Original article at bloomberg and bunch of other trading sites carrying it.:::
Caminschi and Richard Heaney, a professor of accounting and finance at the University of Western Australia, analyzed two of the most widely traded gold derivatives: gold futures on Comex and State Street Corp.’s SPDR Gold Trust, the largest bullion-backed exchange-traded product, from 2007 through 2012.
At 3:01 p.m., after the start of the call, trading surged to 47.8 percent above the average for the 20-minute period preceding the start of the fix and remained 20 percent higher for the next six minutes, Caminschi and Heaney found. By comparison, trading was 8.7 percent higher than the average a minute after publication of the price. The results showed a similar pattern for the SPDR Gold Trust.
“Intuitively, we expect volumes to spike following the introduction of information to the market” when the final result is published, Caminschi and Heaney wrote in “Fixing a Leaky Fixing: Short-Term Market Reactions to the London P.M. Gold Price Fixing.” “What we observe in our analysis is a clustering of trades immediately following the fixing start.”
The researchers also assessed how accurate movements in gold derivatives were in predicting the final fix. Between 2:59 p.m. and 3 p.m., the direction of futures contracts matched the direction of the fix about half the time.
From 3:01 p.m., the success rate jumped to 69.9 percent, and within five minutes it had climbed to 80 percent, Caminschi and Heaney wrote. On days when the gold price per ounce moved by more than $3, gold futures successfully predicted the outcome in more than nine out of 10 occasions. “Not only are the trades quite accurate in predicting the fixing direction, the more money that is made by way of a larger price change, the more accurate the trade becomes,” Caminschi and Heaney wrote. “This is highly suggestive of information leaking from the fixing to these public markets
It is holding onto this $19.943 level for dear life. For the last 2 hrs it's average about $19.95. Bulls need to take this past $20.235 silver Dec contract before 3:00pm for this to maintain some momentum, else this returns back to having downside risk.
When rolling over from the front month to the back month futures contract, the volatility can "fool ya" but if the price takes out major hurdles, the rollover is just noise.
For the truly conservative, silver needs to move up off these level by at least 10% to return to "fund manager" worthy marginal bullish status. It needs a 30% move up off these levels for the weekly chart to trip bullish signals. Back in the day, 10% in a month was a breeze, today an Herculean effort.
Just broke through 19.943 upside, this is going to be support for the next few hrs.
We'll know this is really a turn bullish if it can hit $20.235 and close there for at least 5 mins.
Last week I wrote about the downside risk to the mid $19.xx level in silver. I indicated that it wouldn't become bullish unless it could tap above $20.50 or higher, it didn't, so it went lower.
We've come close enough to the forecast low that it seems an attempt is being made for a bullish reversal. If you get $19.944 print or greater in silver today, it marks a turn bullishly at least in the short term. It is trying. It's come up to the $19.90 level. The danger is half the open interest is now on march 2014 so I don't think there's enough juice in the tank until silver switches to the back month (to March from Dec )and all the volume can muster it's combined strength to assert some new direction. I still have $19.35 and $19.633 as targets and until they clear or have a print, the danger is still towards those prices.
This is from a day trade perspective.
The entry point that provides the most certainty is hitting $21.019 Dec silver. Hitting this price indicates bulls have taken over.
Another way to play it is on the hourly with an inverted head and shoulders, with the right shoulder being completed at between now and 11 am. This is trickier to do not something I would do. I'll be using 3 and 5 min data close to open to figure out what I'm going to do.
Can silver and gold catch a break?
At this point the greatest risk after two years of falling is for a move to the upside. However, one still has to keep in mind there's about $1.00 left for exhaustion selling to completely have run it's course.
Perspective is all one can ask for. The wall street crowd are singing the demise of gold and silver after their fall. When I started watching gold at about $250, it went up to $1900, so $1650 gain. The math says it has retraced 22% to date.
Similarly I bought my first silver bar around $5 to $7, it went to $50, for a $43 dollar gain or 46% retrace to date.
Those retrace percentages fix perfectly the 2:1 to 2.5:1 magnitude moves that silver has to gold. It is hard to remain positive though when you see all that money disappear from your physical bars. insurance is insurance.
There's real danger here of another $1.00 down move in silver.
Those bear targets are $19.35 and $19.633. I give them freely because I won't try to bottom fish it. I heard a funny saying the other day "those that pick bottoms, end up with stinky fingers":) After this prolonged trip down, I don't believe it will be a strong bounce up, but it will be sideways action for at least several weeks continuously testing the bottom and coinciding with the next debt debate in the USA. If there's a chance it will move up, it seems that will be a catalyst. There's a rule I have, don't try to catch the last 20% of a move, it will turn on ya, and I believe 85% to 90% of silver's total move bearishly over two years is complete
I believe the way to play this is to watch for the price point where shorts will cover and or reverse their positions to long. On a day trading basis $20.779 is the price, for a more substantive price that has real strength $20.959. I leg-in on meeting the first price, then scale in more on the second taking no more than 1/5th of a position holding overnight depending on how strong a move silver has above and over $20.959.
I've been mainly trading oil and nat gas lately because silver is broken on the bull side, with the bear side working but the problem is my system works on momentum balance. Moving one way all the time makes my system too difficult to calculate and track. As of yesterday I had 22 calculations running on silver alone. Today, I've cleaned it up with the break to $20.50 down to 7 calculations.
I'll tell you this, I never believed silver could be beaten so badly.
Technical's mean nothing in the face of major news, at least this is what I've found.
So the question then becomes did the technical's in silver and gold occur because of the news in japan, before it or after it?
The Japanese earthquake happened at 1:10 pm our time, however the moves started well before 1:10pm and stopped going higher exactly at 1:10 pm after silver had already hit it's reversal target indicating change from bearish to bullish position. Now the question is how fast do algo's that are programmed to read tickers and the phrases "earthquake" "greater than 7 on richter scale" etc execute?
They execute within fractions of a second. It seems that is what caused the algo's to bull back and stop trading.
This almost has a feel of divine intervention. Earthquake happens at exact time gold is taking off and silver wants to take off...lol.
If News is present, it screws with the validity of the signal. It becomes a flip of the coin when breaking news occurs during or at the time of the breakout. Now I'm sitting here with this sizable position long sweating because this is not not how the price typically behaves after a breakout.
Risk management says if the price doesn't close above $22.649 by 4pm cut the position to a third, stop out completely under $22.517, keep it and ride it all with a close above $22.843.
And, now the price is sitting (stuck) right at the $22.589 I've been writing about which means it's sitting on the fence.
I'm going to have to back track. I said I'm 90% certain silver won't go under $22.589 by more than a few pennies.
I just scanned the news and Japan was hit by a massive earthquake with Tsunami warnings being issued. 7.3 richter. This throws a monkey wrench into my call.
Technically the numbers I use to take and get out of positions were met. Typically, I want those numbers executed independent of any news events, or fed speak or numbers being released. Did the algo's and market partcipants automatically just hit buy gold buttons on news of the disaster and as news trickles in folks start saying "it ain't so bad" then sell. This is something to watch into 4 pm.
So now, I'm about 70% confident $22.589 won't be breached by more than 5 cents to the downside. Technically, the machines look like they are set to cover positions and buy at the silver price I mentioned. Gold looks set to be bought/covered at 1351.90 and no lower.
Bearishness strongly reversed to the bull side in Silver minutes ago. Gold popped $5 above $1350. These are the signs bulls have been waiting for. After gold breached $1350 silver was pulled along even though it was more negative for the day compared to gold. This says, look to gold for silver's movements and this will be a weaker rally since silver isn't leading it
This set up targets in the $24 to high $25 region. $23.32 is going to be met easily.
The silver reversal was extremely strong. $22.589 is now the bottom and I'm 90% certain it will not be penetrated to the down side by more than a few pennies.
I was short $22.549 to 22.644 and I was stopped for $800 dollar loss, now I'm on the long side very heavily.
A number of possibilities:
(1) Today the close will be under$22.73 and $24.00 will be hit
(2) Today silver does not close under $22.73 which means mid $24.xx
(3) Most optimistic call would be for $25.72 regardless of how it closes today.
"well, I'm on the other....good luck"
I wrote that as a mistake. I saw that you bought 24 puts and thought it was in response to what I wrote about being long. Then wrote the good luck thing...my bad.
Silver is above 22.642 although it took 15 mins longer than I speculated it should. next is to get above 22.705 within the next 2 hrs.
one man's crash is another's opportunity.
$22.582 is the price silver should have corrected to overnight. It went a bit lower to 22.50 but as we speak it is back above 22.582. If it can get back above 22.643 by 10 am, that will be a good sign the red day candle turns green and $23.32 is taken out.
Silver did turn bullish again yesterday, the only question is how much does it want to correct? The math says 22.582 is the price. If it falls past this by more than 8 cents, I have to exit but will not go short.
The bullish run in the beginning of August, saw this same type of volume .
Watch $$23.11 silver, and if that is pushed aside, $25.72 over several days.
I last saw this setup 2 yrs or so ago. Back in those days, $25.72 would be reached overnight.
I used to be a dart thrower too. It took the school of hard knocks to realize I was throwing darts at the wall while blindfolded trading any other way than technical.
I got out a few minutes after I said I was going to cover, and sure enough it went higher.
$22.127 is the price shorts will cover tomorrow and up to that point they'll be applying shorts. My numbers are momentum reversal points but the problem is there are 7, no, now 8 different trends converging in this price area. Less accuracy as a result, and the number has a 67% likelyhood of being right.
This just smells funny.
The way my trades work, after a price is hit or surpassed, the move off it or to it is supposed to happen in minutes. The longer it takes for the move I predict to happen, the more and more less probable my trade becomes.
That short happened nearly two hrs ago, and I'm trying to find an explanation for why it isn't moving, just like the bull trade didn't work yesterday. I totally forgot about the FED minutes today.
I don't like holding positions unless I'm up big into a Fed meeting or minutes release. 1:00pm is 15 mins away and the $22.13 level hasn't been recaptured, this points to more bearisness..
I will likely get rid of the position before 2:00pm, but this 21.89 price I predicted is proving true as an inflection point where bulls and bears are battling it out.
stopbuy on the short is tight @ $21.963, where I'd be done for the day unless the 1 pm close I wrote about is reached for bulls to be comfortable
With Yellen about to be submitted for Fed Chief, wouldn't the macro belief be that she will continue Bernie's policies in QE, ergo (therefore), this would support commodity prices and stock prices sending them screaming higher.
I imagine the reason the administration waited until now to release this information v earlier, is they speculated this same thing. They probably sketched out a scenario that the debt ceiling default would get close to happening, the stocks would be tanking, and so if they used their Yellen card it would give the stock market a brief reprieve. It hasn't
This is why I rely on the charts, they don't lie. THey help you define and manage your win loss scenarios.