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.

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. Unless there has been some significant change in the intermediate or long term prognosis this mid-week review will basically concentrate on the short term market action. The rest shall be covered during the week-end review.

GOLD

Tuesday up, up and away, Wednesday shot down in flames. Lucky I wasn’t making any predictions on Tuesday. But now what? Well, only the market participants know so let’s see what they are saying with their money (talk is cheep).

No change in the long term or intermediate term position as spelled out during the week-end review. Both periods are still bullish but not overly so. It’s the short term that is the interesting period so let’s get to it.

First, let’s see what the short term point and figure chart (shown today) is telling us. The last confirmed signal was a bear signal at the $426 level. Since then it has given us a bull notice by moving above two previous highs, at $434 but by my technique must still go through the down trend line to confirm a reversal of trend. It looked like that might be at the $438 level but unfortunately that did not quite do it. The action hit the down trend line and turned down. So as of right now we have an advance bull signal but still unconfirmed. Confirmation would definitely come if the next up mpve takes us to $440.

On the bar chart side I normally look at three different indicators, moving average for trend, price momentum for strength and volume for investor participation. There are always other indicators like support and resistance and a myriad of chart patterns but these are not everyday indicators, only as they occur. Gold is still above its short term moving average and the average is still pointing upward. All three of my basic price momentum indicators are still positive although two show signs of turning, but only signs. As for volume, my volume indicator is positive but a look at the daily volume activity STILL does not give me a comfortable feeling. On the short term I will continue with my short term bullish position keeping in mind that $432.40 support level, the breaking of which would change my position.

A quick look at the more aggressive Stochastic Oscillator shows an oscillator that was overbought and has now dropped through its overbought line for a negative trend direction signal. Keeping in mind that this is an aggressive indicator and could change with a day or two of action, it is giving us an indication of further downside activity for now. Although many technicians relegate great importance to this indicator, for me it is just another, more aggressive, price momentum indicator which takes into account trading range not just closing prices.

U. S. DOLLAR INDEX

Those who follow the activity of the US$ Index would have noted that the Index did not reverse to the down side on Monday to reflect an opposite move to gold. The thinking is that the $ is the driving force and gold takes its cue from the $. Therefore, Tuesday would have warned investors of a possible false move in gold because the $ trend remained in an upward trend. I am not totally convinced of this relationship as something to bet money on but it is an extra indication of potential gold move as long as the relationship continues. I think that sometimes ahead, the two will end up moving in concert with one another, at least for a while, thereby baffling investors.

GOLD INDICES

Nothing much to say about the major North American Gold Indices except that the slide continues, see the AMEX Gold Miners Index.

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.