Tuesday, August 9, 2011

Does this Look Familiar? Silver and Gold Tops


The True Strength Index (TSI) indicator has now given us a sell signal for GOLD on every timeframe but the daily and weekly. And until it does I am not confident, yet, in calling a top in GOLD's price (though I did buy DZZ today because I believe the top, if not here, is very close).

This first chart takes a look at the 4 hour time frame of Silver's recent parabolic top. We note that price bounced around violently within a band of about 10% below the parabolic top. Meanwhile, the TSI and VolumeFlowIndicator (below price) continued to agonizingly fade lower and lower - making a noticable negative divergence.

This second chart is also a 4 hour time frame look, but this time at Gold. I have identified the SELL signal using a red line and arrow. We can see that gold has already made one attempt to make a new high which failed by $1.60. No doubt traders will keep trying to surpass $1782.50. They may even make it, but I bet the negative divergence with the indicators below will say they tried in vain.


  1. Hey John,
    I very much appreciate your effort in these charts. I am seriously considering ZSL when the wheels start to come off this lumbering beast; so this helps. Your insight, experience and generousity are much appreciated as well as sharing your trades/commitment to your belief. As a very new trader, I appreciate your candor and mentoring. I hope we surface from the TNA rabbit hole soon and you regain that spring in your step and in your writing voice. The enthusiasm and humor you share make this trading stuff much more rewarding and enjoyable! Thanks again, Adam

  2. Hi John,

    Top now is possible although I am watching top of wave 3 is in, wave 4 retrace to GLD 161-162 and then final wave 5 top around GLD 174. Either way, a BIG correction is coming and should be very profitable.

    You are such a great teacher and so willing to share your knowledge. I am very pleased to have the privilege of visiting your site every day (yes, EVERY day).


  3. Hi John
    thank you again for your insights and analysis.
    Please explain what positive and negative divergence means/implies. I know its to do with MFI and asset price but i would be grateful if you could explain it as i find you are a great and honest teacher. i am sure your students appreciate your knowledge and are always eager to attend your classes. Thank you once again and please DO NOT retire soon from this blog. I hope we shall be reading from you for a very long long time.
    Sincere appreciation

  4. John
    When gold gets this stretched above the 200 DMA, the futures exchange will raise margin requirements. If you recall, that's what finally ended silver's run earlier as well as for the Hunt Brothers. If we only knew when they will pull the trigger!

  5. I might be reading too much into this, but if gold is topping out here, then that implies the Euro area is about to get its shit together OR we're about to be hit by a massive deflationary wave that is going to take down all assets.

    If the Euro area is about to get its shit together, that implies that the stock market is on the verge of a monster run to the upside.

    If it's a massive deflationary wave, then that implies more downside for the stock market.

    Either way, short gold could be a really good position to be in.

    On the other hand, we have Jackson Hole coming up in two Fridays, and surely Bernanke now recognizes there's a high probability of deflation if he does nothing more. So shorting gold is potentially fighting the Fed.

    I'm sure I'm missing something somewhere so any thoughts would be appreciated.