Saturday 25 May 2013
We cannot control the markets, but we can control how to respond to what they are saying.
The paper market has been turned into a circus, thanks to JP Morgan, and abetted by the
exchanges, COMEX and LME. Focus has to remain on the physical market, for it is where
one can expect to find true value for price. What everyone has learned is that as price has
declined, demand has disproportionately skyrocketed.
We have written extensively on the acquisition of physical gold and silver, regardless of
price, because no one can know when the central bankers will lose control and price will
erupt like Eyjafjallajökull. The world is in the middle of a huge central bank bubble, of
which there are many sub-bubbles, as it were. [Anyone who pretends to believe whatever
information is being disseminated by NWO-owned mainstream media, none of which
makes any economic sense, and those who do not fully believe, (or at all), what is being
said but do not know where else to turn, stay away from all central banks and central
planners news or information.]
In addition to creating bubbles that will fail, the Western central bankers, and their puppet
governments, are also doing battle with Eastern countries, mostly BRICS, but more and
more countries are aligning with them and against the impending demise of fiat regimes.
Western central banks are on the losing end, as their fraudulent rehypothecation of gold,
several times over, and the virtually depleted reserves now rest comfortably in the hands
of Russia, China, India, Turkey, et al, none of which will tolerate any more of the reckless
mismanagement of the West. It will not end well for those of us in the Western sphere of
The most coveted of all assets around the world has been gold, on a grand scale, and silver,
on a smaller scale, but grand relative to diminishing supply. As we asserted last time, it
does not matter what the fundamental picture says, for now, the moving forces are those
in control of the paper market, and the populations of Western countries. The power will
not be ceded willingly nor readily, so one cannot rely upon the known demand factors, no
matter how bullishly presented. That information is already in the market, and it has not
created the large mark-up most have been anticipating. It ain’t happening, yet.
The paper markets, however much manipulated or disconnected from the physical, are
the only barometer available, for now. Under normal circumstances charts, which reflect
the market forces, are the most reliable source of information. Here is what they are
saying, at this point in time.
In our last article, we said that time was on the side of those currently in control, and it
would take longer than most expect before gold and silver will reach previous highs and
yet higher, after that, [The True Story Is About Time, http://bit.ly/12iELsC]. In another
previous article, we explained how wide range bars can lead to range control for several
more bars to follow, and longer, [It Could Get Uglier And Take Longer, click on
http://bit.ly/18AlO9G], and we will give more examples of why any recovery will take
The one caveat would be a V-type bottom, when price takes off from a low. Because
Anything Can Happen, and no one knows in advance how a market will unfold, it is
mentioned as a possibility.
Trading Range, [TR], – A, shows the wide range bar from April, and the close is mid-range
the bar. Very often, that bar’s range will contain price behavior for several bars into the
future. TR – B is pointed out to demonstrate that an ensuing TR can take quite some time.
Going into the last week of May, the range has been under the close of April, telling us
the attempt to rally has been weak.
Even with the sharp decline from last month, and the overall decline since September of
2011, there is still bullish spacing. It occurs when the current swing low is above the last
swing high, from 2008. It tells us that buyers have been willing to buy into the market
without waiting to see how the last swing high will be tested, an overall bullish condition.
The importance of a wide range bar is that it tells us of the likelihood of a trading range.
One can either sell the top of the range and buy the bottom of the range, or wait, knowing
that the market is unlikely to rally higher or break lower, for an unknown period of time
and then follow the breakout.
You can see how price has already spent five weeks within the wide range bar with a
close in the middle. The high of the range has provided resistance, and the lower portion
has been support. Last week’s close was in the upper portion of that range, telling us
buyers were in control at lower price levels.
Keep in mind, however, that the trend remains down, and the onus is on buyers to show
a change in strength. We do not see that, yet, but this is the paper market. Buyers have
amply demonstrated demand in the physical market, but it is no avail, for now.
The wide range bar scenario is uniformly persistent over all three time frames. The daily
activity looks weakest of all, but still within the range parameters described. Using the
“knowledge of the market,” from the low of the range, we did use it to advantage to make
a short-term trade off the lows, with success. It was an against-the-trend-trade, but we
used the smaller time frames and the knowledge that the lower end of the TR would be
support, as a basis for it.
Silver tells a more interesting story. It has been weaker than gold, but the current
developing market activity shows promise within a weakened environment. Bullish
spacing has been eliminated, and the swing high from 2008 has proven to be support, at
least for now.
We drew down sloping channel lines, and interestingly, silver is holding above the 50%
of the channel range, not going to the bottom demand line. The underlying implications
are bullish, within the context of a prevailing downtrend. It does not mean one should
be buying futures, based on this, just that price is holding relatively well in a bear market.
Entering the last trading week for the month, at this late date, the range is relatively small,
which tells us that buyers are meeting the efforts of sellers, preventing sellers from moving
price lower. It does not mean price will not go lower before month’s end, but based on the
facts available, it is a positive sign. It could take more time for buyers to turn the futures
market around, but it has to start from somewhere.
Wide range bars are not inviolate, evidence by the weekly chart. Price did go under the
low of the wide range bar, but note the location of the close, at the high of the bar and just
above the last week’s low-end close of a selloff week.
The chart comments relate the current daily activity. Just like TRs reveal important
high/low information, failed probes also provide clues about the character of the market.
The 3 points made explain what the clues are. The lack of continuation higher speaks to
the overall trend being down, weighing on attempts to rally.
We continue to recommend buying the physical, regardless of price, and be very selective
if/when trading the futures.