Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Gold Inverse Head and Shoulder Pattern Revisited

Commodities / Gold & Silver 2009 Nov 24, 2009 - 01:41 AM GMT

By: Douglas_V._Gnazzo


Best Financial Markets Analysis ArticleThe following excerpt is from our full weekly report available for subscribers only. Please note that the section below on gold is from the May 1, 2009 report that discusses gold's inverse head & shoulders formation that was still forming at the time - waiting for confirmation that recently occurred.


Interest rates are showing their strong influence on the markets. The Fed and other central bankers have been busy plying their trade: intervening in what are supposed to be free markets.

This is why Congressman Ron Paul so rightly calls for not only an audit of the Fed, but the abolishment of the barbaric relic as well. Godspeed to Ron Paul.

Up first is the daily chart of the 10 Year Treasury Yield (interest rate). The chart shows that from 2008 to 2009 yields fell dramatically. This was a boon to bondholders, as bonds move inversely (opposite) to yields.

From early 2009 to June, rates rose quite fast; and have since formed a downward sloping price channel. Whichever way yields break out of this channel, be it up or down, the result will play large all markets. Notice how much action has centered around 34.

The unseen hand can be seen most readily in the steepening of the yield curve. Someone has been quite busy - perhaps Tiny Tim and his band of merry men. Be that as it may, the difference between long term rates and short term rates has been increasing (steepening).

This is illustrated most clearly by the 30 Year Yield (TYX) that has risen from the abyss of late 2008, to 4.295 as of Friday's close; while at the same time 90 day paper (IRX) has dropped off a cliff and hangs just above the bottom of the abyss (zero).

It seems that the U.S. and Japan are in a race to hell - zero bound interest rates. Such malfeasance is beyond rational thought. The unacceptable should not be accepted. The road to hell is paved with lies and broken promises; and the pavers have been busy.

Last up for bonds is a long term chart of 30 Year Yields that goes back to 1982. The 27 year-long downward sloping price channel is a secular trend of huge proportions: long term rates have been declining for decades.

Notice that rates are presently near the upper trend line; and have been bumping up into that trend line for several years now. Also, remember the yield curve is steepening.

If rates were to break and hold above this channel, turning resistance into support, a secular trend change could possibly be in the making. This is mere speculation at this time - not fact.

However, if such were to occur, the mortgage and related markets would not be happy. Another fine "job" orchestrated by the Fed; and some wonder why Ron Paul calls for their abolishment? The faults are many - the reasons legion: like the number of dollar bill credits the Fed has created.


The dollar was up 0.38 for the week, closing at 75.61, for a +0.50% gain. It appears that the dollar is trying to carve out a short term bottom, albeit from lower lows than its Oct. lows. Price is bumping up into horizontal resistance (blue line) and its upper falling diagonal trend line from the Sept. highs.

If the dollar can clear these two resistance levels, then it has a chance of challenging more significant resistance marked by the black horizontal trend line at 76.5.

A positive MACD crossover has occurred and the histograms are entering positive territory as well. RSI is turning up, but has stalled at the 50 level. It is important for RSI to break above 50, for any chance of a rally.

Next is the daily chart of the Power Shares DB Dollar index (which trades), hence volume levels are available. It shows pretty much the same as the $USD chart, with some nuances.

UUP is also trying to carve out a short term bottom from lower lows. Presently, price is bumping up into resistance near 22.50. Notice that the 50 dma is just above, at 22.61, followed by horizontal supply marked at 22.75.

The dollar's first real test will be at horizontal resistance marked by the black trend line at 23 (if it gets there). Just above is an open gap indicated by the blue arrow. Volume has increased on the days the dollar moves up. The dollar appears to be on the verge of either collapsing, or putting in a short term counter trend rally. As of now the trend is still down.

Both stocks and commodities have been rallying side by side since March. Australia and Canada are two of the major commodity exporting nations; hence their currencies have been stronger in relation to currencies from nations less dependent on commodity exports.

The charts that follow show this currency relationship with commodities. Watch the dollar in relation to these currencies, as a move lower in the Canadian and Australian currencies versus the dollar would warn that a fall in commodities is likely.

The euro is basically the inverse picture of the dollar. While the dollar has been falling relentlessly since March, the euro has been steadily rising. Just as the dollar looks like it may be getting ready to rally - the euro appears it may be getting ready to correct.

The daily chart shows a rising wedge pattern, which usually (not always) resolves bearishly. Price is presently testing the lower trend line. Further below is more significant support at 145. Resistance is at 150.

MACD has put in a negative crossover and shows a negative divergence along with ROC. Gold and the euro trend in the same direction, so a falling euro would likely present a headwind to gold's advance.

Gold (from the May 1, 2009 market letter)

Despite short term weakness on the daily chart, the weekly chart still shows a possible inverse head & shoulders formation, with the right shoulder presently under construction. This formation has been noted in the report now for weeks.

Notice that price could still drop further and not violate the present formation. This does not mean the formation is guaranteed, as until a breakout above the neckline occurs on expanding volume, it is all merely potential not actual.

Nevertheless, the potential does remain, now it remains to be seen if it obtains. Possible upside targets are around 130 if a breakout occurs and holds.

The above chart and discussion of gold's inverse head & shoulders formation is from May 1, six months ago. Our upside target of $1300 was discussed months prior to the recent breakout, which is one reason why we were confident in offering a money back guarantee for new subscribers (on a few different occasions) if gold didn't make new all time highs this year. This offer has since expired, as gold has made new highs (a few times).

For those interested in whether our upside target of $1300 still obtains, and for a discussion of whether the gold stocks will follow in the same vein, come visit our website, or request a trial subscription by sending an email to

The full market wrap report covers all the markets: stocks, bonds, currencies, commodities, and the precious metals. A free book on Gold is offered to all new subscribers - one that explains more than just investing in gold; including a detailed examination as to why the cause of the financial crisis is the fact that gold and silver have been unconstitutionally removed as the only form of circulating legal tender, and replaced by bills of credit (Federal Reserve Notes); bills of credit (paper money) that the Constitution expressly forbids.

A new monetary system of gold and silver coin is offered. We are interested in not only making money in gold and silver, but more importantly - in gold and silver coin circulating as money, as ordained by the Constitution. This is the only sustainable cure for today's financial problems - perhaps the most important legacy we can leave our children, and their children to come.

Good luck. Good trading. Good health, and that’s a wrap.

Come visit our website: Honest Money Gold & Silver Report
New Audio-Book Now Available - Honest Money  

Douglas V. Gnazzo
Honest Money Gold & Silver Report

About the author: Douglas V. Gnazzo writes for numerous websites and his work appears both here and abroad. Mr. Gnazzo is a listed scholar for the Foundation for the Advancement of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

Douglas V. Gnazzo © 2009 All Rights Reserved

© 2005-2019 - 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