for gold and silver, the reality is market participants are ignoring the current news and dealing with where price is and is headed.  This is why charts are always more reflective of what is going on, at all times.

Weekly Silver Chart

Just like there was no ability to rally from the lows in daily gold, weekly silver is in a similar position.  Last week’s tiny range is hard to read: price could neither rally nor decline, a stalemate.  The trend is down, and the onus for change is with the buyers.
Until buyers make their presence known, expect more of the same.

The rally in early October was on wider range bars and sharply increased volume.  It shows where buyers stepped in and made a difference.  Typically, buyers will defend those prices, anywhere from the top of the first wide range bar to the bottom of it. That potential support was totally ignored as price declined over the last several TDs, and that says weakness.

Daily Silver Chart

[As can be seen in the chart below,] relative to the decline that started in late October… once at the bottom of the current decline, there has been no ability to counter-rally.

Conclusion

All of these observations are nothing more than reading developing market activity. They are simple and factual messages the market is conveying.  These messages clear the fog formed from sentimental beliefs. Jettison the beliefs and stay with what the market says.  Trading life becomes easier.

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[The original article* was written by Michael Noonan (edgetraderplus.com) and is presented by the editorial team of munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here) in a slightly edited ([ ]) and abridged (…) format to provide a fast and easy read.]

*Original source: http://edgetraderplus.com/market-commentaries/gold-and-silver-value-of-knowing-the-trend

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