Guest Post from EdgeTraderPlus

This was emailed to me last weekend. It's well-written with lots of pretty charts.

The web address for the author is: http://edgetraderplus.com/

Gold And Silver – Current Decline Not Over. Watch Market Activity For Turnaround.
Posted on February 16, 2013

We often make a distinction between buyers of physical precious metals, [PMs] and
buyers of futures, exhorting the former to buy with impunity, and some may see that
as cavalier, given how the price for both gold and silver have been in recent decline.

The point for buyers of PMs is for both protection and creation of wealth.  Protection
against insidious central bankers destroying currency-purchasing power, over time,
and wealth creation as evidenced by those buying PMs over the past decade and seeing
the intrinsic value grow dramatically.

Buyers of the physical are less price sensitive and view current declines as opportunity
to add more.  As an example, we still hold physical silver purchased when price was in
the mid-40s.   Has the relative value declined?  Absolutely.  Concerned?  Absolutely not.
It remains a matter of time when the price of PMs will go dramatically higher, and the
concern will not be how much one paid, $1800 or $1600 the ounce for gold, or $45 or
$30 the ounce for silver.  The concern will be over having any at all.

If gold is to go to $3,000, $4,000 $5,000, or wherever, and silver go to $100, $150, or
$250, there will be many who will be glad to have paid $2,500 the ounce for gold, and
$75  the ounce for silver.  How does that compare to $1,800 and /or $45 purchases for
physical PMs, at this point?  One cannot always time the market, which is why consistent
buying over time is strongly recommended, but one can determine whether to be an
owner of PMs, or not.

The problem moving forward is fear of central bankers changing the rules and precluding
the purchase of any PMs by the public, at any price.  Death and taxes are touted as the
two things one cannot escape, [not always true for the latter], but the certainty of lies and
deception by central bankers/planners runs an immediate third place.

The handwriting is on the wall, as most in PMs know only too well.  We mention this for
those on the fence, those waiting for “bargains,” [misplaced values, there], and those who
have not yet purchased any PMs.  Do not wait, do not wait, do not wait!

For futures, while most everyone is of the mind that manipulation is showing a steady
hand in PMs markets, that “hand” is losing its grip.  It is the charts that show what the
market has to say about what those who are participating are saying about their decisions.
A not so simple statement, but one that says, watch developing market activity to know
what is going on.

That is always our purpose.

While ongoing efforts are being made to suppress the price of PMs and discourage their
purchase, mostly in futures markets, the “Discouragees,” [central bankers,]  have been net
buyers of gold for a few years now, after having been sellers for so long, so do not go by what central bankers say, [often voiced through the puppetmeisters on daily financial
"news" programs], go by what they do, only in this area.  Ignore them, otherwise.

The larger picture for gold is as bullish as ever.  We provide two strong facts to confirm
why, on the monthly chart.  Bullish spacing is referenced as such  because it shows the
degree of eagerness of buyers in a market.  It is measured by noting the last swing high
and the last swing low.  Typically, markets retest previous swing highs.  When buyers
are so intent on being long in a market, they do not wait to see if a retest of the last swing
high will be successful.  Instead, they, [and by "they" we mean smart money participants,
or controlling forces], just keep buying breaks, creating a space that is bullish.

Another and related measure is the extent of a break, or market “give-back,” in a reaction
after a rally.  Monthly charts are more controlling than the lower time frames, so the
information you can glean from them is more reliable and more pertinent.   You can see
how the current break since the September 2011 high has been relatively shallow when
compared to from where the rally began.

Despite the “daily grind lower,” recently, the larger focus is very strong.  Very strong.

A trading range is where smart money operates to accumulate or distribute their positions.
Controlling market forces require time to acquire positions so as not to disrupt their
attempted “sleight of hand” buys/sells during the process,  and the TRs are also used to
discourage participants from following them.

We said last week that $1600 was a possible target, and it was reached on Friday.  Will
that area hold?  “NMT.”  Need More Time to know that answer.

Points 1 and 2 form an upper supply channel line, and a further line down is marked by
dashes to show how it extends into the future, well ahead of price activity.  Point 3 is the
low is between points 1 and 2, and it is from there that a horizontal line, a demand line,
is extended lower.  It is also dashed to show that it extends into the future well ahead of
developing price activity, to be used as a guide to gauge potential support when touched
by yet to develop market declines.

You can see how the dashed line held the December lows, and now February is retesting
it, again.  There is no evidence yet of a turnaround, and it does take time for a market to
turn.

The most interesting aspect of the daily chart happens to be the last bar, Friday’s activity.
It is a wide range bar lower, a sign of EDM, [Ease of Downward Movement], indicating
sellers are in control.  The sharply higher volume is a red flag, a point in time for which
one needs to pay close attention, moving forward.

Remember, sharp volume increases are usually smart money either pushing a market even
more, or starting to take the other side in a transfer of risk.  Subsequent developing market
activity usually indicates which.  This volume day prompted a look at intra day behavior to
see if any clues can be gleaned.

We say smart money always tries to hide their intent, but volume is something they need
in order to move or accumulate positions, and they cannot hide that.  If smart money sells
highs and buys lows, where is the highest volume in this chart?  We ask, the chart answers.

The position of the close tells us buyers are more than matching the effort of sellers to
cause a rally off the low under such heavy selling pressure.  The two preceding bars of
increased volume may “look” like selling, but it is quite possible that smart money has
been buying on the way down, taking everything offered by weak-handed longs selling
out and new shorts getting in.

If Benjamin Franklin had been a trader, he would surely have said, “Never a bottom-
picker be.”

Bullish spacing exists in silver, just not as strongly.  We do point out how the past five
months of selling effort has not been impressive, relative to the two month rally prior.
It is like an Ali “Rope-A-Dope,” taking all the punches from his opponent, but protecting
himself so not much damage is inflicted, despite the effort against him.  Eventually, he
comes out stronger to defeat his now-weakened opposition.

We show the same intra-TR channel down, just like in gold.  Unlike gold, however, silver’s
low has held the lows of last December, a small show of relative strength within a negative
trading environment.  Still, no apparent end is at hand in the decline of futures.

The best way to trade a TR?  Not to trade it at all, instead, wait for a price breakout and
go with it.  Why does that work?  As mentioned, TRs are how smart money accumulates
positions.  Once they are done, they then begin the mark-up or mark-down phase, and it
will last for some time, once it gets underway.

Just as a dashed line in a channel projects into the future for support/resistance, you can
see where the failed probe lower, at the end of December/beginning of January acted as
support.  From there, a horizontal line is drawn.  We made it dashed to show that is was
extended into the future much earlier than when current price activity has returned to it.

Will price hold current lows?  No one knows, and anyone who says otherwise is showing
an unwise ego trying to be “right,” as opposed to being in harmony with the market.  Any
bottom requires time in order to turn around, and any potential turnaround always needs
to be confirmed by price behavior.

The increased volume on Friday is a red flag, as it was for gold, but a red flag means a sign
of caution, to take note and see how price responds to it.  That takes time.   Futures players
have time, or at least the smart ones are exercising it.


 

387 Comments

Nana's picture

Chart Your Course

1st Amendment- Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

philly's picture

2nd ...Sweet! I've been so

2nd ...Sweet! I've been so busy B'ingTFD, I am almost completely out of fiat. Hope nothing unexpected my way comes!!

Coincidentally, the 2nd Amendment is the glue that holds the other 8 amendments together!

"A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed."

Gold Dog's picture

Fifth?

Fifth?

Wow, I haven't even been in the running since the very early days around here.

Cornball responses;

5th/3rd Bank of Fu5K You Pay Me!!

Fifth of Makers...the new old new old Coke of Bourbon.

Lucky Dog

¤'s picture

No. 4

Rhymes with Core......thanks for the new thread yes

Be Prepared's picture

Walk on the Dark Side..

It takes great fortitude to walk on the opposite side of where the crowd is being lead....  to walk your own path where there only a few see the world the same way you do.  This market has been and will continue to be a true trial of mental endurance.  Hang in there, my friends!

Mammoth's picture

More to Come!

First they smash it, and then they will come to confiscate it.
This is what they can expect when they try to confiscate the citizen’s PM’s:

Strongsidejedi's picture

Kitco stops

Can someone look at this list of buy and sell stops...

http://www.kitco.com/ind/Wyckoff/20130219.html

how did Mr. Wyckoff's numbers fare?

April Gold Buy Stops Sell Stops
  $1,618.80 $1,606.70
  $1,627.90 $1,600.00
  **$1.636.00 **$1,596.70
  $1,650.00 $1,590.00
 
March Silver Buy Stops Sell Stops
  $30.15 $29.775
  **$30.46 **$29.66
  $30.75 $29.50
  $31.00 $29.24
Gold Dog's picture

@moretocome

That is exactly what my trading this AM feels like....7 entries and 7 stops.

(Is it too early for a nap?)

Unlucky Dog

EDIT- Finally caught the bottom....whew!

Be Prepared's picture

The Asteroid is coming... for sure....

jmcadg's picture

Never been this early in a post

Might as well make a comment. Great albums DPH. Awesome band, saw them live in at Brixton Academy a year or so ago. Recommended.

Talking of recommendations - Turd, do you think we'll drop a little lower this week. Ready to buy.

Be Prepared's picture

Gas Price Oscar...$5 now and $10 coming to a theater near you...

jezfry's picture

That was subtle

tpbeta's picture

Here it comes

How bad and how long are the only questions.

pforth's picture

This is not capitulation...

This is a raid that smashed us through the lows of a few days ago, killing any hope of a "double bottom" and turning algo traders bearish.  It kills me to say this, but I see no sign of near term strength.

fast mover's picture

The Great Flush of 2013

Silver (paper traders) puking blood now...

tpbeta's picture

If $29-20 fails

...I think the game is up

Grublux's picture

The carnage continues

It is rough out there!

Would love to see a FUBM today!

Silver_investor's picture

More of the same

This nonsense isn't going to end any time soon, in my opinion. After a three-day weekend, Gensler and Chilton are probably sitting at their desks surfing the internet or reading email. But they have no excuse as the Cartel is not even using any type of cover for their raids.  

Mad5Hatter's picture

Silver is off .70$, Gold is

Silver is off .70$, Gold is off 4$, a raid that fails to stampede the yellars. 

Wednesday is nearly here. O.O

binzer's picture

You perma-bulls

sure got those evil banksters on the run :)

No doubt you will continue to come here day after day, posting any bullish article you can find to support the case. Turd will continue posting charts and making predictions which have been and will continue to be so wide of the mark it's laughable.

I will await the vitriol which no doubt will follow here, the male ego will rise up and defend itself to the hilt.

Couldn't find one of my previous posts from late 2012 where I stated to get ready for more pain in 2013, it was pretty much ignored by most and abused by a few who only want to hear bullish claptrap.  

tmosley's picture

Paper to zero,

Paper to zero, bitchez.

Somehow this thread reminds me of this famous scene from The Quest for the Holy Grail:

Up to and including the first five (three sir), three posts, underestimation of the Cartel (nasty sharp pointy teeth), and the soiled armor.

Himalaya's picture

Bring it on!!!

More the manipulation more close to the moon we get!!!!

Let's go to 26 once again!!! better 22!!!!!

Strongsidejedi's picture

@DPH - redefinition of "deep reserves"?

DPH- in the last thread you posted a clip from a gold reserve statement made by FRBNY.

I have to say something here.

You republished the definition of "Deep Reserves", but that definition does not match my memory of the definition.

My recollection is that there were pdf copies of either US Treasury or Federal Reserve Bank ledgers.  These were officially published ledgers where the "deep reserves" were clearly defined as gold that was not yet extracted from the ground and were essentially gold that was "deeply held", as in the dirt still.

The new definition declares this gold as "consists primarily of gold bars" and also adds "formerly called "bullion reserve" or "custodial gold bullion reserve".

I find this redefinition intriguing and have been attempting to locate the pdf's of the prior 10 years of US Federal Reserve Bank statements on the web.  Unfortunately, all the search engines appear to be unable to find those statements!

The closest thing I can find are some statements at US Mint. 

http://www.treasury.gov/about/organizational-structure/ig/Documents/OIG11042%20(FY%2010%20Mint%20Financials).pdf  (see page 60)
 

However, this US Mint page seems to only reflect the same numbers that FRBNY reports.

I am left puzzled right now because I can not locate the US Treasury reports that were prior years' annual reports listing the gold inventory and "deep reserves".  If I recall, the page had the deep reserve calculation and the definition I am citing.

I find it intriguing that the pages are now missing from search engines.
Someone over at GATA needs to go look for this issue.

SRSrocco's picture

LETS GET REAL...

I don't even care about the paper moves in GOLD & SILVER.  There is nothing else to put ones "SURPLUS WEALTH".  If you are buying gold and silver and do not have a paid for home in the country... you are doing so at a risk.  If you are buying gold and silver without a 1-2 years worth of food... you are doing so at a risk.

If you have those two fundamental requirements... there is nothing left to buy but gold & silver.  Make sure it is in small denominations and not those 1,000 oz monsters.  You can't trade a 1,000 oz bar of silver.  You can trade 1-10 oz more readily.

You will have to hold on to your gold and silver even if there is a confiscation.  Even if I knew there was going to be a confiscation... they have to give you something for it.  However, only 25% of Americans turned in their gold in 1933. 

You just have to be smart and save your gold and silver for the up coming BLACK MARKET.  That is where its real value will be seen.

Mad5Hatter's picture

I got in

I got in, 2000

Imagine what my basis is. 

so .... er ... where am I going wrong, for the last 13 years ......

You doubt yourself, and so, you throw your poop at others.  sweet

gold is now off a whapping 2$ with 1550 solid.

Gold is making a very nice stand here at 1600, in the continuing graceful retreat.

Keep your eye on gold, just now, we are having a confirming 50$ UP move in the yellar base line, the habitual, on going, never ending, staggered retreat UP in price.

and that's a good thing.

koan's picture

Fascinating business this,

Fascinating business this, for instance - anyone else suspect that their own personal capitulation, in whatever form it takes (parting with the stack obviously not on the table here), is going to coincide almost exactly with the bottom of this cycle?

My capitulation comes in the form of believing I'm going to die of boredom before things turnaround...and/or be forced to convert every last soon-to-be-worthless scrap of fiat into the stack because when you never thought you'd see a price level again but lo and behold you do then it's time to buy some more if you can...

Jasper's picture

Ha Ha Ha Pinzer

The time for honoring  yourself will soon come to an end!

mymotherskeeper's picture

teotgke? i'm dense about

teotgke?

i'm dense about stuff like this...someone kindly tell me what that stands for?  (not sure i have it exactly right...but i'm close).  tia, lost

Chevy Thunder's picture

Paper Silver to Zero? Stop joking TMosley!

TMosley - Why would you be buying silver every week - regardless of price - if you thought the paper price would steadily reach zero?  This makes NO SENSE.  Why buy at $30, $40, $50 and claim it's going to "$60 next week" yet also tell everyone that it's going to zero?

Also, do you have any historical precendent for your "paper to zero" theory?  I miss you at ZeroHedge.  Why did you stop posting?  You used to post 35 times a day, and educate everyone.  Come back!  We miss you!

Silver_investor's picture

@SRSrocco

I agree that there is no other place to store one's "surplus wealth" than gold and silver. But, a paid for home in the country? I don't know about others who come here, but I'm certainly not in that position. Even if I were to liquidate most of my stack today, I wouldn't be able to pay cash for a place in the country. I'm guess I'm just poor.   

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