-- Posted Thursday, 23 April 2009 | | Source: GoldSeek.com
Going Nowhere Fast
Last week I commented on the fact that gold was marking time. Since March 20th, gold June Gold has been stuck in a trading range of 970 down to 865, about a $100 ounce trading range.
Gold lacks a headline story to grab onto. My guess is that it will come from either the upcoming Bank Stress Test results or the bankruptcy of GM and/or Chrysler. While today the market broke out to the upside, the seasonal odds strongly favor sideways to lower prices in the summer. Rallies are however likely when you look at the seasonal chart below, especially the 15-year chart. The chart below was supplied by The Moore Research Institute.
Bank Stress Tests
As mentioned above, a possible catalyst for gold prices might come from the Bank Stress Test results due to be released starting May 6th. I seriously doubt all the banks tested came out with stellar readings. Some most likely did but I doubt most did. My guess is that those that believe they tested well are those that have been in the press stating they want to give back the TARP Funds they borrowed, now.
These banks problems are that the Treasury is in the midst of setting stricter standards governing the return of TARP Funds to the Treasury. This is good news for all since it means that banks that were overly too eager to take taxpayer funds, now find they have a price to pay in both the governing of how those banks run themselves, the capital they keep on hand and oversight by a new government bank oversight committee. I am certain the bankers hate this and when they took the money, may not have taken into consideration.
The government is already factoring in about $25 billion of returned Tarp Funds. I saw mention in the news that with the $110 billion still not used and taking into account the return of $25 billion or so over the next year, that Secretary Geithner believes the US is well positioned going forward. He made it clear that if not, he had no issues with going back to Congress should another downturn grab hold. In other words, everything is still on the table.
Daily Chart
The Daily June Gold Chart today established a clear cut uptrend signal.
As you can see on the above chart, prices are now over the 18-Day Moving Average of Closes, the red line. Support is at 894.5 with risk down to 882.7. Profit objective is around 932, the Bollinger Band Top.
When you look at the above chart, focus on the bottom graph as well. As long as it does not become overbought, long positions are warranted.
The bottom graph is the “Slow Stochastic Chart Study”. This study is made up of a K and D line. The K line uses 3-days worth of data and the D line uses 5-days worth of data. The theory is that the K line, which is the red one, will swing around the yellow one since the red line uses only 3-days of data to influence it. When one or both of these lines are under 30, the market is to be considered oversold. Over 70, the reading is overbought.
Conclusion and Recommendation
My bias is now bullish. The current trend is up. Getting under 882.74 will negate the current uptrend and turn the trend back down.
The upside target, assuming the trend turns up comes in at 927.4, which is where the 45-Day Moving Average of Closes now intersects prices. This number will fall a bit each day going forward since prices are trading well under this price level.
I recommend being long against the 18-Day Moving Average of Closes, currently at 894.5, using 882.1 stop. Take profit against 920.00.
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-- Posted Thursday, 23 April 2009 | Digg This Article
| Source: GoldSeek.com
