Silver Prices and Technical Analysis

8/20/2019 Silver Prices and Technical Analysis

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Silver Prices and Technical Analysis

We started this series “shallow and wide” on the subject ofwhat's really determining the silver price…

What are the factors, the most influential factors right now? Lastweek we covered high-frequency trading and algorithm trading inassociation with the future's market. This week we're going tokind of go on a second factor, which is silver prices and technicalanalysis.

Once again, we started this whole discussion about talking on justsurface level the major influences on price. We started withelectronic price discovery versus the sort of fundamental realityunderneath, underlying it. We went through 6 factors. We listed

the futures market and HFT. And today the focus will be technicalanalysis.

We'll talk about in subsequent episodes the standard of caremechanism that manage money traders use. We'll also go throughdata analysis, options expiration, the FOMC, and actually a wholehost of others.

Last week, we focused on high-frequency trading and algorithmtrading.

This presentation comes on the heels of lots of volatility….Upside for a change, but nevertheless very artificially induced.

The purpose: I want you to be able to wake up in the morning, see


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the price down 3%, and instead of immediately going out andtrying to find a bunch of false or offered correlations as to what'sgoing on.. Correlations that that are often totally disconnec ted…

I want you to stay connected and look at what the primary pricingmechanism, the most important factors that influence price.

Last week, we discussed HFT and algorithm trading.

As a recap, I don't think that speed, electronics, or computers arenecessarily a bad thing, but when you combine self-regulationwith a for-profit exchange like the CME, that's a recipe fordisaster, and that's actually where we are. Algos aren’t necessarilya bad thing either . High frequency traders (HFT’s) have evolvedfrom a special privelege. This special class of algorithm trader arerepresented by the commercial traders on the Comex. The Comexis owned by the for-profit Chicago Mercantile Exchange or theCME.

HFT’s have access to exclusive information and the ability to moveor put the price wherever they want. They use key technicalindicators as their target. And the daily moving average price is aprimary one in the silver futures market.

We will touch on the other technical indicators, but the key one isthe moving average. I think that's probably a pretty good segueinto diving into really the core today I want to talk about.

Silver price and technical analysis….

Again, I think the main one is the moving average, but what istechnical analysis? Technical analysis is really a method. It's amethod of forecasting that's based primarily on price and volume.It's been around for nearly 200 years. I know that's not forever,but it's been around for a long time. There have evolved from it,

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models and our trading rules and our charts and patterns. Thesecharts and patterns have existed the longest, because they werearound before we had computers that could crunch numbers andcreate all these statistical data sets.

We have indicators now that are really just mathematicaltransformations of where price and volume are. There aretechniques that have evolved from technical analysis. Many ofyou know or have heard these before: Candlestick charting.There's the Elliot Wave theory, there's the Dow theory. These aretechniques.

Many traders use some combination of all of these. Some of thepatterns that I'm sure you've heard of are head & shoulders,double top/bottom reversals. There are support and resistancechannels and flags and pennants. These things that you can kindof read when you look at a price chart over a period of time, youcan see these patterns evolving, like patterns in tealeaves.

Some of the indicators, these mathematical indicators are up anddown volume, the RSI which is the relative strength indicator, themoving average convergence and divergence, the MACD or themoving average, which I think is the daily moving average, Ibelieve is the most important one. Of those moving averages, youhave the 10, 20, 50, 100. There are others, but the 50 and the200, really the 20, 50, and the 200 are the key ones. The 200 is theone we are flirting with right now.

This is where kind of we've been over the last week, we've seenkind of a nice little rise in the price.

We moved through the 50-day moving average very quickly up tothe 200-day moving average. I think Monday we crossed over andthen went below. Tuesday we went through it. Yesterday westayed above it. Now today we're way down below it. We're not


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down to the 50-day moving average which is technically a positivesign, or may be a positive sign. What we'll actually find out ...

What's interesting is that because Tuesday was a cut off day for a

data report that we talk about a lot. We go over our weeklyreview in our membership program every week, we analyze thisdata, so every Friday a report comes out from the CFTC. It's thecommitment of traders report. That report shows the interactionof the 2 major entities that formulate the silver price on thefutures market, the Comex, the most important exchange fordiscovering silver prices currently in the world.

There are other exchanges that are evolving, that are coming on-line. The Comex is still the largest by volume by far. These 2entities, these main entities, the commercial traders, the bigbanks, the investment banks, the JP Morgans versus the managedmoney traders or the hedge funds or these funds that arebasically managing money on behalf of others, other people'smoney.

The interaction is based upon these technical indicators. In thatreport, we'll be able to see the change in their trading structure,the relative positions of those traders. What we'll probably seebased on today's price action is that on Tuesday's cut off whenthe report comes out on Friday, it's a little confusing, we'll seewhat happened was that most likely the managed money tradershad covered a lot of short positions that they had accumulated inthat rally, so that position will be less. That category usually

represents the fuel that burns when we move up through thesemoving averages.

On the other side, you'll see the net short position of thecommercial traders will have increased. You and I probablynoticed that even during these rallies we saw ... I think Friday was

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the biggest up day we had seen in a year. Even though we wereup and it was significant, we were up at 5%, we still tapered off.That's an indication that that rally was capped, and we'll seeevidence of that in the commitment of traders report.

What that all means is that we're still locked in this cycle , thispattern where these big traders, they're commercial traders whouse high-frequency trading in order to keep the price contained,to keep a veil over the fundamental supply and demand reality.

In that video, you can go back to the You Tube channel to find it,we talked about the major factors that I think will lead to a

convergence where what we're seeing on the surface in terms ofprice, these factors will converge and the true fundamentalistsupply and demand factors will kind of manifest.

We're seeing a lot of those signs right now. We can talk aboutthem but, again, just to recap, we've been talking about technicalanalysis as it pertains to the silver market and futures market inparticular, the moving average, the relative strength indicator,and the MACD are probably the most important technicalindicators.

I would say moving average is number 1, and we're kind of flirtingaround with a 200-day moving average today. You saw when youwoke up this morning, most of you saw the price was down a solid2-1/2, 3%. Really out of nowhere. There's no economic

justification.

What's absurd about all of this is that if you back up and youlook at this whole phenomenon, this religion of technicalanalysis, which these traders really adhere to, it's based upon afundamental, this principle that price reflects all of the relevantinformation. That's it. That belief right there is what all of thisanalysis hinges on, is this belief that the price is already done,

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already factored in, all of the relevant information.

Of course, it hasn't even been factored in even close to therelative information. That's a dangerous thing. I remember, and

I'm sure you remember as well, when I was a kid, I watchedprofessional wrestling with my friends. I was convinced, onlybecause they were so convinced ... I had this funny feeling that itcouldn't be real, although it seemed like it was pretty athletic andimpressive what these guys were doing, but my friends, theyreally believed it, and they would fight about it and argue about it.It turns out many years later, it's all just ... It's not real at all.

Technical analysis is dangerous. That was entertainment. This isdangerous, because we've gone so far disconnected that, asRussell was saying before in the chats, he feels his internal alarmbells ringing, because when we do correct finally, most people aregoing to be in for a significant wake-up call. That's the core ofwhat I wanted to present today. I know that was kind of fast. I dohave a couple of charts to show you. I'd like to answer questionsor take your questions and comments.

How absurd this idea of the principle of technical analysis thatprice is actually taken into consideration all of these factors. Lookat this, inflation and student loans and food stamps. I know you'veseen this before, but debt levels, overall money printing, healthinsurance costs. Look at labor force participation. The workersshare of the economy which is related. Median family income alsorelated to that. Even home ownership.

Again, that's another reason why I think we're in for a shock, mostpeople are.

Q&A


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To what extent do the manipulators use technical analysis?

The way that they use it ... They use it to make money. Thecommercial traders, I think, they're in this for a lot of reasons we

can go into. Who's controlling them? Who controls the fed? Buton the surface, they're using it to profit.

Today, for example, maybe over the last couple of days, theyallowed these managed money traders to maybe come back inbefore they would fleece them by putting the price backunderneath the 200-day moving average, so it looked likeeverything was going to keep going up because, technically

speaking, we just crossed over a huge ... We stayed above the200-day moving average.

The manipulators, again, they use it because they could put theprice where they want it, and they know the trade structure. Theyknow how these managed money funds trade. In fact, they brokertheir trades. They're the dealers for these guys. They're justgaming them. They're playing them. They're playing it for a profit.That's what they get on a surface. No one's watching, so they cando it all day long. They're still involved, unfortunately.

**

Steve believes that the manipulators don't care about technicalanalysis, and that manipulation's done for political reasons. Iagree and I disagree. I think that they use technical analysis togame it, to make money. It justifies their existence if they're

making a profit. JP Morgan has a perfect trading record. Butyou're right in that there are political reasons, I believe, that areconnected to this. The purpose of this, the reason why I want tobring it out is because it allows regular people like you and I ...instead of going out there when the price is moving and tryingagain to find some crazy correlation, or being sucked into the


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commentary that usually follows like ... I haven't seen any of thestories yet, but you'll see them come up. Someone will say, "Oh,yeah, the silver price is down because we have deflation. China isnot producing. Greece is going to turn over again," and all thesereally sort of loosely-connected reasons, when the trade ... Youcan see the trading actually happen in the data.

I think that's why it's important to kind of keep people sane. Somepeace of mind. Even for long-term investors, because there'sreally no way to turn all of this off. The information is out there.It's so easy. You can turn on your computer and it's right there,whether it's the price or a commentary about the price. I feel likemany people become disillusioned on this journey and forgetabout really ... Again, it's a veil. This all puts a veil over really theunderlying fundamental supply and demand reality. .

I'll add here that there is a legal precedent for intervention inthese markets, at least in gold, for example.

If you follow any of GATA’s ( gata.org ) work, you can go throughtheir essays. There has been a legal precedent for intervention inthe gold market for years, primarily through the exchangestabilization fund (ESF), which was created at the end of WorldWar II.

I haven't seen a legal precedent for involvement in the silvermarket, but we've gotten to the point where the regulators arecompletely captured. The fox really does guard the hen house inthese markets. There's not going to be any regulatoryintervention.

If you take the combined budgets of the CFTC, the department of justice, the SCC, the GAO, all of them combined don't even comeclose to the money power behind even one investment bank, likethe JP Morgan for example. Any kind of lawsuit or suit will just go

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on forever.

Chris asked the question about signs of shortage.

That's one of the factors that I think will eventually break the backof paper trading. I haven't heard anything brand new this week.More of the same. There's certainly controversy. I've heard somepeople say they can find silver, or there's a slight delay - but onlyfor certain products like the American Silver Eagle. Premiums, I'veseen people report from 20 to 50% premiums on Eagles, but‘normal’ premiums for rounds or junk, small bars, for example.

There's definitely something going on. The US Mint continues toreport significant demand. We've seen it out of Perth also. On thesurface, the fact that this demand exists, is incredible given theoverall sentiment.

Even if you move beyond sort of hearsay from the retail demandside, but if you look at like US Mint Reports or what's coming outof Perth, the fact that we are so down in the dumps in terms ofsentiment overall ...

Nobody sees this market, and yet demand has been so strong.That goes against human nature. Either Ted's right that there'smajor intervention by someone who knows better, or we're smallbut collectively there are enough of us that see this as anopportunity.

I don't know if I believe that. I think that even people thatunderstand the opportunity still can't get over what they see inthis price, this illusory price that's created by these points that I'vebeen bringing up.

We certainly haven't seen or heard any more evidence of thatparticular retail shortage developing into a wholesale shortage,


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although if you look at what Ted Butler brings up every week, (towhich no one makes much comment about,) is the very visibleand frantic “into and out from” silver COMEX warehouseinventory.

No other commodity is exhibiting this kind of massive turnover.That's huge, but only time will tell if that develops into awholesale shortage.

If you know the story and you see lower prices, then many peoplelook at it as a buying opportunity. Especially for a long-terminvestor.

As I reflect on who we're talking to or who you guys are and astime goes on, I’ve witnessed an interesting phenomenon. You'veseen this go on and on. We've seen swings from single digits to 20back to 8, up to 50, back down to where we are now.

If you're brand new and you have an open mind and you can seethe fundamentals clearly enough or objectively enough, thenmany see manipulation as a gift, an opportunity not to be takenfor granted.

However, I don't think that's fair for most of us who have beenhere for a long time, many people who want to retire, who havebeen waiting for this. It seems like the writing has been on thewalls for years.

Maybe that's the definition of long-term investment, but manypeople see this as, “Wow, here's another opportunity to buy low”.I think when we moved to the 200-day moving average, and givenwhat we know is likely about the positioning that transpired as wegot there, it would been prudent, if you were thinking of buying,to wait until we get pushed back down, which is the normalpattern that's developed.


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While you can't predict, or I think forecast accurately, you cancome up with a spectrum of probability, and that's something weare developing that as we discuss these issues.

Again, the purpose of this was to kind of create some sanity byunderstanding what the major price influences are. This is a seriesthat we've been doing. We began by introducing the key factors,and then we've been doing in these episodes, these shorterepisodes, a subsequent deep dive into each one of the categories.

Again, my hope is that it arms you with some information that willkeep you kind of

If you have any questions, feel free always to email me. You canfind me, again, if you don't know me, Silver-Coin-Investor.com .
http://www.silver-coin-investor.com/http://www.silver-coin-investor.com/http://www.silver-coin-investor.com/http://www.silver-coin-investor.com/

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Silver Prices and Technical Analysis