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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 - Interestinger And Interestinger Sentiment, In The Short Term, Can Be Costly 0 comments
    Oct 21, 2012 3:33 PM

    Sunday 21 October 2012

    "Interestinger and interestinger" is often associated with Lewis Carroll's "Alice In Wonderland." Actually, she says, "Curiouser and curiouser," but accuracy did not fit as well in the title, so we went with the incorrect association. The sentiment of holding high expectations, [literally and figuratively] for silver and gold can be costly during periods of correction, if one chooses to remain long. We address the short-term outlook for both, in a few moments, but have an editorial comment to make, first.

    Often, we end articles on gold and silver with the exhortation to buy the physical, either or both, at any level and to hold it PERSONALLY, not with the purported "safe-keeping" of some institution. Way, way
    back when gold was used as money, the "Moneychangers" made it convenient for those transacting in gold to use a form of script, whereby the holder of the script could present it to another as payment for any transaction. The paper script stated that the amount of gold the script represented was being held by Mr A, the moneychanger, who would pay the script holder in gold upon demand.

    The use of paper scripts became more convenient and less cumbersome than carrying around heavy amounts of gold. As this practice developed and gained widespread use, the moneychangers noted that relatively few people were demanding gold in exchange for the paper. An enterprising lot, moneychangers began to make "loans" backed by the available but unclaimed gold they were holding IN TRUST by others. This became a very profitable venture to make loans of other people's holdings because there was very little chance that much of the gold held would be claimed at the same time. Another Ponzi scheme is born.

    Moving forward, a couple of hundred years, nothing has changed. It has been suggested that if there were any gold being held in Swiss banks, [and elsewhere in the Western world], it has been "loaned" out. Here, we would prefer the word "stolen" to "loaned." Either way, IT IS GONE!!! Think MF Global...the yet unverified number of accounts whose holdings were vaporized, vanished forever... "Corzined" as it were.

    Most of the agreements for holding vast amounts of gold for the super-wealthy contain a clause that says, in effect, upon emergency, settlement can be made in cash. This is certainly true for all brokerages and exchanges. Why? They KNOW physical delivery demands CANNOT BE MET. For Swiss bank holders, if anyone storing their gold, and we are talking in the hundreds of millions per account, wants their gold back, and CANNOT GET IT, they have signed, as a part of their bank agreement, [not so funny thing about the fine print stuff], that any claim[s] against the bank MUST BE ADJUDICATED IN THE COURT SYSTEM. [Good luck in that arena]. If not, all claims against their gold ARE WAIVED!!! Gone!!! MFGlobalized...Corzined...

    The has become an East v West thing, and we are not talking about a football game, either. Factions in the East are demanding any margin calls for loans made to Western central banks be delivered in
    physical gold. The West[ern] banking cartels have been making egregious bets, the WRONG way, and they have to cover their asses using gold, which happens to belong to someone else, and without that someone[s] else even knowing about it or giving permission.

    The irony here is, when Franklin Delano Roosevelt closed down the banking system to allow the privately held corporate banking cartel, called the Federal Reserve, take over the money system of the bankrupt United States, back in 1933, when the Federal Reserve "loaned" money to the United States, the ONLY form of repayment was in gold and silver, at least until it all ran out, but that is another [tragic] story.

    Moneychangers never change...except changing someone else's gold to their own use. We have no names, we have no numbers, [except to say they are larger than most can imagine], and we offer no
    proof... fraud never has reliable proof, so we just make mention of the possibilities that exist. The point is, central bankers will steal anything in their possession and make rules saying if you were stupid enough to give it to them, well, you should have known better. Read the fine print, and if there is no fine print, what are you going to do about it?!

    So we start, rather than end, with stating that YOU should be buying AND PERSONALLY HOLDING gold and silver without concern at what level you are buying. JUST GET IT! We know of no gentler way to say this. One more [not so subtle] note: DO NOT HOLD ANY PAPER FORM OF GOLD OR SILVER. If you do not understand that, well, keep drinking the banking cartel kool-aid. As another aside, that banking cartel kool-aid has been packaged and is being sold by ALL governments, [Read anything related to bailouts of various and sundry countries] and the bought-and-paid-for mainstream "news" media that only reports on the [manipulated] Party line.

    None of the above, except FDR and the FED , can be backed-up, so take it with a grain of gold or silver.

    On to the analysis of the futures.

    We had been viewing, incorrectly for now, the previous weeks activity as buyers absorbing the efforts of the sellers with the expectation that the resistance would be broken to the upside. It may yet happen, but not for right now. Recent longs in gold and silver were stopped out prior to the current pull-back. [See Silver And Gold - Stopped At Resistance, click on http://bit.ly/Wmolhy, 2nd paragraph after weekly gold chart, and 2nd paragraph after weekly silver chart]. [The technical moral is to always use stops.]

    Not to forget the initial purchases of gold and silver for position holding, see Silver And Gold - Context Matters, click on http://bit.ly/QZqpLC, 3rd and last charts.

    So far, the correction in gold is holding well above the 50% retracement level, a general indication of a bullish condition, and anything is always subject to change. For as long as gold remains in a trading range, little can be said that is of consequence until a breakout develops, either way. All that can be said is the bullish nature of the chart has not changed.

    (click to enlarge)GCZ W 21 Oct 12

    The same cannot be said of the daily chart, so the bullish synergy amongst these two time frames has diverged. All we can do is look at the facts: price is in a down channel...the low of Friday touched and held the lower demand channel line...the close was above the high volume support bar from September. Generally, these wide range, high volume rally bars will hold on a retest. Gold is showing that, as of Friday, whereas silver has not. Gold may give way when price opens on Monday, [Sunday evening], but that has not yet happened. All that can be done is to view potential support to see if it can hold, when tested.

    (click to enlarge)GCZ D 21 Oct 12

    Here is a closer look at the potential significance of a strong rally bar, supported by sharply increased volume, a sign of buyers overwhelming sellers, thus the large price rise. These areas tend to be defended by buyers, and gold is now testing that premise on a retest of the 12 September lows. The purpose of looking at intra day charts is primarily for timing, but only when the larger time frames show a potential move, or trend, is about to start. The daily down trend cannot go anywhere until we see a change in the lower time frame[s] that successfully undergo a retest to confirm a change is underway.

    (click to enlarge)GCZ 90m 21 Oct 12

    Just for drill, we look at HOW price reacted at the lows of the accelerated sell-off on Friday. All one can do is to note changes to see IF they lead to a greater change in direction. Right now, the near-term direction is down. Compare the bar size and volume of bars 1 and 2. Bar 1 shows EDM and a low-end close on a significant increase in volume for the day. Bar 2 has an even greater volume increase, the largest of the day, but the bar range is smaller than 1. Why? The only reason is because buyers were entering the market, [likely in the form of short-covering v new long positions], and preventing the range from going lower.

    Bar 3 volume is almost equal to bar 2, but note the location of the closes on bars 1, 2 and 3. Bar 3 closes about mid-range the bar, a definite sign that buyers were meeting the efforts of the sellers as they had been unable to at bar 1, using the close as the indicator of who won the battle of that bar. Subsequent to bar 3, there was no further selling pressure going into the close.

    Is this significant? We do not know. A 10 minute time frame is NOT generally reliable. We look at this one because it is at potential support, and we want to see if there are any signs of a possible change. There are some signs, as noted, but price activity on Monday can erase that activity, quickly, or it can offer credence to the observations. The point is to make the distinctions, and THEN see if the market validates them.

    Other than buying physical gold, we have no recommendation for the futures until the shorter term time frames STOP going down.

    (click to enlarge)GCZ 10m 21 Oct 12

    You can see the difference in price location relative to a 50% retracement between gold and silver on the weekly charts. The charts continue to advertise that gold is outperforming silver on a relative basis.

    It is always worth noting the last low before the last high, LLBH, incorrectly labeled LSBH on the chart. That area will usually be defended and be support, at a future date. You can see it held on three previous occasions during this current trading range.

    (click to enlarge)SIZ W 21 Oct 12

    We mentioned how a high volume, wide range rally bar will often act as support, in gold above. Here is an example in how that generalization failed in the relatively weaker silver. Its failure is an indication of weakness. Where will price hold? We look to the next wide range bar from earlier September, which is also where the demand line is on the lower down channel. What we need to see is some sign of a turnaround, and that is not yet evident.

    (click to enlarge)SIZ D 21 Oct 12

    As we did with gold, we look at the intra day of Friday's sharp sell-off for potential sign[s] of change. You can read the chart comments, but be aware that intra day time frames are NOT to be relied upon. As with gold, buy the physical, but hold off on the futures until the TREND turns positive.

    We want to be on the long side of both gold and silver, where sentiments lay, but one has to be on the right side of an existing trend. Otherwise, those sentiments can be costly in margin calls/losses.

    (click to enlarge)SIZ 10m 21 Oct 12

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