-- Posted Friday, 5 February 2010 | | Source: GoldSeek.com
As I mentioned last week, the intermediate gold trend had in my opinion, turned down.
I also said last week that “Rallies are looking like sale opportunities in the near term”. Today’s near $50 break to a new, current break low of $1063 certainly makes last week’s analysis look right.
So far this year, gold seems to be following its 30-year pattern of peaking out in January and breaking in February. In fact, gold is now down $100 an ounce from its January 2010 high.
The Euro-zone debt crisis in Greece, Spain and now Portugal is clearly not supportive at this point in to gold. Gold’s “safe haven” status has taken a back seat to the rising Dollar.
The chart above is a seasonal gold chart that was provided and created by the Moore Research Center, Inc. On the chart are three lines. The magenta line according to MRCI represents the most recent 30-year pattern. The black line represents the most recent 15-year pattern. The red line represents the most recent 5-year pattern.
The bottom graph represents a smoothed price projection of what prices look like in both in Bull and Bear scenarios. I believe the Bear Market scenario is now at work. Until and unless this changes, this chart implies that gold may not see another bull trend in terms of “time” until the second half of 2010. Keep in mind that past historical performance is no guarantee of what the future holds. Rather, past performance is simply another trading tool that some analysts like me use in their market analysis.
The Dollar Index as I interpret trends remains in a Bull Trend. Until and unless gold de-links itself from its inverse relationship with the Dollar and as long as the Dollar maintains it uptrend, I would expect to see gold remain under selling pressure.
Over the past week gold managed to rally up to its 18-Day Moving Average of Closes which I’ve displayed as a “red line” on the above chart. Prices stalled out at that point and today plunged.
I have plotted the Bollinger Bands as “black lines”. Notice how gold has bounced away from the bottom band or be turned back from the top band.
Keep in mind that bouncing off of or finding support at the lower band level is not a trend changing event.
The key element that makes up a Down Trend is the whether or not the pattern is one of making lower highs and lower lows. Right now the pattern is that of a higher high and a lower low. Until 1105, the most recent high is taken out, the chart pattern I expect to see develop is one where after the next rally we start to see lower highs and lower lows.
Below is a Weekly Chart of gold prices. Each individual bar on the chart represents one week of trading. In “red” I have plotted the 18-Week Moving Average of Closes and in “black”, the Swingline Study.
I view the Weekly Chart Pattern as being bearish since the Swingline chart pattern is one of lower highs and lower lows. The current price of gold is also under the 18-Week Moving Average of Closes, $1102. I use moving averages as filters to confirm or deny trends. Unless the most recent high of $1124.9 is taken out, the weekly chart trend remains bearish.
I do not see a change in the bearish chart pattern quickly changing. Resistance, which I see coming in at the 18-Week Moving Average of Closes, is now at 1102.0.
Technically speaking, rallies in gold look to me to offer short sale opportunities. I expect resistance on rallies to be seen at the 18-Period Moving Average of Closes. Currently that resistance is near $1111 on the Daily Chart and $1102 on the Weekly Chart. Resistance is expected by me to soon drop down to the $1100 an ounce area, given the severity of today’s price decline and that decline’s impact on the moving average study.
Both the Weekly and Daily Charts have a current top in place near $1125 an ounce. It’s common for the Daily Chart’s most recent high, as defined by the Swingline Study, to change quicker than that seen on the Weekly Chart. From those with a longer term perspective, I recommend paying close attention to the Weekly Chart high of $1124.9. Until taken out, at this time it is the key number to keeping prices in an intermediate downtrend.
Last, as readers of my past reports know, I believe that gold moves in approximate $25 swings. Those swings can at times move in units of more than one swing at a time. Look at the current price zones of $1050, $1075, $1100, $1125 and $1150 to see what I mean.
At the time I was writing last week’s Gold Report, the low in the April Gold Futures contract was 1074.4. Prices rallied up to $1126.4, an approximate $50 rally. This represents two increments of $25.
Today’s price break broke prices back down to $1059. As I believe that approximate $25 increments are at work, it matters little to me if $1050 is exactly hit or not as $1100 looks like it will offer an important resistance zone on a price rally.
The key to keeping up with my trade recommendations is through my Twice Daily Updates and my oral updates.
This Weekly Metal Report is designed to provide you with my current “take” on the gold market. However, what happens when my ideas change before I write my next report? That’s where my Daily Updates come into play.
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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. Chart data is courtesy of LGP-IraCharts. 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 Friday, 5 February 2010 | Digg This Article | Source: GoldSeek.com