-- Posted Friday, 20 February 2009 | | Source: GoldSeek.com
Plans and more plans
There might be a business opportunity in creating a playbook, just like the ones you buy when you go to a sporting event that describes the players and what the pros are saying about them. The same could be said for the many “plans” being instituted not only in America, but around the world to cushion this severe recession.
How many plans do we have? What do those plans say? A new plan seems to be rolled out each week. To date they have one thing in common. Each plan is either lacking in detail or is so complex, that it takes an expert economist to figure out what they say. Even they disagree when asked what the plans say and who qualifies for what.
The "Bet"
The bet is that the combination of the plans will short-circuit the recession. That is a bet I agree with. The problem is that implementation of the plans have yet to commence. The government passes plans and they forget to or don’t know how to implement them. Implementation is everything as that will change perception. Perception can and does move markets. Fundamentals either reinforce or change perceptions. In other words, the euphoria these plans can bring, can only last as long as the fundamentals back the perception up. Without the plans being implemented, the euphoria has no chance. Once implemented, it will remain to be seen just how optimistic investors become.
Safe Haven
Both Gold and the US Dollar are enjoying their current role as “Safe Haven” investments. It matters not if the Dollar is up or down as appears that investors are simply looking for places to “securely” store their funds. Once things straighten out, investors move from these investments into higher risk ones. The flow to and fro is abrupt and dramatic when it occurs. Remember, just recently we saw investors investing with treasuries with net negative interest yields.
Daily Chart
The Daily April Gold Chart is in a clear cut uptrend, with an Embedded Stochastic at work.
Notice that each low has been higher than the immediate previous low. I’ve circled the lows in the chart the above chart. Most of the highs have been higher than the immediate previous high as well. As long as he lows continue with this pattern and Stochastics remain embedded, this bull move should continue.
Eventually Stochastics will break down. When they do it will occur with the “red” line on the bottom graph of the above chart closing under 80. A move back down to where the 18-Day Moving Average of Closes is at that time will be the immediate downside target. From there, the Bull trend can once again build, as I see nothing other than short term corrections to prevent Gold in today’s economic environment from going to all time highs.
Gold’s Seasonal Story
To get an idea of the longer term picture, look at the Seasonal Chart below, as provided to us by The Moore Research Center...www.mrci.com. This is the newest Seasonal Chart which includes 2008 pricing.
An early to mid-February peak in prices often occurs. So far it hasn’t occurred, but there is still time for it to show up. What’s more interesting to me is that while prices may eventually stall out, I don’t think there is much downside given today’s economic worries. Therefore, I think you should maintain an overall bullish attitude, using seasonal weakness when it shows up to accumulate long positions.
Conclusion and Recommendation
The 18-Day Moving Average of Closes, the red line on the Daily Gold Chart will be moving up in price. The current pace is about $6 a day.
Should prices break in the next few days with futures approaching $935 I think a long call position in the 1000 April Gold is warranted or a bit more aggressive June Call Spread that I am now formatting.
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Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from Ira Epstein & Company or Macquarie Futures USA, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
-- Posted Friday, 20 February 2009 | Digg This Article
| Source: GoldSeek.com
