What Happens To Gold And Silver Next? Look Out Below?

If this year's pattern holds silver is due for another big drop any day now

I am running behind here but will have an update later in the day.

To me, I see the price action as continuing to run lower and now gold has turned away from the gap it filled and wants to go away from it. Same with silver. Going forward it was critical that both these filled and held these gaps.

They havent and are now embarking on a slow leak down.

Thanks for the updates, Yup! Just learning how this works and sorry if this question is off-base... but could you elaborate on what the 52 low means? Is that 52 days? 52 weeks? How does one determine the 52 low? Thanks in advance!

good morning folks!

Right quick I wanted to bring everyones attention to whats happening in gold. Referene GLD as our proxies- You can see after two days of walking away from the gap from 6/20 and going to the lower end, gold is once again entering the 6/20 gap.

Watch this to see if it can hang in there or ends up pulling away.

Lets look at silver, using our proxy SLV. First, remember how I always say "price has memory"? I always make mention that price repeats itself, always, over and over again?

Please note that SLV is also entered the 6/20 gap. but look right where it has stopped... 19.47 right now as I type this.... which is the top of the gap from 6/20. Once again, pay attention to see if SLV can go into the gap.

more later

Hi yup! I have followed and really enjoyed your posts in this thread over the past several months. I don't hold (never have held) any position in gold or silver, apart from my coin collection. On principle, I prefer equities, but conversely I never mustered the cajones to short metals.

If you have time, please help me understand something about TA. Basically, I'm not much of a believer in TA. While I acknowledge your adage that "price has memory", you must admit that a big driver of markets -- especially commodities -- is news. For example, there's news these days such as changes to Indian gold tarrifs, Fed statements on tapering, etc. The key point is: the timing of these news items has nothing to do with chart history. How can one be confident that TA is making the correct call when tomorrow's news is unknown?
Put another way, in a battle between a weak chart (say SLV) and bullish news (recovering economy and industrial demand), who wins?

In the absence of any big news, I guess I agree that TA is probably valuable, but only to experts like yourself. That's why I enjoy your thread here. But to my untrained eye, locating a given pattern in a chart is as easy as connecting stars to make whatever constellation fits my fancy. Disclaimer: I realize that you seldom talk about fancy chart patterns, but you seem to have a good sense of what it means for a chart to look weak or strong. I completely lack this sense, and even when I have such a sense, tomorrow's news often comes along and crushes my backward-looking analysis.

I wish I had something amazing to add but I don't. All I can say is this has been a great read. I will be looking forward to following the discussion in the following weeks and months.
Thank you for some great insight.
Liverpool

Bib- what a great question, a tough one to answer because there are so many scenarios when it comes to application of TA but i'll do my best.

Thanks for the comments! Glad you are enjoying the posts. Let me breakdown how I approach items in the financial media as they are discussed and released in a trading day.

First I will address how I handle news as a trader and if you ask any good trader doing this for a living he will tell you the EXACT same thing. A little on my view on TA first-

To me, I think TA has its use but its never going to be spot on every single time because a lot of TA and charts etc only tell us the past. Many times a pattern will play out, but it lacks CONFIRMATION to validate it when we see it develop.

For that reason I don't tend to really use a ton of TA. Most of what I have stuck to over the years has been really price action and volume, those are my key metrics.... and sure I might refer to a chart to make a trade if an asset is breaking out of a price range but that's about it. Price and price action NEVER lies. It is always truth.

To me, it is fundamentals that are always important but those are expressed by the price action first and they tell me whether they are strong or weak for a certain asset.

Now how do I deal with news events in a trading day?

I would beg to differ and say markets dont move on news, none of them. You mention tapering. Until NOW its been talked and headlines about the Fed wanting to taper. But for at least 6 months BEFORE news hit of tapering happening, it was being telegraphed by the market. How?

Well one big loser when the tapering was going to start was gold and silver. Another big loser would be the long bond ....and low and behold, yields have been rising WAY BEFORE news hit about tapering. Now after many months of the market pricing in yields as they rose, now all the talking heads talk about how rates are up.

That's one key thing about financial markets. By the time its news and makes headlines, its old and the vast majority of an assets move has already happened. Another example is the housing market improving and prices rising. That market has been saying that for over a good year now and of course all we hear about is how great the housing market is.

To me, I ignore news and consider it to be noise. Why? Because whats important is the REACTION to news, not what is said. That is why in stocks, people say "I don't understand, they had good earnings in a stock, they did well with sales, everything looks good" but the stock doesn't react in accordance with news regarding it.

So again, two important things to remember - 1. Assets such as stocks, bonds, currencies and commodities,, by the time its news about their moves, its already been in progress for a while and 2. whats more important is the REACTION of an asset to news, NOT what is said.

Now, your question-
How can one be confident that TA is making the correct call when tomorrow's news is unknown?

You make mention of silver, where the price action is weak but we do see a global economy that is not dying but rather doing well. That's super easy, prices for silver are near their yearly lows. As I had mentioned in a previous post, silver prices are near yearly lows for a good reason. Any asset near a yearly low is weak. Why?

It has no support from buyers such as funds. Therefore, without strong buyers, silver is not going anywhere. It will either languish and go no where or continue to go lower.

We can then, with all certainty, say that gold and silver remain stuck in a downtrend.

There are other metrics that traders use- Moving averages is a godo example. Certain moving averages tell us that after a stock or commodity has fallen, it is now ready to be bought. As an example, many times the 50 Day moving average is watched and tada! a stock bounces off that level.

But again, what is accepted as universal truth, is the price action. How does an asset act on a given day in relation to market movements. Is it up when other things are down? Is it down when other things are up?

To be sure, TA is not perfect. It only tells us the past. One big factor in validating what we see in TA is confirmation. Without confirmation, the TA that is used is negated.

I mean I could go on and on and on about how price action and TA does many times signal a major move of importance BEFORE its even reported or happens. Each case and scenario is diffrent and many times the trigger does take mulitpile occurances before its validated.

So, to a degree, TA is a very fine science. I would agree with you tho, like anything, its not 100% right.

Let me give you another example of how using price action, even tho it did have confirmation in a trade, still didnt work out.

I commonly sell short any asset at a 52 low provided it meets a simple things. In particular, there was a company that was having issues with growth and sales. I waited and waited and waited for weeks and months until it came to its 52 low yearly low. It finally came hit that trigger, the 52 low. I sold it short. It went a bit lower at the end of the day. The morning, within 15 mins of the opening bell, the stock shot up, hitting my stop and taking me out of the trade.

The stock continued higher, despite being at a 52 low and being weak. At that point on the week it was up maybe 3% if I remember. Now check this out- the stock continued to slowly grind up. Then it chopped and went lower a tad but continued to move higher. Mind you there was no news at all. Finally roughly about 2 and half weeks later from where I had been stopped out, a news event happened and it was disclosed that a hedge fund has been buying the stock and the stock shot up 20+ points in a day.


So here are my two points on that- the stock had already been moving higher all that time, WITHOUT any news. By the time it was reported, the move had already taken place. Anyone who was buying up those shares had already missed a much larger move.

Furthermore, we can also see that despite I, having a proper set back, having most probablities on my side, I had no clue some hedge fund was snatching the shares, although I did know SOMEONE was indeed buying those shares at a large rate for the reaction I experinced when I sold short.

There are many examples like that everyday in the market. It takes being a student and discipline to spot them, but they do repeat over and over and over if you know what to look for.

Whew, that was long winded. I mean I could go on and on on various things that happen with TA that probably would fill reams and reams of paper.

I sure hope I helped you to understand how TA works and under what circumstances. If you have further questions let me know.

yup: Wow... thank you for this very informative response. I didn't find it long-winded at all. This is all valuable insight, so I'm lucky to get so much of it!

It makes total sense what you're saying about tomorrow's news hitting price before it hits the media. This even matches up with my own newbie observations. I suppose I knew this in some fashion, but to have you confirm this is very reassuring.

And I am keenly aware of how memory exists at key price levels, despite my essential believe in an efficient market. The way I explain it to myself is that investors have an irrational tendency to want to save face on a trade. So something like silver will have a hard time recovering any time soon. Weak longs will rush for the exits as soon as it shows any life.

Personally, I am close to shorting SLV.