-- Posted Thursday, 11 February 2010 | | Source: GoldSeek.com
I believe that gold is moving down in an attempt to establish a new trading range. At this point in time it looks as though the April Gold Contract is trading in a range of approximately $1100 to $1050.
Gold has not gotten much support off the Greek debt situation. Investors are still using the US Dollar as the “safe haven”. As the Dollar Index has been rallying, gold has been selling off. Eventually this inverse relationship will change, but right now it continues to be in play.
In looking for a clue as to when gold’s inverse relationship with the Dollar Index may end, I have turned my attention to US debt auctions. My guess is that when disappointment in bid to cover ratios and higher yields becomes a trend, gold will be ready to break away from its inverse Dollar relationship. I could be wrong, but I like this logic.
The Seasonal Gold Chart shown above was provided and created by the Moore Research Center, Inc. On the top graph are three lines. The magenta line 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 have looked like in past Bull and Bear Market scenarios.
The Bear Market scenario is currently in play. Until and unless this changes, the seasonal chart implies that gold may not see another bull trend in terms of “time” until the second half of 2010. However, in all three time scenarios the month of March is often a low point with June providing another low point. Keep in mind that past historical performance is no guarantee of what the future holds. Rather, it is simply another trading tool that analysts like me, use as one of their tools.
Dollar Index versus Gold and the Eurocurrency
The Dollar Index remains in a Bull Trend against both gold and the Eurocurrency.
I have displayed all three markets on the above daily chart. You can do so in your own IraChart application. Apply the adage of what an uptrend or downtrend is on each line. Higher highs and higher lows define an uptrend and lower lows and lower highs define a downtrend. Gold and the Eurocurrency are in downtrends. The Dollar Index is in an uptrend.
The above chart is a Daily Bar Chart of April Gold. Over the chart bars, in black, is my proprietary Swingline Study. The Swingline Study is in a downtrend with the most recent low being $1044.5 and the most recent high being $1083.8. The pattern is one of lower lows and lower highs. In other words, this Daily Chart is in a downtrend.
Prices are trading under the 18-Day Moving Average of Closes. I consider this significant since I use this moving average as the master filter of the Swingline Study. When prices are under this moving average, I look for sell signals, not buy signals.
On the above chart I plotted both the 18 and 100-Day Moving Average of Closing Prices. These moving averages have converged near $1095. Currently this is where I expect to see strong price resistance.
Below is a Weekly Gold Chart. 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.
The Swingline Study is in a bearish configuration since it has a pattern of making lower highs and lower lows. Prices are trading under the 18-Day Moving Average of Closes. This is bearish.
Given the current chart pattern, it would take a move over 1124.9 to reverse the bearishness of the Swingline. I expect resistance on rallies to be seen against the 18-Day Moving Average of Closes, which has a current value of 1102.3.
I continue to see rallies in gold as short sale opportunities. If the Swingline Study on the Daily Chart were to turn up, at best it would neutralize the downtrend. It would not in my opinion signal a new uptrend. Therefore, the “line in the sand” is 1083.8, the most recent Swingline High on the Daily Chart. If taken out resistance next comes in at 1095. If prices were to get over 1095 and were to get back over 1124.9, I would change both my mid term and shorter term attitude towards gold and become bullish.
Until or unless this occurs, I remain bearish and expect the trading range within this report to hold up. In fact, that range may extend even lower unless the chart pattern soon changes.
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 not indicative of future performance.
-- Posted Thursday, 11 February 2010 | Digg This Article
| Source: GoldSeek.com
