Sunday 20 May 2012
Both metals may have seen a respite to the downside, but it is not enough for a turnaround. We will look at the daily and intra day charts to show how strong volume entered at the lows, indicative of a change of risk from weak hands into strong. What remains is to see some buying activity to confirm a turnaround could be at hand.
Silver was in an oversold condition, as evidenced by going under the demand lower channel line, and volume increased sharply on Wednesday's low, holding just above previous lows from last year. The 60m intra day chart shows more detail.
We are seeing a likely change of behavior that may lead to a turnaround, and like any potential situation, it needs to be confirmed. On the 4th and the 7th of May, intra day rallies created the upper supply channel line. Subsequent rallies on the 10th, 11th, and 15th failed to reach the upper channel line, and that told
us of the underlying weakness that kept price moving lower.
An extreme was reached when silver become oversold by going under the lower supply channel line on the 15th and 16th. Price activity of the 16th has become critical. the intra day rally was the weakest in all of May, but volume effort changed and changed dramatically. Just prior to the peak volume at 1, there was a persistent increase on the failed rally to just under 28, and that led to the selling climax at the low. Volume reached the highest hourly volume in weeks, and the hourly range was the widest in the decline.
This is classic selling climax behavior, where there is a change of risk from weak hands into strong. Remember, smart money buys lows and sells highs, and here you see direct evidence of this trading maxim. Additionally, this selling climax is occurring at previous support points as indicated on the daily chart above. On the 17th, there is even higher volume, as price recovers back into the channel. We see this as more short-covering than new net longs. Price was even able to break above and out of the down channel for
the first time, but volume declined, relative to the previous two days, and for us, it says demand was not as strong as the short-covering, suggesting more work has to be done. Also, this is an hourly chart. The daily chart show price still entrenched in the down channel.
We would expect to see more signs of strength, if this is to be the start of a new leg to the upside. If that develops, there should also be buying opportunities in the futures. Physical silver and gold are
great buys at these levels.
The gold chart is similar to that of silver. Gold appears to have sold off a little more than silver, given that silver held just above last year's same level lows, and gold formed a true double bottom relative to the December 2011 low. The scenario for gold is exactly the same as for silver.
The next chart is of the fiat Federal Reserve Note. It seemed appropriate, for the moment.
The bought and paid for financial news media loves to take digs at gold NOT being considered as an alternative "currency." Let us forget for a moment that since the questionable formation of the Federal Reserve Act of 23 December 1913, when the private corporation, Federal Reserve, took over the nation's money supply, [in derogation to the organic Constitution and evidence of Congress abdicating its Constitutional mandate to control the nation's money of silver and gold coins], that since 1913, the "value" of a Federal Reserve Note, which by law are NOT dollars, is about 5 cents in terms of 1913.
In 1933, when Socialist extraordinaire Franklin Delano Roosevelt sold out this country to the Rothschild moneychangers, gold was removed from all Federal Reserve Notes. Then all remnants of silver backing, via silver certificates was removed in 1964. At that point, Federal Reserve Notes [FRN] became pure fiat, backed by nothing of intrinsic value.
We find it ironic that imaginary money, [FRNs are merely paper chits, the exact same worth as Monopoly money, whose "value" exists only in the minds of those who use them], have been stronger than both
silver and gold which HAVE absolute intrinsic worth. The Federal Reserve Ponzi scheme continues to unravel, but one can never underestimate the power of those in government to keep creating more imaginary...we cannot even call it money, any more. All that is created are promises to lend and promises to borrow, with the lenders lending nothing and the borrowers giving up life, liberty, and sovereignty in exchange.
All one need do is ask, WHAT is the IMF, World Bank, Federal Reserve, ANY central bank lending? It sure ain't money, but only computer blips on a screen . Presto!, Greece, [pick any country] you now owe us X amount of billions of Euros, even though you only received a promise and not actual Euros. In fact, what do you think is the main goal of the world's central bankers lending only promises? They are demanding the borrowing nation's gold reserves as payment in return. As an aside, the United States gave up all of its gold decades ago when it declared bankruptcy. Physical gold and silver are being accumulated by the tonnes from China, India, and even central banks, [despite any denials by Lying Ben].
Better to be a month, quarter or year too early in accumulating physical silver and gold than a day too late.