Gold And Silver - No Defined Bottom

By: Michael Noonan | Sat, Jun 28, 2014
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Despite a decent rally in both gold and silver over the past 7 trading days, [TDs], both remain in bear market conditions, overall. This should hold true for however many more months, or years that the war-breathing, fiat-issuing federal United States government can retain its control. Despite the fact that the numbers of people who recognize the utterly corrupt nature of Western governments, led by the US and willingly abetted by the UK and Germany, those in control still remain in control.

Little has been accomplished by Westerners to hold their out-of-control politicians, [we refrain from calling them leaders], accountable. In fact, the mounting pressure on the West has come externally, from opposing Eastern nations more interested in genuine growth and fed up with the Fed's fiat free-riding, inflationary exporting ways. Those days are in the process of ending and at a faster pace with each passing month.

When will gold and silver rally, and likely not look back at the current depressed but bargain prices? No one knows, and anyone who says otherwise has already been proven wrong. If such a rally comes as a result of the US succeeding in finally provoking a wider spread war, it could be a hollow victory for those who have been widely "stacking," as it were. While much higher prices will have helped preserve purchasing power, conditions of war would mitigate any satisfaction from such a long-awaited event, at least for those in the West. The big winners would be China, Russia, and India, along with several other countries aligned with the growing power of the Eastern nations.

This week, with the end of the month charts printing on Monday, out focus will be more on the technical perspective of what the charts are saying about those engaged in the gold and silver tug-o-war, East v West, physical v paper/derivatives, and those of us smaller fry who are converting worth-less-and-less fiat in exchange for 5,000 years of proven history on the side of both precious metals.

It has obviously not been a one way street over 5,000 years of history for gold, holding as the most viable constant of value as a measure, and having world-wide recognition, from main streets to back streets, even to areas with no streets. An ounce of gold is accepted as an ounce of gold, no matter where in the world.

The month of June ended well, [Monday's activity not yet occurred], but there is no defined indication of ongoing strength. The close did not close above April's small range high. One would not think it a big deal, but that small range was a failure of the buyers to maintain a rally, and an inability to rise above that mark, given a second opportunity, is not the best showing for buyer's ability to prove their worth.

Mention of bearish spacing has appeared often in our charts, of late. It occurs when the last swing high fails to reach the low of the last swing low, leaving behind a space. It is considered bearish because sellers were confident enough that lower prices would come without having to see how the last low would be retested.

Gold Futures Monthly Chart
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Last week's inordinately small range is a potential red flag. Buyers were unable to show any upside follow through after the previous week's strong rally. At the same time, sellers were also unable to take advantage and move price lower. This is less problematic because sellers have already proven themselves in a down trend, and the onus is on buyers to demonstrate change. That did not happen.

While the monthly chart had more of a positive look, it is tempered by the weekly, for reasons just explained. This brings the daily next to see if it can be an arbiter in favor of one over the other.

Gold Futures Weekly Chart
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The daily has the potential for buyers absorbing sellers at an area of resistance. The overall read of the last several TDs has the appearance of a weak correction, after the large gains of the 7th TD from the end. There are a few possibilities, from what we see, but it would take more time to explain without reaching a clear conclusion upon which to make an informed buy/sell decision. It is for this reason why one should always let the market lead, and then follow, as opposed to "guessing," however well-reasoned, in which direction price might go.

The trend is not clearly up, and not up at all in the higher time frames, so caution is preferred when viewed from the long side.

Gold Futures Daily Chart
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So far, silver has not sustained any upside rally, evidenced by its current location relative to the 2011 highs and current lows. A monthly chart is more for context and less for making an informed buy or sell decision, so we are left knowing silver remains bearish.

Silver Futures Monthly Chart
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Silver has the same troubling small range for the week. In addition, there are two recent failed swings, and above that, bearish spacing. This relates how the prospects for a sustained rally are dimmed by these factors. It could change, next week, next month, but next week/month has not yet happened, so all decisions have to be based on what is, as it currently exists, and not what may or may not occur.

Silver Futures Weekly Chart
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In a bull market, when price rallies, you often see the progressive lows at the upper end of the preceding trading day. This is so because buyers are in control and can move price higher more readily. The last 6 TDs overlap, and that is an example of a more balanced struggle between buyers and sellers, neither having clear control.

Regardless of how it plays out next week, after such a seemingly strong rally, what will be just as important is how the next correction develops. If the ranges on the next decline are relatively small and volume dries up, it will indicate selling pressure is not there, and another rally is likely to ensue. If price declines with ease and on increased volume, it will be a sure sign that silver, and gold have not found the bottom so may anticipate.

Patience is warranted. Ongoing buying of physical gold and silver is warranted. Keeping one's focus on the larger picture is warranted, and will ultimately prove rewarding, in many ways. Stay the course.

Silver Futures Daily Chart
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Michael Noonan

Author: Michael Noonan

Michael Noonan
http://edgetraderplus.com

Michael Noonan is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

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