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-- Posted Thursday, 22 March 2012 | | Disqus

Commentary

 

At this point in time I don’t see reason for gold to rally. Yes, bounces can and will occur, but there isn’t reason in terms of chart analysis to get bullish at this time. If anything, in the short term I think the bear side of the market is the place to be.

 

The sovereign debt issue that plagued Greece is for all purposes no longer headline news. Yes, Greece still has problems, especially problems in implementing austerity measures that are a precondition for the bailout funds they need to continue to receive. However the focus for the time being is off Greece as Spain and Portugal’s issues moves to the news podium. There are reports circulating about Spanish interest rates climbing higher and news concerning “coverage levels” for real estate assets that Spanish banks hold. The new government in Spain wants higher coverage levels, which is necessary if Spain is going to tackle its internal problems before those problems tackle Spain. Look for internal bank stress tests in Spain to point to reasons for increasing capital ratios in Spanish banks. While it may not be easy for some banks to raise capital, it doesn’t mean that they won’t or be forced as were banks in other countries to merge, form better alliances or go out to business.  They will end up having to do so because of EU demands and demands by the new Spanish government.

 

India has imposed a large duty on gold imports. Jewelry stores have been closed for nearly a week in protest this move. In the end, this will impact sales in India of gold.

 

Chairman Bernanke and Treasury Secretary Geithner spoke yesterday in front of a House panel. The Chairman again stated that his stand was to keep interest rates low for the foreseeable future. While the US economic stream of data being released looks bullish for the US economy, the Chairman thinks at best the data still points to a fragile situation that hasn’t done much for housing and unemployment

 

All quiet on the Iranian front right now, but that’s most likely because of an upcoming meeting with Western countries. If the past is a precedent, this will soon change.

 

China has slowdown issues as can be seen through the HSBC/Markit China PMI Index which came out today and reported a break down in March to 48.1, from a downwardly revised 49.6 in February. A reading below 50 implies contraction.  Should China see its economy slow down too much, China may find that it needs to provide stimulus to its economy.

 

Monthly Charts

 

 

The Monthly chart pattern above is bearish. Prices continue to make lower highs and lower lows. Admittedly until we don’t know where the current monthly bar low will find a Swingline Bottom, but the current momentum is down.

 

Weekly Charts

 

 

The chart pattern on the Weekly Chart above is one of a higher high and a lower low. Because the most recent action if that of a price break, the bears remain in control until the market sees a chart pattern change or prices take out 1790.4, the most recent high.

 

Seasonal Charts

 

The chart below is published with permission of the Moore Research Center, Inc. For simplicity purposes, I have only published what a Bull Year looks like given that there’s no reason to yet consider a Bear Year in my opinion.

 

 

The “seasonal chart” above points to a market break in early March that ends late March. This has just occurred, so score one for historical price patterns.

 

We’re approaching a point in where you start to stay on the lookout for a price momentum change. That has not yet taken place, as momentum often doesn’t change until early April. Therefore the bears remain in control for the time being.

 

Daily Gold Chart

 

 

The chart pattern on the Daily Gold Chart is bearish. It’s a pattern of lower highs and lower lows. The most recent high is 1661.9. Until it is taken out, the market is acting bearish. Should prices decide to extend the price break, the $1600 price level seems a likely downside target.

 

If you look at prices since the last week February, you can see that prices have been “walking” to lower price levels. Other than the break in late February, the price break has been very orderly.

 

I haven’t shown the Moving Average or Slow Stochastic Readings this week in an effort to keep the charts simple. Suffice to say; gold is trading under the 18, 45 and 100-Day Moving Average of Closes and the Slow Stochastic reading is embedded, which is bearish. When the Slow Stochastic reading loses its embedded reading, I think momentum to be the downside will be lost and a rally similar to that on the Seasonal Chart has a chance of developing. Since this is not yet the case, I advise remaining short term bearish.

 

Summary

 

I see no reason to not remain bearish as prices remain in an orderly downtrend.

The economies of Europe and Asia are stumbling. Inflation is not yet an issue. Iran is not making headlines. Energy prices are breaking.

While I am not looking for a sharp decline in gold prices, I am looking for prices to continue to work lower. Yes’ they’ll be short covering bouts from time to time, but until the trend changes the trend is down.

In terms of time, March 25th is important in that the Moore Research, Center has that pegged as a date to cover shorts. It is not a date that the seasonal trend turns up from, however as no historical upside trade is mentioned by them concerning gold through all of April.

Therefore, until the trend runs its course, it’s down and I will follow it as such.

I recommended today that clients go short June Micro Gold. Those that followed this recommendation did get filled and are profitable as of this writing. I will do twice daily follow ups in my Daily Reports. Overall my downside objective is 1617. I don’t want to see prices get up over its most recent Swingline high.

 

 

Futures Trading Kit and Twice Daily Updates

 

In is through my Twice Daily Updates, available through subscription where you can keep up with my thinking and specific entry point, stop and profit objectives for gold.

 

By clicking here you will be taken to my subscription page or you can go to:

 

www.iraepstein.com and look on the left hand side of the page for the link.

 

Simply call to receive your of our Futures Trading Kit.

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

 

To receive this kit, discuss markets or open a trading account…

 

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, 22 March 2012 | Digg This Article | Source: GoldSeek.com

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