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.

We started okay but it didn’t last long. The last 2 days were downers. Will it continue? Let’s see.

GOLD

Let’s get the long term and intermediate term out of the way fast. Long term, no change. Neutral until a little more upside confirms a new trend. Intermediate term, also neutral. With its moving average still not turned around and momentum still nudging its neutral line, a few more days are still required to turn positive.

Now for the short term. The P&F chart still has a way to go before it turns positive. The P&F will probably be late in calling the turn. As for the moving average, well, gold is far above its short term moving average line and the line is steeply pointing upward. The price momentum is still in its positive zone but has turned downwards. Volume has two views. The On-Balance Volume indicator is still very much positive but the daily volume action is not so. The sharp rise last week and Monday was on greatly reduced volume action. The move had little volume (investor) enthusiasm. Despite some negatives I am still bullish on the short term. This might change by the week-end.

As for the aggressive Stochastic Oscillator, trying to determine the immediate action ahead is not encouraging. The indicator is inside its overbought zone and has already turned down and crossed its trigger line. It is sitting on top of a well defined very short term up trend line. What this tells me is that the momentum has gone out of the recent move and it is time for a rest or short reaction to the down side. How serious such reaction will be remains to be seen.

U. S. DOLLAR INDEX

First, many of you have caught my boo-boo in the week-end review. I got my signals crossed during the writing of the commentary and equated a positive US$ with a positive gold move. The story should have been the opposite, gold should show weakness if the US$ strengthens, at least per recent actions of the two. Now for the idea that the US$ will continue strong because of the EURO. The Euro has been weak but as I see it a weak Euro is good for Europe and they just might let it fall. But I wouldn’t underestimate the stupidity of bureaucrats to do whatever they need to do to keep the Euro strong. Euro or no euro, let’s take a quick look at the chart to see what the US$ Index is actually doing.

Although the US$ Index is showing great strength the short term price momentum has just broken below its overbought line and seems to be heading lower. The more aggressive Stochastic Oscillator (shown in the chart) is already inside its negative zone and heading lower. Looking at the price action lately, one can draw a Merv’s accelerating FAN Principle trend lines with the third FAN trend line (often referred to as a blow-off stage) in trouble of being broken any day now. Once the Index closes below this trend line one can expect a down trend for some time, possibly back to the second (middle) trend line. For now we are in a waiting period, things are still positive but the negative could come on a moment’s notice. Watch that third trend line.

METALS and ENERGY

We’ll have detailed commentary on the Metals and Energies in the Week-end review.

GOLD INDICES

The AMEX Gold Miners Index shown here looks like it is on the verge of moving lower. It has just crossed below its short term up trend line and is very close to crossing its moving average line. The Stochastic Oscillator is already negative and heading lower. Since the Stocks are usually a leading indicator to what gold will be doing, it looks bad for gold in the days ahead.

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.