The mid-week review lets us see if the actions foreseen during the week-end are performing as expected or if we need some refining or revision to the analysis.

GOLD

That was somewhat of a hair raiser on Monday. One would have thought that the bottom fell out of the gold market from the way many commentators were writing on Tuesday morning. However, the trend is still unbroken with the gold price still above its short term up trend line, still above its positively sloping short term moving average line and above that support at $430. During these past few days gold has been establishing another short term support just a hair above the $440 level from where the Wednesday bounce originated. Short term price momentum is positive. Volume action is still somewhat on the weak side and needs to improve. The aggressive Stochastic Oscillator had dropped below its overbought line on Monday and quickly moved lower. It is now at a point where one might expect a rebound. The short term point and figure chart, shown today, shows a normal reaction after a decent upside move. The operative word here is normal. So, on the short term all is still well and bullish. I would, however, be cautious if that new support at $440 should be broken on the down side.

As for the intermediate and long term, there is no reason to revise my bullish prognosis for both time periods.

U.S. DOLLAR INDEX

The action in the US$ Index is just the opposite to that of gold. A bounce on Monday, halt on Tuesday and starting to come back down on Wednesday. The short, intermediate and long term are therefore still all bearish.

GOLD & SILVER INDICES

The major North American Gold Indices have not reacted to the gold move to any significant degree. Yes, they moved down a hair but at the same time they then moved up a hair. Nothing volatile here during the first part of the week. The AMEX Gold BUGS Index and the PHLX Gold/Silver Index are both sitting almost on top of their respective up trend lines, but still above. The moving averages are pointing upward and price momentum is still positive (although just barely). All in all, I remain bullish on all time periods for the gold stocks themselves. Looking over the various individual stock charts the action is still with the “gambling” type of gold stocks and to a slightly lesser extent, the speculatives. The “quality” are doing okay but nothing like the others. If playing the gold stock game, regardless which caliber of stocks you are looking at you must always have your end game firmly in mind and act fast when required. Gold stock investing is not for the faint of heart.

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.

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