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Michael Noonan Edge Trader Plus Michael Noonan is the driving force behind Edge Trader Plus. He has been in the futures business for 30 years, functioning primarily in an individual capacity. He was the research analyst for the largest investment banker in the South, at one time, and he... More
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  • Silver And Gold - Off To A Great Start. But Still A Way To Go. 0 comments
    Sep 23, 2012 12:06 PM

    Sunday 23 September 2012

    Very often, it is a matter of making simple observations of the market's behavior in order to best draw some leading conclusions. When silver started the third Quarter, price was at 27.44. Just a week shy of
    3rd Q ending, [as well as month end and week end, all on this Friday close coming], price is trading in the 34.65 area. In addition, the downsloping supply line has been commensurately broken over all three higher time frames, in itself a significant feature. [A Qtrly chart is not shown, but its start is indicated by the arrow, third bar from the end.]

    The 3 bars up followed by 4 - 5 bars down reflects the duration of the rally versus its correction, longer in time with narrower bars. The 3 bars show greater ease of movement up and are larger in range, as
    opposed to the narrower range bars going down to the last swing low, a more labored effort. The conclusion to be drawn is that buyers were stronger than sellers, and that marked a new turning point from price behavior going down to up.

    A 50% retracement of any move is used as a barometer of the strength/weakness of a rally, in this instance. If price stops at or under the 50% mark, it indicates a degree of weakness for the move. If the 50% level is exceeded, it is a sign of strength, but just as a general rule. The half-way level is at 38, and the last swing high was 37.48, so we can expect to see some resistance for the developing move up from the recent low.

    It is too soon to know how the Qtr and month will end, showing a strong close or maybe a mediocre one, so no comment can be made about it. What can be said is to watch the character of any correction to the current rally. Ideally, smaller ranges down would indicate sellers are having a difficult time.

    The weekly chart does not show much that is already seen on a daily chart in more detail, so we will skip to a daily chart, next.

    (click to enlarge)SIZ M 23 Sep 12

    Many articles written by precious metal "gurus" are sometimes more designed for sensationalism in bold "predictions" and less practical as to HOW to take advantage of what may develop. While we are of the
    belief that both gold and silver are headed much higher, we prefer to take potential direction one step at a time, in a more pragmatic fashion. We prefer substance over sensationalism.

    We had been advocating waiting for confirmation of an upside breakout before venturing into the futures, while still strongly encouraging the ongoing purchase of the physical metals, TO BE HELD PERSONALLY AND NOT BY ANY INSTITUTION, and we still recommend the latter just as strongly. We discussed the merits of waiting for confirmation in last week's article, [See Silver And Gold - Developing Trend Is Up, click on
    http://bit.ly/PHFwYU, opening paragraphs before first chart, and the 2nd and third charts show when buys were made for silver and gold, 30.60 and 1659, respectively.].

    The week just ended was another of what appears to be a weak reaction, so far. That can change on Monday, which is why we added the "?," but Monday is not here, yet, so we can only go on what we know for certain. It is similar to the initial breakout weak reaction, a few weeks earlier.

    The primary focus on the daily silver chart is to put it into a practical context. Silver may go back to $50, and it may advance to much higher levels, $100 or more, but first, it has to get over the $38 area, marked as resistance in the chart above, dotted line "A." What makes the 37.48 - 38.00 area so interesting is that a measure of the sideways move from May through August stops right there. [See the explanation provided on the chart.]. The swing high coincides with the minimum measure for the current rally.

    To summarize, if you were to take the "measured width" of the box and turn it sideways and began its measure from the bottom of the range, the end of June's low, it would reach the area marked on the
    monthly chart, above. Using the low end of the trading range gives a minimum upside objective. Taking the same measure from the high of the trading range gives a maximum objective for a rally, as a guide for
    it does not have to be absolute, but it does provide useful guidelines for any ensuing rally. This is the HOW of using the market's own history as a basis for making future assessments, or we should add, it is but one of the HOW's to make an informed conclusion about the market.

    It can be pointed out that reference was made to this back when we mentioned a breakout was getting underway, 26 August 2012. [See Silver And Gold - Breakout Underway, click on http://bit.ly/ReHImV,
    third chart.] Markets are very consistent with the valuable information they provide, if one pays attention.

    Where silver has not yet neared that resistance swing high, gold is knocking on its anticipated swing high resistance. This fact confirms that gold remains relatively stronger than silver. We have some
    thoughts about Friday's range and close, but prefer to keep the focus on what was just expressed.

    Stay long and continue to buy physical silver, regardless of price. Its accumulation is essential to both preserving and building wealth. Leaving it in the possession of ANY financial institution leaves it subject to confiscation, and NEVER discuss your ownership of it to anyone else

    (click to enlarge)SIZ D 23 Sep 12

    Gold, like silver, started the 3rd Q at a much lower price and has now exceeded the highs of the 2nd Q as it moves to the likely resistance of $1,800 the ounce. As was mentioned the silver analysis above, any
    time a higher time frame shows relative new highs over previous bars, it is significant, especially when the higher price occurs at the same time over several time frames, Qrtly, monthly, weekly, and daily. Synergy is always important in any market movement.

    (click to enlarge)GCA M 23 Sep 12

    The last two swing highs on the weekly continuation chart show a band area of resistance where gold can be expected to stall. The buy is shown when gold had a weak reaction that was perfect as an entry
    in a move that had just gotten underway.

    (click to enlarge)GCA W 23 Sep 12

    The Oct contract is still lead month for weekly and monthly charts, but Dec is the most active month for trading purposes. There is a slight difference in prices on the Dec contract, but the overhead resistance
    area is still there. The second swing high was the start of a very large, wide-range bar down, and that is typically a sign of supply, sellers dramatically overwhelming buyers and exerting control with impunity.
    Such a high will often be defended by sellers who want to protect their position.

    You can see how steep the rally is from the trading range breakout. If you are only interested in gold and did not read the comments for the daily silver, please do so. The width of the trading range for gold
    is slightly different than silver, but its "stored energy" has about been expended as it reaches a natural resistance area, and the steepness of the assent makes the market subject to a correction, which would
    also be healthy for the market.

    There have been three weak corrections during the rally, indicated by the ovals and number "4." Each correction lasted 4 days before resuming the trend. This does not ensure that another leg up will follow because the most recent correction made less upside progress relative to the upside difference between the first and second noted oval corrections. This is a sign that the rate of upside movement has lessened as buyers have expended a lot of energy to get to the current highs.

    Stay long because there is no sign of ending action in gold, or silver. There can and will be corrections along the way, but with an excellent positions, long from 1659 in gold and 31.60 in silver, it gets more
    difficult to get back into a move once out. Many traders look at reactions as threatening, as opposed to looking at the market from a more positive perspective and expecting the best, with more upside to come.

    Continue to buy the physical metal, only to be held personally and not to be trusted by an institutional holding of gold or silver. Safety deposit boxes are no exception. There is no guaranty of "safety" in their description. Banks are the enemy of anything other than fiat and computerized creation of "money," which is nothing more than a fiction and a form of debt enslavement.

    An ounce of gold is an ounce of gold, and an ounce of silver is an ounce of silver. They never change. What does change is the number of fiats it takes to purchase them. It simply takes more and more fake
    "dollars" to purchase the same ounce of gold or silver, which is why both are the recognized stores of value and vehicle for accumulating wealth.

    We are not intending to preach to the informed choir, but add these comments for those seeking only an opportunity for making a profit. When dealing with precious metals, it is more than the desired outcome of a profit. They are a better form of a protection posture for increased value and a true measure of wealth, Both gold and silver have real value, as opposed to the imaginary value people falsely assign to imaginary "money" issued by a foreign corporate banking cartel, aka The Fed. Many in the gold and silver community still think the corporate-issued fiat Federal Reserve Notes are money. Federal Reserve Notes are nothing more than debt instruments. Federal Reserve Notes are nothing more than debt instruments. Get that fixed in your mind. Debt can NEVER be money. Stop believing in the lie.

    Stay long gold and keep buying the physical whenever you can.

    (click to enlarge)GCZ D 23 Sep 12

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