"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Tuesday, March 22, 2011

4 Hour Gold Chart - Update 5:00 PM CDT

Gold is currently is in a consolidation phase with a higher bias. The broad range that is containing it is $1435 on the topside and $1390 on the bottom.
It has moved from the bottom of the range to the top and is now at a point where it either needs to clear $1435 and press on towards $1445 or it will set back towards $1420. While it has pushed through what I consider to be an important technical resistance level, namely $1430, it cannot seem to hold its gain above this level for any length of time. This suggests that the bulls are hesitating to take on the selling cap at $1430 thrown in place by the bullion banks.

If you note, both the Percent R and the Stochastic Indicator, trading range indicators, are now either at their sell zones or are moving down and away from that zone. Bulls need to quickly push this market higher or they run the risk that some of their more fickle comrades will liquidate longs and wait for a lower level to re-enter on the long side again. A fast, strong push through $1435 will negate the negative signals from Percent R and Stochastics.

Should price move down away from today's resistance zone and find buying near $1420, we could see the range in gold tighten considerably.

Silver update - 4:30 PM CDT

Silver kept to its recent pattern of moving higher after the close of pit session trading adding another 10 -15 cents in the after hours trading but was unable to breach $36.50, the last line of defense being erected by the shorts to prevent a surge above $37.

Volume to the upside has been pretty good but not strong enough to dislodge the shorts from behind this castle.

Upside momentum is waning on this time frame chart as it is reflecting the inability of the bulls to breach $36.50. The Percent R, which is an indicator that is useful to gauge oversold and overbought zones for markets which are range trading or consolidating, which is what silver is currently doing, is now at the sell zone. That puts the burden upon the bulls to press through the sell side barrier and kick the market into a trending phase higher or some of the weaker longs will decide to book some profits and wait for another pullback before coming back in again.

If that should occur, we will want to see how the market handles any setback towards $36. If it can hold that level, it will embolden the longs to move back in very quickly and force some of the weaker shorts back out. If that level fails, there is support on the downside first near $35.50 and then near $35.

Gold and Nikkei both in holding pattern

Silver Deliveries - none reported today

There were no reported deliveries for silver scheduled tomorrow according to exchange data released this morning. There are still 875 contracts open in the March contract, a drop of 23 compared to yesterday. We are running out of days in the month of March so it will be interesting to see how this plays out.

The March contract still remains at a very slight discount to the active May (about half a cent) with the May at a 1.5 cent discount to the July. The structure of the front three silver contracts is one of a slight contango. It does not appear that a squeeze of the March is going to occur. Silver seems to be doing fine without it anyway.

The longer silver remains above the $36 mark, the better the chance of it breaking into another leg higher. It has one line that I can see standing between it and just that, namely $36.50.

The HUI weakness, (thanks to the hedge funds and their spread trades), is weighing  a bit on gold and taking some of the pressure off of the silver bears at the Comex. Any move higher by the HUI above 550 will embolden the bulls to try to take out $36.50.

Silver has been in a pattern of late which sees it GAIN strength after the close of pit session trading. Let's see if that pattern holds true today.

4 Hour Gold Chart

Silver attempting to push away from $36

The session is still young but the silver bulls finally appeared to have beaten back the defenders at $36 on good volume. Bears are attempting to stymie the move higher by digging in near $36.50. When the market dipped earlier and fell below $36, the selling dried up and the shorts were forced to cover.
That has emboldened the longs who are pushing and attempting to now take out the last refuge of the shorts here. A strong push through $36.50 sets the market up for a run towards $40 with initial resistance standing near $37.20 - $37.30.

If the market is going to break out it needs to hold $36 on any possible setback in price now that it has cleared that level.