Gold Chart comments

The Daily Chart is pretty clear as to the larger resistance and support levels. Those remain the same as they had been previous to the strong upside moves on Monday and Tuesday of this week. The sell off was contained on the downside by the same level support that has held for over a month now. Value buyers continue to surface near and just below the $1700 level. Reports of very strong increases in physical offtake are surfacing out of Asia on such dips in price.

This buying is not of the nature that it chases prices higher; that requires the momentum crowd (hedge funds in particular) many of which were run out of their long positions on Wednesday's rout. For that crowd to come back in, gold will need a return TO AND THROUGH the $1750 level.

Last week I posted a weekly chart detailing the BULLISH FLAG OR PENNANT FORMATION which had developed. I also gave a price projection based on that pattern noting that this pennant would remain in force unless we got a move in the price that TOOK US BELOW THE BOTTOM OF THE FLAG. That did occur with this week's outside reversal pattern so the price projection from that flag is no longer immediately in effect.

What we have now on the weekly chart is a powerful upside formation clashing with a powerful downside formation. The fact that gold did spike through the bottom of that flag only to recover above $1700 is encouraging. It looks to me like we have a setup that is more conducive to a consolidation type trade (sideways movement) rather than the setup for a sustained downdraft. The longer gold holds above $1680-$1690, the better the odds become of this becoming a new base from which the next leg higher will commence.

Note that the moving averages I like to use to get a sense of the prevailing trend (10, 20, 40 and 50 week) are all moving higher indicating that the weekly trend still remains up.

Price did come down and touch both the 10 week and the 20 week moving averages and bounced from there. The 50 week moving average has seen only one close below it in the time frame shown but immediately recovered the following week. The 40 week moving average (dotted line) has also served as a support level on several occasions. It was not reached in this week's sell off. The only reason I would become the least bit concerned about a longer correction being in store for gold were it to get TWO CONSECUTIVE WEEKLY CLOSES BELOW THE 50 WEEK MOVING AVERAGE.

In short, the longer term trend is up.

HAPPY TEXAS INDEPENDENCE DAY

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.

Unleaded Gasoline continues to charge higher

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.

(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.

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.

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.

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.

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.