The initial read is actually rather surprising. I guess we shouldn't forget this move occurred during the light volume overnight session.
I'll show you the opening indications in GLD, SLV and GDX as well as the charts for Gold and Silver E-mini futures.
As far as reasons, I don't know, I mentioned it could be an effort to raise capital by Chinese banks facing liquidity shortages that are spiraling out of control for the same reason they did in 2008, the overnight lending between banks absolutely comes to a grinding halt when you don't know if the counter-party (the other bank you are lending to ) is a "Bad bank", so the banks just stop lending to every other bank. Thus it's the PBoC who becomes the liquidity provider of last resort, however just last week they were trying to drain liquidity out of the system as they have been doing all year to sop op the QE hot money that was flowing in from the US, but more so from Japan recently, so they can try to keep a lid on inflation (mainly housing) - recall they even put in housing curbs to keep citizens from becoming real-estate speculators. In any case it was interesting to recall that the liquidity draining operation from last week failed, I wrote about it at the time, now we know why.
The Rupee hitting all time new lows against the USD (and gold is traded worldwide in USD's except for a few experimental markets) and I think we all know how much gold India as a culture alone, absorbs.
There's the chance as well that these may have been aggravating factors in something that is otherwise totally unrelated. As we know and see very often, a shakeout move is often the last thing we see before a reversal, I was going to mention that in yesterday's post, however I got sidetracked and started talking about the range instead as I had been talking a lot about the range yesterday and how you have to be careful that you aren't lulled in to complacency because of, well "boredom:.
In any case, so far the results are a little surprising, unless of course that is a head fake move, then they'd be right on track.
GLD 60 min with a clear support zone, that makes running stops more attractive because they congregate just below the support TRENDLINE, I use the word trendline specifically to point out that retail traders view support and resistance in terms of exact numbers, thus we see large volume spikes on a break of support by a penny or two (for instance if that support line were exactly at $130.00, most stops would be around $129.90 to $129.99- they take support/resistance that literally). This makes it very easy for Wall St. to shakeout traders, especially when they place orders on the books with their brokers rather than mental as almost anyone with decent software knows exactly where all the orders are.
* Think about what creates support and resistance (outside of market manipulation), put yourself in the shoes emotionally of a trader in a position with a break of support/resistance and think about how you'd react when you get close to being able to get out of a position at break-even after having been down. Would you hold out for $130.00 exactly or if things started getting a little shaky at 129.90 would you just get out there and then? For most its the latter, that's why true support/resistance is an area, not an exact number.
All cumulative indicators float on the chart unlike oscillators, not just 3C, but any cumulative indicator so it makes it hard to properly scale the indicator with price, but that doesn't matter for signals, all that matters is the relationship between price and 3C, it doesn't matter if price is above or below as that can all be changed as a function of zoom. What matters is price making a new low and 3C making a higher low, that's a divergence no matter how the chart is scaled.
The point is this morning in GLD on the fastest timeframe of 1 min, there's no downside confirmation, that would happen almost immediately on the open, it didn't, that's telling us something, thus far (although we need some longer term charts to catch up to today's trade), it looks like it's telling us this is a shakeout move, whether intentional or not, that's the way its being dealt with.
GLD- The 2 min chart is very hard to scale too, but the signal is the exact same on a chart that would have moved by now if it was to confirm the downside, thus it still looks like a shakeout and again, if not an intentional one, it seems it is being handled as one.
GLD 3 min is confirming as well. It's a little early to go too much further past this timeframe until the longer charts have a chance to catch up to the new day's trade.
Silver looks amazingly similar.
SLV 60 min chart and support, nearly exactly the same as GLD, to the left there's churning which is a form of distribution, you can tell by the long upper candle wick, the lack of any price movement and huge volume, it is most often associated with the handing off of shares from strong hands to weak hands.
SLV 1 min, again difficult to scale, but the signal remains the same as GLD.
SLV 2 min, again the same
SLV 3 min, again nearly exactly the same, these are not two ETFs with the same underlying asset, these are two different assets, although both PMs, the signals being so similar is good confirmation.
GDX-Gold Miners
The 1 min in GDX, but I wanted to show you NUGT because these are the ones that will move because of the leverage, leveraged ETFs are often good leading indicators for the underlying asset.
NUGT 1 min confirms the drop, it's in line right now
However the 2 min chart is not doing the same, that's not an error, it just shows the depth of underlying trade, I'd interpret this as retail giving out quickly and stronger hands staying on board.
It's way too early to tell anything about the open with a 10-min chart, but I wanted to show the support area and the break. If the 10 min chart looks like this at the end of the day, I'd say we have a very high probability shakeout, again whether intentional or not, but with such defined support intentional would not be surprising at all.
Gold and Silver E-mini Futures (YG and SI respectively).
GLD 1 min with a positive at the 5:30 a.m. lows shown in the last post and since the capture, in line.
YG 5 min with a clearer trend
YG 30 min This is the big picture, the move overnight is emotional, it's strong, but it doesn't look very important in the big picture, if it is a shakeout move it is important form a timing sense for the big picture.
SI 1 min, very similar to YG at 5:30 lows
SI 5 min not looking like sellers were dominating the underlying action; the support issue is the same here as GLD/SLV/GDX
SI 30 min, again along the lines of the Index futures
I'll keep following all 3 assets and see if the longer term charts also confirm the shorter term charts for today specifically.
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