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Ira Epstein's Weekly Metal Report

-- Posted Thursday, 25 March 2010 | | Source:


Gold Overview


A lot has and is taking place in the financial markets since my last Metal Report.


The US Dollar Index has rallied sharply, the Eurocurrency has forged new all time lows against the Swiss Franc, Portugal has seen its credit rating lowered by Fitch, Greece and the European Union (EU) remain at odds on the manner, if any, that the EU “stands behind” Greek debt and the US and China are on the verge of having the US labeling China as a currency manipulator. If you try to say it all in one breath you end up short winded.


Gold has not held up well during all this. Rather, it has seen its value shrink at the expense of the rally in the Dollar Index.


The combination of the threat of higher US interest rates and the rise in the Dollar Index are what I believe to be the current catalysts behind the decline in gold prices.


In my last report I said, “According to the Moore Research Center, the first two thirds of the month of March have historically seen more downside price pressure than upside pressure. Over the past 15 years there have two years where this hasn’t occurred”. With the close of business today, the statistics are now 14 out of 16-years in which the first two thirds of the month of March have prices break.


Die hard gold bulls have to be scratching their head as to why gold has not responded with more bullish vigor to the Greek situation. I don’t think it’s slipped anyone’s mind that right behind the Greek debt issue are the debt issues of Portugal, Spain, Ireland and the U.K. Yet gold is not building in a price premium for these potential events.


Seasonal Gold Chart



The Seasonal Gold Chart above was provided and created by the Moore Research Center, Inc.


The top part of the graph contains three lines. The magenta line represents the recent 30-year pattern. The black line represents the recent 15-year pattern. The red line represents the recent 5-year pattern.


The bottom of the graph contains a representation of what gold prices have looked like in prior Bull and Bear Market scenarios. These scenarios date back to 1973. Neutral years are not shown.


It’s hard to argue that the gold market at this time isn’t following its Bear Pattern. It is. Does this mean prices will continue to break down? Well that’s the question. The graph on the top part of the chart offers some historical insight which I interpret to mean that even when gold prices hold its Bear Pattern, a relief rally of sorts can occur in April. However I don’t expect rallies to have the same follow through they would have had the month of March ended up with an overall gain in gold prices.


Daily Gold Chart


The chart pattern on this chart is displaying a chart pattern of lower lows and lower highs. This simplistic pattern is the definition I use to describe a “Downtrend”.


From this pattern chart analysts often apply filters such as Slow Stochastics, MACD, RSI, Bollinger Bands, Window Envelopes and so on. Chartists use filters as a tool to help them in trying to figure out where the market is in its overall trend, profit objectives, changes in trend objectives and other things important to their chart analysis.


My guess is that many chartists see the shorter term trend in gold as being in a Downtrend, a Downtrend that is both oversold and one that has hit some initial downside price objectives. Not every analyst will agree with me which is fine. However, this is what I believe many see.


Oversold conditions can turn into either an “embedded situation” or simply rally from being oversold to correct the oversold condition. I teach that markets don’t just stay oversold on Daily Charts for long periods of time.


I define the term embedded to mean “locked in” or “well entrenched”. Right now, I interpret the gold chart’s technical condition as one of being simply oversold. What I don’t see are any new reasons that haven’t already surfaced that will suddenly change the way gold views current financial market conditions both here and abroad. The key word here is “suddenly” because over time I continue to believe that gold is a great investment since I believe that all the debt issues that are now surfacing will at some point cause gold to go ultimately higher. Ultimately is the key word here. 



Given the oversold condition of the Stochastic reading, I would wait to see if the Stochastic reading embeds or if it resolves being oversold by the market rallying.  


Weekly Gold Chart


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 Closing Prices and in “black”, the Swingline Study.



Let’s analyze this chart.


First, the Swingline Study has a chart pattern of a lower high and a lower low which is a bearish chart pattern. Second prices are trading under the 18-Week Moving Average of Closes. Third the Stochastic reading has a neutral reading.


Therefore I view this chart action as being bearish. Near term resistance is at 1113, the 18-Week Moving Average of Closing Prices.


Prices on this chart need a move over 1133.9 to turn the trend back up.




I last wrote my last Metal Report on March 10, 2010. In that report I was questioning which way gold was going to resolve its March trend. Gold looks to have resolved that direction and trend on both the Daily and Weekly Charts is down.


The way that the European Union is handling Greece’s sovereign debt issues has provided support to the Eurocurrency. In fact the infighting between Greece and its fellow EU members has done a poor enough job to rob the Eurocurrency of value.


What needs to be seen is a solution to resolve Greece’s debt matter in a way that doesn’t cause investors to doubt EU resolve in solving its own internal matters. From all I am reading as I write this letter, that doesn’t seem to be the case. Rather, the EU wants to put together a plan where IMF and EU funds will become available to Greece. In what manner and who puts up funds first isn’t yet clear.


Maybe this mess will ultimately trigger the inverse relationship between gold and the Dollar to change, where both can move in the same direction. That hasn’t yet occurred in a long time so I wouldn’t hold my breath.


Most importantly Greece has not yet turned out to an unmanageable risk. Rather, it’s the disappointment on how the EU is washing its laundry in front of the world that has caused a lot of this mess.


Whatever occurs doesn’t matter since as a chart analyst, I view both the Daily and Weekly Chart action s as bearish. Until these chart patterns change, there looks to be more downside pressure left. Yes there will be rallies along the way and the market is ripe for one. But until the chart pattern changes, rallies look to be selling opportunities.


Twice Daily Updates


The key to keeping up with my trade recommendations is through my Twice Daily Updates and my oral updates. That is where I put out specific trade recommendations.


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.  


Futures Trading Kit and Twice Daily Updates


Important Notice…


For the past couple of months a number of our customers have been testing out a new phone service where Ira Epstein orally records his trade recommendations and market commentary. Our phone service next calls your phone within moments Ira finishing his recording. The updates are short with specific trade recommendations first and commentary second. The feedback has been fantastic.


If you are not already receiving Ira’s oral updates, you can easily be added to our phone list by calling us at 1 866-973-2077.


In additions we have a Futures Trading Kit that can easily be downloaded.


The Kit contains access to:


Live Chart Data, Charts, Quotes, Technical Chart Studies, Videos that talk about trading techniques, money management tools, access to our Daily Market Research along with our proprietary electronic trading booklets and much more.


Best of all, all this is FREE to experience


Simply call to receive your of our Futures Trading Kit.

It’s your FREE Trial to our market information and other trading tools.


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. 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, 25 March 2010 | Digg This Article | Source:


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