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.
Gold, down a little these past few days but looking brighter, oil up these past few days but looking darker. Why? Well, let’s see.
Gold ended the first three days of the week slightly on the down side. It has also established a short term down trend from its highs early in July to those late in July. And worst of all, it had a large volume down day on Tuesday, which is something I do not like to see. However, having said all that there are a few encouraging items on the charts. First is that aggressive Stochastic Oscillator. It is pointing upwards and has just entered its positive zone. Then there is the short term moving average line. It has stopped moving lower and appears to be in the process of turning up although the turn is lagging somewhat. Then, of course, I have mentioned the fact that the recent reactions have been reversing with higher lows versus the previous reaction. Well, this trend couldn’t go much lower if it was to rally once more from a higher low versus that made in May. But the most encouraging feature on the chart is that reverse “head and shoulder” pattern shown on the chart. That down trend line mentioned above also makes up the “neckline” of the H&S pattern. A breaking of this neckline, on the up side, would be a very positive sign with a move projecting to at least the $438 area for starters.
All in all, I would be looking for some upside action leading into the week-end.
TEXAS LIGHT SWEET CRUDE
The first three days of the week have been positive for West Texas Crude Oil. Along with that has been the up turn in the aggressive Stochastic Oscillator, suggesting more upside ahead. BUT WAIT – is that the first hints of the oscillator starting to top out and turn back towards the down side? A closer look at the indicator seems to suggest so. The short term moving average is still pointing lower and the volume on the positive days has not been very encouraging. And like gold, we have a “head and shoulder” pattern forming, this one is of the upright type. A breaking of this neckline, on the down side, would be a very negative sign projecting to about the $51 level, for now.
All in all, I would be looking for further down side action in oil.
The short term P&F chart of silver still shows that the price continues to move in a lateral direction, trapped between the levels of $7.60 on the up side and $6.90 on the down side. Silver is once more heading towards the lower support level. A move to the $6.80 level would be a down side break and a very, very negative sign. Both the short term moving average and price momentum are negative but not overly so. The Stochastic Oscillator had moved into the positive zone but has reversed direction and is now heading towards the negative. For any rally to take hold the price must close above short term resistance which is at the $7.20 level. Breaking of support at the $6.95 level would constitute a serious short term break which might cause a move lower, to the point of activating a bearish signal at $6.80.
For now, I am looking at some lateral to slightly lower action towards the week-end.
See you on Monday for the full week-end review.
Merv Burak, CMT
Hudson Aero/Systems Inc.
Market Technical Information Group
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.
To find out more about Merv’s various Gold Indices and component stocks, please visit Merv’s Precious Metals Central. There you will find samples of the Indices plus other publications of interest to precious metals investors.