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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 - Current Decline Not Over. Watch Market Activity For Turnaround. 0 comments
    Feb 16, 2013 3:20 AM

    Saturday 16 February 2013

    We often make a distinction between buyers of physical precious
    metals, [PMs] and buyers of futures, exhorting the former to buy with
    impunity, and some may see that as cavalier, given how the price for
    both gold and silver have been in recent decline.

    The point for buyers of PMs is for both protection and creation of
    wealth. Protection against insidious central bankers destroying
    currency-purchasing power, over time, and wealth creation as
    evidenced by those buying PMs over the past decade and seeing
    the intrinsic value grow dramatically.

    Buyers of the physical as less price sensitive and view current declines as opportunity to add more. As an example, we still hold physical silver purchased when price was in the mid-40s. Has the relative value
    declined? Absolutely. Concerned? Absolutely not. It remains a matter
    of time when the price of PMs will go dramatically higher, and the
    concern will not be how much one paid, $1800 or $1600 the ounce for gold, or $45 or $30 the ounce for silver. The concern will be over
    having any at all.

    If gold is to go to $3,000, $4,000 $5,000, or wherever, and silver go to $100, $150, or $250, there will be many who will be glad to have paid
    $2,500 the ounce for gold, and $75 the ounce for silver. How does
    that compare to $1,800 and /or $45 purchases for physical PMs, at
    this point? One cannot always time the market, which is why
    consistent buying over time is strongly recommended, but one can
    determine whether to be an owner of PMs, or not.

    The problem moving forward is fear of central bankers changing the
    rules and precluding the purchase of any PMs by the public, at any
    price. Death and taxes are touted as the two things one cannot
    escape, [not always true for the latter], but the certainty of lies and
    deception by central bankers/planners runs an immediate third place.

    The handwriting is on the wall, as most in PMs know only too well.
    We mention this for those on the fence, those waiting for bargains,
    [misplaced values, there], and those who have not yet purchased
    any PMs. Do not wait, do not wait, do not wait!

    For futures, while most everyone is of the mind that manipulation is
    showing a steady hand in PMs markets, that "hand" is losing its grip.
    It is the charts that show what the market has to say about what
    those who are participating are saying about their decisions. A not so
    simple statement, but one that says, watch developing market activity to know what is going on.

    That is always our purpose.

    While ongoing efforts are being made to suppress the price of PMs and
    discourage their purchase, mostly in futures markets, the
    "Discouragees," [central bankers,] have been net buyers of gold for a
    few years now, after having been sellers for so long, so do not go by
    what central bankers say, [often voiced through the puppetmeisters
    on daily financial "news" programs], go by what they do, only in this
    area. Ignore them, otherwise.

    The larger picture for gold is as bullish as ever. We provide two strong
    facts to confirm why, on the monthly chart. Bullish spacing is
    referenced as such because it shows the degree of eagerness of
    buyers in a market. It is measured by noting the last swing high and
    the last swing low. Typically, markets retest previous swing highs.
    When buyers are so intent on being long in a market, they do not wait
    to see if a retest of the last swing high will be successful. Instead,
    they, [and by "they" we mean smart money participants, or controlling
    forces], just keep buying breaks, creating a space that is bullish.

    Another and related measure is the extent of a break, or market "give-
    back," in a reaction after a rally. Monthly charts are more controlling
    than the lower time frames, so the information you can glean from
    them is more reliable and more pertinent. You can see how the current break since the September 2011 high has been relatively shallow when
    compared to from where the rally began.

    Despite the "daily grind lower," recently, the larger focus is very
    strong. Very strong.

    GCA M 16 Feb 13

    A trading range is where smart money operates to accumulate or
    distribute their positions. Controlling market forces require time to
    acquire positions so as not to disrupt their attempted "sleight of hand"
    buys/sells during the process, and the TRs are also used to discourage participants from following them.

    We said last week that $1600 was a possible target, and it was
    reached on Friday. Will that area hold? "NMT." Need More Time to know that answer.

    Points 1 and 2 form an upper supply channel line, and a further line
    down is marked by dashes to show how it extends into the future, well ahead of price activity. Point 3 is the low is between points 1 and 2,
    and it is from there that a horizontal line, a demand line, is extended
    lower. It is also dashed to show that it extends into the future well
    ahead of developing price activity, to be used as a guide to gauge
    potential support when touched by yet to develop market declines.

    You can see how the dashed line held the December lows, and
    now February is retesting it, again. There is no evidence yet of
    a turnaround, and it does take time for a market to turn.

    GCJ W 16 Feb 13

    The most interesting aspect of the daily chart happens to be the last
    bar, Friday's activity. It is a wide range bar lower, a sign of EDM, [Ease of Downward Movement], indicating sellers are in control. The sharply
    higher volume is a red flag, a point in time for which one needs to pay
    close attention, moving forward.

    Remember, sharp volume increases are usually smart money either
    pushing a market even more, or starting to take the other side in a
    transfer of risk. Subsequent developing market activity usually
    indicates which. This volume day prompted a look at intra day behavior to see if any clues can be gleaned.

    GCJ D 16 Feb 13

    We say smart money always tries to hide their intent, but volume is
    something they need in order to move or accumulate positions, and
    they cannot hide that. If smart money sells highs and buys lows,
    where is the highest volume in this chart? We ask, the chart answers.

    The position of the close tells us buyers are more than matching the
    effort of sellers to cause a rally off the low under such heavy selling
    pressure. The two preceding bars of increased volume may "look" like
    selling, but it is quite possible that smart money has been buying on
    the way down, taking everything offered by weak-handed longs selling
    out and new shorts getting in.

    If Benjamin Franklin had been a trader, he would surely have said,
    "Never a bottom-picker be."

    GCJ 60m 16 Feb 13

    Bullish spacing exists in silver, just not as strongly. We do point out
    how the past five months of selling effort has not been impressive,
    relative to the two month rally prior. It is like an Ali "Rope-A-Dope,"
    taking all the punches from his opponent, but protecting himself so not much damage is inflicted, despite the effort against him. Eventually, he
    comes out stronger to defeat his now-weakened opposition.

    SIH M 16 Feb 13

    We show the same intra-TR channel down, just like in gold. Unlike gold, however, silver's low has held the lows of last December, a small show
    of relative strength within a negative trading environment. Still, no
    apparent end is at hand in the decline of futures.

    The best way to trade a TR? Not to trade it at all, instead, wait for a
    price breakout and go with it. Why does that work? As mentioned, TRs are how smart money accumulates positions. Once they are done,
    they then begin the mark-up or mark-down phase, and it will last for
    some time, once it gets underway.

    SIH W 16 Feb 13

    Just as a dashed line in a channel projects into the future for support or resistance, you can see where the failed probe lower, at the end of
    December/beginning of January acted as support. From there, a
    horizontal line is drawn. We made it dashed to show that is
    extended into the future much earlier than when current price activity has returned to it.

    Will price hold current lows? No one knows, and anyone who says
    otherwise is showing an unwise ego trying to be "right," as opposed to being in harmony with the market. Any bottom requires time in order to turn around, and any potential turnaround always needs to be
    confirmed by price behavior.

    The increased volume on Friday is a red flag, as it was for gold, but
    a red flag means a sign or caution, to take note and see how price
    responds to it. That takes time. Futures players have time, or at leastthe smart ones are exercising it

    SIH D 16 Feb 13

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