We spoke in our last weeks release of our chartbook on how to take a contrarian position. How to bet against consensus. Sentiment is one aspect supporting a contrarian trader. The obvious in achieving a “buy low, sell high” approach… Selling when media is in exuberance of extremely good news. Consequently buying when there is doomsday mood in public opinion. There is more though to read sentiment. We would like to focus on the less obvious parts of this edge today. Sentiment, silence and lies.
A bit harder to spot is the absence of sentiment. “Media silence” in itself is a warning signal for the astute trader. The market is often in need for a stimulus when looking for direction. In the past only the ones “in the know” were able to place their bets ahead of time. Social media has opened for the savvy investor a way to read about events abroad when main stream media is still suppressing news that might not be beneficial to its economy or political agenda.
…are a bit harder to spot. It is easy to identify them when your neighbor tells you over and over again how often he goes to the gym, and how well he is off. You can guess that he most likely is at the bar and scrambles to make his credit card payments. It is quite different when in a time of crisis, where one is looking for security and guidance, one has to doubt media, presidents and alike. Looking back through history unfortunately is is a common trail that policy makers prior to currency devaluations have given great assurances for these events not to take place. This in the midst of precious metal prices rising which was attributed to pure manipulation of speculators. Truth to be told nothing but government manipulation at its finest.
Once the silence is broken and the cat is out of the bag, a long trail of lies often follows. This at times where individuals are longing most for security and support. It is the reoccurring sequence of events identified, that make the sentiment trader independent of this media misinformation.
Monthly chart, silver/US Dollar 11/20/2019, “fence trading” :
Silver in US Dollar, monthly chart as of November 20th 2019
Alternating red and green bars (=fence trading) (yellow circle) on the monthly chart show a directionless market seeking out for sentiment. A catalyst is needed for the market to break a range or a triangle. With support (green horizontal line), a break to the upside is more likely.
Silver, weekly chart, 11/20/2019, “highest probability: sideways”:
Silver in US Dollar, weekly chart as of November 20th 2019
The weekly chart confirms the highest probability, without news events, to be sideways action. A double bottom formed at recent lows near the 200 simple moving average (purple line), would a first sign of a possible low risk entry point.
Silver in US-Dollar, Sentiment, silence and lies, November 20th 2019, weekly chart, “symmetrical harmony”:
Silver in US Dollar, daily chart as of November 20th 2019
The daily chart gives a reflection of who is mainly trading silver. Charts are like a heartbeat of a patient. Compare crypto, penny stock, commodity, currency, bond, futures charts and you will find a special imprint in each of these various markets. The symmetrical harmony is typical for the silver traders. Yet another way to identify edges of the sentiment of a specific type of group of traders.
Sentiment, silence and lies
In our telegram channel we post news items in real time that we find sensible to identify sentiment edges ahead of the crowd. It is the stacking of odds, that allows us our low risk approach. While many jump into action in a reactionary way when prices start to move and the crowd has found its common denominator, we aim to be already positioned and rather use the crows provided liquidity to take first profits and reduce our market risk.
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