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
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Gold Topping Action Continues

Commodities / Gold & Silver 2009 Oct 25, 2009 - 12:34 PM GMT

By: Merv_Burak

Commodities

Best Financial Markets Analysis ArticleThe gold topping activity continues with the price moving sideways while momentum keeps getting weaker and weaker.  Something’s bound to break soon, will it be up or down?  I hate to say it but at this point my money is on the down side, but will change fast should gold close above the $1075 mark.


GOLD

As Detective Friday would say, “Just the facts ma’am”.  Limited time this week-end so I’ll just cut to the chase.

LONG TERM - No change in the long term P&F chart versus the previous weeks.  Still BULLISH.

The gold price remains above its positive sloping moving average line and the momentum indicator remains in its positive zone just barely above its positive trigger line.  The momentum is showing signs of weakness although more pronounced in the other time periods.  The volume indicator continues to show strength and is at all time high territory, showing no sign of weakening.  The long term rating therefore remains BULLISH.

INTERMEDIATE TERM

The intermediate term indicators are starting to slowly indicate possible changes ahead.  The gold price continues to move sideways but remains above its positive moving average line.  The momentum indicator is showing weakness and has started moving lower.  It has crossed below its trigger line and the trigger has turned downward.  However, the indicator is still in its positive zone and not yet in danger of dropping into the negative zone any time soon.  The volume indicator remains in a positive trend and above its intermediate term positive sloping trigger line.  All in all, the intermediate term rating remains BULLISH.

SHORT TERM

Two things are very clear in the short term chart.  First is the topping process of the gold price, shown as a lateral move after barely any upside following the move into new high territory.  The other is the weakening momentum, during the lateral price move, shown by the short term momentum indicator (13 Day RSI). 

A weakness in the momentum indicator is actually normal after a sharp upside move by the underlying price and especially if the price then goes into a lateral trend.  One thing this could be saying is that the strong move by the RSI cannot be maintained while the price is moving sideways.  The longer the price moves sideways the more the momentum will move towards its neutral level.  This is normal.  It could also be a foretelling of a market top.  I mentioned last week that a move into new all time highs should have been immediately followed by a move at least 20% above the previous high level.  We only moved a couple of % which suggests a lot of selling and shorting going on. 

As I understand it the open interest represents primarily short sales.  If that is true then from the day before the break-out into new highs to this past Thursday the open interest increased by 61,507 contracts representing 6,150,700 ounces of gold shorted.  If we assume an average price of $1060 during this time that suggests a total of $6,519,742,000.00 involved in this shorting process during only the past couple of weeks.  Boy, someone has a lot of money to waste.
   
          

If we look at the daily chart we see that the price of gold started its move on the first of Sept.  The open interest started its sharp rise at the same time.  It had increased 132,129 contracts since the first of Sept.  That’s 13,212,900 ounces of gold.  At an average $1000 per ounce we’re now over the $13,000,000,000.00 mark of short sales. 

The total short interest is 516,832 contracts representing 51,683,200 ounces of gold which represents $54,841,043,000.00 worth of short sales at Friday’s closing price.  WHO has that kind of money?  And WHO has that amount of gold to short?  Or are these just naked shorts with no gold behind it?

THINK ABOUT THAT

I’d better stop there, my head is really starting to spin.

Before I get too many emails about the above, I know it’s not REALLY that simple but simplicity gets to the heart of the matter, even if it might be somewhat – well – simplified.

Gold closed just below its short term moving average line but the line remains sloping in an upward direction.  The momentum indicator is moving lower and is below its negative trigger line but still inside its positive zone.  The daily volume activity has improved over the past few months but not out of the ordinary or expected range.  For the short term the rating has been downgraded to a – NEUTRAL rating, just one level above a full bear rating.

SILVER

Since breaking out of its down trend last Dec, at $11.00 on the P&F chart, silver has been in a steady climb with a couple of rest periods along the way.  The initial break gave us two projections, one to $17.50 and another to $18.50.  We made one but not quite the other (silver got as high as $18.12 so far).  It looks like we might be into another one of those rest periods again.  We have a negative divergence in the momentum indicator which too often precedes a reversal of price trend.  A move back to the $16 support level would be easy although the $15.00 is more likely.  In any event, any rest or reaction here is not expected, at this time, to be of major concern and the up trend would be expected to return.

PRECIOUS METAL STOCKS

What we see in the universe of 160 gold and silver stocks (see the Merv’s Gold & Silver 160 Index) is a universe that is struggling with its all time high levels.  The previous high was reached in Feb of 2008 and the universe exceeded that level last week.  This week it just meandered below.  It did hit an upper resistance trend line so one could have expected a reaction.  The big question is if it is a major stumbling block to further advances or is this just a short nuisance along the way to greater heights?  Well, the long term momentum indicator has been well into new highs versus the previous Feb 2008 highs.  This suggests that the latest move does have strength behind it and any rest or reaction should be short lived with the up trend returning.  How much of a reaction?  Well, I would not expect the reaction to go as low as the lower support trend line might indicate, maybe a 10% to 15% correction.  However, as a technician I will let the continuing market action tell me what it’s up to.

MERV’S PRECIOUS METALS INDICES TABLE

NO COMMENTARY NEXT WEEK

I will be on the move for the next week or two and therefore there will be no commentary during that time.  I will try and get a commentary in for the week ending 06 Nov 2009, otherwise the next commentary will be for the week ending the 13 Nov 2009.

Well, that’s it for another week.

By Merv Burak, CMT
Hudson Aero/Systems Inc.
Technical Information Group
for Merv's Precious Metals Central

For DAILY Uranium stock commentary and WEEKLY Uranium market update check out my new Technically Uranium with Merv blog at http://techuranium.blogspot.com .

During the day Merv practices his engineering profession as a Consulting Aerospace Engineer. Once the sun goes down and night descends upon the earth Merv dons his other hat as a Chartered Market Technician ( CMT ) and tries to decipher what's going on in the securities markets. As an underground surveyor in the gold mines of Canada 's Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry. As a basically lazy individual Merv's driving focus is to KEEP IT SIMPLE .

To find out more about Merv's various Gold Indices and component stocks, please visit http://preciousmetalscentral.com . There you will find samples of the Indices and their component stocks plus other publications of interest to gold investors.

Before you invest, Always check your market timing with a Qualified Professional Market Technician

Merv Burak Archive

© 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