-- Posted Thursday, 4 June 2009 | | Source: GoldSeek.com
Volatility Grabs Hold
For the first time in weeks gold is showing signs that it has reached a near term peak. Prices in the August Gold Contract reached a high of $992 before sinking down to $962 this morning. At the same time, Stochastics, an important technical chart study that measures:
- Overbought market conditions
- Oversold market conditions
- Getting Stronger…an embedded state where the trend gets stronger
Current market conditions lead me to believe that a move down to the 18-Day Moving Average of Closing Prices is the markets current downside objective. Current support is near $950.
The $1000 mark will probably remain elusive for a while. Keep in mind that summer months don’t often bring with them up movements in gold. This year however has proven different. Probably because of the price and psychological extremes all markets witnessed between this past September through March. Markets that fell as much as they did in that time frame often react and correct too much.
Seasonal Story
The chart below was supplied by The Moore Research Institute.
The Seasonal Gold Chart above displays gold price movement in two ways. It goes back 15-years to get a more current average of prices and back 35-years showing a longer averaged time frame. Historically speaking, price trends are fairly erratic in summer months. It’s at summer’s end that uptrends often grab hold.
Keep in mind that the above chart is simply a road map of what prices have done going back over a 35-year period. Divergence can occur, but isn’t likely too last too long given market tendencies.
Gold Rallies
In last week’s letter I pointed out that the US Dollar was the catalyst behind gold prices. This has not changed. Yesterday’s price action was proof of that as the Dollar encountered its first bout of serious short covering, which caused a large price break in gold of nearly $30 off gold’s high yesterday. Yes today’s rally is nice, but until Wednesday’s high is taken out, a short term top looks to be in place. Take it out and all bets as to how high this leg could carry are off.
Look for support against the 18-Day Moving Average of Closes, currently near 949.6 and for resistance against Wednesday’s high of 992.1.
Daily Chart
For the past couple of week’s I have been bullish on Gold. Stochastics embedded and the price pattern was one of higher highs and higher lows. Yesterday that changed.
On Wednesday’s close Stochastics lost their embedded status. Normally once this occurs more of a price correction is seen, often resulting in a test of the 18-Day Moving Average of Closes, the red line on the chart above at 950.2. Instead Stochastics embedded again today, causing a “Bear Trap”. Until they lose their embedded status, higher prices are likely. Whether high enough to take out yesterday’s high is the question, as this is the markets near term objective as long as Stochastics remain embedded.
Conclusion And Recommendation
Right now I have no bias as far as the Daily Chart of August Gold is concerned.
As mentioned last week, the longer term weekly chart is more bullish than the Daily Chart. Last week I was both short term and longer term bullish. Now I am longer term short term bullish.
Don’t get me wrong, I totally respect the Stochastic reading which has once again embedded itself, creating another bull signal. This signal occurs when both the K and D lines, the ones on the bottom graph of the above gold chart remain over 80. When Stochastics embed, a bullish influence is present and should be respected. When Stochastics lose their embedded status will be the time to abandon bullish ideas. Until than, stay cautiously bullish.
I realize that the markets are now becoming something of a whipsaw. As such it is difficult to get long up at current levels.
In the end whatever happens immediately with the Dollar will determine gold’s future. Taking out $992 in August Gold should not prove easy. The question is whether or not yesterday was simply a shakeout of weaker longs or a sign that the current Bull Run is ending.
I don’t know but will update my thoughts in my oral updates as best I can.
In the meantime, remain bullish.
Research
We offer a vast array of FREE Market Research to our customers. We provide access to Market Research throughout the day both via e-mail and through our trading platforms. Our information covers in depth:
METALS: gold, silver, copper, platinum, palladium
STOCK INDICES: s&p 500, dow jones, nasdaq, russell 2000
GRAIN: corn, wheat, canola, rice and the soybean complex
MEATS: live and feeder cattle, live hogs, pork bellies
SOFTS: sugar, cocoa, orange juice, cotton, coffee
and just about every other futures market covered.
Call us to receive your copy of the recently updated 2009 Linn Group Commodity Markets Outlook, that covers with graphs and verbiage an in-depth analysis of what The Linn Group thinks many markets will do in 2009. Updates to this are sent out a few times a year as well.
Let us set you up with a FREE Trial to our information.
Just call 1-866-973-2077.
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 and Options on 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 The Ira Epstein Division of The Linn Group, Inc or The Linn Group, 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 Thursday, 4 June 2009 | Digg This Article
| Source: GoldSeek.com
