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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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  • Gold And Silver - Stopped At Resistance How Much Of A Correction? 0 comments
    Oct 15, 2012 12:54 AM

    Sunday Evening 14 October 2012

    It is always fun to pose a question no one can answer but so many offer some kind of answer. Our response is simply, we do not know.
    All we can do is look to price history and market behavior and prepare for what could happen within that context. While each new day or week can be found someone definitively stating how high gold and silver are going to go, and there are myriad justifications for making the "predictions," all of that is of little avail to the TIMING of one's purchases or sales. The one exception would be the purchase of physical gold and/or silver. For THAT, we are unabashedly advocating the purchase of either or both, at any time and at any level.

    The holding of physical precious metals does not entail a lot of risk because no margin is involved, and as we continue to point out, history is on the side of gold and silver as the truest form of preservation of purchasing power, or a store of wealth. History is also on the side of unabated failures of central bankers and central governments abysmal record for destroying the value of "money" when imaginary fiat is the only issue of "currency."

    It should be noted, as an aside, that the only circulating medium of exchange in the United States is the fiat Federal Reserve Note, deceitfully called "dollars," which they are NOT!. Federal Reserve Notes are commercial debt instruments issued by the private corporation, The Federal Reserve. In law, debt cannot be money. Federal Reserve Notes are debt, therefore, they CANNOT lawfully be money. This is very much akin to "the Emperor is wearing no clothes!" The corporate federal government, the tail which is being wagged by the central Federal Reserve Bank, does everything possible to carry out this shameless charade.

    We digress a bit, but the truth of these FACTS, [always do your own due diligence], are determinative of the future for gold and silver. Both are going to go much higher, but the elevator for knowing when is not
    working, so one must take the stairs, one step at a time. This is what we endeavor to do...not always well, but with some measure of continuity.

    Gold is the standard by which most all fiats are eventually measured, no matter how many governments eschew its existence, for to acknowledge it would be an unacceptable admission of the ongoing lies and deceits of the central banks' practice[s] at stealing wealth through the issuance of fiat. For as long as the public is willing to tolerate/accept such stealing, the public gets what it deserves

    We have been pointing out the obvious resistance area, with a bullish bias to its eventually being exceeded, but for now, it has been stopped at the highs of the established trading range. The horizontal
    line, defined as resistance, is depicted as a broken line subsequent to the two failed highs which created it, because previous highs/lows are more important than numerous trendlines drawn to suit the chart.
    The horizontal lines are from established FACTUAL levels of previous resistance/support.

    The overall structure of the weekly gold chart remains constructive. Yes, there can be pullbacks, healthy for any established trend, and we expect the trend to resume its upward slant once this correction runs
    its course.

    We noted the amount of time price corrected, after the second swing high from last November, 2011, as compared to the shorter amount of time to recover that corrective swing. This helps define the character
    of a market because it tells us, factually, it has been easier for the market to recover previous losses, and that is a plus.

    (click to enlarge)GCZ W 14 Oct 12

    The more detailed daily gold chart shows how the always-moving trendline has been broken, but it is only an indication of a weakening of the established trend, and not a change in trend. The most recent swing low, from late September, forms a secondary support level. From that low, price rallied to the current swing high in six trading days. Since the last swing high, just under 1800, price has been now correcting for seven trading days.

    In point of fact, we did recommend buying gold on that last swing low, at 1753, [See Silver And Gold, buying Opportunity In A Trend?, click on http://bit.ly/R5G5tq, third chart and explanation following.]. That
    position was stopped out by market activity at 1762, on 9 October, for a decent gain. We remain long at 1659 from the core long position, on 29 August.

    What we get to do now is watch HOW gold responds to those two identified supports, and then look for a change in the intra day trend for an entry from the long side. We have no clue how and when that may happen, but we know how to read market clues AS they happen to make such a determination. Until then, we remain long a core position at 1659 and wait for another re-entry.

    (click to enlarge)GCZ D 14 Oct 12

    Silver is similar to gold, but it has a slightly different chart look, and that would be slightly weaker than gold. The amount of time spent on the last recovery rally was shorter than the amount of time it took silver to decline from its previous swing high in February 2012. From the 26 low to the recent 35+ high, the give-back in silver has been relatively weak, and that is a strong point.

    (click to enlarge)SIZ W 14 Oct 12

    Where gold has held its intervening swing low from late September, silver has exceeded it on the down side, again a showing of relative weakness between the two. What does stand out as expected strong
    support are the two days of very high volume, when price rallied from the 32.50 level low and even stronger on the second of the two days. We view that volume as a change from weak hands into strong hands, or at least some important indication of potential strength that propelled the market higher, as a consequence.

    Our last recommendation to go long silver, at 33.99, was also stopped out by market activity at 34.10, for a marginal gain, but not a loss. As with gold, we remain long a core position from 30.60, and we will also
    look to see HOW price responds to expected support as a place to go long, again.

    Buy, buy, buy the physical, [and hold it PERSONALLY, NOT with any institution], and wait for an entry signal to add to long positions in the futures.

    (click to enlarge)SIZ D 14 Oct 12

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