COMMODITY TIPS | GOLD AND SILVER ARE ON THE LAUNCHING PAD:-
The metals
have continued to act bullishly over the past week, with silver finally breaking
through its important 17.85 level, after spending most of the week
consolidating just below it. Moreover, it broke through on strong buying
volume, which is what we want to see during a bullish move.
As I have
said many times before, markets are not driven by the substance of news or
exogenous events. Many social experiments have been conducted over the last 30
years which prove this to be true, despite the public's belief to the contrary.
And, as these experiments have proven, what does control market direction is
something we term "market sentiment" or "social mood."
The
prevailing social mood or market sentiment interprets the exogenous events we
hear about, and then "spins" that news based upon the prevailing
social mood. This is what moves the market. If sentiment is positive, then the
market will react positively, even if the news is negative, and vice versa.
This is why we often see markets go up on bad news and down on good news, and
it makes so many scratch their head, especially if they are looking to
"logic" in the markets or if they are looking for directional cues
from the substance of the news or fundamentals.
If you need
to look to the most obvious recent event which proved this to be true, I have written
extensively about how and why most everyone got the move in the market wrong
after the election, while we maintained on the correct side of price action the
entire time.
So, in my
continued quest to enlighten readers about how markets really work, we had yet
another episode where the market reacted differently than most expected based
upon the substance of the news, and I believe it deserves to be highlighted.
Last
Friday, the market presented us with a very strong jobs report. And, the common
expectation was that gold would decline on a positive jobs report. While there
is a myriad of "reasons" many have noted as to why gold should drop
on a positive jobs report, I believe the strong consensus was expecting a drop
in gold.
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