Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Adaptive Fibonacci Price Modeling System Suggests Stock Market Peak May Be Near - 15th Aug 20
With Gold Above $2,000, Bulls Triumph! What’s Next? - 15th Aug 20
Stock Market, Asset Price Crash Dead Ahead - 15th Aug 20
NASDAQ vs. DJIA: Does the Recent Divergence Matter? - 15th Aug 20
AMD Ryzen 4900x / 5900x and 4950x / 5950x Zen3 4th Gen IPC and Clock Speed and Core Specs - 14th Aug 20
Stock Market Gap Fills Suggests Market Momentum May Stall - 14th Aug 20
Silver May Be Overextended – But It’s STILL Cheap - 14th Aug 20
A Short Guide To Making Your First Stock Market Investment - 14th Aug 20
Is Tech Reality Affects our Dating Possibilities? - 14th Aug 20
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Do We Have a Breakout in Gold or not ?

Commodities / Gold & Silver 2009 Sep 19, 2009 - 05:26 AM GMT

By: Bill_Downey

Commodities

Best Financial Markets Analysis ArticleMedium Term Gold Technical Analysis - With gold's entry into triple digits for a second week, investors are asking themselves, is this it?  Is this the big one?  What price will confirm we're going much higher?  Will there be a pullback? 

For those who are not chart readers, consider this.  A doctor does not diagnose you by looking at you.  He tests and looks at his charts for results.  Based on those charts he determines how well you are.  


This is a technical update of the medium term time frame for gold.  

While the short term trend has been bullish since the beginning of September and while there's been a breakout in price on the daily charts, the weekly charts measure the medium term time frame and they have now arrived at their breakout area.  The medium term is where the market focus goes from traders and early investors to the more "mainstream" participants.  Just think about the fact that CHINA is advertising to the masses to invest in gold and silver.  Can you imagine what that is doing to the markets?  Initially, they have been rallying since the news hit.  And they're doing it while the SHORT POSITIONS are at their highest.  And it’s doing it with STRENGTH.  Should the Chinese people embrace the metals, an explosion could develop.  So, let’s get to it.

I've used the ETF symbol GLD so as to obtain volume characteristics.  As of today's close GLD trades at around 100 when gold is at around 1020.  I'm sure there are slight fluctuations to that range.

In order to understand what to look for in a major breakout and new up leg, we have 2007 as our guide and it’s right here on the chart below. 

Here's what we need to see in order to confirm a major breakout is developing. Let’s look at it from top to bottom.   Take a look at the rally from SEPT 07 to JAN 08.   Look at that nice long rally.  Now let’s see what the charts left for clues to see if GOLD exhibits the same characteristics this time.  

 

1)  2007: The oval red circle on RSI at the top of the chart shows that in a real BULL MOVE, RSI can stay OVER 70 most of the time and can remain that way for the entire move.  

NOW:   RSI is only 3 points away from entering 70.  While most think that's a sell signal -------it’s NOT during a major move.  It would also mean that it’s still very early in this new rally.

2) 2007: The red arrow mid way down the chart shows the breakout in price above the dotted line channel.  Notice there were no pullbacks, no chance to get on until price was 100 dollars higher in gold. 

NOW: Everyone is waiting for a pullback.  When I look at this chart, I ask myself, pullback to where?   If price pulls back under the 950 area in gold or 93 in GLD......it will spoil the "Breakout" look.   No, if this is the real deal............price should advance from here without a pullback under say 975 in gold and 95 in GLD.  And even that is pushing it.  If it does, something is wrong and gold is not ready to breakout.

3) 2007: The red line showing the volume increase during this bull move.

NOW:  Volume, after dropping off all year, has suddenly expanded.

4) 2007: The oval red circle near the bottom of the chart on the Wm%R indicator shows that this indicator stayed OVERBOUGHT during the entire UP LEG in 2007.

NOW:  Wm%R has entered the high 80% and while most are saying that gold is overbought, we know that it can stay overbought for a few hundred dollars higher as it did in 2007.

5)  2007: The red arrow at the bottom of the chart shows that MACD turned positive at the same time that all the above technical events happened. 

NOW:  MACD has turned up just as it did in 2007.

Now we have a map as to what was happening then.  We can see that a lot of what was happening then is happening now.  In fact.............it’s all happening.  The markets always have "odds" if you look deeply.  It would see the "odds" at this moment, is favoring the upside.

What else did we see that is worthwhile?

We saw that indicators can be OVERBOUGHT and as long as they stay overbought, the rally will continue.  It is only when they come out of overbought range should we look to exit.  Meanwhile, a lot of technicians will stay out of the market because their indicators are overbought.  But we have seen that during a bull run, it should be EXPECTED.

We saw that VOLUME did expand..........we need to see the same.

WHAT NEXT?

Now gold needs to perform.  It’s that simple.  If this is the real deal, gold should continue to move up from here into the October time frame and then correct into the December/January period and have one final thrust into mid winter before next spring’s correction.

So from here on, we just continue to monitor gold's action.

WHAT'S FIRST?

Well, the indicators are all lined up saying their ready to go as they were in 2007.  All that we need to do now is let gold prove itself.  PRICE is reality.  It must show us now. 

We need to see gold move above the top channel (as it is attempting to do this week) and it needs to do it with CONVICTION.   Ideally another 30-50 dollar thrust up over the next few weeks.   The final resistance area near here is the 1035-1050 area.  IT MUST BE EXCEEDED WITH CONVICTION. 

If this rally is already underway, the 1060 and the 1130 area would be initial targets with potential for a spikes higher than that.  As long as the indicators and price action that I've described continue in play, then the market should be readying for a good move forward. 

LOOK for price to now remain above the 965-975 area.   ANYTHING BELOW THAT suggests that this market is not yet ready for a breakout.  If this is the "BIG MOVE" price has NO BUSINESS going back there. 

It is no secret that 4 banks hold most of the shorts and that the COT is at all time highs.  Does this make this risky?  Sure.  Where there is great reward there is great risk.  There's no getting around that.  So you have to minimize that risk if things start going the other way.  It's part of the game.   Should price drop below the area listed above, it will be time to evaluate the market again.

It’s in gold's hands now.  And what it needs to do is EXCEED this final dotted channel line on the chart and begin to move higher and make NEW ALL TIME HIGHS.  That’s what it needs to do here.

KEEP YOUR EYES ON THE NEXT TWO BARS COMING UP ON THE WEEKLY CHART to see if gold now confirms with a price move.    So far the set-up is the same.  The homework is done.  Now it’s up to gold.  

Bottom line: It has to move above the upper dotted channel line and do it with conviction.   

If we think about it, gold has no business trading below 1000 (or at the worse, 965-975) is this is a “BREAKOUT.”   Anytime gold is below 1000, be suspicious.

Let’s see what she does.   And keep in mind,  gold usually PULLS back in October.

At Goldtrends, we follow all the timeframes of the gold market right down to the hourly trend.  We are currently monitoring the potential for a weekly medium term breakout.  Gold has established the PRICE points at which the "odds" will tilt to the upside or the downside.  If you like to follow along with us as we watch PRICE confirm when the next major trend begins, then drop by the website (where registration is not required) and check out ALL of the gold and silver analysis provided there for your review.

May you prosper

Bill

http://www.goldtrends.net/

Bill Downey is an independent investor/ trader who has been involved with the study of the Gold and Silver markets since the mid 1980’s. He writes articles for public distribution for other newsletters and websites as well as his own free site at: http://www.goldtrends.net/
Email: Goldtrends@gmail.com

© Copyright Bill Downey 2009

Disclaimer - The opinion expressed in this report is the opinion of the author. The information provided was researched carefully, but we cannot guarantee its total accuracy. The report is published for general information and does not address or have purpose or regard to advise specific investments to anyone in the general public. It does not recommend any specific investment advice to anyone. 


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules