MORNING STARS RISING - CLASSIC BULLISH REVERSAL CANDLESTICK PATTERNS OCCURRING NOW IN GOLD & SILVER RIGHT AT SUPPORT LEVELS NEAR 200DAY MOVING AVERAGES.
Election Day has finally arrived here in the United States of America, so please exercise your civic duty: get out and vote (if you haven’t already) thank you.
Today was largely expected to be uneventful in the Gold and Silver markets as many traders were looking to avoid the event risk inherent upon the outcome of the U.S. Elections, but that has definitely not turned out to be the case.
After Friday’s massive drops of -$40 Gold and -$1.50 in Silver, which happen to be the biggest single-day spikes lower in the last 2 months, both markets blasted higher this morning with Gold putting on nearly +$35 and Silver around +$1.00 higher (intraday) before pulling back off the highs...
Let’s take a look at where the recent consolidation stands from top to bottom:
OCTOBER/EARLY NOVEMBER PULLBACK:
DECEMBER GOLD (GCZ2)
1798.1 HIGH (10/05/12)
1672.5 LOW (11/05/12)
DOWN -$125.6 PER OZ (-6.9%)
DECEMBER SILVER (SIZ2)
35.445 HIGH (10/01/12)
30.655 LOW (11/05/12)
DOWN -$4.790 PER OZ (-13.5%)
Friday’s steep vertical drops gave way to potential bottoms being formed as new lows for the pullback were printed Monday (11/05/12) before both heavy metals, hard currencies turned around to begin their upward climbs higher - followed by explosive moves higher today (Tuesday 11/06/12 U.S. Election Day).
BE AWARE: This swift change in sentiment has given rise to a classic technical candlestick pattern: The Morning Star formation which typically portends that a bullish reversal is at hand. Especially interesting is how they have both formed nearly right on Gold & Silver’s 200 Day Moving Averages, which should be highly supportive.
So, will Friday’s gutting of longs be seen as one of those bloody, waterfall, capitulation-type bottoms? Since their early October highs, the Open Interest in Gold has been pared back by over 72K contracts (was at 350K but now is near 278K = -20.5%) while Silver has seen over 17K contracts removed (was at 88K but now is near 71K = -19.3%).
Whether this bounce is a real reversal and not just the temporary closing out of very profitable short positions ahead of the Election results, nobody really knows. Instead of the light at the end of a tunnel, if the markets aren’t pleased with whatever outcome occurs, both markets could easily spike immediately lower regardless of technical indicators or candlestick patterns.
In order to really force a positive change in the current near-term bearish (weekly) outlook, the precious metals must now follow through with momentum to the upside and put some good distance between prices and their 200Day MAs going forward.
We’ll start to get a better sense of where these markets are going as the night progresses and as the votes start to come in. The London and Asian markets will get to react first, then the pits in NY will get into it tomorrow (Wednesday) morning.
For the sake of our country, I truly hope there is a clear winner come Wednesday. Don’t forget that The Bank of England and the European Central Bank return to the spotlight later on Thursday as they meet to discuss current their current economic situations and policies, so this week is full of market-moving currents.
Please refer to the charts below for further commentary and analysis.
*Look for email alerts/market updates should conditions warrant or if/when environment allows
IMPORTANT UPCOMING DATES ON THE CALENDAR THIS WEEK/NEXT WEEK:
DECEMBER GOLD (GCZ2) - DAILY CHART
DECEMBER SILVER (SIZ2) - DAILY CHART
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By: Kurt Pfafflin