edgetraderplus'  Instablog

Saturday 13 April 2013

What happened?! is the question so many are asking about Friday's
waterfall in prices. A better question is, "Why?" Outside of the
insiders, no one really knows. Yes, there can be some fairly cogent
explanations, lots of glib answers, but no one knows, for sure.

What we do know for sure is that the market is always the final
arbiter. Throughout the decline of the past nearly few years, there
has been a continued glimmer of hope for a turnaround in
recognition of the infinite printing of fiat, countries drowning in debt, and the only viable solution, at least in the Western world, has been more debt!

Who issues that debt? The central bankers, IMF, EU, Basel
Committee, all unelected, non-represented factions that run the
lives of the Western world under the sanction of the officially-
elected-but moneychangers-beholding governments.

Friday, 12 April 2013, was a sign of desperation. It may become
known or apparent at some point in the future, but if we strictly
adhere to the message of current developing market activity, as
displayed in the charts, almost all market surprises occur within the
trend. As our Commentary title states, amidst all the bullish hopes
for PMs to soar to considerably higher levels, the market trend wins, as it always does.

Our comments have not been immune to those hopes, as we have
strongly advocated the purchase and holding of physical gold and
silver, but the comments have also been qualified with the advice to not buy futures, simply because the charts were sending that very
message. The advice to buy and hold physical gold and silver is as
important as ever. We have no clue what prompted the Western
central bankers to crush the markets lower, but it will ultimately
fail, as history as amply proven.

"If you can keep your head when all around you are losing theirs...
If you can trust yourself when all men doubt..." Edited from
Rudyard Kipling's "If"

The point is to keep a level head in what appears to be turmoil for
the real turmoil is on the other side, the opposition to PMs as a
known alternative to the issue of worthless fiat. We cannot say
nothing has changed, for price just got lower, but the attempt to
destroy whatever opposes fiat debt is obviously a high priority for
central planners, and their message is very clear: they will stop at
nothing to continue their fraud. Nothing.

Instead of trying to figure out the unknown, look at what is known
for certain, and that is the results of the decision-makers who
cannot hide their intent from the trail left behind, price and volume
"footprints" for everyone to see, or for those who choose to see
what too many overlook or ignore.

One point worth remembering is the charts reflect the paper market,
and the paper market is in the total control of central banks, so you see what they want you to see, and what they want you to see is
the apparent failure of PMs to do well. They are succeeding, to that
extent. Everything else central planners are doing is failing, and
there is little reason to believe they will succeed in this game plan,
either.

The trend is always the number one factor, then the location of
price within the trend. Gold is moving sideways, but still within an
overall bullish condition, based upon the facts presented. The
current location within the trend is neutral to slightly negative.

Insiders will never reveal their "hand," especially the central banking
cabal, but we can read what they are doing, overall, by the clues
left behind. Within the down channel, there was a definite clue in
the weakness of the last rally that failed to reach the upper
channel line. Weak rallies within a bear trend inevitably lead to lower prices. As we always say, one can never know how the market will
unfold, and certainly no one was prepared for how current market
activity unfolded on Friday.

Curiously, the overall volume for the week was not that strong. We
construe that as an indication that the number of weak sellers and
stops was not that great.

We presented this Bearish Spacing in our last commentary, when we stated: "Here is a closer "read" of developing market activity. The
trend is down, and the bearish spacing is just that, bearish. The
three points made on the chart are indisputable facts. You can have a contrary opinion, but opinions are not facts, no matter how
strongly held."

The comment stresses opinions are not facts. The trend is very
much a fact. [First par. after 2nd chart, plus 3rd chart, Comex
Prices Manipulated? http://bit.ly/YYX5HV]

One truism to always keep in mind about the markets is: "Anything
Can Happen." Friday was one of those days. Remember it in that
context.

Silver

Silver is already under the 50% retracement from swing low to swing high, which is a general indication of a weaker trend. The bullish
spacing is smaller than gold's, but price is holding support a little
better.

As with gold, no one knows how much lower silver can go, and there is no evidence of a turnaround.

We certainly held out "hopes" for a turnaround in previous analyses,
still not arguing against the tape for taking a long position in the
futures, and as a consequence, did not even consider the short
side. That is what a bias will do.

As pointed out below, given the manner of how price unfolded within the TR, it cannot be a surprise that price continued lower. The
extent of Friday's decline was a surprise, and it goes back to the
importance of knowing, "Anything Can Happen."

All anyone can do is wait to see how the market reacts to Friday's
sell-off. It never pays to guess or anticipate, and no one
anticipated how price declined so much. Let the market inform us as to what the next development will be, for the market is never
wrong, and the market never lies. Trust it.

Wednesday 10 April 2013

The one common denominator that crosses all cultures, even religions,
is money. It is the global equalizer. We take a look at the DAX,
Germany's stock market. Do the "precise" Germans fare any better at
investing than at, say, building cars?. Likely not. Money goes to the
core of the human psyche as the fundamental driver for tapping into
the fear/greed element from which few escape, at least when it comes to investing.

Unfortunately, DAX does not have volume, a vital element that shows
the ebb and flow of two incredibly important principles, supply and
demand. Why it volume so important? It shows the effect from the
cause factor of investors/traders making buy/sell decisions.

You may see two daily bars of equal price range and close, and theyappear to be equal. When the volume factor is added, one bar with
volume of 15,000 shares and the second bar with 120,000 shares, they are far from equal. The lesser volume shows a lack of demand, the
other a force of demand that convey very important information for
decision-making.

With that handicap, let us proceed to what the DAX may be saying at this random point in time.

For German readers unfamiliar with how we analyze markets, it is based on current developing market activity and compared to historic
activity, using the factors of price, shown by size of range and
location of the close, informing us who won the battle between
buyers and sellers. The other critical factor, volume, is missing. As a
consequence, some of the analysis will lack more pertinent detail.

Not many look at Quarterly charts. It is our starting point as a
reference and context when compared to the progressively smaller
time frames. What we want to see is a synergy from one time frame
to the next. It does not always exist, but when it does, it makes an
analysis more compelling. From whatever time frame once views a
market, it is important to be aware of support or resistance on the
next higher time frame. The higher the time frame, the more controlling is the chart. What jumps out immediately is the persistent resistance
that started with the 2000 high, stopping the rally in 2008, and now
price is retesting that same level. The first Qtr, 2013, second bar from
the end, was the smallest range since the 2011 swing low. The narrow
range tells us demand was weak, otherwise, the range would have
extended higher. The location of the close, mid-range the bar,
confirms the weak demand because sellers were present, as would be
expected.

The First Qtr 2013 looks weak, and sets the stage for how the other
charts may appear.

Note the TR, [Trading Range], just prior to arrow 1. The inability to
rally above the high established in 2000 said demand was weak, and
once again, you see how small the ranges were for the bars
attempting to rally. Weak demand opens the door for supply to enter,
as sellers note the inability of buyers to extend the rally. An analysis of volume, during the TR may have made the "red flag" potential clearer.

The size of the decline, at 1, shows how sellers took control with EDM, [Ease of Downward Movement], erasing the previous 12 month's effort in just a single month.

The arrow at 2, shows small ranges, a lack of demand, and closes in
the middle, telling us sellers are meeting the effort of buyers each
month. As it did in 2007, this can open the door for sellers to rout
buyers and carry the market lower.

Compare the length of time for the EDM, in 2008 and early 2009, with
the length of time for price to recover back the retest to the 2007
high. This is an example how a protracted effort tells us that the
market is relatively weak.

What can be said is that the current trend, for the past few years, is
up. The question is, can it sustain itself in view of what the message
of the market has been since 2000? All we are doing is making factual
observations, letting the market tells us what to expect, moving
forward.

At no time is there any discussion or consideration to fundamental
factors, country or world situations. All of that information shows up in the charts, and it becomes a matter of "reading" the message from the market itself, the most reliable source of all.

When you look at the net gains from each swing high to the next
swing high, it is apparent that the upward momentum is laboring.
Almost all of swing high "C" has been a struggle, a lot of sideways
movement. It is at a support level, as defined by the weekly time
frame, and you can better understand why it is so important to be
aware of the next higher time frame.

The weekly is above a former resistance line, now acting as support,
whereas the monthly shows all the current activity under important
resistance.

The first week of March was a wide range bar up with what appears to be a strong close. The second week, fifth bar from the end, was very
small. What happened to the buyer's effort? It disappeared. What
looked like strong demand may have been an exhaustion rally, instead.
We cannot say for sure, without the volume story to confirm, but the
2nd week in March is a red flag warning.

The second and third bars from the end show greater EDM, wider
ranges and poor closes. This tells us sellers took control from buyers.
Can they keep it? In an up trend, the onus for change is on sellers;
demand has already been proven by virtue of the trend.

Concern is for the inability of buyers to lift price higher, away from
support. It is critical to observe the how of a market's response. Right
now, price is not responding well to the existing support. After a one-
time spurt higher, as just described, price has returned to the level
from which it had moved sideways from mid-December until the March
rally.

Too many tests of support is the market's way of telling us demand
cannot move higher, and support will likely give way. There is no
guesswork here, just a factual reading of the developing market
activity and applying the logic it conveys.

The box captures the sideways trading from mid-December to March.
It formed a base from which a rally can be sustained. How did the rally unfold? In small ranges with not very strong closes, a sign of little
demand effort/ability. Compare the bar ranges in the rally to "A" with
those in the decline to "B."

Based on a series of factual observations, from the Quarterly chart to the current daily, the DAX is at a critical juncture. As an index, it is
telling us to look very closely at individual stocks to make a decision
to remain long, or not, or at least use close stops, [stops being
something stock "investors" for some reason fail to use.].

Volume would have made this analysis more compelling in conclusions,
but one thing is certain: caveat emptor!

Sunday 7 April 2013

Salivating Bears have been calling for a market top for over 4 years, now, and none have been right. The sentiment is understood but
misplaced. This goes to show how markets are not predictable, but
people are. So many want to exercise the FILO inventory premise:
First In Last Out. It is so difficult to check egos at the door for
there is a huge difference in being right and being profitable.

Those who choose to be right often find themselves on the loosing
end. Those who choose to be profitable always have a game plan.
Game plans rarely pick tops or bottoms, the most unprofitable areas
for trading. The best source for market information comes from the
market itself, and from what we can see, there has been no
indication that a top has formed. It is possible the market is getting
there, but getting there and being there are not the same. Always
stick to a proven game plan.

The message of the market is best viewed from the charts, and we
are using the E-Mini.

An associate of ours has observed that market rallies tend to last
15-20 weeks, and the current rally is in week 20. A correction, of
some sort, is now due, this week, next week, it cannot be known until it happens, but the Time factor is ever-present.

Last week was an OKR, [Outside Key Reversal], defined by a higher
high and lower low from the preceding week, and in this one, a lower close, [the close can higher, lower or unchanged]. The word
"Reversal" provides a clue as to near term expectations. Not ours,
necessarily, but as in the acronym, OKR.

The one factor outweighing the rest is the trend, and the trend for
stocks is up. Trends tend to persist, and it takes time to turn one
around. Time equates to patience, and it is patience that is the
undoing of a great many traders. There have been so many calling
for a top, as we have observed from comments and expectations
over the last 4 years.

In an up trend, demand is already a proven factor. It is supply, or
sellers who bear the burden of proof for making a change, and that
has not yet happened. The groundwork already exists for a
correction, but it is impossible to know, in advance, if it will be a
normal correction, and lately, they have been 9-10 days in duration, or if it will signal the potential of a topping formation.

Identifying the trend as up does not mean one should not be
cautious or unprepared for a market turn, but the caution would be
in the form of taking profits and/or using close stops. It does not
mean going short. Even the 2008 market top took a few months to
develop.

Upside momentum has lost a few steps in the current rally. In the
rally leading to swing high 2, note how the bars were steadily
higher. In the current rally, the bars have been higher, but mostly
overlapping. When bars overlap, it indicates a greater struggle
between buyers and sellers, but so far, buyers have prevailed.

The bulk of the rally to swing high 3 began when price broke above
swing high 2, at the beginning of March. The high of 2 has been
support, seen at arrow 1. Friday's decline is still above that price,
1529 area, and the entire box area is above 2, which is a bullish
sign. It may not hold, but until that event occurs, we can only
judge the market by the facts as they presently exist.

Friday's sell-off closed above the half-way point of the range, and
that tells us buyers are still actively present, even if the buyers are
only the Fed. If sellers were in control, the close would have been
lower. Based on the trend, we could be looking at an opportunity
to buy on Monday.

The 1529.50 low of 15 March is likely to offer support on a future
retest, horizontal line extending to the right. This makes Friday's low very interesting. One measure Connie Brown, Aerodynamic
Investments, uses is equality between swings. The decline of "A"
was 24 points, as was the decline of "B." Based on this, at least a
reaction can be expected, at a minimum. [Never forgetting
"Anything Can Happen" in markets, it can also fail.]

The highest volume occurred at the low, and that begs the
question, who do you think creates volume? The short answer is
what we like to call "smart money." The public tends to follow, not
lead. The Friday low is above the 15 March support, telling us if
sellers were in charge, why couldn't they press the market lower
and take advantage of their selling momentum? Maybe because
sellers do not have the momentum.

The reaction off the high volume low was immediate and to the
upside. If we see a light volume pull-back on Monday, with smaller
intra day ranges, it could offer a low-risk buy. As was stated in the opening second paragraph, having a game plan is essential to being
profitable. It is not a guarantee for profit on every trade, but the
consistency in application is a winning combination.

Developing market activity is always the most reliable source for
information and the best guide.