http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/5/20_Incredibly_Important_Developments_In_Gold_%26_Silver_Markets.html
Dan Norcini has been stunningly accurate in his predictions of the movement in the gold and silver markets. Now the acclaimed trader discusses these incredibly important developments in both of these markets: “Gold appears to have successfully retested its former spike low down in that important support level between $1320 - $1340 and held. What is important from a technical analysis perspective is that the volume completely dried up as price worked its way back into that critical support zone noted on the 4 hour price chart.
Bears were hoping to be able to recruit a wave of fresh converts to their side and give them the firepower to pressure the market down through this level, thereby touching off another wave of sell stops and setting up a fresh new leg lower in price. Obviously, there appears to have not been a large contingent of traders interested in selling gold aggressively down at these levels right now. That gave some would-be longs the excuse they were looking for to re-enter the market plus stirred some mild, but not aggressive short covering on the part of the bears. However that all changed rather abruptly!
As you can see on the following two minute chart below, after the initial fireworks that occurred in early Asian trading last evening, volume died off in the Comex gold futures and continued to remain lackluster until around 11:00 AM CDT. Out of nowhere, the market surged $32 higher in the matter of a mere six minutes on huge volume. Notice that volume leaped to over 10,000 contracts trading hands in one 2 minute interval. That is short covering and some serious short covering at that.
There does not appear to have been any particular catalyst for the move higher other than the fact that the US Dollar was weaker. However, I noticed a couple of things that merit some mention. The first of these is the performance of crude oil. It was lower early in the session but as the stock market continued its one way trip into the outer regions of space, crude reversed those losses and moved higher. At one point is was up over 1% on the day reaching a peak of $97.11 before drifting a bit lower.
Also, the bond market, which was also higher early in the session, lost those gains and began moving lower with interest rates moving up correspondingly. I am very hesitant to say this, but maybe, just maybe, we are watching some incipient signs of a shift towards inflation on the part of some larger traders. Honorable mention must go to copper which also refuses to break down. Strength in copper is generally beneficial towards silver....
“I, along with some others, have been bewailing the fact that Central Banks around the globe have been able to embark on a money creation scheme which is unprecedented in economic history without causing the least bit of inflationary fallout. When you consider that trillions have been conjured into existence through bond buying programs, without the least bit of consequences, you are tempted to say that the laws of supply and demand have been suspended and monetary science has been turned on its heels.
Could it be that the volatility in the Japanese government bond markets, along with the very slow, but methodically move upwards in interest rates here in the US are some early warning signals that some investors/large players are beginning to rethink their “the best of all worlds” scenario? In other words, we have seen stocks surging one way, interest rates comatose and commodity prices going the other way, namely lower, all based on the idea that the inflation genie is well contained within its magic bottle. If this is a subtle shift in that thinking, and it is a bit early to say with any dogmatism, then this would explain the strong buying interest in both gold and silver and today’s lower levels.
The price action in silver is about as volatile as anything I have ever witnessed in that pit! After collapsing 9%+ last evening in early Asian trade, a collapse into a downside air pocket that required CME Group to halt silver trading four different times, silver reversed course as gold moved higher. This time around, it was not bulls getting forced out; it was bears especially those who shorted below $21. Their losses must be enormous right now. Look at the price action. You can see the panic among the shorts by the surge in volume as price moved through the overnight high in price.
Keep in mind that in both gold and silver, hedge funds have been building larger and larger short positions. We are now witnessing some of those shorts being lifted as the excessive bearishness among that contingent of traders has caught some of them napping and unprepared for the abrupt turnaround in price.
I should also note here, that we mentioned the significance of the $20 level in silver from a technical analysis standpoint. The level had served to cap rallies back in 2009 and yet again during the first half of 2010. The reverse polarity principle tells us that former overhead resistance “reverses polarity” and then serves to act as support on the way back down. That is precisely what it did today. When one considers that silver had fallen from $50 all the way to $20, the metal begins to look attractive to would-be buyers.
It appears that the brunt of the selling has run its course, for right now, in both gold and silver. This is being validated by the strong upside showing in the HUI here at midday. It is currently up over 4.5% as this commentary is being written. We have a tradable bottom in place here in the paper gold and silver markets. Now we need to see the physical markets perform. I think after price action of this nature, particularly in silver, many traders are going to take time off for a nice cold beer! I know I sure as hell am!”
No comments:
Post a Comment