The analysis presented is the view of a pure market technician. There is no attempt to present any fundamental data or information as this is not the expertise of the analyst.
Gold and the US$ moving together 3 out of 5 days, I didn’t think they were supposed to do that. Gold up, silver plunging, I thought silver was supposed to be the strong one. Gold up, gold stocks down, aren’t they supposed to go together? What’s happening here?
All that is just interesting but one might start to wonder. As for gold itself, well I am still wondering if it will end up going through the roof or down into the cellar (my money is on the roof, long term).
Long Term: Nothing much has changed from the long term standpoint. My point and figure chart (P&F) still is bullish and will remain so for now. Price momentum is giving mixed messages. Using charts based upon weekly data, momentum is negative. Using charts based upon daily data, momentum is still positive. I go with the daily charts when I have them. Volume indicator is positive but not overly so (see short term commentary for daily action). Finally, gold is above its moving average with the moving average just very slightly positive. All in all I remain bullish on the long term.
Intermediate Term: The intermediate term P&F chart is still a puzzle. Its last confirmed signal was a bear signal. However, it immediately turned around and has been moving laterally since. It now needs $410 to reconfirm the bear or $450 to reverse back to the bull. As for the other more conventional indicators, gold is just above its positively sloping moving average line with a price momentum that is still positive. The volume indicator is also positive although not enthusiastically so. I remain bullish on the intermediate term.
Short Term: Thursday and Friday’s gold action almost breached the $432.40 support but it could not hold and quickly rallied. Gold is once more above its support, above its positively sloping moving average line and above that third FAN Principle trend line for bull confirmation. To go along with all that, the price momentum just touched the neutral line and also rallied. Volume, however, is still the big bugaboo. Although the volume indicator is still (slightly) positive the daily action leaves a lot to be desired. It looked like speculators moved gold through the latest short term resistance into new rally highs hoping for a follow through of masses jumping in. No mass jump in so the speculators quickly reversed direction and go out. Unlike the masses who, once they buy they then hold on for dear life, the large speculators have no problem QUICKLY reversing their trades, take their lumps and go to the next trade. The difference between amateurs and professionals. Looking at the short term P&F chart published during the mid-week review, the only change has been an extra 2 X’s plotted to get us to the Friday close. Still no new break-out, that requires a move to $440 on the up side for a bull or $420 to reconfirm the bear. On the short term I still remain bullish although that $432.40 level continues to bear watching.
U.S. DOLLAR INDEX
Up, up and away. The US$ Index had a good week gaining on every day for a final 1.1% advance on the week. 1.1% may not sound like much but compared to the alternatives, it was okay. But does that mean we are back on a roll towards new recovery highs? Let’s see.
Long Term: The Index is above its long term moving average line and the line is very slowly turning upwards for a good sign. Price momentum is still inside its negative zone under the neutral line. My long term P&F chart is still in the bearish camp and still needs that 86 level to give us an initial reversal signal. So, on the long term I will remain bearish pending the P&F break-out.
Intermediate Term: On the intermediate term things are a little brighter. The Index is above its moving average line and the line has been positive for a while now. The price momentum indicator has moved back into the positive zone and seems to be heading higher. Only the P&F chart is lagging and still requires that .855 mark to turn bullish. I will go neutral this week pending the P&F break-out.
Short Term: After the week’s worth or rally the Index has moved above its short term moving average line with the line turning up once more. Price momentum has also shot up through its neutral line and is positive. The short term P&F chart had given us a bear signal by moving below two previous lows BUT had not crossed the up trend line for confirmation. It is now bouncing up after just touching the line so it is still technically bullish for now. All in all, I am in the bullish camp on the short term after the recent action.
As for that aggressive Stochastic Oscillator, it has just moved into its overbought zone telling us the action has been hot and heavy but may not continue for much longer. It has not yet turned son we’ll just have to watch it every day but it is warning that we may have a rest period for the Index ahead.
GOLD & SILVER INDICES
What can you say after you’ve said “Watch out below”. That AMEX Gold Miners Index seems to have just fallen over the cliff. It is about to hit the lower channel trend line and may be ready for a bounce but with action such as this one should not expect that a bottom is at hand. Wait for the bottom to arrive and confirm a reversal before risking capital in this market.
Looking at the performance of the AVERAGE gold stock (all my Merv’s Indices are based upon the average performance of their component stocks) except for my Merv’s Gamb-Gold Index, all other Indices show 87% bearish ratings or greater for both the intermediate and long term. My Merv’s Gamb-Gold Index has an 87% bear rating on the intermediate term but still only a 52% bear rating on the long term, the lowest of the groups. As for the highest quality stocks, the Merv’s Qual-Gold Index stocks have a 97% bear rating for both time periods. Such high negative ratings almost suggests there is no way to go but up as the down is fully covered.
METALS and ENERGY
Except for gold and its 0.1% advance, all the other metals and energies dropped during the week. Oil took a drubbing along with the other energy commodities. Their short term ratings (not shown in the table) are now at the bottom of the heap unlike their intermediate and long term ratings which have not yet been affected by this weeks plunge.
Copper remains within that rising wedge, but for how much longer is ??
I thought from all I’ve been reading that silver was supposed to be the stronger metal versus gold. A 10.2% plunge on the week, what gives? What you have this week is a short term P&F chart of silver. The last confirmed signal has been a bear signal with a downside projection to the $6.00 area. Although it tried to rally and reverse it just fell short being unable to move above two previous highs. It is now at the bottom of its recent trading range (support) and unless it perks up will probably break the support. A move to $6.80 will break the support and give us a new projection to $5.90 (looks an awful lot like the previous $6.00). A reversal and move to the $7.40 level is needed for a reversal confirmation move. Stay tuned.
Mid-Week Review: See you on Thursday for a review of the first few days of trading during the week.
Merv Burak, CMT
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.