Gold, Silver, and Indexes Using Price Action

[Builder17]

After quite some time I am going to have a look at gold. Gold, as far as I can tell is giving mixed signals. The drop during the retracement has been a bit fast and that has put a bit of doubt in my mind as to the viability of solid demand.

So we are at a location where it's possible for price to go either way. Those who are believers are going to understand this statement that price can go either up, down, or sideways! Those who are nonbelievers are going to scoff at this obviously deceiving statement. Any sucker knows price can go either up, down, or sideways, so what's the big deal about this? Isn't it just stating the obvious? Yes and no.

What's important is to keep in mind that price has a context. It doesn't existing in a limbo. This context tells us that the demand did come to life albeit for a few weeks and is now weaker than the supply. Price did manage to go above its last swing high. There was a change in stride as evident by this swing high penetration. This is also visible if one uses the solid supply line as a clue (the derided and woefully maligned crutch). Those using SLA can clearly see the line broke and can wake up from their slumber. No need for elaborate number crunching or advanced thinking. Price broke above the line and is now retracing the path back down.

I must be the only genius around to see this phenomenon of utmost importance. To be truthful I find this a bit boring. Those days when I could recall the multiple reasons and handle the conflicting arguments whether to go long or short and when all in my head. I could discuss the merits of Fed intervention in the markets and global turmoil due to Ukraine and Russia and USA war mongering. And now compared to all that, just one straight line. Nothing to talk about. Nothing to say. Just one damn line. My ability to wow audience has materially reduced while my trading account has materially increased. Despite all this I do feel less intelligent. I don't have much to say. I'm beginning to forget the old theories and logic of things. Simplicity is the norm and in the evening I now watch cartoons to please myself.

Back to price again. From here price can plop down and continue down, spend time going nowhere, or start pushing back up. The faster drop is a negative development and I tend to become cautious when this behavior shows up. Nonetheless, if price turns up I could choose to enter and not go heavily in based on this somewhat weaker behavior by demand. The price behavior is giving me a clue and I can use it by reducing my risk yet still participating.

So far we haven't seen any sign of emergent strength so there's no reason to enter. The thing to do here is to watch closely, very closely. Based on the price movement, GDX appears to look relatively stronger so far.

Gold Futures Weekly

GLD Weekly:

GDX Weekly

Gringo

Nice charts.

 

[Gringo]

I have made an entry on the long side. This time I have chosen GDXJ. These are Junior Gold Miners and are showing more strength than Gold miners (GDX) themselves and Gold (GLD).

Below the last swing low around 25.70 I am not likely to stay long. The exit is mainly based on price behavior itself instead of a hard stop.

Gringo

 

[llIHeroic]

Can't speak for GDX, but I've slowly been watching GLD creep into a good position for a long-term buy. Here are two of the scenarios I'd need to see in order to go long in the near future.

 

[Gringo]

Sitting on razor's edge. In case demand doesn't show up I'll have to exit this position. Position started going underwater from the start and usually it's a sign that things aren't working out well. Gave price enough room due to support showing up around these levels time and again but the lower highs are still in the play and a breach of support will have to be taken seriously.

Gringo

 

[Gringo]

Overnight and pre-market gold price dropped but returned upward with strength. I wasn't sure where GDXJ would open but the strength in gold was an indication that there might be demand. At the open there was a gap down, yet the demand showed up right away and price started rising. Seeing this strength I gave traders some room to show their hand. It turned out that the supply never really held sway other than the fact that the open was a gap down. As I result I pulled my hand of the exit trigger.

By using the general strength in gold and the quick and decisive arrival of demand I switched my mind to not exiting. Now there are going to be questions about a hard stop and a soft feel about stops. Those following SLA-AMT would have exited at the break of the last swing low or some other criteria. This is the kind of question that a person can determine for themselves.

Now, the risk here was genuine and price could have turned down and continued in that direction. It actually still can. The fact that demand has repeatedly defended the 26 or thereabouts area I am willing to give price some more space. Attempts by buyers to lower their bids have repeatedly failed. Sellers discontinue chasing and aren't so willing to part with their goods. For the time being the buyers are forced to raise their bids and chase sellers a bit.

This drop down and quick recovery could be considered a shakeout. So far that's what it appears but in hindsight may turn out to be the last chance to have gotten out with the pants on.

I'll try to show what's happening currently in the charts below. This might be helpful for some and may appear to be hindsight BS to others. Let me assure you that both parties are correct in their assessments.

Gringo

 

[dbphoenix]

bit.

This drop down and quick recovery could be considered a shakeout. So far that's what it appears but in hindsight may turn out to be the last chance to have gotten out with the pants on.

I wouldn't call it a shakeout unless there's a float. More likely it's just a test of selling interest. Since buyers stepped in, that was that, tho there's no guarantee it won't be tried again.

 

[Gringo]

Oh. I mentally wasn't distinguishing between a shakeout and a test of selling interest. Hmmm.. it does change the way I was viewing the situation a bit.

Thanks,

Gringo

 

[k p]

Question Gringo... now sure if this is a smart question or not... but since you're holding overnight... do you have a stop in place? If the market opens lower, at the line where your stop might be, would this automatically trigger an exit at the market? Since you're still in this trade, either you didn't have a stop in or it was lower than how low price hit, is this correct?

 

[Gringo]

I don't have a pending limit order.

 

[k p]

I don't have a pending limit order.

You mean a stop order? Is this because its an ETF and hence quite diversified so a huge drop would be very rare indeed?