-- Posted Thursday, 8 February 2007 | Digg This Article
“To everything there is a season. A time for every purpose under heaven. A time to be born, and a time to die; a time to plant and a time to pluck what is planted”…… King Solomon, (Ecclesiastes 3)
Once again the gold and silver markets are at a crossroads. The price of gold (POG), is bumping up against resistance, but is not buckling, supported by recent strength in oil.
The overhead resistance, evident in the POG, RSI, MACD and Stochastics, has not been resolved as yet. While the long-term trend and the medium trend are very bullish, the short-term (next few weeks) is difficult to plan for. Ideally (for the bulls), the POG would move sideways to somewhat lower, towards the support line (blue dashed uptrend line).
It is important that the commercial traders, who according to the latest COT report are net short by 135,000 contracts, reduce this number somewhat, and they will only do this on lower prices.
The possibility exists that the POG will break out above the 660.00 resistance level without first correcting. The reason for that would likely be some unforeseen event. Where this to happen, I would expect the commercial traders to sell into such a breakout, in the process raising the number of net short positions even higher, and thereby cause a lot of traders to question the strength of the breakout.
The Silver chart, although very bullish medium and long-term, would also benefit from a reduction in the number of net short positions held by the commercials. Ideally (for the bulls), a dip into the support level around 13.00 would set the stage for an upside breakout with a likely target of 16.00 – 17.00
I like to use the GDX (a gold ETF), as a proxy for gold, as it provides volume. The red arrow point to the declining volume during the latest rally, a sign of weakness.
The bottom line is: Unless some unforeseen event triggers an upside breakout, expect a few days of lower prices. The best course of action is to wait for a definite buy signal. I never advise going short during a roaring bull market. It is usually difficult to get back in.
DISCLAIMER:
Please do your own diligence. I am not responsible for your trading decisions.
Happy trading!
Peter Degraaf
-- Posted Thursday, 8 February 2007 | Digg This Article
