Loading ...Sobering work from a guy named Michael Noonan
Curtesy of Mserr from the Rambus Chartology Forum
The chart comment for the month gives our view at the end of Q3 which shows the value of paying attention to what the market’s message is as determined by reading the charts.
Most do not like to hear news that is not supportive of what they want to see happen. We are just as eager to want to see a strong rally, but those expectations are contrary to what the market is advertising. Consider just viewing the facts, as presented on the weekly, and then decide if it makes sense to expect a change in trend any time soon?
For review, the concept behind Bearish Spacing is when a swing high rally fails to reach the low of the last swing decline. It leaves a space, as shown by the two horizontal lines. What this means is sellers were sufficiently confident that lower prices would follow that they di not wait to see how the market would retest the last swing low. Obviously, it has a bearish connotation that should not be ignored.
The series of LHs, and another LL is a text-book example of a down trend. When you consider just these observable, undisputable facts, the reality of what to expect for the near term future cannot be in doubt, and it should put into perspective any “bullish” analysis as being significantly uninformed and very misleading.
When you look at these charts, you can better understand how all of the current event stories are not what is driving the market, a concept many find hard to accept.
After declining from the last swing high to a recent low in just 13 TDs [Trading Days], the question to ask yourself is, how is the market responding? Well, 21 TDs later, 50% longer than it took to decline, price turned back lower. Is that a strong reaction or a weak one? When you ask these simple questions about what the market is doing, you actually get an immediate and accurate response. Price is struggling, and this is to be expected of a market in a down trend.
37 TDs after the last swing low, how is price responding? It is now only at the half-way mark and even lower than the 21 TD rally. The market message is very clear for those willing to observe what is.
The silver market has a lot of work to do before any kind of prospective turnaround can occur. Does it matter how great a shortage there may be for physical silver, for how great the demand is for this metal? Not according to what these charts are saying. Before this market can go up, it has to stop going down. Can it be any simpler, and can you see how relying on shortage statistics, et al, can be very misleading, at least as to timing?
Markets do not lie, and opinions do not matter.
Same as for gold. Second verse same as the first.
If you look at the Quarterly chart for silver above, prior to the last two Qrtly bars, price was unable to rally away from support. Axiom: weak rallies lead to lower prices. You see a similar price activity situation on the daily chart with price not rallying away from the 15.50 area. It may hold, we are not saying it cannot. When considering what price is likely to do from a probability perspective, it is more likely to give way, especially when viewed in light of the trend. It is just common sense.
Is this all disheartening? It should if one is willing to deal with what the market has to say and ignore any “expert advice” to the contrary. The reality of the underlying fundamentals will eventually prevail, and if only half of them are real, gold and silver will go to higher levels than ever seen previously. The market is simply saying to be patient.
We are as bullish on the potential of both of these markets as most. However, we are realists with the highest regard for what the market says and no one else. Expect more of the same for 2015, at least to start, until there is evidence of a market turn. For now, there is none.
