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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Mon Feb 05, 2007 5:06 pm Post subject: Weekly Gold and Silver Technical Analysis Report |
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GOLDIt was looking good there for a while but then along came Friday. Why always Friday? Maybe it just seems like sharp moves occur on Friday's. Maybe speculators do not wish to hold contracts over the week-end.
LONG TERM Well, the first thing is the long term P&F chart (see chart in last week's commentary). Thursday's action broke that initial resistance at $645 with a move to $660 to provide a bullish signal. The swift reversal on Friday, however, puts that break-out in doubt. As mentioned last week I think it's best to wait for a move to $690 which would break through the next serious barrier. That would then set up a stronger move that would take us through to new bull market highs and then through the 1980 rally high of $748. After that, the 1980 all time high of $894. But let's take it one step at a time.
Market action like that on Friday does not usually affect the long term position of gold (or stocks). It did, however, seem to somewhat nullify an upside P&F break that occurred just the day before. The indicators are still all in the positive although not encouragingly so. Although the price action is still taking place above a positive long term moving average line, the positive feature is not all that positive. The moving average line has been bobbing upwards and downwards without taking hold of any direction for long. This is one worrying thing about these past several months. One does not REALLY know which way the trend will really take off in but it will do so at some point. In the mean time the long term prognosis is still more neutral than anything else.
TREND and OTHER LINESOn the chart below are drawn several trend lines. One can say they represent long term trends or intermediate term trends but all technicians would agree that they represent some kind of trends. Let's go through and see what they do represent.
Looking first at the price data we have a long term up trend starting from the low in July of 2005. This line has proved to be a very strong support up trend line. It has been touched, or almost touched 4 times since the start with a rally following each occurrence. Should this line be decisively breached on the down side we would really have a problem.
The next line to consider is the Head and Shoulder (H&S) neckline which was touched in March, June and October of last year. Whether or not we still have a valid H&S pattern (due to the extended right shoulder) we do have a support trend line. If the long term trend line should be breached the last line of defense prior to a significant decline would be this trend line.
Also drawn on the price data is the red resistance line. Following a sharp decline after a significant advance what you usually get is a bottom followed by a strong rally. This often provides a bottom and top for a lateral activity that often follows. This is what we have here with the bottom in June and a sharp rally high in July. For the past 7 or 8 months these levels have not been breached. A breach, either on the up side or the down side may be taken as significant events that may forecast the direction of the price for some time.
Lastly on the price data are drawn the three bearish accelerating FAN trend lines ending with the third “blow-off” stage line that started in March of 2005.
On the intermediate term price momentum indicator (50 Day RSI) are also drawn trend lines. What's interesting about these lines is that they seem to provide information as to price bottoms and tops during a lateral trend. Every time the indicator came down to the 45% level it seemed to rally. Every time it got to the 57%/58% level it seemed to react. Once it broke through the 58% level it was on its way to a several month great bull move.
These trend lines are not perfect but one might want to watch them and understand that once these are breached the odds of a change in price action (versus the established action) must be considered as high.
INTERMEDIATE TERM It's hard to maintain a neutral intermediate term position when the trend seems to be so positive, except for Friday. With the majority of the week's price action occurring above a positive moving average line, with momentum moving into new multi-month highs and volume indicator seemingly moving higher and higher, everything looks just too good to be true. And maybe that's what it is, too good to be true. But technicians are not supposed to be going by looks, only by the charts. Everything there is great so despite Friday's action I am turning bullish. With the intermediate term P&F chart moving into new highs what else can one do?
Having gone back to the bullish side there must be something in the chart action that I can grab on to for a dissenting view so that I can claim ”I told you so” no matter what happens ahead. For that I have to go back to last week's commentary. The price action for the past several months has been in a basic lateral trend and this week's action remains so. We are near the upper part of the trend so there may be little upside before a reversal of trend takes hold. See the chart on below.
http://www.marketoracle.co.uk/Article306.html |
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