Monday 29 August 2011
One cannot make much of what is not there, and in silver, demand
is currently absent at higher levels. Whenever you want to have a
clearer idea of market direction, it is always best to look at the higher
time frames. The monthly and weekly charts tell a story, and it
appears we can expect more of a two-sided market, both in silver
The month of May pretty much defines the upper and lower
boundaries of where silver is likely to be contained. The lower level
has held, so far. If you note the close for May, 4th bar from the right,
it was off the lows. This tells us there was buying in support of the
market, and that factual observation was confirmed by the lack of
downside follow-through in June, with a small range bar, followed by
a recovery rally in July with a wider range and strong close.
The month of August has three more trading days before the close
gets painted, but looking at where price is currently, it is apparent
that sellers are present, just as buyers were present at the May lows.
August trading is also going up against the large sell-off from May,
so it will take time to absorb all of that sell activity.
The weekly chart shows just how strong the sell-off was in May by
the large range down with a poor close. the small range retest at the
end of June said that sellers were spent and could not make any
more downside progress, hence, the rally that has since ensued.
A look at the composition of last week's bar shows that price opened
near the high of the week and closed under mid-range the bar. This
is a clear sign that sellers were in control as price attempted to retest
large vertical selling bar from May. No one knows exactly how the
next several weeks will unfold, but we are surmising that more back
and forth is a greater likelihood than upside continuation.
A look at a gold chart finds support in that premise.
Last week was clearly one where sellers took control after new price
highs. It was an Outside Key Reversal [OKR] week, [new higher high,
lower low from previous week, and a lower close]. The close was well
under the open and about mid-range the bar. Last week's range
could well define the high and low of any developing trading range,
with an outside chance of 1600 as support.
While everyone wants to know what is going to happen next, odds
favor market indecisiveness, and that is not a productive environment
for trying to trade in the direction of market momentum. We see no
edge, either way.