Friday, March 2, 2012
Silver retreats from Resistance but holding Support
Silver bulls could not take the metal through the resistance zone near $35.50 so the market has now retreated lower as longs take profits and some new shorts sell against that level. Support remains down near the $34 level and the spike low from Wednesday's wild takedown.
Thursday, March 1, 2012
S&P 500 keeps marching higher - shrugs off downside reversal
Yesterday the S&P 500 give a hint that it might be forming a sort of interim top as it shot to a brand new 52 week high only to move steadily lower throughout the rest of the session closing below the preivous day's low. That constitutes a downside reversal day on the price chart, normally a powerful bearish signal.
Once again, as has often been the case in this market, once the liquidity spigots are wide open, no downside followthrough was seen. Early in the overnight session there was some light selling but nothing heavy. Today, this market is once again working on testing yet another new 52 week high. The session is not over yet so we might still see some late selling efforts but no matter if that does show up, the perma bulls once again have prevailed in this one way market.
Note on the bond chart the market dropped to the bottom of the 4 month old trading range and is trying to bounce. My guess is that the crony pals of the Federal Reserve, the primary dealers, are buying furiously to try to prevent long term interest rates from getting away from their control.
Once again, as has often been the case in this market, once the liquidity spigots are wide open, no downside followthrough was seen. Early in the overnight session there was some light selling but nothing heavy. Today, this market is once again working on testing yet another new 52 week high. The session is not over yet so we might still see some late selling efforts but no matter if that does show up, the perma bulls once again have prevailed in this one way market.
(I wish to interject here that no matter how high the US stock market might run and how long the rally lasts - you will be fortunate if you ever hear the word, "OVERBOUGHT" pronounced by the talking heads, whom I might add are always SWIFT TO PRONOUNCE GOLD AND SILVER OVERBOUGHT. It seems that the stock market can never become overbought since that is equivalent to some sort of financial blasphemy). Nope, overbought is a one way term reserved for the gold and silver markets by these yahoos.
I am noting however that the bond market is showing some heavy selling pressure in today's session. Whether that too will last is anyone's guess, particularly with the Fed through its primary dealers fooling around in that market and working to artificially distort interest rates.
What the dishonest Fed is trying to do is convince the investment/trading community that the economy is in decent shape and is moving in the right direction ( here is their subliminal message - GO AND BUY STOCKS; GO AND BUY STOCKS; GO AND BUY STOCKS), so that they can get their rising stock market and pull up consumer confidence, but is not in good enough shape to have long term interest rates begin a steady climb. That would be a gigantic NO-NO. "OH, it is good but not that good". Subliminal message repeats - GO AND BUY STOCKS BUT DO NOT SHORT THOSE BONDS.
If this bond market breaks down, it would signify a change in psychology among the interest rate community and illustrate the need for a new subliminal message crew from the Federal Reserve.
Gold holds at support near $1700
Gold thus far is holding quite well on the technical price charts as the $100 break in price has apparently revived the huge physical market buyers who are seeing value in the metal near the $1700 level.
A closing push through $1725 would be constructive and would set the market up for another test of the resistance barrier near the $1750 level, which held the market in check prior to last week's breakout.
Considering the spanking that this market received yesterday, it is showing very good resilience.
A closing push through $1725 would be constructive and would set the market up for another test of the resistance barrier near the $1750 level, which held the market in check prior to last week's breakout.
Considering the spanking that this market received yesterday, it is showing very good resilience.
Silver back to knocking on the door of chart resistance again
This is a rather remarkable price chart and what can only be called remarkable price action on display. As you all know by now, silver was absolutely obliterated yesterday resulting in the total erasure of the huge breakout rally from Tuesday. Such occurrences are very uncommon from a purely technical analysis perspective. More often than not, such a breakout will see some initial profit taking followed by another burst of buying as momentum based buying kicks into high gear.
To witness a market completely undo such a breakout on massive volume and then to experience only minor additional downside pressure is also something that one rarely sees. We are getting a bird's eye view of something akin to a Supernova in the sense of its rarity.
Silver bounced right off the former resistance zone near $34 noted on the chart and has now returned directly to the same exact resistance barrier that held it in check prior to this Tuesday's breakout ($35.50).
I have to say that if the bulls in this market can blast through this $35.50 - $35.70 level once again and prevent an intraday dip back below this level, those same shorts that rammed it down yesterday once they capped it at the highs, are going to be shell-shocked and that is putting it mildly. Once again you can see how critical this former resistance barrier is on the charts.
To witness a market completely undo such a breakout on massive volume and then to experience only minor additional downside pressure is also something that one rarely sees. We are getting a bird's eye view of something akin to a Supernova in the sense of its rarity.
Silver bounced right off the former resistance zone near $34 noted on the chart and has now returned directly to the same exact resistance barrier that held it in check prior to this Tuesday's breakout ($35.50).
I have to say that if the bulls in this market can blast through this $35.50 - $35.70 level once again and prevent an intraday dip back below this level, those same shorts that rammed it down yesterday once they capped it at the highs, are going to be shell-shocked and that is putting it mildly. Once again you can see how critical this former resistance barrier is on the charts.
Wednesday, February 29, 2012
Silver Chart Analysis
Following is an 8 hour chart of the front month silver contract (that will be changing to May from March) detailing the technical action.
All of the readers know by now that the commodity complex was being targetted by the Fed in today's comments coming from Chairman Bernanke. Prior to his testimony in front of the House Committee, silver was trading higher recovering from some mild profit taking late in yesterday's session and into early Asian trading in the evening. This is normal in a market especially after having put in a strong upside breakout on heavy volume from a recent consolidation pattern. Dip buyers came back in taking the metal towards the $38 level before Bernanke levelled the boom on the complex.
Note the first down bar in black coming after the peak in price which showed the metal BOUNCED RIGHT OFF OF THE BREAKOUT AREA after touching it. That is excellent technical price action and confirmed the former resistance level was functioning as support.
However, once Bernanke's comments began circulating a wave of selling engulfed the metals with gold, copper, platinum, silver and palladium all getting hit extremely hard by algorithm selling. That took the silver price through the resistance level now turned support as large groups of downside stops were hit in a cascading fashion.
I do wish to point out however that the market bounced exactly at the zone where it should have, which is near the $34 level. Look carefully at this chart and you can see how significant this zone is from a technical analysis perspective for it is the region that had been serving as strong overhead resistance going back well over a month and had prevented silver from moving higher. Once price had pushed through $34, it began accelerating to the upside.
Now it has come back down to this level and seems to be attracting the same buyers who were busy accumulating it prior to the march higher.
I suspect that the reason the buyers are showing up here is because NOTHING HAS CHANGED IN REGARDS TO THE FED's EASY MONEY POLICY. Sure, based on what Easy Money Ben said today, we are not going to get a forthcoming QE3 program anytime soon but back when the Fed signalled an ultra low interest rate policy continuing until late 2014, did they tell the market that it was going to get a QE then? NO, it did not. In spite of that the entire commodity complex, but especially the metals, began marching higher based on that expected low interest rate environment being sustained for some time.
The facts are that the Fed is still on hold for an ultra low near-zero interest rate policy for the foreseeable future unless they see something in the economic data that leads them to conclude that this sort of low interest rate environment is no longer necessary. In my view that would necessitate some really astonishing payrolls numbers coming our way for starters. You would also have to see a successful resolution to the woes afflicting those nations in the Euro zone whose sovereign debt issues still linger unresolved in the background.
For now we will watch and see how this market acts over the next couple of sessions. I would not be concerned about it at all unless it were to punch solidly through the bottom of the former trading range down near the $33 level and fail to quickly recover.
All of the readers know by now that the commodity complex was being targetted by the Fed in today's comments coming from Chairman Bernanke. Prior to his testimony in front of the House Committee, silver was trading higher recovering from some mild profit taking late in yesterday's session and into early Asian trading in the evening. This is normal in a market especially after having put in a strong upside breakout on heavy volume from a recent consolidation pattern. Dip buyers came back in taking the metal towards the $38 level before Bernanke levelled the boom on the complex.
Note the first down bar in black coming after the peak in price which showed the metal BOUNCED RIGHT OFF OF THE BREAKOUT AREA after touching it. That is excellent technical price action and confirmed the former resistance level was functioning as support.
However, once Bernanke's comments began circulating a wave of selling engulfed the metals with gold, copper, platinum, silver and palladium all getting hit extremely hard by algorithm selling. That took the silver price through the resistance level now turned support as large groups of downside stops were hit in a cascading fashion.
I do wish to point out however that the market bounced exactly at the zone where it should have, which is near the $34 level. Look carefully at this chart and you can see how significant this zone is from a technical analysis perspective for it is the region that had been serving as strong overhead resistance going back well over a month and had prevented silver from moving higher. Once price had pushed through $34, it began accelerating to the upside.
Now it has come back down to this level and seems to be attracting the same buyers who were busy accumulating it prior to the march higher.
I suspect that the reason the buyers are showing up here is because NOTHING HAS CHANGED IN REGARDS TO THE FED's EASY MONEY POLICY. Sure, based on what Easy Money Ben said today, we are not going to get a forthcoming QE3 program anytime soon but back when the Fed signalled an ultra low interest rate policy continuing until late 2014, did they tell the market that it was going to get a QE then? NO, it did not. In spite of that the entire commodity complex, but especially the metals, began marching higher based on that expected low interest rate environment being sustained for some time.
The facts are that the Fed is still on hold for an ultra low near-zero interest rate policy for the foreseeable future unless they see something in the economic data that leads them to conclude that this sort of low interest rate environment is no longer necessary. In my view that would necessitate some really astonishing payrolls numbers coming our way for starters. You would also have to see a successful resolution to the woes afflicting those nations in the Euro zone whose sovereign debt issues still linger unresolved in the background.
For now we will watch and see how this market acts over the next couple of sessions. I would not be concerned about it at all unless it were to punch solidly through the bottom of the former trading range down near the $33 level and fail to quickly recover.
Bernanke tries talking down Commodities
Today was Fed Chairman Bernanke's chance to testisfy before the Congress' Financial Services Committee. Here is a quick synopsis of his comments as I see them.
"The economy is getting better based on what we can see of the employment numbers but it is not growing at a fast enough clip to justify any immediate change in our accomodative monetary policy. The uptick in hiring has been helped by this policy and any change to it at the present time is not warranted. Real Estate is still a concern. Us fiscal condition is dire and faces a serious challenge at the end of this year. Inflation is not a concern although temporary rises in energy prices bear monitoring".
There you basically have it.
Based on this testimony, gold and silver were murdered. The supposed reason? - We are told that traders were expecting QE3 to be imminent and were disappointed because the usually dovish Bernanke did not sound quite as dovish as before. Thus the metals were hammered mercilessly lower.
Excuse me - but as a trader who watches these markets each and every day for more hours than I would prefer anymore, I have not seen any analyst explain the reason for the heretofore rally in the metals as traders EXPECTING AN IMMINENT QE3 program to launch.
The reason for the rally has been expectations by the market that Central Banks would keep the liquidity spighots open for the foreseeable future (near zero interest rate policy coupled with QE out of Europe and the UK) and thus create an environment in which there was little opportunity cost for buying the metals. This has been generating RISK TRADES in which traders/investors buy both stocks and commodities and generally sell off the Dollar, which was particularly pronounced after a rush back into the Euro once traders were convinced that the immediate fallout from the Greece debacle was past.
Comments this morning trying to explain the sell off in gold mentioned the failure of the metal to make it through the $1800 level and downside stops as the culprit but ironically they are deathly quiet in regards to silver, which only yesterday had staged a MASSIVE UPSIDE BREAKOUT on strong volume out of a congestion zone. Yet today we saw a nearly 8% wipe out in silver which completey erased yesterday's breakout and then some.
My thinking AT THE MOMENT is that Bernanke and company were watching the commodity complex begin to accelerate higher once again as a result of their free money policy and began getting extremely nervous particularly as energy prices were rocketing higher. This is an election year and one thing that the boss cannot stand for is having to deal with that pesky issue of unhappy drivers bitching and complaining about the outrageous cost of filling their gas tanks especially since he and his crew are doing as much as they can to shut down drilling on public lands and offshore.
If one basically states that the economy is doing better - not out of the woods yet but better - and all the hedgies are leveraged to the gills because the FED GAVE THEM THE GREEN LIGHT TO DO EXACTLY THAT when it first announced that it would keep this near zero interest rate policy out to the end of 2014, then it is a simple matter of throwing a bit of uncertainty in that regards to generate a bout of selling. Toss in the same permabears as always capping at the highs of the day and the algorithms did the rest of the work as the stops were picked off.
In the meantime today's wild move in silver was a daytrader's/scalper's heaven. As said before, there are no worse traders on the planet than the hedge funds. Those guys could not trade their way out of a wet paper bag if their lives depended upon it.
In watching both of these metals, it does seem that we are now getting a bit of stabilizing in here around midday.
Gold and silver shares as usual are going nowhere. They made it just to the bottom of the critical resistance zone that I noted on the chart yesterday at the gap region 555-560 before going Kerplunk.
Interestingly enough, the long bond is down a full point right now as I write this. I am keeping an extremely close eye on this market. As stated yesterday, I refuse to believe ANY talk about an improving economy as long as the bond market does not start a solid downtrending move.
"The economy is getting better based on what we can see of the employment numbers but it is not growing at a fast enough clip to justify any immediate change in our accomodative monetary policy. The uptick in hiring has been helped by this policy and any change to it at the present time is not warranted. Real Estate is still a concern. Us fiscal condition is dire and faces a serious challenge at the end of this year. Inflation is not a concern although temporary rises in energy prices bear monitoring".
There you basically have it.
Based on this testimony, gold and silver were murdered. The supposed reason? - We are told that traders were expecting QE3 to be imminent and were disappointed because the usually dovish Bernanke did not sound quite as dovish as before. Thus the metals were hammered mercilessly lower.
Excuse me - but as a trader who watches these markets each and every day for more hours than I would prefer anymore, I have not seen any analyst explain the reason for the heretofore rally in the metals as traders EXPECTING AN IMMINENT QE3 program to launch.
The reason for the rally has been expectations by the market that Central Banks would keep the liquidity spighots open for the foreseeable future (near zero interest rate policy coupled with QE out of Europe and the UK) and thus create an environment in which there was little opportunity cost for buying the metals. This has been generating RISK TRADES in which traders/investors buy both stocks and commodities and generally sell off the Dollar, which was particularly pronounced after a rush back into the Euro once traders were convinced that the immediate fallout from the Greece debacle was past.
Comments this morning trying to explain the sell off in gold mentioned the failure of the metal to make it through the $1800 level and downside stops as the culprit but ironically they are deathly quiet in regards to silver, which only yesterday had staged a MASSIVE UPSIDE BREAKOUT on strong volume out of a congestion zone. Yet today we saw a nearly 8% wipe out in silver which completey erased yesterday's breakout and then some.
My thinking AT THE MOMENT is that Bernanke and company were watching the commodity complex begin to accelerate higher once again as a result of their free money policy and began getting extremely nervous particularly as energy prices were rocketing higher. This is an election year and one thing that the boss cannot stand for is having to deal with that pesky issue of unhappy drivers bitching and complaining about the outrageous cost of filling their gas tanks especially since he and his crew are doing as much as they can to shut down drilling on public lands and offshore.
If one basically states that the economy is doing better - not out of the woods yet but better - and all the hedgies are leveraged to the gills because the FED GAVE THEM THE GREEN LIGHT TO DO EXACTLY THAT when it first announced that it would keep this near zero interest rate policy out to the end of 2014, then it is a simple matter of throwing a bit of uncertainty in that regards to generate a bout of selling. Toss in the same permabears as always capping at the highs of the day and the algorithms did the rest of the work as the stops were picked off.
In the meantime today's wild move in silver was a daytrader's/scalper's heaven. As said before, there are no worse traders on the planet than the hedge funds. Those guys could not trade their way out of a wet paper bag if their lives depended upon it.
In watching both of these metals, it does seem that we are now getting a bit of stabilizing in here around midday.
Gold and silver shares as usual are going nowhere. They made it just to the bottom of the critical resistance zone that I noted on the chart yesterday at the gap region 555-560 before going Kerplunk.
Interestingly enough, the long bond is down a full point right now as I write this. I am keeping an extremely close eye on this market. As stated yesterday, I refuse to believe ANY talk about an improving economy as long as the bond market does not start a solid downtrending move.
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