SD Friday Wrap: A difficult week in the metals has led to a bullish set-up. If the cartel drops gold and silver prices too low now, the cartel could get stuck…
Some have said the volume in silver is not supportive of further price rises, but volume picked up noticeably this week:
And when compared to the beginning of the year, it has been a slow move creep higher with silver up from $16 to $17.
Over the last two weeks now, we have seen that silver has done something it has not done all year – consolidation:
The range is between $16.90 and $17.30. The consolidation is healthy, because it shows that the white metal is forming a base for the next move higher.
Although there is an ugly sign on the daily that silver has to deal with first:
Silver desperately needs a close above $17.50. With silver putting in that golden cross a few weeks back, traders understand that price is going up. However, $17.50 was defended as a stout line in the sand once it was about to be breached on Monday. The cartel, however, may have bit off more than they can chew, because once silver closes above $17.50, that daily is going to look very bullish. Yet if somehow they succeed in crushing price below $16.60, poor sentiment will be putting it lightly.
That is why the consolidation has been so important over the last two weeks. There is now stout support at $16.90. The cartel truly is stuck and the longer they let price consolidate here, the stronger the foundation.
The GSR is showing strength in silver:
Two attempts to cross the fifty and then the denial.
That is what we watched unfold on the gold-to-silver ratio this week. After falling decidedly on Monday as silver nearly broke $17.50, the GSR moved back up to it’s 50-day moving average. However, today, with gold stalling and silver coming off of a big move higher yesterday, the ratio fell back down.
This is what we want to see with the ratio. As Rick Rule told Silver Doctors the other day, the silver market is much more accessible to the average investor, so just a small percentage increase in interested investors, coupled with such a tiny market to begin with, and the silver price can really get going.
Over the long term, gold is shaping up nicely in terms of monthly price action:
We can see now why the cartel freaked out so much on September 8th when gold hit $1362 intra-day. When gold closes above $1360 on a monthly basis, that long term chart will show the cartel is no longer able to contain the downside pressure. Those candles are drawn out over one month. They are very slow and long to develop. And to think we were right there in early September.
While the long-term prospects are certainly all bull and no bear, there are, however, immediate concerns:
That candle is bearish and downright nasty. Traders understand it means that price is going lower, and if the price action holds to the chart pattern, there are two points to on the chart to consider. First, $1270 would not be a good sign for short-term bullishness, but $1252.80 would be downright awful. It could take us some time to recover from a drop below that price level.
But in keeping perspective, we’ll see how next week play out. If, on the other hand, we go down somewhat as indicated by that last candle, but we rally and close above $1310, that would be just as awesome on the bullish side as the previously mentioned downside sentiment-killing move would be.
And by the looks of it, the worse may be over when looking at the two other precious metals:
Looking at platinum, it seems that there is a lower-low that has formed on the daily. Anybody looking to spend some hard-earned fiat may want to consider platinum due to the over-soldness of the latest move. Then again, any precious metal right now reflects something that is feeling so much un-love, that they all have the potential for dramatic returns one the march higher continues.
And that’s talking about just normal rises due to fundamental and technical analysis. Add in some sort of monetary, currency, or other world-wide fiat currency event, and all bets are off.
To get a perspective on the big picture of what such an event would mean, check out the article that looks at the significance of a monetary reset, either done in house with the ‘two things EVERYBODY missed” article, or the awesome Willem Middelkoop interview.
Crude looks to be catching up to copper of late:
Said differently, the price action in crude oil looks to be confirming the price action in copper. Once both of these highly used commodities start rising in earnest, the only natural direction for the precious metals is higher. It is hard to mine for gold in silver barely at cost or for under cost, and if the price of diesel rises, it will be even harder to do so.
Though the dollar could continue to keep a lid on the metals for some time:
If there is a slow inverse ‘head and shoulders’ patter forming, albeit slowly, on the DXY daily chart, the dollar index could be headed for 96. Head and shoulders patterns are generally not that drawn out on the daily time-frame, but there were several days of trading action at the 96 level. it is quite possible that we could get up to that level again, even if for technical reasons.
The one thing to keep in mind, however, is that every time the dollar looks to be rolling over, it ends up moving higher. While it is highly unlikely we are on the cusp of a trend-change in the dollar, there is certainly a compelling case to be made now that the dollar is going higher than most have thought.
On the other hand, the treasury market is sending a ‘wait-and-see’ signal:
The yield on the 10 year not has been squarely stuck in a range of 2.3 to 2.4. Since we are once again on the top end of that range, yield is going to either break-out or break-down again.If yields break-out, then that would add to the dollar bullish case, but a break-down in yield could see the dollar rally either fade or fizzle.
Finally, well, as per tradition:
Not one but two gap-ups this week! How do you spell “melt-up”? D-O-W.
Even if our President spells it “M-A-G-A”:
— Donald J. Trump (@realDonaldTrump) October 18, 2017