Michael Noonan – With the holiday weekend, the focus will be on charts only for, ultimately, they reveal the truest story of what is developing in any market. There is one more trading day in May, next Tuesday, but we are using ending data from Friday, the 27th, for the monthly charts.
The rally in both gold and silver has been a significant change in market behavior, and these changes are telling the world that the decline from 2011 may have ended. We note the ending action at 1, on the monthly chart. Besides the obvious support and resistance areas, what stands out are the two high volume months when price closed lower each time, once in March, and now for May.
Volume is the energy behind every move. Without it, no trend can be sustained. Always remember, exceptionally large volume is when smart money movers are in action, either covering old or taking new positions, in the market. It is during these high volume events that one can see the “footprints” left behind by smart money movers. We define “smart money” as those who move and influence market direction, to keep it simple.
To put bars 2 and 3 into context, when bars overlap, especially moving sideways, it is the struggle/battle between buyers and sellers for control. The volume for bar 2 was the highest since the 2011 all time high for gold. It was interesting when there was no further downside movement in April. When price stops on a dime, as it were, under heavy selling pressure, it can only mean one thing. The apparent selling pressure was overwhelmed by opposing buyers in numbers great enough to halt any further decline. That means what looks like a selling month, for March, was actually net buying.
What is interesting about the lack of downside follow-through, after March, was that the low at the end of the month was where buyers took total control, and that specific low should now become important support on any subsequent retest because it was at the point where sellers could not move the market even a penny lower.
In the process of ending, May’s volume was even higher, so the battle between buyers and sellers was at an even greater pitch than in March. Yet, when one views that action, May was nothing more than another overlapping bar, and the exceptionally high selling effort did nothing to carry price lower, at least up to that point.
We all remember the surprise selling minutes when billions of dollars worth of gold were dumped on the market with impunity and no care for market impact, were the “seller” so concerned. There are fewer of those kinds of market dumping and their impact has lessened, considerably. When we talk about changes in market behavior, March and May exemplify the significance of that change. Gold is not selling off to lower swing lows, as occurred in the past. In the present rally/decline, the decline portion has not even approached the half-way retracement level, an indication of relative underlying market strength.
We see March and May as “messages from the market,” advertising its intent. Some little skirmishes designed to take one’s attention off that intent may yet follow, and that is when weak-handed players get lost in the shuffle.
This is the developing “story” as we see it, and it pays to lock onto further developments in order to take advantage of potential new upside trends that leads to greater probability for being profitable by harmonizing with the trend.
Because of the high volume that stopped at the March low, discussed above, that stopping area should now become support. Chart comments explain it further. We will instead add to the observation of volume increasing as price declined. Continue reading . . .
Michael Noonan is a Contributing Writer for Shift Frequency
SF Source Edgetrader Plus May 2016
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