Sunday 13 January 2013
The article title is a wise message from a voice in the past. The best way to follow
what the market says is to read its net effect as derived from the collective of all
market participants that have made a buy or sell commitment. If it does not show
up in the chart, then what is being expressed is an opinion about the market.
When one takes this approach, letting the market lead, there is no need to wonder
what to do next. Present tense developing market activity, combined with a fixed set
of trading rules is all that is needed. It is then a relatively simple matter of viewing a
market from different time frames to see what is being “said.” We like to start with a
monthly to know what the prevailing forces are doing because higher time frames tell
what “smart money” is doing.
Whenever you see an unusually wide range bar, pay attention for it can be making an
important statement. Very often, a wide range bar will lead to a trading range, bound
by the high and low of the bar. We see that has been the case in gold for the past 16
months. The unanswered question is, are we seeing distribution that will lead to lower
prices, or is this re-accumulation in preparation to go higher?
The answer to that question will come from reading clues left behind by market activity.
If an answer is not apparent, and many times it is not, then more information is needed,
and it will come. This is where patience is required, not trying to anticipate what may
happen, but wait for clearer direction. The market never disappoints.
One observation is how the past four months are more of a labored decline, no wide
range bars down like we saw back in September and December of 2011. We have
commented about this before: four months down, correcting the previous two rally
bars. The market is taking twice as long to retrace past gains, without fully retracing
the entire gain.
Markets are replete with logic. In a horse race, if one horse covers ground from point
A to point B, and another horse runs the same course but takes twice as long to get
from point B not quite to point A, which horse is showing the most promise?
Once you see a “story” develop in the higher time frame, it is easier to then look at it from
a more detailed perspective. The weekly provides the same information but with more
focus. We learn that the market is most recently in a down trending channel within a
trading range that is also within a much larger trading range, a bit like Russian nesting
dolls.
To read more about gold and silver, with charts, visit our website, http://bit.ly/VUTZDl
Privacy respected at all times.
