Given today's further downward action in the price of gold and silver, Abigail Doolittle of Peak Theories has put out a video update.
For those of you trained in Austrian economics and very suspicious of technical analysis, I concur that a lot of technical analysis is voodoo squared. However, there are some technical analysts who stay within the bounds of chart reading that are based solidly on human action. Doolittle's analysis almost always falls into this category.
Overhead supply, for example, simply means that there are holders of the stock at this price level that are likely to sell when the stock reaches these levels (Because they took profits at this level in the past). A price breakdown, for example, simply means an area where a lot of buyers are likely (because they have profitably traded the stock from this level in the past) has been breached.
There is a lot more to it, but just know it is based on analysis of human action and attitudes, and not blind empirical models. Doolittle seems to be among the best. Here's her video:
4
Here's her summary of what is in the video:
- Despite the current downward trajectory of both gold and silver, I think we may see a near-term rise in these precious metals.
- Specifically, if gold and silver move toward the fulfillment phases of their respective Falling Wedges, gold could move as high as $1,400 per ounce and silver to $30.50 per ounce in the near-term
- However, on the other side of these potential moves up will be the intermediate decline predicted by the topping process that each is engaged in irrespective of a near-term move up or not.
- In gold, an intermediate decline will likely be below $1,200 per ounce, and perhaps as low as $1,150, and in silver we’re looking at a level between $22 and $24, best case, and possibly $18 per ounce.
- The ironic effect of this type of downward price action, however, will be to strengthen the primary uptrend shown in the long-term trendlines of both gold and silver.
- In other words, the primary bull market in gold and silver remains “on” despite any such volatility.
Doolittle is describing a topping formation which occurs when there is too much stock to be absorbed by buyers. This is not the case in Au & Ag, where there are chronic shortages of physical. However, in the paper market (futures) there are some bulls to be shaken out, and at the same time the commercials are desperate to reduce their shorts. But when they bash the price, buyers of the physical, who are long-term hoarders, exacerbate the short position.
ReplyDeleteIt amounts to a manipulated market. For this reason I ignore technical analysis, and never trade short-term. That is the way to sleep at night.
Huge Drop in comex gold open interest, huge deliveries on silver/
ReplyDeletehttp://harveyorgan.blogspot.com/2011/01/huge-drop-in-comex-gold-open-interest.html
I have never witnessed the following:
In the gold comex, the open interest plummeted from 580,750 to 498,998 for a loss of 81,752 contracts. The previous record for a drop in open interest is around 28,000 so this is absolutely enormous. I can understand a drop of stay 10,000 contracts but 81,000? Something is seriously going on behind the scenes. The front options expiry month of January saw its open interest fall from 17 to 9. There were zero deliveries the day before so we mysteriously lost 8 contracts who decided to either settle in cash or pitch their longs.
The all important front delivery month of February saw its open interest drop a huge 36,417 contracts or 44% of the drop in total open interest. The estimated volume today was a rather robust 270,.034. The confirmed volume yesterday was also very high at 256,469.
Thus on an confirmed volume of 256,469 contracts we lost 81,752 contracts. Regardless of how or why it happened, this has to be the most bullish anyone can be in gold today with the revelation of this massive hit in open interest. The open interest has fallen from a high of 611,000 contracts to a low of 498,000 on a drop of gold from 1420 to today's 1332. Thus on a huge open interest contraction we lost only 88 dollars. A lot of work for our bankers with marginal effect!
...
Thus the total number of gold oz standing in this non delivery month of January is 68,600 (already served) + 700 oz (to be served) = 69,300 oz (yesterday 70,100 oz ) This equates to 8 contracts lost and thus the missing open interest. These guys were bought off with cash with a huge premium to settle.