Sunday 10 November 2013
All people in the futures markets are there to make money, [hedgers
excepted], or they would not subject themselves so unnecessarily to
the risks. Even buyers of the physical, Stackers, want to get as low
a price as they can. More people are fundamentally inclined than are
technically driven. As a consequence, they like to read articles that
provide a degree of psychological comfort in support of their own view
of the market.
With the onslaught of bullish news/facts/figures about silver over the
past year, one need only look at where the price of silver is and ask,
"How is that bullish information working out for you?" This applies less
to buyers of the physical, but even they need an occasional reminder
that even though price has declined, their end game is still in process.
It can be helpful to understand the market from a chart perspective
because you will have a more accurate read for what to expect in the
next week[s] or month[s], or until you see a change in the structure
that signals an important move is underway.
While some of you may think it is difficult to read a chart, all that is
required is a bit of common sense attached to the explanations we
provided with each chart.
When will silver rise to higher values? Answer: No one knows. It has
taken longer than most thought, and it will continue to take longer
than most believe, but there is one thing for sure, the price of silver
will retest the old high, and then proceed to exceed it, by at least a
It takes time to turn a market around, and silver is in that process.
There is no degree of certainty that a bottom has been reached, but
there exist at least a probability the recent lows may hold. Whether
the lows hold or not, one cannot lose sight of why accumulating
silver has been so important. When price finally accelerates higher,
the trying of one's patience will quickly be forgotten and all will be
The charts relate a story of the news/facts/figures, just in bar form.
This is what the market is saying, as of Friday.
Everyone in the world who follows silver knows the importance of $26
for silver. Until price can rally and hold above it, do not expect higher
levels. It is that simple.
There is a small 8 week base that is currently being retested by
another small trading range. Whenever a trading range retests and
holds above the previous one, it has a bullish connotation. Because
silver is in an overall down trend, upside strength is not a dominate
factor, so expect additional time required to develop a more overtly
The two bars at rally high "A" showed EDM, [Ease of Downward
Movement] on high volume, as price declined. At the current low of
the decline, "B," there is another high volume effort, but instead of
showing EDM, the two bars overlap one another. When you see
overlapping bars, it is indicative of a balance between the efforts of
buyers and sellers. The fact that buyers were more responsive at
the low of the correction speaks well for the prospects that support
That answer will come next week. If it is to be support, there will be
the beginnings of another rally. If support disappears, lower prices will result. We do not have to guess which, but instead follow the
market's lead, either way. For sure, if price declines, one would not
want to be a buyer, based on the message of the market.
Two points worth considering from this 90 minute intra day chart.
There was a high volume rally on 15 October, left side of chart, that
was retested three times at the 21.10 area, and that led to another
strong rally. From that kind of market development, we can expect
buyers to defend that support area on a retest. That retest is now
There was a wide range, high volume decline, last Thursday. On
Friday, there was another sell-off on the highest intra day volume in
over a month. Volume is a measure of effort. The question to ask is,
if the effort was the greatest in recent days, why was the net result
Keep these last two bars in mind in relation to the daily chart, above,
where the discussion centered on overlapping bars, a balance between
buys and sellers. So far, the increased effort failed to reach the
support from the 21.10 area, when it was more than opportune to
not only retest but even break it. After all, silver is in a down trend.
Were the two bars reflecting a balance, or more of buyers overcoming
sellers in preparation for a rally?
We cannot know the answer, [no one can], until next week, but it
does raise the possibility of a trade potential should support hold. It
may be only short-term, if one develops, but what the charts show is
how developing market activity can be used to advantage.
The same holds true for a larger time frame. Stackers need to keep on
stacking, and futures traders need to be select, if buying, while the
trend remains down. When and as a change in trend occurs, from
down to up, making buy decisions will become easier, not that trading
is easy, but knowing the trend and market context puts the odds of
success in a much higher arena of probability.
One then has an edge.