ChartWatch Markets: Nasdaq slump triggers gold and silver pump amid a shifting risk landscape

In today's edition of ChartWatch Markets, we'll be covering the technicals for:

• Nasdaq Composite

• Gold Futures (Front month, back-adjusted) COMEX

• Silver Futures (Front month, back-adjusted) COMEX

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Nasdaq Composite Index

Nasdaq Composite Index chart (click here for full size image)

That's the thing about news. Its "new". It wasn't in the demand-supply environment... it wasn't having an impact on demand or supply... and therefore, it wasn't impacting the Comp's chart.

And then it came into being... and it has an impact. MOTN (More Often Than Not) in a bull market, news tends to support the trend, but sometimes – like Friday – it doesn't. The Comp just got Trumped again! 🤦

Cast your minds back to 18 December 2024. Feels like forever ago, but that’s the last time we saw a candle similar to Friday’s – the “we found supply” candle.

That time it wasn’t Trump shenanigans that caused the sharp about-face from the previous strong short and long term uptrend, price action, and candles – it was revised FOMC projections that added 50 basis points to long term Fed interest rate projections.

It’s worth scrutinising that candle, and its volume, to help us understand what might be occurring now.

“Might”. An important word to include there…

Because there are no guarantees that a technical pattern from the past will turn out the same way next time. It’s just a guide.

That 18-Dec candle did not foreshadow an instant reversal – far from it. The Comp traded in a 1400 point range for the next two months before breaking through the bottom of the range and ceding a bear market move into April (Trump tariffs 1.0).

And that’s the norm, not the exception, in my experience. It’s less likely a major supply-side candle like 18-Dec, or our new 10-Oct triggers an instant “do not pass go, do not collect $200” reversal. It’s possible, just less likely!

Friday’s candle is a signal we’ve found supply. That supply is smacking up against a previous wall of excess demand. If we were D > S = P⬆️, then the following can happen to get us to D = S = P↔️.

• S⬆️ while D↔️; or

• S↔️ while D⬇️; or

• S⬆️ and D⬇️

Which one does Friday’ candle indicate? 🤔

The volume on Friday was above average, so an above average amount of supply met with an above average amount of demand – it wasn’t a demand-side vacuum – and this is a minor consolation prize. The price action (long black candle with close on the low of the session) tells us that the supply-side was clearly more motivated to get out at any price than the demand-side was motivated to get in.

The volume tells us demand was ready to buy the dip, but the dip kept dipping!

This can only last so long – i.e., while the demand-side believes the move it’s buying into is just a dip. If they start to believe the supply-side’s resolve is too great, they will pull their bids – and demand (and volume) will dry up. They may even choose to join the supply-side themselves – and that’s when pullbacks turn into corrections 😱.

But we are getting ahead of ourselves! So, let’s just acknowledge we’ve found supply. That supply is motivated, and there was an above-average amount of it on Friday. The demand-side has not yet completely given up.

That’s it. We know where we are right now and that’s as far out as my prognostications go! I don’t predict, remember? No, I react. So, that means I require more data:

• Price action that confirms the demand-side is losing faith and or is potentially switching to the supply-side itself; or

• Price action that confirms the demand-side is rock solid and it’s the supply-side that has lost its will to continue to reduce risk.

So, more candles. It’s this simple 🧐:

• Next candle is long and white and or has a long downward pointing shadow = Demand-side control remains intact. Ideally, we close above the “balance point” (i.e., mid-point of Friday’s candle = 22657).

• Next candle is long and black and or has a long upward pointing shadow = Supply-side is in control now. The demand-side is no longer driven by fear of missing out (FOMO) or by the tried and true buy the dip narrative. It’s getting out of the way, and it may even be joining the supply-side.

• Next candle is a small demand-side candle that cannot close > 22657 = Demand-side offering some resistance, but hardly convincing – it remains open to attack as the supply-side does not yet have a definitive signal to switch back to holding risk instead of offloading it.

• Next candle is a small supply-side candle that largely sits within the range of Friday’s candle = Little demand-side impetus / sustained supply-side pressure, bordering on control. In many ways, just as bad as scenario 2, which is now likely inevitable…

Friday's candle is a frustrating one for trend followers – but it was always within the realms of possibility (which includes aliens attacking!). We shouldn't be surprised that it appeared, and we simply continue to do our work: Analyse the trends, price action, and candles + Manage risk accordingly 💪💪💪.

View: I require a confirmation signal before I move to a reduced risk setting, but I stress that I'm not in a hurry to replace any risk that might have been knocked out by Friday’s move. So, whilst my official personal allowable capital allocation limit for US stocks remains 100% or "FRP" (Full Risk Position) – I am adopting a substantially more risk-averse stance.

Key levels: 22058 is the closest point of demand, the price should not close below here if the demand-side is in control of the Comp's price; the Comp's price has closed below the short term uptrend ribbon (presently 22285-22530), therefore nullifying the short term uptrend = ⚠️.

Gold Futures (Front month, back-adjusted) COMEX

Wall of demand (click here for full size image)

A follow up to Friday’s gold and silver update, as the price action certainly deserves it.

The stock market’s misfortune has turned out to be a boon for gold traders! Just as the gold trend threw in its own little “we found supply” moment on Thursday, risk-aversion has emboldened the demand-side and triggered a wait and see approach from the supply-side.

While there was no follow through selling from either of Thursday’s candles, their respective Friday candles were far from convincing (silver far more so). It’s only in today’s live candle that we are seeing the demand-side appearing to wrestle back control from the supply-side.

But! Today’s candle, as good each appears right now, are live = We must discount them!

What I can say, is that if they should finish as the look right now, i.e., credible demand-side showings (white-bodied and or with downward pointing shadows), then one must conclude that the dip triggered by Thursday’s candles has run its course.

One thing I failed to mention on Friday, and that I wanted to rectify today – is the proximity of both gold and silver to major round numbers. 4000 for gold and 50 for silver.

Round numbers are an important consideration for students of demand and supply. MOTN, you will find that they elicit a supply-side response as the price draws close to them. It can be a major one, as in – that’s the top, cue the next bear market… or minor, as in – it’s just a pullback.

My analysis on Friday might have missed the likely triggers for Thursday’s gold and silver supply-side candles – but it was still consistent with a “this is likely just a pullback within a strong long term uptrend”.

For gold, I continue to view the trends, price action, and candles as supportive of a re-alignment of the long term uptrend. However, if today’s candle ends up closing at its low, and particularly if it closes below Thursday’s candle low of 3957 – it would likely seal the deal on a deeper pullback to the short term uptrend ribbon (presently 3787-3872).

View: No change to prevailing FRP view on gold.

Key levels: 3842.8 is the closest zone of demand, the price should not close below here if the demand-side is in control of gold's price; alternatively, a close below the short term uptrend ribbon (presently 3787-3872) will also nullify the short term uptrend = ⚠️

Silver Futures (Front month, back-adjusted) COMEX

Demand side holds for now... (click here for full size image)

Somewhat oddly, silver had the more severe of the two Thursday candles, and the least encouraging of the Friday candles – and yet it shows the strongest Monday candle!

But, as noted above – that candle is meaningless for now.

Still, if it closes the way it appears now, it would be an emphatic reassertion of the demand-side’s control. In this scenario, 49.97 falls, and silver’s short and long term uptrends keep chugging along.

But, there’s every chance the same supply that sold into 50 the first time uses the present rally to let go of some more supply there. If there's insufficient demand to soak up this supply, the candle will transform into one with a long upward pointing shadow – which we know is a major warning sign of growing supply-side control.

So, we wait for confirmation one way or the other. It's that simple.

View: No change to prevailing FRP view on silver.

Key levels: 45.71 is the closest zone of demand, the price should not close below here if the demand-side is in control of silver's price; alternatively, a close below the short term uptrend ribbon (presently 44.65-46.10) will also nullify the short term uptrend = ⚠️