Thursday, 29 January 2015

Gold's repeat performance?

This is the chart I am watching for gold.

And I'm wondering if gold is putting on a repeat performance of a false upside break of a previous support-turned-resistance line:

I'm not aware of anyone who has their eyes on this chart.

As the saying goes, fool me once, shame on you, fool me twice, shame on me.

Gold is now trading back beneath that resistance line.

The longer gold stays beneath that line, the more ominous the action becomes. At least that's how I see things.

Bulls need gold to get back above that resistance line, and soon.

Tomorrow is the last trading day of the month and the week, so the closes will be important.

Gold flashes warning signal

In falling hard on Thursday, gold is threatening to re-activate the bear case scenario explained a few posts ago. Gold has fallen back under critical resistance-turned-support.

The action can be seen in this chart of the gold ETF GLD, my proxy for the gold action:

Yesterday, gold appeared to fall out of a rising wedge formation. In confirming the break on Thursday, gold appears to have negated the potential threat of continued spike up.

IF gold/GLD closes under the pink line in the chart above, gold is potentially signalling that the recent rally may indeed have been the sneakiest of bull traps. IF gold continues to trade below that pink line in the days ahead, my models suggest the counter-trend rally has likely finished, and the bear market is likely resuming with full force.

Time will tell.

Wednesday, 28 January 2015

Gold dips while the miners break out in a sweat

Gold fell several dollars following the release of the policy statement of the recent FOMC meeting. That's because the statement indicated that it's steady as she goes.

Compared to gold, the miners had a severe reaction, and saw oversized declines.

The reason for the relatively big decline in the miners is that gold's move lower, though modest, was technically potentially serious, as gold appeared to break down from a possible rising wedge, as can be seen in the following chart of the gold ETF GLD, my proxy for the gold action:

The black line in the chart above is the price action of the GDX gold miner ETF.

The downside action in the mining indexes has put many of them on the verge of sell signals, according to my models.

It seems that for the miners to gain a more solid footing, gold may need to reverse that breakdown. Can gold do it -- or has the fat lady sung?

Tomorrow's action could be important.

Tuesday, 27 January 2015

Keeping an eye on silver

Silver is facing some pretty stiff overhead resistance.

This chart of the silver ETF SLV, my proxy for the silver action, shows silver's challenge.

The last time silver/SLV faced a similar technical set-up (see pink arrows), silver balked.

Will this time be different -- or is the end of this rally near?

Thursday, 22 January 2015

Gold's choice

Based on the previous few posts, it would seem gold has the potential to top out here in a very sneaky "fake breakout" bear market move -- or blast higher, possibly higher by a couple hundred dollars. It may be that gold is facing an extreme choice at a key technical cross-roads. At least that is how I see things.

The chart below of gold should be viewed in relation to the charts posted in the previous few posts.

The way I see it, the zone between the orange and blue lines is the "decision zone".  Gold is deciding whether to top out, or blast higher. As such, I view this juncture as likely critical.

There are enough conflicting signals it may not be a slam dunk to call the outcome.

As an example, on the one hand the junior miners as represented by the GDXJ are under performing the seniors (GDX), a strange and obvious red flag, at least in my books. The underperformance is so extreme at the moment that it should give any bull serious pause. It's just weird -- even creepy. On the other hand, gold's monthly chart sports a tentative bullish cross in the momentum indicator -- something not seen in almost three years, and a development that bears need to consider.

To me, that disconnect between the action in the juniors and the seniors appears suspicious. But I'll let the market do the talking.

My sense is that a convincing close either above the orange resistance line in the chart above, or below the blue support line, will likely be gold's signal of it's choice. Time will tell.

Wednesday, 21 January 2015

The case for a bull trap

In the previous post, I reviewed the case for the possibility of a vigorous move up in gold.

Today, I'm going to look at a possible bearish scenario.

A fly in the ointment of this rally has been the relative underperformance of the junior miners (as represented by GDXJ)compared to the seniors (GDX). Generally, the juniors tend to lead rallies, but that has not been the case for this rally. The odd underperformance of the juniors may be a temporary aberration that will resolve itself, or it may be a warning sign that the rally may not be what it seems. I have no idea at this point what the signal, if any, from the juniors means. I just know it makes me uneasy.

At the same time, one should keep always keep an open mind to all possibilities.

So here is the possible bear case for this rally: when the bear market really started to get going in gold, gold broke a major support line. After breaking it, gold rose back up through it and held above it for a spell, convincing many the bull market had restarted. This upside recapture of the broken support line was only temporary, and when gold broke back below it, the bear resumed in earnest.

That scenario is very similar to what has just occurred with gold: it has recaptured back a previously broken key support line.

Will history repeat?

The markets are never easy -- there is always more than one path a market can take.