-- Posted Monday, 19 October 2009 | | Source: GoldSeek.com
The first chart shows the gold price divided by the US Dollar Index Bearish Fund. In effect, it shows how gold is moving when measured in the currencies the US Dollar Index consists of. The index is a weighted geometric mean of the dollar's value compared with:
Euro (EUR), 57.6% weight
Japanese yen (JPY), 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight and
Swiss franc (CHF) 3.6% weight.
Gold recently broke out from a cup and handle formation marked by the thick green line, and appears to be starting a significant move against paper currencies in general, not just the U.S. Dollar.
The next likely hurdle for gold priced in the currencies that make up the Dollar Index is the February 2009 high. It may take two or more attempts to break that high (a significant high is usually not successfully broken on the first attempt).
For non-U.S. investors, gold is clearly in buying range.
Silver Breaks out from Significant Head and Shoulders Formation - Major Support at $15
Silver has broken through a large head and shoulders formation marked by the thick green line. The metal is currently pushing up against the lower line of the old channel (in orange).
A 50 percent correction of the recent rally would take silver to major long-term support between 15.30 and 14.95. That is likely to prove an excellent entry-point should such a correction occur.
Note the suggested potential new channel marked by the thick dark blue lines.
The $80 Level Holds the Key to Crude Oil's Intermediate Term Future
After crude oil finally broke back up through the $50-55 area, it quickly ran up to major resistance between $68 and $80. Our anticipated short term support around $47 worked out very well as a long entry point, and we sold out with a large profit near $68 - the start of our expected resistance area.
If $80 breaks on a weekly close, a new major uptrend is likely underway. Last week, we stated that Gold's break of $1034 increased the odds that oil at some point will start to follow by breaking $80. Oil surged 9.5 percent this week, and closed just 1 percent below $80.
Increasing the odds that we may see a new bull market in oil is the fact that the 10 week average (green) has crossed the 43 (blue) and 65 (red) week moving averages to the upside. From 1999 to 2008, that always indicated a resumption of the uptrend.
Initial support is currently expected in the area between the three pink lines, roughly from $74.50 to $71.50. We will add to our long position on any pullback to that area or a weekly close at least 1 percent above the $79.86 high from 2006.
Have a very good week in the markets.
Always remember that proper risk management is essential.
All the best,
Christian Normann
dr.normann@post.harvard.edu
www.normannfinancial.com
For the complete version of our weekly analysis including many additional and significantly larger charts (as well as potential setups in commodities, currencies, stocks and ETFs) please click here Dr. Normann is a graduate of both Harvard University and Florida Atlantic University, with one of his degrees in Finance (summa cum laude and 4.0 GPA).
Previously, he was a financial advisor with Morgan Stanley Dean Witter, but left ten years ago because he wanted the freedom to do completely independent research and focus on perfecting his own trading style and investment skills.
He first entered the financial markets in 1995, trading currencies for his own and his family's accounts. Later, he expanded into equity, commodity, futures, and bond investment and trading, and has extensively studied the history of financial markets going back to their origin centuries ago (covering multiple extraordinary mania periods and subsequent busts).
Please visit the About Normann Financial page for important information about risk management and position sizing. We provide analysis in good faith and to the best of our ability, but all information on the Normann Financial website is provided solely for educational purposes and does not constitute investment advice. Learning to operate successfully in the financial markets is not easy - it takes a substantial amount of time, effort, and discipline. Your trading and investment decisions are exclusively your own responsibility. Proper risk management is crucial.
-- Posted Monday, 19 October 2009 | Digg This Article
| Source: GoldSeek.com
