The analysis presented is the view of a pure market technician. There is no attempt to present any fundamental data or information as that is not the expertise of the analyst.

Zzzzzzz —- boring, boring. What is it going to take to get some life into this gold market? I don’t know but there is always something that comes along to sparks the market. We’ll just have to wait and wonder. In the meantime, let’s see where we are.

GOLD

As insinuated above, gold has done nothing these past few days of the week. It had come down to just about that $423.40 support that I keep mentioning but has not broken through. BUT it has not bounced either. It is just sitting there not knowing what to do.

Gold is still below its negatively sloping moving average line and appears to be setting up another short term resistance at the $432.50 level. This is, surprise, just about the same level as during its previous sideways trend in the march/April period. These support and resistance levels often come back to play their role over again that’s why it is instructive to keep them in mind for potential future use (but not too far into the future). The short term price momentum continues to move slightly lower within its negative zone but not with much enthusiasm. And then there is the volume. Snooze again. The volume action, except for Friday’s volume which was not provided until after the Monday’s action, continues to add a whole lot of nothing to the action. Lethargic volume action some say is a precursor to a new advance ahead, others say that it is a precursor to further downside action. I say it is just lethargic and will wait for evidence from the market action as to what lies ahead. Now, I mentioned that Friday’s volume. It was the highest in many, many weeks AND it was on a down day. This is not the sound of future upside action to come. But again, wait for confirmation of a new trend. With a P&F chart that still has as it’s last confirmed signal a bear signal and with all the indicators being negative I must remain bearish on the short time until something happens to verify a reversal of trend.

Nothing has changes in the past few days to revise any of my positions on the intermediate or long term. On the long term, despite many indicators telling me otherwise, I remain bullish primarily due to my P&F chart and the more conservative long term indicators (versus my somewhat more aggressive long term indicators used in the tables). On the intermediate term I am still bearish waiting for the action to justify a change in such status.

U. S. DOLLAR INDEX

Shown is an intermediate term P&F chart of the US$ Index. We could not get a clearer picture than this that shows the importance of a firm break above that 85 level. A move to or above 85.50 would give us that break-out which could project a move to at least the 90/91 level. With little change from my week-end review, except maybe a little extra strength coming in, I will continue with the neutral rating until such time as the upside break actually happens. Then I will go bullish.

Short term has strengthened a little since the week-end review and has become a little more bullish. Suffice it to say that I therefore remain bullish on the short term.

METALS and ENERGY

I get so tied up with gold that I sometimes miss out on the other metals or energy commodities. I don’t recall looking at a long term chart of Copper for quite some time. A long term bar chart or Candlestick chart had shown us that wedge pattern that has been developing for over a year now. I thought I’d look in on the P&F and see what it is telling me. Lo and behold, it shows the break-out in 2003, the long bull and volatility that have been going on for the past year and most importantly, it has shown for the first time a break below two previous lows AND below the long term up trend line. According to this we are now in a long term bear market in this metal. The consolidation area from which this break came from is not all that strong, so the break can be considered as a weak break (but still valid). Once the move goes below 135 then we’re in real trouble here. Although the wedge pattern has not yet been broken it looks like that event is not long in coming.

GOLD INDICES

It looks like the various gold Indices are once more on the down track. Although not yet into new recent lows, that just looks like a matter of time. Not the time to be thinking of risking capital in gold stocks yet.

See you on Monday for the full week-end review.

Merv Burak, CMT
[email protected]


During the day Merv practices his engineering profession as a Consulting Aerospace Engineer. Once the sun goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician (CMT) and tries to decipher what’s going on in the securities markets. As an underground surveyor in the gold mines of Canada’s Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry. As a basically lazy individual Merv’s driving focus is to KEEP IT SIMPLE.