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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 - Sticking With The Charts, From A Buddhist Perspective. 0 comments
    Oct 26, 2013 12:27 PM

    Saturday 26 October 2013

    "If you want to know your past, look into your present conditions. If
    you want to know your future, look into your present actions."
    ~Buddhist Saying.

    The cliché for that is, "you cannot know where you are going until you
    know where you have been." One of the most direct applications of
    this wisdom of the ages is found in charts.

    Left to the realities of supply/demand factors, gold and silver would
    be considerably higher, already. We can think of no other commodity
    situation with unprecedented demand and shrinking supply that has done anything else than drive price much higher. The fiat cartel will
    not allow reality to supplant their massive wealth-transfer Ponzi
    scheme, as it enters the final stages like a cancer consuming
    everything until inevitable death results from this banker faux-Kabuki
    theater.

    This leaves us with monitoring the measure of price "reality" found in
    the charts. Lacking an alternative, the COMEX and LBMA remain the questionable arbiter of last resort to see how the marketplace is
    assessing what "value" to use in determining the current price for gold
    and silver, as derived from the exchange paper markets. Ultimately,
    therein lies the most important element, that of timing.

    Fortunately, charts are a good thing, providing a past as a guide and
    pointing to a likely future direction.

    Charts are the distillation of all available information, including inside
    information, even manipulation. It is okay not to be able to
    understand or read them, but it is a huge mistake to dismiss them.
    You see the results that include the most highly informed, as well
    as those with the highest degree of skill in trading. You get a front
    seat on the battle line, observing first hand what is going on. Too
    few realize the importance of the valuable information a chart can
    and does convey.

    Some of the finest and most highly regarded minds in the world of PMshave been saying metals are going higher, most particularly over the
    past few years. The charts have "said" otherwise, and that has been
    the correct read. Charts are infallible. Why? They are the market.
    They are the mirror of what the war between supply and demand is.
    They show the intervening battles between buyers and sellers, and
    everyone gets to see the results, as they develop, each and every
    day.

    If demand is greater than ever; if supply is shrinking, relative to
    demand, yet price is and has been moving lower, then the problem
    is what almost all recognize, manipulation. The charts for both gold
    and silver have been steadily reflecting that fact. What that fact is
    telling the world is that the manipulators have been in control, and
    still are.

    If gold is going substantially higher price levels, it must first show an
    ability to rally above certain resistance levels. That has not
    happened, in large. The same holds true for silver. If you read about
    all the reasons why both metals should be at much higher levels, weigh
    that information with what the charts are revealing.

    If you want to make rabbit stew, first you have to catch the rabbit.
    It you want to see prices go higher, first you have to see them stop
    going lower. It could not be any simpler.

    Within this context, here is our read of the charts.

    The reason why the trend is mentioned so frequently is because it tells you if the ocean tide is coming in or going out, as it were, and you do
    not want to be opposing the direction of prevailing strength. In gold,
    the trend remains down, but evidence is building that shows there are
    signs of weakening.

    The simplest definition of an up trend is a series of higher swing lows and higher swing highs. The most important information in the
    weekly chart, after acknowledging the trend is down, it the first higher swing low since the 2011 lows. This is showing factual evidence of a
    change in market behavior. While the trend is down, it has weakened,
    but not ended.

    What would change the trend? A higher swing high above the August
    high of 1434. In a down trend, the onus is on buyers to demonstrate
    a change in market behavior, and this is one of the measures.

    If you notice the bars since that August swing high, they have
    remained relatively large and overlapping, at the same time. In making that observation, we learn buyers have been more active and
    responsive to selling activity. The proof of that comes from the
    outcome: a newly established swing low. Price closed at the highest
    weekly level since the opening week of September. This is a red flag
    for the bears.

    Weekly charts are not used for timing. We need to look at a daily
    chart for more detail.

    GC W 26 Oct 13

    Charts can be a thing of beauty when they capture an ongoing
    synergy that procedurally leads one in a certain direction, and with
    a purpose. There are a few aspects found in this daily chart.

    On the left side, there is a clustering of closes, at "A." A clustering
    can lead to a brief pause before resuming the previous trend, [down,
    in this case], or it can lead to change, as it did here.

    After the strong rally bar and swing high, just above 1340, the
    character of the ensuing correction was labored, taking 11 trading
    days to retrace a five-day rally. This is a clear message from the
    market, for anyone to see, although not everyone does despite it
    being there.

    The retest correction ends at "B," and another higher rally follows.
    What we can now see are two points of support for future reference. After that rally, another correction developed, and its decline stopped
    at "C," the same price level as "A" and "B." In knowing the past, the
    market was providing important information in the then present, at "C."

    We see the rally that followed "C" was weak, and from that, we could
    expect either another retest, or even a stronger trend lower. Another
    clustering of closes and overlapping bars developed at "D," slightly
    lower than "C," but still in a support area, which we know from
    knowledge of the past.

    The difference between the stronger quality retest at "B" versus the
    weaker retest at "D" comes from knowing the trend. At "B," we were
    seeing the early stages of a trend higher. At "D," price has obviously
    been trending lower, and it take more effort to stop and reverse a
    down trend.

    What we continue to know from the past is even though retest "D"
    may have been lower than "C," it is still at previous support "A" and
    "B." We comment that support is an area and not a single straight
    line or single price level. One has to be more flexible.

    Would the "D" cluster be a pause, or would it reverse the down trend,
    while at support? The answer came on 17 October when price rallied
    higher on a wide range bar and also on increased volume, "E." At the
    same time, the trend line off the August high was broken.

    After the rally at "E," the market provided more important information
    in the 3 day correction sideways, a rally ensuing on the third day.
    Note how little price corrected over that 3 day span. Weak corrections lead to higher prices, and the market's message did not
    disappoint.

    After the next rally, 4th bar from the right, there was only a one day
    correction, and price began to resume its current love higher. So far,
    the lack of a downside counter move has been a sign of strength, and
    price may be absorbing at the minor failed high resistance at the end
    of September.

    The more important resistance level, at least on the daily, is just under 1380. How price gets there and how it reacts to that potential
    resistance level will provide additional market feedback that will reveal
    the character of the trend at that point.

    The futures are now providing reason to be trading from the long side,
    that is, the paper market. The other known fundamental factors have
    already been screaming for purchases of the physical metal, without
    any question.

    The point is to use a chart to provide a context for viewing
    fundamental considerations.

    GCZ D 26 Oct 13

    Silver has been constant in its message since the August breakout
    gap. Knowledge of the trend, [past], tells us not to expect too much
    from rallies until there is proven change. From that gap higher rally, a
    swing high formed two days later. The retest correction of what was
    a 3 day rally took 7 days to unfold. This is the market telling us price
    is having an easier time going up, and a harder time declining.

    The chart provides more information by showing the labored decline
    stopped at the gap breakout, [a support point], and a higher swing low was created, a necessary first step in a change of trend. We are
    being educated about the nature and character of the market via the
    chart pattern behavior.

    SI W 26 Oct 13

    Similar to the daily gold analysis but sharper in subsequent support
    areas, silver has also been sending a message of change. There were
    two consecutive labored corrections after a rally, and both are signs of buyers being more in control over sellers who are having more
    difficulty moving price lower. In a down trend, sellers should be in
    greater control and be able to move the market more readily.

    The two failed retests stopped at previous support. By taking that
    knowledge of the past and applying it to the present, we are positioned to make a more informed decision about the future. There are both rhyme and reason to be found in the charts. Nothing is
    hidden. Everyone gets to see the developing information at the same
    time.

    All we can say for certain is that the trend has weakened, but it has
    not ended. Still, we are being given clues on how to participate from the long side, using close stops. The last 4 trading days appear to be
    absorbing the effort of the sellers. If that is the case, expect to see
    higher prices next week.

    The fundamentals may be as bullish as can be. The charts are sending a different message, and that has been the case since the 2011 highs.

    SIZ D 26 Oct 13

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