The April highs around $690 are looking more and more like the seasonal high, so our task now is to anticipate the lows. The charts are pointing for a low to come in at anywhere from $640 to $600. The 200-day moving average is around $640. It may need to dip down below the 200-dma for a spell as it has in previous years. But this shows it is getting close now. I thought it might be useful to check the COT data to help pinpoint the low and I discovered an unusual coincidence that’s happening again now!

   Take a look the lower chart above. It’s a noisy one, looking like one of those “Rorschach” psychology tests turned sideways. Don’t be intimidated by it. For now, just focus on the red bars in the lower half of the chart. Those are the Net Commercial positions; that is, the number of short contracts minus the number of long contracts. Use the scale on the left hand side. Notice how they are always net short because they are constantly moving producer bullion into the end user market. The net short positions tend to grow as the gold prices rises and they tend to fall when the prices come down.

   Now notice where I have drawn two circles to the left. These are the only two times in the past year when the number of Net Commercial contracts dropped to as low as 80,000; last October and once again in January. Sure enough, check the Gold price chart above and see how these lows in the COT data also coincide with important lows in the gold price itself.

   Changes in just this past week indicate we are at or very near a cyclical low. As of June 19th this number was sitting at roughly 114,000 well down from the April highs of around 160,000. Well, don’t look now, but this past week the Net Commercials dropped to 83,000, all but a Buy signal!

Sources to track this

CommitmentofTraders.com 

   You need to register for these special charts. The free service lasts for one month. Sign up and you can access “Rorschach tests” for all the major commodities at their site.

321gold.com

   For a tidy weekly summary of COT, visit Bob Moriaty’s web site each Friday (listed in our HOTLINKS section if you forget). You’ll find a link to the COT summary in the second section from the top entitled: “Reports Charts”. Click the “Gold” link. Then you just subtract the latest numbers of Commercial shorts from longs to arrive at the net position. The URL directly to this is: www.321gold.com/cot_gold.html  

ALSO IN THIS (June/July-07) ISSUE No. #5-07:

• Storm clouds forming over stock market, economy
• Biotech with battered stock, strong product pipeline ($0.42)
• Gold/Mexican near producer ($0.56)

To order, visit our web site www.emerginggrowthstocks.ca and take the single-issue option for U.S. $15 + GST.

Louis Paquette’s EGS has been utilizing market psychology along with proximity to the mining capital of the world to spot emerging trends and stocks for paid subscribers since 1996. We invite non-subscribers to visit and sample our links to outside content of special interest along with our own “Week in Review with Lou” an audio summary of new and market technical analysis along with “Charts of the week” posted each Friday evening.

Louis Paquette

Publisher

www.EmergingGrowthStocks.ca
EGS Copyright 2007 DISCLAIMER – Louis Paquette`s Emerging Growth Stocks is an independent publication committed to providing an objective analysis of the markets, focusing on the TSX-Venture Exchange and individual companies with substantial upside potential over the next six to twelve months. The information contained herein is believed to be accurate but this cannot be guaranteed.  The analysis does not purport to be a complete study of securities mentioned herein, and readers are advised to discuss any related purchase or sale decisions with a registered securities broker. Companies featured in EGS are often at very early stages of development and can therefore subject to business failure, and are to be considered speculative and high risk in nature. Reports herein are for information purposes and are not solicitations to buy or sell any of the securities mentioned. The author may or may not hold a position (long or short) in the securities mentioned herein.  This publication may not be reproduced without the expressed prior consent of the author. The author is not a registered securities advisor, and opinions expressed should not be considered as investment advice to buy or sell securities, but rather the author's opinion only.

-- Posted Tuesday, 10 July 2007 | Digg This Article