Sunday 9 December 2012

One can take comfort in the maxim, “The Market Is Always Right,” [or “Never Wrong”],
in the realization that trading in harmony with it will make the odds of profitable
success much higher than otherwise. Understanding and reading the market’s message
is an art form, for there is nothing mechanical about it. The market is totally
unbiased, and it provides all the information it generates for everyone to see/read,
at the same time. Just because you may not “see” it, does not mean the information
is not there. If it remains hidden, then it remains hidden under the brightest light.

We happened to be looking at a daily silver chart, on Thursday evening, only to be
struck with the fact that the trend is UP! If the trend is up, then one should be
looking for a place to buy. What made that observation more meaningful was that the
current correction developing in silver was stopping at a 50% retracement area. A
half-way retracement is but a guide and not a hard and fast rule. There must be other
circumstances in developing market activity that indicates a correction may be ending,
and a resumption of the up trend is at hand. That meant we were viewing Friday’s
early activity with an intent to look for a reason to go long.

Before proceeding further, we should acknowledge for newcomers to our commentaries
that we are strictly price and volume readers of developing market activity. The
underlying premise is that all of the fundamentals, and all of the smart money, with
the best and most current research information available, and all other market
participants who hold some kind of “belief” as to what the market may do, and all
of the uninformed who buy or sell for any number of reasons, are what gets distilled
into price action each and every minute, hour, day, along with the cumulative volume
from all sources mentioned. This is how a high, low, and close is formed on a bar
of any chosen time frame.

Smart money likes to hide their hand through deft buying and selling skills, but they
leave “footprints,” as it were, in the form of chart patterns. Do you know the best
way to catch a bear? You can try following its paw prints on the ground and hope to
catch up to it, and the bear may have turned around and be following you, or you can
follow its footprints backwards, leading you to its den from where it came. Then, all
you have to do is wait for it to return.

Charts are not much different. You look at all the activity that has transpired over
a chosen period of time, and you are able to see buying or selling patterns that will
lead to logical conclusions. Then, all you have to do is follow the lead and act
accordingly. If you want information for the best and most reliable source available,
you can do no better than “reading” results from developing market activity, as depicted
in charts. Forget about news or opinions. Stick to the proverbial “horse’s mouth.” It
cannot get any better. If you find it boring, well, you can lead that “horse to water,”
but… Then best stick to conventional sources and keep getting the same results. Back
on point…

Because we already made a conclusion about the daily trend being up, and current price
activity was correcting, it would make sense to buy near the end of a correction that
is turning, or about to turn, than to wait for more confirmation, in higher price
activity that would mean buying higher and increasing the risk exposure. To make a
determination, we need to know the “story” of the market and put it into a context.
For that, one always starts at the higher, more controlling time frames.

We can see from the monthly chart that despite silver moving mostly sideways for the
past year, the current swing low is above the last swing high, shown by the two
horizontal lines. The logic behind that factual observation, [and it is always better
to deal in facts v opinions, which can often be biased or wrong], is that buyers were
willing to buy at the current swing low levels without waiting to see is the last swing
high would be successfully retested, so there is a sense of urgency on the part of
buyers, aka smart money, at this point.

When you look at the last four bars, [for the benefit of any chart-impaired readers,
follow the logic of what is stated to better understand what you are looking at in
each chart. Eventually, it will make sense.], the fourth from the end was a rally bar,
and it stopped at previous resistance, the 35 area, from the end of 2011 and into
January, 2012. Note how the market has been correcting. For the last three months,
it has moved sideways.

To see charts and entire article, go to our website, http://bit.ly/UvwFJn