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-- Posted Thursday, 4 November 2010 | | Source: GoldSeek.com
Like it or not, the Fed has turned the printing presses on and they will be running full steam for another 8 or so months. Probably non-stop as the Fed is determined to get the economic results it wants to get. In the process, I expect the Dollar to fall sharply against most major currencies. As the Dollar falls, I expect goods priced in Dollars to rise. The Fed has repeatedly stated that inflation is running below their target levels. That’s another way of the Fed saying that the printing of money, while it will create inflation, shouldn’t create inflation much beyond the Fed’s target rate as long as the Fed keeps a close eye on market statistics and makes adjustments along the way. I have faith that the Fed will reach its goal. In the process of reaching the goal I think it logical to assume that the Fed will most likely overshoot their goal, but that’s acceptable to me as it’s a lot easier to rein in inflation than it is to pull an economy out of a deflationary nose dive. The Fed message is clear. Inflation is going to pick up and in the process a number of markets are going to rally. Stock market wealth is going to increase. Nearly every futures market contract I track is positive. Look at the energies, grains, soft commodities, metals, currencies and stock indices. All are sharply higher. Most important is that today’s rally in gold marks in my opinion, the end of the mid October correction I had correctly forecast and written about in my last gold report. I now expect to see gold trade at new all time highs, maybe up to $1450 in the very near future. Below is a Seasonal Chart of Gold prices produced and provided by Moore Research Center, Inc, (www.mrci.com). I’ve been writing about gold’s historical tendencies for a long time.
For those of you that wish to learn more about seasonal historical studies, visit the Moore Research Center and sign up for their 14-day free trial. I believe that today’s rally in gold marks the end of the October selling correction. I now expect to see general upside momentum going into year end. Yes, there will be price breaks and somewhere along the way I expect consolidation to take place. But I don’t expect to see the most recent low of 1315.6, made on October 22nd, to be penetrated in the near future. If it is, I will have to rethink my price objectives. Below is a Daily Chart of December Gold. Each individual bar on the chart represents one day of trading. In “red” I have plotted the 18-Day Moving Average of Closing Prices, in “dark blue” the Swingline Study and the “black dashed line” is the Bollinger Band Study. The Swingline Study’s current pattern is one of a “higher high and a lower low”. I interpret this to mean that the market is expanding its range to the upside. The first resistance point should be the Bollinger Top of 1386.1. If prices stall there, the next break low should set itself up somewhere above the 18-Day Moving Average of Closes and above yesterday’s break low of 1325.5. The Slow Stochastic Study is nowhere near overbought, which means the market has not reached a point where new buying is drying up. That is bullish. The hardest thing about this chart’s pattern is that it’s not an ideal one. By this I mean it doesn’t yet have a pattern of “higher highs alongside higher lows”, with prices trading over the 18-Day Moving Average of Closing Prices.
The Weekly Chart has what I term a “classic bullish pattern”. Each rally high as displayed and measured by the Swingline Study is making a new high. Today’s price rally carried prices up to 1384.8, which took out the most recent high of 1383.9 and keeps the higher high chart pattern alive. At the same time, break lows have not exceeded previous break lows. The result of this is one of higher highs and higher lows, which is what we chartists call a “Bull Trend”. The chart internals are actually getting stronger as prices rally. The Slow Stochastic reading is embedded. I interpret this to mean that price momentum is not overbought. Rather it is getting stronger as prices rally. Embedded readings occur when both the “K” and “D” lines that makeup this study stay over an 80 reading for several time periods. When this occurs, momentum locks in. It embeds. When the red line closes under 80, upside momentum is lost. Next upside target on the chart is 1398.9, which is close to $1400 an ounce and is the current Bollinger Band Top. The reality is that the Fed is gold’s best friend, at least for the time being. Sovereign debt issues remain, but aren’t in the current environment news worthy. Talk of a currency war will soon surface. However, the reality is that not much will be done to stop or make the Fed drift from their current course. Too much in the way of politics and our own needs are at stake. I realize that readers of this want to hear how high gold can go. $1400 is an even number and one that I think that offers a logical, near term upside target. I found it interesting with all that went on today that gold did not make a run for a new all time high. While that’s interesting and may mean that there is price resistance at current price levels, until the charts provide me with reason to be concerned, I’m not. Probably the best advice I can give you is to not buy blindly. Know where you’re wrong or where you can’t stand the pressure of a downside correction. Regardless of what the Fed does, there will inevitably be points along the way where market forces come together to offer you with a price correction. Whether the price correction comes from current price levels or a higher one matters little to me as I will be focusing more on price momentum than gold’s the raw price. Given the seasonal tendency of gold to maintain overall upside price momentum into year end, coupled with the Fed’s commitment to an 8-month program of adding funds to our economy, I can’t help but walk away with the idea that higher prices, possibly much higher prices are on the horizon. The key to keeping up with my trade recommendations is through my Twice Daily Written and Oral Updates. That is where I put out specific trade recommendations covering all the markets I cover with twice daily updates to them. I rarely put out specific recommendation in this Gold Report since it’s easier to use my Twice Daily Updates than this report which is limited to but once a week. If you currently do not or have not had access to my Twice Daily Oral or Written Updates, you can easily be added to our phone and e-mail list for a trial period by calling my staff at 1 866-973-2077. If you have had access and want to subscribe to the Daily Updates, simply copy and paste the following into your browser or go to: http://iraepstein.linngroup.com/delayed-trade-recommendation2/oral-update-service.html We provide both client and non client subscriptions. Prices differ as clients who have a funded trading account with us pay $25 a month for a subscription while non-clients pay $50 a month. You can read more about what the subscription offers by clicking here. 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, 4 November 2010 | Digg This Article | Source: GoldSeek.com
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